The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
. 499
X-1530
FEDERAL RESERVE BOABD ANNOUNCEL!ENT
FOR THE ./E:EK ENDING JtiLY 7, 1923.
ADMITTED TO THE FEDEBA.L
RES~VE
SYSTEM:
SUrplus
Capital
Total
RKsourcet
DISTRICT NO .. 2.
Federation Bank of New Yorlc,
New York. N. Y.
$250,000
$250,000
$962,424
250,000
1,253,972
50,000
5,000
564,997
30,000
5,000
264,926
DIS!miCT NO. 4.
Lake Erie Trust Oo.,
Cleveland., Ohio.
1,000,000
DlS'l'RlCT NO. 9.
Gold and Company State Bank,
Big Stone City, S. Dak,
DISTI\ICT NO • 10 •
security State Bank,
Sallisaw, Okla.
CONVERTED IN'ro NATIONAL BANK:
Oitisens Bank of Barnesville, Barnesville, Ga.
New .Jedftrd Safe J•poft'it & Trust
co.,
i~ev;
Bedford, Mass.
WITHDB.AWALS:
Bank of Christiansburg, Christiansburg, Va..
San Francisco Savings & Loan Society, San Francisco, Cal.
PlJBMISSION GRANTED TO EXERCISE TRUST BOWERS:,
The First National Bank.of Rockville, Conn.
The First National Bank of West Newt~m. Mass.
The First National Bank of St. Johnsbury, Vt.
National Bank of Amer~ca in Faterson, N. J.
Safe Deposit National Bank, New Bed~ord, Mass.
:: 500
X-15~0
FEDERAL RESERVE BOARD .ANNOUNCEUE...~T
FOR THE \'/EBY ENDING JULY l~, 1923.
AD.M:tTTBD TO THE F.EDEP£ RESERVE SYSTEM:
Capital
Total
Resources
DISTRICT NO. 12.
Security State Bank,
Coulee City, Wash.
;;;.. 25,000
CHANGE OF NAM&:
Foreman Brothers Banking co., Chicago, Ill., to The
Foreman Trust & savings Bank.
Empire Bank & Trust CO., Lewistown, 1Iont. , to Empire
and State Bank.
CONVERTED TO NATIONAL BANK:
The Bridgeport State Bank, Bridgeport, Texas.
INSOLVENT:
Ballantine State Bank, Ballantine, Llont.
Iron Exchange Bank, Hurley, Wisconsin.
~MISSION
GRANTED TO EJQ'1RCISE TRUST PO/lEES:
Liberty National Bank in New York, New York, N. Y.
501
X-1530
FEDERAL RESD.RVB BOARD ANNOUNC:JA.ENT
FOR THE WEEK ENDnm JULY 20, 1923.
ADMITTED TO THE FEDERAL
RESERV'~
SYSTEM:
Total
Capital
Resou:r~es
DISTRICT NO. 8.
Water Tower Bank,
St. Louis , J4o.
$200,000
~50,000
lil,557,460.
INSOLVENT:
First Savings Bank, Sutherland, Iowa.
Yellowsune Valley Bank & Trust Co., Sidney, Mont.
ABSORBED BY NA.TIONAL B.JINK:
The Bankers Trust Company, Denver, Colo.
Brule State Bank, Chamberlain,
s. Dak.
PEEMISSIOU GRANTED TO E:x:ERCISE TRUST POWERS:
The
The
The
The
First National Bank of Northampton, 1/Iass.
Second National Bank of Phillipsburg, N, J.
Rye National Bank, Rye, New York.
National Bank of Fayette County, Unionto~n, Pa.
502
X-1500
FEDERAL RESERVE BO.mD ANNOUNCZJ:l&NT
FOR THE \~EK ENDING JULY 27, 1923.
'.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
None admitted.
CLOSED:
Inverness State
Ba~k,
Inverness, Montana.
The Importers and T:..·adcrs Bank of New Yc rk, ·N. Y • , has
merged with the Equitable T1·ust O>:n:.pan.y, New York, N. Y.
The Paradise State Bank, Par12,dise, 'l'exas.
First State Bank of Clyde :Pa:rli:, Clyde Pat'k, Llont.
Over lea Bank, Over J.ee,, Maryla11.d.
Avoca State Bank, Avcca, Iowa.
PERMISSION GR.ANT"i.D TO .EXERC !BE TRUST POWEP£:.
The
The
The
The
Peoples National Bank, Clare:tt:o., N. H.
First National Bank,
Ho,sick Falls, N. Y.
Valley National Bank, Chambersburg, .Pa.
Atlantic National Bank,Jacksonville, Fla.
503
X-1530
FEDERAL RESERVE BOABD ANNOUNCEMENT
FOR THE WEEK ENDING AUGUST 3 , 1923
ADMITTED TO THE :BEDE:ML
ftESERYE_ei~~M:
Ca.pi ta.l
Surplus
Total
Resources
$200,000
$16o,ooo
$2,446,487
1,5()0,000
1,000,000
14,869,178
200,000
50,000
3.258,841
PI§'l'JUCT NO. 2.
Mutual Bank of Roseville,
Newa.rk, New Jersey.
The Battery Pa.rk Bank,
New York, N. Y.
DI§TRICT No.
~·
1'·owell Bank,
St. Louis , Mo.
ABSORBED BY NATIONAL BANK:
'!he Peoples Bank, New Bern, North Ca.rolina.
CONVERTED INTO NATIONAL
BAlrK:
The First State Bank of Streetman, Streetman, Texa.s.
SUCCEEDED BY STATE BANK:
The First State Sa.vings Ba.nk, Mount Carroll, Ill., whose cha.rter
ha.s expired, ha.s been succeeded by the First Sta.te Bank, Mount Carroll.
VOLUNTARY LIQUIDATION:
The Commercial Bank of Yakima., Yakima., Washington.
PEBUUSSION GRANTED TO EXERCISE TRUST POWERS:
The
The
The
The
Na.tiona.l Bank of America. a.t Ga.ry, Gary, Ind.
First Na.tiona.l Bank of Paragould, Pa.ra.gould, Ark.
First Na.tional Bank of Veva.y, Veva;y, Ind.
First National Ba.nk of Owensboro, Owensboro, Ky •
. 504'-
X-153:)
FEDERAL RESERVe BOARD .ANNOUNCtLiENT
FOH THE ·:fi.EK ENDING AUGUST 10, l.S123.
Total
Resources
-
-
First State Bank of
Mount C'arrcJll, Illinois
Citizens Bank o~ Dy~Tsburg, Tenn.
Bank of Arcadia, Arcadia, Wisconsin.
CONVERTED
NATIONAL
IN~
BAl~
First State Bank of Perrin, .t'errin, Texas.
BANK REPORTED CLOSED.
State Bank of Garfield 1
Pa~~itch,
Utah.
CHANGE OF TITLE
Deposit Bank of i'linona, :linona, 1:innesota
to
Deposit Bank and Trust Company, 'Cfinona, Minnesota.
P.BliMISSION Gru.NTED TO
EXE:RCI8~
TRUST POWEHS
The Central National Bank of Columbia, Columbia, Pennsylvania
The Waukesha National Bank, Waukesha, Wis~onsin.
The First NatJonal Bank, Buffal() Center , __ Iowa.
505
X-1530
FEDERAL RESERVE BOARD .ANNO"(JNCEi\1ENT
l!'OR THE iJ.EEK ENDING AUGUST 1?, 1S23.
N 0 N E
CHANGE 0 .!!"' TITLE
Union Savings Bank & Trust Company, Cincinnati, Ohio
tn
The Union Trust Ccmpany,
The
The
The
The
Ctncinnati, Ohio.
Kutztown National Bank, K1ltz·~ovm, .Pa.
Fort DodgP. Na·i.ional Bank, Fo::t Dodge, Iowa.
First National Bar:.l-c of lead, South flalcota.
Haskell National Bank, Haskell, 'Texas.
506
X-1530
..
FEDERAL RESERVE BOARD ANNOUNE.BMENT
FOR THE \VEEK ENDING AUGUST 24. 1923c
ADMITTED TO THE FEDERAL :RESERVE
SYST~1:
~l
Resources
DISTRICT NO.
i.
Farmers Bank qf Pelham,
Pelham, Ga.
$100,000
$
[~,000
$621,126
DISTRICT NO. 12.
The American Bank,
San Francisc~~ Cal. 2,000,000
400,000
26,260,787
INSOLVENT:
State Bank of Belt, Belt, Mont.
The Columbia Bank of New York, N.Y., has merged with the
Manufacturers Trust Company of New York.
WITHDRAWAL:
Clarkfield State Bank, Clarkfield, Minn.
PERMISS~ON
.
) ..
GRANTED 10 EAE?CISE
TRUST
~0V~S~
.
- - - - -
5;.
The Calcasiou National Bank of Southwest Louisian&., Lake Charles ,La.
The Highland NatiJna.l Bank •f Pittsburgh, Pittsburgh, .Pa.
507.
X-1530
F'BDERAl. RESllilVE BOllltD ANNOUNCJZIBNT
l!"'OR TI:I£ ''ib'EK ENDING .AUGUbT 31 , 1 923.
Total
Capital
Surplus
res~urces
. plSTRICT NO. 8.
Peoples ~xchange Bank,
Russellville, Ark.
~100,000
~
50,000
CLOSED:
Citizens' Bank & Trust Co., Rapid City, South Dakota.
The ·,';ens-Hine ll'rust Co., Savannah, Mo.
CONVEhTED INTO NATIONAL BANK:
Bank •f Commerce, Dl Dorado, Ark •
.Pllli11ISSION GRANTED TO DXCRCISB ThUST
The First National Bank, PEm. A:rgyl • Fa.
The Midland National Bank, Billings, Mont,
l:'O~IBRS:
$ 911,907
508
X-15ZO
mDLEAL RESERVE BO.ARD A.blNOUNCEMJJNT
FOO. Tlffi .ISE.K lli"'IDING Sli?T.@.!LB.E.R 7, 1923.
ji...IW!ITTED TO THB FEDERAL RESERVE SYSTDW:
Capital
East
~etersburg
East
State Bank,
Pa.
~etersburg,
$50,000
Surplus
Total
Resources
~5,000
$190,548
PEBMISSlON GRANTED TO EXERCISB TRUST POvVERS:
National Union Bank, Dover, New Jersey {supplemental),
Broadway Natronal Bank, Denver, Colorado.
509
X-1550
FEDERA.L RESERVE BOARD ANNOUNCEMENT
FOR T!I'D ?lEEK ENDING
ADJl!.TTED
S~TEMBER
TO__!l!§_~RA1.,
14, 1923.
RESERVE SYSTEM:
Capital
Su:rplus
Atlantio Safe Deposit & Trust Co.
Atlantic City, N. J.
$300,000
$350 ,000
!.~
Resources
DISTRICT NO. 3.
1
iji;6, 71:4' 654
.PISTlUCT NO. 6.
Rutherford County State Bank,
Murfreesboro, Tenn.
50,000
OONVERTEP INTO
N~TIONA1
South Texas State .Bank, Galveston,
Eden State Bank.
~den,
25,000
75,000
BANK:
TeJPlb.
Idaho.
MERGER:
The Battery Park .Bank, New York, N. Y.. , has merged with the
Bank of America., New York, N. Y., a member bank.
SUCCEEDED BY NATIONAL B.!INK:
The Farmers and Merchants Bank of Burbal:lk, Cal if. , has been
succeeded by the New First National Bank in BUrbank.
:PERMISSION GRANTED TO EXERCISE TRUST PO .'£11.5:
The First National Bank of· McKeesport, McKeesport, PaThe Citizens National Bank of New Castle, New Castle, :Pa.
The Farmers and Merchants National Bank of Reno, Reno, Nev.
X-1530
i'EI£RA..L. m:5mVE BO.iU1D 4)1N00NCEMLNT
FOB ~BE ~~ lf!Nl)nfe]. 8Ml:J\4BER 21, 1925.
AlJ411"lE:D TO THE FEDERAL JtESlliVE SYS'l'EU:
NONE
The Security BBDk & Trust Co .. , San Frauciwco, Cal.,
a member, has merged with the Americaa. Bank ot San Frcmcisco, also a. member.
CONVERTED lNi'O A NA!l'IONAL BANK:
!!'he First State Bank, Graford, Texas ..
A'UTHODIZEI> TO
AO~f
.DRAF'l'S AN]) BIJi.l,S OF
IlXC~GE
t1f TO 100 PER CENT OF CAPlfAL AJP STJ.lWI.VS:
~
.American Bank ot San hauc i sc o, Calif.
PERMISSION CiRA!T.ED TO EXERC 1$ 1'-RUST p0"1¥§:
The Scarsdale .Natio.aal Ba.JJ.k, Scarsdale, N. Y.
The First National BaDk, Batavia., Ill.
511
X-.1530
mDERAL RESEffiVE .BO.ARD A.NNO'(JlJC.EMb,;NT
FOR THE lv'EEK. ENDING SEI?TEMBER 28, 1923.
ADMITTED TO THE EED.ERAI.. RESERVE SYSTEM:
Capital
--
Total
Resources
SUrplus
DISTRICT NO. 10.
Federal Trust Company,
Kansas City, Mo.
$200,000
$40,000
$495,356
SUCCEEDED BY NATIONAL B.ANX:
Fort Scott State Bank, Fort Scott, Kansas.
INSOLVENT:
Bank of Hansen, Hansen, Idaho.
PERMISSION GRANTED TO EXERCISE TRUST P01Y.ERS:
First National Bank, Roscoe, New York.
Columbia National Bank, Columbia, s. c.
Jackson State National Bank, Jackson, Miss.
First National Bank, Thornton, Iowa.
First National Bank, ryausau, Wis.
California National Bank, Long Beach, Calif,
512
X-1530
FEDERAL RESE.RVE BO.i;IRD ANNOUNCEMENT
FOR THE \~'EEK ENDING OCTOBER 5, 1923.
The Ninth Bank and Trust Co., Philadelphia, Penna.
INSOLVENT:
State Bank of Garfield, Panguitch, Utah.
WI THDRA.",:A.L :
First Uta-1 Sav:.ngs Bank, Ogden, Utah.
The First National Bank of Sheffield, Sheffield, Iowa.
513
X-15W
F.EDclBAL RESERVE BOARD ANNOUNCEMENT
FOP. THE ','LE;EK ENDING OCTOBER 12, 1925.
AIXUTTED TO TI!n FEllEBAL RESERVE SYSTEM:
N 0 N E
CHANGB OF TITLE:
The Pall~ Ber!k:ing and Trust Company, Cnya..1-l0ga Falls,
Ohio, has cha."lged it.s title to ''The Falls Banking Company".
VOLUNTARY LIQUIDATION:
Sioux Falls Savings Bank, Sioux Falls, S. Dak.
(Succeeded by Sioux Falls Trust & Savings Bank, non-member)
l?ERIJISSION GRANTED TO
EXI:::RCI~:E
TRUST .P07iERS:
Home National Bank, Meriden, Conn.(sup.)
]lianufacturers National Bank, J.ev.-iston, 11aino (Sup.)
Security National Bank, Everett, Wash.
514
X-15~0
FEDERAL RESERVI; BOAhL ...Nt~OFNCP1,fl:J\JT
FOR THE IVEEK El-IDING OCTOBE:R 19, 1923
ADultTTED TO THE li'EDERAL RbS:CEVE SYSTEM:
Capital
DISTRICT :NO. 6.
Commercial Bank,Trust & Title Co.,
Miami, Florida.
~~00,000
Surplu~
Total
Resources
wl50,ooo $1,395,246
DISTRICT NQ.:....L.
F5.rct Iowa State Trust & Savings
Bank, Burlington, Iowa.
200,000
CLOSED:
Discount and Deposit Bank, Kentland, Ind..
WI TIL1)RA7JN:
State Bank & Trust Co., Harrodsburg, Ky.
300,000
6,04~,575
515
X-15~0
FEDEIW.. P.ESERVE BO.ARD ANNOUNCLMENT
FOR THE V.EEK ENDING OCTOBER 26, 1923
ADMITTED TO THE FEDEBJU RESERVE SYSTEM:
N 0 N E
The Farmers Bank of Crawford, Cravvford, Ga.
·,v ITHDRA\'/N :
Security State Bank, Neligh, Nebraska.
PERMISSIOH GHlU'ifTED TO EXBRCIEJE TRUST PO:JER;):
Planters National Bank, Richmond, Va.
Colonial National Bank, Roanoke, Va.
Old National Bank, Evansville, Ind.
Union National Bank, I.Iarquette, Mich.
First National Bank, Chippmva Falls. Wis.
Texas National Bank, Beaumont, Texas.
Republic National Bank, Dallas, Texas.
First National Bank, Galveston~ Texas. (Sup.}
516
X-15~
.FEDERAL RLbEIW~ BOARD Ai'r1mUNC1:.ME;NT
FOR THE WE:&:e :&'l"DING NOVEMBER 2, 1923.
AD1UTTED TO Tllli FEDERAL RESERVE SYSTEM:
Capital
Total
resources
Surplus
DISTRICT NO. 3.
Lock Haven Trust CompR:c.y.
Loclc Ha,.en, PcnnR.
·w250 ,000
:jj;250,000
$3,W5,844
16,000
391,467
DISTRICT NO • 7.
Webster County Trust and
Savings B~~. Ft. Dodge, Ia. 100,000
DISTRICT NO. 8.
Park Savings Trust Company,
Richmond Heights, Mo.
50 ,000
Southwest Bank of St. Louis,
St. Lou~s, Uo.
125,000
10,000
60,000
17 ,000
1,291.334
INSOLVENT:
HB.rlln B'.fate Bank,
Hardin, Montana.
C:lti?:ens' Bank & Trust Co., Rapid City, S. Dak.
Denton St'Ol.te
Ba.~k,
Denton, 11ontar..a.
AUTHllRlZED TO ACCB.t>T llRAFT~ AND BILLS OF EXCHANGE
Ut' TO 100 .i?ER C:E;NT OF f!UITA.L AND SUR.!:'LUS:
Albany :hlxchange National Bank, Albany, Georgia.
PERMISSION GREJ;JT.t,;D ~J:'O EY.ERC I bE TRUST PO'ifERS:
First National Bank, ii[arquette, Mich.
First and Farmers National Bank, Montrose, Penna ..
Second National Bank, Allentown, ~enna.
517
1
X-1530
FEDEJ.\AL RESERVE BOARD .A.NUOUU\.::~.:IENT
FOR THE VJEEK ENDING NOVEMBER 9, 1923
aDMITTED TO THE FEDERAL RESFR'II_E
~:iYSTD1:
N 0 N E
C.LOSBD:
Live Stock State Bank, Kansas City, Mo.
First tltate Bar..k, Fort Towson, Okla.
CONSOLIDATION:
The .Peoples ~:rust Company and the Peoples Bank,
both of Philadelphia., Pa .. , have consolidated under
the title "Peoples Bank and Trust Company".
INSOLVENT:
Hardin State Bank, Hardin, .Mont.
Inverness State Bank, Invern~ss, Mont.
Citizens Bank & Trust Co., Rapid City,
Fannin County Bank, Bonham, Texas ..
s. Dak.
WITHDRAWAL:
The Planters Bank,
~ilson,
N. C.
AUTHORIZED TO ACCEl?T DRAFTS AND BI1l.S OF EXCHANGE
lTE TO 100 PER CENT OF CAPITAL AND SUR.t>LUS:
First National Bank,
Montgomery, Alabama.
PERMISSION GRANTED TO EXEB.C ISE TRUST l?O\VERS:
First National Bank, Richfield Springs, N. Y.
Boonville National Bank, Boonville, Mo.
Southern National Bank, Memphis, Tenn.
518
X-1530
FEDERAL RESERVE BOARD ANl-JOlfl~CEiviENT
FOR THE .VEEK ENDING NOVEMBER 16, 1923.
ADMITTED TO THE FE.DE.RA.L RESERVE SYSTEM:
Total
Capital
Surplus
Resources
DISTRICT NO. 2.
Carteret Trust Co.,
Carteret, N. J.
$220,582
:/i>lOO ,000
DISTRICT NO. 4.
Central Trust Co.,
Cincinnati, Obio
1,000,000
1,000,000
PERMISSION GRANTED TO EXF.RC ISE TRUST PO'mmS:
Sullivan County National Bank, Liberty, N. Y.
10,560,155
519
.
X-l5ZJO
FBDBRA.L R.L:S:EB.VE BOARD ANNOUNCEMBNT
2~, 1923
FOR TJD.:; 'iJb.EK El.'l'Dli'JG NO'Vf.,:J,ffill{
ADI1ITTED TO THl5 FEDERAL lil.iSERVE SYSTEM:
Total
Capital
Surplus
~125,000
~(40
resources
DISTRICT tm • 3.
P~ple's
Trus·i; 0o.,
Fracl{Ville, Pa"
,000
;w646,558
15,000
310,281
DISTRICT NO. 12.
The Home Bank,
Porterville, Calif.
100 ,000
.J..
Willow Creek St&te Bank, 'dillm; Creek, Mont.
)
520
X-1530
FEDERAL RESERVE BO.AltD ANNOUNCEMENT
FOR THE \'lEEK ENDING NOVEMBER 30, 1923.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
Farmers State Bank, Spring Valley, Minn.
Stock Growers State Bank, Timber Lake~ S. Dak.
PERMISSION GRANTED TO EXERCISE TRUST PO·NERS:
The National Bank of" Norwalk, Norwalk, Conn. (SUp.}
First National Bank, Bound Brook, N.J. (Sup.J
National Bank of Commerce in New York, New York,
N .. Y. (SUp.)
521
K-1530
~"'EDERA.L
RES:.ERVE BOARD ANi.'JOUNCBMBNT
FOR THE ',',EEK ENDING DECEMBER 7, 1923
ADMITTED TO THE FEDERAL BESERVE SYSTEM:
Capital
Surplus
Total
resources
$12,000
$388,018
DISTRICT NO. 8.
Shaw State Bank, St. Louis, Mo.
NITHDRA.V/N FROM SYSTEM:
The Bank of Ocoee,
Ocoee, Florida.
CLOSED:
Security State Bank, VJolf ..2oint, Montana.
D. w. Standrod & Co •• Blackfoot, Idaho.
C&WGE OF TITLE:
The Central Trust Company, Cincinnati, Ohio,
to
The Fourth and Central Trust Company
(having taken over the Fourth National Bank of Cincinnati).
Farmers and Merchants Bank of Burbank, California,
to
Farmers and Merchants Savings Bank.
PERMISSION
GR~'JTED
TO EXERCIBE TRUST
~ONERb:
The First National Bank of Darby, Darby, Penna..
The Citizens National Bank of Casper, Ca.s_t)er. Wyo.
522
X-1530
FEDERAL RE~ERV.8 BOARD arll•OtJNCEM.ENT
FOR THE WEEK ENDING DECEMBER 14, 1923.
All.UTTED TO THE FEDERAL RESERV.S SYSTE.n.I:
Capital
Surplus
Total
resources
{?50 ,000
$12,500
:ii 62,500
Farmers' Bank of Egyyt,
Egypt, Pennsylvania.
60 ,ouo
30,000
668,070
Scbnecksvil1e State Bank,
Scnr.ecksville, Pennsylvania.
25,000
2,500
56,64~
J2illRICT NO. 2.
B'lnk of ?earl River,
r·earl River, New York.
Stat:·~
DISTRICT NO. 3.
CLOSED:
Bank of Commerce, .!forsyth, nontana.
State Bank of ?lenty.mod, Plentyvvood, :rontana.
PERMISSION GRANTED TO
Farmers National Bank,
i
1
EXERCI~E
TRUST PO . 'JERS:
Princeton, Kentucky.
'
523
FEDERAL RESERVE BO.ARD .!OOJOUNCE1IE1JT
FOR Tllli ,'.'EJ!X ENDING DECE11BBH 21, 1923.
ADMITTED TO TH1 FEDERAL RBS . . HV.L: SYST:8rv1:
N 0 N
E.
CLOSED:
Crittenden County Bank & Trust co., I'larion, Ark.
Payson Exchange Savings Bank, Payson, Utah.
VOLUNTARY LI9.UIDATIOH:
The Farmers State Bank, S;prague, i'iash.
PERI\USSION GRaNTED TO EXDRCISE TRUST PO.JERS:
The
The
The
The
The
The
The
The
First National Bank, Brush, Colo.
Easton National Bank, Easton, Md.
Lewiston National Bank, Lewiston, ldc.ho.
annville National Bank, .Annville, Penna.
First National Bank, ''fi scons in HaJ?ids, Wis.
Oll First National Bank, Mount Vernon, Ind.
Pacific lqational Bank, Nantucket, Mass.
First National Bank, FrackVille, ~enna.
AUTHOR tzED TO .ACCll:c'T DRAFTS .AlrD BILLS Oll~
EXCHANGE ,Y.Ii TQ.lOO J."'BR CENT OF CAdT# .&'JD .§J.!1::.r?LUS:
Illinois Merchants Trust Co., Chicago, Ill.
'
!524
X-1530
FEDZRAL RZSERVE BOARD ANNOUNnEi,lENT
FOR THE 1.':EEE: ENDING DECZf'!BER 28, 1923.
ADMITTED TQ T1-IE
..fED~
RESER'T£ SYSTEM:
Total
---
caeita1
Surplus
resources
*zoo,ooo
;jy20 ,ow
"'220 ,000
50,000
20,000
429,034
5,000
82,912
DISTRICT NO. 8.
Lindell Trust Company,
St. Louis, Mo.
Franklin County Bank,
Washington, Mo.
]~STRICT
NO. 11.
Austwell State Bank,
Austwell, Texas.
VOLUNT.<Ji.Y LIQ,UID.Afl:ION ~
The Farmers State Bank, Sprague, \'lashingt.Jn.
M.l!JiGER:
The Citizens Trust Co., BuffalC~, N.Y., has merged with the
Marine Trust Co., Buffalo, N. Y.
PERMISSION GRANTED TO :.;xzRCISE TRUST 20\'!.SRS:
First National Bank, Lebanon, Ill.
South Texas National Bank, Galvest~n, Texas.
525
i..-3767
To: Federal Reserve Board.
Law
From:
July 2, 1923.
Co~m~tts~.
Tiie Law Comrnittee
Subj0ct: Roport on
:tal?
carefully
consider~d
N~w
Regulation.
t1'le proposed new
edition of the Board 1 s ree:,u1a.t ions, fee provf of which is attached
}:ere to,
ar~d
recormr.onds t;"at it be approved and adopted by the Board,
wDiC~1
except as to two points m .ct.eg1.1:.ation H,
are referred to the
Boa.rd without recomr •.enuation.
T:1ere is given belov a brief description of t:.e
have baen made in tr_e regula.t ions, in the
o~der
l·
Gen~ra;t._ Sta~'.J,.:t_C2!:1L_Prcvisions.
w::ich
in which they appear.
REG~ATION A-Di~counts m1der Sections
~ction
c~·~anges
13
and
13
(a).
This section contains
only a summary or para:;?hrD.se of the general statutory provisions effecting the rediscount cf notes, drafts and bills of excf.a.nge, and the
only changes made are suet as are necessary to make this section conform to the law as amended to da.te.
Section II.
Excha.nge eligible.
Gcn-Jral Character of _No_~;::_?2 __ ;1lr_§Jf~~?!ld_ Bills of
Subdivision (a) i:ac b.; en am0nd00. uy ins.srting in
tte first line tJ-..ereof imr:-JBdia tely bafore Le •,vord ''note" t. e word
''negotiabla", in order to incorporats intte r.:;;gula.tions tte well 3Stablished ruling of the Board
of
e:~;;cr.tanga
t~at
only neEotiable uotes, drafts and bills
are eligible fer rediscount.
J.t tha end of this subdivision
there :C.as also been inserted a requir.err.ent t:_at 1'the na.rr;e of the party
to such transaction must a.y.."'ear upon it
endorser. 11
The purpose o.f
t~~hi
:iS
g.ak.er. d.ra-:ter, acceptor or
ct.ang2 is to incorporate in the :regu-
lation the substance of the ruling puulisi-:ted in the Fadera.l Reserve
Bulletin for September, 1921,
w': . ici'l.
announced a rule which is m~rely a
--2-
X-3767526
corollary to the rule previously stated in suodivision (a).
Subdivision (c) of t-he old regulation conta.ined a statement of two
d..iffereni;.:rules, (1) teat pa.per offered for rediscount must not be
paper the proceeds of 1iJbi.:h have bean or a.re b
be used for investments
of a purely spec'C.l.J.tive ~haracter and (2) it must not be paper the
proceeds of which hav a te,m used for the purpose of lending to some
other borrowe:..·.
This
~ubci:i
·::.s Ln
~1as
been split into two subdivisions
in order that exception::: mignt be made to t;:J.e latter rule to covar two
classes of paper
w~ich
have been made eligible by the Agricultural
Credits .Act even though tl1e proceeds bave been usad for the purpose of
making loans to other borrowars ,- i.e.", papar of cooperative marketing
associations of the kinds described in Section VI (b) and factors' paper
of the kind described in Section VIII.
This part of old subdivision (c),
and the exceptions to the rule nave been incorporated in new subdivision
•
(b), and the remaining part of old subdivision (c) has been re-designated·
as subdivision (d) .
New subdivisions (c) and (>;1) are identically tLa same; as old subdivisions (b) and (d), respectively.
~on
section
r~s
III.
.Applications for Discount.
Tr.e language of this
been changed somewhat in order to clarify it, but the sub-
stance remains the same except that the latter part, which relates to
the amount of paper bearing the signature or endorsement of any one
borrower wLich :nay b;;; rediscounted for any ono merr.ber bank has been
changed
/
$0
as to conform to -t;,he provisions of Section 9 of the Federal
Reserve .Act as amended by the Act of July 1, 1922.
Section IV.
Promissory Notes.
T:le second paragraph of subdivision
(b} has n()t been changed in ::mbstance, but the phraseology has been changed
527.
X-3767
-3··
somewhat for the purpose cl .cla.:ri£ying wbo.t ..vas forrr.erly a. very ambiguous provision.
Sub-parag!'a.ph (1) of Bection I'V (b) h~:;~.s also been amended in
substance by inse::-th·.e; after the word
11
storage 11 the words
11
by a. valid
prior lien on live stock which is being D:'arketed or fattened for
ma.rket. 11
~his
The eifec-:: of
as to makers of notes Vvh:u.1.
amendment is to waive financial staten:ents
secured by such a lien on live stack.
c;..l'd
It wa.s n:ade at the suggel:>ti.)n of several of the Western Federal Reserve
:Banks who stated the.t it had
lon~
been their custom to waive financial
statements as to ndtes secured. by chattel mortgages on live stock.
Section VI.
Agricultural Pape:·
of a definition of agricultural paper
Subdivision (a) Which consists
~as
been re-drafted so as to
clarity the definition and broaden it so as to incorporate the latest·
and most liberal principles adopted by the
~oard
in determining what
constitutes agricultural paper and especially the principle that the
marketing of agricultural products or the carrying of agriculturSl.
products by the growers thereof pend.ing orderly marketing constitutes
an agricultural purpose.
This definition has also been changed by the
substitution of the new nine months' maturity clause
i~
place of the
old six months' maturity clause, to conform to an amendment contained
in the Agricultural Credits Act.
Subdivision (b) is entirely new and was inserted for the purpose
of incorporatiLg the provisioLs contained in the Agricultural Credits
Act whiCh make certain
cla~ses
of paper of cooperative rrarketing as- ·
sociations eligible for rediscount as agricultural paper.
subdivision except the
~.ast
All of this
paragraph thereof is simply a. paraphrase
528
!-3767
.-4~hE)
or analysis of the law.
that paper the
proc~::eds o{
last paragraph is a. corollary to the rule
which have beuv .J.Sed for permanent or fixed
investrr£nts of for gny other capital
~urpose
is ineligible for rediscount.
It is inserted iu tJ:-ds ra:::-t of the regulation in order to obviate the
necessity of ar.swering
r'JJnz.r
inquiries as to the eligibility of the class
of paper described which cleA.:dy is inelig5.ble even under the law as
amended by tha Agr.icul ~ur3.·'. ·;r-cu ts .Act.
Subdivision (c) is exactly the same a.s the corresponding portion
of the old regulation, except that the words "six months" which previously
appeared immedia.tely before the words "agricultural paper 11 have been
stricken out.
Subdivision (d) is entirely new and covers the redisaount of agricultural paper for Fedaral Intermediate Credit Banks as permitted under
the second paragraph of Saction
13 (a) of the Federal Reserve Act as
amended by the .Agricultural Credits Act.
Section VII.
Sight Drafts secured by Bills of Lading.
This
section is entirely new and was inserted for the purpose of covering a
new provision inserted in Section
Agricultural Credits Act.
13
of the Federal Reserve Act by the
It is merely a paraphrase or analysis of the
law except in one respect in which an interpretation of the law ha.s
been attempted, i.e., the law says that all such bills shall be ~orwarded
promptly for collection and "demand for payment shall be made with
reasonable promptness
destina.tion."
a.:t~
the arrival of such staples at their
In the re£'1.llation this is interpreted to trean that all
such bills of exchange shall be forwarded promptly for collection and
demand for payment shall be zr.ade promptly, unless the drawer instru:::ts
-5-
X-3767
529
that they be held until arrival of car, in which event they ~st be
presented for payment within a reasonable time after notice of arrival
of such staples at their destination bas bee.."'l received.
This is be-
lieved to be a correct and practical interpretation of the law and one
which fairly cax·ries cro.t the intention of Congress.
§ection VIU.
Fac.tors 1 Paper.
This soction is entirely new and
is merely a paraphras~ of th(::l law, except that one ambiguous phrase
has been interpreted.d' The law says that "notes,. drafts and bills of
exchange of factors issued as such making advances
exclusive~
to pro-
ducers of staple agricultural products in their raw stato shall be
eligible for such discount.n
This ndght be construed as making eligible
only the paper of such factors as make advances exclusively to producers of agricultural products in their raw state, but such an interpretation would exclude the paper of all factors who make advances
to any one else.
It is believed that this is not what .,was intended, and
the provision has been construed in the regulation to apply to the
paper of all factors issued as such fg: the purpose ~ nak:i.ng advances
exclusively
~
producers
£f agricnltural
products in
thei~
raw state.
This is believed to be a fair interpretation of the law and one which
carries out in good faith the real intent of Congress.
Section X.
Eligibility.
The first paragraph of this section has
been changed by strilQ.ng out the words trof not more than three months,
exclusive of days of grace", and inserting in lieu thereof the words
"not greater than that prescribed by Sectior.. XI (a). ri
The purpose of
this is to make it possible to cover in a different)sectian the amendment to the law naking si.x months 1 acceptances eligible for rediscount
530
-6when drawn for an a.gricul i~ural PQ.rpose and
X-3767
aoou:~.·ed
at tha time of ac-
ceptance by warehouse rece:t.pts. or other such documents conveying or securing title covering readily marketable staples.
Section (:i) has been amended by adding.at the end the words nor
between dependencies or insular possessions and foreign countries.n
This amendment cover3 a class of acceptances which has always been eligi'ble under the law, but wh:l.nh.
lation.
~,,as
over looked in writing the old regu.-
The remainder of this section is identically the same as the
corresponding part
Section XI.
o:
the old regulation.
Maturities.
Subdivision (a) is entirely new and was
inserted for the purpose of covering acceptances draw.n for an agricultural purpose and
se~ured
at the time of acceptance by a warehouse
receipt or Other such document conveying or securing title covering
readily narketa.ble staples, which acceptances were made eligible for
rediscount with maturities up to six months by an amendment contained
in the Agricultural Credits Act.
Subdivision (b) is identically the same as Section IX of the old
regulation, except that the words not not more than three months, exclusive of days of grace,. have been stricken out and the words "not
greater than that prescribed under (a) n have been inserted in lieu
thereof.
~ rema.inder of Regu.lation A is identically the same a.s the old
· regu.lation, except that whereve:r:. the word "rediscount" occurs in the old
regu.lation it has been ohanged to ndiscount", in order to meet a suggestion as to phraseology maae by the Gover.nors of several of the Federal
~serve
Banks.
531
X-3 767
REGULA:J:liON B4 QPan Mt..rket Purchases.
There :!las be::n no
sub$ta...~tial
change in this regu.lation except that
the ondssion therefrom of subdivision (c) of Section II, which was inserted. by an amendment adopted by the Board uader date of Decembe.r 19.
1922, making a certain restricted class of acceptances of cooperative
marketing associations eligible for purchase lll the open market with
maturities upto six months.
This provision has been completely super-
seded by the amendment contained in the Agricultural Credits Act which
makes a much broader class of acceptances drawn for agricultural purposes
eligible for rediscount with maturities up to six months.
the first
parag~ph
Inasnuch as
of Section II of RegQlation B in general terms makes
eligible for purchase on the open ma.rket all bankers 1 acceptances which
are eligible for redisnount under Regulation A if secured in the manner
required by the Agricultu=al Credits Act, subdivision (c) of the old
regu.lation is now entirely unnecessary ood would only cause confusion
if retained in the new regu.lation.
The first paragraph of Section II bas been rewritten and clarified;
but the substance of it has not bean changed.
· REGULATION
c.
Acceptances of member banks.
This regulation is identically the same as the old Regu.lation C,
except for slight
cha~ges
in phraseology which were made in order to
describe accurately the statutory provision referred to in the first
section thereof; and wherever the expression "per centum" occurred in
the old regula tier. it has been changed to ':per centi! ,in order to make
the "style" uniform.
532
-8-
REGULATION D.
Time Deposits and
~avings
Accounts.
This regulation has not been changed in substance, but section.
nunmers have been inserted Qnd certain inaccuracies in the
from Section
19
~otatian
of the Federal Reserve Act have been corrected.
REGULPTION E.
Purchase of Warrants.
This regulation has been rearranged and the appendices heretofore
published sp:jarately have been incorporated in tne body of the regulation.
No material change has been made in the substance of the regulation,
however,
exce~t
the elimination of the 10 per cent limitation an the
amount of warrants of any municipa.li ty which might be purchased by a
Federal Reserve Eank with the endorsement of a member bank.
This limit-
ation did not apply to the pu.rcbase of warrants with the endorsement of
nonmember banks, and it was contended that it operated as a discrimination
against member banks and in favor of nonmember banks,
This matter was
calle.d to the attention of the Board by Governor Youug and was discussed
at the last Governors' Conference.
REGULATION F ~
Trust Power::;.
No change has been made in this regulation.
REGUlATION G.
Loans on Farm Land and Other Real
Estate.
-=~~~~~~--~~~~~~
This regulation has been changed in only one respect.
Paragraph
(g) thereof has been changed so as not to require notes representing
real estate loans to be cancelled at maturity and new notes taken in
their places.
It now per':nits an e:q>iring note to be renewed or extended
for an additional period.
ijt1e important safeguard that the bank Illll.St 11ot
obligate itself in advance to make such a renewal is retained, and the
only thing changed is the ma..'lner of making a renewal.
X-3767
-3REGULATlOJ.T Y.
533
M"Dlborship of Stat6 Banks •
This regulation has been changed materially so as to conform to
the amendments to Sectior.. 9 of the Federal Reserve Act contained in the
.Agri.dultural Credits Act of 192 3, which make a State bank with a.
capital equal to not less than 6.0 per cent of the amount required for
the organization of a na'.-ior.a.J. bank eligible :r:'or admission to membership under certain te1·ms
vides that the
Feder~l
a·:1-:~
coni.i tions.
Section
9 thus amended, pro-
Reserve Board shall prescribe rules and
re~
lations fixing the time within which and the metho.ds by which the unimpaired capital of such banks
~hall
the amount required to entitle it to
be increased
be~~me
~.of
lli!! income to
a national banking asso-
ciation in the place where it' is situated under the National Bank Act,
"Provided , That every sunh role or regulation shall require the applying
bank to set aside annually not less
come of the preceding year
~
than 20 per centwm of its net in-
a. fund exclusively applicable to such
capital increase. " · Such rules and regulations have been incorporated
in subdivision 2, of Section I of the new regulation.
There is one point to which the Comni ttee desires to call the
Board's especial attention: The time within which such banks shall increase their capital.
named, but this is
~ch
In the regulation as now drafted 10 years is
a vital point that the Committee. hesitates to
name this time except tentatively.
The time originally
~ggested
five years; but it was feared that it would be absolutely
was
i~ossible
for many of the smaller bHrJcs to increase their capital in the reqaired
8.DX)unt (66-2/3 per cent) "ou'.; of net income 11 as required by the Act
within five years.
It probably would be
eq,~lly
impossible, however,
534
X-3767
. JO-·
their
for many of the smaller banks to increase
out of net income in fifty years.
~apital
such an amount
·The Comnittee has suggestad ten
years as a reasonable time limit and one which does not postpone the
date of such increase so far in the future as to practically nullify
·the
re~uirement
that the capital must be increased.
There has also been ins&rted in
Secti~.
IV of the regulation a
new paragraph (numbered lt) spe0ifically providing that all banks admit ted to membership shall cnmp)y at all tirr.es with any and all conditions of
~embership prescribe~ ~Y
the Federal Reserve Board at the
time of the adndssion of such member bank to the Federal Reserve System.
This has been inserted
becau~e
+.here 5.s
r>..
technical difference between
the Board's power to p1·es"riiJe ·1c·Jr.oi ti~msn of membership and its power
to prescribe
0
regulat;tons" governing state member banks, and Section
9 authorizes the Board to expel state banks from the System for failure
to comply with the Boar·dts regulations but does :hot authorize it to
expel them for failure to corrply with conditions of membership.
There is another matter in this regulation which the Coundttee desires to call to the Board's attention~
The latter half of the second
paragraph of Section V expressly authorizes the examiners of the Federal
Reserve Banks to cooperate with the State examiners in examining state
member banks.
This is inconsistent with the rulings recently made on
the subject and probably is not in accordance with the law, since
Secti9.n
9 apparently
cont.e~lates that the exandnations of a State member
bank shall be e1ther Sta"'ie exa"ninations or Federal examinations..
It
provides;.that the expenses vf Federal examinations shall be assessed
again-st the bank examined "!:Jut
tr~at
the expenses of a State examination
•
535
•
X- 3767
shall not be assessed by tbe Federal Reserve Bank against the bank
examined.
The express mention of State examinations and Federal ex-
aminations impliedly exclude joint examinations, which are not mentioned
in the Act at all, and the General Counsel is of the opinion that joint
examinations are not authorized.
For this reason he recomr.oonds that
all but the first three lines of this paragraph.•bc stricken from tho
regulation.
This provision hao; beE';ln in the regulation for In9llY yearst
however, and theCOlliili ttee hesi -~a ted to strike it out without first
subrndtting the matter to the Board.
REGULATION I.
Increase or Decrease of Capital Stock.
Section I (a) has been amended so as to conform to the practice
agreed upon between the Board and the Comptroller's Office in the fall
of 1921 with reference to applications by newly organized national banks
for membership in the Federal Reserve System.
Section II (b) and II (c) have also been amended so
the receivers of
insol~ent
~s
to require
znember banks and the liquidating agents of
member banks 1n voluntary liquid.ation to apply for the surrender and
cancellation of the Federal Reserve Bank stock held by such banks within
six months after their appointment.
REGULATION J.
Check Clearing and Collecyion.
This regulation has been rewritten and brought up to date.
It has
not only been amended by the addition of the two new paragraphs recently
adopted by the Board, but it has also been entirely rearranged and reworded so as to conform to present practices and to the uniform check
collection circular recently adopted by all the Federal Reserve Banks.
Each section of the new regulation will be discussed briefly in order.
'
..
X-3767
536
Sections I and II are identically the snme as the first three
paragraphs of the old regulation.
Section III.
Subdivision (P.) is identically the samt: as condition
(1) of the old regulation, except that the words "in acceptable fundstt
have been inserteC!.•
Subdivision (b) is the same as condition (2) of the old regulation
except that t:he 'Nerds "in o+~e.l:'
~~,ederal
Reserve Districts authorized ·
to route direct", have been sutstituted for the words "regardless of
their locativn" and the words "which agree to rami t at par in acceptable
funds 11 have been substituted for the words llfihose checks are collected
at par by the Federal Reserve :Bank."
Subdivisions (c) and (d) are tl1e two new provisions recently
adopted by the Board.
Section IV.
The first sentence is substantially the same as the
last paragraph of cm1dition (7) of the old regulation.
The remainder
of the section correctly describes the present practice of the Federal
Reserve :Banks and
superse~es
condition (3) of the old regulation, Which
is obsolete.
Section V. correctly describes the present practice of Federal
Reserve Banks in collecting checks and contains the limitation of
liability and other safeguards against liability on the part of the
Federal Reserve Bank which are contained in the old regulation and in
the uniform check collection circular recently adopted by all the Federal
Reserve
Banks~
Itrr.takes tho place of condition (4) and the first four
lines of condition (8)of th3 old regulation.
It also permits Federal
Rea.erve Banks to guarantee prior endorsements, a suggestion submitted
537
X-376·7
-..lJby the Collection Comudttee, made a topic of discussion at the
Governors' Conference and referred··,t,o the
action.
F~deral
la~t
Reserve Board for
This matter was referred to the Board's General Counsel who
has suggested that it be covered by this arr.endment to Regulation J.
As a. practical matter, it is necessary for Federal Reserve Banks to
·guarantee prior endorsements if they are to handle checks for collection and most of them have
bi¥'~
doing it, though it probably con-
stituted a technical violation of. the old Regniation J.
Section VI.
Subsections (a) and (b) are substantially the SalJ19
as the first two paragraphs of condition (6) of the old regulations ..
Subsections (c) and (d) take the place of the third paragraph of condition (6) of the old regulation, but differ from it sufficiently to
fit the present practice of the Federal B,eserve Banks.
Section VII• Is identically the same as the last five lines of
the old regulation.
BEGUlATION
x.
Edge Corporations.
There is no change in this regulation.
EEGU!m:'ION L.
Clayton Act.
This regulation is the same. as the old regu.lation with the following exceptions:
1.
The definition of .the term "national bank" has been broadened
so as to include all banking institutions organized or operating under
the laws of the United States, and corresponding changes have been made
elsewhere.
2.
The words "such State bank has" have been striclien aut of
'
.
538
X-3 767
-11-
subdivisions 7 and 3 of Section III and the words "either or both
of such banks haven have been inserted in their place.
3·
There has been inserted in Section
nr under
the sub-head
"Substantial Corrpetitio:nn the statement of general principles adopted
by the Board for its guidance in determining whether two or more
banks are in substantial competition.
5llie Law Commit tee
c. s..
Hamlin
Edmund Platt
Walter wyatt, Secretary
539
FEDERAL RESERVE BOARD
WASHINGTON
X-3768
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Dear Sir:
This will aCknowledge receipt of your letter
expressing your approval of the par clearance system.
Your letter will be brought to the attention of the Board and
will have due consideration.
You are advised that there is opposition by.the smaller banks
of the country to the par clearance of checks, and they are threatening to take the matter to Congress with the purpose of having the
Federal Reserve Act amended or repealed.
The question of legislation amending or repealing the Federal
Reserve Act is one for Congress, and not, as I take it, for the Federal
Reserve Board. If Congress is to be importuned to either amend or
repeal the Federal Reserve Act, the result will depend largely upon
the business men of the country, if they desire the perpetuation of
the Federal Reserve System a.nd the par clearance of checks.
· The Board in attempting to follow the rules laid dovvn by the
Supreme Court of the United States, and even those rules are now being
questioned, so it would seem there is to be some further agitation, and
possibly litigation, pertaining to the Whole subject.
You will understand that the Board is an administrative body, and
only attempts to enforce such laws a.s may be enacted by Congress, and as
construed by the courts.
Governor.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
X-3769
THE FEDERAL RESERVE BOARD
SUBJECT:
July 5, 1923-
Ed~
Act Corporations;
Report of Condition as at the Close of Business,
June 30, 1923.
Dear Sir!
Under the prov1s1ons of the Board's Regulation
K, Series of 1920, governing banking corpora.tions authorized to do fore,ign banking business under the terms of
Section 25 (a) of the Federal Reserve Act, you are hereby
respectfully requested to furnish the Board with a report
of condition, as at the close of business June 30, 1923,
giving in detail all assets and liabilities of your
corpora.tion and the data asked for in the accompanying
memorandum.
Kindly acknowledga receipt.
Very truly yours,
Governor.
(Enclosure)
TO EDGE ACT
CORPO~TIONS•
'
.
X-3769a
-----·---···
REPORT OF CONDITION TO FEDERAL RESERVE BOARD·
The following information is desired in connection with the report of
condition to be made as at close of business June
30, 1923.
HEAD OFFICE AND DOMESTIC BRANCHES COMBINED
l. Detailed balance sheet showing all assets and liabilities, including
contingent liabili ties9 It is reque·sted that the items for which detailed. schedules are requested below be shown as separate accouuts an
the balance sheet.
·
2. Amaun t of loans
(a)
' (b)
(c)
and discounts, divided: Secured - tmsecured
Demand
Time
Overdrafts and other adva..Ylces
Total
3·
Detailed list of investments (including stock of affiliated institutions) showing:
.
(a) Issuing Govemment or corporation
(b) Inte=est rate
(c) Maturity
(d) Par value
(e) Book value
(f) Approximate market value
4.
Ownership o! stock of affiliated institutions:
... _~. .
(a)-· Per cent omed by yourselves
-----.:_(b) Per cent owned by foreign Governments
(c) Per cent owned by individuals and corporations
5· List of b~~ branches, etc. having balances due to your corporation
with amount for each bank separately:
(a) Government bank
(b) Domestic banks
(c) Foreign banks
(d) Foreign branches, agencies and affiliated institutions
6. List of banks, branches, etc. having balances due from
;y'our
corporation
w1 th amount for each bank separately:
(a)
(b)
(c)
Domestic banks
Foreign banks
Foreign branches, agencies and affiliated institutions
...
- 3 ·~-·
(c)
Nama
..
List of drawers of u.raft::> acceptati, with to.t~. ·.
aggrae;a..t<a liaoility
iilxca,::; of 10 per. aen~···. · ·.
of sub;:;crib 30. capi ~al and. aurv-lus showin5: · · ·
in
Aiidrass
AggE\3gat;, Liaoility
.Amount of acceptancas out<>tan;;tm 6 drav.'ll for tha pu.r_po.;;;a
of furniah1nc; iollar exchange.
Rasarve ag.:.inst outstana.ing acceptances:
1-Requira~: 15~ a5ainst ail acceptancos outstanding
which mature in 30 ciays or less:~-----3% against all acceptancc~s otitsta.n(iing
·Nhich matura in mor;:; than 30 days~$.____
Total reserve requir~u against
acceptance liability $.-~-------2..,.H~lci:. Cash and Bank, bala."lcas (**) $'---...---·Bankers acceptances
$--~----
Securities apvroved by
Federal
Rds~rve
in detail)
Board (List
.
$______
Total raserve held·$~---------------12~
General limitations:
Per C$nt ciaposi ts and acceptanc:3s outst.aniiing to subscr.ibad
capital and surplus
13.
List of· officers c;..mi ciir.;ctors.
14. List of stockholu.ers, snowinr, numbor of
shar~s oll'lillSd. .by ea.cil.
15y List.
of branChis, sub-branchas, agenci~s, offic~s and affiliatad.
institutions - date of opening of oa.ch ani tho3 -lOCi.i.tion.
·
16. Da.t.a of last .examination or au<lit - by whore. mad.~.
(*) If s~~urity, state what tha security consists of, g1v1ng quantity and
approximat_a valu<3.; if a. bank guaranty, t:,iv~ name and loc=1tion of bank.
(>k*) Ex.cess amount as sho·Nn in 10-(g) not raquirad. for r;;.sai"IIa agains -:-.
daposi t 1 iabili ty ..
NOTE: Where a sched-ule d·oes not refer to your corporation, please indicate this by inse.rti.ng the word "Nona11 •
'···
·~.
,.
·.
..
,
543
FEDERAL RESERVE BOARD
WASHINGTON
X-3770
6' 1923·
ADDRESS OFFICIAL. CORRESPONDENCE TO
July
THE FEDERAL. RESERVE BOARD
stiDJECT;
Foreign and International Banking Institutions;
Report of Condition as at the Close of Business,
June 30, 1923.
Dear Sir:
Under authorityof the agreement entered into by your
corporation with the Federal Reserve Board, you are hereby respectfUlly requested to furnish the Board with a report of condition, as at the close of b~siness June 30, 1923, giving in
detail all assets and liabilities of your corporation sud the
data asked for in the accompanying memorandum.
Kindly arrange to file the report of your Head Office
and domstic branches combined as soon a.s possible. Separate
reports of foreign branches and affiliated banks should be sent
as soon as they a.re received by you. It will be spprecia.tecl if,
after the reports have been received from all of your foreigll
bre.nches and affiliated banks, you will have prepared a consolidated statexnent of your corporation to be sent to the Board..
While the Board has ruled that no specific reserve baa
to be carried by foreign branches or affiliated institutions of
.American banking corporations against deposits a.broa.d, it, nevertheless • wishes to be advised as to the average reserve. Qa.J"ried
by all such branches and affiliated institutiol'la or corporat1 C)DS
which are operating under. ag.re~nt witQ. t_he Fe4eral Reserve
:Board. You are• ~AA~foJ!e, reques-te.i \o :ha.Ye each of you:r foJ<eie;n
branches • agencies, offices a.nd subsidiary banka fumish f(N.•
for transmission to the Boa.rd • a. report of the average rese~
carried during the month of June, 1923, against deposit
liabill ties in the form shown in the aoc~ing mamoraa<}um.
Kindly acknowledge receipt.
vll'J '1't'U1/ ,OW't (
(lihclosure)
X-37708.
REPORT OF CONDITION TO FEDERAL RESERVE BOARD.
~
following information is desired in connection with the report of
condition to be made as at close of b~stness Jt1ne 30, 1923.
READ OFFICE AND DOMESTl C :BRANCHES COMBINED
1. Detailed balance sheet showing all assets and liabilities, including
contingent liabilities. It is requested that the items for Which detailed schedules are requested below be shown as separate accouuts on
the balance sheet.
·
2. !mount of loans
(a)
' (b)
(c)
3·
and discounts, :iivided:
Secured - Unsecured
Derr.and
Time
Overdrafts and other advances
Total
Detailed list of investments (including stock of affiliated institutions) showing: .
(a) Issu:l.r~g Govemment or corporation
(b) Interest rate
(c) Maturity
(d) Par value
(e) :Book value
(f) Approximate market value
-
·- .... ...
4.
Ownership o! stock of affiliated institutions:
... _·
(a)-. Per cent omed by yourselves
··---.:.(b) Per cent owned by foreign Governments
(c) Per cent ov.ned by individuals and corporations
5·
List ot b·anb~ branches, etc. having balances due to your corporation
wi tb amount for each bank separately:
(a) Government bank
(b) Domestic banks
(c) Foreign banks
(d) Foreign branches, agencies and affiliated institutions
6. List of banks, branches, etc. having balances due from
with amount for
(a)
(b)
(c)
;your corporation
each bank separately:
Domestic banks
Foreign banka
Foreign branches, agencies and affiliated institntions
- 2 -
7.
· X-3770&
::tlills payable: (Primary obligations of reporting corporation representing money borrowed)
b) Payable to:
(b) .bmount
(c) Inter~st rate
(d) Matu.r i ty
(e)
Collateral - give list
g. Rediscounts (other than acceptances sola. Rith enciorsement):
(a)
Arcount
Co)
Maturity
Rate
Vli til vhom
Secured or un.oecured - if sa cur ea., give detailed inforl1ld,tion regaru.ing security.
(c)
(d)
(~·)
9· Total liability
for acceptance;;; sold with encior~ement;
10. Deposits in the Unit.::ci States:
(a) Net demand cieposits (after deducting uncollected demand items payable within United States - exchanges)
$
Reserve Required $------~------(b) Time Deposits $
Reserve Required $--~---(c) Total Resarv::; required against deposit l ia-oil ity $.____
Reserve held:
(d) Cash on hand $..,....._____
(e)
(f)
(g)
Bank balances ~·-----:-
Total cash reserve hdd $
Excess or deficit of cash reserve held over reserve
required $._- - - - ____
-------
11 • .Acceptances:
(a) Acceptances outstana.in~:
1. r&aturing in 30 days or less
2. Maturinc., after 30 day:a
Total outstanning acceptances
(b) Subscribeu capital anu surplus
E.xc~ss g, over :!2_
Acceptances secured
.Acceptances unsecured
$
------
~'
~
$. _ _ _ _ __
$
$
$
Amount required to be secureu under
agreement with Federal 1\eserve Board $
(Give list of security held as required
above giving description and approxi-
mat;;; amount)
•
546.
-3(e)
Liat of o.ra.wer:& ot: o.n.tta accepwe • .S.th to.~.
aggre~t~ l~Uity in 'C)4C-'~* of 10 PG~"·.~*·.
of t.ub&crib~. Cei.piuU an.i aurplu •bowing,: .
+
!!!!!,
Mclraaa
.
(<1)
(a)
Buineaa
+
..
+
+
Securttt*.. ~ Jaara.ov.
.!!te~aa.t;l Lia.oi!_!tt
of aeeeptanca• outotam.un0 uam fo<t tha ~a
excbanga.
haftVe atpinat outt.tam~ accep~s:
l-Alquir3.j.: 15, &&dust all acceptmeqs out•tandina
«hich r:atwe in 30 48¥.• or less:""~~'·_·_ __
31' apinat all accaptaDcaa ·outa~ing
which ~tura in 1rt0re than )0 ~;t..__.__
!otal reserve r4qUir~ ~at
Amount
of
t\lrnia'h~ ·.iollar
a.:oaptanca liaoility $
2-Bel<1:. Cash and. Bank balancaa (**) $..
.Banlta'rs. acceptances
houri ties ap.,roved by
'ledaral !Ws~ne Joard (List
in detail)
··
:
$,__ _ __
$,_ _ __
. total raaerve belA·~:;.·- - - - - - + +
..
++
Per C$nt aepoaiU. and. acoeptanc1s outata.Min& to subscr.ibe4
cqital aDd. surplus
·
·
ah-
lJ. List ot·otficeTs ano. dirtctors. · -
14. List. of atockholaera,
nu.~r
of
~- 0~·-
sach.
15/ List. of branCh~•, sub-branches, 6Sei1Cios. offio~• and atfUia.~.
mstt.tutions - elate of opening ot• -.chana th~ locauca.
••
.·
...
,
··~
(*) If ea.:u.rity, state mat tha security consists o£. givine quantity and.
approximat~ valua; ~ a. bcmk guaranty. 6 ivo mme am locc.tion of ~·
..
·. ·: t**)
*
Excaes amount as ahown in lo-(g) not reqUiroci Jor
<l•poUt liability...
.
..
.
t"... &erva
agatna~
.
·· .. ...
..
+
+
+ +
*
...
. .. .
+
...
.. .. .. . .
..
... '..
+/+
.
"
-4-
1. Balance si1eet to be furnished by each, sho·Ning in detail all assets
and liabilities, incl.udine, contin6ent liabilitias. It is re ....
quested th:.1t the items for ~vnich detai.ieci. sc:ned.ules are requested
below be shown as separate accounts on the balance sheet.
2. Amount of loans and d.hcounts, showing:
Secured - Unsecured
(a) Demand
(o) Time
(c) Overdrafts and other advances
3·
Detailed list of inve~tments, showing:
(a) Issuing Government or corporation
(b) Interest rate
(c) Maturity
(d) P3.r value
(a) Book value
(f) Approxirnate market value
4. List of banks having balances due to your branch with amount for
each bank separately:
(a) Government bank
(b) Banks and bankers
(c) Head Office
(d) Other branches, agencies and affiliated institutions
5·
List of banks having balances due from your branch with amount for
each bank separately:
(a) Banks and bankers
(b) Head Office
(c) Other branches, agencies and affiliated institutions
6. Bills payable: (Prtmary obligationscf
re~orting corporation
representing borroNed money)
·
(a) Payable to
(b) Amount
(c) Interest rate
(d) Maturity
(e) Collateral (Give detailed list)
1· Rediscounts:
(a) Amount
(b) Maturity
{c) With whom
(d) Rate
(e) Secured or unsecured - if secured, give detailed data
X-3770a
8. Deposits.
Dollar
Equivalent
(.::..) Go·r.;rnrn;:;nt u.epos1ts (if sc:c·.1rad '-'i:e
list of collateral)
Ot~·.ar
J... Der;.and
:::.. Time
dapo~i ts
3 . De rr.,;;.nd
4. Tu:-;e
'Total
(b) Dcpo.:oi t:, - iJOiv p:.1.yaole
1. Local Currancy
2. Dollar
3· Sterline;
4. Othe rwi "e
Total
9· Special Reserve Stat<:Oment -
---
,weratoe for month of Decembar, 1922.
(a) lJ.et deposits:
1. P~yable in local currency
2. Payable in dollars
3.
Payable in st0rl ing
4. P,1yaole Ot:1en1ise _ _ _ _ _ _ __
Total
(b) Rcsarve:
1 . .AJ:iount, if any, and composition requirad by
local laws.
2. AL;ount held:
Per cent to
Amount
n::t deposits
(a) Gold and Silver .... ~;b
(b) Local currency .... .
(c) Other cash ........ .
(d) Bal.1nce in local .. .
Govt. bank ....... .
(e) Other reserve funds
Total
-------------
-610. Date of L::..st a::.amination or auiitNOT;+;: 1. Whara
pla:.:..~e
x-3770a
oy
whom rrau.a.
ct. schau.uL~ QOc.:.
not refer to your corporation,
ind.icd.te this by insartin6 t:ne word "1Jone 11 •
2. Reports for forei:Jl branches, agencies, etc., s:nould
be in terms of United Statas dollars, stating the rate
of exch:m::.e at which th3y wsre converted.
550
FEDERAL RESERVE BOARD
WASHINGTON
X-3772
July
SUBJECT:
6, 1923.
Financing the Marketing of Agricultural Products.
Dear Sir:
The Federal Reserve Board wishes to call attention to the
importance of the Federal Reserve System functioning effectively in
providing adequate financing for the orderly marketing of agricultural products.
Your attention is called specifically to the near approach
of the American .vhca.t harvest. The movement of this comrr.odi ty to
the world markets will soon be on and will require financing, as
well as expert handling, to insure an orderly marketing movement
and avoid periodical congestion at terminal market points, which is
very much to the disadvantage of the producer in that it permits a
~ombined b1Jying arrangement on the part of foreign coWltries.'
-·
-
The Board is advised that the agricultural situation in
many sections of the country has materially improved over what it
was in the three previous crop seasons. There a~e, however. some
weak spots that require studied attention with a view of assisting
the producer in obtaining full advantage emanating from orderly
marketing.
The Board would like to suggest that officia.ls of all of
the Federal Reserve Banks. including branches, iriform themselves
fully regarding the added facilities for agricultural financing made
possible through legislation enacted during the la.st Cong:t-ess. This
done, the FederaJ. Reserve :Sa.nY..s should give the info:rma:tion to the
public, especially to the member banks, cooperative marketing
agencies, and producers and buyers of agricultural products.
The Board feels that any activity on the part of the
Federal Reserve :Banks will give added assurance to the producer and
his marketing a~ncy that added credit facilities are available and
will also be helpful in promoting mutual confidence Which should be
instrwnental in pointing out any additional steps that can be
properly taken in the process of orderly marketing of agricultural
products,
:By order o:f the Federal Reserve :Board.
Very truly yours,
Wm.
w.
Hcl:ton,
Secretary ..
TO ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE
BO~'JID
X-3773
STATEMENT FOR THE PRESS
For Relea.se in Morning Papers,
Saturday, July 7, 1923.
The following is a. copy of a letter addressed to all Federal
· Reserve Agents today:
"The Federal Reserve :Board wishes to call attention to the
importance of the Federal Reserve System functioning effectively in
providing adequate financing for the orderly rw.rke ting of agricultural
products.
11 Your attention is· called specifically to the near approach
of the America.n wheat harvest.. The movement of this commodity to the
world markets will soon be on and will require f.inancing, as well as_
expert handling, to insure an orderly marketing movement and-~oid
periodical congestion at terminal market points, which is very much
to the disadvantage of the producer in that it permits a combined
bu;yin_g arrangeroont on the_ part of foreign countries.,;
"The
Boardis-advised that the agricultural situation in
II'&'l.Y sections of the country has materially improved over what it was
in the three previous crop seasons. There are, however, some weak
spots that require studied attention with a view of assisting the
producer in obtaining full advantage emanating from orderly marketing.
"The :Board would like to suggest that officials of all of
the Federal Reserve Banks, including branches, inform therr~elves
fully regarding the added facilities for agricultural financing made
possible through legislation enacted during the last Congress. This
done, the Federal Reserve Danks should give the information to the
public, especially to the member banks, cooperative marketing agencies,
and producers·and buyers of agricUltural products.
"The Board feels that any activity on the part of the
Federal Reserve. Danks will give added assurance to the producer a.nd
his marketing agency that added credit facilities are available and
will also be helpful in promoting mutual confidence which should be
instrumental in pointing out any additional steps tbat can be properly
taken in the process of orderly marketing of a~ricultural products .. "
OFFICE CORRESPONDENCE
TO The Federal Reserve Boa.rd
EBOM Edgar W. Freeman-Assistant Counsel.
X-3775
July 7, 1923.
SUBJECT: Further discussion as to
Havana. Agencies.
An informal meeting 11a.11 held on July 6, attended by Governor
Crissinger, Mr. Hamlin, Mr• Eddy, Mr. :Bullen from Boston, Mr. Adelson of
Atlanta, and ~self, at WhiCh a number of points were discussed concerning
the proposed operation of the two agencies in Havana. under the Board• s
resolution of June 27'· This uemorandum contains a brief outline of
what took place at the meeting and is merely for the information of the
Board members who were not. present.
The first question discussed was whether or not under the Board's
resolution l3oston was required to pay for all bills purchased by it in
Federal Reserve notes of Atlanta. Mr. Adelson apparently was of the
opinion that so long as Atlanta notes were available for use Boston
would have to use them in the purchase of bills. Mr. Hamlin referred
to the concluding sentence in paragraph 3 ot the resolll.tion and advised
Mr. Adelson that this clearly contemplated the right of :Bost.on to use
a.ny form of currency it saw fit, except Federal Reserve notes, in the
purchase of bills. In this connection, Mr. Bullen sta.ted that :Boston
did not plan to increase the supply of other currency in Cuba, but would
make use pr~ily of Atlanta note~ in purChasing bills.
The question of the exchange of fit for unfit Atlanta. notes was
diScussed at considerable length. Mr. Dullen argued that the primary
purpose of the establishment of these agencies in Cuba was the purchase
and sale of bills as provided in Section 14 (e), and that mile 1.t. was
also contemplated that ~Cuba should be supplied with clean currency, the
new mone;y should come in only through the purchase and sale operations
:J;>rovided for by the resolution. Mr. Adelson contended, on the other
hand, that the Atlanta. agency might exchange fit Atlanta notes for unfit
Atlanta z,lotes, whether or not the paying out of new notes was connected
with a purchase or sale transaction; in other words, that the Atlanta
agency could function purely as an agency to supply new notes in place
of old notes. It was the opinion of the :Boa.rd members present· th).t,
even conceding that there was no objection under the terms of the law
to Mr. Adelson's proposition; the resolution contemplated that mw cur- ..
rency should be furnished in Cuba solely through t~ bSllking operations
to be carried on by the Boston agency. It was argued that if the Atlanta
agency could call in its unfit notes and replace them by new notes without limitation, this would prevent the Boston bank from tra.lilacting the
bulk of its anticipated business, that is, the sale of cable transf$rs,
and the Boston bank would accordinsly be deprived of its norual profit.
Mr. Hanain stated his view that under the Board's resolution it is conterJillated that Atlanta should engage in the business of furnishing
~ts notes and maintaining its circula.tion, that Boston should enga~
in the business of buying and selling bills, and that Atlanta should
not encroaCh upon Boston's business by supplying new notes free of charge
and without reference to Boston's operations. It was brought out that
while any bank in the United States might deposit money in the Atlanta.
..
., ..-.3
.
,..,,.~,.-.,
Q...· ·:~'
X-3775
-2-
head office, or its Jacksonville or New Orleans branches, and receive
new Atlanta notes in the United States, it. could not, upon such a. deposit, properly receive new Atlanta notes in Havana, except through a
transaction with the Boston Dank, because this would amount to a cable
transfer mich, under the terms of the resolution, only the Boston bank
'f!'a:y negotiate.
Some discussion wa.s had as to whether or not the Atlanta bank
might increase the circulation of Atlanta notes in Cuba without limitation , as for example, by purchasing all the other currency which
circulates in Cuba and replacing it by its own notes, or by sending its
own notes to Cuba against deposits received by its head office or branches
in the United States. The Board members stated emphatically that the
Atlanta agency could not do this under the resolution, because it was
contemplated that Atlanta should merely maintain its circulation, subject
to reasonable increase, but tha.t such increa.se should result only from
the purchase and selling operations of the Dbston agency.
Mr. Adelson further argued on behalf of the Atlanta bank tba t the
~tlanta
agency alone should maintain a currency department in Havana.
His proposi.tion was that all money Which the Boston agency might receive
in exchange for bills sold should be turned over to the Atlanta agency,
where it would be counted and sorted and, for all Atlanta notes and
other currency, l3oston would receive credit through the'Gold Settlerrent
FUnd. With respect to notes of other Federal Reserve Banks, the Atlanta
agency would pack and ship them to the several Federal Reserve Banks or
to Washington for redemption for the account of the Boston a~ncy. Mr.
Bullen stated that the Boston bank would not agree to this proposition,
but that on the contrary the Boston bank expected that its agency would
have a.. currency department of its own a.nd itself handle all money received
in p~nt for bill& sold. He agreed, however, that if Atlanta desired,
the Boston agency would be willing to turn over to the Atlanta agency
all Atlanta notes received by the Boston a~ncy in payment for bills.
It was the sense of the Board members tha. t the Boston agency should main. tain its oWn. currency department to handle mney received in payment ·.ffi'r
bills. Mr. Adelson seemed very much disappointed at this expression of
the Board's opinion, stating his understanding of the agreement to be
that the Atlanta agency would alone maintain a currency depart'f!'ent and
would have entire charge of the handling of all moneys received by either
agency. Be stated very strongly that i f Atlanta did not have the sole
currency department, the Atlanta agency would entirely lose its identity
and would be no more than an automaton marely to hand out new Atlanta.
notes whenever the Boston agency required them. Mr. Adelson anticipated
that the Atlanta bank would have practically no business in buying or
selling bills origina.ting in its own Federal Reserve District, and for
this reason, he urged that the Atlanta agency have sole charge of all
currency opera.tions.
It does appear that under the resolution, as thus interpreted, the
Atlanta agency will have little more than a meChanical existence and its
. functions will be largely lindted to paying out its own notes in connection
•
•
>
-3-
X-3775
with operations carried on by the Boston agency ::1.rd, as Mr . .Adelson
intimated, there is a possibility tba.t the J.tlanta. bank rrey not care
to proceed with the arrangements under these terms.
Mr. :Bullen stated that he would submit to the Boa.rd early next
week the Boston plan of operation and forward a copy to Mr • .Adelson.
The latter plans to discuss the situa.tion with the directors of the
.Atla"flta b~ and make a report la.ter. It does not appear, therefore,
that any imnediate action is required on the Board's part. This rr.emorandum may, however, be helpful as a reference in further constructions
of the Boa.rd 1 s resolution, as indicating the attitude of the Boa.rd a.nd
of the Eoston and .Atlanta representatives.
Respectfully,
(signed)
Edgar W. Freeman
.Assistant Counsel.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-3776
July 10, 1923.
SUBJECT:
EXPENSE MAIN LINE, LEASED WIRE SYSTEM, JUNE, 1923 •
Dear Sir:
Enclosed herewith you will find two mimeograph
statements, X-3776a and X-3776b 7 covering in detail operations of the main line, Leased Wire System, during the
month of June, 1923.
Please credit the amount payable by your bank
in the &eneral ac_count, Treasurer, U. S. , on your books, and
issue C/D Form 1, National Banks, for account of "Salaries
and Expenses, Federal Reserve Board, Special Fund", Leased
Wire System,. sending duplica.te C/D to Federal Reserve Board.
Very truly yours,
Fiscal .Agent.
(Enclosure)
TO GOVERNORS OF .ALL l3ANKS EXCEPT CHICAGO.
,
.
X-3776a
REPORT SHOWING CLASSIFICATION .AlJD NUMBER OF WORDS
TRANSMITTED OVER MAIN LI1J"E OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR 'l"HE MONTH OF JUNE, 1923· ·:
From
Percent of
Total Bank
Business(*)
Bank Business
Treasury
Dept.
Business
Wa.r
Finance Corp.
Business
Total
------------------------------------------------------------------------------------
)
38,522
226,104
61,756
93,709
71,641
67,073
151,524
93,606
45,388
79,591
65 ,6b4
142,731
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta.
Chicago
St. Louis
Minnea.po 1is
Kansas City
DaUa.s
San Fra.nci$CO
Total
F. R. Banks
13~32
8 ·23
3·99
7-00
5·77
12·55
1,137,315
1oo.oo%
296.406
Washington
1,433,721
Grand Total
Percent of Total
Bank Business
Treasury
3·39
19.88
5·43
/3.24
6.30
5·90
78
46·532
246,966
71,268
105,713
79,733
77,408
165,735
105,924
52,5T!89,951
71,982
164,269
140,659
78
1,278,052
183.136
402.
323,795
480
18.42%
81·55%
1,433,721
. 323,195
8,010
20.862
9,512
12,004
8,092
10,335
14,211
12,318
7,183
10,354
6,318
21,460
4191944
1,757,996
·03%
words or 81.58~
II
II
18.42%
100.00%
TOTAL
(*)
These percentages used in ca.lcula.ting the
pro rata share of lea.sed wire expenses a.s
shown on the accompanying sta.te:rrent (X-3776b)
FEDERAL RESERVE BOARD,
WASHINGTON1 D. O.
July 10, 1923·
l
•
X-3776b
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM JUNE, 1923 •
------------------------------------------------------------------------------------------------------------------------·. Name of Bank
Operators'
Salaries
Operators'
Overtime
Wire
Rental
Total
Expense
Pro rata
Share of
Total
Expense
Credits
Payable to
Federal
Reserve
Board
~----------------------------~-------------------------------------------------------------------------------------------
Boston
$ 250.00
New York
1,453·14
Philadelphia
190.83
Cleveland
366.CJ
Richmond
315.00
Atlanta
24o.oo
Chicago
(f/:)4,852.49
.St. Louis
301.63
Minneapolis
278-38
Kansas City
336.64
Dallas
251.0-:
San Francisco
395·0..:·
$
$
-
- 2\J0
-
Fed. Res. Board
$
250.00
1,453·14
190·83
366.00
315.0G
24o.C0
4,854.49
301 .• 63
278·38
336.64
25l,QC
395•Vv
16,937·11
16,937·11
$16,937·11
$26,169.22
(a)3 ,111.13
$23,058·09
$
781.67
4,583·95
1,252·05
1,899·99
1,452.66
1,360.43
3,071·34
1,897·68
920.02
l,614.o6
l,33vo45
2,893·79
$ 250.00
1,453-14
190·83
366.oo
315.00
240.00
4,854.49
301.63
278·38
336.64
25l•vv
395·0(,
531 .. 67
3,130.81
1,061.22
1,533·99
1,137·66
1,120.43
(*)1,783.15
1,596·05
641.64
1.277.42
1,079·45
2,498·79
$
------------------------------------------------------------------------------------------------------------------------TOTAL
$9,230.11
(#)
(&)
· (*)
(a)
a.oo
$23,058-09
Includes salaries of Washington operators.
Amount reimbursable to Chicago.
Credit.
Received $11.13 from War Finance Corporation and $3,100.00
from Treasury Dept. covering business for month of June, 1923.
FEDERAL RESERVE BO.ABD,
WASHINGTON, D. C.
JUEY 10, 1923.
$ -
$9 ,232·11
$15,609.13
(&)1,]83·15
$13,825·98
558
FEDERAL RESERVE BOARD
WASHINGTON
July 1~, 1923.
X-3777
stT.BJECT:
Currency Shipments.
Dear Sir:·
~e Board recently requested the Cozttllittee on Econ9W7 and Efficiency
to consider the subject of insurance~ Closely related to this subject
is that· of rates charged by the eJ!Press conpanies foz> the transportation
of currency and securities. At the present time 1 t is understood that
all ~cb ship~ts are made either by registered mail with outside insurance provided under the so-called registered mail insurance policies,
or by e~ress at rates which include insurance for safe-carriage, the
choice of method being deterrndned by cost.
About a lYear ago the e:x;press rates for such shipments were increased
which has increased rr.aterially the expense to the Reserve ·
Banks for the maJdng of these shipments. A study of the express rates
'now in effect discloses certain inconsistencies which it is felt may
afford a basis for securing a revision dov.nward. One of the important
questions is the cost of insurance on these shipments. Steps are being
taken to find aut the premmum rates in the various districts through
Messrs •. DeLanoy & DeLanoy. brokers for all, the banks. The determination
of the legality and reasonableness of rates c:narged. by the express
conpanies lies, in the first instance, with the Inter.state Comnerce
Compission. The whole question has already been taken up informally with
the Coumission and there are some reasons for feeling that a reduction
in costs may be obtained on one or more of the following grounds:
35~
or
4o%,
l..
I
That the ra.tes at present charged by the .American Railwa¥
Expre's Collllany on shipments of currency, which rates
are based upon value; are unauthorized ~in confl'ict
with the termsof the statu-te.
..
X-3777
- 2-
2.
That the rates generally are excessive and entirely out
of prcportian to the cost of the service rendered.
3· That the rates should be graduated so as to provide
smaller charges for each succeeding thousand dollar
unit of value after the first.
While it is still too early to indicate w~t, if any, actual· reducti'ons my be obtained, negotiations have now reached the point where
it is necessary to present the matter formally to the Interstate Commerce
Commission, and in this connection it is desired to obtain from each of
the Reserve ~anks certain information with respect to its shipments. Will
you, therefore, please forward as pronptly as possible the information
requested in the attached memorandum concerning shipments now being made
by your bank.
.
Very truly yours,
A. c. Miller, Chairman
Committee on Econonu and Efficiency.
TO BE SENT TO ALL GOVERNOR•
t~6.0
Ct.,./
. 'V'
·· ... X- 3777a.
FEDERAL RESERVE 31\N:C OF
Including Branches if any.
Information requested in Board's lette~ X-Jlll_ concerning currency
shipments by mail and express.
(The word "Currency" wherever used refers to both paper money and coin.)
1~
State total amount of express charges paid for shipments made during
the six months' period ending June 30, 1923, if possible classifying
the amount as follows:
a.
b.
c.
d.
{
Express
Express
Express
Express
charges
charges
charges
charges
on
on
on
on
outgoing paper money shipments $
incoming pape~ muney shipments
outgoing coin shi:frnen ts
incomii.1g coil'l shipments
'l'OT.AL
2.
)
3,
4~
What classes of currency shipments are now being forwarded or received
by your bank routed by express?
What classes of currency shipments, both incoming and outgoing, are
now routed by registered mail at fourth class postage rates insured?
What classes of currency shipments, both incoming and outgoing are now
routed by registered mail at first class letter postage rates insured?
5•
If there have been any incr~ases in rates charged by express co~anies
in your territory within the last two years, give dates of increases
and approxirrate percent of such increases,
co~arison of costs of shipping paper money b;r mail with cost by
express in form similar to the attached.
6. Submit
1· How do you ship gold coin at the present time? Show comparison of
costs by mail and by express.
8.
How do you ship minor coin (pennies and nickels)?
State rate basis and shipping charges per standard bag.
9·
How do you ship silver coin (10¢, 25p, 50p and $1.)?
State rate bas·is and shipping charges per standard bag.
..
&
X.,-3777-b
(Sheet 1)
TAJLE SHOWING COST OF SHIPPING PAPER MONEY IlY MAIL IN COMPARISON WITH COST OF
SHIPPING 3Y EXPRESS.
c
Denom.
No.of
Value
Bills in
Package
I
0
s t
Insurance
·Premium
0 f
Ma i 1
Reg. 4th Class
Fee
Postage
P.P.Zones
l &2
Fourth Class Mail Ship.
1,000
$1,000
$1.
2,000
2,000
3,000
3,000
4,000
4,000
2.
1,000
2,000
4,000
2,00G
6,000
3,000
4,000
13,000
1,000
5,000
5·
2,000 10,000
3,000 15 ,ooo
4,000 20,000
Sh
~
p me n t s
Total 14th .. Qlass
Cost Postage
Zones P.P.Zone
1 &2
3
.
Insurance
Premium
Reg. lit Clae.s
Postage
Fee
Total
Cost
as 1st
Class
Mail
c
0
Express
s t
0 f
Shipments
To
To
Total
To
Points
Points
Cost Points
Taking Taking
Zone 3 Taking
Next
.Minimum Next
Highes
t
Highest
Rate
Rate
Rate
••
X-3777-b
c0
Denom.
No.of
Value.
13ills in
Package
First Class Mail Ship.
$1.
1,000
$1,000
1,000
2,0CO
1,000
5,000
5·
10.
1,000
10,000
20.
1,000
20,000
1,000
50,000
50·
100.
1,000 100,000
s t
Insurance
Premium
c0
o f
Ma i 1
Reg. i4th Class
Fee
Postage
P.P.Zones
1 &2
Sh i p me n t s
Total Il-tth Class
Cost . Postage
Zones P.P.Zone
1 &2
3
X
X
E~press
(Sheet 2)
s t
0
f
Shipments
To
To
Total
To
Points
Points
Points
Cost
Zone 3 Taking Taking TaJdng
Next
Minimum Next
Hj:--ghest Highest
Bate
Bate
Bate
X
X
X
X
X
X
X
X
X
X
X
X
Approximate percentage
of rr£;. i.l s.h~_prnent: s made
to p~L1ts wi ti:1in each
parcel post zone.
Approximate percentage
of shipments that would
be made to points within each express rate
zone assuming all paper
money shipments were to
be made by express.
Note:
Provide additional columns for zones 4 & 5 i f necessary to cover all points in your district.
.. .
X-3779
RESOLUTION ADOPTED :BY FEDERAL RESERVE IJO.ARD
AT !VIEETING ON
JUNE 27, 1923.
SUBJECT:
- -CUBAN
- - - --
AGENCIES
-- - - -
WHEREAS, the United States Government, by virtue of the so-called
Platt amendment has entered into relations with Cuba which it does not
have with any other foreign country, especially in matters of finance and
C'Ul'rency, the currency of the United States. having been made legal tender
by Cuba.;
WHEREAS, the Federal Reserve Boa.rd is of the opinion tha.t the esta.blisbment of an agency in Cuba is desirable as a means of stabilizing
banking conditions a.nd furnishing a.n adequate supply of clean currency;
WHEREAS. the President of the United States and the State Department
have advised this Doa.rd that it is important that such an a.geney should
be· established;
WHEREAS, the Federa.l Reserve 'Bank of Atlanta. and the Federal Reserve
Bank of :Boston have each petitioned the Federal Reserve Board for
authority to establish an agency in Havana., Cuba., for the purpose of
conducting opera.tions perroi tted under Section 14 of the Federal Reserve Act;
WHEREAS, the Federal Reserve Bank of :Boston desires to establish such
an agency primarily for the purpose of buying a.nd selling cable transfers
and buying, selling and collecting bankers' acceptances and bills of
. exchange bearing sa.tisfa.ctory bank endorsement•;
•'
WHEREAS, a substantial portion of the currency now in ·circulation in
Cuba.. consists of Federal Reserve notes of the Federal Reserve :Sank of
'Atlanta; and it is feared that the establishment of an agency of another
Federal Reserve Bank in Cuba might result in the retirenent of such notes
from circulation; and the Federal Reserve Barik of Atlanta desires to
establish an agency in Cuba. primarily in order that it may maintain the
circulation of its Federal· Reserve notes in Cuba;
WHEREAS, the Federal ~serve Bank of Boston does not desire to put
its Federal Reserve notes in circulation in Cuba but is willing, if
authorized to establish such an agency, to preserve as far as possible
the circulation in Cuba. of Federa.l Reserve notes issued through the Federal
Reserve 13ank of Atlanta;·
BE IT RESOLVED :DY THE FEDERAL RESERVE DOARD, tha.t the applica.tions of
the Federal Reserve Bank of Atlanta and the Federal Reserve Bank of Boston
for permission to establish such agencies are hereby gra.nted on the fol·
lowing te:rms and conditions:
{i) The Federal Reserve Bank of Atlanta. and the Federal Reserve Dank
.
'
-2-
X-3779
of Boston a.re each authorized to establish an a.g,mcy in Havana., Cuba, a.nd
through such agency to buy and sell cable t.ra.nsfersi buy 1 sell ·and collect
prime bankers' accepta.nces a.nd prime bills of excbange, which accepta.nces
and bills are payable in dollars, arise out of actual import or export
transactions, bear the signa.tures of two or more responsible parties, bea.r
a satisfa.ctory bank endorsement 1 have not more than 90 days to run, exclusive of days of grace, and are secured a.t the time of ·purchase by
shipping documents evidencing the actual import or export and the actual
sale of goods and conveying or securing title to suCh goods; and to exercise only such incidental powers as shall be necessary to the exercise
of the above powers. The term ft'Qills 11 a.s hereinafter used shall mean
cable transfers, bankers' a.cceptances and bills of exchange of the kinds
described in this paragraph.
(2) T'ne Federal Reserve Bank of Atlanta. SHALL NOT BUY OR SELL ANY
CABLE TRANSFERS EXCEPT AT THE REQVEST OF THE :FEDERAL RESERVE J3.ANK OF
· IlOSTON AS PROVIDED IN PARAGR.Al'H 3 HEREOF, .AND shall not purcha.se, sell or
collect any bills in Cuba.except suCh as originate in or are drawn upon
banks or ether drawees, in the Sixth Federal Reserve District and such
other bills a.s it shall be necessary to purcha.se in order to maintain the
circula.tion of its Federal Reserve notes in Cuba.; and before purchasing
in Cuba any bills not originating il:m, or dra.wn upon banks or other drawees
in the Sixth Federal Reserve Distrie t it shall first offer to purchase for
the Federal Reserve J3ank of Boston bills to be selected by the Federal Reserve Bank of Boston.
(3) The Federal Reserve Eank of Boston shall not pay out its own
Federal Reserve notes in Cuba, except as hereinafter provided, a.nd whenever bills OR CABLE TRANSFERS are offered for sale to its Havana Agency
and the sellers request payment in Federal Reserve notes, the Federal Reserve Bank of Boston shall request the Federal Reserve :Bank of Atlanta. to
purchase such bills OR C.AJJLE TR.Al'l'SFERS for it and imnedia.tely pa.y for
them with Federal Reserve notes issued through the Federal P~serve Bank
of Atlanta. The Federal Reserve Bank of Atlanta may at its option comply
with such request or decline to do so, but if it purcha.ses su.ch bills
or C.A13LE TRANSFERS it shall pay for them only with its own Federal Reserve
notes AND SUCH CASH AS MAY BE NECESSARY INCIDENTALLY TO COMPLETE THE
PURCHASE a.nd shall immediately resell them t.o the Federal Reserve Bank
of Boston at cost and without recourse, If the Federal Reserve :Ba.nk of
Atlanta shall fail or refuse to purcha.se such bills promptly for the
Federal Reserve Bank of Boston or shall not have available in Havana a
sufficient supply of its own Federal Reserve notes, the Fe~eral Reserve
·:Bank of Boston rray itself p'lll'chase such bills a.nd pay for them with its
own Federal Reserve notes or in any other form of money or currency which
it mey ha.ve available except Federal Reserve notes issued through ott.e r
Federa.l Reserve Banks. Nothing in this paragra.ph shall bE? construed as
qualifying or limiting in any wa.y the right of the Federal Reserve Bank
of Boston to purchase bills· through such agency and p~ for them with
bank drafts, cable transfers, book credits, or in any otr~r ~anner except
With Federal Reserve notes.
-3-
X-3779
(4) The establishment and opera.tion of such a.gencies, and the exercise
of all the a.bove powe;rs through such a. gene ies, shall be subject to such
changes and such further rules and regulations a.s the Federal Reserve Board
ma.y prescribe from time to time.
{ 5) The Federal Reserve 13oard expressly reserves the rignt to revoke
its consent a.t any time to the continuance of such agencies, to require
the discontinuance of such agencies OR TO .AU'lBORIZE THE EST.A:BLISHMENT OF
NEW .AGENCIES Whenever in its discretion it considers it desirable to
do so.
FEDERAL RESERVE BOARD
WASHINGTON
X-3780
July 17 J 1923·
SUBJECT:
Code Words to be used in connection with transfers
to 57~ Redemption Fund accounts of National Banks.
Dear Sir:
In order to reduce the phraseology in a large number of
telegrams from the National Bank Redemption Agency to Federal Reserve .Banks and .Branches, it has been suggested to the .Board by
the Superintendent of the National llank Redemption Agency that additional code words supplied from the Federal Reserve Telegraphic
Code, be designated to cover telegrams bet"Ween the Agency and the
J?anks an<!.J?ranches t which r~.ve reference to correct~ons a~d adJUstments 1n the 57o Redemptlon Fund accounts of Nat:wna.l banks on
deposit with the Tr ea.surer of the United States.
This suggestion meets with the a.pproval of the :doard,
and you are advised that, commencing with August 1 1 1923, the following code word will be used by the National :dank Redemption Agency
in its telegrams to the Federcl Reserve :Banks and Branches:
DUP~Uill: Verify item
$
for credit of (name of bank)
reported in your sche~e (date) of depoaits for
5~ Rederrq:>tion Fund of National Banks.
The following code word will be used by the National :Bank
Redemption Agency in its telegrams to the Federal Reserve Banks:
DURATE: Complyin~ with wire (head office or Branch)
(date) your Gold Rademption Fund account has been
credited $
to a.djus t 5% deposit reported
by you for credit of (name of bank).
It is also requested that the code words DUPMAN and DURATE,
indicated in this letter 1 be added to the bottom of pa.ge 80 of the
new code book, to follow the supplerr.ental code word DUSKYYours very truly,
Walter L. Eddy.
Assistant Secretary.
TO GOVERNORS OF F• R. BANKS
. .
TREASURY DEPARTt1ENT
Office of t:1e Secret.:ry
,;.e;~HiiTG'l. ON
July 12, 1923.
Tlie Governor
Federal Reserve Board.
Sir:
You are hereby advised that the Department has referred to the Djsbursing
Clerk, Treasury Department, for payment, the account of tl1e Bureau of Lngraving and Printing f~r j?repa.ring federal Reser-,re notes durin6 the pe_riod from
June 21, to June 30, 1923, amounting to ~42,806.58, as follohs:federal Reserve Notes, 1914
Total
w50
xlO
!J;:ZO
i&
471
,ooo
New York •.•.•.••• 263,000
208,JUU
189,000
8,000
70,0u0
12,000
Philadel~hia ••••. 99,000
13,000
13,0JO
Cleveland ••••.••.
z,ouo
l,Ouu
Atlanta ••••••••••
1,000
127,000
12,000
Chicago ••••••••••
14,000
101,000
44,000
44,000
Minneapolis ••••••
z, .ooo
l,OJO
1,000
San Francisco •••• 1,000
849,000
33,000
28,000
363 ,ouu
425,000
849,000 sheets at :W50.42 per L1 ...•...•.•.•.....• ~42 , 80 6 • 58
The charges against the se?eral Feder~l Reserve Banks are as follows:
Coro~Jen-
sat ion
Sheets
New York •••...•• 47l,Ouo ~7 t 950.48
Philadelphia •••• l89,000 3,190.32
Cleveland .••.•.• 13,000
219.44
Atlanta •••••.••. 2,0UO
33.76
Chicago •••••.••• l27,000 ;,: ,l<r.:>. 76
742.72
Minnea~o~i~ ••••• 44,000
San Francisco ••• 3,000
50.64
849,000 14.331.12
.J:·late
l'rinting
'tr7,512.45
3,014. 55
207.35
"31. 90
2,025.65
701.80
47.85
13,541.55
In.c • ComTotal
1Iaterials t::ensation
.,5, 986.41 :W2,298.48 423,747' 82
2,402.19
922.32
9 ,529. 38
655.46
165.23
b~.44
9.76
100.84
25.42
1,614.17
619.76
6,403.ZA
2,218.48
559.24
214.72
38.1 :I
14.64
151.26
4,143.12
42,806.58
10 '790. 79
The Bureau appro~riations vvill be reimbursed in the above amount from the
indefinite appropriation "?r<:;paration ancl Issuc of iederal Heserve Notes, Reimbursable", and it is requested t::tat your boc.rd. cause suc!1 indefinite a ..1propriation to be reimbursed in like amount.
hes:pectfully,
(Signed} S. R. Jacobs,
Deputy Commissioner.
.
..
X-3781
TREASURY DE.P.n.R~ME~:r'
Office of the Secretary
1N.c~.:::-HINGTON
July 12, 1923.
The Governor
Federal Reserve Board.
Sir:
You are hereby advised taat tne 1epa.rtment has referred to the Disbursing
Cle:rk, Treasury De •.artment, for .._.Jb.yL:ent, t11e account of tne Bureau of Bngrav..
ing and .PrintinG for pre)aring lec;eral heserve notes on June 28, 192:5, amounting to ~55.46, as follows:Federal Reserve Notes, 1918.
';rlOvO
New Y..>rk. • • • . • • • • . • • • . • . . •
1100 sheets at
~50.42
60u
Total
1100
500
.;?er ii. .•..••••.•••••••••• :ws5.46
The charges against the t'ecieral Reserve Bank of New York are as follows:Sheets
1100
Com..;-ensat ion
.c'late
i'rinting
~18.57
~,17.
I.Iaterials
55
Inc. Compensation
wl3.98
*5.36
~otal
~55.46
The Bureau appro.._Jriations will be reimbursed in tl1e above amount from the
indefinite a,.J.flrOpriation ".Pre:;;:a.ration and Issue of lederal ::cserve Notes, Heimbursable", and it :its requestea. that your board cause suc11 indefinite appropriation to be reimbursed. in like amount.
Respectfully,
(Signed)
s.
R. Jacobs
Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
X-3783
July 20,
SUBJECT:
1923-
Recomrrendations of Committee on EconoiTlf and Efficiency.
Dear Sir:
In a letter dated May 29, 1923 7 X-3726, all banks were
advised of the recent progress of the work of the Board's Comnittee
on Economy and Efficiency in studying and rr.aking a co~arison of
the methods and expenses of the banks in the four principal functions.
Since tha.t t in:e the auxiliary commit tee of t !:lis Committee 7 representing the banks, has given considera:ble t.ime to a study of the
reports and data submitted by the banks and has made a number of
recommendations to the :Board's .Committee on Economy and Efficiency
which have been approved.
The attached memorandum, in which the several recommendations
are discussed in detail, is now furnished to all banks for their
informa.tion a.nd guidance. While the present practice at every bank
conforms to a nunber of the recommendations made, there is at present
no bank in the System following every recommendation.
The Board's Committee realizes that there ma.y possibly be
so:rre special cases where these recomrrendations may not be fully .
practicable, yet it believes that in the grea.t majority of ca.ses their
adoption will result in greater economy and efficiency of opera.tion.
It is requested, thereforet tha.t your bank carefully ccns;_de:r the
recommendations made and advise the Committee of Your conclu:-dons
with respect to each recomnenda.tion.
Very truly yours,
A. c. Miller, Chairman,
Committee on Economy & Efficiency.
(Enclosures)
TO GOVERNORS OF F. R. :BANKS ·
X-3782
RECOMMENDATIONS PRES:&.'NTED TO TEE BO.ARD 1 S
CO!v!.UTTEE ON ECONOMY AND EFFICIENCY BY
THE AUXIL 'J:.ARY COI...WITTEE FOLLOWING 'IHE
FUNCTION.lL GROUP l'.mETINGS.
--- - - - - - - - - -- -- - -- - - - - -- - - - -- - - - - - -- - - CURRENCY AND COIN.
1. CONDITI_Q_N__ AS _TO SORT OF CURRENCY RECEIVED i3Y FEDERAL RESERVE :UANRS
FROM MEM:aERS.
Nine oanks require that all deposits be sorted as to denomination, while three banks receive from country memuers i_unassorted.
It is the view of the Committee that it is reasonable
and consistent with good banking practice to require that all money
deposited be sorted a.s to denomination, and it is
RECOMME:NDED that all banks arrange to receive all currency
sorted a.s to denomination.
2. METHOD OF COUNT.
The method of sorting and counting currency is found to be
nearly uniform with the exception that one of the bank:. receiving
currency unsorted as to denoTI".ina.tion makes it a pra.ctice to thumb
count and also to verify before sorting.
It was the view of the
Committee that this extra operation is unnecessary and it
RECOM.NJENDS that this oank consider handl:Lng its rr.oney on the
Same basis as the other banks in the System.
3·
SORTING OF FIT MONEY AS TO KI}ID.
It wa.s found that one bank has ma.de it a. regular practice not
to sort its fit money as to kind.
Several of the banks occasionally
follow the same pra.ctice when exceptionally busy, while a number
of the banks have always sorted a.s to kind regardless of conditions.
It is apparent that a. considera.ble. saving of time can be effected
-2by packaging fit money without assortment as to kind, and it is
therefore
:RECOM:viENDED tha.t fit mcney be put up, without assortrrent a.s to
kind, with discretion, care being exercised not to permit a vault
accumulation of unsorted currency.
(NOTE: Tee Eoardrs Committee on Econorrw and Efficiency sees
no objection to this practice, provided. a va:vlt a.ccumulation
of unassorted currency of not more than two days tL1.rnover is
permit ted . )
4 .. ACCU!IIDLATION OF o~ms
.ANI)
TT~ros FOR couFTING rN DU1J!_S}4~.ASONS.
About h0lf of t:1e oanks now permit tills of the one and two
dollar denomination to accumulate during the period when money is being
received in large quar. . ti ties for J.a.ter
~1andling
du:dng the dull seasons.
The principal object ion to this practice is the a.cc,mru.J.ation and
practical retirement from circulation of a. con&iclers.ble quantity of
bills of these denominations.
There is, hoJVever, a.n o'Jvious economy
in the practice of permitting one and two dollar bills to a.ccumulate
during peak
~overrsnts
for subsequent handling by experienced
counters, and i t is the opinion of
t~1e
rr~ney
Boa.rd 1 ;;; Committee tha.t all the
banks should follow this course V'ihenever pracUcable.
5· METHOD OF
~o
DETER1vUNING PBCPOR'!'ION OF N'E'N MONEY PAID OUT.
or three of the banks have a.dopted a more or less elaborate
plan for making an equitable di& tribution of new currency, while
several ha.ve no particular plan, the proportion of new money being
determined largely by the amom1t of fit currency on hand.
tha.t the plans now in effect at many of
th~
It is apparent
bai'I.ks do not. result in an
-3-
X-3782
equitable distri'cut5.or. of ne'N Ct'.rrcncy a.:l.d. in some respects may
be costly to the barllr:s through the duplication of shipping charges
and handling.
It is a.lso apparent t:1at the plan for the distribution
of currency approved by the Trea.sury no longer obtains to a.ny extent.
It is therefore REC07JI1ElTDED. that the Federal Reserve :;.,oa.rd take
such action, preferably through a. ccmnittee representing the banks, .
as will result in the formulation a.nd adoption of an equitable plan
for the distribution. of currency which will prove satisfa.ctory to all
the banks and also to the
Tre~.sury.
(NOTE: Ti1e :Doa:cd 1 s Coi!1mi t tee on Econorr,y and Effie iency has already
requested the Federal Reserve Board to take action.)
.6· .SORTING OF FIT !TOTES REC3~ VI:D Fho; 1 OTHES. FEDERAL RESERVE E.ANKS.
There is a. wide variation in the practice among the Federal Reserve :Danks in handling fit Federa.l Reserve notes received from other
Federal Reserve l.lanks.
In some cases, this currency is resorted and
in other ca.ses i t is paid out as received.
It is apparent that the
resorting and counting of this currency is an entirCJl;y unnecassa.ry and·
unwarranted operation, and it is
RECOJ';IMEriDED tr"at, the prcl.Ctice be discontinued.
The only apparent excuse for this operation results from a. difference in the standard of fitness adopted by the different banks and
it is apparent that a. uniform standard should be adopted.
It is therefore RECOMIVIENDED tha.t the committee, the desigr.a.tion
of which was recommended under the preceding heading, shall a.lso be
requested to determine upon a. standard of fitness sa.tisfa.ctory to all
the banks and to the Treasury.
•
-4-
X-3782
(NOTE: Tl.'le Joard' s Comrd.ttee on Economy a.nd Efficiency ha.s
already requested the Federal Reserve Joa.rd to take action.)
7. VERIFICATION OF
NEv'l !'!!ON:H:;1
REC~~IVg;D
FT.OM TP.EASlTRY BY F. R. AGEN"T.
Several banks make it a. pr3ctice to slit the outer wrapper of
original packages of currency in such a. way as to perrni t of an inspection of the straps to determine ttat the rr.oney is of the denomination
indicated by the outside wrapper.
It is REC0!'.1:1ENDED that, as a. matter of saf aty, all oanks adopt
this or some similar rr.ethod for determining the denomination of tha
rr.oney received from the Treasury Department, in view of the fact that
this money is sometimes held in stora.ge for a. long time.
'
8 • lV!ERIT PLAN FOR COr.lPENSATION OF MO:NEY COUNTERS.
Two of the banks
ha~e worl~d
out
rat~er
elaborate plans for the
compensation of money counters on a sliding <>cale based upon output.
Must of the banl:s rnainta.in more or less cocplete records of the work
of money counters, but do not ·oo.se compensatio:c
records.
en tirt:Slyupon thesd
It was the view o_f the Cornrni tteo that probably the time had
not yet arrived when all reserve banks could profitably put this
operation upon a piece '1'/0rk basis.
It is, hoNever, EECOTf.:,J:ENDED that all banks maintain a record of
the vvork of each individual money counter and tl"a t these records be
made known to the counters to encourage a. spirit of competition.
Following the conference with the C'rd.irman, one of the mediu."'l
sized banks of the System adopted
&.
method of grading its rr.oney counters,
which resulted in very greatly increasing its output.
The method
ad.opted and the results are explained in detail in the attached. memorandu."'l
-5-
X-3782
"Exhibit A" which is submitted for the informa.tion of all banks.
(NOTE; The Board's Committee on Econonw and Efficiency believes tha.t if this plan is intelligently followed, rrarked
results will be obtained,)
9.
CH:B~GKING
- ------ ...
-
OF POST
--·- OFFICE REGISTRY RECEIPTS FOR CURRENCY SHIPMENTS.
--·-~·
Some banks continue the practice of ootaining a.nd checking the
rP-turn registry receipt ca.rds furnished l:ly t·he Post Office for all
shipments made, in addition to checking the receipts received from
the consignees.
It was the viev': of the committee that these postal
receipts are of no benefit to the banks and tha.t the work of checking
and tracing them is unnecessary a.nd unwarranted, a.nd it is therefore
RECOM!'/JENDED tha.t their use be discontinued.
10. USE BY MEMBER l3.AL'fKS OF .A ST.ANDJJID FORM OF ADVICE OF CTJRF.ENCY SHIPMENTS.
Several of the banks ore furnishing members with a standard form
of advice, including a request for the effecting of insur:mce, to be
used in all cases where shipments are made to reserve banks.
It wa.s
the view of the Committee tha.t the use of such a. form is sound in
principle and is good practice, inasmuch as it can be rr:ore promptly
routed to the proper departrr..ent for the effecting of insurance and
cheCking of tha arrival of shipmunts.
It is SUGGESTED that those banks not now using such forms give
the matter consideration.
11. FORMS FOR USE AS RECEIPT FOR .AND RECORD OF SH!Pi:IENTS ..AND FOR
EFFECTING INSURANCE.
Several of the banks a.re using more or less simila.r forll.'il pre~ pa.rt.Jd
in triplicate or quadruplicate with which at one writing
then~ ~3
-6-
x-3782
prepa.red a complete record of registered mail ~J::/;~pments including
a receipt for the use of the Post Office, a notice to the registered
mail insurance underwriters, and a. record for the use of the a:udi ting
department, if desired.
A few of the banks a.re not using such a form,
but are making up two separate records of all such shipments, one for
the purpose of effecting imnJrance, and one for the purpose of securing a receipt from the Post Office.
It was the v:iew of the Committee
that the use of a form of this chara.cter is very mU.ch to be desired,
not only because of the econonw in the preparation of the records,
but from the standpoint of safety in the effecting of insurance •
A
similar form is also adaptable for the purpose of securing a. record
of and receipt for express shipments.
There is a wide variation in the style of forms in use by those
banks which are following this plan.
The Cornrr.i ttee considered the
form adopted by the Federal Reserve :Bank of Dallas, a san:ple of which
is attached (EXhibit B), as the most economical of any of those submitted.
It is RECOMMENDED that those banks not now using similar forms
adopt this plan, and that those banks now using more e::pensive forms
for this purpose revise them with a view to reducing the cost of
printing ..
12. QQ.n!.
With two exceptions the banks do not handle wrapped coin·
It
was the vie w of the Conmi t tee that the requi reman t of moe t of the banks
that all coin be deposited in bulk causes an economic waste in the
bx-eaking down of a large amount of coin a.l.rea.dy m-a.pped.
It was a.lso
the view of the Con:mittee that the banks should not attempt to supply
X-3752
-7-
wrapped coin in cases where it is necessary for it to be wrapped at
their own expense.
It is therefore RECOM:IIEI>IDED that all banks receive wrapped coin
of the one, five and .ten cent denominations and pay out such coin as
far as it will go without rewrapping and that the banks should not
furnish wrapped coin except suCh as is received in that form.
13. COST OF SUPPLIES.
While all banks are using substantially the same supplies in
the handling of currency and coin, tr.ere is a very
considerabl~
variation in the quality and also in the cost of the supplies used.
It is therefore
RECOM~DED
that a plan of standardization of
supplies and, if necessary, central purchasing, be considered in order
tha.t all banks may secure these supplies at the lowest possible
(NOTE: T'ne :Ooa.rd 1 s Committee on Econorey and Efficiency is
now giving this matter attention, and the banks will be
advised of the results as promptly as possible.
X-3782
-8TRANSIT AND COLLECTIONS.
14. DESCRIPTION OF ITEL:IS ON CASH LETTI;:;RS :_
There is considerable variation in the method of the banks in
describing cash items on outgoing
tr~~sit
letters.
Three banks
describe every item by batch or block number; two banks describe
every item by ADA nurr.oer; t·No bar.ks describe even a.mounts oy AJJA
number; five banks do not describe any items.
It is the view of the Cozro.mittee tha.t a. de;;;cription of other than
items of even
~~ounts
from, say, $500 and up, is unnecessary and in-
volves an unwarranted expense, a.nd it is, t:':lerefore,
RECOM'1IENDED that all banks diacontinue deacribing ca.sh items on
tra."lsit letters addressed to the dra.wee bank except in C8ses of even
amounts of above $500.
15.
NOTIFYING :J.ANl:S OF TFEIR FII:SUBE TO "'IRE FO:-J-P.AY!ii.ENT Of~ TO PROTEST
.ACCOFJ)IHG TO
IN?TRUCT~
It is the practice of several banks to se!lc;. a forrrn.:i. notice to
all banks failing to wire non-payment or failing to pre test, while
several of the banks do not send such notices.
It is understood that
several of the banks have been informed by Counsel thu.t the sending·
of these notices does not afford any additional protection.
It is therefore BECO!'f1ENDED that the banks consult ·vith their
Counsel with respect to this matter vvith a view to diocontil'ming these
notices, wherever
pra~ticable.
16. RECEIPTS FOR RETURNED ITEI!IS CHARGED B.ACK.
T'.ne banks are about equally divlded ·oetueen those that do obtain
receipts for returned i terns a.nd those that do
r~ot.
It is the view of the
r.:.·f-"·Js
X-3782 ~;: ;' .
-9-
Committee that with the frequent reconciling of accounts it is not
necessary to obtain receipts for these items and
beca~e
of the con-
siderable expense incu.t-red by checking a.nd tracing receipts, it is
RECOMMENDED that all banks diacontinue the practice of requiring
receipts for returned items.
17 • CONTROL OF NON-C.;\SH COTJLECTION ITEMS.,
Several of the banks a.re ma.inta.ining a control on non-ca.sh collection items in process of collection.
It is the view of the Com-
mittee that the cost of maintaining this control is entirely out of
proportion to any benefits that can be derived therefrom.
It is therefore RECOMLlENDED that all banks t.aving such a control
discontinue it so far as it applies to collection items.
The banks
will probably find it advisable to continue any control they now have
with respect to negotiable securities ha.ndled in connection with these
collections·.
18. REDEMPTION OF RETUBJ."'mD ITEr-iS.
There is considerable variation in the practice of redeeming re•
turned items.
In most cities there is a so-called
11
retur"ued item
clearing", but in addition to this • a.t nearly all points, items are
also l'edeemed over the counter, the
ge~1eral
pra.ctice being to issue
so-called redeiX!Ption or teller's checks which are. cleared the following da.y,
One of the bank$ furnishes a duplicate form for use with all
items
ret~d.
This form being :presented with the items • one copy
being stany;>ed and returned to the messenger a.s a receipt and the other
copy serving as a credit tickat to the returning membarts a.ccount.
-10-
X-3782
This method saves considerable clerical labor and makes unnecessary the
issue of redemption checks.
It is the view of the Committee that banks
that a.re now using redemption checks for this purpose would find this
method more economical and efficient.
It is therefore BECOht.:ENDED that banks .now using redemption checks
consider the adoption of the duplicate ticket method.
Sample copy of
the ticket used by the b.;41l-: 5.n q_ue.:>tion is attached (Exhibit C).
19. CLEARING HOUSE !vlEMJEES~IP.
The basis upon which the Federal Reserve Banks ba.ve clea.ring house
rr2mbership varies considerably in the different cities.
the membership is on the same basis as that of
In some ca.ses
com~rcial baru~s;
assessments being based upon items taken to the clea.ring house, which
results in a progressive increase from year to year in amounts paid by
the reserve ba.nl{s; in other ce.ses membership is obtained upon the payment of q. flat fee; and in still others it is· complimentary.
It wa.s
the view of the Committee that the service rendered by the reserve banks
in connectio.n with the opera.tion of the clearing hous-Js sLould in roost
cases warrant the clearing houses giving complimentary mar:;bers:l.ip to
reserve banks or at lea.st in reducing the membership fed to a nominal
amount.
It is RECOUJ1,!ENDED that banks now paying r::.ore than a nominal fee
give this matter consideration.
20. PAYME11T OF GOVERNiiEJ:.JT COUPONS.
In two or three cases the banks 1
'.'l~:ile
giving imrradiQte credit
for Government coupons, are accumula.ting them over the peak periods
rather than supplying the necessary help to rr.ake prompt shipment and
X-3782
-11charges to the account of t:he Treasurer,
u.
S.
580
It is the view of the
Committee that this practice is unwarranted and that a.ll coupons should
be charged to the Trea.surerts account the sa.n:a day credit is given.
To make this possible, it is
RECOM!1ENDED that the banks give consideration to combining the
work of paying Government coupons with the work of counting money, so
tha.t the money counters could be rrore effectively employed in the
handling of coupons over the peak veriods.
21. LISTING CLEARING HOUSE CRECT\:S.
A number of banks sort all clearing house i terns before proving
incoming
letters~
after which the block sheet is prepared in duplicate,
one copy being stripped up to a.ccompany the. checks to the clearing
house raCk, thus avoiding an additional listing.
lt is the view of
the Committee tha.t w~:.ile the application of this method will depend
in considerable measure on the number of bankS in the clearing house
and the distribution of items among the banks, tha.t this plan will
nevertheless prove very efficient in all cases where it can be adopted ..
It is BECOM!1ENDED that all banks not now using it consider this
plan of handling clearing house items.
22. N.QN-CASH COOORY COLLECTION'S.
Some banks give credit for non-cash collection i terns as of the.
da.te pczyment is received by the collecting reserve bank, even thougt
advice of payment is not received and actual credit given until
several da.lfs later.
It is the view of the Connnittee tha.t this method, as a regular
practice, is unnecessary, and it is
-12-
X-3782
RECOM111ENDED that cradit should not be given as of a previous da.te
e·xcept in unusual ca.ses where the amount is sufficient to warrant the
·J~Jork.
•
- 13 ACCOUNTING:
There is a wide variation in tl1e practice of the banks with
reference to the prepa:::-ation of statements and reports, scme banks
apparently
th~~
consi~ering
others.
tion~of
statements and
that o!lly
it necessary to prepare a much larger number
It was the view of the Committee
t~1ose
re.._..~orts
~1at
the prepara-
involves considerable ex-pense and
statements and re;Jor ts found by experience to be
absolutely necessary should be prepared.
It is tnerefore REC0Vi:11ENDED that every bank give careful
consideration to its statements and reports with a view toreducing the number and also sill!Plifying the form of those that are
prepared.
24.
MEllffiER BANKS ACCOUHTS:
T'ne methods of
booli.::.:~eeping
parable at most of t:1e
bm-.~;.s.
were found to be reasonably com-
Nino ba:..•l.-:s are now furnishing
members with a daily statement, five mailing statemffi'lts on the
day of date, and four on the following day.
nishing
semi-mont~ly
Two
b~u:s
are fur-
statements, one furnishes all. bru1ks desiring
it (2(about 255'~) with a daily statement.
furnishes weekly statements to all banks.
The twelfth bank
Four banks are furnish-
ing statements including a full description of all items, and
eight banks are furnishing statements prepared an a Burroughs
rr.a.c.t'J.ine, indicntint; tlle character of entries by synibol.
t.: '-''N
~-::;,(})
(L
X-37G2
- 14One bank has perfected a metDod of'bookkeeping under which
it writes both the statement and the ledger at a single operation,
the statement also including the deferred items.
Tnis plan has
worked well in the bank in which it is in operation, and it is the
view of the Comr.uittee ti:lat some of the other banks in the System
would find this
pl~1 e~ually
efficient.
There is
a~tached
a
memorandum ( "E.x:.':libi t D") cu tlining this plar. in detail.
Three of the
b~~s ~-.ave
discontinued t:he operation of the
deferred or so-called float ledgers, resulting in considerable
economy in operation.
T::tere is attached a memorandum ( 11 Exhi bit E")
outlining the plan of one of these banks in accoaplishing this result.
It is the view of the Committee that the maintaining of a
deferred ledger
m1d
posting in detail of all deferred items is
unnecessary.
It is RECOMMENDF..D,
( 1)
that the operation of t~e def~rred cred.i t ledgers
be discontinued by all b~1ks, and it is suggested
that all bru1ks give consideration to combining the
,;:;repar3.tion of ledgers and staten:e. .: ts in a single
operation;
( 2)
that advising be reduced to the lowe<;t possible
minimum. In cases where daily stateLents are mailed
on t4e same date it should be possible to elirr~nate
all advising except for deferred credits and for
loru~ transactions, and if daily statement includes
a stateme:..1t of deferred items, t:-:.e advising of such
cre.:lits could also be eliminatedj
(3)
that the practice of furnis:1i::lg postal cari acknowlei~;rr:e:.:l ts to direct sen.:lL1g Dc"-_>·..::.s of c t:."ler Cl.i s tricts
fol· c..ll letters recej.ved be iiscontinued a:.~i no
acknowledgments sent except in cc..ses w::C.ere ;:;elfaidr8ssed a.:J stamped. card:;;; are received wi t:1 the
letters.
X-3732
- 15-
25.
RESERVE DEFICIENCIES:
There is considerable variation in the amount of work performed
in connection with this operation.
With a few f?XCeptions all of the
banks are checking for clerical accuracy the reports received from
the member
b~~ks indicati~6
tneir demand ani time deposits as the
basis for computing reserve requirements.
Corrmi ttee
t~1at
wa~
tne view of the
t:·wse re.:'0rts should be cowplc;tely checked.
Most of tiie
statements
It
w: t . .:
b~"L:s
-1ave been
c:.~ec~dng t~1e
Corrptroller's call
t.1.1e reports 1:-1ade by member ban-'::s.
In some cases,
thi.::. cl1ecking . .J.a.S been d.o1-:.e once each year, in o tj,er cases more
frequently, and in some cases not at all.
Committee that
t~1is c~J.ec,d~1g
once each year, and.
t~1at
It was
t~1e
view of the
snould be done by all banks, at least
with tl'le e.ACeption of member banks lmown
to be careless in tbis respect, it should not be done more
tr~
twice each year.
A few ban·s :'klve !7'..ale it a practice to
as to the accuracy of
with bis work:.
t~e
c~1eck
all defer.ced items
deferred availability date in com1ection
It is t:1.e vio;;w of the Committee that t:O.is is
unnecessary.
It is RECOI'!JMEl\TD.ED,
(1)
That all banks check fer clerical a.ccu.racy all
reports received from members.
( 2)
That all bankS cl1eck the figttres shom on Comptroller's
call statements at least once and not exceeding twice
each year with the reports received from the merrber
banks.
f3)
That those ban~:s now checking the availability date
on deferred items in connection with this work discontinue the practice.
- 16-
2b.
FEDERAL RESERVE BAN~~ ACCOUNTS:
One of t·,vo
met~:ods
of
c~1ecldng
the accounts with the other
Ii'aderal Reserve Banks has been adopted by nearly all of the banks.
One
met~od
provides for the charging of all iterrs regardless
of availability to an 11uncollected items n acount and the handling
of the c..ccoun t on a rerni ttance basis.
Under
t~1e
other met·J.od.. all items are c::arged to a "deferred
debi ts 11 account and later transferred on the date of availability
to a "collected items" or "due from 11 account.
Vllhile both met1:cods
~lave
appeared. to be satisfactory to the
banks using them, it is more difficult to analyze the float in
connection with tra;:1si t i terns under t:1e first met~1od than under
the second, and as several of the -us1l::s are doing considerable extra
work in connection with the analysis of the float, it is the view of
the Committee that in such cases the second method would prove more
economical, inasnuch as tile transfer ·of items from the "deferred
debits" account is practically automatic and involves a mininum of
labor.
It is therefore SUGGESTED that the banks give consideration to
the respective merits of the two plans with a view to adopting that
which will prove most economical in operation.
27 • TRA1\fSFER OF FUNDS:
T.ne methods in use i::i t-1e iifferant banks for the i:..andling of
this work do not vary greatly.
The principal difference is in the
extent to whic:1. the ban:;s ~1ave a:::lopted multiple forms for the
preparation of advices and entries.
The extent to which any bank
- 17way profitably use such forms will depend 1.n a considerable measure
on the volume of its work.
Several of the banks continue to prepare and to forward to
other reserve ban:i..s copies of telegrams a.'1d typewritten advice
forms covering transfers m.ad.e and. in some cases with reference to
transfers received as well.
It was t:1.e view of tne Committee that
the use of confirmation and advice forms is unnecessary.
It is therefore RECOI\1:;!F}JDED, tl1at all
bat1.~
s discontinue the
forwarding of advices of any ::ind whatsoever to other reserve banks
in connection with transfers, either received or sent, the only
advice needed .in such ce.ses being t:1e original telegram and the
regular daily statement of
cr~dits.
It is the practice of some
ban~cs
to wire out-of-tovvn members
advices of credits, in some cases such wires are sent only for
transfers received from other bm~~s.
IT is RECON.C'l:FNDED,
( 1)
tnat t~>.e ban:C>.s consider w'11et"1er wiring of ad vices
is necessary, and if it is, whether such advices
whic~·. are solely for the benefit of the member
b&~ks may not properly be sent collect;
(2)
that t:1ose ba."]j:s not now using duplicating forms
for the preparation of entries ru1d advices to
members consider wJether or not the volume of their
b"csine.ss is sucn tl1at economy can be effected by
L:e c.:.se of such forms.
28. APPROVAL OF EXPENDITURES :
There is considerable variation among the banks with respect
to the authorities granted for approval of expendi t1.1res, in some
cases all expenditures require the approval of a designated officer 1
and in other cases the approval of any officer of the bank is
:':§.'l:Micient.
t:< ...,,.""'/
~-
·..
'~
;X-3782
- 18 -
It ·,vas tho view of the Cormi ttee that it is desirable to
lirni t as closely as possible the C11:',t::·"cri ty for a;proval of expendi-
twes a1·1d it is
RECOrvr.IFNlJFD, L1at tho authority for the approval of expenses
be vested in d..;;;;;ic:,::.-:.ated officers and also that such au t . .:ori ty should
be exercised in connection with t:1e hs'J.e of the requisition in
adva..."'lce of tl-1e actual occurring o:f' t::s obligation.
(Note.
29. CAPITJ\L
ThG Board's Committee on Econoxey and Efficiency
belioves that t~~ough a carsful vise and control
of ruquisitions consideraole economy can be
effected.)
STOCi~:
It was fo;:ttJ,i
t~1::ct
several of the banks pay the serni-armual
dividends to stockhold.ers by the use of cashier 1 s or officer's
checks while in a few instances payment is made by credit to the
reserve account of the member.
It vv'o.s the view l..f the Cor.r:ittee
that the latter m0thod is not only ri10ra satisfactory to stockhglders, but is less expensive in it5 fCperations.
It is there:ore
RECOMMENDED, that all banks arrange to ;;ay dividends by credit.
'
X-3782
- 19LOANS, REDISCOUNTS .AND INVESTMENTS.
30. WIRING ADVICE OF CREDITS.
It is the practice of some ba.nks to wire advice of credits only
when requested, while at least one batik wires advice on all items.
It is the view of the Cor.m1ittee that, as this represents a
service to the member banlcs, it ;;;bould be unnecessary to 'Nire except
upon request and it is
Fill:COMlV!ENDED that advices of credits be wired only upon request
and then at the expense of the
req~lesting
ba.nk.
31. PREPARATION OF REPOHTS P.ND ST.ATE!iENTS.
A study of the material submitted indicates a wide variation
in the extent to \vhich different banks have considered it necessary
to go in preparing data 'Nhen presenting loans for approval and in
the preparation of statements and reports for internal use.
It would
a.ppea.r that a nurnber of banks are preparing statements which are of
questionable value and it is believ-ed that a very considerable part
of the difference in the cost of ha.'1dling this function a.t the
several banks is due to this one factor.
It is therefore RECOI&. '!ENDED tba t every bank give ca.reful con-
sideration to the reports and statements that are being prepared with
a view to eliminating those which do not serve a useful purpose commensurate Hi th their cost.
(NOTE: The noard's Corrmittee on Econorrw and Efficiency believes that this matter should be given careful and constant
attention, a.nd that very conaiderable economies will thereby
be effected.)
X-3782
- 20 32· SECURING CREDIT INFO:RMATIOlJ.
There was found to be a wide variation in the policy of the
several banks with respect to the extent that it is necessary to go
in the securing of credit information.
As an illustration, the cost
of the various outside re1Jorting sarvices for the System is approxima.tely $17,000 per annum.
from
$5,100 to $300.
The cost of the individual banks varies
Three of the banks do a considerable arrount of
outside investige.ting 'Nork while the other nina ba.nks do none at all.
In the cases of two banks there appeaTs to be a large amount of
duplication at the main office in connect ion with V\Ork originating
at the branches·.
While it is not the purpose of this Con~ittee to ·determine the
policy of each bank in this respect, it is the view of the Committee
that there is nevertheless an undue variaticn in the policies of the
several bariks with respect to this matter.
It is RECOitl!\ffilmED that each bank be requested to submit a brief
outline of its policy and of the vvork performeo. in securing credit
informa.tion, together with a.n estima.te of its cost for the current
year.
(NOTE: The Board's Comrr.dttee on Economlf and Efficiency requests
that this information be furcished-)
r-.
c..
EXHIBIT A.
·gn~
V'
X-37S2a.
Outline of Plan Used by One of the
Ba.nks to Measure the EffiC'iency of
its Money Counters.
Ma.chinery has been set up:
(a.) To make a real comparison each day of the volume of work
performed by each money counter.
(b) To· utilize this comparison so as to speed up the drones.
You will probably say that there is nothing new here, that all of the
Federal Reserve Ea.nks are already doing this very thing. The fact is,
probably, tha.t all of the banks are measuring their money counters' output
on the basis of the number of pieces ha.nd.led. This wa.s our former method.
Under it, we would discover that a certain money counter had a low
average. We would inquire the reason and we wotud be given any or all
of the following excuses:
That the particular counter had more rags than the others,
That the counter had hard luCk looking for differences,
That the counter waited half an hour to rna~· exchanges,
and so on. Always there were excuses, therefore. we set out to remove the
grounds on Which they rrere based.
It had be.en our pra.ctice to verify all currency on the day it was
sorted. We had adopted this plan so as not to carry errors overnight,· a.nd
also to give the rr.oney counters a variety of work to do with the idea of
lessening its monotony. We had accomplished these things but no fair comparison of Nork performed was possible, because all of the counters were
engaged in doing two kinds of work in varying proportions.
To straighten this out, we set up a separate verification unit. In
doing this, we incorporated two features with a view of lessening the
monotony of steady recount work.
Each morning a. bulletin is posted in the verification unit under the
caption, "Errors to be found", showing the differences carried overnight
from the previous da.y's sort. Before commencing ·work, the counters gather
around this bulletin a.nd take down a list of ini tia.ls and amounts to look
for during the day. \Vhen a verifier has found one of the differences, we
have her sign her initials in the proper place on the bulletin. A
seemingly unimportant detail, but it has had a very desirable effect on
the morale of the verifiers.
Sitting at a deSk for six or seven hours, however, is irksome at best.
To counteract this, we have the verifiers themselves carry their fit money
to the sealing machine to be sealed a.nd their unfit money to the canceling
'9--1!.J!..
''-t ,·
X-3782a
-2-
machine to be canceled. Units of 4o str~ps are given to them so that
t:·ley make these little trips about once a.."l hour. We find that this helps
to xake the work of verifying less monotonous.
)':ith the establishing of a sepa.rate verifying unit, the sorting units,
of course, continued breaking down all day, where formerly they had
switched·to recount about two or three o1 clock in the afternoon. Under the
old system, we had maintained an exChange desk in each unit to enable the
counters to make up even straps. lliese exchanges could not be XT~.a.de simultaneously, however, and it was found that each money counter began to J:T~.ak:e
up her exchanges about 30 minutes before closing time and then waited her
turn at the exchane:,a desk. Accordingly, we cut out the exchange desks and
required each sorter to break down up to five minutes of closing time and
then rrake up her odds. The re-handling of the extra amount of odds is
about ten.percent.of the extra work perforrred.
Formerly, When a sorter did not come out right in her proofs, she
would search for the difference herself and perha.ps consume an hour 1 s time
finding it.. Now, sorters are not allowed to look for their own differences,
but these are carried through to the verifying unit and posted on the
rr~rning bulletin.
All of these preliminaries were necessary before we could get down to
actual comparison of the volume of work performed. Previous comparisons
or· attempted comparisons had been made on the basis of number of pieces
handled •. :But it takes longer to break down 1000 pieces than it does to
verify them, and it takes longer to recount and paste 1000 ra~s than it
does to verify 1000 fit bills. To make any real corr~arison, therefore, it
seemed necessary to arrive at some common denominator. To this end, I have
made use of a. term which I will call 11 Minutes' work performed".
any
To arrive at this, we timed and averaged six of ou:r better rr~ney
counters working at average speed through one cycle of their routine in
verifying 4o straps of fit money:
Count
Exchange
Check
Sealing
Delivery
Returning
Total
34 min.
2
II
4)39 min.
9 min.
20 sec.
45
II
54
48
II
28
11
tl
35 "
50 sec.
58 sec.
Yle also timed and averaged the same six counters through one cycle of
their routine in handling 40 straps of unfit money:
X-37B2a
-3 ...
Count
Exchange
Pa.sting
Canceling
Dehvery
Return
34 min.
1
II
13
II
3
"
30 sec.
30
II
~--------}Q_~
4~nir~---'-3u.:::..~'_s e c.
13 min.
S sec.
From the foregoing, it was apparent that a good a:vera.ge rr:oney
counter required nine minu.tes and fifty-3ight seconds to verify, check,
seal, deliver and restoek 1000 fit notes. For ccnvenience, we ca.ll this
an even ten minutes. It wa.s also appa:rent that a gcod average money
counter required thirteen minutes and eigl:..t SE:conds to verify, paste,
cancel, deliver and restock 1000 rags. For convenience, we call this
an even thirteen minutes.
A record is kept of the n~~ber of fit notes and the number of rags
that each verifier recounts. 1~ne multipliers given in the previous pa.ragraph are applied to tnese amounts and the result is "Minutest work performed11 by each counter. In a six-hour day, vvhich is V'hat we are working
at present, there are 360 minutes. Arbitrari1y, we figured that an
average money counter might wa.ste thirty miJ•.;_·,_tes a day. Therefore, any
counter whose 11 Minutes; work performed 11 ec1uaJ.s or exceeds 330 is. called
good. A list of s::tch verifiers is :t:-osted each morning on a bulletin
board in the verifiers' unit under the caption 11 330 :Batters".
Figures of some of the slow ones redncert to "MinutesT work performedrr
were an:a.zing. We had several counters, for AX!-l.J:lple, who were only performing 200 minutes' work out of the 360, E2pe-:::ially bad cases were
talked to or disposed with, but we haYe fcund tha.t t::Oe lure of ma:l.:ing the
~330 Batters 11 list exercises an even more P'Y~ent infl ue>1~e to·v11·.1.rds
speeding up than any bawling out by the depa:rtment rrana.ger. I have in
mind one case of a girl who ha.d been spoken to repeatedly and who, on the
first day, showed 212 "Minutes' work performed". Last Friday the same
girl showed 334 11Minutes 1 work performed 11 •
A similar principle has been applied to the breakdown. The result
of timing a. cycle in this work shovred that a good average money sorter
would break down and make up 1000 bills in twe~ty-two minutes. Here again,
when reduced to "Minutest wcrk performed", some of the slow counter-s were
found to be even slower than we thought they were. We post separately
a "330 Batters 11 list for the money sorters. There were five or six on
this list the first day and something like 30 last Friday.
Aside from the desirable effect it bas on the money handlers, this
plan works to the advantage of the department manager and his assistants
in that it enables them to visualize the loss in minutes on each lazy
and inefficient employee. They regard it as the fairest and most effective
plan we have tried out.
-4-
X-3782.a
The following figures will indicate the improvement which we have
been able to bring about:
April 2
No. of Counters
Total no. of pieces
.Average per counter
.Average per hour
78.4
537,099
6,851
1,246
May l
May 21
79-1
71S,204
9,080
1,513
703 .348
10,193
69
1,699
The hourly average is the real measure of efficiency. With respect
to this figure, our change in methods has resulted in an increci.se of
over 36%. If we apply this ratio to a. tota.l f':lr·:)e of about ninety
people, receiving a.n ann1l.al salary of about $100,000, it will effect a
saving decidedly worth while.
X-3782b
OUTLINE OF METHOD OF ONE BANK FOrt POSTiNG OF LEDGER
AND STATEMENT AT A SINGLE OPERI\TION.
Member Banks' Reserve Ledgers a.re in the form of a. Daily Statement,
the carbon copy of which oonsti tutes the :permanent ledger record. The
original copy is mailed to the member bank addressed. All posting is
dona with the Burroughs Book!-:ee:ping I11a.chine.
The operation of transferring balances, posting and proving is
exactly the same as tbough separate ledgers and statements were typed
except that both are prepared at the single operation.
The combined ledger and statenent form used also allows sufficient
space at the foot of the sheet to show L1 detail a.ll entries to the
"Deferred Credit 11 account-.
No credit ticket is _prepared and no advice, other than the da.ily
statement, is sent for daferred items~ the posting of deferred items
to the combined ledger and statement being done directly from the original
ca.sh letter. The deferred credits are also posted to a small control
ticket, a separate control ticket being prepared for each bank and each
availability date~ ~hese tickets are cumulative and upon the availability
da.te are used as th8 posting n:edium to the reserve a.ccount to which each
cash letter total is separately posted. T'.ae debit entry to the 11 Deferred
Credit" account being the total of the cont:rol ticke~ a-~d including a.ll
items available that day.
NOTE:
kny bank desiring samples of the forms usee, or
other informa.tion concerning the a.boYe opera.tion,
will please comzmmicate with the Committee.
f·95
EXHIBIT ''En
X-3782C
Outline of Method of Handling Deferred Credits
Without Posting to Ledger Accounts.
1.
All ·deferred Cash Letters received are routed to one point where
vvhere they are sorted:
(a) According to availability date;
(b) According to banks.
2.
After sorting as above, tickets are prepared in duplicate, the
original being sent to the bank as an advice, and the duplicate
being retained for suose~~ent use as an entry ticket. So far
as possible all cash letters of the same availability date are
included in the same t ickat, a total being shewn for each Ucke t.
3·
Adding machine lists are made of these tickets, with a separate
total for each availability date, the grand total agreeing with
the total of all deferred cash letters received.
4.
One entry is made for ~he total of the day, crediting the general
ledger control account "Deferred Credits"; after which the individual tickets are filed in pc:.ckages as already sorted, according
to availability dates.
5· A record is maintained of the total placed in the file for each
availability date, so tr..at upon removal the tickets becoming
available each day are .r.Xoved to this record.
6.
On availability date all tickets are removed from the file and
used as credit en tries to the member banka 1 res0r'ra accounts, the
total being offset by one debit entry to the general ledger account
"Deferred Credits".
7.
The tickets remaining in the file may be easily proved at any
time, each day's availability separately and in grand total, to
the general ledger control account.
Under the above method the posting of entries, first crediting and
later debiting individual deferred account, is avoided, with a large
saving of labor and printed forms. This method has been in use more
than a year in one of the larger bank£ and no difficulty has been experienced either in maintail::dng the proof or in obtaining any desired
information.
596
FEDERAL RESERVE BOARD
WASHINGTON
X-3784
July 18) 1923··
St.mJECT:
Rediscounts for Nonmeniber Banks·
Dear Sir:
During the emergency of .1921, the F.§lderal Reserve Eoa.rd
granted to member banks the privilege of acting as the media or agents
of nollll)3mber ba.nks in rediscounting paper with Federal Reserve Banks.
(Circular letter X-3176, July 27, 1921: Federal Reserve Bulletih,
.lugust, 1921, page 963). That privilege, hovvever, was granted only
as a temporary emergency measure and, the err.ergency ha:ving passed, it
was revoked by the Federal Reserve :Ooa.rd under da.te of June 26, 1923 ·
In advising you of the withdrawal of such privilege the Board announced
that all previous rulings on this subJect were rescinded, and that
announcement has led to a number of inquiries a.s to the proper application of the Board's ruling. The Board has deemed it advisable, there~
fore, to announce the following rules for the guidance of the Federal
:Reserve Banks and the member banks;
1. The ruling published on page 963 of the August, 1921,
Bulletin, whiCh gave member banks general authority to apply to their
respective Federal Reserve Banks for discounts of ~igible paper acquired from nonmeniber banks, and the ruling published on page 213 of
the August, 1915, Bulletin are rescinded in toto .. T'.ne rulings published an page 520 of the June, 1918, Bulletin and on page 745 of the
August, 1918, Bulletin are rescinded in so far as they apply to the
rediscount of paper bearing the signature or endorsement of nonmember
banks or acquired from nonmember banks.
2. Except with the :Board's permission, no Federal Reserve
:Bank shall discount any paper acquired by a member lank from a nonmember
bank or bearing the signature or endorsement of a nonmember bank:
Provided, howeyg, That Federal Reserve :Ba.nks mav discount bankers' acceptances and other eligible paper bearing th,e signature or endorsement.
of a nonmemer bank, if such paper was bought by the offering bank in
good faith on the open market from some party other than the nonmember
bank.
3· Applications for permission to rediscount paper acquired
from nonmember banks shall be made by the member bank which desires to
offer such paper for rediscount and shall state fully the facts which
give rise to eaeh _application and the rea.sons why the applying member
bank feels justified in seeking such permission.
X-3764
-2-
4. As a gene raJ. rule, the Federa.l Reserve Board will not
permit member banks to discount paper for nonmember banks which are
eligible for membership, baca.use such banks should. join t;he Federal
Reserve System if they desire to participa:te in its benefits.
The
Eoa.rd will make exceptions to this rule, however, in some cases in
order to assist such banks in emergencies for a l:i.mitec.'. time; but
such exceptions will be made only with the ,mderstano.:ing that they
will not be contim:.od beyo::1rl the period ·when the bank concarned can
qualify for admission to m~m·oer:;:hip in the Fed,;;ral Reserve System •.
Ey order of the F'adera1 Raserve Loa.rd.
'.'!m. W. Roxton,
Secretary.
TO GOVERNORS OF F. R. :i3ANKS
-
f98
FEDERAL RESERVE BOARD
WASHINGTON
X-3785
July
StJBJECT;
~0,
1923.
Check Collection - Procedure under Regula.tion J,
Series of 1923-
Dear Sir:
As you have oeen advised previously the Federal Reserve
Board has amended Regulation J. effective August 15, 1923, by adding
the following new conditions;
"No Federal Reserve Bank shall receive on deposit or
for collection any cheek drawn on any no~ember bank which
refuses to remit at par in acceptable funds.
11 Whenever a Federal Res.erve Bank receives on deposit
or for collection a cheek drawn by 1 indorsed ":Jy, or emanating
from, any nonmember bank which refuses to remit a.t par in
acceptable funds, it shall n:.ake a. charge for the service of
collecting such check of one-tenth of 1 per cent, the minimum
charge to be 10 cents for each i tern."
At the request of the B~rd, the Federal Reserve Barks'
Standing Committee on Collections was called, by the .Acting Chairn:a.n of
the Governors• Conference, to n:eet in Chicago on July 9, 1923, for the
purpose of considering the rrsthods and procedure in Federal Reserve
Banks necessary to put into practical effect and operation on August 15,
1923, the provisions of the recent azmndments to the Board 1 s Regulation
J. The Committee n:et, duly considered the suoject and submitted a
report, which was in part approved ":Jy the Federal Reserve l3oard, and
this circular is designed to give force and effect to such portions of
the report as the Board desires formally to adopt.
. There is attached hereto draft of a uniform circular, based
upon the amendments to Regulation J, which each Federal Reserve BaJ:lk
should iranediately issue a.s a supplement to its present check collection
c;ircular and which should be incorporated in its complete check collection circular whenever it becomes necessary to reissue it. There is
attached also a photostat copy of a uniform advice of service charge.
The successful administration of these two new conditions of
Regulation J depends very largely upon the observance and application
of certain principles and practices uniformly by all Federal Reserve
Banks. These essentials are as follows:
(1) The full and complete coopera.tion of. each Federal Reserve
Bank
-2-
X-37S5
in carefully and consistently ap~9lying the cha.rge a.ga.inst member and
nonmember clearing banks on all checks received from them v.hich are dra.wn
by, indorsed by, or which emanate from any nonmember bank in the United
Sta.tes • v.hich will not remit at par in acceptable funds; a.nd in furnishing
other Federal Reserve Banks (through the medium of the Federal Reserve
:Board) with the na.mes of all such nonmember banks in its respective
district ,
(2) Inasmuch as a. charge on such checks will be made by a
Federal Reserve :Bank against rmmber and nonmember clearing banks from
which such checks a.re received, it is rea.sonable to expect that member
and nonmember cleal'ing banks will not route to the Federal Reserve Banks
any of such checks which can be disposed of through other collection
channels· It ma.y therefore be anticipated tha.t circuitous routing will
be practiced and that banks coming into possession of such checks will
route them, Whenever possible, to other correspondents, in which event
such of these checks as are finally sent to a. Federa.l Reserve Bank are
likely to bear the indorsements of severa.l banks (par as well as non-par)
in other districts. The charge on such checks should be made only and
reta.ined by the Federa.l Reserve Bank which f irat receives such checks
into the Federal Reserve collection sys tern, rega.rdless of where such
' checks originated or the loca.tion of prior indorsers. Therefore, it
will not be necessary for one Federal Reserve :Bank to examine checks
payable in its district when received from another Federal Reserve_Bank,
it being understood that the Federal Reserve :Bank which first rec~J.ves
the i terns applies the charge to those checks which are dra\Vl'l by, J.ndorsed
by, or which emanate from a.ny nonmember bankt merever loca.ted, which will
not remit a.t pa.r in acceptable funds.
(3) It will be essential for a. Federal P..eserve :Bank to exa.mine
all checks received from member and nonmember clea.ring banks to determine whether any of them were drawn by, indorsed by, or emanated from
nonmember non-par banks in other Federa.l Reserve districts as well as in
its own district, and therefore each Federal Reserve :Bank must be in
possession of a complete list of all nonmember banks in the United states
which will not remit at pa.r in acceptable funds for dlecks drawn on them.
Upon receipt of this letter each Federal Reserve l3a.nk will suomi t to the
:Board a list of those nonmember banks in its district by states whiCh refuse to remit at par in acceptable funds for checks drawn on them. Upon
receipt of this informa.tion from the Federal Reserve :BankS the Boa.rd will
make up a composite list covering all districts and send copies to each
Federal Reserve Bank for use only in the transit departments of the Federa.l
Reserve Banks. It is not thought a.dvisa.ble to publish a list of the names
of those nonmember banks which refuse to remit a.t pa.r nor for the Federal
Reserve Banks to furnish this informa.tion to their member banks· Member
Banks and clearing nonmember banks will be able to ·determine Vlbether or not
items drawn on other banks 3.re collectible at pa.r by consulting the :Board's
so-called 11 pa.r list" a.s it will be issued in the future. If i t is not
clearly indica. ted by the pa.r list tha.t a partic'Ular ba.nk will remit at par,
the member bank consulting the list will thereby be on notice that the
bank with Whose i tern i t is concerned refuses to remit at par· in a.cceptable
exchange and tl>.a.t the item is subject to a. collection charge if routed
through a Federal Reserve Bank.
f93
-3-
X-37S5
600
In addition to sending to the Board a list of all banks in its
district which refuse to remit a.t par, the Federal Reserve Board requests
each Federal Reserve Bank to prepare a.nd send to it a. list of all banks
i~ its pistrict by states Which
are willing to remit at pa.r. It is desued that both lists rrentioned ne.rei.n oe !'repa.red and transmitted to the
Board prom,ptly on receipt of this letter, and not later than July 31 the
Federal Reserve Banks may wire to thE;l Boa.rd any corrections they ma.y have
to Il".ake in either of the lists. The Boa.rd will continue to issue monthly
supplements to the par list, based on information which the banks will
wire to it once a. month as in the past, stating additions and withdrawals.
{4) Each member and nonmember clearing bank may be required in
the discretion of its Federal Reserve Bank to list in a. separate or special
cash letter all such items sent by it to its Federal Reserve Bank, as are
drawn by, indorsed by, or emanate from any nonmember bank whiCh will not
remit at par in acceptable funds; and ma.y be required to indica.te on the
letter (by rubber stamp or otherwise) tha.t such checks are subject to a
charge. This arrangement would make it possible for the F'ederal Reserve
Banks to apply the charge to specific cash letters without dela.y and with
the possibility of differences reduced to a minimumr The Federal Reserve
Banks, nevertheless, a.re required to ·examine all checks received in oth~r
cash letters to see tha.t no checks drawn by, indorsed by, or emanating
from such nonmember non-par banks are included therein.
( 5) Ea.ch Feder~l Reserve Bank will be required to a.dvis e its
member and nonmember clearing banks daily the total Blt.Ount of the charge
.on each cash letter containing such items together with the da.te and the
total of the letter. This rule shall also a.pply to letters received by
Federal Reserve Banks direct from member and nonmember clearing banks in
other Federa~ Reserve districts. All Federal Reserve Eanks will be required to use the appended forms in a.dvising member and nonmember clea.ring
ba.nks of other Federal Reserve districts of the arr.ount of service char~es
on each cash letter containing such items received direct from them. One
of these forms may also be used by Federal Reserve Banks in advising their
own member and nonmember clearing banks of such service charges.. Ina.smu.ch
as such charges are for the service of handling such items, no such charge
should be returned or rebated in case any such item is not pa.id.
(6) If a Federal Reserve Ba.nk should receive a. check d.ra.wn on a.
nonmember bank which will not remit a.t par in acceptable funds, it will
use the following wording in stating the reason for returning such check!
"Not collectible through a Federal Reserve Bank under the
Fe gulations of the Federal Reserve Board."
The Board requires tba.t the above wording shall be used uniformly by all
Federal Reserve Banks.
(7) Official checks and drafts of the Federal Reserve Banks are
in payment of their own obligations or the obligations of the United
States Government in Fiscal Agency opera.tionsj checks and warrants drawn
on the Treasurer of the United States are likewise in discharge of obli.2:ations of the United States Government; the reserves of member banks .
-4must be
against
to whom
items.
X-37S5
deposited with the Federal Reserve Banks and "ll18¥ be checked
under the Act, and since they are at liberty to issue such cheekS
they choose 1 the charge should, of course, not apply to such
This matter is covered in the uniform circular attached.
The Board Will in due course transmit to the Governor of each
Federal ~serve Bank not represented upon the Standing Committee on
Collections, for his information, a copy of the tull report made by
the Commit tee.
By direction of the Federal Reserve Board.
Very truly yours,
w. w.
Hoxton,
Secretary.
(Enclosures)
TO GOVERNORS OF ALL F. R. BANKS
..
X-3785a.
UNIFORM CIRCULAR BASED
~"PO!'J
.A1v1ENDHENTS TO REGULATION J
COLLECTION OF C".tiECtS DRAWN BY I :h:~TDORSED BY
OR E!.IANATUW FI\OM NON-MEMBER BANKS Vi'II:C CR
WILL NOT REMIT .AT ~AR IN .i\.CCEPT. .IiliL'E: FUNDS.
(l) The Federa.l Reserve :Ooard' s. Regulation J, Series of 1923,
Section III, provides that:
''!No Federal Reserve bank shall ·receJ.ve on daposit or for
collection any cteck drawn on a. non-merr,ber. bank wnich refuses
to ~emit at par in acceptable f\mds.
''Whenever a. Fede:ra.l Reserve Bank receivei on deposit or
for collection a check drawn by, andorsed by or emanating from
any non-member bank whiqh refuses to remit at par in accepta.ble
t:unds, it shall make a ch2.rge, for the service of collecting
such check, of one-tenth of one per c0nt, the minimum cilo.rge
to ~e ten cents for e~ch item.••
(NOTE - The .following are· optioral· paragraphs (2),. tha.t is; one or the
other must be used by each Federal Reserve Bank according to Whether or
not such Federal Reserve :i3ank will require its merr:ber and non-rr:ember
clearing banks to ~ist such items in separate cash letters, provided in
"Fourth" paragraph of the .report.)
·
(If separa.te cash letters are not req,uired by a. certain Federal Reserva
Bank, that bank should use the following paragraph:)
(2) Pursuant to the foregoing regulation, the Federal Reserve
Bank of - - - - - - - will make a charge of. one-tenth of one per cent
for ·the service of collecting each of such checks, the minimum charge to
be ten cents for each item, and in order tra t this _cha.rge rr.a.y be applied
with the least possible confusion and delay and ·Ni thou.t occasion for
differences, it is_ suggested tha.t n:errl:>er and non-member clearing banlcs
send such checks to the Federal Reserve Bank listed in separate cash letters
and indicate on each such letter that such items included thersin are
"subject to charge .1l' In other respects such cash letters should be prepa.red
in the same ~nner as cash letters containing checks which a.re
.
""
X-37359:
-2-
.
not subject to the charge.
Such servi-::e charges will be made against
the reserve accounts of rr.ember ba....":ks or against the clearing accounts
of· non-member clearing banks, and appropriate advice or advices of such
charges will be sent to me.nber and non-member clearing banks daily,
showing the total amount of the charge on each cash letter containing
such items together with the date and total of the letter.
Inasmuch as
such charges are for the service of handling such i terns, no such charge
will be returned. or rebated in case any such i tern is not paid.
(If separate cash letters are reg_uired ·oy a certain Federal Reserve Bank,
that bank sho'J.ld use the following parae,raph:.)
( 2) Pu:c::::uant to the forego inc; regula.tion, the Federal Reserve
Bank of - - - · - - - - - will make a charge of one-tenth of one per cent
for the service of collecting each of such checks, the minimum charge to
be ten cents for each item, and in order that this charge rr.ay be applied
with the least possible confusion and delay and wit:1out occasion for
differences, member and non-rr.ember clearing banks are required to send
such checks to the Federal Reserve Bank listed in separate cash letters
and to indicate on each such letter that such items incluied therein are
'• subject to charge.'' In other respects such cash letters should be prepared in the sa.me rr.anner as cash letters containing checks Nhich are not
subject to the cha.rge.
Such service charges will be made agair.st the reserve
accounts of rrember banks or against the clearing accounts of
clearing banks, and appropriate advice or 3.dvices of such
non-~mber
c~Dq?;es
will be
sent to roomber a...."1d non-m0mber clearing bank.:> daily, showing the total
amount of the charge on
ea~h
cash letter containing such items together
with the date and total cf the lettar.
Inasmuch as such cLarges are for
the service of handling such i terns , no such charge
~"Jill
be returned or
X-37S5a
-3rebated in ca.se any such item is not poiJ.
(3) Official checik:s and dra.fts of the Federal Reserve Eanks,
checks and warr&"'lts drawn upon the Treasurer of the United States, and
checks and dra.fts drawn by member bonks on the i:r respective :Federal Reserve Bo.nks are not s-ub,ject to such cl1.a.rge, even when such i terns a.re
endorsed by or eroonate from a non-member ba.nk which will not remit a.t
par in acceptable funds, a.nd
~onsequently
such checks a.nd drafts under
all circumstanceJ may be included in cash letters along with items not
subject to the service charge.
(4) Member bar>.ks and non-rrember clearing banks may rea.dily
determine 'Jiihether or not a particular item is subject to charge, if
routed tJ:-_rough a Federal Reserve Ba.nk, -oy consulting the Federal Reserve
Board's par list.
Wnen items drawn on all banks in any given tovv.n or
city are collectible a.t par, opposite the narre of such town in the par
list will appear the words
11
All Bank:stt.
W.nen there o.re several banks
·in any given toVvn,. one or more of wnich will not remit a.t par,
the name of the town in question will appear the words
11
opposi~e
All National
Banks 11 , if any, and thereunder the na.rra of each state institution, member
or non-member, Which will remit a.t pa.r in acceptable fu.x"ds.
Distribution
of the Federal Reserve par list will be made as in the pa.s t.
(NOTE - The following paragraph should be used by Federa.l Reserve banks which will require member and non-member clearing
banks to list such items in separa.te cash letters. H should
not be used by tl:~se Fode:r·a.l Reserve :Banks vvl:d;;h ·vill r..ot require that such items be listed i:ri separate ca3h letters)
(5) ·Member bom:s and non-member clea.rir..g banl:s must very carefully assOrt their items before sending tl:em to the Federal Reserve Bank
of
exercising care not to include any item, d.ra.wn by,
-4-
X-3785s.
endorsed by or erna.nating from any non-member bank which will not remit
at par in accepta.ble funds , in any letter containing checks which are not
subject to the service charge of one-tenth of one per cent, since it
would be difficult and confusing for the Federal Reserve Bank upon ex•
amination of a.ll checks to apply the service charge against any such
checks which are included with checks not subject to the service cha.rge.
The Federal Reserve Bank of _ _ _ _ _ _ _ _ _will examine all ca.sh
letters received from member and non-member clea.ring banks, a.nd if any
items subject to the service charge are included in regular cash letters
with items not subject to the service cha.rge, the Federal Reserve Bank
reserves the right to defer cred.i t for suc:n letter one business day
longer, in order that it may have time to make thorough examina.tion of
all endorsements on
all
items included in such letter a.nd sepa.ra.te and
properly apply the service cLarge to those items contained in such letter
which are drawn by, endorsed by, or which emanate from a.ny such non-member
non.-par bank.
.. ..
f06
FEDERAL RESERVE BOARD
WASHINGTON
July
19, 1923.
X-3786
SUBJECT:
Items for Collection. Resolution of
Illinois Bankers' Association.
Dear Sir:
For your information I attach copy of a
resolution, which was adopted at the 'Ihirty-Third
.Annual Convention of the Illinois Bankers 1 Association held at Rockford, I~llnois, on June 26-27,
By order of the Federal Reserve Board.
Very truly
yours~
W. W. Roxton,
Secretary.
Enclosure.
TO BE SENT TO ALL GOVERNORS.
1923.
.X<~~3756(a)
ILLINOIS
BANICERS
AS S 0 C I AT I 0 N
V\lHEREAS, The Federal Reserve Banks and their branches are now authorized by the Federal Rese:~ve Board to coJ.lect notes and negotiable
instruments other than cash items, and
WHEREAS, These items are generally known as "Collection Items"
and not 11 Cash It t:ms " and
VmlliREAS, The said Fede raJ. Reserve Banks and their branches do not
make any collection ch<'l-rge for handling these i terns commonly
known as ncollection 1tems 11 and
WHEREAS, We do not believe i·i; was the intention of Congress in
establishing the FedeTal Reser"~re System that the several Federal
Reserve Banks aod their brru1ches should go into active competition
with the members of the sys tern in handling what are knom as "Collection
Itemsn and
WHEREAS, The member banks handling "Collection Items" make collection
charges, and
WHEREAS, The member banks o~ the Federal Reserve System furnish the
capital of the Federal Reserve Banks and the dividends the member
banks may receive on their stock in the Federal Reserve Banks are
limited 1 and
WHEREA.St The Federal Reserve Banks and their branches in handling
"Collection Items" without making the usual collection charge and
at a pecuniary loss to themselves, are giving unfair and unjust
competition to the member banks of the system and are thereby curtailing their rightful and just profits without benefit to the
Federal Reserve Banks or the system, now therefore be it
That the Illinois Bankers Association is u.~alterably
opposed to the Federal Reserve Banks doing a collection business as
set forth above and urges the Federal Reserve Board to give to the
members of the system the relief tbat is justly due ~~em in
prohibiting the Federal Reserve Banks and their branches from
handling what are generally lmovun as 11Collection Items".
RESOLVE~,
..
~
.
FEDERAL RESERVE BOARD
WASHINGTON
X- 3788
July 20, 1923.
SUBJECT:
Deposits of Secu:·ities for Safe Keeping.
Dear Sir:
By direction of Governor Crissinger, I
transmit herewith certain correspondence with reference to deposits cf securities for safe keeping
by Governm&~t
officers and agencies with Federal
Reserve Banks.
Very truly yours,
Wm.
(:Ehclosures)
TO GOVERNORS OF ALL F. R.. BANES
w. Roxton,
Secretary.
lr'00
;.]I
•.
X- 3788a.
( COPY )
FEDERAL RESERVE :BA~JK
OF CLEVELAND
June 11, 1923.
Federal Reserve Tioard,
Washington, D. C.
Gentlemen:
Attention- Mr. Walter L. Eddy,
Assistant Secretary.
From time to time securities have been left with
us for safekeeping by different government agencies such as
the Federal Land Bank, Collector of Internal Revenue,
Immigration Service, U. S. District Court and others.
This morning I was asked what our authority was
for taking a deposit by the U. s. District Court and I
found, in :lan1.es 1 Federal Code, Section 5634, that "Wherever
by the laws of the United States or regula.tions nade pursuant
thereto, any person is required to furnish any recognizance,
stipulation, bond, guaranty, or undertaking, hereinafter
called '!penal bond", with surety or sureties, such person rray,
in lieu of such surety or sureties, deposit as security United
States libert;{ bonds or notes of the United States, etc., with
the Treasux·er of the United States or a Federal reserve bank. n
Do you happen to have compiled all the laws and
regulations to date on deposits by gover:unent agencies with
the Federal reserve banks? If you have, it will save considerable
effort on rrw part.
Very truly yours,
(signed)
J.c.
Nevin
Secretary.
i...J
X-3 78Bb
( COPY )
July 2,
Dear Mr. Secretary:
There is enclosed hercwi th copy of a letter
received from the Federal Reserve Bank of Cleveland.,
which is self·-expla"Ylatory. On at least one other
occasJ.on the :Goard has re,:;ei ved ar.. inquiry f:;.•om a
Federal reserve bank regarding authority fer the
acceptance by Federal reserve banks from Government
officers and agents of Governr.nenJ.- secu:..·:i ties for.
safekeeping. I should be glad to have you suggest
a form of reply to be made to the Federal Reserve
Bank of Cleveland u1 this instance, copies of which
might, if you deem it advisable, be sent to the
other Federal reserve banks for their inforrr.ation.
Very truly yours.
(signed)
D. R· Crissinger
Gove:cnor.
Hon. S. P. Gilbert, Jr.,
Under Secretary of the Treasury.
1923.
'
..
X-3788c
( COPY )
TREASURY DEPARTMENT
WASHINGTON
Dear
Gover.n~r
July 17,
Crissinger:
1923.
I received your letter of July 2, 192}, with which was transndtted copy of letter of June 11, 1923, from the Federal Reserve Bank
of Cleveland, inquiring as to authority to accept a deposit of securities
from the Ulited States District Court, and further, whether the Treasury
has compiled all of the laws and regulations to date on deposits of securities for safekeeping by Government officers and agencies with the
Federal Reserve Banks. The specific case referred to in the letter in
ques~_ion is covered in Department Circular No.· 154, as amended May 15,
· 1922· Under Section 13 of the Treasury's confidential instructions of
October 19, 1920, with respect to the exchange and reden:ption of
United States coin and other functions formerly performed by the subtreasuries, the Treasury expects the Federal Reserve Danks, as fiscal agents
of.. the Uhi ted States, to receive for safekeeping such stocks, bonds, and
other s~curities as may b7 direction of the Secretary of the Trea~ry
_be deposited therewith from time to time. Specific directions are given
for deposit of seeurities in certain cases, of which the Federal Reserve Banks are advised, while in other classes of cases there are
general instructions,· in Department circulars like No. 154, or otherwise,
"'lllder which securities are deposited with the Federal Reserve :sanks··securi ties tendered by Treasury officers may be taken to be in the course
of .their official duties, under general instructions fro~ the Treasury,
and the Federal Reserve ianks are accordingly expected to receive such
securities for safekeeping, advising the Secretary of the Treasury thereof
immediately, through the office of the Commissioner of Accounts and
Deposits.
I should be glad to have you advise the Federal Reserve Bank
of Cleveland accordingly, and have no objection to copies of this letter
being forwarded to the other Federal Reserve Bank$ or branches for
their information.
Very truly yours,
{signed)
S. P. Gilbert, Jr.
S. P. GILBERT, Jr.,
Under Secretary.
Honorable D. R. Crissinger,
Governor, Federal Reserve BoarO.,
Washington, D~ C.
X-.378Bd
( COPY )
July 2.0,
1923.
Federal Reserve Bank,
Cleveland, Ohio.
Attention of Mr. J. C. Nevin.
Gentlemen:
Pnswerine your letter of June 11th, I beg to advise you
,,
that the inquiry rr.ade by :·ou as to deposits of securities for safekeeping by Government officers and agencies with Federal Reserve
Banks, was submitted to the Und.er Secretary of the Treasury, and he
has handed me a letter, the enclosed of which is a copy, covering
the subject matter.
This letter is fer your information, and, of course, yau
will have to be governed c.ccordingly.
Yours t:ruly,
(signed) D. R. Crissinger
Gov-er:1or.
t<
•
FEDERAL RESERVE BOARD
WASHINGTON
X-3789
July 25' 1923.
SUBJECT:
Official Advice of Removal of Old Restrictions
Aga.ins t Silver Payments.
Dea.r Sir:
For your information there is enclosed a. copy of
a. letter from the Under Secretary of the Trea.sury, da.ted
July 20, 1923, with reference to the removal of old restrictions a.ga.inst silver payrr:ents.
By order of the Federal Reserve Board.
Very truly yours,
Wm. W. Roxton,
Secretary.
(Enclosure)
TO GOVERNORS OF F. R. BANKS
...,..
( COPY )
X-3789a
THE U1"DERSECRET.AlW OF TTIE TRE.:\SUD.Y
W.'\SHilJGTON
July 20,
1923.
l;v dea.r Governor:
In going over the TreB.su.ry 1 s recordG a.bout silver I have
noticed that the letter of J.snuc•. ry
7,
1921, from the Secre~a.r;r o.f the
Treasury to the J.i'eder:1.l :S..es3rve Bo8ri, suggesting the discontinuance
of the arrangement of Decerr)oer
b, 1919, for supplying sta.nda.rd
silver dollars tl;.rough the Division of' Foreign Exchange of the FeCl.eral
Reserv3 Board, includ'ld at the end a. reserva.tion .;,~ee:2in3 in force t'he
restriction a.ga.inst t:1e pa.;y1ner.t of s tar~da.rd s i l Yer dollars a.ga.5.nst
other forms of
mone~r
reasonn:bly clear from
than silver C8rtific8.tes.
sub;.:;eq_t~ent
I think it ::.s
i::structions to the Federal Reserve
Banks snd correspondence wHh the J!'edera.l Reserve Bo:J.rd tha.t this
restriction no longer remaL1s in force, but I am wri tlng you definitely
to tha.t effect in
o:::de:;.~
tha.t there may b s no possi ole misundersta.nding
a.s to payments of standard. silver dclla.rs.
With the completion of
purcha.ses under the PittiTJr'ln Act a.nd th8 recoina.ce of silver bullion
into standard silver dollars the Treasury's stocks of s i:ve:::- are en-
tirely adequate and. there is no longer a.n,y rea.son fer keel_:ing in
effect any of the old restrictions a.ga.inst silver pa.yments •
Very truly yours,
(signed) S.P. GIIJBEB.T, Jr.
Under Secreta.r;:,·.
Ron. D. R. Crissinger,
Governor, Fed::Jral R::;sc:rve :So3::d,
Washington, D. c.
..
.
FEDERAL
r.ESERVE
BOARD
STATEMZNT FOD. THE PRESS
X-3790
For Release in Morning Pa.!)ers,
Friday, July 27, 1923.
The following is a. summary of general business
and fina.ncia.l condit:i.ons throngnout the several
Federal Reserve Districts, based upon s ta.tis tics
for the months of June snd July, a.s con ta.in ed in
the forthcoming issue of the }'edera1. Reserve
Bulle tin.
Production of ba.sic conmodities declined in June but employment
was maintained at last month's hi3}l level,
frei~ht
shipments were ex-
ceptionally la.rge, and the volume of V'iholesale and retail trade continued heavy.
Wholesale prices showed a. furth9r decrease.
PRODUCTION:
The Federal Heserve Board's index of production in basic industries, which makes a.llowance for seasonal variations, wa.s four per
cent lower in June than in Ma.y. and stood a.t about the level of the late
winter.
Mill consumption of cotton, steel ingot output, and sugar
rneltings showed particularly large reductions.
The value of permits
for new buildings and of contracts a.warded decl'ined in June more than
is usual at that season#
The Department of Agriculture forecasts on the basis of July 1
condition a. large increase in the cotton crop, a. slight reduction in
sa.n:e
the corn crop, a. winter wheat crop of about the1 ~ize a.s last year, and
a. spring wheat crop which will possibly be about forty million bushels
below
1922.
The number of factory employees a.t work in June in the cou..'1.try
a.s a. whole wa.s about a.s large as in May, though a. reduction is reported
by New England establishments.
The proportion of fa.ctories reporting
X-3790
-2-
..., tull time operations decreased a.nd consequently average earnings per
employee were snla.ller.
616
Wage advances continued to be reported in June,
but they were not nearly so tiUJif!rous as in April or May.
~:
Distribution of comzr.odities, as mea.sured by railroad freiEJ:lt
shipments, was active throug..'lout June.
The number of cars loaded ex-
ceeded one million in each of four successive weeks, and in the week
ended Ji.me 30 was the la.rgest on record.
'lhe vol1lme of Wholesale allli reta.il trade in June was a:t>out the
same as in May and continued to be substantially larger tr.IBD in 1922 ..
Sales of groceries and d.ry,goods were much larger in June and this increase wa.s reflected in an a.dvance of 4 per cent in the Federal Bessrve
:Board's index of wholesale trade.
for seasonal changes, wa.s
'lhis index, Vlhich makes no allowance
9 per cent above the June,
i.922 level.
Department store and mail order sales were sma.ller; a.s is usual a.t this
season, while sa.les of reporting c:1a.1n. stores were a.t about the same
hish level as in May.
Stocks of merchandise at departr.uent stores were
reduced about 6 per cent. .
WHOLESALE PRICES:
'lhe decline 1n comnodity prices, which 'Qega.n late in April,
continued during June and the first two weeks of July and the index of
the Bureau of Labor Sta.tistics for June was 2 per cent less than for
~·
The largest decline amounting to 4 per cent ocC'I,l.rred ~.n the prices
of building materials, and decre.ases were shown a.lso for all the other
commodity groups, except house furnishings mich remained unchanged.
During the first half of July price declines wel"e shown for wheat, s1.1.ga.r,
i
l"':J
!::-'·~
..) . ,,
-3-
X-3790
petroleum, a.nd lead, while the price of corn and hides a.dvanced.
:BANK CBEDI T.
:Banking developments betVII9en the middle of June and the
middle of July lat'gely reflected the payment of ir:.cor.1e taxes on JUne
15,
dividend a.nd interest payments at the tt.un of the half year, the demand
for addi tiona.l currency for the July
cu:rrency after that date.
4 holiday, a.nd the return flow of
.At the end of the period the volu"!le of
member bank and Federal Reserve :Bank credit in uae was approximately
at the same level as a rr.onth earlier.
.At the Federal Reserve :Banks the
amount of discounts for member banks on July lS ,vas about $100,000,000
larger than on June
13,
but this increase ·Na.s practically balanced by
a decline in holdings of a.ccepta.nces and Government securities.
During the month of June gold and gold certificates in
circulation increased by over $40,000,000, and this increase is reflected
•
in an equivalent decline of gold hel.d by the Federal Eeeerve :Banks.
I'vioney ra.tes ware slightly firmer a.s is usual a.t this season
of the yea.r.
..
COPY
X-379la.
FEDEBAL EESERVE BANK
OF CLEVELAND
July 23, 1923.
Hon .. D. R. Crissinger, Governor,
Federal Reserve Board,
Washington, D.c.
Dear Governor Crissinger:
I have been considering the practical effect of the
Ammd:ments to Regulation "J" which a.re to go into opera.tion on
the 15th prox. In this connection certain questions have arisen
in my mind which did not occur to me, or apparently to the other
Govamors, a.t the time of the recent Conference in Wa.shington.
IJ.'he importance of these questions is of such n:o~nt that I feel
I should bring them to your attention ..
You wUl recall tha.t the Amendrrents to Regulation nJtt
in effect divide banks into two classes, namely, those WhiCh have
agreed to remit at par and those which have refused to do so. The
refusal to handle cneCks for collection and the imposition of the
collection service charge will under the revision of the Regala.Uon be made in all cases where the bank which ha.s refused to. remit at par, is involved. As you lmow, there are a. considerable
number of banks which have not formally a. greed to remit a.t par,
but the number of banks, on which the Federal .Reserve Banks have
diffieu.lty in collecting checks at par ..without expense, is small.
In the Fourth District we have been coll acting without
difficulty at par checks drawn upon 275 bankS which have nQt
formally agreed to remit at par·. 'lbe cheeks on these banks ba.ve
aU been collected at par through ~mber or non-member banks and
accounted for to us without cost.
Peculiar considerations enter into some of these a.rrangements which do not involve hostility to the par clearance system.
For example• the financial condition of· certain of these banks is
such that we prefer to collect checks drawn upon ·them through a
ballking institution in the same coumunity which is familiar vrith the
condition of the drawee bank, rather
to send these checks
directly to the banks on which drawn.
than
In other instances the a.rrangement is one of conve11ience
to the collecting .and paying bank, in that settlement between them
is nade at intervals which they arrange to conform to local condi ...
tions thereby simplifying their own operati'Ons.
A typieal instance
where the convenience of the collecting and paying bank is served
.
'
. -2-
X-379la.
by such an a.rrangenent occurs where the Pl33ing bank accUI'mllates
currency and the collecting bank accumulates exchange. In such cases
it is a. real service to the bank making the collection to have the PS31ng bank settle with it in currency'.
In sorre cases which have cozm to ley' attention the importance
of this arrangament is such tha.t it would engender hard feeling if the
bank making collection for us wa.s deprived of adjusting its currency
and exchange balances. In fact we have a. nwnber of member banks who
are ver.y insistent that checks drawn on the non-member banks in their
conmmities be sent to them for remittance to the Federa.l Reserve :Bank.
In most of these instances I believe the fa.ilure of the peying bank to
agree to rami t a.t par has not bean due tc hostility to the par collection system, but merely to the fact that th~ arrangement worked out
best ierves the convenience of the paying. a.s well a.s, the collecting
bank.
Another phaae of this indirect collection a.t par without
expense arises through the opera.tion of the Clea.ring House .Associations.
We are collecting checks draYm upon SO non-member banks in the Fourth
District which have not formally agreed to remit a.t pa.r • through
members of the various Clearing House Associations in the District.
In most of these instances the p133ing bank is not a member of the
C~ea.ring House .Association but its checks are cleared through a member.
In this connection I wish to call your attention to the fact
tha.t in the published sta.temant of theBoard xr.a.de with reference to the
revision of :Regulation 11J" it is stated that the collection system is
now in opera.tion between banks which in number a.re a.bout 92~ of all
banking ins ti tu.tions and which have a.pproxima.tely 98% of the total
banking resources of the co'Untry. This sta.temant, it seems to me, is
subject to question in tha.t i t appears to be predicated upon a computation
which includes the banks on which the Federal Reserve Banks a.re collecting Checks 1ndirectly throusn member and non-member banks as outlined
above. It has occurred to me that the critics of the par clearance
system may seize upon this statement as constituting a claim by the
Federal Beserve :Board which is not justified by the fa.cts.
Upon reflection I feel tha.t the difficulties which it seems
to me mst be mat if the revision of Regulation "J", alrea.dy published
goes into effect on the 15th prox. ~ might be avoided by an Amendment
thereof in the following form:
·~o Federal Reserve Bank shall receive on deposit or for
collection any check dra.wn on a.ny non-member ba.nk which refuses to remit a.t par in acceptable funds to the Federal Resl3rve Baru,, or to make
payment a.t par to its collecting bank·
.
'
X-3791a.
"Whenever a. Federal Reserve B k
·
collection a check drawn by endorsed ~- ~ecelves ~n deposit or for
member bank h. ch
f
'
.
' r emana.tlng from any nonFederal Rese;v~ B ~ uses to remit a.t par in a.cceptable funds. to the
.
a , or to make payment a.t par to its collectin bank
~t ~~1~ ~ke a. ch~~e for the service of collecting such check ~f one'
en
o
/0 • the nu.n1mum cha.rge to be 10 cents for each item. n
.
n "
tlon. J
. Under
l
this suggested rev is ion of the .Amendmer.. ts to Re
t seems to me tha.t the number of banks to which it
la.be
wo~d
a.ppl~ca.ble would be reduced to the banks which ha.ve shown active
hostJ.lity. to. the pa.: clea.rcnce system and would not involve disturbance
of the ex1stlng sa.tJ.sfa~tory arrangement for colle:tion of checks dra.wn
upo~ the large number ot banks which, although they have not a.greed to
rem1t a.t p~r, a.ra pa.yi:::1g their checks at pa.r in a. ma.n:::1er which is entirely satlsfa.ctory from the point of view or the Federal Reserve System.
It would also o~viate the nece~si ty of ca:using dissa.tisfa.ction of ma.rzy
member banks wh1ch are collectmg these checks at the present time.
.
I understand that in the Seventh District the number of ba.nks
which have not agreed to remit at par is a.pproxima.tely 3o6, but only
six of these banks a.re actively opposing the collection of their checks
at par. In our district the figures are 277 banks which have not formally agreed to remit at par including only two ba.riks which will not remit except upon presenta.tion of their checks by this bank throu~ an
Agedt. In one of these instances the checks are not handled by reason
of pending litigation.
I am advised tha.t the Dallas bank has in its District 123
non-member banks on whiCh CheCks are collected by it at par without
expense through other banks in the same communities, but I do not know
the number of banks which are actively opposing par clea.ra.nce in that
district.
I assume that the figures given above are typical of conditions in the other Federa.l Reserve Districts with the possible exception
of Boston.
To rey mind they emphasize the fa.ct tha.t if the present revision of Regulation "J" goes into effect on the 15th prox. , the result
thereof will be to create a grea.t deal of avoidable critic ism of the
Federal Reserve Collection System. My own thought is that in the la.st
analysis the only banks a.t which the revision of Begulation "J" was
aimed, were those which are now seeking to break down the par clea.rance
system by compelling the Federal Reserve Banks to ~e collection of
their checks, if at all, by the expensive and burdensome method of
..
)I
_).,._
X-3791~.
employing an a.gent to present them at fuair respective counters·. !rhe
revision of Regula.tion "J" ma.de for this purpose, now ~ppears to be
broader in 1 ts scope than is necessary or advisable.
If it be. suggested that the Regulation a.E'· now revised might
be construed by the banks to relate only to those banks whiCh require
presentment of their checks by agents of the respective Federal
Reserve Banks, I feel that this is not a. pra.ctice which should be
adopted because it will afford the opponents of par clea.ra.nce ground
for claiming tha.t the Regulation purports to be uniform in its opera.tion as to all banks which have not a.greed to remit at par, but the
Federal Reser1e :Sanks are const-ubg it in viola.tion of its express
terms to be a.pplica.ble only to the srr.a11 number of l>anks w~ich are
actively hostile to the par c1 ea.ra.nce system·. This, it seems to me,
would be a criticism which cot:.ld not be a!"Sweren •
.I trust that you will pardon the length at which I have
written in this connection, but in view of the importance of the
matter I have felt that I could not a.dequa.tely express rey views
briefly.
!ours very truly,
( Sgd) E. R. Fancher,
Governor.
F.N.m
'
FEDERAL
RESERVE
BOARD
X-3793
For relea.se in .Afternoon Pa.pers,
Tuesda.y, July 31, 1923·
CONDITION OF ACCEPTAlWE MARKET
JUNE 15 TO JULY 15,
1923·
The a.cce;pta.nce rna.r:-re t wa.s genera.lly quiet during the
30-da.y period ending July 15.
The supply of bills wa.s limited
in June, but increased somewhat in the ea.rly part of July, while
the demand though light wa.s generally sufficient to absorb offerings
and dealers 1 portfolios were kept fa.irly liquid.
Bills with short
ma.turitias were in the best dem:md and were sold freely in the
early pa.rt of the period. but a.fter the first of July bills of 60
to 90-da.y maturities were preferred•
Bates rem.ined unchanged at
4 1/8 to 4 1/4 bid and 4 to 4 1/8 offered.
The principal com-
:rr.odities a.gainst which bills were dra.wn were sugar, grain, cotton,
silk, lea.ther, wool, and trerchandise.
(~ .~
'
FEDERAL RESERVE
. '1'
,.,
.,~
X-3794
:BOARD
STATEMENT FOR THE PRESS
For relea.se in Morning Papers,
Wednesday, August 1, 1923·
The following is the Review of the Month a.s
contained in the forthcoming issue of the
Federal Reserve Bulletin.
AGRICULTURAL OUTLOOK·
During the n::onths of July and August the general
harvesting of crops begins, Government forecasts of the volume of crop produc- ·
tion become ava.ilable, and plans are w.a.de for marketing a.nd financing the
crops.
Harvesting of winter whea.t is already under wa.y, its movement to
the world Il1.8.rkets will soon begin, and during the next few months as other
crops are harvest&d the banks will be enga.ged in providing the credit
incident to an orderly Im.rketing movement.
The use of credit ordina.rily
reaches a. sea.sona.l peak a.t crop-moving time when the credit rr.achinery is carrying the load of both domestic marketing and export firumcing.
The present
strength and liquidity of the banks and the added fa.cilities for agricul tura.l
financing assure a supply of credit a.deq_ua.te to meet this yea.rts seasonal
requirements.
· · In view of their bearing upon proS.fB ctive returns to the farmer and
therefore U.i.)On the general business situa.tion. especial interest atta.ches to
the recent forecasts of crop production and preva.iling farm prices 1 shown in
the table.
These afford the best ba.sis now ava.ila:Ole for ma.king a.h estimate
of the present a.gricultura.l outlook com1Ja.red with tha.t of a. yea.r a.go.
f,.....'.~·llf'!
\.' ; ',· '-!..:
-2-
X-3794
Price a.t the
farm ...
PRODUCTION
Unit.
Corn ••......•
Whea.t, total.
Winter ...
Spring .•
Cotton •••..•
*
Bushel
do
do·
do
Ba.le
·1922 final
1923 J July
July l,
July l,
estima.tes
forecast
1922.
1923.
2,890,712,000
862;091.,000
2,877,437,000
820,628,000
585,889,000
234 '739 ,000
11,412,000
$0 .. 622
1-026
$o.865
·951
586~204}000
275 ;1537 ,coo
9.762,000
. . . . . ..... -..........
. . ... .. . . .. ...............
"
* ·.204
I
• .262
Price per pound.
'!he July l foreca.st of winter wheat indicates a. crop of a.bout the same size
a.s last year, while the spring wheat foreca.st, which a.t this time of the year is
much less definite, shows an axpected reduction of about 40,000,000 bushels.
.A
slight reduction in the corn crop a.nd a large increa.se in the cotton crop are
a.lso forecast.
While fa.rm prices on July l can not be taken a.s indica.tive of
the prices the farmer will receive for this yearts crops, they constitute a
basis for. compa.rison of cul'rent conditions with those preva.iling a. year a.go.
Corn and cotton prices a.re mu.ch higher than a.t this time last yea.r, while the
price of Wheat is lower..
The aggregate value of this year 1 s \"ihea.t crop a.t
July 1 farm prices would be in round numbars $BOO ,000,000, compared with
$900,000,000 for last yea.r's crop a.t prices prevailing in July, 1922.
The
a.ggrega.te value of the cotton crop on the saro3 basis, on the other hand, was
$1,500,000,000 this year, compared with $1,000,000,000 last year, an increese
of 50 per cent over last yea:r.
The agricultural outlook is conditioned by the world supply of leading
farm pro duets and the buying power of consumers, both domes tic and foreign, during
X-3794
-3the coming yea.r.
Competition fixes substantia.lly the same price in all
countries for those agricul tura.l sta.ples which are sold in world ma.rkets, and
this continues to be true even under the existing disorga.nized currency
comdll;ions.
The return to the .Ansrican farmer, is, therefore, the outcome
of world supply and world demand, of which the domestic production and
demand constitute only a. pa.rt. While foreign
/ demand is more impor·~ant in the marketing of s orne a.gricul tural products than
of others, in the aggregate the doll'.estic ma.rket consum3s much the larger
proportion of our a.gricul tura.l products.
T.he domestic demand for fa.rm
products during the past yea.r ha.s incree.sed a.s a. result of the larger buying
power of industrial workers arising from fuller employment and wa.ge advances.
During the first five months of
1923
the sale of groceries a.t wholesa.le
exceeded that of the same period of the pre-gious year by 14 per cent and the
sale of mea.t by 20 per cent, the domestic consumption of pork being unusua.lly
la.rge.
These la.rge food purcha.ses, hov.ever, were made a.t rela.tively low
prices, though these were not due· to any limitation in the buying power of
domestic consunsrs, but to the conditions of the world supply and the limited
buying power of foreign consumers..
In fact, it is ha.rdly likely that the
total food consumption in the United States would have been much reduced
even if prices ha.d been higher.
With the present relatively large earnings
of workers the effect of a. rise in food prices on the family· budget would
ha:ve been to increase the expenditure for food rather tha.n to reduce consumption.
For the ultimate consurr.er in the United Sta.tes the chief result
of relatively low food prices, therefore, ha.s been to increase the zr.a.rgin
ava.ila.ble for the purchase of other conmodi ties and for savings.
For the
farmer this ha.s meant that the selling price of his products ha.s been out of
line with the prices of the things he buys..
In this respect there ha.s been a
better adjustment during the pa.st yea.r, taken a.s a. whole. though latterly
-4-
/'""
\
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.
X-3794
a.gricul tura.l prices ha:ve shared in the decline in the general level
sale prices 1 the fall in the prices of Whea.t and hogs
attention.
,~~~·-
oi
v.bole-
a.ttra.cting~pa.rticula.r
Price movements in the sensitive, highly organized produce
ma.rkets at this sea.son of the year a.re a:pt to reflect the a.tti tude of the
speculative dealer and are not invariably indica.tive of the prices that will
be realized by the American farmer during his
cro~l
marketing period.
With
reference to the present situa.tion this is particularly true in view of the
many uncertain fa.ctors which must be taken into account in estirr.a.ting at this
time the market outlook for a.gricul tura.l products.
FOREIGN DEMAND
In the sa.J.e of his products the .American farmer is confronted with world
conditions, a.nd the price which these products will bring in the international
markets depends chiefly upon the extent of European dew.and and the supply
available from other food exporting countries besides the Urited Sta.tes.
From present estimates i t a.ppea.rs probable tha.t a. larger proportion of
European consumption requirements than in recent years will be met by
European crops a.nd tha.t consequently European imports of food products this
year are likely to be smaller.
Agricultural production in leading food export-
ing countries • largely stimula.ted by condi ticns prevailing during the war, is
still considerably above the prewar level, a.nd the exported product of the
.AI.rarican fa.rmer has to meet in the European ma.rket the competition of this
enlarged world p\-oduction.
The ability of Europe to pay for imports is still
much less than before the war, though there ha.s been some increa.se in its
beying power during the past year arising out of industrial revival.
.A large
share of the reduced buying power of these foreign countries during 1923 has
been used in the purchase of food; the imports of food into Grea.t Bri ta.in,
for
exa~le,
during the first
five months of this yea.r were
50
per cent
...
I,..,-,,..._,
\
X-3794
-5-
greater than during the Sal'!'e period of last year and constituted a. la.rger
percent of her total imports.
On the Continent, particularly in those
countries where a.bil i ty to make foreign purcha.ses has b;aen limited by
their depreciated currencies, there ha.s been a. shift from the more expensive
imported foods, such as v.hea.t, to the cheaper domestic foods, particularly
potatoes and rye. Fc~od exports from the United States, which were greatly
during the war and the years imnediately folJowing, hava
enla.rgedj during the pa.st year continued well a.bove the p-ee-war level.
Cotton exports on the other hand, have been much lower.
The quantity of
European purchases in the American market in view of Europe l s limited
buying power depends both on the prices prevailing in this country a.nd
on the level of exchange rates, with the :result that Eu-rope has bought
larger quanti ties of such corrmodi ties as pork and la.rd and of the cheaper
grains.
Cha.nges in the volume and character of Europaan }?Urchases of Amarican
fa.rm products ha.ve bean accompanied by an important changa in tha saa.sonal
distribution of these purchases and in the size of the stocks ca.rt'ied in
Europe.
In recent yeal."s
European buyers of American cotton a.nd vmea.t have
distributed their purchases more evenly throughout the yeo.r.
Under the
practice thG'>.t prevailed before the war the bulk of cot ton exports took
pla.ce during the five months following the ha.rvesting season.*
Since the
war 1 however 1 exports have b;:;2n more closely related to the immedia.te consumption requirements 1 and stocks carried in Europe are relatively smaller.
A similar change in prca.ctice has affected the sea.sonal distribution of wheat
Jxports.
Stocks now carried in Europe a.re ma.teria.lly below the arr.ounts
carried in the years preceding the war.
Tha change in pra.ctice began during
the war, when supplies wert) short. and this
*
ha_nd-:o-o:o~th
p_olicy_ ha.s C_?n-
See a.rticle on cotton financing. FEDEiv\L RESERVE 5ULLETIN • Mey,
1923, P· 566.
.•
.. ..
--
tinui;;d to the pr0sent time.
-,~
X-3794 l .
-6-
0
Moreover, the holder of stocks in Europe is
exposed to unusua~ hazards arising from wide fluctua.tions in prices and
exchange rates.
Also the cost of storage and handling a.t the docks ha.s
increased, and this has tended to reduce stocks carried in wa.rehouses end
to increase the direct movement from the ship to the milL
The reduction
of these European stocks h9.S increased ·the amounts of agricultur~ staples
that had to be ca.rrisd in the United States a.nd lengthened the period for
marketing the exportable surplus..
particularly the
This chang3 of pra.ctice has affected
size of the ..m:erican carry over of wheat and must be
recognized both by farmers and
banker~
a.s a. factor in the rrarketing and
financing of the 1\rneri cax1 crop.
OBDEELY MAfu:"tETING.
Since the harvesting of the ~4.merican crops takes place during the
summer and auturnn months, while their consumption is distributed over an
entire year 1 the rr:a.rketing r:rn:;.st be a.djusted to the f1ow of products from other
exporting areas and to the req_uir')ments of the consumer.
In this respect
there is a. distinction between the rr.a.rketing of such crops a.s cotton and
tobacco, in which world supply is prirra.rily dependent upon
;.~.m3ric;;;n
produc-
tion, and the ma.rkating of whe.Jt, which is produced in a.ll parts of the
vvorld and rna.rketed throughout the year.
The function of credit in the marketing of fa.rm products is to finance
the flow of products from the producer to the
over the entire period of consumption.
cons~~er
in an orderly manner
Products not irrmedic..tely consumed
are necessarily ca.rried :::md finc.mced at some point in the distrbuting
process, and consequently require the use of storage and credit facilities.
Credit can not create a msrket where none exists, but i t can assist in
·~
..
X-3794
-7-
adjusting the movement of products ir.to the w.zrket a.t any given moment
to the actual
stat.~
of the del7lond, ond thereby insure to the producer in so
fa.r a.s conditions will a.t all permit of it a. rr.ore settled price situation
than he would face if his products were dumped upon th0 rr:a.rket a.s soon a.s
ha.rvested.
It is worth noting that this is a.ls o the chief and a.imed at by
producers in organiz:tng themselves into coopera.tiva ma.rketing associations.
:But these a.ssocia.tions also work within the limits of consumptive derm.nd,
and their chief service to their members is to pro•ride more a.d.equate financing
and better marketing arrangements.
In a. letter to the Federal Reserve a.gents the Federal Reserve Boa.rd
recently called attention to the added fa.cilitL:s for a.griculturo.l financing
made possible through legislation ene.cted during the le.(;t Congress and t..'lrough
the board. 1 s regulations -putting into effect the amendments to the Federal
reserve a.ct.
Facilities available to farmers for securing credit to carry
their crops in the process of orderly ma.rketing were consid.e:ra.bly enlarged by
the agricul tura.l credits a.ct of 1923.
This a.ct, in ado.i tion to creating new·
ma.chinery for granting longer term credits to fa.rmers. conta.ined a. number of
amendments to the Federal reserve act.
services tha.t the
With the view to increa.sing the
·reserve banks can render fa.rmers in financing their
current short-term operations, the act extended thJ ma.ximuro ma.turi ty of
a.gricul tura.l pa.par eligible for discount vv'i th tha r.;;serve banks from six to
nine months.
It a~so extended the maturity of ba.nkars' acceptances eligible
for discount or purchase by the Federal reserve bank from three to six months,
provided these acceptances a.re dra:wn for a.gricul tural purposes and a.re secured
by warehouse receipts for a.gricul tUi':'al products.
Other changes a.ffecting the
length of period for which a.gricul tUt'al paper is eligible for disco"Ul'lt were
.'
.--
>
•
X-3794
-8-
provisions that certain classes of pa.par of cooperative ma.rketing associa.tions
were to be construed. a.s agricultural pa.per rather than a.s commarcial pa.per,
thereby making them eligible for discount for nine months instead of
90 days,
and that certain a.gricllltural drafts without definite maturity (sight a.nd
demand drafts) might be discounted by the reserve banks.
The act also ad-
mitted to discount paper of coopera.tive marketing associations, the proceeds
of which are to be lent to mem·bers to finance their a.gricul tural operations,
and fa.ctors t paper issued for the
sta.ple a.gricul tural prod:1cts.
pU..t'J;OSe
of rns.king advances to producers of
A nontecl;nica1 surrnary of the facilities for
agricultural credit provided by the Federa.l Reserve act a.s amended is published
elsewhere in the BULLETIN·
In surveying the agricultural si tua.tion, i t is still too early to estima.te
even with approximate accura.cy the proceeds to the farmer from the approaching
harvest.
Neither the volu.'lle of production nor the prices through the period
of ma.rketing can now be definitely l;:noil\ln.
It is evident, ho'J'Jever, that with
the inproved credit facilities and the strong position of the banks the
credit available is adequate to provide for the needs of
o:.cde.;.~ly
marketing.
.....
.
X-3795
X-3779
superseding
§. Q ~ Q I !. Q. ~
}J)OPTED BY
FEDERAL RESERVE BOARD
AT MEETING JULY 30, 1923
(.Alrending action of June 27, 1923.)
R J!i
SUBJECT:
CU B A N A GE N C I E S
WHEREAS, the United States Government, by virtue of the so-called
Pla.tt amendment ha.s entered into relations with Cuba. ·nhich it does not
ha.ve with a.ny other foreign country, especially in matters of finance
a.nd currency, the currency of the United Sta. te s having been ma.de legal
tender by Cuba.;
WHEREAS, the Federal Reserve Board is of the opinion that the
esta.blishtrent of an agency in Cuba. is desirable a.s a. means of sta.bilizing
banking conditions and furnishing an adequa.te supply of clea.n currency;
WHEREAS, the President of the United Sta.tes and the State Department
ha:ve advised this Boa.rd tha.t it is important tha.t such an a.gency should
be established;
WHEREAS, the Federal Reserve Bank of .Atlanta. and the Federal Reserve :Ea.nk of Boston ha.ve ea.ch petitioned the Federal Reserve B.oa.rd for
a.uthori ty to establish an a.gency in Ha:va:na., Cuba., for the purpose of
conducting operations permitted under Se ction 14 of the Federal Reserve
Act;
WHEBEAS, the Federal Reserve Bank of Boster.. desires to establish
such an a.gency priiDB.rily for the purpose of buying and selling ca.ble
transfers and buying, selling and collecting bankers 1 a.cceptances and
l:lills of exchange bearing satisfa.ctory ba.nk: endorsements;
WHEREAS, a. substantial portion of the currency now in circula.tion
in Cuba. consists of Federa.l Reserve notes of the Federa.l Reserve :Ba.nk:
of .Atla.nta.; and it is feared that the est~.blishment of ari agency of another Federal Reserve ?ank: in Cuba might re.sul t in the retirement of
such notes from circulation; and the Federa.l Reserve Bank of .Atlanta
desires to establish an a.gency in Cuba primarily in order that it rre.y
rm.inta.in the circula.tion of its Federal Reserve notes in Cuba.j
WHEREAS, the Federal Reserve Bank of Boston does not desire to put
its Federa.l Reserve notes in c1rcula.tion in Cuba. but is willing, if
authorized to establish such an agency, to preserve a.s fa.r as possible
the circulation in Cuba. of Federal Reserve notes issued through the
Federal Reserve :Bank of Atlanta.;
BE IT RESOLVED BY THE FEDERAL RESERVE :DO.AIJJ, that the c:pplica.tions
of the Federal Reserve Bank of .Atlanta. and tt"e Federal Reserve Bank of
Boston for permission to esta.blish such agancies a.re hereby granted on
"
.
-2-
X-3795
.:-":' (}\
·,
,-J
the following terms and conditions:
(1) The Federal Reserve Bank of Atlanta. and the Federal Reserve
Bank of Boston are each authorized to esta.blish an a.gency in Havana.,
Cuba., and through such agency to b.ly and sell cable transfers; buy,
sell and collect prime bankers' a.cceptances and prime bills of exchange,
which acceptances and bills are payable in dollars, arise out of a.ctua.l
import or export tra.nsa.ction.~. bea.r the signatures of two or rr.ore responsible parties, bea.r a. sa:t[sfa.ctory bank endorsement, ha.ve not rr..ore
than 90 da.ys to run, exclusive of days of gra.ce, and are secured at the
tima of purchase by shipping documents evidencing the actual import or
export and the a.ctual sale of goods and conveying or securing title to
such goodsj and to exercise only such incidental powers as shall be
necessa.ry to the exercise of the above powers. The tertn 11bills 11 as
hereinafter used sha.ll mean ca.ble transfers, bankers t acceptances and
bills of exchange of the kinds described in this para.g;ra.ph.
(2) The Federal Reserve Bank of Atlanta. S!L\LL NOT BUY OR SELL ANY
CABLE TRANSFERS EXCEPT AT THE REQUEST OF THE FEDERAL Iffi:SERVE :B.ANK OF
BOSTON AS PROVIDED IN PARAGRAPH J HEREOF, A..lU) shall not purchase, sell
or collect a.ny bills in Cuba. except such a.s origina.te in or a.re dra.wn
upon banks or other drawees, in the Sixth Federa.l Reserve Districtj and
shall purchase no other bills nor purchase or sell any ca.ble transfers,
e.x:ceptupon the request of, and for the account of 1 the Federa.l Reserve
Bank of Boston.
(3) The Federal Reserve Bank of Boston shall not pa.y out any cm:rency in Cuba, except as hereina.fter provided, a.nd whenever bills or
CABLE TRANSFERS are offered for sale to its Eavana. Agency and the sellers
request payment in Federal Reserve notes or other cu't'rency 1 the Federal
Reserve Bank of :Boston shall request the Federal Reserve Bank of Atla.nta
to purchase such bills or CABLE TRANSFERS for it and immediately pa.y for
them with Federal Reserve notes issued through the Federa.l Reserve Ba.nk
of Atlanta. or other currency. The Federal Reserve Bank of Atla.nta. sha.ll
comply with all such requests and shall make imrr.ed ia.te payment , and sha.ll
imrr.edia.tely resell such ca.ble tra.nsfers or bills to the F~dera.l Heserve
Bank of Boston at cost and without recourse. If the Faderal heserve
Bank of Atlanta. shall fail to purcha.se such bills o:r ca:ole transfers
proiT!PtlY for the Federa.l Mserve Bank of Boston or shall not ha:ve available
in Havana a. sufficient supply of currency, the Federal Reserve Bank of
Boston may itself purchase such bills and pay for ti1;am with its own
Federal Reserve notes. In making sa.les of cable tr.;nafers and bills of
exchange where currency i:> tendered in pa¥J11Snt 1 tl.-.8 F0deral Reserve Bank
of Boston shall require the pu.-rchasing banks to mal". e the currency payments
to the agency of the F~deral Reserve Bank of Atlanta. for credit to its
account. All settlements between the a.gencies shall be made at the request of the creditor bank by the hea.d offices t~~rough the Gold Settlement
:Fund. Neither bank shall make any direct exchan;scs of currency in Cuba.•
(4) The establishment and opera.tion of such o.gencies, and the exercise
'~
...
-3-
X- 3795
of all the above powars through such agencies, shall be subject to such
changes a.nd such further rules and regulations as the Federal Reserve
Boa.rd w.a.y prescribe from time to time.
(5) T.he Federal Reserve Board expressly reserves the ri~ t to revoke its consent a.t a.ny time to the continuance of such a.g:mcies, to
require the discontinua.nce of such agencies OR TO .AUTHORIZE THE ESTABLISBiv!ENT OF NEW .AGENCIES whenever in its discretion it considers it desirable to do so.
(
,~. 3
•••
-
(.
\
~
-~-'
l'!
'.,.
._
X-3796
July
To:
Subject:
Federal Reserve Boa.t-d
From: Mr. Wyatt,
Genera~
Counsel
QQ!!El~~!!~lAl!
I ha:ve been requested to
rr.a~e
31' 1923·
Pa.st policy of Board in
acting upon applications of
State nember banks for additional branches.
a. study of t:O.e :Boa.rd• s records and to
report a.s to What ha.s been its policy in the pa.st in a.cting upon applications
of State member ba.nks for its pe!"mission to establish a.dditional branches.
This informa.tion I ha:ve had to seek from the minutes of the Boa.rd (which
frequently state merely the l3o<;Jrd 1 s a.ction without giving any rea.sons therefor) and in the. co1·respondence on this subject, (which is filed in several
different places, is incomplete, and is not analyzed or indexed in any way).
I ha:ve made as thorough an investigation as is possible under these circum-
stances and in the limited time allo1ved me; anci, so far as I
ba~e
been able
to ascertain, the Boa.rd L.a.s never ha.d a:..J.Y definite, co•nprehensive policy on
this subject, though from time to time it ha.s adopted or a.pproved policies
covering certa.in specific points.
It ha.s been suggested that a. coraprehellsive .t?Olicy should be developed
gradually. like the common
la.w/~bciding
each ca.se on its merits as it a.rises;
· but if such a ~thod is to result in a. de:f'ini te :;?Olicy it is necessary (as
in the development of the common la.w) to
d~cide
ea.ch ca.se in accordance
with precedents previously established, if there .s.re any precedents in point
and in the absence of preceo.ents in point to deciO.e each ca.se in a.ccordance
with the general principles that ha:v~ been annou11cea. in conn;,ctior. with
previous ca.ses.
So fa.r as I ;,.a:va been able to a.s·certain, no v;ell defined
comprehensive policy has yet been developed in this ·way.,
NUmerous different considerations of pol!qr
ha~e oee~
suggested or
acted upon, howeve.r, from time to time a.s a. ba.sis for the :Soa.rd 1 s· decisions
x--3796
-2-
in various ca.ses, and it is believed that a. statement of these various considera.tions will throw con::;iderable light upon this subject and will be of
some a.ssistance in formulating a policy for the future.
After a. careful
investiga.tion of all the 'Board's records on this subject, I have prepared
the following sta.tement vJaicJ1 I believe describes most, if not all of the
various cons idera.tions of policy which ha:va influenced the :Board a.t different times in a.cting Up':ln applications for permission to establish a.dditional branches or wbich have been suggested as possible bases for such
action.
POLICIES FAIRLY WELL
Assimilation
2£.
ESTJ~LISHED.
:Banks Taken Over: -
The :Board seems to ha:ve ndopted the principle that a. bank should not
be permitted to establish addi tiomi.l branches through the absorption of
existing banks at a. .rate out of proportion to its powe1· to assimilate the
business taken over by the banks absorbed.
Sept. 24, 1921, :Bank of.Italy File No. 22).
(Letter, Harding to Perrin,
Thus, in acting upon the appli-
cation of the Ba.:nk of Italy for permission to take over and opera.te as
bra.nches the eight banks in the so-called "Bakersfield" and
11
I.fu.rysville"
Groups, the Boa.rd parmi tted it to take over only four of such ·oa.nks at a.
time, with the understanding that the other four should not be a.dmitted
until after the :Board was satisfied that the first group had been properly
organized and vva.s properly functioning a.s branches of the Bank of Italy.
(Letter, Harding to Perrin, Janua.ry 18, 1922 .)
Branches in Same City
~
Hea.d Office:-
The Boa.rd B:Pparently has been disposed to grant any California. State
member bank in good condition authority to esta.blish a.dditiona.l branc:1es
~-· ~
-3-
X-3796
or a.gencies in the same city as the head office wl1enever t:i.1e public convenience would be ser·1ed.
In the ca.se of the Pa.cific Southwest Trust &
Savings Bank of Los .Angeles, and the Mercantile Trust ComparJ.Y of San
Francisco, these a.ddi tiona.l offices ha.ve been for the n:ost po;rt so-ca1led
11
receivinga.nd peying sta.tions".
(Letter, Perrin to Boa::--d, ]'ebru'3ry 21,
1922, re establishment o£ a.dditiona.l branches in Los .Angeles by the :Bank
of Italy) ..
Receiving and Pa.ying Stc:;.tions Distin@ished from Bran::hes:The Board ha.s taken the position tlat teere is qv.ite a. distinction
between the establishment of a. branch bank and the esta.blishruent of a
mere office or receiving sta.tion a.t which no discounting of any consequence
is ca.rried on and· the funds of Nhich a.re sent to the ma.in office ea.ch da.y,
and it ha.s expressed the opin:i.on tha.t it is not a. matter of prima.ry concern
with the Federa.l Reserve Board how many such s ta.tions member ba.nks esta.blish, unless the expense threa.tans the impa.irrr.ent of their working
ca:pita.l.
The Boa.rd, however, ha.s expressly reserved the right to interfere
if such stations should develop into full fledged branches and has notified
the banks concerned tha.t i f they desire to opera.te full fledged branches
they must obtain the Board's a.pprova.l.
The Boa.rd has not issu3d a genera.l
ruling on this subject giving blanket to all member banks, "Jut bas .s.:iopted
the policy o£ making its approval of such receiving sta.tions under such
circumstances and conditions a.s those which obta.in in the City of Los
.Angeles a. more or less proforma. matter.
(Letter to Perrin, Mc:;y 15, 1922).
In this connection, it is to be noted that the Board gave
til~
Southwest
Trust & Sa:vings Bank of Los A.'"lgeles blanket :;ermission to establish twentyfive such a.dditiona.l offices in Los Angeles :md gave the Mercantile Trt:st
'.G
-4-
X-3796
Company of San Francisco bla.nl;:et a.uthori ty to esta.blish thirty such offices
in and about San Francisco.
The :Board has a.lso taken the position that
the mere fact that such sta.tions make loans in amounts not exceeding
$500
does not bring them within the designa.tion of "branches 11 and tha.t, so
long a.s the mana.gers are not vested v-.ri th discretionary power to make
larger loans, the Board is not disposed to consider them as actual branches.
(Letter, Platt to Perrin, Janm.ry 4, 1923.)
Effect _2!! Examination Problem:In a number of cases the Board ha.s expressed concern a.oout the extension of branches in so far a.s such extention tends to make it impossible
to have simultaneous examinations of the head office and all branches.
(Letter Platt to Perrin, March 14, 1923).
After a. careful study of the
si tua.tion in California. and numerous conferences with the various pa.rties
concerned Messrs. I!Iiller a.nd I\1i tchell also reached the conclusion that the
a.bili ty to supervise and examine banks having a. large nUitber of branches
should govern the number of branches to be permitted.
April, 1922, page 12).
(Report to Board
And in this conneation the Bo~.rd has taken the
position that, for examination purposes and general adrninistra.tive purposes,
there is no difference between a. full fledged branch and a. mere a.ddi tional
(Telegram, Roxton to Perrin, March 10, 1923).
office or receiving station.
The :Boa.rd has a.lso expressed the belief tha.t the inability of the State
authorities to ma.ke proper examinations is a. vi tal matter and the difficul ty of conducting an examination of a. ba-l'lk with a. ls.rge nu1nber of
branches offers a.dequa.te justifica.tion .for limiting bra.nch expansion.
The
:Board, of course, is reluctant to ha.ve the Federal Reserve Bank assume the
res:ponsibili ty in such ca.se which should be borne prima.rily by the State
authorities.
•
(Telegram, Roxton to Perrin, Iv'Ia.rch 10, 1923).
In a. report
X-3796
~-
submitted to the Boa.rd as early as Deoem'Car 22, 1921, by a. Committee composed of Messrs. Crissinger and MitChell, the conclusion was reached that
the l3ank of Italy already had rr:ore branches than the Federal Reserve :Bank
had. machinery to properly supervise and examine and that any request for
addi tiona.l branches should be refused.
Cons idera.tions Influencing Board's Decision in Particular Cases:'Ihe following is a statement of the various considera.tions which ·nave
influenced the Board's a.ction on applications of member bariks to esta:Clish
branches in particular ca.ses a:nd 'Nhich it is believed contain suggestions
which may be of a.ssistance in formulating a. general policy:
Understanding with Giannini
~
Admission of Bank of Italy:-
In the letter a.ddressed by Dr. :,aner to Mr. Giannini, President of
the Bank of Italy, under da.te of September 26, 1917, and ratified by the
Board in a. telegram addressed by Govern.:;r Harding to Mr. Perrin, under
date of October 20, 1917, it is stated tha.t on the question of the Bank of
Italy taking on addi tiona~ branches the sole concern of the Federa.l Reserve
'·
---------
Board would be to satisf;y itself tha.t a.n;y proposed extension will not
impair the general sa.fety and strength of the institution.
Since that
statement wa.s made, however, the method of the Bank of Italy in a.cquiring
a.ddi tional branches ha.s changed materially, and the entire problem has taken
on new aspects which would justify the Board in taking oth3r rr.atters into
consideration.
Furthermore, the Bank of Italy did not join the Federal
Reserve Systemupon receiving these letters but waited until 1919, over
two
ye~s
.
later, and at the time of its admission its method of developing
branch banks was under sefious criticism by the Superintendent of Banks,
and the Board admitted it only after it promised to comply with a.ll the
r · - ,........
X-3796
-6-
{' ' ',J)
requirements of the Superintendent of Banks a.nd agreed specifically that
it would not establish any additional branches without first securing tre
approval of the Federal Rese~e Board.
December
15. 1919,
(Letter, Supt. of Banks to Perrin
Bank of Italy File 13).
This would seem to supersede
completely any unders.tanding ba.sed on Dr. Miller's letter of September 26,
1917.
.At the t ima of t.."le a.dmis s ion of the Bank of I ta.ly, the Super-
intendent of Banks a.nd Mr. Perrin agreed tha.t the Bank of Italy should not
go forward with the expansion of its branch system unless and until its
organization, policy, management, both pra.ctica.l a.nd theoretical, could
dam:mstra.te a. full control a.brea.st of its problems.
Perrin to Board, December 18, 1919,
Condition, Organization, a.nd
Ba.Dk
~.1ana.gement
(See a.lso letter
of Ita.ly file 14).
of Parent Bank:-
It is obvious tha.t the condition, organization and mana.gement of the
parent bank necessarily must be given important consideration in determining whether the establishment of additional branc1:.s will affect its
soundness, liquidity or solvency.
This element ha.s a.l'va¥s been considered
in act·ing upon applica.tions of the Ba.nk of Italy for permission to establ ish bra.nches, a.nd the Board clearly ha,il been inf:uenced by tr.e criticisms
of Iv.Tr. Perrin and the Sta.t.a Superintendent of Banks on the ground. tha.t it
is expanding too fa.st, is suffering from lack of proper coordina.tion between the branches a.nd the head off ice, from lack of hea.d office control
and supervis.ion, from lack of tra.ined bankers a.Ir..ong the senior officers
of the head office, a.ud from lack of indepandence on the pa.rt of the directors of the home office, and also on the ground that its
affiliation
with other corpora.tions such as the Banci taly Corpora.tion of New York,
The Stockholders' Auxiliary Corporation, the Liberty Bank of San Franciseo,
and California. Joint Stock Land Bank, the Ea.st River National Bank of New
X-3796
-7-
York, the Comnerc ia.l Trust Company of New York, a.nd two banks in I ta.ly,
constitute a.n element of danger.
Criticism of Bouttne Qpera.tions:In approving certain a.pplica.tions of the :Bank of Italy for per ...
mission to esta:blish branches the l3oa.rd did so on condition tba. t the :Bank
submit "evidence tha.t the ma.tters criticised by the State Banking Department in connection with the la.st report of condition of the Bank of
Italy had been adjusted to the entire sa.tisfa.ction of the Superintendent
(Letter, Governor Harding, J~e 29, 1922, which is not
of Banks."
in
file but is quoted in memorandum, Hoxton to :Board, December 12, 1922).
Mr. McAdoo, Co"Unsel for the Bank of Italy, questioned the propriety of
this condition on the ground tha.t "it concerned ma.tters wholly unrelated
to the merits of its app1ica.tion for the acquisition of additional branches."
{Letter to Harding July 21, 1922) •
Governor Harding replied und~r date
of July 21, 1922, tha.t the Board had particularly in mind, however, criticism
relating to routine operations of a. bank and felt that where so large an
ins.~i tution
wa.s subject to criticism in respect to its routine operations
the ma.tters complained of should be adjusted before the :Board should become a.· party to permitting the bank to still further enla.rge the scope of
its operations.
Effect~
standard
Required~- Condition~
Membership:-
Na.tura.lly, the Boa.rd must take into consideration the effect which
the establishment of a.ddi tiona.l branches will have on the s tanda.rd required of such bank as a c.ondition of membership, and quite frequently
this question a.nd. the question of loca.l convenience ba.ve been the only
points discussed in Mr. Perrin's recommendations.
(See J:OOmora.nda. Imlay
to l3oard September 29, 1920, and Februa.ry 24, 1921, re a.pplica.tions of
X-3796
-8-
Pacific Southwest Trust & Savings Bank, and correspondence a.tta.ched): .
P.a.tio of Capital to Deposits:In approving the applica.tion of the Bank of Ita.ly for permission to
take over the eight ba.nks in the so-called Bakersfield a.nd Marysville Groups,
as explained above, the Boe>rd indicated tha.t its aJ>proval was ba.sed largely
on the fact tha.t the Bank of I ta.ly had recently increased its ca.pi tal and
surplus sa.ying, "The Board pla.ces great importance upon the proper relation
of ca.pital and surplus of the Bank to its deposit lia.bilities".
Harding to Perrin, Ja.nua.ry 18, 1922).
(Letter
This is very important in connection
with a. rapidly expanding branch system, because the
continue~
absorption
of going banks with their axisting deposit liabilities will soon reduce the
ratio of the capital of the parent bank to the aggregate deposit liab'ili ties, unless the capital is increased correspondingly.
La.xitl of Ivlana.gement:Mr. Perrin refused to recommend the establishment of a branch at Fresno
by· the Sacramento-San Joaquin Eank (now United Bank a.nd Trust Company of
California.), because of the laxity of its ro.ana.gement, saying,
11
If unable to
mana.ge acceptably the present complex si tua.tion, it wa.s not clear how
matters would be improved by increa.sing the complexity with the addition!
of a.nother branch."
Upon being advised of this fact, the Board said that
Mr. Perrin's position wa.s well taken.
(Letter Parrin to Harding J'.lly 9,
1921, and Harding's reply July 16, 1921).
~Bludgeon
Monopolistic Tendencies
Methods:-
.Another factor v.hich ha.s rr>.ade the Board hesitate to a.pp:rove applica.tions of the Bank of Ita.ly for permission to esta:olish a.dditiona.l branches
ha.s been the so-called
11
bludgeon ID3thods" of tha.t bank in a.cquiring otter
t--~
X-3796
-9-
branchc;s for the purpose of converting them into branches, and the tendency
to CO!l!Pel such banks to sell out rather than face the competition of the
Bank of Italy.
This, of course, tends to destroy the independent system of
banking upon which the Federal Reserve System is based a.nd is in my opinion
a. perfectly valid lega.l a.nd rr..ora.l ground for declining to permit the esta.blishment of a.dditiona~ branches.
Yuba City to Crissinger, January
(See telegram First National :Bank of
16, 1923).
It is especially i:mporta.nt to consider the effect of this tendency on
the existence of independent na.tiona.l banks, mich constitute the real
11 back
bone" of the Federal Reserve Systems inca their membership in the
System is compulsory.
It ha.s been suggested tha.t a. contiruation of the
present tendencies in California would eventually result in the complete
elimination of the national banks from the State.
This would pla.ce the
Federal Reserve Bank of San Francisco largely a.t tha roorcy of the large
State banks, because they could pra.ctically take California out of the
Federal Reserve System on six months • written notice.
They have a.lrea.dy
indicated a. tendency to attempt to coerce the Federa.l Reserve Bank "'and even
the Federa.l Rese.rve :Boa.rd by threats of withdrawal from the SJ'S ten:;.
:Branches Outside Home
City~-
The :Board's disa.pproval of the a.pplica.tion of the :Bank of Italy for
permission to esta.bJrish a bra.nch de novo a.t Sa.ci'3ln6nto wa.s ba.sed upon a.
recommenda.tion of Iv!r. Perrin and upon the policy of the Sta.te :Banking Depa.rtment not to permit more tha.n one bra.nch to be established by any bank in a.
city or locality other tha.n that in which its principal place of business
is located, nor to permit any bank to establish branches de novo in any
town or city other than that in which its head office is located, unless the
"' {.~
- '.J
!'
X-3796
-10-
Superinten<ient of Banks in his discretion sna.ll find that the public convenience and advantage req'W.re it.
(Letter, Criss::nger to IIIcAdoo, June 1,
1923)·
Local Convenience:The Board's disa.pp1·ovuJ of the
a. branch a.t Yuba. City wa.s
basec~
es~a.blis:hrr£nt. ';)'y
the Bank of Ita.ly of
primarily upon a fi:::1d.i:1g of fa.ct by Mr.
Perrin, its loca.l re:presenta.t:.ve a.t San Franciscv ~ to the effect that the
banking needs of Yuba. City we1·e alrea.dy
wa.s no appa.rent public
community.
d~zm.nd
ad~qu.a.tely
serve-d &r.d thc...t '.;here
for addi tiona.l banking fa.cili ties
~n
the
T"ne .Board a.lso had before it a. suggestion from r,1r. Perrin
tha.t, a.s a. ma.tter of general policy, it is not desirable to permit the
esta.blishment of branches de novo in tovms or cities other than tha.t in
which the head office is loca.ted, if there already are commu."li ty banks
loca.ted in such toVIms or cities whose existence may be threa.tened.
Further,
more, the Boa.rd wa.s advised that the Ba.r.k of Italy a.lrea.dy ba.d substantial
representation in the banking field in tha.t loca.li ty.
to McAdoo, June 1,
(Letter, Crissinger
1923).
In this connection, I consider it rey dut;," to advise the Board that
in my opinion it took an unnecessarily weak position when it ba.ded its
disa.pproval of the a.pplica.tion of the Bank of Ita.ly to esta.blish a. branch
a.t Yuba City on the ground that the 'banking
n~ads
of Yuba. City were a.lrea.dy
adequately served and that there wa.s no appa.rent public demand for additional banking facilities in the community.
As a. practical ma.tter, it
is very difficuJ. t for the Board to determine Nhether or not a. small community in California. neeeis or desires additional banking facilities, a.nd
it cannot a.lwa.ys depend upon its local repre.senta.tive to decide such
X-3796
-11questions.
This is demonstrated by the fa.ct that Ivlt-. Perrin first advised
the Board tha.t no a.dditiona.l banking facilities were needed in Yuba City
and has since reversed tha.t finding.
Furthermore, for the Board to under-
take to determine local questions of this character contrary to the findings
of the local authorities would be likely to have a.
ve~
bad effect on public
opinion i f the matter should be ma.de the subject of a test ca.se or public
controversy, because it ia
a.ppa:..~ently
inconsistent with one of the funda.-
mental principles of our Government, namely, tha.t local questions should
be decided by the loca.l authorities rather than by the Federal Government.
If Mr. McAdoo chooses to make a. test case of the Board's a.ction in the
Yuba. City ca.se, he undoubtedly will make a. lot of ca.pi tal of this point,
which will have its effect on the public mind.
It may even have its
effect (subconsciously a.t lea.st) on the court, just a.s the idea that the
Federal Reserve Banks were oppressing the small State banks recently influenced the Supreme Court of the United States to make a decision in the
North Carolina pa.r clearance ca.se which -vva.s entirely out of line with its
decisions for the pa.st fifty yea.rs on questions involving State interference with the corporate powers of Federal corporations.
In my opinion, there are many other grounds upon v.hich the Board could
ha.ve ba.sed its refusal to permit the Bank of Italy to esta.blish a branch
a.t Yuba. City and which could ha.ve been defended much more ea.sily.
Thus,
it could ha.ve pla.ced it squarely on the ground suggested by Mr. Perrin tha.t,
as a. matter of general policy, it is not desirable to permit the estaelishment of branches de novo in to•.ms or cities other than tha.t in which
the head office is loca.ted if there a.lrea.dy are cox;mnmi ty banks located in
-12-
X-3796
such towns or cities whose existence may be threatened; or it could ha.ve
pla.ced it on the ground tba.t the .Bank of Ita.ly a.lrea.dy ha.s too many
branches, is expanding too rapidly, ha.s not properly coordina.ted the
bra.n.ches which it ha.s a.lrea.dy a.cquired, or on many of the broa.d grounds
which ha.ve been considered in other connections.
On any of those
grounds, its a.ction could be sus ta.ined before a. court or before the
bar of public opinion with cowpa.ra.tively little trouble, a.nd it is
doubtful tha.t the .Bank of Italy would dare to ooke a. test case if the
.Boa.rd ha.s ba.sed its a.ction on such grounds.
I do not presume or intend to criticise the .Board's action
in this watter; but I do consider it my duty to point this out, in
order to suggest tha.t it would be advisable for the .Board to ba.se
its action in such ca.ses on broader grouncis in order tha.t its position
rr.a.y be a.s strong a.s possible if it is ever drawn into a. test ca.se
or into a. public controversy.
In this connection, it should be
remembered tha.t if a. test case is broue,ht it proba.-oly will be brought
by the .Ba.rik of Ita.ly, and the attorneys for tha.t Ba.r.k na.tura.lly will
select the ca.se in which they think the .Boa.rd ha.s takm the weakest
position.
-13-
,,. '3 "796
.II.-.
I
The following are several s·u.ggestions that nave been rr.ade from time to
time but apparently have not been adopted 1Jy the Board.
It is believed that a
statement of them will be helpful in connection with the formulation of a
general policy on this subject;Liquidity
2f Parent
~
§llld
Coordinatio~
£_f_ :Branches.
At a conference held in San Francisco, April 11, 1922, attended by
Messrs. Mitchell and Miller of the Federal Reserve :Board, the Superintendent
of Banks of California, Mr. Oliver, his attorney, and by Mr. Perrin,
Governor Calkins and other officers of the Federal Reserve Lank of San
Francisco, the following was agreed to as a basis upon which the State
·nanking Department and the Federal Reserve Board should treat branch
banking problems:
1.
That a ba.">J.k should not add a branch or branches unless ex-
aminatian discloses that it has in cash, due from nonaffiliated banks,
United States Government bonds and paper eligible and acceptable for rediscount by the Federal Reserve Bank, a total of not leas than fifty per
cent of its demand deposits and fifteen per cent of its time and savings
deposits.
2.
.And in the case of a bank already operating branches that it
should not establish an· additional branch or branches unless a survey discloses in addition that its existing branches are well coordinated under
Head Office control and airection both in accounting and in
ext~nsion
of
credit.
These conclusions were approved unanimously by the directors of
the San Francisco Federal Reserve Ban.c:, but the State bankers were unwilling to accept such a basis.
(Report of Messrs. Miller and Mitchell
(~
-14to Federal Reserve Board, April 1922, pages 5 to 3).
X-3796
>The :Board apparently
took no formal action on this suggestion, but at times has followed a
policy somewhat similar to the second point stated above.
Branches within Reasonable Radius
~
Parent Bank:-
The national banks in San Francisco have generally taken the
}Osition that branch banking should be confined to districts within a
reasonable radius of the parent bank and that it is impractical to attempt to cover the entire State with a system of branch banking. (Report
of Messrs.
~tiller
and Mitchell, April, 1922, page 5).
The Board apparent-
ly tookno action on this suggestion.
State Policy
~
Branches De
~:-
It has been suggested that the Board adopt as its policy in acting
upon applications of California State member banks for perrndssion to
establish additional branches, the following policies adopted by the
State Bank Superintendent, and promulgated as rulings effective March
8, 1923, after a conference with the Legislative Committee of theCalifornia
Bankers• Association and the Executive Committee of the California League
of Independent Bankers; but the Board apparently has not adopted this
·suggestion:"From and after this date no branch office shall be
established by any bank in a city or locality-other than that
in which its principal place of business is located by the purchase of or consolidation or merger with another bank unless
both banks shall have been open for business for at least
three years prior to said sale, consolidation or merger unless
~ superintendent nf banks in his discretion shall find that
the public conveniBnca and ad val! tage require it; in the case of
a national bank that has been converted into a state bank the
time required herein shall be coDsidered as running from the
date of the original organization of said national bank.
"From and after this date no more than one branch office
shall be established by any bank in a city or locality other than
..... '.tt..Y
~
- "'
-15~
..
X-3796
that in which its principal place of business is located, unless
the superintendent of banks in his discretion shall find that
the public convenience and adVantage require it. .In tlLe :went,
however, of sale, consolidation or merger, all branches that have
been ma.intained for a period of three years prior to such
sale, consolidation, or merger by the respective institutions or
banks concerned ma.y be thereafter continued as branches of the
consolidated banks. The three-year requirement herein provided
shall not be construed as applying to branch offices in existence
as of this date.
11From and after this date no branch shall be created
in any locality other than the city or locality in which is
located the principal place of business except by purchase of
or consolidation or merger with an existing bank in said city
or locality unless the superintendent of banks in nis discretion
~find that~ public convenience ~advantage require !b."
(It should be noted that the practical effect of these policies is
greatly dimdnished if not_entirely nullified by the exception stated in the
words,
~ess
the superintendent of banks in his discretion shall find
that the public convenience and advantage require it 1 n especially when
it is well knov.n that most California ex-Superintendents of Banks obtain
lucrative positions with the large California banks operating branch
systems.)
Distinction between Establishing Branches De
Banks:-
~
and Talcin6
~
Exiisting
At tent ion has been called to the fact that there is quite a difference
between granting
per~ssion
to establish new branches and acquiring the
business of banks already established
an~
/
converting them into new branches.
In the case of new branches there is no immediate asSUI:qfltion of additional
liabilities, and the machinery of the parent bank is gradually developed
with the' growth of the business of the new branch.
With the acquisition
of established banks, however 1 the volume of business is immediately
greatly increased, and, unless the organization is equipped vdtn the highest
quality of efficiency, a. proper ·control cannot be had over the business
acquired. (Letter, Jan. 17, 1922, proposed by Mr. Mitchell disapproving
ap 1jlication of Bank of It::!.ly to establish eight branches; but not adopted
by the Loard.)
.
"
-16~.
X-3796
{~
\
Hamlin's Pending Resolution:At the Board meeting on May
1923,
April 10,
~2,
1923,
Mr. Hamlin stated that he had on
presented certain resolutions setting forth the terms of a
general policy covering the Federal Reserve Boardts attitude towards applications for branches by State member banks. and requested that ·his resolutions
be recorded upon the minu.tes of tha.t date, but laid aside for· the present as
unfinished business.
Mr. Hamlin further stated that he
now desired to
amend the resolutions aforesaid, and to have them recorded upon the minutes
as follows, with the
re~est
that the _amended resolutions be
treat~d
at
this time as were the original, and laid aside for the present as unfinished
business:".Resolved:That, in passing upon the establishment of Branches by
~mber State llMlra and Trust Coapanies, whetner de novo or
through voluntary purchase of existing Banks, the Board wili
take into consideration the need of the corr.munity for addition•
al or improved facilities and the effect of the establishment
·of the proposed Branch on the condition of the Parent Bank.
".Resolved:-
That, the Board will accept the decision of the State Banking
Department as to the need of the comnuni ty for additional ot
improved banking facilities.
lr.Reaol ved:-
That, the Board will not undertake to lay down any general
polict as to territorial liudtations or spheres of influence,
but will accept the policy of the State with regard thereto, as
determined by the State authorities. n
(Minutes ~
22, 1923)
It appears that these resolutions are still pending and that no action
bas been. taken on them.
"",.,....
-Ji
..
-17-
X-3796
SUMMARY
The following is a brief summary of the va.rious points heretofore considered or suggested and Which might be given consideration in connection
with the
for~lation
of a general policy on this subject:-
1.
Rapidity of expansion and assimilation of going banks taken
over and operated as branches;
2~
Distinction between branches in same city as head office and
branches scattered over the entire Statej
3· Distinction between branches and mere receiving and paying
.,
stations;
4.
Effect of establishment of further branches on the problem of
proper supervision and examination;
5· Effect of establishing additional branches on general safety
and strength of parent institution;
6. Condition, organization and II'.anagement of parent bank;
1· Ratio of capital to deposits;
S.
Monopolistic tendencies and bludgeon methods in obtaining
branchesj
9. Establishment of de novo branches in conpetition •Nith
existing banks in cities other than that in which the
head office of parent bank is located;
10.
Geographic location of branch with reference to parent
bank, especially as it affects economic relation mtd
ability of parent bank to properly control and'supervise
branch;
11.
Policy of State re branches de novo;
12.
Distinction between establishing branches de novo and taking
over existing banks;
13. · Mr- Hamlin's resolutions which are now pending before the Board.
CONCLUSION
It is believed that a historical discussion of the Board's attitude
toward the development of the present branch system of five or six of the
,:-
,~, ~--~
"
-· v
X-3796
-18-
California State member banks having large numbers of branches will throw
more light on this problem, but I have been unable to prepare such a statement in the short time allowed me.
This office wUl cheerfully undertake
the task if the Eoard so desires; but it is not a legal problem and the
Board may prefer to have it prepared by some other iepartment of its
organization, especially in view of the fact that tnis office already has all
it can do while some of the other offices are not so busy.
In conclusion, I respectfully suggest the importance of having
the Board's files on this subject put in such shape that they can be more
easily consulted and that correspondence on any particular point can be
more readily located.
To this end, it is respectfully suggested that all
the files on this subject should ·oe consolidated in one pla.Ce; all missing
papers should be found and restored as far as possible, even if it
is necessary to write to the Federal Reserve Bank of San Francisco for
duplicates; and the entire file should be analyzed, subdivided and
indexed.
In their present state, it is very discouraging to attempt
to make a study of these files, and it is often difficult and sometimes impossible to locate a particular letter when it is needed.
This
is not intended as a criticism of any one, but merely as a constructive
suggestion.
Respectfully,
WALTER WYAT'T I
General Counsel
FEDERAL RESERVE BOARD
WASHINGTON
X-3797
Augu.st l,
SUBJECT:
Costs of Examining State Member Banks,
When E.xa.rrd.na.tions, Rather than Credit
Investigations, a.re Necessary.
Dear Sir:.
In order that a. uniform ba.sis ma.y prevs.U
throughout the System for a.ssessing the costs of the
examination of sta.te member banks, whether conducted
independently or in cooperation with the sta.ta supervisory authorities, the Board considers the following
items as proper charges for this service.
11. per diem charge, calculated a.t the rate
of· 300 days to the year • on the annual sa.laries of a.ll
examinets and assistants furnished by the reserve bank
for the entire time they are occupied in connection
with an examination and in addition an amount to cover
the actual tra.veling a.nd living expenses while so
employed.
No charge shall be ma.de for any work in connection with such examinations performed in the office
of the reserve bank, or on account of any services of
the chief examiner or other employee of the bank, unless they have been actually enga.ged in the work of
the examination a.t the bank examined.
No cha.rge shall be II'.a.de for examina.tions of
state banks which are applicants for n:embership in the
System ..
By order of the Federal Beserve Board.
Very truly yours,
Wm. W. Haxton,
Secretary.
TO .ALL F. R- AGENTS
1923.
. ..
..-. _., r,...,
,;
(COPY)
~~0~~
l-
X-3798
on opinion of General Counsel:
Power of the Federal Beserve Board to impose
concH tions of a.dmission of f:ita.te banks.
I agree that the Board ha.s power to impose, a.s a. condition
of membership, that no new branches shall be established wi-thout the
consent of the Board.
2-
The only question of difference is a.s to the rea.sons upon
which such consent or refusal should be ba.sed.
3-
The opinion of Counsel seems to rest upon the belief tha.t. the
Boa.rd ha.s a. dispensing power
wh<?ll~
a.pa.rt from the express provisions of
the Federa.l Be serve Act, and limited only by wha.t it believes to be the
so-called "spirit" of the Act.
4-
For exari!Ple, Counsel. cla.ims tha.t the Board could refuse its
consent on the ground that branches are inconsistent with tl"..e independent
system of banking mich wa.s the basis upon which the Federal ll.eserve
System wa.s founded-.
5-
In my opinion, no condition can lawfully be imposed, and no
reason for refusing consent would be valid, which did not rest upon some
provision, express or necessarily implied, of the Federal Reserve Act.
6-
It is clear to my mind tha.t the Boa.rd could justify its r afusa.l
upon the ground tha.t the taking over Gf a. pa.rticu.la.r bra.nch. would injure
the parent bank, or that the general character of its ma.nagement wa.s such
tha.t the :Boa.rd felt tha.t it could not properly ma.inta.in such a. branch.
'•
,)
"
.
x.-.3795
-2-
7-
I differ decidedly with Counsel in his statement that the Federa.l
Reserve System is based upon a.n independent
s~rstem
of banking.
On the
contrary, I believe that the System rests upon a. double ba.se, (l) national
banks,- an independent system; (2) sta.te banks and trust companies, .which
in many states consist of banks with numerous branches.
8-
By the Act of June 21, 1917, it is J?rOvided tha.t when a. sta.te
bank becomes a. member of the Sys tern it shall retain its full charter a.nd
statutory rights, and may continue to exercise all corpora.te powers
granted it by the state in which it was crea.ted.
It would seem clear that .
the above language can only mean tha.t where the corporate powers· of a
state bank include the right to establish branches, such a bank has tha,t
right during its membership in the System, unless it affects the soundness of the pa.rent bank.
If this were not so, the Board, a.ppa.rently,
would ha.ve the power to refuse to admit any state bank ha.ving branches,
irrespective of its financia.l condition, which I cannot believe would
be claimed by anyone.
9-
There are other questions which the Boa.rd ha.s, from tima to
time, taken into considera.tion in determining whether to give or refuse
consent, which I believe to be not within its province.
For example, in my opinion, the question. whether or not tha community
needs a. new bra.nch, or whether it will be benefitted by the purchase by
the state member ba.nk of an existing bank, is ·one to be determinad by
the authorities of the state, and that theBoa.rd should accept such detarruination.
In this connection, vve should remember that if the sta.te
authorities refuse permission to esta.blish a. branch or buy an a.dditiona.l
bank, the ma.tte.r is settled, as the consent of the Boa.rd would give no
fJ
..
-3-
X-3798
power to the a.pplicant to· establish such a. branch or buy such a. bank.
So,
conversely, 1 believe that Where the state a.uthori ties have certified their
a.pproval the Board should accept this decision as a. finality a.s to this
question.
10-
Some ~rembers of the Boa.rd, a.pparently, believe tha.t, even though
there is an admitted necessity for a new branch from the point of view of
the public, and even though the pa.rent bank is amply able to maintain such
a. branch,- the Board should still decline to give its consent if the parent
bank seeking to establish such a new branch is seeking to inva.de territory
Which the Boa.rd believes to be within the sphere of influence of other
banking centers, and it .ha.s even been suggested that the Boa.rd establish
a zone or sphere of influence with this end in view.
To
rrw
mind this would be an extension of the "dispensing.power"
fra:u.g)lt with peril to the Federal Reserve System.· Such a. limitation
and spheres of influence should surely rest and remain upon tha sound
discration of the individual s ta.tes.
For the Board to interfere would
seem to be a taking away from the states of their police powers,- which
I can not believe Congress ever intended even to attempt to bring about.
11-
I believe tha.t the legisla.ture of California. ha.s acted for
the best interests of its people in establishing its branch system of
banks; that this system, on the whole, is demonstra.ting its usefulness;
that in many instances it is giving the a.gricul turists the banefit of
lower discount rates; tha.t it has enabled them to borrow larger amounts
than they could borrow from many of the individual unit banks,- such
larger amounts being necessary to the proper development of sa.id agricultural interests; and, furthermore, that the branch bank system is of
....
( :~·
-4-
X-3798
specia.l va.lue because of the different peaks of borrowing within the
state, thus ena.bling the banks having branches to move their loannble
funds quickly wherever they may be needed, in order to serve the neads
of the respective communities.
C. S. ILM.LIN.
·~·
/-.
~}
FEDERAL RESERVE BOARD
X-3799
WASHINGTON
August 1, 1923 ~
SUBJECT:
Uniformity of Policy in Sta.tistica.l, Publication Work, etc ..
Dea.r Sir:
The Boa.rd has decided to make a. systematic survey of publica.tions, public rela.tions and statistica.l work now being performed a.t the
several Federa.l Reserve Banks with a. view to informing itself a.s to the
desira.bili ty of o ffecting a. reorganization of the work of this na.ture
done by the Federal Reserve Boa.rd and the s e.veral Federal Reserve Banks ..
It is the purpose of the Boa.rd to secure greater unity a.nd efficiency
in work of this cha.ra.cter and by the elimination of duplication, and
otherwise, to reduce costs.
The work of the Cornrni ttee on Economy and Efficfency and of the
Procedure Comrnitte·es in the respective banks ha.s been devoted prima.rily
to e.ffecting economies and improving efficiency in the operating departments of the benks. The Boa.rd, however, feels tha.t it ha.s a. specia.l
responsibility with regard to the cost, scope and character of activitias conducted under the direction of the Federal Reserve Agents a1d is,
therefore, especia.lly interested in wha.t is being done by the Agents to
increase efficiency and reduce costs in their depart!Thilnts ~ The sta.tis•
tical organizations of the twelve banks a.re costing a.t the rate of approxima.tely $540,000 a. year.. Of this total aiDOunt, a.pproxima.tely twothirds, or nearly $360,000 a. year:, is spent by four of the banks. In
order tha.t the expenditure of such la.rga r,ums of money for this purpose
:ro.ay yield proportiona.te results it is necessa.ry tha.t the work of the
Boa.rd and of the banks be rr.ore systewa.tica.lly organized and tb.a.t the
cha.:ta.cter and scope of the work be n:ore clearly defined. It is with
this purpose in mind that the Eoa.rd is undertaking a. survey of the sta.tistica.l work of the Boa.rd a.nd of the banks.
In order tha.t fuller informa.tion may be a.t hand in making this
survey, the Board req_uests tha.t you assemble and send to the Secretary's
office copies of a.ll reports and s ti'ltements corrpiled and distributed by
your department during the month of June, 1923, including reports rra.de
to officers and directors a.s well a.s reports issued to the ·public for
general circulation.
·
By order of the Federal Reserve Board.
Very truly yours,
w.
W~ Hoxton,
Seereta.ry.
To All Federal :Reserve Agents.
FEDERAL RESERVE BOARD
X-3801.
August 2, 1923.
WASHINGTON
SUBJECT:
1:""'
CURRENCY ST.AND.AB.D.
Dea.r Sir;
It ha.s been reported by the Boa.rdts Committee on
Economy' and Efficiency tha.t in spite of the efforts of the
Federal reserve banks and the Treasury- Depa.rtll'ient to establish a. uniform stanqa.rd of fitness of currency for circula.tion, there exists a.mong the Federa.l reserve ba.nk:s a. wide
variation in the standard of fitness, as indica.ted by the
fact that some Federa.l reserV-e banks have a.dvised the commit tee that all Federal rese r;.,e notes returned to them by
other Federal reserve banks a.re sorted to such a low standa.rd
that a resort is necessary, and other Federa.l rese:Mte banks
ha:ve a.dvised tha.t returned notes are sorted. to a. standard
highet than their own.
From time to tirr.e during the past
year or two, the. Trea.sury Depal'tm3nt ha.s sent circular
letters and telegrams to all Federal reserve banks complain- ·
ing of too high a. standard of fitness of currency notes received from the Federal reserve banks by the Treasury redemption a.genci es.
Th.e following recommendation ha.s been made by the
Econonzy- and Efficiency Co:rmni ttee and ha.s been approved by the
Federal Reserve Board:
That the redemption agencies of the Treasury Department carefully scrutinize a.ll currency redeJI!Ption receipts
from the Federal reserve banks ~and after examining them' ca~l
the attention of the Boa.rd to each and every redemption lot
which in the opinion of the agencies ma.y contain too grea.t a
percenta.ge of notes fit for further circula.tion; That a
representative of the :Boa.rd be cha.rged with the duty of
examining the redemption lots in question, n!eking compa.rison
of those notes contained therein which a.re a.lleged to be
fit for further circula.tion with notes conta.ined in a. standa.rd
pa.cka.ge of fit notes ma.de up by the Trea.sury Depa.rtment and
lodged in the Boa.rd 1 s office, a.nd tha.t on the ba.sis of the
report of the Boa.rd's representa.tive, the ma.tter be taken up
by the ;Boa.rd direct with the Federa.l reserve bank concerned ..
T.he plan of procedure outlined in the committee's
recornmenda.tion is now ·effective.
·
By order of the Federal Reserve :Board.
Very
~ruly
yours,
Wm.. w. Roxton,
Secreta.ry.
TO GOVERNORS OF
;r...
R. :SANKS...
-~
,..,
, . ~-J
X-3802
:F'EDERAL
RESERVE
BOARD
ST.ATE!I'lENT FOR T}:E PRESS
For release in Morning Papers,
Friday, August 3, 1923·
At a meeting of the Federal Reserve Board on August lstt
Charles DeE. Claiborne, representing the Committee of Five on Exc~~ge
of the .American Bankers 1 Association, presented and discussed in detail
the so-called »Claiborne-Adams Check Collection Planr n designed to
supersede the regulation of the Federal Reserve Board governing the
collection of checks by the Federal reserve banks.
The session was attended als·o by the Governors of the Federal
Reserve Banks of Boston, New York, Philadelphia, Cleveland, Chicago
and Richmond.
Following a discussion of the plan oy I\1r~ Claiborne, the
matter was referred by the Federal Re~enre Board to an advisory committee
co~osed of the Governors of the ban."ks named.
The so-called llClaiborneAdams Check Collection Plan'' and the re_2or·~ of the advisory comm.i ttee of
Governors of the Federal Reserve Banks in their entirety are attached~
The Federal Reserve Board, in accordance with tne recommendation
contained in tne report of the advisory comrd ttee of Governors, directed
all Federal Reserve Banks to·
·. ·
· discontinue the use of agents
other than banks fo:r the purpo$e of :making collections at par of items
drawn upon non-remitting b:=mk~..
No action was taken by the Board looking
to the adoption of the proposed collection plan, nor on that po:rtion of the
Governors 1 report which :relates to the p2.an.
The ]federal Reserve Board
nas referred both the proposed collection plan and th~ Gov&rnvrs' report
to the Federal Advtso::y Council for consideration and report thereon
to the Board at the ne.z:t Cnu.ncil meeting, which _will take place some tilr.e
in September.
The Federal Advisory Council is composed of twelve members,
one from each Federal Reserve District and is representative of the public.
Report to the Fc::d :;r<;Jl I.-3serve Board
by the Ldvisory Comrdtt;;,-, of Governors
of FedGrDl Heservo Banl:s, on th~: soca.l.led 11 Claiborne-l,darns Chock
Collection Plan"
X-3800
.Aug. 1,
1923 •
Gentlemen:
In compliance with :-,.our requ0st that we should rreke a statement of our
views on the three subjects discuss~d ot todDy's conference, we be~:S to advise
you as follows:
.Amended he§,-ulati.on "J" suggested by !,1essrs. Claioorne
and Adams on J~halt of the Ccmrdttee of Five on Exchange
of the American B..mkers• Association.
***** **~ ** ** ''-*
We are entirely and unanimously opposed to this plan for the folloi.ing
res.sons:
(1) It '.vould reinstate and perpetuate one of the most glarin 6 faults of
the old banking system - the creation of a. ficticicus reserve.
(2) It would b~ a substantial abandonment of the pa.r collaction system
:md ·.vould pave the way for tl~e :rr,position upon the'- comm~rce ond business of tl18
country of an annualcharg~ of over $100,000,CU).
(3) If immediate av::Jila.c.ility ·.vere to be given ·oy -:ach bank on all items
in its district there ·.vould probably be a.dded to the float over $300,000,000,
calcula.ting simply on th8 basis of the present .;~eekly cor.sol ieioted stD.terr.ent
of the System. In :pra.ctice this float would u:; enormously increasea.
Human nature being what it is, it is inconceivabls that bsru:s ·.vould
not take advanta.ge of the unusua.l opportunity afforded thc;m. Inst~ao of forivarding to their own Federal reserve banL checks psya ble in other Federal
reserve districts, thay would naturally send such :.. tsr.~s to cor :•espondents in
other Federsl Reserve bank citi.::s, which correspono<:>nts could deposit them in
their o.vn Federa.l reserve banks and receive irr,;-:Jediat:; credit :Jr.d ::;va.ila.bility
without being :oubject to the exchan[s2 charge. This vtould result in giving
irr,rr.ediats crcdi t and ava.ilabili ty for practically all checks, as received at
each Federal reserve bank or branch. It is also evident that it would make
possible unlimited "ki t·ing"- ·
(4) .As these addi tiona,l credits would be either checked out or used to
reduce loans; there vvould not only be a. reduction in the re::;..:rve ratio of the
Federal reserve system but ther.; vould be a still further very large l";3auction
in thr;; actU<:Jl Nserves of the merr,ber b'-'nks which were pre.ctically cut in half
uhen the Federal reserve system was established.
These obj7ictions might L>e elaborated and various other;;; might be cited,
but the mere -enumeration of ~ho;:;e stated above seems sufficient wholly to condenri tha pLm. In vievv of these; considerc;tions and of the f\:crther facta wr.ich
vere orought out at the he9ring todsy, this Comrittee r~s_r.,actfully and earnestly
r::comr:-:::nds that tha Board prom_;,tly announce its rejection of the l).roposed plan.
X-3800
-2-
,-
;"'' .,/
I
Effectiva d.s.te of J,rnan.ded 1\Ggula.tion .11 J 11 •
*~'*************
In view of the fa.ct tha.t a. revision cf the phra.seology of amended Regula.tion
J seems desira.ble, it is recornrr:end:;d that t.~e postponemerJ.t of the effactive
date for this 1\egula.tion be continued until further notic~.
cr.~.a.ne;es in pra.ctice of making collections on
ba.r.ik:s. not willing to remit a.t pa.r.
*****'~*********
In order to conform to the :fullest pos.sibla e.xtont to the spirit, a.s well a.s
the letter, of the recent decision~ of the Supr-1me Co·~ut of th:J United States in
tha par clearance ca.ses, it is rdcmnr:euded that thd use of a.gents other than banks
for the pur.~:~ose of ro.aking collections a.t par of items upon non pa.r-remitting
banks be discontinued in any district .11.here a.ny such pra.ctice IDEI.Y novr exist.
Hespectfully,
(Signed) Geo. W. Norris,
(Signed) J. H. Ca.se,
(Signed) . J. B. McDot'.ga1,
(Signed) E.~· Fancher,
(Signed)
w.
P. G. Harding,
(Signed) Chas . .A. Peple .
.Advisory Comrnitte.3 of Governors.
The Federal Reserve Boa.rd,
Washington, D. C.
Check Clea.ring and Collection Plan
Submitted to the Federal Reserve Boa.rd
by Cha.rles DeB. Claiborne, representing the Committee of Five on Exchange
of the American Bankers Associa.tion.
X-3791 .
.. (•..,J
CHECK CLEARING AND COLLECTION
Section I.
Section
Statutory Provisions.
16 of the Federal Reserve Act authorizes the Federa.l Reserve
Board to require ea.ch Federa.l Reserve Ba.nk to exercise the functions of a.
clearing house for its merriber banks, and section 13 of the Federal Reserve Act, a.s amended by the a.ct approved June
a 1917,
1
a.uthorizes ea.ch
Federal Reserve Bank to receive from any non-member bank or trust company,
solely for the purposes of exchange or of collection, deposits of current
funds in lawful money, national-bank notes, Federal Reserve notes, checks
and drafts pa~a.ble upon presenta.tion, or rraturmg notes a.nd bills, provided such non-member bank or trust company rra.inta.ins with its Federal
Reserve Bailk a. balance sufficient to offset the i terns in transit held for
its account by the Federal Reserve Bank.
Section II.
General
~guirements.
In.pursuance of the authority vested in it under these provisions of
la.w, the Federal Reserve Boa.rd, desiring to afford both to the public and
to the va.rious banks of the country a. direct, expeditious, and economical
system of check collection and settlement of .balances, ha.s a.rranged to
have aach Federal Reserve Bank exercise the flll1ctions of a. clea.ring house
for such of its member banks a.s desire to avail themselves of its
privileges and for such non-member Sta.te banks and trust compa.nies a.s ma:y
ma.inta.in with theFederal Reserve Bank ba.la.nces sufficient to qualify them
l.ll1der the provisions of section 13 to send i terns to Federal Reserve Ba,nks
for purposes of exchange or of collection.
Such non-member Sta.te banks a.nd
I
,
X- 3791
-2-
trW::t compar..ies will hereinafter be referred to as non-member clearing ba,nks.
Each Federal Heserve Bank shall exercise tl1e functions of a. clea.ring
house unQ.er the general terms and conditions hercino.ftcr set forth.
Section III.
;Eli,&~1l~£i
He serve
of Checks J.g
b~ l!o..nd.~ed
_Ex Federal
BA.i:l'~<S.
(a.) Each 'Federal Reserve Bank will receive from its member ba.nks and
from non-member clearing b:uit:s in its district on deposit at pa.r for immediate credit and a.va.ilsbility
~hecks
payable within its district dravm
on all member and non-mer:1bsr clea.ring banks and on a.ll other b.3nkS within
its district that agree to remit a.t per in a.ccepta.ble funds to the Iederal
Reserve Bank.
(b) For all such checks so deposi t3?-, the depositing bank sha.ll be
given immediate credit and a.vaila'oility by the Federal Reserve Bank.
(c) No Federal heserve Ba.nk shall receive on deposit for immediate
credit a.nd a.vaila.bility any check drawn on any bank not within its district,
on
nor/any bank within or without its dh~trict ths.t refuses to remit a.t pa.r
in acceptable funds: Provided, however, tha.t all Federal Rasarve Banks
will receive from their members and clea.ring merr;bers wi trin their respective districts as forwa.rding a.gents onl:· and for deferred credit only
checks on rrember banks of other Federal Reserve Banks, and checks on nonm~mber
banks within or without their districts to be forwarded direct to
the banks on which drawn if within their district, or through the Federa.l
Reserve Bank of the @istrict in which the drawee ba.nk is located, for remittance by said drawee banl:, and any such drawee bank may deduct from
the fa.ce value of the checks so forwarded to it :for remittance an excha.nge
cha.rge against the bank for which said checks are being handled of not
exceeding ten cents (106). per One Hundred Dolla.rs ($100.00) of the face
X-3791
-3-
amount of such check or checks, and in no ca.se less than tan cents for any
one rerni ttance, and tne net proceeds of such check or checks sha.ll be
covered by exchange drafts a·,ra.ila.ble at par, dra:vm to the order of the
Federal Reserve Bank from which such checks were received by the dra.wee bs.nk.
Vihen the net proceeds of any such check or checl::s a.re a.v.:1ilable to any
Federal Resene Bank, either direct or through the gold settlement fund, or
under its established averagt3 t.i.rne schedule 1 tha sa.rr.e sha.ll be credited by
it to the reserve or depos::.t 4ccount of the bank from which su:;h checks
were originally received.
(d) Rvery Federa.l Reserve Bank will receive from other Federal Reserve
Banks checks drawn upon a.ll bonks of its
distri~t
a.s forwarding a.gent
only, and as such agent receive -che proceeds of all such checks direct
from the drawee ba.rik, less such cha.rges a.ga.inst the bank for which said
checks a.re being handled for pa.yrnent and remi tt<Jnca as rr._'iy be made by:·
the drawee bank, but in no case to exceed ten cents (106) per One Hundred
Dollars ($100 .oo) of the fo.ce a.mount of such check or checks, and a minimum
charge of ten cents (10~).
(e) No such cha.rge for payment a.nd ren~ittance sha.:::.l be r.iade by any
rr.ember or clea.ring member bank against the Federal Eeserve $nk upon any
check drawn payable to such Federa.l Reserve Bank Without prior endorsement·
(f) No exchange cha.rge shall be made by any bank upon any check '·Vhich
is the property of the United States.
Section
IV. Manner of Collection.
The Federal Reserve Boord hera by authorizes, and ea.ch xr.ember and nonmember clearing bank will be required to authorize the Federal l~eserve Banks
to handle checks received on deposit, or a.s forwarding agent, as follows:
X-3791
-4-
(l) A Federa~ Reserve Bank will a.ct a.s agent only, and will assume no
liability except for its ovm negligence and its gua.ranty of prior endorserrents.
(2) A :li'-)dero.l Res<Jrta B::1.nk: is authorized to send checks for pa.yment in
exchange draft direct to the bank on which they are dra.vm, o:r to which they
are payable.
(3) Checks recaivad on deposit for imrr.edia.te cred:.t and availability,
as provided in paragraph (o.) of Section III of these regulations, by a
Federal 1:eserve Ba.nk on it:.> m;;;rrber or non-me,nber clear:i.r.g tanl>.:s will be
for11.rarded direct to st:ch banks, and euch banks w::ll be requi:::-ed to remit
I
therefor at par in funds accer'table to the Fed.ero.l ileserve Bank, or to
authorize the said R.;serve Bank to charge their respective account or
clearing accounts.
(4) Checks received. by
;;1.
:Fe:ier:Jl :Reserve Ba.nk as forJerdine; agent
payable in other districts will be for,va.rdad to the Factera.l Heserve Bank
of the district in which such items a.re paz·aoJ.e , in
acGordan.~e
with para-
graph (c) of Section III of these re61llations.
(5) A Federal Reserve Bank will cnarge ba.ck tne amc,unt of ru-zy check
for which payment has not actually been re0eived, r0garClL:ss of vvhether
or not the cheCk itself can be returned.
Section
v,
Penalties for Deficiencies in Reserves.
(a) Statutory provisions:-- Section 19 of the Federal Reserve i•ct
provides tha.t -The required balance carried by a member bank d th a Federal
Reserve Bank may, under the regtllo.tions and subj3ct to such
penal ties a.s may be prescribed by the Fede1·al Reserve Board,
be cheeked. a.ga inst and ·-v:i. their awn by such member bank for the
purpose of meeting ez:isting liabilities; Provided 1 hcwever,
That no bank shall a.t any t irLe ma~r..e nf, IV loar:.s or sheJ.l :pay·
any dividends unless and until tile totaJ. b:J.lance reqcd:ced by
la.w is fully restored.
~
...
X-3791
-5-
(b) Basic Penalty:-- Inasmuch a.s i t is essantial that the la.w in
respect to the uBinter$nce by rramber banks of the raQuired minimum reserve
ba.lance shall be strictly complied
wit~.
the Federal Reserve Board, under
authority ve.sted in it by section 19 of the Federal ll.eserve .Act, hereby
prescribes a. basic penalty for deficiencies in reserves according to the
foJ.lowing rules:
1.
Deficiencies in IeGerre balances of member bznl\:s in central re-
· serveJ and reserve cities vvill be computed on the basis of avel'a.ge daily
net deposit balances covering a. weekly period of s evet;jr days.
Deficiencies
in reserve balances of other member banks will be computed on the basis
of average daily net deposit balances covering a semi-monthly period.
2.
Penalties 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 n:onth.
3·
A basic rate of 2 per cent per annum above the Federal Reserve
:Bank discount rate on 90-day corr.mercial pa.per will be assessed as a penalty
on deficiencies in reserves of rr~rnber bar~s.
(c) Progressive Penalty:-- The Federal 1\eseT.'ve :Board
wn:.
a.!. so pre-
scribe for a.ny Federal Reserve District, u:pon the a.pplicaticn of the
Federal Reserve Bank of that district, an additional progressive r·ena.lty
for continued deficiencies in reserves. in accordance with the following
rules:
1.
When a rr~mber baruc in a central reserve or reserve city has had
an average deficiency in reserves for six consecutive weekly periods, a
progressive penalty, increa.sing at the rate of one-fourth of l per cent
for each week thereafter during W:lich the a.vera.ge reserve balance is deficient, will be assessed on weekly deficiencies until the required reserva
.
. ._)
.
'
X-3791
-6-
...
{- r""" ~ "'·•'
has been restored a.nd ma.inta.ined for four consecutive weekly periods, provided tha.t the rr.aximwn
2.
:pe~l
ty cha.rged will not exceed 10 per cent.
Wnen a member bank outside of a central reserve or reserve city
ha.s had an avera.ge deficienr.y in reserves for tl1ree
consec~::.tive
semi-
n:onthly periods, a progressive penalty, increasing a.t the rate of one-half
of 1 per cent for ea.ch half n:onth therea.fter during whirh the a.vera.ge
reserve balance is
d·.~fi;;J.e~1t,
will be a.ssessed on
sen::i.-n~onthly
de-
ficiencies until the required reserve ha.s been rest•.n·eri. ano. mainta.i.ned
for two conseCJ.l tive semi-monthly periods, provj ded tha.t the ma.ximum
penalty charged will not exceed 10 per cent.
Section VI.
Other Rules and Rer:t:kla.tions.
Any further requirements tha.t the J3oal·d rre.y deem necessary will be
set forth by the Federa.l Rese:rve Ba..."lks in their letters of ins true tion
to their member and non-member clearing banks.
Each Federa.l Reserve :Ba.nk
will a.lso promulga.te rules a.nd ree,ul8.tions governine; the details of its
operations a.s a. clea.rine; house not inconsistent herev:ith, such rules and
regula.tions to be bindine; upon a.ll member ond non-member bEJ.nks •1\hich a.re
clearing through the Federal Reserve :Bank.
"'
FEDERAL RESERVE BOARD
WASHINGTON
X-3804
August 3, 1923•
SUBJECT:
CHANGE IN. RATE FOR PRINTING F.EDERAL RESERVE NOTES.,
Dear Sir:
For your inf orn:.a ti on, I would state t bat the
Board is in receipt of a communication from the D1rector
of the Bureau of Engraving and Printing, advising that
"the rate to be charged for Federal reserve notes until
further notice will be $42.50 per thousand sheets. This
is a reduction of $7·92per thousand sheets, conpared
with the rate for the fiscal year 1923· u
Very truly yours,
Walter t. Eddy,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
..
'~
--- ,r• ......
·.
,J'
X-3805
CoPY
UNITED STATES CIRCUIT COURT ,OF APPEALS
FOURTH CIRCUIT
No ... 2106
F.EDERAL :RESERVE BANK OF RICHMOND,
Plaintiff in Error,
versus
D. J. MALLOY & J. H. MALLOY, trading as
MALLOY BROTHERS,
Defendants in Error.
In Error to the District Court of the United States for the Eastern District
of North Carolina,
{.Argued May 24, 1923 ..
a~
Raleigh.
becided July 12, 192})
_._
_____ ....__
Before WOODS and WADDILL, Circuit Judges, and GRONER, District Judge ..
M. G. WALLACE (J. C. LITTLE on brief) for Plaintiff in Error, and ROBERT H..
DYE (BRANCH & SNOW on brief) for Defendant in .Error.
WADDILL, Cireui t Judge:
This action was instituted in the
~erior
Court of Cumberland County,
North Carolina, by the defendants in error D. J. Malloy and J • .H. Malloy,
parters doing bl.Lsiness under the firm name of M3lloy Brothers, citizens of
the State of Georgia, against the plaintiff in error, the Federal Reserve
Bank; of Richmond, a corporation organiZed under the act of congress known
-
-2a.s the F&deral Reserve Act, and ·Napier 0:.
of Cumberland, North Carolina.
X-3805
n·.
l3alfou.r, a citizen a1)(l resident
!Lhe purpose of the suit wa.s to recover from
the plaintiff in error the sum of $9,000.00, the amount of a eerta.in check
drawn by the saicl Napier u·. G. :Balfour on the Lumberton Ridge Bank of
Lumberton, N.
c·.,
in favor of the defendants in error in pa.yuent of an
indebtedness due them by sa.id Balfour, secured upon rea~ e sta.te in Cumberland. County.
'l'he check bad been entl'U.Sted to plaintiff in error for
collection in due course of its ba.nking business, aDi the amount of Vlhic:h
was lost to defende.nts in error, a.s claimed by them, bf reason of the
neglige,nc:e and want of business ea.:re exercised by the plaintiff in error;
tne specific Charge being that plaintiff in error neglisently mailed said
check to the Lumberton Bank upon which it was drawn, which c:ilarged the
sa= to the a.ccount of Balfour, the drawer, Vlho had to his cred ~ t a.tnple
fundS to meet the check, and negligently accepted in pa.yn:ent therefor a.
draft drawn by the l3ank of Lumberton on \he Atlantic :Bank and Deposit
Company, of Greensboro, N.C.. , in favor of the Federal Reserve B8Dk ot
Richmond, the plaintiff in error, for said $9,000.00.
this draft wa.s not
paid when presenteO., for la.ck of funds, and the Llunberton Bank in a few
d.qs suspended, and a receiver wa.s appointed for it·. .Defendants in e%l'or
further a.verred that plaintiff in error carelessly
am
negligently omitted
to give them pompt and timel.r notice of the failure to receive the
allli3'Ullt
of said check sent it for collection. Yilich would have enal>led them to
collect the same, e.n4 tba.t the plaintiff in error was liable a.s well for
its negligance in forwarding sa.i4 check for $9,000-00 to the bank on which
it wa.s dra»m, a.s for accepting something other than moner therefor, wb.iC'h
proved
va.luele~s.
'l'be ca.se wa.e, b:V appropriate proceeding, removed to the Unite4Sta.tes
District
~urt
•.....
for the Eastern District of North Carolina., where the sane
.
'
.......
·'
'-'
X-3805
-3was docketed, duly matured, and issue joined upon the plea.dings.
.A tria.l
by jury wa.s wa.ived by written stipulation of parties by counsel duly filed,
and a.ll questions of la.w and fact submitted to the judge of the tria.l court
for determina.tion, all parties asking for findings of fact and judgrr..ent in
their fa:vor.
After full consideration, the court found in favor of the
defendants in error against the pla.intiff in error, and also found in
favor of the defendant Ba.lfour, and rendered judgment a.gainst the pla.intiff
in error.in fa:vor of the defendants in error for $9,000.00 with interest
and costs.
This writ of error is presented by the Federal
Richmond, to review and reverse this judgment.
r.~s.;rve
Bank of
The learned judge of the
court below made a. full and comprehensive finding of facts, the accura.cy
of which is conceded, and not challenged in a:ny ma.terial respect, a.nd upon
the facts thus a.scerta.ined, rendered the opinion and judgment sought to be
·reviewed and reversed. (Malloy Bros. vs. Federa.l He serve Bank, 281 Fed·. 997) ..
The a.ssignments of error raise in substance the question of whether
the district court erred in holding pla.intiff in error guilty of negligence in
the circumstances, and tha.t it wa.s without authority to receive in settlement of the check in its hands for collection, the draft accepted by i t
upon the .Atlantic Bank and Trust Company, the taking of which resulted in
the loss sued for.
,After most careful consideration, we find ourselves in full a.cco:rd with
the court below upon the fa.cts, if, indeed, it rna.y be said .tha.t there is any
real dispute about them, and wff accept the a.ble and comprehensive opinion
of the judge of the district court a.s containing a. clear and correct r&1'1ew
of the law properly a.pplica.ble to the ca.se, and neither desire nor deem it
' .l
--4-
X-3805
necessary to add anything to wha.t is thare said.
The decision of the district court will be a.ffirmed, with costs· ..
Affirmed..
COPY
THE illillERSECFIETP.RY OF THE TREASURY
WASHINGTON
August 3, 1923.
My dea.r Governor:
I take i t that thare is no immediate occasion a.t this time
to consider possible advances in the discount ra.tes of the Federal
Reserve Ba.nks, but it is conceivable that sorr.e such occasion may
arise in the not distant future, and I am therefore writing to suggest
a. method of approa.ch to the problem which it seerns to me has not been
sufficiently considered in the pa.st.
I refar particularly to the
possibility of establishing a different rate for discounts at the
Federal Reserve Banks rep:·es3nting the ordinary line of credit loans
to commercial banks, a.s d).stir;E,uished from paper of prirr.e liquidity
which he.s a.t the same time a recognized open market, a.s, for example,
bankers acceptances and short-time Treasury certifica.tes of indebtedness.
The Fe<ieral Reserve B,mks now are proceeding ge·ne rally on the
basis of a. uniform discount rate for all classes of paper, wHh a.
special buy:ing ra.te for ba.nkers acceptances.
I take it that there is
nothing sacred, however, in a uniform rate, and i t is manifest
that any uniform rate necessarily fails to take into account the differences existing be tw<::en different cla.sses of paper.
The m.ost funda-
mental difference, which is rr.uch better recognized in England and is
coming to be recognized in this country, is tha.t betvJeen paper wLich
has a. recognized status in the open market, like bankers :>.ccept:mces
and Trea.sury certifica.tes, and pa.per like customers' loans at a bank
..
.
-2-
X-3807
Which ha.s no ma.rket status and cannot be readily teste~ by the open
ma.rket.
There is a. growing realization in the Feder.Jl Reserve System
of the importance of the open rrBrket powers of the Federal Reserve
Ba.nks, and with tha.t, it seems to rr.e, there nust come a. better recog.,.nition of the fa.ct that the wz,y for the Federal Reserve Banks to bring
their opera.tions into relation with tlle general credit situation is
through an open ma.rket policy divorced entirely from any- question of making enough ea.rnings to meet expenses and dividends. and based instead
on the ma.rket 1 s need for credit.
along this line.
There has already been much progress
For some yea.rs pc.;.st the Trea.sury has been engaged in
developing an open rr.arket for Treasury certificates of indebtedness 1 a.nd
there is now, and for some time ba.ck ha.s been. an active open rr.a.rket • refleeting accurately the investment values of Treasury certificates a.s liquid short-time securities a.nd a.t the same time enabling the Trea.sury
to a.djust the tenns of its successive offerings to meet a.ctual marke-t conditions.
The Federal Reserve Banks at the same time hove bean engaged in
an effort to esta.bl ish a ma.rket for bankers a.cceptances and have achieved
some success 1 though frequently the buying rate a.t the Feder.;:;l Be serve
Banks ha.s been so low as to undersell the open ma.rket, leaving the Federal
Reserve :Banks pra.ctica.lly the only ma.rket for a.cceptances.
More could be
a.ccomplished if the buying rate for a.cceptances were kept up to the ma.rke t , a.nd I understand th8 Central Corrmi t tee of Gave rnor s on open market
operations ha.s been giving some study to this side of the problem.
At '.my
ra.te, both the Treasury and the. Federal Reserve BJnl:s have had sufficient
experience with Treasury certifica.tes and bankers acceptances to know
.,.
~3-
X-3807
tha.t an open ll'.a.rket can be successfully developed. for both classes of
securities, and that if free of artificial influences this ma.rket will
constantly reflect the true position of the securities and afford free
play, through purcha.ses and sales of certifica.tes a.nd a.cceptances, to
changes in the credit situation.
The further development of the open na.rket for certificates and
acceptances offers. it seems to rr.e, the best opportunity in the world
for placing the Federal :ae?erve Banks in··•omething of the same relation
to the market here that the Bank of England holds to the bill ma.rket
over there. lea.ving the Federal Reserve Banks to deal, like the Bank of
England, with only the Inarginal demmd for credit·..
The open msrket, in
other words • would act as a. kind of balance-wheel between the ba.nks and
the Federal Reserve Banks.
TI.::mks in the financia.l centers would hold
in their portfolios reasona.ble amounts of liquid short-time securities.
like T.rea.sury ce.rtifica.tes and bankers acceptances, a.nd when in need of
funds would sell certificates or acceptances to the rr:a.rket before having recourse to the Federa.l Reserve :Sank~··
The market would norma.lly
a.bsorb the certifica.tes or acceptances
sold, proba.bly through sale
thll.S
to an investor o.r to another bank ha:ving."a.n excess supply of funds, but
in the event of a. real lack of credit the rr.a.rke t itself could a.pply to
the Federal Reserve Bank, through a sale of certificates or a.cceptances
to the Federal Res a rve Bank under its open ~re.rke t powers·
To some ex-
tent this is already wh8t happens in the principal fina.ncial centers under the present system, but. it breaks down in a situation where Ir;ember
bankS, without ha.ving recout'se to the rr:a.rke t. can get funds from the
Federal Rese-rve Banks onthe san:e terms by discounting vvi th the Fed..e.;ra.l
.....
, .....
•
-4-
X-3807
Reserve Banks customers' notes and line of credit loans which ha~e
no standing in the open ma.rket.
Under this system discounts of
custorrers' notes a.re almost a.lwa.ys made a.t a. ra.te :.ower than the
going ra.te for such paper, while sales of certificates or bills to
the Federal Reserve Banks, wl:lich must be regarded for practical
p1
-
poses as only a.nother form of discount, will probably be rrBde at about
the open rna.rket rate, unlGSS the Federal Reserve Banks therr,selves cut
in under the open rrfl.rket by esta.blishing a.rtificially low buying rates
for bills..
There is no real recognition given to paper enjoying an
open rr.a.rket, and Vlhat has been done in the nan:e of encoura.ging the rr.arket for acceptances ha.s frequently tended to destroy it.
The remedy, it seems to me, would be to establish the rate of
discount on cus tamers 1 notes and line of credit loans a.t a. sufficient
fi§.ure, sa.y, 1 per cent higJ::.e:>:> than the rate on Treasury certificates
and bankers a.cceptances, to n:a.tch the going rate on corr.mercia.l pa.per
and give a. differential in fa.vor of paper which has independent stnnding in the open rna.rket.
This would encoura.ge the development of the
open market and bring the banks more and more to resort to the open
market for certifica.tes and a.cceptances as a. means of securing necessa.ry funds or of employing funds temporarily idle.
it
~uuld
.At the sa.me time
tend to give an outside Check on the credit policies of the
Federal li.eserve Banks and throu@:l the inevitable relations tha.t would
a.rise between the banks and the rr.a.rket would keep the Fede;a1 Reserve
~anks
n:ore on their mettle in the development of these policies.
The suggestion offers particula.rly interesting possibilities
..•
~s-
in case there should be a. situation ca.lling for an increase . in P,isof~
count ra.tes, for it would make it possible to recognize, a.s the
ficia.l Federa.l Reserve ra.te, the rn.te on a.cceptances a.nd certdica.tes
of indebtedness, wi ~the proviso tha.t the rate of d:\,scount on customers t notes a.nd 1 ine of c1:edi t loans would be, say, 1 per cent
higher than the established ra.te,
This would recognize the essentia.l
di-fferences between the two classes of pa.per, would be a. perfectly .
safe distinction in view of the liquidity of the
pa.~er
and
~e
inde-
pendent open rr.a,rket which it would enjoy, and would make the Federal·
Reserve ra.te more nea.rly cornpa.ra.ble than it ha.s ever been before to
the discount rate of the :Bank of England.
Incidenta.lly, i t would
ha:ve the psychological a.dvanta.ge of leaving one official ra.te a.t the
rela.tively lowe-r figu:re, with a. hi@:ler ra.te applicable to discounts·
of line of credit loans, which are ha.ndled ordina.rily by banks in··
pra~tically
a.ll sections of the country a.t a. ra.te considera.bly'higher
than the open market rate on certifica.tes a.nd a.cceptances •.. The
differential. would thus accord with the
fa.cts·~
Even now, for example.·
with a ~per cent discount ra.te,. it is the. general pract~ce of banks · ·
to cha.rge around 5~ per cent to their customers·, and in many c·ases
much more than this, >mather in the fqrrn of diract interest cha.rgas.
or through. incidental cha.rges i~ the form of commissions
t
.
fix8d:
deposits, a.nd the like.
A rec•gnition of the differences between paper e:njoying an
•,I
X-3807
inctependent open rnarke t, like certificates and bankers e.cceptances,
and customers 1 paper or line of credit loans by banks, on t11e other
hand, would give the Federal He r.erve Bonks rr:uch rr:o'::'e effective control over the gener<c1::. credit situation, would put their rates into
better rela.tion with
+Jtc~,
g·)ing rates on the different classes of
paper, and would enabJ.e them to exercise such control as might be
necessary through ir"c:"easj;-",; t:1eir rates withouta.t the s:::nne time
prejudicing the open markt:t which has been built up for both certifica.tes and acceptances.
Federal
R~serve
To put it enother way, i t gives the
Banks the opportunity to establish their ra.te at or a.bove
the ma.rk:>.t without discriminating a.ga ins t certifica.tes and a.cceptances.
The facts are r,hat there are eiifferent rates for different
kinds of pnper, loacr ra !.es
fry;:-
a.cceptances and certifica.tes and
higher ra.tes for cornnco:rdal pa.per, and unless the Federal He serve
Banks a.re vvilling to .recognize these facts i t will always be impossible for them to get on top of the mark8t ·;vithout operatin5 unfairly
against certificates and acceptances.
At the present ti1r.e the
Federal Reserve rate on line of credit loans is undoubtedly below
the market and just a.s
a.cceptances.
cle<:n~y
.An increase to
a.bove the rr.arket on certificates nn:t
5-~per
cent, for example, would
"Lm-
fa.irly penalize certificates and a.cceptances a.nd still not much
more than meet the market on cus torr.ers 1 notes and linJ of cr0d it
loans.
Any increase in
ra:~e3
large enou6h to
1~ut
the Federal Ice-
serve rate on top of the rracl:et rote on customers 1 notes ond line
of credit loa.ns would thus opera.te most unfairly a5ainst certificates
~7-
X-3807
and a,cceptances and seriously upset the IP.a.rket for these securities
without giving Federal D.e serve Banks much better control over the
genera.l Situat)on.
If, on the other hand, the differential is
reocgnized and differar:t. rates established for the different classes
of pa.per, it would lie
f"JS~>ihJ,;,
by putting a higher discount ra.te on
customers• notes and line of eredit loans, to put Federal Reserve
ra.tes all a.round into d.£ ec t1ve relation with outside ra.tes and
thus accomplish vVha.t the :5';-)de:ral Heserve Banks have been hop5.ng to
a.ccomplish ever since their original organiza.tion.
The differential betwaen the two classes of pa.per would
also have a. direct bearing on our posit ion in world trade a.nd commerce, for it recognizes the ;?opular cha.ra.cter of short-time pa.per
like a.cceptances at1d wot1i.d.
an a.ppropria.te rate,
rr:a~~e
it possible to finance such pa.per a.t
U..."'l]Y,·a~;;,cliGed
by the higher rate that might be
applicable to ordina.:-y corr.mercial pa.per.
This would enable cur bankers
and business rr.en to compete on rr.ore nearly an equality with the
.
other rr.oney mark0ts of the world, and facil i ta.te the development of
.
our own market for bills •
.Another thing to be sa.id for the suggested differential in
ra.tes is that it would keep the Federal Reserve Banks on their
mettle, and require them in q.ll their operations to keep in the
closest touch with the rr.arket.
Both the Federal Reserve System and
the Treasury would have to cxerc ise the; ut.mos t ca.re to watch any
artificial influences operating in the na.rket for certificates or
,-.-..~··
-8-
X-3807
acceptances • a.nd to a:void a.t all costs any a.ction on their own part
tha.t would tend to put either certifico.tes or acceptances on a. false
ba.sis of value.
'Ihe zna.rket itself will give a constant check on
these things i f not subje1::ted to a.rtificia.l influenGes, and vvould
be the best test of vvhe :·.}1:;;r the rates vvere being intelligently administered by the ]'6 deral Reserve Ba.nks.
All of these s·uc;ge:; tions are, of course, more or less ten-
ta.tive and would ha.ve to h>. fu-rther developed, but
:r
am offering them
now in the light of the T;·se.s>;.ry' s experience in these ma.tters with
the thought that there may soon be a. real opportunity to consider
their
a.pp~
ica.tion to the d.eveloprner.t of Federal Reserve policy.
hope the Federal
1\ese~re
Boa.ro will receive them on tha.t ba.sis, and
give sorre considera.tj on t,,
when a.ction will have to
I
bc
t~1ei -r
possibilities m advance of the time
token.
The term "Treasury certifica.tes
of indebtedness", I shouln add, ought to be regarded throughcu t this
letter a.s me1ming strictly w.ba.t it says 1 and not a.s including other
Government securities like Liberty bonds or short-time Trea.sury notes.
Generally speaking, i t seems to rra tha.t Liberty bon<i.s and 'I'rea.sury
notes, not being a.t a.ll in the cla.ss of short-time Trea.sury certifica.tes
or bankers a.cceptances, and not ha.ving the same kind of a. ma.rket, would
ha:ve to fa.ll into the general classification a.nd not enjoy a.eydifferent ra.te of discount tha.n customers• notes and line of credit lo<ms.
Sincerely yours,
Hon. D. R. Crissinger,
Governor, Federa.l he serve Boa.ri,
Washington, D.c.
(Signed) S. P. GIL~ERT, Jr.,
Under Secreta.ry.
'""
t\
TREASURY DB.PARTl/fi:J1T
~
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X-3808
:Jf'fdce · .f t!1.e Secretary
'.VASHINGTON
August 7, 1923.
The Governor
Federal Reserve Board.
Sir:
You are hereby advised thQt the Defartment has referred to the Disbursing
Clerk, Treasury De~rtment, for ~ayment, the account of the Bureau of Engrav- ·
ing and rr·inting for pre..,JB.ring Federal Reserve notes during the .tleriod July 1
to July 31, 1923, amounting to w88,910.00y as follows:
Federal Reserve Notes 1 1914
$>10
ll
Boston •••••••••
New York •••••••
Philadelphia .••
Cleveland ••••••
Chicago ••••••••
San Francisco ••
lir20.
113,000.
90 ,0 1.)0
113,000
225,000
113,000
225,000
113,000
789,000
113,000
180,000
45,000
274,000
68 2000
770,000
102,000
n,ouo
51,000
_2.§.,200
~50
11,000
17 ,oou
88,000
~--~
116,\-0U
405,000
Total
215,000
226,000
518,000
246,000
638,000
249.000
2,092,0U0
:ilOO
12,.000
12,000
2,092,000 sheets at :_,42.50 per .M ••••••••••••••••• ~88,910,00
_2H!CAGO
Sheets
225,000
274,000
51,000
88,000
638,000
Denomination
Serial Numbers
79,068,001
79,968,000
60,564,001
61,660,000
37,828,001
38,032,000
3y348,000
2,996,001
~5
10
20
50
The charges against the several Federal Reserve Bankt' ar"l
Sheets
Boston •••••••••• 215,000
New York •••••••• 226,000
Philadelphia~ ••• 518 ,ouo
Cleveland. , ••••• 246 ,OOU
Chicago ••••••.•• 638,000
San Franeisco ••• 249,000
2,092,000
Compensation
~2, ~2.50
3,051.00
6, 993.00
3,321.00
8,613 .. 00
3,361.50
:;r28,242.00
..t:>late
.Printing
%r2,956.25
3,107.50
lvJ.aterials
7~122.50
6,086.50
2,890.5U
7,496.50
2,925.75
ij.,24,581.00
3,382.50
8,772.50
3,423. 75
~28,765.00
~-s
~nc. Co~-
follows:
Total
pensation
~2,526.25
~752.50
2~655.50
7Sl.OO
1,813.00
861.00
2,233.00
871.50
9~137.50
9~605.00
22,015.00
10,455.00
27,115.00
10,582.50
~7.322.00 ~~8,910.00
The Bureau appropriations will be reimbursed in the ubove amount from the
indefinite a&Jpropriation "preparation and Issue of Federal Reserve Notes, Reimbursable",. and it is requested that your board cause such indefinite appropriation
to be reimbursed in like amount.
Respectfully.,
(Signed)
R. ~- BA.Rli.,
Acting DEputy Commissioner.
..
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OPI"ICIAL CORRESPONDENCE TO
THE FBDERAL RDIERVE BOARD
X-3809
Augu.st 14, l92J.
SUBJECTt
EXPENSE MAIN LINE, LEASED WIRE SYSTEivl, JULY, 1923.
Dear Sir:
Enclos~d herewith you will find two mimeogra.ph
statements 1 X-3809a. and X-3809b, covering in deta.il opera.tions of the ma.in line, Lea.sed Wire System, during the
month of July, 1923.
Plea.se credit the a.rr.ount paya:ble by your bank
in the ~nera.l account, Treasurer, U. S. , on your books, and
issued C/D Form l, Na.tiona.l Banks, for account of "Sala.ries
and Expenses, Federal Reserve Board, Specia.l Fund" 1 Lea.sed
Wire System, sending duplica;te C/D to Federal Reserve Boa.rd.
Very truly yours,
Fiscal Agent •
(Enclosure)
TO GOVERNORS OF ALL :BAN".t{S EXCEPT CHICAGO·
i-·
~-,
r"'!',
..
•
•
X-3809a.
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDETIAL RESERVE
LEASED WIRE SYSTEM FOR THE MONT!~ OF 4TULY, 1923.
From
Ba.nk Business
Percent of
Tota.l Bank
Business(*)
!!:'rea.f:lury
Dept.
Business
WE).r
Finance Corp.
Business
Total
-----------------------------------------------------------------------------------35,830
225,511
59,446
95,621
69,870
68,220
151,139
91,288
44,092
96 ,2l~LJ.
67,835
134,821
Boston
New York
Phila.delph ia.
Cleveland
Richmond
Atlanta
Chica.go
St. Louis
Minneapolis
Kansa.s City
Da.lla.s
San F!'ancisco
TCital
F. R, Banks
s.o1
3·87
g.44
5,95
11.33
1,139.917
loo.oo%
2~1 !227
Wa.shington
1,431.274
Grand Total
Percent of Total
Bank Business
Trea.sury
TOTAL
3·14
19.78
5·22
8·39
6.13
5·98
13.26
88.92%
tt
August 14, 1923.
88,434
118
1,228,469
74 ~::ft1
91
89,049
381,181
3.77,483
1,609,650
88.97%
n ;1.1.03~
100.00%
(*)
FEDERAL RESERVE BOARD I
Wa.shington, D. C.
27
73,955
159,945
98,321
48,278
101,971
72,132
147,554
11·03%
1,4}1,27~ words or
177,483
1,608,757
41,711
243,234
65,076
101,721
5,881
17,723
5,630
6.,100
4,701
5,735
8,715
7,033
4,186
5,727
4,297
12,706
/
These percenta.ges used in ca.lculating the
pro ra.ta. sha.re of leased wire expenses a.s
shown on the a.ccoro,panying sta.te®nt (X-J809b)
.,
......
X-3809b
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIBE SYSTEivl JULY, 1923.
----------------------------------------------------------------------------------------------------------------------Payabla to
Pro rata.
Name of Bank
Operators'
Sa.la.ries
Operators 1
Overtime
Wire
Rental
Total
Expense
$
$ -
$
Federal
Reserve
Share of
Total
Ex.pen.Je
Credits
-----------------------------------------------------------------------------------------------------------------------
Boston
$ 250,00
New York
1,501.14
P..'lila.delphia.
190.83
366,oo
Cleveland
Richmond
315,00
240 .. 00
Atlant3.
C:hica.go
(#)4,92l.J3
St. Louis
235<00
Minma.pol is
289~45
4't2 .66
Kansas City
DBlla.s
251.00
San Francisco
395·00
·75
Fed. Res. Boa.rd
$
679·08
4,277'·77
1,128.92
1,814.48
1,325·72
1,293.28
2.,867·71
1, 732-30
836.96
1,825.30
'l ,286. 79
2,558-44
$ 2)0.00
l ,501.14
190.83
366.00
315-00
24o.oo
4,921.13
235 .oo
283-45
412.66
251.75
395-00
$
429-08
2) 776~63
938.09
1,443.48
1,010. 72
1,053·23
(*)2,053-42
1,497·30'
547-51
1,412.64
1,035-04
2,163.44
16,976-36
$9,367.21
TOTAL
250.00
1,50Ll4
190.53
366.oo
315-00
21.:-o.oo
4,921.13
235·00
2S9.45
412.66
251.75
395-00
( #)
(&)
{*)
(a.)
• 75
$21,626.75
Includes sala.ries of Wa.shington opera.tors.
Amount reimbursa:b1e to Chica.go.
Credit.
Received $17.57 from Wa.r Fina.nce Corpora.tion and $4,100.00
from Treasury Dept. covering business for month of July, 1923.
FEDERAL RESERVE BOARD,
WASHINGTON, D. C.
AUGUST 14, 1923.
$
$14,312.21
(&)2,023-42
$12,258.79
,_.
X-3810
(Superseding
BY-LAWS
OF
THE
FEDERAL
RESERVE
-·.
~-
X-3755)
BOARD.
August 14, 192}.
Article I.
The Cha.irman.
The Secretary of the Treasury, a.s Cha.irman of the Board, shall preside
a.t a.ll meetings when pre sent. In the a.bsence of the Cha.irman, the Governor
shall a.ct a.s presiding officer. In the a.bsence of both the Chairman and the
Gove:rnor, the Vice-Governor shall preside 1 and in the absence of a.ll three
such officers 1 the rema.ining member of the Executive Cornmi ttee sha.ll preside.
Article II.
The Governor.
Sec. 1. The Governor of the Federal Reserve Board shall be the
active executive officer thereof; subject, however, to the supervision
of the Board and to such rules and regula.tions as may be incorpora.ted
herein or ma:y from time to time, by resolution, be established.
Sec. ?• The Governor sha.ll ha:ve genera.l cha.rge of the executive
and routine business of the Boa.rd not specifica.lly a.ssigned under the byla.ws or by resolution of the Boa.rd to any individual member or committee
thereof, a.nd sha.ll have supervision of the :Board's sta.ff.
Sec. 3• It sha.ll be the duty of the Governor to oversee and control the submission of statements to the press expressive of the Boa.rd's
policy or descriptive of its a.ction.
Sec. 4. The Governor sha.ll be an ex-officio member of all Standing
Committees of the Board.
Article III.
The Vice-Governor.
Sec. 1. In the a.bsence or disa.bility of the Governor, his powers
shall be exercised and his duties discha.rged by the Vice Governor, and in
the a.bsence or disa.bili ty of both of these officers, such povvers sha.ll be
exercised and such duties discharged by the re:rra.ining member of the Executive
Committee; in the a.bsence or disa.bility of a.ll members of the Executive
Committee the povvers and duties of the Governor sha.ll be exercised by the
senior member of the Board present •
- c: -
.x- 381.,.
Sec. 2. It shall be the duty of the Vice Governor to cooperate with
the Governor in the administration of the executive business of the Board.
Article IV.
The Executive Committee.
Sec. 1. Thare shall be an Executiva Committee of the Board consisting
of three members, which shall include the Governor and Vice-Governor and one
other. Th.a third member shall be nominat3d and elected at a regular meeting
of the Board. Members of the Board shall serve as far as :practicable in
rotation and for :periods to be fixed by the Governor from time to time. Two
members shall constitute a. quorum for the transaction of business.
trJc. 2. It shall be the duty of the Executive Committee of the Board to
transact all business of an ex.ec'J.tive nature which cari be transacted in
accordance with principles or policies already established by tha B9ard, and
such as may be del3gated to it from time to time; to review and approve irnportant correspondence involving the expression of opinions or decisions of
the Board, and to :prepare and make recommendations t;SOVerning th<:J conduct of
the Board' s business •
Sec. 3· The Executive Corrmdttae shall also have Charge of all matters
appertaining to the inte-rnal organization of the Board, and shall make recomiD3ndations from time to time on this matter. It shall also prepare
-..• ._~,7~11'-~r a budget of proposed expenditures.
Tb.e Genera.l Secretary of the L>oard shall serve as Secretary of thl-3
Executive
Co~ittee.
.article '1.
Standing Committee.
In addition to the Executi vo Committee there shall.be the followinP. Standing Committees:
Sec. L
Law.
~o the Law Committee sh3ll be referred for study and report
all questions of a legal nature. To this Co~ttee shall also be assigned
the preparation or revision of the Beard's regulations, contemplated amendment·s to tha Federal Reserve Act, applications under the Kern amendment to
the Clayton Act, and applications for the exercise by national banks of trust
powers.
The General Counsel shall serve as Secretary of tee Committee.
Sec.
Z Examination.
To this Committee shall be referred all questions relating to
the examination of Federal Reserve or member batiks including admission of
state banks and permission to establish and operate branches.
The Chief Examiner shall serve as Secretary of this Committee.
_,
- 3 Sec.
X-3810
3· Clea.rings.
To this Conmittee sha.ll be referred a,ll questions rela.ting to
the Federal Reserve par clearance system.
The General Secretary of the Board s:1a.l-1 serv3 as Secretary of
this Committee.
Sec.
4. Discount and Open Ma.rket Policy.
It shall be the duty of this Committee to study and advise
the Board from time to time of the trend of business and credit and to make
recommenda.tions with regn.rd to th3 credit policy and operations of the
Federal Reserve Banks including c..."langes of discount rates and the purcha.se
or sale of open w.a.rket investments.
The Director of the Division of Research and Statistics sha.ll
serve a.s Secreta.ry of this Committee.
Sec. 5• .Agricul tur_a.l Credit Conditions.
It shall be the duty of this Committee to keep the Board informed of the condition of agriculture and its credit needs in different
Federa.l Reserve Districts in order to bring a.bout a. better adaptation of the
credit operations of the Federal Reserve Banks to the rrBeting of these needs·
.A member of the Division of Heseerch and Statistics sha.ll be
designated to serve a.s Secr-etary _of this Comrr:i ttee.
Sec. 6, Resea.rch and Statistics.
This Committee sha.ll ha:ve cha.rg-3 of all investigations of an
economic a.nd sta.tistica.l cha.ra.cter authorized by the Boa.rd and shall supervise the work of the Division of Resea.rch a.nd Statistics and the prepa.ra.tion
and publication of the Federal Eeserve Bulletin. This Committee shall also
ha:ve supervision of the sta.tistica.l a.nd publication work of the Federal Reserve Banks.
The Director of the Division of Resea..t•ch and Sta.tis tics sha.ll
serve a.s Secretary of this Committee.
Sac ..
7. Sa.laries and Expenditures· of Federal Eeserve Ba.nks.
To this Committee shall be assigned a.ll recommenda.tions from
Federal Reserve Banks fgr chang8s of salaries a.nd other expenditures • This
Committee shall also make reports with respect to cha.rge-offs and franchise
tax of Federal Reserve Banks.
The Executive Secrata.ry of the :Ooa.rd shall serve a.s Secretary
of this Committee.
Sec. 8. District Committees.
To eEJ.ch Federal Reserve Bank a.nd District sha.ll be assigned
a. Conmittee of not less than two members of the Federal Reserve Boa_t'd. It
shall be the duty of each Committee to keep itself informed by correspondence a:i.1.d visit of the a.ffa.irs of the Bank and the condition of the District,
and make investiga.t ion a.nd report on all questions E!-Ppertai ning to the
operation of ony Federal neserve J3ank or the condition of any Federal Reserve
District that ma.y be referred to it by the :Boa.rd. These Committees shall
a.lso a.id the Committee on Sa.laries a.nd E:x:pendi tut'es of Federal Reserve Ba.nks
- .. 11',.1
.•
- 4-
X-3810
with informa.tion regarding personnel of the respective Federal Reserve
Banks of 'Mlich they have charge, These Committees shall also make recommenda.tions to the Boa.rd for the a.ppointment of Directors a.t Federa.l Reserve Banks and :Bra.nches.
Sec. 9• NOMINATIONS. It shall be the duty of this Committee to
investigate a.nd report on the qua.lifica.tions of a.ll recomrnenda.tions for
the a.ppointment of Cla.ss C Directors and other va.cancies to be filled
by the Boa.rd a.t Federal Reserve Banks or their branches.
Article VI
Secretaries and Assistant Secretaries.
Sec. 1. The :Doa.rd shall a.ppoint a. General Secreta.ry, an Executive
Secretary, one or more a.ssistant secreta.ries, a.nd w.ay a.ppoint an assist··
ant to the General Secreta.ry.
Sec. 2. The General Secreta.ry sha.ll a.ttend ea.ch zreeting of the
Boa.rd and shall keep an a.ccura.te record of its proceedings, a.nd sha.ll
conduct such correspondence as ma.y be assigned to him by the'3Boa.rd or
tha Governor. He shall perform suc.'IJ. other duties a.s may be a.ssigned
to him by the Governor.
Sec. 3. The General Secre ta.ry sha.ll ha.ve custody of the seal and,
acting Ul1der the a.uthority of the Boa.rd, shall have power to affix same
to a.ll instruments requiring it. Such instruments shall be attested by
the General Secreta.ry.
Sec. 4. The Executive Secretary shall perform such duties a.s sha.ll
be a.ssigned to him by the Board, and in the absence or disa.bili ty of
the Genera.l Secretary ma.y, by direction of the Board, perform the duties
of tha.t office. In the absence or disa.bility of the Executive Secretary,
the duties of tha.t office may, by direction of the Boa.rd, be performed
by the General Secreta.t'y, or a.n a.ssistant secretaJ:·y.
Sec. 5• The a.ssista.nt secreta.ries sha.ll each perform such duties
as may be a.ssigned to them from time to time by the Board, by the
Genera.l Secretary, or by the. Executive Secreta.ry •
.Article VII
.Assistant to the Governor.
Sec. L
The Boa.rd may appoint a.n .Assistant to the Governor.
Sec~ 2.
The .Assista.nt to the Governor shall perform such duties
a.s shall be assigned to him by the Governor.
• •
•
•
- 5-
X-3810.
Sec·. J. The Assistant to the Governor shall ha.ve power to sign checks
of the Federal Reserve Board withdrawing funds from the Gold Settlement :FUnd
a.s described in Article IX of these by-la.ws 1 and requisitions upon the
Comptroller of the Currency for the delivery of Federal Reserve notes to the
respective Federa.l Reserve Agents or to their order and Federal Reserve Ba.nk
notes to the respective Federal Reserve Ba.nk:s or to their order as described
in Article X of these by-laws 1 such checks and requisitions to be countersigned by the Governor or acting executive officer of the Board.
Article VIII.
The Fiscal Agent a.nd Deputy Fiscal Agent.
Sec. 1. The Board sha.ll appoint a. Fiscal Agent and a. Deputy Fiscal Agent.
The duty of the Fiscal Agent s:aa.ll be to collect and cieposi t a.ll moneys receiva.bl e by tl:e :Boa.rd with the Trea.surer of the United Sta.tes, to be
pla.ced in a. special fund esta.blished on the books of the Treasurer for
the Federal Reserve Boa.rd. The Deputy Fiscal Agent shall perform the
duties of the Fiscal Agent during his a.bsence or disability.
Sec. 2. The Fiscal Agent and Deputy Fiscal .Agent shall ea.ch execute
a. sepa.ra.te bond with surety sa.tisfactory to the Boa.rd.
Sec. 3· Pa.yments of expenses and other disbursenents of the Board
sha.ll be made by the Fiscal Agent upon proper vouchers out of moneys advanced to him by requisition and wa.rrant out of the specia.l fund a.nd
ple.ced to his official credit with the Trea.surer of the United Sta.tes a.s
provided by section 5 of this Article. In the a.bsence of the Fiscal Agent
pa.yment of expenses and other disbursements shall be rre.de by the Deputy
Fiscal Agent upon proper vouchers out of moneys advanced to the Fiscal
Agent by requisition ~d wa.rrant out of the specia.l fund and pla.cErl to
his official credit with the Treasurer of the United Sta.tes a.s provided
by Sections 5 and 6 of this a.rticle.
Sec. 4. The Fisca.l Agent shall prepa.ra a. quarterly account in such
form a.s· sha.ll be a.pproved by the Comptroller Genera.l of the United Sta.tes
a.nd, a.fter a.pprova~ by the Governor, such quarterly a.ccount sha.ll be submitted to the General Accounting Office. Such a.ccount sha.ll cover payments
of expenses and other disbursements ro.ade by both the Fisca.l .Agent and the
Deputy Fiscal Agent.
Sec. 5· The Gove mor shall, when necessa.ry, make requisition on the
Trea.surer of the Uni tad Sta.te s for the a.dvan ce of such sums to the Fisca.l
Agent a.s ma.y be necessa.ry from the Federal Reserve Eoa.rd fund.
f-Q''
"-'
- 6-
•..r
X-3810
Sec. 6. The Deputy Fisca.l Agent in ma.king disbursements of the Boa.rd
upon proper vouchers out of the moneys a.dvanced to the Fisca.l Agent sha.ll
sign a.ga.inst funds to the :.ffi,Fia.l credit of the Fiscal Agent with the
Trea.surer of the United States in the nane of the Fisca.l Agent by himself
a.s Deputy Fisca.l Agent.
Article IX.
Gold Settldment FUnd
a.nd
!_ederal Reserve Agents I Fund
All funds deposited ·by or for a.ccount of the respective Federal lleserve Agents in the Federa.l Reserve Agents' fund of the Federa.l Reserve Boa.rd
a.nd all funds deposited by or for a.ccount of the respective Federal Reserve
Ba.nks in the Gold Settlement Fund of the Federal Reserve Boa.rd shall be held.
on deposit with the Trea.surer of the United Sta.tes and sha.ll be subject to
withdra.wa.l only by check of the Federal Reserve Boa.rd signed by the Executive
Secretary, the General Secreta.ry or a.n .Assistant Secreta.ry or the Assistant
to the Governor and countersigned by the Governor or a.cting executive officer
of the Boa.rd.
Article X.
Requisition for Delivery
of
Federal Reserve Notes
Requisitions upon the Comptroller of the Currency for the delivery of
Federal Reserve notes to the re;spective Federal neserve Agents sha.ll be
signed by the Executive Secre ta.ry, the General Secreta.ry or an Assistant
Secreta.ry or the Assistant to the Govamor a.nd countersigped by the Governor
or a.cting executive officer of the 3oa.rd.
Article XI.
The Seal.
The following is an impression of the sea.l a.dopted by the Boa.rd •
SEAL
Article XII.
Sec.
to advise
ma.ya.rise
opinions,
generally
Counsel
1. The 'Boa.rd shall appoint a. General Counsel whose duty it shall be
with the Boa.rd, or any member thereof, a.s to such legal questions Q.S
in the conduct of its business; to p:repa.re, a.t the :Soa.rd1s request
regula.tions, rulings, forms and other lega.l papers and to perform
such legal services a.s he rna.y be called upon by the Boa.rd to perform.
-7-
X-3810
Sec. 2. SQbject to the direction of the Governor, the General Counsel
shall have aut~ority to cortespond directly with the Counsel of the various
Federal Reserve Banks and to request their opinions as to the interpretation
of the local laws of the States included in their respective Federal Reserve
Districts. Copies of all such correspondence to be furnished to the Board
for its infor~ation.
Sec. 3· vl!henever it rrB.y be deemed advisable, the :Board rrB.y appoint one
or more !ssociate or Assistant Counsel, or one or more AssistarHs to Counsel.
The duty of such Associate or .Assistant Counsel shall be to assist the
General Counsel in the performs.nce of his duties and to perform the duty of
the General Counsel in his absence. The duty of such Assistant to Counsel
or Assistants to Counsel shall be to assist the General Counsel in the performance of his duties.
.
Sec. 4. The Board may appoint fro~ time to time Consulting Counsel,
who may be attorneys at law engaged in out3ide practice.
Article XIIIMeetings.
Sec. 1.
Stated meetings of the Board shall be held on such days of
the week at such hours as the :Board. b;r majority vote may adopt from time
to time. Special meetings of the Board shall be called by the Chairman.
or the Governor or upon the written request of three members of the Board.
Sec. 2. Four members of the Board shall constitute a. quorum for the
transaction of busines3, except as otherwise requirad by tha Federal
Reserve Act.
Sec. 3·
of business:
At all meetings of the Board the following shall be the order
(1)
(2)
(3)
(4)
Reading or inspection of tl1e 1/Iinutes of the la.st
regular meeting a.nd Minutes of rr:eetings of the
Executive Co~mittee.
I~eport of the Governor •
Re}_)ort of tl1e Genera.l Secrets.ry.
il.epor ts of t~~a coc.rr:i t tees or meT..lbers on
assigned ·0U~L,e ss.
Unfinisha~ ~u0iness
Article XIV.
Infor~ation
and Publication.
Sec. 1. All persons employed by the Board shall keep inviolate its
business, affairs, and concerns, and shall not disclose or divUlge the same
to an~ unauthorized person w11ornsoever, and any employee who shall give information contrary to this by-law shall be liable to immediate dismissal,
, ..
-8-
X-}810.
Except upon vote of the Board, no one other than a Member of the Board, or
the General Secretary, &~ecutive Secretary, Assistant Secretaries Assistant to the Governor, and Gvneral Counsel, shall De permltted to inspect any
'Ort~'le Board Is minutes.
Sec.· 2. While each member of the Board must determine for himself the
propriety or necessity of expressing publicly his individual opinion on any
question, members shall not quote public~y the opinion of other members on
matters which have not formally been passed upon by the Board.
Sec. 3· There shall be published monthly, under the supervision of a
committee of the Board, a bulletin to be knom as 11 The Federal Reserve
Bulletin", which shall be the official periodical organ or publication of
the Federal Reserve Board.
{
Sec. 4. No resolutions of a personal character, except upon the death
of a member of the Federal Reserve Board while serving as suci1, shall appear
in any publication of the Federal ReserveBoard.
Article XV.
The executive committee, acting as a co~mittee of Audit, shall
audit the accounts of the Board for each six months 1 period.
Article XVI •
.Amendments
These by-laws may be amended at any regular meeth1g of the Board by a
maJority vote of the entire Board, provided that a copy of such amendmar~ts
shall have been delivered to each member at least seven days prior to such
meeting.
'Q':.
•.,
FEDERAL RESERVE ·soARD
WASHINGTON
August 16, 1923
X-3811
SUBJECT:
Joint Conference of Federal Reserve Agents
and Governors.
Dear Sir:
The Board has designated Monday, November 12th, as
the opening date for the annual conference of FeC:h-:ral Reserve
Agents and Governors of Federal Reserve Banks. The Board desires
that this conference be conclucted in the same !1'anner as heretofore
and that both joint and separate sessions be held. It is ur.dei·stood that the programs for discussion at the :l.ndependent conferences of the Governors and Agents will be prepared undAr the
direction of the chairmen of the confe.re.n:-:es, e.nd the BoaTd itself
in due course will prepare a list of topics which it desires to
have considered. It would be weU. to have th.; program con'!Plet.ed
ru'ld a copy placed in the hands of each Federa1 Rese:t·ve Agent and
Governor not later than Octobe1:' lst.
Very truly yours,
Vice \}.overnor •
•
TO FEDERAL RES:ERVE AGENl'S .AND GOVERNORS,
i __ I
•
FEDERAL RESERVE BOARD
WASHINGTON
X-3812
August 16, 1923.
SUBJECT:
EXPRESS RATES FOR TRANSPORTATION OF MONEY .AND SECURITIES •
Dea.r Sir;
In letter X-3777 da.ted July 12, the Boa.rd's Coiill!'.ittee on
Economy a.nd Efficiency a.sked all banks for certain informa.tion concerning
the present costs of shipping currency and coin, pa.rticula.rly ·vith respect
to those shipments ma.de by express, .As •dvised in tha.t letter, the question
of securing a. downward revision of the express ra.tes now being dla.rged, ha.d
already been taken up inforlll.3lly with the !ntereU.te Commerce Commission,
with the result tha.t it was regarded a.s advisable to fortn9.lly pre sent the
ma.tter to the Commissillll·
It is, of course, desirable tha.t the ma.tter be ha.ndled in
such a. way a.s to secure the grea.test benefits possible, and the Committee
on Economy and Efficiency ha.s a.dvised the Boa.rd that i t ma.y be advisable
to secure the services of an a.ttorney regularly practicing before the
Interstate Commerce Commis:>ion. The Boa.rd has a:pproved of this a.ction
with the understanding tha.t wha.te'V'er expense ma.y be incurred in this connection, which is not expected. to be grea.t, will be pa.id by a.ll banks on
a pro ra.ta. (not an eq~l) ba.sis.
The information received from the banks indicates tha.t
the ma.tter is of eonsidera.ble importance ina.smuch a.s the twelve banks are
paying a.ltogether ovel' $300,000. per annum for express chB.rges, this cost
being ba.sed upon rates which are between l.j.Q and 50% higher than the ra.tes
in effect prior to a.bout a. :rea.r a.go. It is des ira.ble to ha:ve the ma.tie:t
handled a.s promptly as possible and will you, therefore, advise if the
proposed a.ction meets with the a:pprova.l of your bank.
By order of the Federa.l Reserve Boa.rd.
Very truly yours.
w. w.
General
TO GOVERNORS ALL F.R. BANKS.
Roxton,
Secretary.
. FEDERAL RESERVE BOARD
. WASHINGTON
August 18, 1923.
X-3Sl4.
SUBJECT:
Report of Insurance Committee to
•
Last Governors'
Confe~ence
•
Dea.r. Sir:
'l'he la.s t Governors' Conference , held Ma.rch 26-29, 1923 , considered. a. report· made to the Conference by a. special 11 Insurance Committee''
on the subject· of self-insurance for Federal Reserve Banks. '!his report
embodied a. proposed pla.n for self-insurance of the so-called fidelity .or
bankers I blanket bond risks in excess of an amount of $500,000, for which
sum it wa.s recommended that the banks continue to purchase insurance, for
tbe t~me being a.t lea.st.
·
This repo:-t wa.s approved by the· Govemors' Conference and
refe-rred to the Federal Reserve Boa.rd.. Since then, the Board, through its
Conmittee on Ecoromy and Efficiency, ha.s been considering the general.
subject: of insurance, and the Cotmdttee ha.s obta.ined da.ta. from all banks
concerning. insurance •ca.rried.
..
In this. connection, there is enclosed herewith a. copy of the
repil:rt referred. to a.bove, which it is requested be· submitted. to the Boa.rd
of· Directors of your ·bank for their· considera.tion .and such recommenda.tion
or a.ction .a.s they may think advisa:ble. It is desired, if possible, tha.t a.
definite decision .regarding the plan proposed be rea.ched by all banks, and
transmitted. to the Board, before· the next Govemors 1 Conference,. the da.te
of which ha.s been set for November· 12th, next-..
By order of the Federal Beserv.e Board.
Wm•. W•. Hoxt·on,
General~ Secretary•
'!CD GHA1.:11MEN OF .AtL BANKS •,
COPY·
X-3815
.Association of Res<Jrve City Bankers
August 7th,
1923.
To the Member Addressed:
I am Nri t ing you a.ga.in in re la.tion to
the Par Collection System. Since our referendum letter of July
23rd 1 I\e t,'illa.tion "J" has, as you know, been s~'-;;;pended until
further notice. Va.rious proposals by Messrs. Cla.iborne a.nd
Aria.rns, representing the anti-par collection oanks, were rejected
by the Federal Reserve Boa.:rd and Governors in session la.st vveek.
The whole matter wa.s temporarily left a.s before, except tha.t the
Federal Reserve Banks will discontinue the use of outside agencies
for collecting checks on non-member banks and will, a.t the aan:e
time,refuse to handle check~ dra~n on non-member banks. A number
of non...member banks have signified their intention of going off
the Federal Reserve Pa.r list and it is possible that a large number
will do so unless some additional regulations are put out by the
Federa.l Reserve Board, which 'Vill present a. distinct adv:mtage for
non-member banks to remain on the pa.r list.
Our referendum clea.rly showad a strong
sentiment among our members in fa.vor of the preservation of the
Par Collection System. A little more than 4e:% of our members were
in favor of Regula.tion "J" as it .rva.s ;rittenj the remaining 52fo
found objection to certain features of F.egulation 11 J 11 1 pa.rticula.rly
in relation to the cha.rge of $LOO per thousand on all items bearing
endorsen:ents of non-pa.r banks, or on bank dr9fts d ra.,-vn by non-pa.r banks ..
We have been encoura.ged to thi~ tha. t the
Federal Reserve :Board Hill welcome constructiire suggestions in
rela.tion to this entire problem and tha.t the Board would be gla..: to
give a. committee from our Associa.tion a. hearing on the matter. Our
Association wa.s originally organized for the discussion of tran:::.it
problems, and it ·.auld a.ppear a.t this time tha.t we ha.ve an opportunity
to do a. bit of constructive :ork, 'llich would :ell justify the purposds
of the organiza.tion.
I have conferred by wire .:;i th ea.ch of the
Directors of our Associa.tion and ha.ve obtained their opinion tha.t it
,;vould be \\ell within the province of our organization to take an
a.ctive pa.rt in this ma.tter and send a. commit tee to Wa.sh~ngton a.t
the Association's expense. Before doing so it .-;ould be highly
desirable to determine if the w.a.JOrity of our Association can unite
on certa.in definite recommendations to be presented to the Federal
Reserve Boa.rd and this is the object of this letter.
Quite informally and without any official
standing a. group of our membec-s from the cities of Minne3.polis,
MiLva:ukee, Indianapolis and Chica.go met in Chicago on Frida.y of la.st
week to discuss the problem. Out of this conferance C3tr:e the
r
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"
X-3815
f'ollo:Jing conclusions and I should like to request trot you give the
.Association the benefit of your very ca.reful and frank judgment·.
The opinion wa.s unanimous that Federa-l Reserve ba.nks should not
receive for credit or collection checks dra.wn on bo.nks unwilling to
par • The provi.aions of Regula.tion 11 J 11 were a.pproved with three
important changes:
1. The elimination of the provision
for $L oo per thousand cha.rge on checks bea.ring non-pa.r bank
endorsements.
2. Insertion of a. provision that the
Federal Reserve :Banks do not handle a.t all, either for c:~·edit
or collection, checks bearing non-pa.r ba.nk endorsements.
3. The elimination of the provision
providing for a. charge on dra.fts dra.wn on member banks by non-pa.r
banks.
It would a.ppear to be illogical for the
Federal Reserve Banks to make a. cha.rge aga.inst their membet" bank
depositors Vlhen they ma.y not under the la.w pay any bank exchange
for the collection of cheCks.
There is an old principlei».Jtransit
rela.tions which is still logical and fa.ir a.nd tha.t is the principle
of pa.r for pa.r. If non-member banks refuse to remit a.t pa.r i t
should not be possible for checks, which a.re deposited with them to
be collected with the a.id of Federal lleserve :Bank fa.cilities,
obta.ined directly or indirectly. If this provision were inserted
i t would simply mean tha.t city banks would sepa.ra.te their incoming
ca.sh letters in two pa.rts, one received from pa.rring banks, items
in lhhich could be pa.rred through the Federa.l Reserve System, and the
other received from non-pa.rring banks, which the city bank would be
unde:r the necessity of collecting direct or a.t least outside the
fa.cilities of the Federal Reserve System.
Pla_.inly, the cost of collecting checks
without the use of Federal Reserve facilities would be nigher,
consequently collecting banks would quite na.tura.lly a.sk for la.rger
compensa.tion, either in the wa.y of exchange or compensating ba.lance s •
Under these circumstances the thinking non-member banker would
carefully consider whether his increased cost ...,.ould offset the
revenue obtained in cha.rging exchange •
Ea.ch city bank would know, without question,
which of their correspondents a.re .non-pa.r banks and there Nould be no
di:t:ficul ty a.bout sapa.rating their i terns. Federal Reserve Ba.nks would
be under the necessity of wa.tching the deposits of member banks but
a.fter the plan wa.s in working order there should be no grea.t difficulty
a.bout the matter, a.s member banks would hesi ta.te to present i terns to
the Federal Reserve :Banks for credit and collection bearing non-par
•
... .,
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X-3815
endorsements a.t the risk of having been turned back with ccnsequ:Jnt
loss of time·.
The reason for the third change enumera.ted
above is fa.irly obvious·. No bank draft drawn on a. member bank should
be turned do·,r..rn a.t any Federal Reserve Bank.
'
This lengthy letter is probably necessa.ry
to give you a. full picture of the si tua.tion. If the concl us .ions of
our little conference in Chica.go coincide with your judgment and if
Regula.tion 11 J 11 with these amendments meets with your a.pprova.l
I would be very gla.d to ha.ve youl' wire advice to this effe~t.
If not, a.nd i f you have any other suggestions to make, will you
\jle good enough to wire n:a to this effect and write me your
further suggestions, In any event, it is very desirable tha.t
r)rompt a.ction be taken a.s the ma.tter should not be allowed to
drift along to .tn.e point tha.t a. larie number of country banks
go off the pa.r list·.
Awa.i ting your wire advice, I am,
Very truly yours,
(Signed) Cra.ig D. Ha.zlewood
President.
....
COPY
X-3515 a
August lOth, 1923.
Ivlr • Cra.ig B. Ha.zlewood, Pre&ident ,
As socia.tion of Reserve City Ba.nkers 1
c/o Union Trust CompanY!i1
Chica.go, Ill.
My dea.r Cra.ig:
In response to yo~~ letter of
August 7th to the members of the Associa.tion of Reserve City
Ba.nkers , I a.gree u i th you the Pa.r Collect ion s i tua.tion
presents a. distinct opportunity to our Associa.tion to be of
se:rttce.
I ha:ve always believed in the
ideal of a. Pa.r Collection System, provided i t should be
gra.dua.lly built up through the voluntary co-opera.tion of banks
ra.ther than a.ttempting to force them to conform to the rules
promulga.ted by the Federal Reserve Banks. I do not believe
tha.t force is a. proper means to be used in building up an
America.n institution. On the other hand, I do not think the
Federal Reserve System should open its doors for the collection
of items endorsed by non-as oenting ba.nks, and believe that many
banJ:..s will be convinced tha.t the prvilege of having their
items clea.red a.t pa.r .vill justify them in continuing to ramit
a.t pa.r. Thus slowly the System will be built up.
As indicated in rrY3' first letter, I
am opposed to the Federal Reserve Banks discrimina.ting against
i terns dra.\.VIl on assenting institutions, vbether dra.wn by a.
non-assenting ba.nk or any other customer, a.s such a regu.la.tion
is unfa.ir to the a.ssenting bank and does not give tham quid pro
quo for the service they are rendering.
I think tha.t the a~ndments to
Begula.tion J, suggested a.t the conference of bankers to which
you refer, form a. proper ba.sis for negotia.tions,
Very truly yours,
Vice President.
MeA-A
700
FEDERAL RESERVE BOARD
WASHINGTON
.August 21, 192.3 •
X-3816·..
lmp:tooper Advertise~nts by Sta.te Member Banks•
SUBJECf:
Dear Sir:
The Federal Rese:rve Bank of Chica.go ha.s recently adopted
a. method of correcting itq>roper advertisements of Sta.te member ·
~aUks which should prove to be very effective.
In connection
with correcting the a.dvertising pra.ctices of one State n;amber
bank, it took the ma.tte:r up with the advertising company \Vh.ich
prepared the advertising c-q.ts of this memljer bank and of many
other banks in the country; and pointed out the objeC'tionable
features iri a.ll the cuts which the advertising compar.y proposed
to circulate for use by member ba.fl..kS.. The advert.ismg compa~
was gla.d to coopera.te in revising the cuts • a.nd lin this ca.se ~he
improper member bank advertisements were thus corrected at the
source.
It is suggested tha.t all Federal Reserv-e Agents get in
touch with advertising companies Which handle the a.dvertising
business of member banks in their districts a.nd explain to them
wha.t forms of State member banks adver1.ising a.re deemed to be
illi?ropert a.s indica.ted in the Boa.x·d's circular letteJ:" X-3649 of
February 28, 1923. 4t · is believed that if this cC>U:..'Se ;.s followed
there will be considerably less difficulty in the future in connection with member bank advertiserr£nts-
By order of the Federa.l Reserve Boa.rd.
Very truly yours ,
w.
W. Hoxtont
General Secretary.
'l'O ALL FEDERAL BESERVE AGENTS •
701
CONFIDENT !At
omcE
X-3817
COPY
CORRESPONDENCE
To
Governor Crissinger
From
Mr.. Wya. t t, Gene ra.l Counsel.
Da.tet
August 15,
1923.
Subject: Purchase of Government
Securities a.nd Bankers' Acceptances by ~~ederal Reserve
Ba.nkR under so-called Repurchase .Agreerr:ents ..
~uestion ha.s been ra.ised a.s to the propriety of the pra.ctice
enga.ged in by the Federal reserve banks of pu:rcha.sing Government securities and bankers 1 a.cceptanees from member and nonmember banks, a.nd stock,
bond and acceptance brokers, under a.greemen ts providing that the sellers
of these seouri ties or acceptances will repurcha.se the same from the
Federa~ reserve banks within a specified period of ttme.
The deta.ils of such transa.ctions va:ry, but it a.ppea.rs
tha.t in all cases United Sta.tes Government securities or bankers 1 a.cceptances a.re transferred to the Federal reserve bank
a.t a. certain a.greed price While a.t the same time an a.greeroent
is entered into obligating or permitting the seller of the
securities or a.cceptarices ·to repurcha.se the same within a. certa.in period. It is sometimes provided tha.t the Federal reserve
ba.nks sha.ll ha.ve the right to require the seller ·to repurcha.se
the securities or a.cceptances a.t any time within this period
upon giving a. certa.in number of da.ys 1 written notice. The
Federal reserve ba.nk charges interest for the period .during
which it holds the securities or a.cceptances 1 a.nd this interest is son2times computed in a.dvance and sometimes when the
·resale is effected. It is a.lso provided in some of these
a.greements tha.t the seller shall keep on deposit with the Federal reserve bank a.dditiona.l securities sufficient to ma.intain
a. ma.rgin of safety 1 ba.sed upon a. ra.tio of $120 -to ea.ch $100
of the difference between the par value of the securities pur ..
chased and the market value tbe:teof.
The Comptroller's Office ha.s ruled tha.t na. tiona.l
banks which ha:ve sold securities to Federal reserve banks under
such agreements sha.ll consider the transa.ctions a.s borrowings of
money and· sha.ll ca.rry them on their books accordingly· On the
contrary 1 the Federal Reserve :Boa.rd ha.s held in connection with
the reports of member Sta.te banks and trust companies tha.t such
a transa.ction is not to be considered a.s a. borrowing but should
be included in a. specia.l item on the report a.s securities sold
under repurcha.se a.greements. You ha.ve requested the opinion of
this office a.s to the true na.ture of such transa.ctions. i.e • 1
whether they constitute piucba.ses on the open m9.rket by Federal
Reserve banks as authorized by Section 14 of the Federal Reserve
Act or merely loans secured by the deposit of securities or a.caeptances a.s colla.teral.
..tA
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X-3g17
In my opinion, a. transaction vt.hereby securities or a.ccepta.nces
a.re sold to a. Federal Reserve bank under an agreeoent obliga.ting the
seller to reput"cha.se the same on or before a. certa.in date is in legal
effect merely a. loan secured by colla.teral, a.nd not a. sale; and Federal
reserve banks have no legal authority to pa:rticipa.te in such· a. transa.ction, Where the a.greerr.ent merely perndts, but does not obliga.te, the
seller to repurchase the secu:d ties or a.cceptances, no universal rule
can be la.id downj but it is believed that even in these ca.ses the transa.ctions would genera.lly be construed by a. court a.s loans secured by
colla.teral. The reasons upon which rn::r opinion is ba.sed a.re sta.ted below.
GENEr\AL PRINCIPLES
In construing an agreement such as that described above, a. court
would be guided by the intention of the pa.rties as fa.r a.s it can be ascerta.ined from the agreement itself and the surrounding circumstances. For
this purpose it is settled tha.t parol evidence will be admitted to show
the fa.cts a.:nd circumsta.nces attending the execution of the a.greement. Tha
court will look to the substance of the transaction and will not be controlled by the form which the a.greement may ha.ppen to have. The actual
intent of the pa.rties will be the controlling fa.ctor. Where there is a.
contract of sale and a contemporaneous a.greement to resell at a. certa.in
time the two agreements will oe construed together in the endeavor to
a.scerta.in the true intelltion of the contracting parties. In 5 Ruling
Case La.w, p. 589, it is said!
nsometimes a. bill of sale intended a.s a secu:ri ty
for money lent is a.ccompanied by the execution of a.
sepa.ra.te instrument of defea.sance, by the terms of
Vihich, on the repa.yment of the loan at a. certa.in time,
the bill to be surrendered to the vendor. In such a.
ca.se the two instruments must be construed together
and constitute a. mortga.ge. 11
In discussing the distinction between a. conditional sale and a.
chattel mortga.ge ll Corpus Juris a.t page 412, states a.s follows:
"Intention of the pe.rties. Whether a transa.ction
constitutes e. chattel mortgage or a. conditional sale
ul tiiQa.tely depends on the intention of the parties,
which must be aseerta.ined from their conduct and
the attendant circumstances, as well a.s from the
terms of the a.greement. Further, the. intention
must be collected from the entire transa.ction and
not from any particu.la.r fea.ture of it, and from the
a.ctual a.greement of the parties and not from their
cha.ra.cteriza.tion of it, although the construction
placed on the con tra:ct by the parties is properly
considered. The form of the instrument is of little
importance. A contract of conditional sale will not
be regarded a.s a. cha.ttel mortgage merely because
it is recorded a.s such."
:-~
,,,...·;
< .
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X-3817
With regard to the specific provisions of the em tra.ct v·;hich
indica.te the intention of the pa.rties as to the tra.nsaction, it is
further stated in ll Corpus Ju.ris, at pa.ge 413, a.s follows:
"Conditions Permitting Repu.rcha.se.
A bill of sale
with an a.gre err.ent permitting r epurcha.s e may constitute 13 i ther
a. cha.ttel rr.ortga.ge or a. conditional sa.le, its cha.racter depending on the surrounding circumstances and the intention of the
pa:rties. The fact that a. bill of sale contains an agreement
to resell the property to the seller a.t a. fixed price or confers on him an option to repurchase it does not, in itself,
esta.blish tha.t the transaction is a. mortgage, especially
when there is no debt to be secured and no obligation to repay ..
But the transfer may be shov.n to be a mortga.ge by evidence
tha.t the vendorts obligation continued, that he bound himself
to pay interest, tha.t the bill of sale wa.s given to secure
a. loan, or tha.t the amount of cons idera.tion wa.s inadequa.te
as a. purchase price~ 11
From this s ta.tement of the la.w it is obvious that the specific
provisions of a. pa.rticula_l' contra.ct tr.ust be known in order to determine
whether or not a. conditional sale or a loa.n in the na.ture of a ch a.ttel
mortga.ge is intended. This q_uestion tut'ns upon the provisions of the
pa.rticula.r contra.ct and, therefore 1 an examination of each agreement
entered into by the Federal reserve banks would be necessary for a.
definite opinion as to the efiect of that pa.rticula.r a.greerr.ent. There
a.re, however, certa.in of these a.greements which classify themselves
very readily either a.s sales on condition or loans secured by chs.ttel
Jt.ortga.ge or pledges.
COMMON CHARACTERISTICS OF LOANS
There a.t'e several features found in many of the reput'cha.se a.greements of Federal Reserve banks which indica.te that .loans ra.ther than
conditional sa.les a.re intended. One of the most important of these is the
stipula.tion tha.t a.ddi tiona1 securities sha.ll be deposited by the seller
wi ththe Federa.l reserve bank to ma.inta.in a certa.in margin over and a.bove .
the market value of th~. securities. If the pa.rties intended a. sale
there would be no necessity for such a. provision. This is a. clause which
is usua.lly found in connection with cha.ttel rr.ortga.ges, pledges or other
forms of loans secured by collaterali in such ca.ses the provision is
very desira.ble. The purpose of the provision is plainly to protect the
Federa.l reserve bank from any possible loss by rea.son of fluctllc9tion
in the value of the securities or a.cceptances held by it a.s security
for a. loan.
~~
X-38lft 704:
-4-
Another iuportant c.lia.racteristio of a. loan is p:r~s.;Jnt when 1 t
is provided tha.t the Federal reserve ba.nk rr.ar sell a.t a. public or
private sa.le the securities or acceptances upon which it has advanced
n:oney, in ca.se the so-called seller fa.ils to comply with the agreement
of repurcha.se and to buy ba.ck the securities or acceptances a.t the
time specified. This a.lso is a. clause which is usually found in all
forms of loan a.greements but for which there can be no possible need
in a. contract of sale, even though such ccn tra.ct reserves tin the seller
the privilege of repurcha.sing within a. certa.in time. If these securities or acceptances a.re really owned by the Federal reserve bank it
would be entirely bnnecessa.l:·y to go through the form of a. sale in
order to transfer the title thereto to the Federal reserve bank, because it already has title; Sl'ld if it is des ired by the Federal reserve bank to ha.ve scmeone else purcha.se them, the Federal reserve
bank, being the owner of the securities or a.cceptances, ma'3 make such
sale in the ordinary ma.rmer and it would be entirely superfluous to
provide for this kind of a sale in the a.greement. :But if the Federal
reserve bank does not, a.s a. matter of tact 1 take absolute title to
the securities or acceptances 1 a. provision for sale in case of defa:ul t is necessa.ry in order tba.t the Federal reserve bank, or any
other party purcha.sing a.t such sale, mq a.cquire a. clea.r title.
The fact that the Federal reserve banks cha.rge interest on
such transactions, and that this interest is cQmpute<i in the same wa.y
a.s in the case of any ordina.ry loan is a. very strong factor in evidencing the intention of the parties to this agreement in reality to
nego.tiate a. loan, a.l though in form tb.e tl'ansa.ction is an absolute
sale with a. ri~t to repurchase reserved to the seller. In the case
of an a.ctual sale with right to repurchase there p:roba.bly would be sorr.e
form of fee or commission provided for to compensate the Federal reserve bank for its services 1 but it is unlikely th.a.t this fee or commission would take the form of interest and be computed in the same
manner a.s interest, unless the parties were a.ttempting to consumrna.te
a. loan ra.ther than a. sa.le.
TWO CLASSES OF REP'QRCHASE AGREEMEN'rS .
I
Transa.ctions of the kind under considera.tion ma,y be divided into
two general classes (l); Those in which the seller is obligated to repurcha:se the securities and a.c.ceptances on or before a. certa.in specified da.te; and (2) those in which the seller is gi van the privilege
of repurcha.sing if he so desires. In the first of these cla.sses, the
nature of the transa.ctions seems entirely clea.r, but the proper construction of the second cla.ss of transactions depends largely on the
terms of ea.ch part icula.r a.greement •
. SELLER OBLIGATED
TO
REPURCHASE·
Where the so-called seller ha.s not only a. right or privilege
to repurcha.se, but is absolutely required to repurcha,se by the terms of
the a.greement, this is conclusive of the intention of the pa.rties to
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X-3Slf
effect a. loan secured by t...'le deposit of securities or accepta11ces
a.s colla.tera.l. Wnere the agreerr.ent entered into by the Federal reserve bank, therefore, cont::Jins a. provision obligating the s el1er
to repurcba.se the securities or a.cceptances within a. certain
specified period, or at the option of the Federa.l x·eserve bank upon
L a. certain number of days written notice, there is no question but
that the transaction is a. loan, although in form a. conditional
sale. This position is sustained by the authorities.
In the ca.se of Robinson v. Fa.rrelly, 16 Ala.• , 472; the
Court in discussing the nature of a. transa.ction similar to tb.a.t
under considera.tion states as follows;
11 The
nature of a. sale, with the right to repurcha.se for a. given sum, and within a. specified time,
is a. conveyance of the title to the p-~.ucha.serj he is
the owner of the property, but the vendor ha.s the right
to repu_rcha.se if he sees fit; no obliga.tion rests on
him to do so, it is a. mere ma.tter of volition, whether
he will or not. If he declines to repurchase, he is
not bound to refund the money, and the purcha.ser ha.s no
ca.use of action against him because he does not see fit
to claim his privilege. If the purch_aser reta.in the right
to demand the money of the vendor, notwithsta.ndinghis
purchase, a debt is then due from the vendor to him, and
the existence of this debt within itself shows tha.t the
conve;zance is a mere security for its payment."
In the case of Cake v~ ShuJ,l, (N.J.) 16 Atl. 434, the coul't
made the following s ta.tement:
right of a. court of equity to decla.re a. deed
or bill of sale, which is absolute on its face I to be 3mortga.ge, is clea.r, a.s is also the competency of pa.rol
evidence to prove the fa.ct. 'Ihe question turns upon the
a.ctua.l intention of the pa.rties a.t the time of the transa.ction ... Crane v .. Decamp, 21 N.J. Eq. 414. If tha.t intention wa.s that the instrument should constitute security
for the payment of rr:oney, or the performance or non-performa.nce of any other act, then it is deemed a. mortga.gej
bu.t 1 if a. real sale wa.s intended, then it takes effect
according to its terms, even though a. contemporaneous
right or privilege to purchase back the property sold
wa.s contracted for by the vendor. Ga.ssert v. Bogk, (Mont·)
19 Pac·. Rep. 2Slj Conwa.yt s Ext r v. Alexander, 7 Cranch
213; notes to Thornbrough v. Bak"'Br, 2 Lea.d. Ca.s. Eq. 1030.
An obliga.tion to repU-t'Cha.se, or any other duty resting
on the vendor by the performance of which the property
wa.s to revert to him, could ordinarily be conclusive
evidence of a. mortgage, while the absence of such obligation or duty, either ~xpressed or implied, would be
indica.tive of a. sa.le.tt'*
11The
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X-38. 70G
SELLEll WITH OPTION TO REPYRCH.A§E ..
Where the agreenent provides th.a.t the seller shall ha.ve the
or privilege of repurchasing within a. certa.in specified period,
but there is no obliga.tion upon him to do so, there rna.y be some
question a.s to the intention of the parties; it is sometines uncerta.in V\hether such a transa.ction should properly be construed as a sale
or a loan.. In such cases the courts ha:ve, in endea:voring to a.scerta.in the true intention of the pa.rties, reached different conclusions 1 depending upon the purpose of the trallSa.ction, the result
to be accomplished 1 and the other surrounding circumstances. As ha.s
been heretofore ste.ted, each agreement must be construed a.ccording
to its own particu.la.r terms and 1 t is difficult to lay down any
gen~ral rule which will be applicable to all cases.
'l'be fa.ct that
most of the repurchase a.green:ents entered into by Federal reserve
bankS provide for the pa.yreant or deduction of interest is a strong
indica.tion of an intention to effect a loan ra.ther than a sa.le. Further indica.tion of such an intention is sometimes found in the pa.yment of a. price other than the rmrket value for the securities or
acceptances and in the provision for deposit of additional colla.tera.l. In view of these fa.cts, I. believe that it may be fairly said
that most if not a.U sale agreements made by Federal reserve bankS re•
serving to the seller the privilege of repurc.~a.sing a.re, properly
construed, loans and not sales.
ri~t
The ca.ses hereafter cited show under what circumstances.
a.greements reserving to the seller marely the privilege to repurcba.se are to be construed a.s l.oans secured by colla.tera.l although
the transactions are in fo~ conditional sales.
In the ea.se of Dickinson v. Oliver, 89 N.Y. Supp., 52 (Affirmed
in SS N.E. 44), where a bill of sale wa.s given for certa.in property
together with an a.greement permitting the seller to repu.rcha.se within a: certain time, the transa.ction wa.s held to constitute e. loan in
the na.ture of a cha.ttel mortgage and not a. sale with the right of
repurchase. The court quotes with approval the following head
note from the ca.se of Susman v·. Whla.rd 1 149 N.. Y. 127, 43 N.E·. 413~
"Where the provisions of an instrument which is
in form an absolute bill of sale, taken in connection with
the surrounding fa.cts, indica.te that the pa.rties contenpla.ted
a. loan of money and e. sale of the property, upon the condition, howev.er. that the property should be returned upon
the payment of the money so loaned, the instrument is in
effect a. cha.ttel uortga.ge, and the fa.ct that it employs
the term •resale• wlll not change its mea.ning when no other
sum than the amount of tbe loan is mentioned or contemplated as the price of such resa.le. 11
X-3811~
-1-
i 1"1/ ( ...·.• ••.. '
~~
In the ca.se of 0'Niell v .. Wa.J.ke!', (La.• ) 12 South. 872,
an a.greement of sa.le permittedthe seile:r to buy ba.ck timber purchased a.t any time within six months a.t cost pJ.us eight per cent interest, the repurcha.ser to stand any loss incu:t·red in the meantime.
The court held tha.t this a.g:r.eement, in the light of all the surrounding circu.rnstances, wa.s in effect n::erely a. transa.ction giving security
for a. loan and could not be cons trued a.s a. sa.le.
s.w.
In ~parks v. Robinson, (.Ark) 515,
460, which wa.s a.
ca.se involving the usury laws, an a.bsclute bill of sale, which purported to sell certa.in property a.t a. price fa.r less th:m the market
value thereof, wa.s construed a.s a. cover for a. lo:Jn. The court
sa.id tha.t "The law shells the covering and extra.cts the kernel- 11
In the case of ~ercantile Trust Company v. Y..a.stor, (ilL)
112 N.E .. 988, the Trust Com!)any, mich had no power to make loans
entered into a. contra.ct purporting to be a. sale by a. certain corporation of its a.ccounts receiva.ble to the Trust Company.. The Trust.
Company wa.s by the terms of this agreement to pay no more than 77)~
of the value of the sa.id a.cccunts. The co:rpora.tion and the defenda.nt guaranteed to pa.y these accounts if they were not pa.id a. t ma.turi ty. On a. certain a.c count which wa.s unpaid the Trust Company brought
suit a.ga.inst the defendant on this guaranty. It wa.s held that the
transaction constituted not a. sa.le, but merely a. loan with the a.ccounts receivable a.ssigned to the Trust Company a.s security,
and the Trust Company wa.s parmi tted to recover nothing because the
contra.ct was ultra. vires and therefore void.
In the case of Home Bond Company v. McChesney, 239 U.S ..
563, the Supren:e Court of the United States a.pproved. the findings
of a. special ma.ster holding tha.t a. transaction very similar in its
terms to that in the Ka.stor ca.se, which is discussed a.bove, wa.s
a. mere loan with collateral security, and not a. sale.. The Supreme
Court quotes with a.pprova.l the langua.ge of the United Sta.tes District Court a.s follows:
"In so far a.s the contra.cts in question
here used words fit for a. contract of purchase,
they axe mere shams and devices to cover loans
of money a.t usurious ra.tes of interest. 11
'
.._
ORIGIN OF PBACTICE
Tba.t these transa.ctions are in substance loans rather than
bona. fide purchases of securities on the open ma.rkot is further confirmed by a. considera.tion of the origin of the practice ..
The pra.ctice of the Federal Reserve banks in purchasing Government securities and bankers' a.ccepta.nces under re-sale a.greexrents originated
in N°vember, 1917, when demmdlO> for a.ccomodation upon the Federal re~erve
banks were very hea.vy and the Government was floa.ting large issues of
Liberty bonds.
On December 1, 1917, the stamp tax on promissory notes
wa.s to become effective and this would ha:ve been a. very hea.vy expense
upon member ba.nks in obta.ining funds from Federal reserve banks upon
·their fifteen day collateral notes under Section 13 of the Act. The
Federal Reserve Boa.rd, therefore, suggested tha.t in order to avoid the
payment of this stamp ta.x member banks might obta.in short time a.dva.nces
from Federa.l reserve banks by rediscounting eligible commercia.l pa.per
of longer rna.turi ties under re-purchase agreements. The Board pointed
out that interest might be charged only for the period covered by the
a.greement, tha.t. is, from the da.te of discount to the date of repurchase,
and that the interest might be a.djusted in advance or at t.he tim~ of the
re-sale·. The suggestion of the Board was a.dopted and the Federal reserve banks began purchasing paper from ~r:he-T banks under repur.cha.se
agreements as a. substitute for the fifteen day colla.teral notes of me~
ber ba.nks. Notes secured by Liberty Bonds or United Sta.tes certifi- ·
ca.tes of indebtedness were subse(iuently exempted from the stamp tax
and thereupon a.t least one of the Federal reserve banks (Richmond) discontinued this pra.ctice.. O'ther Federal reserve banks, (nota.bly New York)
have not discontinued it, however, but on the contrary ba.ve extended i t
by entering into transactions of t:pis kind not only with their member·
ba.nks but a.lso with non-member banks and stock, bond, and a.cceptance
brokers~
·
It is clear, therefore, tha.t these tra.nsa.ctions origina.ted a.s
loans (presumably under the a;uthori ty to make direct loans to n:ember
pra.ctice ha.s simply grown and spread until it ba.s gone
ba.nks) a.nd
fa.r beyond the original purpose of the Boa.rd t s ruling, al;ld ha.s been
taken a.dva.nta.ge of by the .Federa~ reserve banks a.s a. justifica.tion
. for.making direct loans to non-member banks and to brokers -parties
to whom the Federal. Reserve Act never intended tha.t Federal reserve
banks should extend credit in any way wi tbout the intervention of a.
member bank.
the
. CONCLUSIONS OF LAW.
When the transactions ·between the Federal reserve bank and the.
va.rious membe·r and non-member banks, and other corpora.tions, therefore,
a.re considered in the lig}:lt of a.ll the surrounding ci. rcumstances it seems
clea.r tha.t under the principles announced by the cou.Tts, mc)st if not a.ll
••
-9of the~e transactions should
of securities or acceptances
right to repurchase reserved
form sales, a.re in substance
be considered loans secmred by the deposit
as collateral, instea.d of sales with the
to the seller. 1.J1l.le a.g:':'eements, though in
loans secured by the pledge of col:!ateral.
The transaction descri'bed being a loan sectil"ed by collateral,
instea.d of a. sale which it purports to be, FederaJ. reserve banks have
no power to engage in such t1•ansa.ctions and such agreements on the part
of these banks are entirely ultra vires·.. Federal reserve banks have no
power to make loans direct to the person or corpora.tion primarily liable
under azv conditions, except tha.t they make advances to their member
banks upon Pl'Omissory not~! for a period not exceeding J-5 d.qs vmen properly se~red in accordance with Section 13 of the Federal Reaerve Act.
Advances under repurchase agreements such as described a:bove, however,
~ not be considered advance~ upon promissory notes, beca.use the debt
in such ca.s~s iS not evidenced by notes of 81lY kind. Federal l'6Serve banks,
therefore, can not in J1lY opinion, make advances even to ember banks under
:repurchase agreements •
P,OLICY
This subject has been discussed above largely as a qliestion of
general law,. and I have not discussed the effect of its apPlica.tiC?n to
the Federal reserve ba:nk;s. I think, how~ver, it is perfectly manifest
that the application of· these conclusions of law to the operations of the
Federal reserve ba.nks will lead to a tt111ch closer a.dhe:l'ence to the fund.a:rnenta.l purposes and principles of the Federal Reserve Act tha~ exists a.t
the 11resent time. The original Federal :Reserve Act ga.ve the Federal reserve
banks no power to make direct lo~ even to their member banks •
to
The power to make direct loans
member banks on their fifteen
daJ notes was granted on the recommendation of the Federal Reserve
Board as a means of enabling Federal :reserve banks to extend credit to
their member banks for short periods of tim on the sec:g.rity of paper
eligible for rediscount. All amenciment to the Act granting this power
to Federal reserve banks wa.s recommended by the Federal aaserve :Board
in 1916 when little use was 'being made of the redisco1mt facilities of
the Federal reserve banks and 1 t wa.s hoped tba.t this would. :induce the
meaer bankS to ma.:1e more use of the system. The. Board's proposed amerulusnt, however, was not acted u;pon before it becan:e evident tha.t this
country miStlt be drawn into the world-wa:r and in o:rder that t~e banks
of the co"Untry might be in position to facilitate Government financing
in such an event, the Board made a further suggestion tba.t tb1 proposed
fifteen-da.y collateral notes of member banks might be made EJligible when
secu.red by bonds and notes of the United States a.s well as when secured
by paper eligible for rediscount.
••
-10-
X-3817
It wa.s never contempla.ted by Congress tba.t the Federa.l reserve banks should ~~ke direct loans to non-~2mber banks nor to stock,
bond and a.cceptance brokers or other individuals, pa.rtnerships or corpora.tions which ordina.rily would seek such a.ccomrnoda.tions from member
banks. The pra.ctice which ha.s grown up in the Federa.l reserve ba.nks
of buying bonds and bankers r a.cceptances under so-called 11 repurcha.se
agreements 11 amounts to nothing more nor less than the making of direct
loans on the sec:uri ty of such bonds or a.ccelJtances; and the ~~king of .
such loans to paxties other th8n member ba.nks is manifestly inconsistent with the purposes of the Act in tha.t it ena.bles non-member banks and
stock, bond and a.cceptance brokers to tap the rasout'ces of tbe Federal
reserve ba.nks directly a.nd without the intervention of a. member bank·
As sta.ted a.bove, I am of the opinion tha.t these trc:nsa.ctions
a.re clea.rly ultra. vires as to Fc1dera1 reserve banks and it is respectfully recomrr:ended tha.t the Boa.rd so rule.
Respectfully,
(Signed) Wa.lter Wya.tt,
General Counsel ..
fAU -~
{_t_L
FEDERAL RESERVE BOARD
WASHINGTON
X-3818
August 25, 1923.
SUBJECT:
Ca~ital
StoCk.
Dea.r Sir:
I enclose herewith, for your information,
copy of a. letter recently written to an officer of
one of the Federal Reserve :Banks with respect to the
necessity of a member bank filing an applica.tion for
the surrender of stock Whenever it reduces the amount
of its surplus ..
Very truly yours,
Walter L. Eddy,
Executive Secretary.
Enclosure.
TO ALL F. R. AGENTS
,.~
.
.
(COPY )
August 15, 1923 •
X- 38l~a.
Dea.r Sir:
Receipt is a.cknowledged of your letter of August
chG~ge in the Boc;;.rd 1 s Regula.tion I, Series of 1923, whicll rela.tes to the increase or
decrea.se of Federal reserve bank stock.
13 inquiring with respect to the
As you sa¥', Section II Qf the Regula.tion of 1920
provided tha.t whenever a. mem'ber bank reduced the ·a.ggrega.te
a.mount of its pa.id-tA.p ca.pita.l stocllli: and surplus, it must
file an a.pplication for the sU':'1~er.der and cancella.tion of a
propor~iona.te amou..'"l.t of its Fedaral reserve bank stock.
The.
equivalent provision. in the 1923 reg-uJ.a.t:Lon omits the require:a:ent thet a. member bank muet file a.n a.pplica.tionfor
the surrender of stock Whenever it reduoes ~e amount of its
surphls and requires merely tha.t an a.ppl:i.ca.tjon for the surrender of :F'ederal reserve bank stock must be filed by a. rr.ember bank when it reduces its capital.
This ct.~.ange in the regula.tion wa.s intentional and
wa.s rr.ade to conform more closely to the provisions of law.
Section 5 of the Federal Reserve Act requires a member b~k
to surrender a proportionate amount of its Federa.l reserve
bank stock when it reduces its ca.pita.l, but is not mandatory
with respect to the surrenter of Federa.l reserve bank stock
upon a. reduction of member ·ba.nk surplus. The relevant provisions of Section 5 are as follows:
11 When a. m3mber bank inc:!'ea.ses its capital ~ock,
Q!. ~~..ill:ld& i l shall thereupon subscribe for an a.ddi tional
amount of capital stoCk in the Federal reserve bank~ * * * *
When a. rr..ember bank ~uc~ lli ca.pital: ~~ ll sha.ll surrende:- a. proportiona.te a.rnotint of its holdings in the capital
of said Federa.l resl!rve bank".
This .&ection also pro•rides in another part tha.t the capital
stock of a. Federal reserve· bank "shall be increa.sed a.s member banks increa.se their ca.pi tal stock and surplus * * * a.nd
may ~ decrea.sed as member banks reduce their ca.pi ta.l stock
or surplus"You will note, therefore, tha.t there 1.s no provision
requiring e,. member bank to surrender a. propox·tiona.te amount o:f
its Fed.era.f reserve bank s toc.k when it reduces its surplus •
The Board ha.s always recognized this distinction between a.
reduction of ca.pi tal of a. member bank and the ::eduction of
its surplus, and has taken the position tha.t when a. mnm'ber
bank reduces its surplus only, it is not req~i~ed to stu·render a. proportiona.te amount of its Federal reserve bank stock,
,....,~
I
X-381Sa.
-2-
but tha.t the Federal reserve bank has the option, subject
to the Board's a.pproval, of ca.roelling the proper amount of
its C1;3pita1 stock in the hands of the member bank or of leaving
suCh stock outstanding. (See opinion of Counsel published on
page 2l8 of the Federal Reserve Bulletin for August, 1915).
In preparlng the 1923 Bego.la.tions, it wa.s found tha.t
Regula.tion I, Series of 1920, was somewhat inconsistent with
the provisions of law in this connection a.nd with the Board 1 s
construction of them, because in terms it required a. member
bank to file an a.pplica.tion for the surrender of Federal reserve bank stock whenever it reduced the a.ggrega.te a.rmun t of
its capital stock and surplus, which would necessarily involve
the filing of sueh an applica.tion upon the reduction of surplus alone. '!he Board also felt tha.t it would be· an unneces·
sary formality to require an a.pplica.tion for the surrender of
stock to be filed every tin:e a. member bank reduces its surplus,
because many_ reductions of surplus are small in amount a.nd.
temporary in cha.l'a.cter.. The regula.tion wa.s accordingly amended
by omitting this requirerr.ent and under the new regulation it
is contempla.ted tha."t a. surrender of Federa.l reserve ba.nk stock
need no.t be ma.de every time a. member bank reduces its surplus,
but tha.t it will be optional with the Federal reserve bank involved, subject to the Board • s a.pproval. 1 to require the surrender of stock in such a. ca.se or to lea:ve it outstanding. In
cases where the reduction of surplus appears to be of a. perma.nent na.ture end is so substantial in amount a.s to affect a. considerable number of shares of stock, a. sul'render of stock sl'lol·,lct
ordinarily be required.
· ~ similar change wa.s made in Section II{d) of the new
l.regula.tion with reference to the su.l'render of stock upon a. consolida.tion of member banks, when the consolidated bank has a. ca.pi ta.l less tha.n the a.ggregate ca.pi tal of the consolidating banks·
The corresponding ·provision in the regulation of 1920 required
a. surrender of stock whenever the consol ida. ted bank ba.d a. capital
and surplus less than the a.ggrega.te pa.id-up capital and surplus
of the consolidating banks.
Yotll' s very truly ,
Walter L. Eddy.
Executive Secretary •
•
J:_
3
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
X-3821
For Relea.se in I4orning Papers ,
Monday, .Augu.s t 27, 1923.
The following is a. sumnary of general business
and financial conditions throughout the several
Federal Reserve Districts, ba.sed upon sta.tistics
for the months of July and August, a.s conta.ined
in the forthcoming issue of the Federal Reserve
Bulletin.
Production of ba.sic comrr.odities and employment a.t industrial
•e s tahlisb:r,p,en ts deer ea. sed in July and there wa.s a. further decline in
wholesale prices.
The distribution of goods, a.s indica.ted by ra.ilroa.d
freight shipments, ma.inta.ined record tota.ls and the sales of merchandise,
though showing the usua.l sea.sonal decline,· continued to be rela.tively
heavy.
PRODUCTION:
Production in ba.sic industries, a.ccording to the inde.x. of
the Federa.l Reserve Board, declined one per cent in July.
Mill con-
sumption of cotton, steel ingot production, and sugar meltings were
considerably smaller than in June.
New building opera.tions during the
month, a.s mea.sured by the value of permits gra.nted and of contra.cts
a.wa.rded 1 showed more than the usual sea.sonal decline.
1:.
Employment at industrial esta}?lishments located in various
sections of the country decrea.sed 2 per cent during July.
Manufa.cturers
of automobile tires, and cotton goods showed large reductions in number
-
of
e~loyees.
There were some further announcements of wa.ge advances,
but thelie were not a.s n'l.lm3rous a.s in the three previous months-
Avera.ge
weekly earnings of factory workers, due to a. deorea.se in full-time
..
-,
-2-._
operations, were
3 per
X-3821
cent less than in June.
Crop foreca.s.ts of the Department of Agricul tut"e on the basis
of cond'i'tion on August l indica.ted ,tha.t yields of wheat and !'Ye would
be below J11ly estima.tes, while larger yields of cotton, corn, oa.ts and
barley were foreca.st.
Due to a. seasonal increa.se in grain shipments
and continued large shipments of ir.dustl·ial raw ma.teria.ls and ma.nufa.ctut"ed goods • ca.:r loadings in the la.st week of July rea.ched the
largest
tota~ recm~d.
TRADE:
The volume of V'bolesale trade wa.s a.bout the same· in July as
in June, \\hile there wa.s a. decline in retail trade, which wa.s largely
sea.sonal in na.ture.
AmOl'lg the
wholeaale lines sa.les of dry goods a.nd
clothing were larger than in June, while sales of groceries, ha.rdwa.re,
and shoes were considerably SII'a.ller.
l3usiness in all reporting lines
wa.s larger tha.n :i.n July, 1922, and the a.vera.ge increase, a.s indica.ted
by the Federa.l Reserve Board' s index of who l.esale tra.de, wa.s 13 per cent •
. Sales of department stores were 10 per cent larger than a. yea.r a.go,
while mail order sa.les showed a. ga.in of
27 per cent. Stocks of de-
pa.rtment stores showed a. sea.sona.l reduction during July a.nd were smaller
than in a:ny month since Ja.nua.ry.
fR!CES:
Wholesale commodity prices declined during July for the
third consecutive month and the index of the Burea.u of La.bor Statistics
wa.s
5
per cent below the April peak.
Prices of a.ll groups of com-
modi ties, except housefurnishings, were lower in July.
The la.rgest
decline occurred in quota.tions of clothing, drugs and chemica.ls, farm
prodl.lCts, a.nd building ma.teria.ls.
During the first half of August price
changes were more moderate and quota.tions of cotton,spr'-n~ \11/hEJa.~t' h6'g~/
Sheep,·
_,.
-3-
X-3821
a.nd rubber a.dvanced.
BANK CREDIT:
Since the middle of July the volume of bank credit in use
ha.s shown a. reduction, largely because of the substantial liquide.tion
of loans on stocks and bonds a.t New York City banks.
Between July lSth
and August 15th loans of member oonks in lea.ding cities
t'~cured
by !>tocks
and bonds decrea.sed by $94,000,000 to ~he' lowest point for the yea.r,
$258 ,000,000 below the a.rr..ount .outstanding a.t the beginning of the year.
Commercial loans, hovreve;r, increa.sed, so tha. t the net reduction in total
loa.ns for the period aroounted to
$6o,ooo,ooo.
~curity
investrrents·de-
clined $73,000.000 to a new low level for the year.
The volume of disco"Unted pa.per held a. t the Federa.l Reserve
.Banks showed a. slight decrease, While their holdings of a.cceptance and
United Sta.tes securities rea.ched new low points for the year.
Between
the middle of July and the middle of Augu.s t gold holdings of the Federa.l
Reserve Banks increa.sed by $21.100 1 000, reflecting in part net gold
imports during July of $27,400,000.
Federa.l Reserve note circula.tion
increased by a.bout $15,000,000, a.nd there were also
substantia~
increa.ses
in the volume of gold certifica.tes and Na.tiona.l bank notes in circulation.
Slightly firmer tendencies in money rates during the month were
reflected 'in a. gradually increa.sing proportion of comnercia.l paper sales
a.t
5 1/4
per cent, a.s compared with
5
per cent in the previous month •
..
FEDERAL
RESERVE
DOAHD
X-3822
For relea.se in Morning Papers,
Friday • August }ls t".
CONDITION OF .ACCEPTANCE 1.1AFKET
JULY 15 TO AUGUST 15, ·192}.
During the 30-day :period ending August
continu~d
dull and ina,ctive.
15
the
a.cc~:ptance
market
The supply of bills was generally moderate
but the s tora.ge of gra.in influenced the supply in sou::e western centers •
The dermnd for bills improved substantially during the first week of the
period but slackened somewhat during later weeks.
Purchases by oor}?ora...
tions, country banks and for foreign account were the rr.ost important
factors in the rna.rke t and bills with 60 to 90-day ma,turi ties were in
the best demand.
Bates rema.ined unchanged a.t 4 1/8 to 4 1/4 bid and
4 to 4 1/8 offered.
Silk, gra.in, 'cotton, suga.r, wool, leather, and
provisions were the :principal com:cr.odities a.gainst which bills were
drawn.
FEDERAL
:hESEHVE
STNrE".1F.t'J'r
}i'QI\
BOARD
'I'hE FEESS
X-3824
For Immediate Release.
'Ihe Feder91 Reserve Boa:rd announces tha.t
the agencies in Ha.vana., Cuba., of the FeC:eral Reserve
Banks of Atlanta. and Boston will open for business
on Sa.turda.y, September
August
31, 1923.
1, 1923.
fAI{
G
4 ...! . V'
, ..
X-3829
CERTIFICATE OF MEMBER OF :FEDERAL RESERVE
CITY. OF WASHINGTON · )
DISTRICT OF COLUMBIA )
BOARD~
ss.
I,
• of
the Sta.te of
, ha:ving been appointed
by the President a. member of the Federal Reserve Board,
ore a. ted by the Act of Congress approved December 23,
1913. known a.s the Federal Reserve Act, a.nd desiring
to qualify and enter upon nv duties .a.s such, do hereby
certify in accordance with the terms of sections 10
and 25(a.) of the sa.id Act tha.t I am not @ officer or
director of acy bank, banking insti tuti'on, trust
company or Federal reserve bank; tha.t i''do not hold
any stock in any bank, banl.d.ng institution or trust
company; tha.t I ,am not an officer or director of any
corporation organized under the provisions of section·
25(a) of the Federal Reserve Act• or of any corporation
enga.ged in similar business organized tinder the la.ws
of any Sta.te,. and tha.t I do not hold stock in an:~
suoh corporation.
Subscl'ibed and
S'!'~Gltll
to before me, a. Notary
Public in a.nd for the District of Columbia., this _
da.y of - - - - - - - • 19_.
Notary Public,
Wa.shington, D.c ..
~ co~ssion
expires
'
FEDERAL RESERVE BOARD
WASHINGTON
X- 3832
Septerrber 8, 1923.
SUBJECT:
MEMORANDA ON. CUBA~
Dear Sir:
For your information there are enclosed herewith~
copies of a memorandum and statements presented to the
Federal Reserve Board by representatives of the Government
of the Republic of Cuba at an informal conference held in
Washington on September 6, 1923.
Very truly yours,
Wm. W. Haxton,
General Secretary.
TO ALL FEDEP..AL RESERVE AGENTS·
j
•
X-3832-a
COPY
Washington,
»-
C., September 67 1923.
'.,
TO THE COVERNOR AND MEMBERS OF THE FEDERAL RESERVE BOARD:
The Republic of Cuba pays its tribute of
r~rd
admirati~ to
the magnificent
B~ard in
the world field
•f achievement made by your Federal Reserve
of economics and finance.
We esteem it a privilege therefore to place our problems and successes
before you so that we may not only have the benefit of conference and advice
with you but also that your people
may
better understand the real conditions
presently existing in Cuba.
We fe'el great pride in the present financial, economic and political
condition of our Republic.
The present administration has had many and
co~
plex problems to solve since the financial and industrial chaos Which existed
in 1920 and 1921.
That
th~y
have been
s~lved
is fully attested by the present prosperity
and happiness of our country ,and its people.
Scme unrest may exist but it
is negligible compared with the general world unrest of today.
We are
the only nation whose war debts have been fully liquidated.
Our treasury has a reccrd balance of over twenty-five millions of dollars.
All acGrUed obligations have been
pr~mptly
~t.et,
and we are paying all charges
as they mature.
'!he Is-land of Cuba has an area of about half that of Great Britain.
1ts
p~pulation
1902, was
at the time of the foundation of the Republic on
ap~~
1,500,000.
~
20,
X- 3832-a..
-2-
On December 1, 1922, it had increased to J,l2J,04o people, or, say
65
per square'mile as against 480 per square mile in Great Britain.
Yet
the total annual trade per head of the fixed population of Cuba is about
the same as the total annual trade per head of the population of the United
Kingdom.
It is the largest
~gar
producing country in the world and yet
not more than 12% of the land of Cuba is under cultivation.
POLITICAL STATUS:
Our Constitution, largely fashioned after your
own, ·guarantees the same protection to life 1 liberty and property.
Our
fresident~
liberal statesman and profound student that he is, has so ad-
r::-.i.nistere~
the affairs of our governrr.ent for the past two years that our
liberty ane1 property rig:1ts have been conserved andrespected, that the confidence and credit of our people and our institutions have been restored,
our trade has made new high records in stability, our education facilities
have been increased and our financial status is more
~ealthy
and prosperous
than ever before in the history of our Republic.
Our Congress and our people recognize the effort and accorrplishment
of our Executive by
SANITATION:
improving.
giv~g
him everJ. evidence of confidence and support.
~overnment
This essevtial feature of our
is constantly
This administration is following the standards and methods
so successful under General Leonard Wood and Dr. Gorgas.
At present there are no quarantine cases.
Small pox has been co~
pletely obliterated and is now unknown within the confines of the Republic.
The administration maintains a permanent service
in
all parts of the RepubliC
to fight the mosquito andother insects that breed infection and disseminate
'
.
-3disease.
Vaccination is
obliga.tory~
X-}832-a.
That these
me~hods
'('{2:J
have been effective
is best demonstrated by the mertality rate of the Republic, conparedwith
other
coun~ies,
M~rtality
statistics for the year l92l, showing England
12.,4 per 1,000 inhr..bitants; the United States, .12.9 per 1,000; Cuba, 15.36
per l,OCO; France,
17. per l,OOOj Austria, 19. per 1,000; Spain, 23.8 per
1,000.
The city of Hav&na is
~econd
only to New York in
~ortality
statistics.
?'
New York City, 18 .. 4 per 1,000; Havana, 19 .. 9 per 1,000.
These results have been acquired through the ability and fidelity
of the highest class of Cuban citizens who have given their time and effort
toward improving the sanitation of the Republic.
Probably the most notable progress of Cuba during the past
ECONOMIC:
two years was in the field of econorey and
Q.ate trf the birth of the Republic.
finance~
M9.y 20th, 1902, was the
Its first budget provided for expenditures
of $16,200,757.26, and its inceme for that year was about the same
fi~re.
Twenty-one ¥ears have passed and the present budget for e.xpendi tures of the
Republic is $61,672,169.23; its income, if we may take as a basis the month
of July of the current year, which is the first month of the fiscal year,
was $9,183,000.00, or at that ratio over $100,000,000 a year.
Our Republic passed through a great economic crisis during the years
1920 and 1921, due to the after-war conditions and the sudden drop inthe
price of sugar.
was
.~
~
1b.is administration which took office on !V'..a.y 20th, 1921,
co:a,fronted with grave and serious political and economic
"HoWiwer,~r-~of
scientious,
~1"\amoc.J)e.t,i..c,
the country, and the con-
met.hods have, in less than twcr y.ea.rs,
•
again
-4-
X- 3832-a
restored the Republic to a sound and conta1ted economic and political
condition.
Today we are enjoying a more prosperous condition than@ever
before in our history, having in the Tr0asury of the Republic on August 16,
last, in excess of $25,00G,OOO, after having paid all of its budget obligations
that had accrued, and having during the month of August last, paid its obligation, principal and interest, to the United States for its war indebtedness.
The Republic of C'J.Oa in order to pay 5. t:: v . :::.;rC:'J~3 of tl:J
dependence and to frovide funds for the
fo~cr1da.tion,~J.nd
;p::~,r
of
In-
continuance of its
existsnce as a Republic, and to cover the cost of sanitation, drainage, roads,
and other improvements necessary to the governrr.ent, h&s negotiated various
external and internal loans.
The external loans were as follows:
Speyer & Co. 1904,
Speyer & Co. 1909,
Loan, $35,000,000
en which there is now due ..•••••..• $ 21,062,500.00
Loan, $16,500,000
On which there is novv due ..........
15,298,0CC.OC
Co. 1914, Loan, $10,00J,JJC
On which there is now uue •....•••.•
8,650,000.0J
J.P.Morgan & Co. Last Loan, $50,000,000
On which there is now due..........
49,749,000.00
J.P.Morgan
It
rr~y
&
be interesting to note that tne Cuban Government bas only
utilized part of the last Morgan loan, the balance oeing on deposit in
New York, earning interest, subject to the order of the Cuban Government ..
For the amortization of the principal and the payment of interest of
these loans, the national budget rr.akes provision each year.
This year
that item amounts to $12,240,000.
The important income of the Republic is derived from the customs,
-5-
X- 3832-a
fiscal z~nes, postal and telegraphic service, revenues from taxation, and income from the various properties b&L:.)r.6 tc t:"'c o~v-oLli,_:i-,t.
The Cubans pay a taxation of
$22.03
per ca~ita, which is the lowest
tax rate per capita of any country in the world.
Its great economic wealth
is due to the fact tl:'..at it occupie8 first ,place in the world as a sugar producing country.
At present it nas
183
S1.tgar mills with capacity for _f;roducing
mere than 6,000,000 tons, annually.
Impcrts to Cuba from the United States during· the fiscal year of
1922.-23
amounted to $154,175,10G.OO.
from Cuba were
During the same period the exports
$379,939,637·
Our dQvelopment, therefore, both internal and international, is dependent
to a ;.ery large extent on the economic pel icy whidl the United States may
pursue with respect to ow· CGU.itry.
Acc2rd7.ng to recent investigation the
capital of .Arr.;;.rica.."l citizens inv.;;sted in Cuba in the sugar industry and other
tusin8ss exce6d~ the sum of $1,000,~00,000.
merchandia~
The United States s0ld Cuba
for valua as nigh as $500,000,000 in a single yearj so that
cc~ercially
and industrially, the national prosp0rity cf each of our
Republics is in a great measure at least dependent upon each other.
I ncglect8d
t~
mention another feature that seems to me very important.
The total funded Cuban d~bt, external and internal, amounts to $43.00 per
capita, as
States, and
cC'mp~red
$275.00
with appoximatdy $208.00 per capita for the United
per capita for Canada.
In making such
corr~drison
it
should be noted that the political subdivisions of Cuba, with the exception
of the City of Havana, have practically no funded debt.
The people of the
Unit:::.d States and Canada, however, hav0 to consider in their taxation programs
-6-
X-3332-a.
!"':-.
· !iot only the service of their na.tional debt, but also the service of a. substantia.l public debt created by political end edministrative subdivisions.
It is a matter of pride to the 1\.epuolic of Cuba, tha.t, while there was
unfortunately a. temporary cessation in the payment of the interest upon the
interna.l debt during the commercia.l and financial crisis of 1921, the Republic
of Cuba has never in its histo.ry defaulted in the payr1ent of the principal or
interest of any of its external debt.
I lea.ve with you the official Gazette of the Hepublic of Cuba under
date of June 30, 1923, setting forth a. detailed and complete sta.tement of
the budget for the fiscal year 1923-24, a. nsume of Nhich will be found on
pagi'
358;
also two statements from the Secretary of the T.re8sury ,- one showing
the national income for the rmnth of July, 1923, the first month of the p:resent
fiscal year; and the o the.t' showing the cash on hand a.s of August
16, 1923.
Ilefore concluding rr.a.y I, speaking for the President of Cuba and the
Cuban people, :reiterate our continued appreciation for the counsel, odvice,
aid and cooperation of your Government.
Our friends and allies in 1893 in our struggle for independence are
still our cherished friends today in our prosp,':lri ty snd success.
The spirit that has animated :Jnd prompted the continued helpful aid
and advice was so well described by your distinguished Sec-retary of State,
Mr. Hugpes. in his recent speech in Minneapolis, ;;hen he said "We have acted
as the friendly adviser of the Cuban Gov2rnment, our action has been solely
for the purpose of aiding in rr..a.intaining the independence and stability
of Cube end thus not to create but to preclude the necessity of inbrvention.
11
-7-
X- 3832-a
We want to lmow you better and on a more intimate basis.
We believe
that meetings such as these are conducive to a better understanding of our
respective problems, and will lead to more business m1d
countries.
~rosperity
to both
It is our hope that there will be frequentrepeti tions of similar
meetings when we can frankly discuss and advise with you concerning our
problems so that our people wi 11 not alone profit socially and financially,
but that we rr.ay have fran:zer expressions of our difficulties and discourage
gossip and misinformation which we believe has largely been the cause of
misunderstanding in the past •.
(Signed) Celso Cuellar
X-3832-b
Republic of Cuba
Department of Finance
Revenue collections during the month of July according
to telegraphic reports.
Customs
$4,258,000.00
'Fiscal zones and districts
4,09 7,000.00
Lottery
528,000,00
Coranunic a. ti on s
,2200,000.00
Consular
100,000.00
Total
$9,183,000 .. 00
Ha.bana, August 17, 1923.
(Signed)
Central Auditor of Finance.
,~
X- 3832-c
Republic of Cuba
General Treasury
Habana
Eduardo Y Montoulieu, General Treasurer of the Republic ad interim
certifies: that the cash holdings of th8 General Treasury on August 16, 1923
are $25,030,694.70, Twenty-five million thirty thousand six hundrec;l and
ninety-four pesos and seventy centavos, composed as follows:
In Vaults:
Gold in $20 coinsII
11
11
10
11
II
5
II
II
II
4 "
II
2
"
"
Silver in $1 coins
"
II
"
II
Nickel
II
11
II
If
II
"
II
~. 4()
II
o. 20
II
0.10
0.05
0,.02
0.01
II
u
II
II
American Money
Gold in $20 coins
II
II
10
II
II
II
5
II
Notes of $10,000
II
II
5,000
II
II
1,000
"
II
500
II
ll
100
II
50
II
II
II
20
II
tl
10
II .
II
$30,000
610,000
535,000
5,000
10,000
209,500
186,000
725,000
144,000
109,950
25,750
58,020
555,000
370,000
300,000
60,000
denomination
II
15,000
II
14,981,000
n
3,496,000
II
899,000
II
6oo,ooo
II
5
130,000
80,000
tl
1
5~000
II
II
33,000
26,000
Silver in $0.50 coins
II
II
Q.25
II
49,000
1,050
Copper " 0.01
"
$24,277,870
/ Total
II
II
In vault $24,277,870.00
Auxiliary
cash holdings 752,824.]0
$25,030,694.70
In witness whereof I have made out the prdsent in quadruplicate at
Habana on the 17th day of Augui\>t of the year nineteen hundred and twenty
three.
(Signed) E.. Y. Montoulieu
Seal: (Repub lie of Cuba
General Treasury)
FEDERAL RESERVE BOARD
WASHINGTON
x-3 ?.33
-*
3SS:)
September 8, 1923.
SUBJECT:
Congressiona.l Inquiry on Iverrbership in the
Federal Reserve System ..
Dear Sir:
There is enclosed herewith copy of a letter,
with enclosut'e, received from the Cha.irman of the Congressional Joint Committee of Inquiry.on Membership in
the Federal Reserve System. This letter is referred to
Y<>U with the request tha.t you furnish the Board, a.t the
earliest possible moment, iid th the answers vvh:ich you individually would propose to the questions a.sked by the
Committee, and any information w.hi.ch you think would be
of value to the Board in its appearance before the Com=
mit tee. This rr.a.tter is also being refe:tred to the members
of the Federal Advisory Council ..
Very truly yours,
G o v e r n o r.
TO GOVERNORS OF ALL F. R.. :DANKS
·'
!
' .
.~,
X-3833a.
( CJPY )
CONGRESS CF THE UNITED STATES
JOINT COMMITTEE OF INQUIRY
oN MENEBERSHIP IN FEDERAL EESEl-NE SYSTEl'vl
WASHINGTON, D. C.
September
6,
1923~
Hon. D. R. Crissinger, Governor,
Federal Reserve Board,
Wa.shington, D. C.
My dear Mr. Crissinger:
In pursuance of the provisions contained in the .Agricultul'a1 Credits .Act of 1923, passed by the Sixty-seventh Congress,
Public Law No. 503, a. copy of which is enclosed herewith, a. joint
committee, consisting of three members of the Eank:i.ng and Cut'rency Committee of the Sena.te and five menbex·s of the :Banking and
Currency Committee of the House of 1\ep;.:esentatives, has been appointed.
It is the purpose of the committee to start forrr.e1 hearings
along the lines of authority conferred upon them by the .Act.
My purpose in corw:unica ting with you a.t this time is tc ·
advise you that the committee will be gla.d to have you, or any ot
all members of the Federal Reserve Board a.ppear before the committee,
on Tuesday, October 2, 1923, at two-thirty o t clock in the a.fternoon,
in the House Banking and Gul'rency Corru"ll:it tee Rooms in the Capitol
I3uilding. The committee would liku, to have you be prepared to give
them the effect of the present limited membership of Sta.te banks and
trust companies in the Federal Ra~.arve System; whether or not it is
advisable to a.ttempt to increa.se the merrbership of the Federal Reserve
Sys tern; also a.dvice upon the present financial conditions in the
Ag:ricultura.l Sections of the United States; Federal Reserve System
rea.sons which actuate eligible Sta.te banks and trust companies in
fa.iling to become members of the Federal Reserve System; and what administration n:easures) if any, ha.ve been taken and a:re being taken
to increase such membership; and whether or not in the opinion of the
Federal Reserve Board any cha.nge should be made in the existing ls.w
or in the rules and regulations of the Federa.l F.eserve Board; or if
you hs.ve any suggestions of change in the method of administration
to brine; about in the .Agricul tu.ral Districts a. la:rger membership of
Sta.te banks and trust companies in the Federal Reserve System.
For the use of the committee in preparing for the investiga.tion, I sha.ll be pleased if you will furnish rr.e with a. complete
set of the rules and regulations of the Federal Reserve Board from
its inception to da.te, also a. copy of the ]'eder-a.l Heserve .Act with
all amendments to date.
The committee of inquiryare endea.vo:ring to give as wide
I
t
•
X-383}a.
-2-
publicity as possible to these hearings with a view of obtainine?;
information in accordance with the instructions in the Act creating
the corrmittee. In this connection we are asking the cooperation of
the Secretary of the Treasury, Secretary of Agr icultu:re, War Finance
Corpora.tion, Federal Farm Loan Commissioner, An:;erican Bankers .Association, State Bankers Association, Federal Reserve D'J.nks, United
Sta.tes Chamber of Coll'merce, American Fa.:rm Ilu-reau Federation, National
Grange and other simila.r organize.tions, which are in a. position to be
helpful in furnishing accura.te inforJr.a.tion such as is desired by the
committee ..
The committee re€!:lizes tha.t in connection with the consideration of the question of limited membership of Ste.te banks and
trust companies in the Federal Reserve System there a1•e several out.:.
standing, widely discussed questions which involve, to a. greater or
less degree, membership in the System; to-wit, branch banking, par
collections, abolishment of the office of the Conptroller of the
CU-rrency, a.dministra.tion practices and policies of the Federal Reserve
System, administration pra.ctices and policies of the office of the
Comptroller of the Currency, interest on da.ily balances of the Federal
Reserve System, conflict and competition now existing retween Nationa.l
end State banking laws.
·The purpose in mentioning these outstanding questions is to
ena.ble you to prepare yourselves, so f a.-r as possible, to present to
the committee your views and conclusions a.s regards the problems presented by each of these questions. It is not, however, the intention
of the committee to limit the discussions to these few enumerations,
but i t is the honest desire of the committee to, as fa.r a.s possible,
arrive a.t definite conclusions, therefore, it is to be hoped that the
Iloaxd will make a. full p:resenta.tion of its vie1.vs to the committee
covering the scope of this inquiry.
Very truly yours·,
(sgd) Lf T. UicFadden,
Cha.irman.
...•
s
(COPY)
X-3333b
(Ext:ract from Public Law, No. 503, 67th Congress.)
An Act To provide additional credit fe.cilities for the agricul tura.l a.nd 1 i ve-s tock indus tries of the United States; to a.mend the
Federal Farm Loan Act; to amend the Federal Reserve ACtj and for other
pUl"lJOSe S •
*
*
*
JOINT CONGRESSIONAL
C~M!UTTEE.
*
SEC· 506 (a.) That a. joint committee be appointed, to consist of
three members of the :Ba.nking and Currency Committee of the Sena.te, to
be appointed by the President thereof, and five members of the Banking
and Currency Committee of the House of Representa.tives, to be appointed
by the Speaker thereof. Vacancies occurring in the membership of the
committee shal~ be filled in the same manner as the original a.ppointments ..
{b) The joint committee is authorized to inquire into the effect of
the present limited membership of State banks and trust companies in the
Federal reserve system upon financial conditions in the a.gricul tural
sections of the United Sta.tes; the reasons which actuate eligible State
banks and trust. companies in f'a.iling to become members of the Federal
reserve system; what a.dministra.tive n:easures have been taken a.nd a.re
being taken to increase such merr:bership). and whether or not any change
should be made in existing law, or in r-hles and regulations of the Federal
Reserve Boa.rd, or in methods of a.dministl'ation, to bring a.bout in the
agricultural districts a larger membership of such banks or trust
companies in the Federal reserve system.
(c) The committee is authorized to sit a.t any time dut'ing the ;.~
sessions or recesses of the Congl'ess, to conduct its hea.rings a.t
Washington or at any other pla.ce in the United Sta.tes, to send for
pel'sons, books, and papers, to take testimony, to administer oa.ths,
and to employ e :xperts deemed necessary by such committee, a clerk, and
a stenographer to report such hearings as may be had in connection with
any sub.ject which may be befol'e said committee, such stenographer's
serv'ices to be rendered at a cost not exceeding $1.25 per jJl'inted page.
The expenses of such comrni ttee shall be paid out of the contingent
funds. of the Sena.te a.nd House of Representa.tives in proportion to the
membel'ship of such comnittee from each House.
(d) 'Ihe comrni ttee sha.ll from time to time :report to both the Senate
and the House of RepresentatiVes the results of its dnquiries, together
with its recormr.endations, and may prepare and submit bills or resolutions
embodying such recomrr.endations, and the final report of sa.id comrni ttee
shall be submitted not later than Janua.l'y 31, 1924.
f"";/":".,1!1
~ '• ·~
X-)8)4
IN THE DISTRICT COURT OF THE UNITED STATES
For the District of Oregon•.
)
)
)
)
)
)
)
)
)
)
)
)
)
BROOKINGS STATE :SANK, a.n
Oregon :Banking Corpora.tion,
Plaintiff'
v.
FEDERAL RESERVE :SANK OF
S.AN FRANCISCO, A Federal
Reserve :Banking Col"pora.tion,
Defendant.
T. T. :Sennett,
Ma~shfield,
,ZulY }0. 1923 •
Oregon,
John F.• Reilly, Portland, Oregon, for Pl&.intiff;
Albert
c.
Ag;>.ew, Sa.n Francisco, Ca.l .. , for Defenda.nt .. ·
WOLVERIJX)N, District Judge:
In this ease there is diversity of citizenship.
~estion
is also involved..
A federal
So it cannot be said tha.t jux-isdiction is
fo'lm.ded only on the fa.ct of diversity of citizenship..
The defendant
is a. Federal Reserve :Bsnkr With its head office and principal place of
business in Sa.n Francisco,
Ca~ifornia,
a.nd with branch banks elsewhere 1
one of these being located a.t Portl9l'ld Oregon..
defendant in this court, in tort.
Pla.intiff ha.s sued the
Service wa.s had upon Frederick
Gl'eenwood ,manager of the Po:rtland Branch, within this jut"isdiction, on
November 18, 1922..
On .November 23rd, the a.ttorney for the defendant
bank wired from San Francisco to the attorney for plaintiff, e.s follows:
"I refer to complaint for damases Brookings :Bank 38S.inst
Federal Beserve ·Bank filed in Portland NOVember ei@hteenth.
Owing to pressul'e of other work and enga.gements in Sea.ttle
and Salt Lske it will be difficult if not impossible for
... 2-
X-3834
tre to give consideration to prepa:ca.tion of answer or other
pleading a.t this tin;e, ViJill you kindly give stipula.tion
tha.t defendant ma.y have thirty da.ys from Novembar eighteenth
nine teen twenty two within which to demu.r, a.ns.ve r or file
such other pleading to compla.int or otherwise a.s defendant
ma.y be advised by counsel. Will a.pp:recia.te your courtesy
in this COlmection. Plea.se wire reply quickly."
On the same da.y a.ttorney for pla.intiff wired:
"You:r request November twenty third re Brookings :Bank Case
is a. greed to. Pre pare written st ipula.tion if you wish,
f orw(;}.rd it to me and I will sign. "
Also on the same da.y, a.ttorney for defendant rr:a.iled to
a.ttorney for pla.intiff a. stipula.tion, entitled in the ca.use pending,
of the following tenor;"Stipula.t ion extending time to plead.
"It is hereby stipulotad by and between respective counsel
for the a.bove named pa.rties tha.t the defendant, Federal
Reserve Bank of San :E'ra.ncisco, may take and have to and including the tvventy-eighth day of December, 1922, within which
to answer the compla.int on file in the a.bove entitled a.ction,
or to demu.r thereto, or to rrake such other motion or motions
in respect thereto, or in respect to the cause of a.ction
stated therein, a.s sa.id defendant, Fede:ral Raserve Bank of
San Francisco, may be advised by counsel."
The stipula.tion wa.s signed by a.ttorney for pla.intiff, a.nd
returned to counsel for defenda.nt, who thereupon signed it, a.nd rna.iled
it to the clerk of the court, with directions:
1 hand you herewith stipula.tion extending tirne for oefendant
to plead in the a.bove entitled w.a.tter. I will a.pp:recia.te it
if you will present the s tipula.tion to the court, ha.ve it
approved and fila."
11
When the stipula.tion wa.s received, the court's a.ttention was
ca.lled to it by the clerk, a.nd the following order wa.s nl9.de respacting it:
"Now a.t this day upon n:otion of defendant on file herein, said
defendant appearing by lvl't'. A. c.' Agnew, of counsel, It is
.ordered tha.t said defendant be and it is hereby a.llowed to and
X-3834
-3-
including Thursda¥ Decembe.r 2S, 1922 ~ to ans-.er, demur, or
file such other motion a.s it may be advised • 11
t~t
It is apparent
the
o~er,
·;
counsel for defendant, a.s it relates to
ma.de no other a.ppea.rance in court than is evidenced by his
letter of' instructions to the clerk.
On December 26, 1922, the de•
1
.
fendant, a.ppea.ring specially 9Y its attorney, moved the court to dismiss
the ca.use, for the
rea.s()~
that the defendant is not an inha.bitant within
the district in which the a.ction ha.s been instituted.
~e
fendant
wa.i~ed
crucial questipn presented for decision is whether de.jurisdiction over 1 ts person by entering into, and
causing to be filed with the clerk of the court, the stipula.tion for an
extension of time within whiCh to plea.d.
It ought not to be controverted tha.t a. stipula.tion between
parties to a. suit or a.ct ion, filed in court , has the sa& effect and
potency a.s an order of' the court, agreed to 'by the pa.rties, to the ssm3
pU'l"pose.
The purpose of the pa.rties is subserved in either event, u,
in the present oa.se, the time. wa.s enlarged in yjlioh the defendant .wa.s
entitled to answer, etc.
'lhe Jurisdiction in controversy here perta.ins to the person,
'
a.nd not to the subject-matter.
the subject-attar.
Clearly, the court ha.s jurisdiction of
The court b_a,:ying such jurisdiction, the dafenda.nt
•
ma:y waive jurisdiction C?var the person, a.nd the question involved here
is whether it has d()ne so.
''Wa.ivar is the intentional relinquishment of s. know right•"
Wa.ters vs Central Trust
.co., 126
Fed. 469, 472•
The :taking of any proceeding, other than a. special a.ppa.a.rance
..~
...
)
1
-4and a. motion or plea. founded thereupon, is equiv~lent to
a. genera.J. a.ppearance and a. submission of the defendant's
person to the ju:risoi.ct:i.on of the cou:rt."
Foster's Federal Pra.ctice, Vol. I (Fourth Edition), p.459·
So, where counsel a.ppea.red and moved to dismiss tha bill for
w~s
want of jurisdiction, and a.lso for want of equity, it
held to be a.
wa.iver of a. non-resident's privilege, and to amount to a. volunta.ry a.pJones v • .Andrews, 10 Wall. 327.
pea.rance.
a.pplica.tion for an extension of time to pl<:Ja.d is a.
recognition of the jurisdiction of the court over the
person and constitutes a. genera.l appea:rance. 11
4 C.J, Sec. 31, P• 1339·
11.An
In Hupfeld v. Automa.ton Piano Co • ,
66
Fed •
788,
the defendants,
non-residents, a.pplied to the court and obta.ined an extension of time
to plead, answar, derrro.r, o.r take such other a.ction a.s might be advised,
and it wa.s held, on motion to dismiss on the ground of want of jurisdiction, tha.t obta.ip.ing such extension of time wa.s the equivalent of a.
general
~ppeara.nce.
See, also, to the same purpose, Brigs;s v. Stroud,
58 Fed • 717; Waters v. Centra.l Trust Co., 126 Fed. 469, 47lj !Au:t'phy .v •
Herring-Ha.ll-Marvin Safe Co., 184 Fed. 495; Everett Hy., Light & Power
Co. v. United Sta.tes,
236
Fed.
806,
SOS.
Attention ha.s been given the ca.se of Ba.con v. Federal J.eserve
Bank of Sa.n Fra.ncisco, recently decided by Judge Neterer, but it is not
a.pplicable here.
The ca.se last cited, decided by the same lea.rned judge 1
he.s a.pplice.bility, and serves pointedly, when compa.red with the Ba.con
ca.se 1 to illustra.te the distinction between a. general and a. special a.ppe a.ra.nce.
Both the letter a.sking for stipula.tion for extension of time,
addressed to counsel for pla.intiff, a.nd the
stipu~a.tion
'
entered into by
·.f
X-3S34
-5-
counsel for the parties, sho,v unmiataka:bly tha.t 1 t wa.s the put'pose of
defendant to obta.in an extension of time within which to answer, demu.t'
to the
compl~int,
be a.dvised.
or make suCh motion in respect thereto as it might
Nothing is sa.id from which to infer ths.t defendant de-
signed to reserve its right orprivilese of objecting to the jurisdiction
of the court over the person of the defendant.
The a.ppea.rance is ob-
viously general in its effect, and is tantamount to a. -:r:,:..vo:r of jurisdiction over the person,
Cou.'1.sel says now, in effect, that he did not
intend tha.t his a.ppea.rance, thus ma.de on the pa.t't of defendant, should
·subject it to the jut'isdiction of the court; but the a.cts speak for
themselves, a.nd show incontrovertibly their purpose.
Another question is presented, whiCh pertains to the power of
the court, in its discretion, to relieve the defendant of the effect
of ita genera.l a.ppea. rance, and allow it now to appear specia.lly for con-
testing jurisdiction over the person.
While it is obvious tha.t the
court is possessed of suCh power, it is not a.t a.ll clea.r tha.t it should
so exercise it in the present case.
To permit the defendant to ra.ise
the question now would be to permit it to violate a. solemn stipula.tion,
in which the opposing pa-rty ha.s a.cquired
~
va.lua.ble right, and this by
extending to the defendant a. fa:vor a.sked for a.nd granted.
The motion to dismiss will be denied.
739
TREA.St.JRY DE.\?ARTMENT
Office of the Secretary
X-3835
WASHINGTO~
September 8, 1923.
The a:.vemor,
.Federal Reserve B•ard.,
Sil':
You a:re hereby advised tha.t the Department has referred to the Disbursing
Olerlt, 1'1"easury Department, fer payment, the account of the :Bureau of Engraving
and Printing ftr prepar.ing Federal Eeserve· notes dt:.ring the peri~d Augast 1 to
Auguat 31, 1923, amounting to $88,825.00, as follows:.!2£';~e.JJlli~..!!..l!9tes, 1914.
!§...
Boston •••••••••• 200,000
New York •••••.••• 400,000
Philadelphia.~ •• 156,000
Cleveland.~ ••••• 200,000
l!.Q..
.~20.
200,000
65,000
16,000
83,000
60,000
23,000
128,000
42,COO
Jiichmond .........
Chic~ ••••••••• 152,000
Minneapolis
Kansas City •••••
San F.ranc isoo
200 1000
.....
,.;
...1,308,000
-29...&'£
591,000
i~
·--
8,000
1,000
]:QQ.&~
373,000
Total
--
i£00
2 10Q.Q.
11,000
1,000
2-;GGO'
la..OOO
4,000
465,000
400,000
263,000
260,000
23,000
322,000
2,000
2,000
553.009.
2,090,000
Z,090,000 sheets at $42.50'per K ..•••• f86,625.00
The charges against the several Federal Reserve Bazlks are as fOllows,1'otal
Boston ••••••
New York ••••
Philadel~a.
Cleveland...
llichmond • • ...
Chicago ·•••••
Minneapolis.·.
.465,000 $6,277.50 $6,593.75
400,000 · 5,400,00 s;soo.oo
263,000 5.550.50 ~,616.25
260,000 ~,510.00 5,575.00
23,000
310.50
316.25
322,000 4,547.00 4,427.60
2,000
27.00
2'1.50
~5.~65.75 ~1,627.50
#19,762~50
4,7oo.oo l,40o.oo
3,090.25
920.50
1'7,000.00
11,177.50
ll ,050.0<.)
977.50
. 13,685.00
85.00
95.00
5,055.00
270.25
3,783.50
25~50
910.00
60.50
1,127.00
7.00
Kansas City~.
2,000
27.00
27.50
23.50
7.00
san·.FJ'auoisco . 355,000 4,765.50 4,853,75 4.2147.75 1,235.50
2.090,000 28,215 ..00 28,737."60 24.557.-50 7.515.00
15,002.50
88,625.00
..
!be Bureau appropriations will be reimbursed ln the above amotmt f':rom the
indetinite appropriation "Preparatio~ and Issue ot Federal Iiese:rve Notes, Reimbursable", and it is requested that your board cause such indefinite appropriatien to be reimbul•sed in like amount.
Bespect:t'Ully,
( siped) S. R. Jaeobs,
.Deputy Commissioner.
-·· ...
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OP'P'ICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
X-·3337
Septembe~
SUBJECT:
EXPENSE MAIN LINE, LEASED WIRE
SYST~~.
15, 1923.
AUGUST, 1923.
Dea.:r Si:r:
Enclosed _herewith you wUl f~nd t~ mimeog:ra.ph
§ta':tements 1 X-3S37a. a.nd-X-~Jg}7b, c~~n·ing
de1Ja.il ope:ra.tions of the ma.in line, L~a.seg Wtl"e 5)'$-tem, dur"ing the
'in
1n0n\h tllf August , 192}.
·
·
'
·
'Plea.se c:re.dit the amount PB·Ya.'t\e by ;y'o\ii' ba.nk
in the ~ene:ra1 a.CC¢Unt, T:>:>easu'te~ 1 U. fh 1 t11'1 yout books, and
issu\l C/D Form l~ N-:Jtiona.l Bkmks- fo\" . .1.cdou.nt. of 11 Sa1a..ries
abd Expense$ 1 F~dehl Rese:rV'e !lbe\'d) ~pecinl Fundi!, Leased
Wi:re System 1 sending duplica.te) 0/D bi Fedet·aJ. Reserve Boa.:rd.
Very truly yours,
Fisca.l Agent •
{Enclosure)
TO GOVERNORS 0F ALL BANKS EXCEPT CHICAGO.
• •
..
'··'
'
,
'
X-3837a.
REPO:HT SHOWING CLASSIFICATION AND NUL::B-8:2. OF WOBDS
TR4NSMI TTED OVER !!JAIN LINE OF THE F"iDE::lAL RESERVE
LEASED WIRE SYSTEM FOB THE MONTH OF .PDGUST, 1923 •
F:rom
Ba.nk Business
Pe:rcent of
Total :!la.nl::
?us :.ness ( *}
Trea.sury
1ept.
Business
Wa.r
Finance Corp.
llusinass
Tota.l
---------------------------------------------~--------------------------------------
Boston
34,053
223,954
5'3' 504
89,4')4
70,303
6),561
14:),046
New York
Philadelphia.
Cleveland
Richmond
Atlanta.
Chica.go
St. Louis
Iv!innaa.po1is
Kansa.s City
I:a.l1a.s
Sa.n F:ra.ncisco
Tota.l
F. E.. Tianks
5·32
s.oo
6.23
;.so
12. :;17
90,821
4b,489
8.12
88,452
1·91
6.21
12.11
69,507
135,482
4.16
1,118,666
Wa.shington
306,630
Grand To ta.l
1,425,296
lOO.OO';y
4,144
15,452
5.359
5,415
4,740
4,S,;02
6,':)76
61 ::>'J'j
3,':;)03
5,05j
4,100
38,l'J7
2}),406
30
27
50, 3'J2
6o
11 ,0~1
93,537
73,667
l4b 573
t
77 '766
117
6],!+72
-
145,241
64,893
9'+,936
75,043
70,463
152,022
97,420
402
1,196,549
374,507
90. 72/o
Percent of Tota.l
Bank Business
Trea.su:ry
TOTAL
3·04
20.02
1,425,296 words or 90·75~
145,241
rt
II
9•25/0
1,570,537
1oo.oo~;,
(*} These percenta.ges used in calculating the
pro ra.ta. sha:re of lea.sed wire expenses a.s
shown on the accompanying sta.tement (X-3337b)
FEDERAL RESERVE :BOARD I
Wa.shington, D. C.
September 1?, 1923.
•'
ru~OhT
X-3837b
OF EXPENSE
MAIN LI11E
FSDEF...:\L I"!ESEEYE LE.ASED WIEE SYSTEM .AUGUST, 1923.
-----------------------------------------------------------------------------------------------------------------------Pa.ya.ble to
Pro ra.ta
Opera.tors i
SsJ.a.~ies
Nama of :Ba:olz
Opara.tors'
Overtime
Wire
Renta.l
Tota.l
Expense
Sha.re of
TotaJ.
Expense
Federa.1
Reserva
C:r.adits
Boa.t'd
------------------------------------------------------------------------------------------------------·-----------------$ 250.00
1,473-64
lSJ0.33
3oston
Hew iork
Ph:Ua.delphia.
Claval and
Richmond
1\tlanta.
Cidca.go
$
$
5·00
3.33 ¢C·:.J
31J.Ov
240.00
(#)5,CCO.,Cl
200.00
303·3 7
St" L01.1is
ML::L:.;azpvl~.s
Kan.sa.s CHy
2:.00
}-JO.C;4
Da..l.las
S3n F:t'a-l::..cisco
Fa d •
$
2~1
.()()
395- 'JC
Rs s , :Sc e:>:'d
---------------
16,831.43
... ·----------····-·~--
$9,402 .. '75
TOTl'..L
")
( 'ff.
(&)
( *)
(a.)
$
6)6.00
4,320.13
1,148.01
1,726·33
1,355·17
1,264.53
2,798·31
1,752-22
897.69
1,70b.SJO
1,340.06
2, 613.22
200.00
303·33
39o .s-~
251-00
395·00
4o6.oo
2 ,33S.4q,
957 .1s
1,338·33
1,040.17
1,024.53
(*)2,203.20
1 ,):-_,2.22
594.36
1,315-96
1,039.06
2,213.22
$
16,881.43
$
7-00
$16,831.4}
~26,291-13
~14,372~52
(a.)4,712.ll
$21 ,579·07
(&)2,20}.20
$12,169-32
C:redi t.
Received $J.2.ll from Wa.r Fina.nce Corpora.tion a.nd $4,700 .. 00
from Tree.su:ry Dept. covering business for month of August, 1923.
11£DER.AL RESERVE .BO.ABD
$ 250.00
1,433.64
190-63
388 .oo
31).00
240.00
5,002.01
------------------------------------------------- ·- -- ---------------·----------- --------------
Includes sa.lariss of Wasr~ii:gton o:psra tors.
Amount :s..·eimbursable to CD.ica.go.
WASEirGTON, D. C.
S,:;FT-::::'-8ER 15, 1923 •
250.00
1,48}.64
190.83
335-00
31).00
240.0C
5,002.01
200.00
303·33
390.04
2?1-00
39::>-00
X-3S39
FEDErAL RESERVE r.OAHD
September
STATEMENT FOil THE PTcESS.
For Immediate Relea.se •
The Federal Advisory Council toda.y concluded its
third sta.tutory meeting for the year 1923 and repo.rted
upon the Cla.iborne-Adams Check Collection Plan, as
follows:
"The Federal Advisory Council ha.ving heard
Messrs. Cla.iborne and Adams in support of the socalled Cla.illorne-Adams check collecl;ion plan and
the recent amendments thereto, is of the opinion
tha.t the plan is unsound and, ther21fo:re, 'I.'IJ.Jcmimously
recormmnds its rejection by the Federal Rese:rve
Board. The Council con.::ut"s in the essential objections to the pJ.an as set forth in the :report of
the .Advisory Com:ni ttee of GoYel'no:rs of the Federal
Reserve :Oanks to the Federal Re ;;;erve Boa.rd da.ted
August l, 1923· 11
The Council recommended sor.::le changes in Hegulat ion J,
which is not yet in effect, the chief of Vlhich was that
Federa.l Reserve Banks shall not receive on deposit checks
on any nonmember bank which a.re. not collect:i.ble a.t pa.:r.
The Council also opposed any cha:rge by Fede:ra.l :Reserve
Il.a.nks for collecting checks d:raV'm on membe.t' banks even
if endorsed by nonmember banks vvhich refuse to :remit a.t pa.r.
lS, 1923
FEDERAL RESERVE BOARD
WASHINGTON
X-3841
September 20, 1923·
Notice of Wi thd:rawa.l of membarship.
SU::3JECT:
Dea.;r Sir:
For your info:rma.tion, there is enclosed herawith copy of a. letter :recently a.ddressed to the Governor
of one of the Federa.l .reserve ba.nk.s, conta.ining a ruling
by the Boa..rd on the e;_uestion of V'.hether the notice of
wi thdra.wa.l given by a. sta.te membe:r bank may remain effective for
a.
month or two a.fter the expiration of the re-
quired six months' period, in o:rde:r tha.t the state bank
member ma.y have an opportunity of pa.ying off its obliga.tions to the Federa.l reserve ba.nk before wi thdrawiL··e!.
from the System.
Very truly yours,
(Enclosure)
· Walter L. Eddy
Executive Secretary.
TO ALL FEDERAL Ii.ESEHVE AGENTS.
••
X-3541-a.
September 19, 1923,
CI)PY
Dear Sir:Receipt is Gl.clmo•.;vl3dged of your letter of September 11 in which you request a. .ruling by the Federa.l Rese-rve :Soard on th0 question whether the notice of Ni thdrawa.l
given by a State member bank rr.ay remain effective for a.
month or two after the expiration of tho six: months' pe:riod
in order tnat the bank may pay off certain obligations to
the Federal Reserve =·ank befo.re ·.vi thd:rawing from the System.
The Iloard is of the opinion tha.t the notice required by Section 9 of the Fede.ral Reserve .Act to be given
by a. Sta.te member ba.nk before withdrawing from the Federal
Reserve System, would ~enxlin in effect for a reasonabl:;; time
a.fter the expira.tion of the six months' period.
The Federal.
Re se:rve ~ank has the :right to ElS.:>un:e tha.t the 11\'i thdrawa1
will be effected at the expi:ra.tion of the six rr.onths 1 period
or within a. reason8ble time the.re:.:;fter.
The question whot
is a :reasonable time is not susceptible of any dafini te answer; this must depend upon the circumstances of each pa.rticular ca.se,
Tb.a notice of wi thd::-awa.l, hovwver, could not
lega.lly remain affective indefj ni tely, as such an indefinite
extension of the force of the notice would se.rve to nullify
the rec:uirements of tr~e statute.
A State bank may, therefore, if it so desires, remain a. member of the Federal Reserve System for a. month or
two after the expira.tion of the six months' period 1 for the
purpose of payin6 off its obligations to the Federal Reserve
Ba.nk, without prejudicing its right to surrender it3 F2de-al
reserve bank stock under the notice theretofore given,
The
a.ctual withdravva.l, hoW9ver, cannot be delayed indefir•ite ly
but must take place, if at all, 'Nithin a reasona.ble time afte :r the expira.tion of the six months 1 period.
Vary truly yours,
(Signed) D. R. Crissingor,
Governor.
G V:B
X-3843
SECTION III.
CHECKS RECEIVED FOR COLLECTION·
(a.) Each Federal Reserve :Ba.nk will .:receive a.t pa..:r from its
membe:r. ba:nks and from nonmember clea.ring banks in its district,
checks drawn on all member and nonmember cleaTing bonks, and checks
d:ravvn on all othe:r nonmember banks which a.re collectable a.:r pa.r
in funds a.ccepta.ble to the Federal Reserve :Ba.nk of the d ist:rict
in which such nonmember banks are loca.ted.
(b) Each Federal Reserve :Sa.nk will receive a.t pa.r from other
Federal Reserve :Banks, and from all member and nonmember clea.ring
banks in other Federal Reserve districts authorized to route direct
for the credit of their a.ccounts with their respective Federal Rese.'t've :Banks, checks drawn on a.ll member and nonmember cle~:u:·ing
ba.nks of its dist.'t'ict, and checks d.:rawn on all other nonmember
banks of its district which a..:re collecta.ble a.t par in funds a.cceptabla
it.
(c) No Feder.3l Reserve :Bank shall receive on deposit -o.:r fo.:r
collection any check d.:ra.wn on any nonmember bank which cannot be
collected a.t par in funds a.ccepta.ble to the Federal Reserve Ba.nk
or which can be collected at pa.r in such funds only through an
agent other than a. ba.nk.
to
746
FEDERAL RESERVE BOARD
WASHINGTON
September 22, 1923.
SUBJECT:
Corrections in Inter-District Time Schedule.
Dear Sir:
By a.greement betwaen the Federal Beserve :Banks of St .. Louis
and Dalla.s and the Fed8x-a1 :Rese:rve B'mk of Son F~~ncis~o, the
follOwing chg.nges shr.1.::.ld be ma.de in the inter-district time
schedule:
3 da.ys
4 days
3 days
Loui sv ill e t.a SaJ. t I.ake City
Louisvi lJ.e h) Gp~)}:a.ne
Houston to Los A;:-,;jf;les
No changes wHl be made in the schedules from Salt Lake City
to Loui.;:;viJ,.le 1 from flp,Jkane to Louisville a.nd from Los .Angeles to
Houston, the time between these points rema.ining three, four 1 and
foul' days, respectively.
Very truly yours,
Walter L~ Eddy,
Executive Secreta.ry.
T0 llE SENT TO G()VERNORS 0F .ALL
FEDERAL RESERVE .:JANKS
Washington, Septer.ibe:r
Under date cf
Ju~y
1923.
1.0, 1923, L:he Feder a.!. Reserve Boa.t'd
issued a. new er.li tion of G.ll of
banks.
,
j
ts "t"egula tions appl:J..r·a.bJ e to meml)er
Those :reguJ.a.t:icns ·NRre entitled
Se~des
of
published both :'.n pamphlet form and in the August,
the Federal Reserve B.;aTd "Bulletin.
1923, a.nd were
1923. number of
They were all made effectiVA
a.t once with the except inn of Regula.tion J concerning Check C:J.ea.:ring
and Collection.
15, 1923,
Tha.t regulatirm wa.s to have become effective .August
but was later suspended lndefini t8ly by a.ction of the Boa:rd ..
The Board tra.nsmits herewith a. revised edition o: its
regu.la.tions, Series of
form
1923, all of which a:re in p:recisely the same
a.s printed in the July issue except Regula.tion J.
Regula.tion J ha.s been redrafted tut conta.ins no substantial
changes in the practices of the Federal Reserve Banks as defined in
Regulation J, Se:t'ies of
1920, except that a. provision is included
which reiterates the recent instructions of the Board to a.ll Federal
Reserve Banks not to handle checks drawn on nonmember ronks which cannot be collected a.t par in funds a.cceptable to the Fedet'al Rese:r.ve Bank,
or Vlhich can be collected at pa.r in such funds only through an a.gent
other than a. bank.
By order of the Federal Rese:rve Board.
Wal tel' L. Eddy,
Executive Secreta.:ry.
'
FEDE!IFAL
RES:SRVE
~49
:SOARD
STATEMENT FOR THE PP.ESS
X-3846
For Rele3se in Morning Pspers
Friday, September 28, 1923·
1
The following is 3 summa.ry of general business
and finan0bl conditions throughout the several
Feder91 Reserve Districts, based upon statistics
for the months of August 0nd September, as contD.ined in the forthcoming issuo or' t!1e Fede:rol
Reserve Bulletin.
The volume of me:rch8ndise distributed during August, as indicated
by railw:Jy tra.f.fic and wholesale and retail trade, was large.
Production of
certain basic comn:odi ties and industrial err.ployment showed fut'ther slight
decreases.
PRODUCTION:
The Feder3l Reservs Boax-d's index of p:rod-cction in basic industries
declined 2 pex- cent dut'ing AU 0'Ust, and was at the lowest point fox- this ye.:Jr.
The August output 1 however, wos 27 per cent larger th-3-n a. yee.r: ago and production in every month this yegr has ber:;;n at a higher level than in any
month of the previous five yea.rs.
The lowe:r. .t-:r.oduction index in August
:reflected ,..educed output, after a cot-rection for the usual saasona.l trend,
of pig it'On, woolen goods, flout', 3nd cement.
Cotton consumption, sug:;,.r
maltings, lumber cut, and bituminous coal p:r.oduction incre3sad.
The
number and value of new building projects, a.s rr,e,9sur-eJ by pe:rmi ts granted
in 168 laading cities, inc:r.eased du-ring August, but e.ctual cont:r.act aws:r.ds
were smaller than in July.
Employrr.ant a.t industrial .:::stablishmants throughout the United
States was slightly smalla,.. in August, while ava:raga we0kly aa:rnings
.
.
-2advanced a.bout l per cent.
Inc:rea.ses in wages amounting to 10 per cent
were granted to anthracite coal miners, and :readjustment of wa.ges and
hours in the steel industry continued, but wa.ge a.dvances du.ring August
were fewer than in any month since last winter.
The pX'incipal changes in c:rop estima.tes shown by the September
l forecast of the Depa.rtment of Agriculture wer.; a large reduction in
the expected cotton crop, slight decr~a.ses in the. proba.ble yield of
Whea.t, ba.rley, and oa.ts, and increases of yields of corn, tobacco and
pota.toes.
TRADE:·
Ra.ilroad freight shipments were iarger in August than in any
previous month on record.
'l"'h.is wa.s due to a. sea.sonal increa.se in ship-
ments of coal, miscellaneous merchandise,.and a.gricultural products.
Wholesale trade, according to the index of the Federal Reserve Board,
increa.sed 12 pe:t- cent in August, which is more than usual. a.t this
sea.so'n of the year.
I
.I
Sales of clothing, dry goods, and shoes showed
substantial ga.ins a.s compa.red with July andwere laTger than a. yea.t'
a.go · · Reta.il trade also iricrea.sed in August and sales· "in a.ll repol'ting
lines were lal'ger than in August, 1922•
Department store sales in all
sections of the cou:nt:ry a.vera.ged 12 per cent above la.st yeal''s level.
PRICES:
'lhe general laval of wholesale prices, a.cco:r.'ding to 'the index
of the Bureau of Labor St9.tistics, rema.ined l'ela.tively constant in
.
.
August, the change fol' the month being a. reduction of less than one-
•
fifth of one pel' cent,. compa:red with declines of about 2 pel' cent in
··~ ...
.
.
-3e3C}J. of the thre.a preceding months.
furnishings, and fuel ·Nera rroterially
and foods inc:r:;ased •
Priess of building mcteri"J1s, house
'I:'
educed, while prices of faxm products
Priess of c2rtain :r3w materials, pBrticubrly cot ton
3nd silk, :;.dv:mc:;d subst~ntially during September, while pTices of ret:roleum
and copper d eclinc:d .
BAFK CREDIT:
After a d eclinc: during July Jnd the first part of August the volume
of bank credit in use show.:)d ;; se~son::Jl inct'2:;se durint,; the l::1st wec;k of
Aut,rust and tha first two ·,ve3ks of September.
TotJl lo::ms snd d2n:8nd deposits
of rn2rr.ber banks in principc'll citias incre.::JSed during recsnt ,·;e-:::ks, rdve:rsing
ths t~end of th;:; preceding two months.
Leans chiefly for COI!rr.erci.?l ana
sg.ricultu:r&1 purposes incrsJsed by $122,000,000 and :re'chcd z, high point fo-r
the ye,Jr~
Investr:,;:;;;nt holdings of these bJn1s, on the contr?ry, continued to\
clecline 3nd on SeptciT:bar 12 '.Vere lo\rve:r than at any time since the miocilc: of
October of last
ye~r.
Between August 22 ;md SaptembGr 19 the arr,ount of accoiLr:.odat.icn
::xtended to rr;smbet' b-mks by Federal R.ass:rvc kmks in
ino~,strL•l
districts
declin2d, ;vhile in ::Jg:ricultu.r:Jl aist:t"icts th2 seJsOn31 d:?n:.md for c:r::dit
end currancy resulted in"' considerJbla crc·vth of r3S2rvc::
0
w. cr .. :lit in
u.se.
Th~
derr:ma for currency 3rising
Oi..lt
of crop moving onu .f ll tr.de
hcts b"'2n r~fL>ch~d in on incra.?.s2 of ~'32,000,000 in n:oney in circul.-,tion
betwac·n j~Uf:,"USt 1
8nd
S.sptvliO;Jr :.
Of this er:.ount :.;bo-.:ct ~44,ooo,cco rarJresents
sn inCr')oSC: in F2dar3l rase:rve not.:J circuJ -;tion.
I,1oney
:r:;~tes
"?iJr,, firn::;r dur-ir~g tha first t'NO ·:~.:;a}:s of So.:pt :rr.'be:t',
-4-
X-3846
but eased somewhat after the 15th, pa.:rtly because Gove:rnment disbursernents were tempo:ra:rily in excess of tax collections.
The T.r~c;su:t·y issued on Septer.:,bc;:r 15th $200,000,000 of sixmonths certificates bea:ring 4 1/4 p0:r cent inte:rcst, comp<Jr.;;ld with
4 pe:r cent borne
http://fraser.stlouisfed.org/
''
Federal
Reserve Bank of St. Louis
by six-rwnths certificates issued in June.
753
FEDERAL RESERVE BOARD
WASHINGTON
X-3847
September 277
SUBJECT-:
1923.
Purchase of Debentures of Federal Intermediate
Credit Banks •
Dear Sir:
There is quoted below, for your information and guidance, a resolution adopted by the Federal Reserve Board at its
meeting today:
mwHEREAS, The Federal Reserve Board has been requested
to express an opinion on the question of whether or not
Federal Reserve Banks may purchas.e the debentures of Federal
Intermediate Credit Banks issued under the terms of the
Agricultural Credits Act of March 4, 1923;
lfJ3E IT RESOLVED, therefore, That the Federal Reserve
Banks are authorized in their discretion to purchase the
debentures of Federal Intermediate Credit Banks issued in
accordance with the terms of the Agricultural Credits Act
of 1923, provided such debentures have a maturity at the
time of purchase not in excess of six months. 11
While the power to purchase the debentures of Federal
Intermediate Credit Banks is subject to such rules and regulations
as the Federal Reserve Board may prescribe, the issuance of rules
and regulations is not a condition precedent to the right of Federal
Reserve Banks to purchase such debentures, and the Board sees no
necessity of issuing any rules and regulations at this time restricting their purchase.
By direction of the Board.
Very truly yours,
Walter L~ Eddy,
Executive Secretary.
TO GOVERNORS OF FEDERAL RESERVE BANKS
X-3849
AVERAGE .AMJUNT OF FEDERAL BESERVE NOTES OUTSTANDING IN EXCESS
OF GOLD PLEDGED WITH FEDERAL BESERVE AGENT AS COLLATERAL
(ON BASIS OF WEEKLY STATEMENT FIGURES) ALSO AIDUNT OF INTEREST
'!HEREON AT 2 PER CENT PER ANNUM
Excess of F. R. notes outstanding over gold pledged with a.gent
1918
1919
1920
1922
1921
Boston
$ 67 .o42,000 $ 133,193,000 ,, 173.396,000 $ 91,587,000 $ 41 ,058 ,000
New York
382 '770 ,000
542 ,ll5 ,000
426,702,000
682,738,000
70,257.000
Philadelphia 77,478,000
149,435,000
110,685,000
55,874,000
16g,216,ooo
C1evel8lld
73,857,000
118,218,000
46,1~,000
18 ,817,000
99,294,000
·Richmond
53.374,000
90,288,000
46,950,000
92,931,000
97,533,000
At1snta.
39.317,000
80,862,000
"100 ,66o ,000
96,604,000
32.745,000
Chica.go
. 129,258,000
56,208,000
402,310,000
21.&6 ,200,000
193, ~10 ,000
St. LOuis
41,493,000
28,421,000
71, 45,000
70,026,000
102,770,000
Minneapolis 27,789,000
46,717,000
23,283,000
51,187,000
43;8)6,000
Xansa.s City 40·, 785,000
66,881,000
25,308,000
71,189,000
56.548,000
·Dallas
25,801 ,000
36t373,000 .
16 t 7l!4 ,000
56,711,000
39.784,000
San Francisco~ ,579,000
121,906,000 .
6o,417,000
1 4,8 ,000
180,9 9,000
TOTAL 1,02 , 3.000 1, 50.9 3,000 2,271,
,000
1,509,0 ,000 503, JO,OOO
'i~
Interes"t a.t 2
1918
Boston
$ 1 '34o ,8l.K>
7 ,655.l.K>o
Philadelphia. 1,549.56o
Clevelsnd
1,477,1l.&o
Richnxmd ·
1,067,480
Atlanta
786,340
Chica.go
2,585,16o
St. Louis
829,86o
Minneapolis
555.780
Xansa.s City
815,700
Dalla.s
516,020
San Francisco 1 ~all .~80
TOl'AL
20, 90,860
New York
ill2
$ 2,66),8'60
10,842,300
2,988,700
2,364,360
1,805,760
1,6l7,24o .
3,866,200
1,432,900
934.3lro
1,337,620
727,46o
2 2 4~8!120
33,018,860
.Amount
1919
$2,703,894
~r
cent.J2er annum
'
1920 .
$ 3,467,920
$ 1,831,740
$ 821,16o
13,654,790
3,Jo4,320
.3. 736,34o
1.• 950,660
2,013,200
8,046,200
2,055,4oo
1,023,740
1,423,780
1.,134,220
8,534,040
2,213.700
1,985,880
1,858,620
1,932,080
4,924,000
1,400,520
876,720
l,l30,96o
795,680
2 2697 2140
30,181,080
10,068,-00
~ 2 618 2 780
li5,li29,320
1 ,405,ll.&o
1,117,480
923,300
939,000
654,900
1,124,160
568,420
465,66o
506,160
334,880
1!208,~40
of Franchise Ta.x Pa.id
1221
1920
$6o, 724,742
*Of this amount, $3,400,o61 wa.s on account
taxes pa.id for previous years •
1922
1921
1922
$59,974,466 •$10,850,6o4
of
a.djustn:ents in
755
FEDERAL
RESERVE
BOARD
For Release in Morning Papers,
Tuesday, October 2, 1923.
CONDITION OF
AUGUST
ACC~~T.ANCE
MARtCGT
15 TO SEPTEMBER 1::>, 1923 •
During the 30-da.y period ending September 15 the a.cceptance
ma:rket continued q,J.iet
'~<Hh
few oevelopments.
The supply of bills
wa.s generally moder::3.te t;,'l:r.ooughout the period, aJ. though duri:::1g the
second week of September sea.sonal evidences of dra.wings a.ga.inst gra.in
and cotton were noted and the volume of bills slightly increa.sed.
De-
mand for bills wa.s ve:r:y ir:regt;.la.r ea.rly in the period but it improved
somewha.t in Sept.3mbe:r:.
the best demand.
Bills with less than 90-da.y ma.tU;rities we:re in
Purchases fo:t' foreign a.ccount continued in good
volume but both foreign and domestic demand we.re not sufficient to
a.bsorb Offerings and dea.lers portfolios showed a. mode.ra.te increa.se.
Ra.tes were generally firm throughout the period a.t l.j. l/3 to l;. 1/4 bid
and 4 to 4 l/3 offered.
'lile princi._:;a.l comiT.odities a.ga.in.st .vl.ich bills
were drawn were gra.in, cotton, silk, suga:r, hides and J.ea.ther, wool,
provisions, and a.gricultural im,plements.
.
FEDERAL RESERVE BOARD
WASHINGTON
X-3851
October 1 , 1923 •
Subject:· Election of Cla.ss "A" and "B" Diractors.
Pea.r Sir:
This is to confirm the Boa.rd 1 s teleg.ram to you
of this da.te, as follows:
"TRANS. 384. Boa.rd has fixed November 16th a.s
date for opening polls election C1a.ss A and B Directors.
No change in gronp c1a.ssific<.Jtions a.s r;:a.de in 1918. See
our lette:r Octoter 3, 1918, X·~l240."
Very truly yours
Walter L. Eddy,
Exacutive Secretary.
TO ALL CHAIRMEN·
~-
756
757
FEDERAL RESERVE BOARD
WASHINGTON
X-3852
October 10, 1923 •,
SUJ3JECT:
EL:p1cymEmt of Specic.l Cou.;.1sel to Represent Fede:r:al
Reserve Bauks beiore Inte:estate C~ImJex-ce Commission.
Dear Sir:
Refen·h"lg '.;o '~he Bo::~rd' s letter of August 16, 1923,
(X-3812), on the subjec·:. ilE.xpress Bo.tes for Transporta.tion of
Money and Securities l:, yc:u are advised tha:t the Fede:ral Reserve
BoaTd on October )rd approved the em:t-lo;,"IDent by the Federal Reserve Bank of NeN Yo:·k of Mr. James W. Carrr.el t a.s special
counsel for the Fede~a-1 Reserve Banks to present to the Interstate Com:rr:erce Cor.:mJission the ma.tter of a. revision of the
present exp.ress ra.tes a.p.tJ1icable to the transpo:rta.tion of money
and securities.
This a.pproval was given with the understanding that
the total expense for lAga.l services in the litiga.tion, which is
to be pro :rated aL:cmg t:1e twelve ]'ederal Rese:rve Ba.nks, shall in
no case exceed $1) 1 000; reGardless of ,vhether the ca.se is
ca.r:ded to the Unit-3d S·~a.tes Supreme Cou.rt, other counsel a.re
enga.g~d , or the :;:-esul t is ant irely fa:vo:ra.ble to the contention
of the Federa.l Reserve Ba.nk:s. l?ayments to Mr. Ca.:rmalt unde:t'
this a.pp:roval will be made by the Federal Reserve Bank of New
York, a.fter submission to the Boa.rd, and you will be advised
promptly of the :p:c·o :t"a.ta. sha.t"e of your bank in a.ll such payments,
in order tha.t you may remit to the New York :Bank.
Very t ruly yours ,
Walte:t' L. Eddy,
Sec re ta.ry,
TO GOVERNORS OF ALL FEDERAL
RESERVE~
EXCEPT NEW YORK
1
758
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
X-3854
Octobe~
. SUBJECT:
EXPENSE MAIN LINE; Lea.sed Wire System,
11, 1923·
Septembe~.
Dear Sir;
Enclosed herewith you will find two mimeograph
statements, X-3854a and X-3S54o, cove:dng in deta.il opera.tions of the main line, Leased Wi~e System, during the
month of September, 1923 ..
Please c~ed it the amount paya.ble by you-r bank in
the general a.ccoun t, Treasu-r-er, U. S. , on you~ books, a.nd
issue c/D Fo:nn 1, Nationa-l Banks, fo~ a.ccount of "Sala~ies
and Expenses, Federal Reserve Boa:rd 1 Special Fund", Lea.sed
Wire System, sending duplica.te C/D to Fede~al Reserve Boa-rd.
Very
t~uly you~s,
Fisca..+ Agent.
(Enclosu:re)
TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO
1923•
759
X-3854a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS
TRANSMITTf.D OVER MAil\ LINE OF THE FEDEl\AL RESERVE
LEASED WIRE SYSTEM FUR THE MONTH OF SEPTEMBER, 1923 ·
Bank Business
Pe:rcent of
Tote.l Ba.nk
Business (•).
Tx-easu.:ry
Dept.
Business
WaxFinance Co:rp·.
Business
Total
~----------------------------------------------------------------~-----------------
:Boston
33,526
219,686
61,672
g6,720
64 ,37o
76 ,3t:.9
142,555
90.939
52,055
New Yot'k
Phila.d elphia.
Cleveland
Richrr.ond
.Atlanta.
Chicago
St. Louis
Minneapolis
Kansa.s City
Da.Ha.s
San Francisco
Tota.l
F4 R. :Banks
Trea.sury
T.OTAL
16
5,408
39,621
238,576
69,041
95tOl4
70,431
83,658
153.342
98.935
57,463
91,915
82,90.1
147,805
4S
104,459
64
1,228 t 758
272,37~
106.?1~
:iiQ.
37~?.926
1,396,613
210,677
394
1,607,684
78,090
132)901
l-,124,235
1Q0.007v
13.10%
s6.87%.
Percent of Total
Bank Builiness
6~79
12.6g
g.Q9
4.63
7·59
6·95
11.82
6,095
18,890
7,369
8,278
6.111
7,309
10.787
7.996
6,543
4,769
14,904
85,372
Wa.ehington
Grand To tal
. 2·98
:l9.54
5·49
7. 7l
5·73
1,396.613 woX'ds or 8t·B9%
210,677 " ft ~%
1,6o7,290
loo.oo%
(•) These peroent~ges used in caloulB.ti.."lg the
:p,.o rata. share of 1ea.sed wire expenaes as
shown on the a.cc:ompanying sta.tement (X-3354-o)
FED~
RESERVE BOARD,
D. c.
October ll, 1923·
W~hington,
.
REPORT OF EXPENSE
MAIN LINE
FE::)Eili.L EI:SETIVE LEASED WIRE SYSTEI.1 SEPTEMBETI, 1923 •
---~·-------------------------------------------------------------------------------------------------------------·----
Operators 1
Sala:des
N::me IJf Bank
Ope:rators'
Overtime
Wire
Rent31
Tota.l
Expense
Pro Rata.
Share of
Total
Expense
Ct'edi ts
Payable to
Federal
Rese l"'Ve
Board
-~--------------------------------------------------------------------------------------------------------------------·
tr 250.00
1,3BL14
$
1.00
$
~\i"-}
:r\ .... a.
\_.;c.) (" o.gJ
s i;.
64?.63
4,233·79
$ 251-00
l
,381.14
190·83
1,1B9--53
338·00
1,570·55
190·83
338.00
315-00
240,00
(-#)5,1<;;4.03
315.00
240.00
:),l92·C3
1,241·:54
1,471.21
315.00
240.00
~'~":':P0Bp:;1
200.00
275·00
K:m:c;as
347 ·35
I-OlJJS
}.',11~
$
33iS.OO
190-83
l~ i c:;-.~.x):nd
251.00
1,381«14
is
City
as
251.00
s.oo
1, 7?2·138
275·00
1,003.19
1,644.55
251.00
360.00
36o.oo
Scm F.::-ancisco
200.00
347·35
...
2,747.41
1,505·88
2,561.07
$
394.68
2,852-65
998· 70
1.232.55
926.;4
1,231.21
5,192.03
200.00
(*) 2,444.62
275·00
728 ·19
1,297·20
1,254·88
2,201.07
347 ·35
251·00
360.00
1,5j2.88
"'ed. Res. Boa:::-d
-~--------------------------------------------------------------------------------·-----------------------------~-------
4~6.93?·16
TOT.l.L
(#)
t~~
(a.)
$21,667.28
(a)l~.709-23
~21,667 .. 28
Includes sala.:t'ies of Washir.gtoll o~era.tors.
Amount ~eimbu-rsabla to Chica.go
Credit 1
Received $9.23 from Wa:r Finance- Corpora.tion and $4.700.00
fl'om Trea.'lury Dept. covering bu.siness for month of peptember, 1923-
FEDERA.I, RESERVE BOARD
WASHINGTON, D. C.
October ll, 1923·
$26,376·51
$14,720-55
{&)2,444.62
$12,275·93
t 761
FEDERAL RESERVE BOARD
WASHINGTON
X-3S55
Octobe~
SUBJECT:
11, 192}·
Re-put"cha.se by Federal Res~rve l3anks of Secul'ities
and Bar>.ke:rs' Acceptances und e~ so-called ~e-pu:rchase
a.g~eemen t
.,
Dea.~ Si~:
Ce~ta.in
questions
h~,ve
a.l"isen a.s to the
p~opl'iety
and legality of "';he p~a.ctice enga.ged in by the Fede:ral Re-
se:rve Banks in
pu~0:1asing Gove~nme~t
secul'i ties and a.cceptances
f~om membe~ and nonmembe~ banks, and stock, bond and a.cceptance broke~s, unde~ a.g~eements p~oviding tha.t the selle~s of
J:bese secu.Tities OX" a.cceptances will :t'.'e-purcha.se the same f~om
the FedeJOal Resel've Banks within a. specified ;pe:riod of timeIn conside~ing these questions it is veX";y desi~able tha.t the
Bo9.rd have. before it copies of the a.g.reem:mts used by the
Federal Resene Eanks in o:t'.'de~ tha.t it ma.y be p~ope~ly informed
a.s to the details of the transa.ctions. You a.~e ~equested,
therefo~e, to fu"t"ni~h the Boa-X"d with a. fom of any such repuTcha.se a.g:reeme:1t which your bank is now using or which it
may ha:ve used he:•·etofo:.-e ..
Very truly youl' s,
Wa.l tel' L. Eddy,
Secretary#
TO GOVERNORS OF F .R. BANKS
762
FEDERAL RESERVE BOARD
WASHINGTON
X-3856
October 11.
SU:SJECT:
1923.
Payment Federal Inte:rmediate Credit :Bank
Debentures.
Dea.,. Si l":
The Federal Fa.rm Loan :Board desires tha.t the deben,;,.:u"es issued by Federal Intermediate Credit :Banks be ffi3.de
payable at Federal R::>serve Banks and Branches, the mechanics
of hand ling such transactions to be the same as those employed
by the l'eserve banks in paying coupons of Fedel'al Farm Loan
Bonds is sued by Federal Land Banks.
The Boa:rd ha.s given its a.pproval to the proposition
submitted by the Federal Fa.rm Loan Board and you will be advised by the Federal Fa:rm Loan Boa.rd of the details of the ar,..
rangement.
By direction of the Federal Reserve Board.
Very truly yours,
Walter L. Eddy,
Secreta:ry •
TO GOVERNORS OF BANKS
""!63
FEDERAL RESERVE BOARD
WASHINGTON
X-3659
October 12, l9B3·
SUBJECT:
Payment of Gold Coins.
DeaJ• Sir:
The supplerrental instructions with respect to exchanges,
repla.cerrent and :redemption of United States paper currency, issued
by the Secretary of the Treasury, under date of August ll, 1923, to
the Treasurer of the United States and all Federal Reserve Banks,
provide that "whenever gold coin is demanded Federal Reserve Banks
should pay out therefor a.va.ila.ble (but, so fa:r as possible, NOT new) ·
gold coin in the denomina.tion of $20; avoiding the use of gold coin
in the denomina.tions of $2.50, $5, and $10 unless epec:i,.fically demanded. n
In view of the app:·oa.ching holiday demand for gold coin,
pax·ticularly of the $2•50 denomination, the Federal Reserve Board
requested the Trea.sul"y Department to a.dvise it whethex- or not the
Treasury Department would be px-epa.red to furnish the Federal Bese:rve
Banks with amounts of gold coin of the $2.50 denomina.tion should a
demand develop therefor which would exhaust their px-esent stocks of
this denomina.tion.
The Tx-easur.y Depa.rtl'IJB.nt, under date of October lOth, advised the Federal Reserve Board a.s follows!
lrThe total stock of gold coins of the $2.50 denomina.tion
held in the Trea.su:ry offices is a.pp:roximately $800,000 fa.ce amount,
and it is not contemplated to :resume coina.ge of this denomina.tion on
a.ccount. of the :relatively large a.bra.sion loss in circulation and the
fa.ct that the demand therefor is "based on sentiment ratl·.e :r than
utility. The Trea.su:ry) however, is prepared to d ist:~:ibute among the
Federal. Resene Banks and branches upon thei:t' a.pplications, a.t their
own expense and x-isk, an aggrega.te of 250,000 pieces from the holdings
of such coins by the Mint at Philadelphia. and the .Assay Office at New
York, the distiibutions to be ba.sed upon the px-opo:rtion between the
a.ggl"ega.te amount in the applica.tions received and the amount to be
distx-ibuted. If you will ful'nish me with the amount of thes·e coins
desi:l"ed by ea.ch Federal Reserve Ba.nk in accordance with the a.bove
procedure, a-ppropriate instructions will be given to the Trea.surex- of
the United Sta.tes to make the shipments."
•
-2You ere reg_uest~d to advise the Boa:t'd of the amount
of gold coin of this denomination desi~'8d l',Y yonr benk, kee,Ping
in mind the fact that the Trea.su:ry is prepa,red to make d istribution of only 250,000 pieces.
Very truly yours,
Walter L. Eddy,
Secreta:r.y.
TO GOVERNORS OF .ALL FEDERAL RESERVE BANKS
'?65
11
AN OPTIMI STt S BIRDSEYE VIEW OF BUSINESS CONDITIONS
.AIW PROSPECTS. 11
Address by
D. R. Criasinger
GOVERNOR, FEDERAL BES:SRVE BOARD
before the
PENNSYL V.ANI A STATE CHAHBER OF CO!>.llMERCE
H.ARRI SBURG
October 18. 1923.
Fo:r :release in morning papers,
Friday, October 19, 1923.
X-3860
X-386o
AN QPT!MISTtS BIRDSEYE VIEW OF BUSINESS
CONDITIONS AND PBOSPECTS.
Afte:r a.ccepting youl' gene:rous invi ta.tion to deliver some observa.tions on this occasion, 1 twned ove:t" in my mind the possible themes
1 might discuss.
It occu:rred to me tha.t I might ca:use a. sensa.tion by
making a. serious speech on business and affa.ix-s • without including anY
a.llusion to the
11
impending colla.pse of civiliza-tion."
me a.s so novel tha.t I examined it with some ca:r.e.
the experiment of complete unconventionality?
The idea. st:t:<uck
Why shouldn't one t:r.y
Why not cut the bonds of
tra.dition, a.nd indulge the shocking originality of ·dealing merely with
the fa.cts? .;;,_ Wouldn 1 t it be possible to shake off the fears and fancies
tha.t have befogged our l'easoning, to lay the· ghosts and ignore the. supe:t:<•
stitions?
Might not one give a. dea.f ea:r to those spi:rit-l'a.ppings
w~ich
..
have wellnigb. wo:t"n out the long tables in so many directors• rooms?
Suppose--just suppose-- tha.t one should insist on seeing the silver
lining and conju:ring up no vision of the seamy side\
Ima.gine one being
just si~ly sane and cheerful about the business and political prospect!
Consider the possibilities of su:rpx-ising an audience by pointing to
quite ~- few things with pride, and declining to view any at all with
profound alar.ml
It would, of course, be a. da:r-ing thing.
The innova.tor could be
sure of ignominious expUlsion 'fl'om all the l'a:t'el' intellectual a.:reas.
He would ha.ve to count on constant dismissal from those exclusive sets
whe:r.ein the "colla.pse of civiliza.tion" has
friend the
11
.~a.tterly
succeeded Q1lr old
social a.vulsion", a.s the manifest end of the
11
existing order."
He wpuld me:ri t and ga.in the unqualified scol'n o:f' a.ll those· of ea:rnest
thinkers whose p:r.ima.:ry postulate is that "wha.tevel' ·is, is w:rong. 1i
-2The mo:re I thought of it, the mor~ the idea appealed to me·
But
when I looked about me. for some models of l i te.,.a.ry form for mch a.
speech, I found that the:re were none in mode:rn records.
I finally found
myself delving into ancient and dust-covered tomes, printed in
with which we a.:re nowadays a11 too unfamiliar.
a.
language
Nevertheless, I per-
severed, and presently was prowling in the forgotten :records of 1912 and
1914, of 1907, and even into the hoary traditions which have been handed
down from the period 1893-1896~
F:rom these chronicles of the dark ages I gleaned that the :re a.c tua11y
was a time when men wrote and talked about current affairs in such
cheerful,
~ven
hopeful terms that it wa.s frequently possible to get a
hea.:ring without even mentioning that the gold standa:rd had become obsolete, or tha.t universal bankruptcy· was probably inevi ta'ble, o:t that
civiliza.tion was a. failu:re, o:r even tha.t human society was on the point
of dissolution.
I
found authentic instances of men getting their
speeches printed in the newspapers, sometirre s even on the front pages,
even though they omitted to p:redict a new war, or to a.nnounce th9t the
sun wa.s cool:i.ng off, or that the ocean wa.s drying up, o:r. that a new
gla.cial a.ge was looming in sight just around the co:rne:r of tomorrow.
It
was all so curiously interesting that I decided to try the experiment of
making an old -fashioned speech of that type with you gentlemen as the
victims.
Befol:'e committing myself irrevocably to this performance, I deta:rmined to su:rvey some nooks and corners of a.ffair>s, to find out whetre :r
there could be possible justifica.tion for hopefulness a.bout anything in
P·
X-3g6d.
-3human relations.
.At· the beginning, I was reminded of the old theo.ry of
the e.c.onomic causation of all warsj the theory that, fo:r instance, the
war of 1914 x-ea1ly happened because the indust:tia.l and comrr.ercia.l rivalry
of Germany and England made i t necessa.:ry for Ge:rmany to destroy England
if Germany was to go on prospex-ing and expanding, o:r else for England to
destroy Germany if England was to :rerrE.in a. real factor in
world.
tr~
business
It seems neve:r to have occu:r:red to any of the economic caus-
ationists that the wo:rld might be big enougrt· to hold' a. pT'osperous
Germany and a. prosperous England at the same
tim~.
Far less did any of
these suspect that a. prosperous Germany might be yet mo:re f>X'OSpeT'oUS because of the existence of a p:t'osperous England. OT' that a prosperous
England might actually be the ga.iner because of the good fortune of Gennany.
We all :t'emembe:r when this theory of economic causa.tion wa.s. solemnly
and widely a.ccepted ,
The wars of England, and F:t'ance, a :nd Spa.in, and
Holland, of Sweden and Russia.. and Prussia and Poland, over a. ha.lf dozen
centut'ies ~ were analyzed in the light of this theory.
The conclusion
seemed to be tha-t i f by any supreme misfortune two countries should ever
stumble into a
s~a.te
of progress and prosperity a.t the sazre tirr.e, they
would just na.tu.t'a.lly have to ·fight until one or both of them ·,va.s extinguished.
You will all remember how some prota.gonists of ultima.te
d isa.ster projected this theory into the future.
They assu.l"ed us that afte:r
Europe had finished its struggle, the United Sta.tes would presently ha.ve
tl' fight the win!J.ers; and after tha.t, the winner of this la.st qualifying
bout would sooner or late,_. have to fight Japanl
It was a. tho:roughly developed theory, completely satisfactory to those
r.
;'
X-3360
-4whom i t completely satisfied· ..
But on examining i t in the light of events
since 1918, I found some serious blow holes in it.
I observed trot England
and he:r. allies had no sooner d est:royed the military power, the financial
system, the n;.onetary fa.b:ric and the world-flung commerce of Germany, than
England herself began derr.anding the :rehabilita.tion of Germany, in order that
a prosperous Ge:r.many might :resume its contributions to the prosperity of
Englandt
It seemed that England, instead of insuring her ovvn good fortune
by destroying that of Germany, was actua.lly suffering only le:Ds than Germany herself.
Instead of rejoicing because German competition had been
eliminated 1 our English friends began to discover that in destroying Gerrran
competition they had also destroyed the German market for their wares,
and that this German ma.rket had been doing them vastly rr.ore good than Gerw.an
competition had done ha:r.m.
From Manchester to Glasgow, from Nottingham
to Coventry, from the Mercey to the Clyde, from John 0 1 Groat•s to Land's
End, went up the demand that Germany be put back on its feet as soon as
possible, for the benefit of English trade, English industry 1 English finance,
English prosperity and pea.ce of mind t
We bad ceased to hear how the Germsns
we:re capturing British rna.rkets everywhere.
But we did hea:r, in terms of
ever-increasing earnestness, the story of how gr.eatly British industries
had been dependent on the German ma.rke t; of how Germ.any had been Bn ta.in t s
greatest customer in the enti:re continent of EuT"ope; of bow impossible i t
was, in short, for Britain to get on unless Ge.rrr.any was permitted to get
on also.
This discovery tha.t your prosperous neighbors are n;.ore useful as
customers than they are ha:r.mful as competitors, has been bol"ne in on all
of us in the last five years.
In 1914, Russia was the greatest whea.t
-5exporting nation in the world..
Any economist of the 1914 variety would
have told you that i f the vmeat exports of R..1ss ia should ce3se, then the
whea.t growers of Cana.da and the United States would be certa.in to enjoy
unprecedented prosperity.
But how ha.s the theory worked out?
A group
of gentlerren f.-rom Minnesota., Kansas and neighboring areas were telling me
the other day how it !:ad been wo:r.king.
While the proprieties of genteel
conversation forbid a. literal :repetition of wha.t they said a.bout it, I am
a.t liberty to tell you tha.t they seemed convinced tha tl there was a screw
loose somewhere in the theory of getting rich off your neighbors t misfortunes.
they
m~ght
T"ney wanted trade with the outside wo:r.ld reesta.blished, so that
sell their foodstuffs to it.
They we:r.e viewing their problem
in the light of realiza.tion that t:ra.de and commerce must be reciprocal.
They a.ppreciated the big fact tha.t in most deals, both sides profit.
They
saw that mutually advantageous exchanges aJ•e necessa.ry to prosperity and
the a.cquis it ion of wealth.
Let me add that when you have got that fund a-
mental esta.blished in the minds of men, you have ga.i:ned much on the wa.y
to sound economic thought and procedure.
Take the merchant ma.rine situation of the world as another illust:ra.tion.
Millions upon millions of tons of shipping had -bsen destroyed
during the wa:f'.
Shelves and wa1"ehouses the world over were empty.
In-
dustrial plants and public wcrks we:re universally in a sta.te of dis"t'epai1".
Manifestly, such ships as were left on the sea.s would now be assu..,.ed more
ca.rgoes than they could possibly handle.
Shipping, everybody a.greed, was
going to be one of the real after-the-wa.:r bonanzas.
But again, something Vlrent W':t'ong with the theory of getting rich by
profiteering off your impoverished neighbor.
It developed tba.t an im-
-6pove:t"ished neighbo:t" is a. poor- cus torr;e:r.
Even under the pleasant system
of lending him the money with which to pay for your goods, he cannot be
confidently :relied on to stay in the market; and anyhow, there a.T'e increasing misgivings a.s to the ul tirnate profits of this sort of trad l.ng.
Illustra.tions might be mu.l tiplied indefinitely, to show that p:rospe:rity is a. conta.gious and self-p:ropagating affai:r; tr.a.t dep:ression is the
same; and tha.t competition among communi ties that are all p:rosperous, is
t:ruly, in a sense tha.t too few of us have quita rea.lized, the life of trade.
Now let us conside:t- fo:r a. moment what progress has been made since
the a.:rmistice, and \"llha.t justifica.tion we can find for an a.ttj tude of hopefulness.
For a. long time aftet' the end of the war, the wo:rld wa.s almost
a.s much absorbed in the struggle to esta.blish peaca a.s it had been in the
business of fighting.
In fact, the struggle at Versailles was so long a.nd
difficult tha.t I think it sornewha.t obscut'ed ou:r :realiza.tion of the ca.ta.clysmic cha:ra.cte:r. of the WiJ.t', and of the enol·mous econorni.c losses it had
necessi ta.ted ~
So long as fighting wa.s in p-rogress and the wo.rld r.erved to
every effo:rt at de st:ruction, pr-epa:red fo:r eve:ry sa.cr ifi ce, thB wheels
went on turning; but When the supreme and instant need of effort a.nd sacrifice seerred to be :removed, the:re wa.s a. certa.in incapa.ci ty to :realize how
fea.:rful ha.d been the wa.ste, and how long and pa.inful must be the p.t"ocess
of rehabili ta.tion.
I do not mean tha.t anybody
expect~d
magically restored with the :resumption of pea.ce.
normalcy to be
I lmow that many people
even :realized tha.t the problems of peace would be welln.igh a.s difficult a.s
those of wa.t'.
people.
But this :rea.lization :reacht:d only a. ve:ry sma.ll minority of
Consequently the:re wa.s irr.pa.tience when it began to be apprecia.ted
-7that the e:ra. of :reconstruction must cover manyy:years, and that the:re
nust be the same willingness to economize and sacl"ifice tha.t there had
been during the wa:r, but without the same
incentive~
There must be the
same willingness. to forego ext:t's.vagances, the same consecration to thrift,
tha.t. a.ll had. so pa.triotica.lly urged du.:ring the wa.r.
Students of history knew that othe:r gl'ea.t and p:rotra.cted struggles,
pa.:rticula:r.ly the Na.poleonic
wa.~,
had been followed by long periods of in-
dustrial dep;ression and social disorganization.
They knew tha.t Europe
did not even begin to recove:t' for centu:ries from the demora.liza.tion that
followed the downfall of the Western Empire.
They lmew tha.t the long
period of social and political turbulence in England, leading to the .l"eform legisla.tion of 1832, wa.s a.s mnch a. consequence of the Napoleonic wa.:rs
a.s were the eno.l"mous debts which those wal'S imposed upon Europe.
But even among the students of history, themselves a pa.thetically
small mino:ri ty, there wa.s small realization of the extent to which the
difficulties of :t'eha.bili ta.tion must be a.ccentuated in this 20th centu:ey
by reason of the increa.sed complexity and intel'dependence of human soci.e:t;y.
The va.s t ma.jo:r i ty of people, who were not students of these things, could
not possibly a.pp:r.ecia.te the difficulties tha.t the world confronted.
In these circumst.;mces, the:t'e wa.s need for a. new kind of leade:rship;
for an intellectual and
spiritua~
guidance, -t}_uite different f:t'om thc).t
which had been requi:r.-ed dudng the v,e.:r.-.
It ha.s been sa.id a. thousand times
tha.t a. d iffe:rent .sort of sta.tesmanship wa.s needed to ca.:t':ey fo:rwa.rd the
struggle fol" resto:ra.tion of pea.ce than ha.d been :t'equi:t'ed to conduct the
wa,:r.
This involved no reflection upon the a.bility o:r services of the rren
who had been the wa.r-time chiefs.
It wa.s simply not in human na.ture tba. t
-8a. leade:l:'ship steeped in the hea.vy atmosphere of conflict, t:l:'a.ined to the
ha.rd determina.tion of conquest by force, should instantly throw off this
tra.d i tion, brea.the the new a.tmosphere, and recognize the completely
changed circumstances to which mankind must now adapt itself ..
Let me l'epea.t, tha.t to say these things is not to rene ct upon the
skill O:l:' ability of tha.t leadel'ship which suddenly found itself shouldering
the bul'den of pea.ce-time.
The leaders simply sha.X'ed the disabilities of
substantially the enti:r.e community.
It wa.s una.voida.ble that there should
•
be an interregnum between war a.nd the full restora.tion of peace.
Tha.t
had always been ne cessa.ry, a.nd doubtless in like conditions always will
be.
Men must take new bea.l'ings, and, surveying the new conditions, :realize
tha.t the old order could never ,-neve:r.- :l:'etul'n a.s the noma.l sta.te of
society.
They must clea.dy envisa.getbe new X'ela.tions and conditions, and
adjust themselves to the weightier x-espons'ibili ties which these imposed
in dealing with the world-wide difficulties of the new epoch.
They must
have time to think on these things, to mea.sur-e the revolution in the financial and economic wol'ld, and in the minds and
het;~.:rts
and souls of rren.
Mr. Lloyd George, declaring tha.t Engbnd must be made n a. place fit for
heroes to 1 ive in, 11 ga:ve eloquent voice to the wellhigh universa.l aspi:ra.tion
of this period.
The ha.l'd experiences, the gl'im realiza.tions tha.t have come to men in
the la.st five yea.:rs, ha:ve not changed tha.t und ex-lying pul'pose to make this
a. more liva.ble world, to ma.ke oul' country a. mo:r.e lova.ble country, foX' the
gx-ea.t ma.ss of the people.
But these X'ecent yea:rs ha:ve b:l:'ought mu.ch of
postponement and d isa.ppointment.
Hope defex-red roo.keth the hea.:rt sick.
In
these five years of the struggle foX' X'estox-ed pea.ce, hope defe:t':r.ed has made
the hea.rt of mankind cynical, dubious about the bettex- day that wa.s to
-9-
'.' ~'
come with its torr.oY'row of peace.
Let us now inq_ui:re b:t'iefl.y whether the:re a :re not sorre justifications
')
fo,., a rr:o-re cheerful view of the si t1..wtion.
In an ea:r-J.y pe:riod of the
st:r.uggle to :resto.re peace and its real blessings, I r-acall 1·eading somewhe:r.e a compilation of pessimism which set fo1·th th3t the w():rld, instead
of having one big wa,., on its hands, had I believe twen+.y--0ne
going on.
m~no1"'
.,-;,'Jrs
We Wl$:re assured therefo:re that t.he peace was a mere fie+-. ion-
It did indeed look so for a tirr:e.
wat'S today?
:But where a.:re those twenty-one little
Sorr.e of them I guess :rT'e not yet entirely liquida.te.d, but on
the whole the world has made this nro.ch pt'Ogress: It has substituted sorrething like an D:r-med peace fo:r pre tty widesp:r.ead war.
The g:re a.t wa.:r is ended •
The effort of Bolshevism to drive its way westward and subjugate
central Europe has been thwarted.
The later effo:r-t of Bolshevism to annex Asia has likewise fa.iled.
The fear of Russian communism spreading itself over Germ:my and becoming a new and greater menace to Western
civilization~
has been pretty
thoroughly dissipated.
Russia, by all accounts, is n:aking progress on th0 way eteck to sanity.
~
Some people a:re even wo:r:rying lest Russia shall in tr.e coming year :rasurr.e
a considerable capa.city for export of its sta:::;le pr0ducts, and thus
once more a competi to:r fo,., the agricultural rrarke ts of the
world.
l"
b·~Cvme
est of the
But there is less fear in this r-ega:r.d than there wculd have been
two or three years ago, because there is now a well-establis'hed •
re o;il. ization that your neighbor's hard luck is not :readily t:rtoH1SlataLle into
your- own prosperity.
-10. ,>
.Almost everywhere, there is increasing disposition to extend a.
helping hand to both Ge:t"many and Russia., because the :t"e is :t"ealization
tha.t the world needs both Ge:rma.ny and Russia, and needs them competent,
ca.pable, productive and prosperous ..
.All this is entirely to the good.
t"'
.All this is sign tba.t the spirituel
and mental a.ttitude of men is g:t"a.dually becoming one of real invi ta.tion
to permanent pea.ce.
It will be worth while to consider some of the evipences tha.t society
is not, after all, bent on committing suicide.
The German Republic still lives, a:nd ha.s demonstra.ted its ca.pacity
to maintain itself under rr.ost distressing conditions •.
The threa.t of a. Bolshevik revolution in Italy, concerning whicll a.t
one
ti~re
we heard a. grea.t deal, ha.s not been rea.lized.
·The public opinion of the world has demonstrated itself powerful
enough to intervene successfully and prevent a contest between Italy and
Greece.
The fea.rfully inhuman struggle between Gx-eece and Turkey has been
bx-ought to an end.
Ireland has achieved :real self-government, with the dominion status
in the BX'i tish commonwealth of na.tions, and peace has been restored on
terms which seem to promise permanence.
Of all the problems vVhich d i sinte gra.tion pres anted in Central Europe
for a. long time a.fte:r the .AX'IDistice, the s ta.te of Aust,.ia. seemed at once
the most distressing and the most hopeless.
Today we point to Austda. as
our best exhibit in support of the view that the will to peace, to
-ll-
resto:ration, to :t-ehabilitation, is ca.pable of a.ccorrplishing the seemingly
impossible.
Austria. ha.s been put on its feet and given a chance, chiefly by the
cooperation of those who we:r.e its enemies.
Today. instead of being a.
testimony to the destructiveness and unwox-kableness of the peace, Austria.
is held up as a. cheering demonstration that none of the WX'eck.s of the wa.r
a.re beyond the possibility of salva.ge.
If we will turn to political concex-ns immediately <involving our own
countx-y, ou:r thought must inmediately cent ex- upon Japa.n and Mexico.
The
Washington conference put an end to the danget'ous and long-cqntinued
fr'iction between the United Sta.tes and
J~pa.n.
Three yea.rs a.go there was
a good deal of evidence that Ja.pan and .America. were drifting to'Jl7il:l~d conflict.
Thanks to good sense and intel.dgent statesma.nship on both sides, thanks
to tha.t generous coope:ra.tion among na.tions which i:na.de the Washington Con· ference successful 1 the mena.ce of conflict in the Pa.cific ha.s been removed.
·.. Todar· we see in the Pacific a. ma.ri time mobilization, not of fleets and
. arms
bent upon . dest.ruction 1 but ra.ther of the
.
a:q~osies
of me:rcy, devoting
themselves to one of the grea.test works of benevolence and hUJrJa.nity that
ha.s eve:r. been inspired by the contemplation of a. supreme d isa.sta:r.
I submit tha.t if we will look on these brightex- a.spe cts of the world
panora.ma. a.s i t has been unfolding before us, we will ha.ve to recognize
that it demands a. good d eel of pe:rvers i ty to l"ema.in a. t a.ll times .:m unqualified pessimist.
I mentioned Mexico a. moment a.go a.s a. problem which, fra:ught with
mena.ce, wa.s of especial conce:r.n to OU.t' own country.
We are entitled to
-12view the present Mexican situation with pa:rticular satisfaction because
it dernoristra.tes tha.t patience and forbearance in trying circumstances will
bear good fruit.
There have been pa.tience and forbea:rance on both sides.
Beyond that. there have been gra.tifying evidences tha.t the Mexican people
a.:re determined to lift tnemselves up by their own effo:t'ts to a. better estate
in the ·world·
The:re is today a better outlook for a. IIl'J.tually helpful
coope:ra.tion between the .Ame:rican and the Mexican peoples
since 1911.
than at any tirr.e
Me xi co is one of the wo:t' ld' s storehouses of na. tu-.:-a.l ·.veal th
and oppo:rtunity ..
It has needed capital, guidancet politica-l stability, and
a. fixed pu:t'pose of bettering its position a.s a. nation in the world and as a.
people in thei:r own country.
We cannot reasona.bly question that in these
directions it has recently been making grea.t progress, which we are justified
in hoping may be reasonably perrre.nent.
I ha.ve attempted b-riefly to suggest Wn.y, in a. broad and libe:ra1 su-rvey
of the poli tica1 sta-te of mankind , many :reasons for hopefulness and even
optimism may be d iscove:red.
Let me. turn now to the economic side, and
· inqui:t:'e whethe:r the:t'e a.-.:-e any cheerful :reflections from oul' political
mirror.
Here, as in the :realm of politics, we find grou.-r:1d s for cheerfulness,
even i f not a. unifo:rmly gra.tifying condition.
Grea.t B:ri tain a.pproa.ches
the winte:r with no plea.sant vision of its prospects.
gx-ea.t.
Unemployment is very
The bul'den of ta.xa.tion is onerous just in p:roportion to British
',l'
deter-mination that every na.tional corrmitmant shsll be exetuted and the
national c:red it ma.in ta.ined.,
Especially is British a.g:ricul ture in a state of p:rofound depression;
and I think i f we will examine ag:t:' icul tu:ral conditions in Gr-eat Br-ita.in
and in ou:r own country, we will be imp:ressed that the agricultural t:roubles
.
x-3so6"·
-13-
of different countries in this after-war epoch a.re curiously alike •
The othe:r day rey eyealighted on a. paragraph in a. newspaper, telling
of sorr.e resolutions of the Farmers Union.
They set forth that, "Failing
la:r ge further measures of State a.ssistance, the farmers will be compelled
to
to put their industry on an economic basis, by letting much land go/waste
altogether
***
and, gene :rally, to :reduce ou:r commitments 1 to :reduce
ma:rginal costs by diminishing p.:roduction, and to divert rerre.ining comni tments to the rr.ost profitable channels."
It sounded so entirely desc:ript5.ve of a.g:ricul tural conditions in this
country tha.t I '.vas a little sta.:rtled to diacove:r later tha.t the quotation
wa.s from a set of resolutions adopted by the National Fa.:rmers Union of
Great Brita.in 1 and not from a. pronouncerr:ent of the Farmers Union of the
United States!
Ce:rta.inly it is suggesti7e that in England, which produces only a
small proportion of its food requirements, agric'.llture is thus described
in precisely the terms that might be applied to its troubles in the United
States, a surplus-producing and exporting country '!'.hose great difficulty
is the collapse of the foreign market for the surplus.
On the point of unerrployment in G:rea.t Britain 1 while the condition is
bad, there are some rays of light.
Thus, there a:re high autho:t'ities for
saying that while the nurrller of unemployed is la:r ge, the number of the
productively employed is probably as la-rge as it e•;er was, and nea.rly as
la.l'ge as the industrial plont of the count.ry csn utilize.
is that a great a:rrny of Englishmer:
:;.;nd Ene,lishwomen were tr.:msi'e:r:red during
the wa_-r from the non-producing to the producing clgss.
The explana.tion
There a_re more
-1.4people willing to work, and in need of work, than there ever were before.
More than any other country, England is dependent upon foreign
marke~s,
and a period in which it finds itself with a. positive incr-eose in its
force of workers, coupled with a depressed foreign demand, is bound to be
d i sas t:rous.
Turning to the continent, I am assured "by competent autho:ri ties tha.t
within the last few months unemployment has been on the whole steadily decreasing in the Scandinavian countries, in Holland, and in Ita.ly.
In
Germany, despite the utter demoralization of finance and money, and the
depression in foreign t:rade, the people have to an a.mazing extent gone on
wo:rking; tilling their. fields,. e:recting factories and office blocks,
building new houses, of which the need has been in many aJ·eas very great
since the wa:r.
In_F:rance, by universal reports, there is no unemployment, and there
has been almost none at any time since the Armistice.
Belgium is constantly described as the busiest and one of .the most
p~ospe:rous
countries in Europe.
Switzerland has had on the whole tha best season, inl923, since the
war, in respect of its vitally important tourist busir.ess.
The disruption of the German; money system seerrs to have gone a.s fa:r
as it is possible, and along with the collapse of passive :resistance in
the Ruhi' and the prospects of resuming production there, measures have
been initiated which look to the re-establishment of a. money system bearing
a ca.lculable relationship to the gold standard.
Taking Europe as a. whole, all :reports indicate a highly satisfactory ag:ricultural yield for
1923·
I know how ha:rd it is to convince an .American
... ..
•.··
-15-
,.
X-3300
y
'?_..: ·.'.,)
fa.rmeJ" with an unrna.r.ka table su.r.plus on his hands, that big c.r.ops in Europe
are going to help him.
But I am one of those American fa:rmex-s; and I dare
say to the rest of them, that in the long
a whole will be to their advantage.
T'Ull
the p:rospe:ri ty of Europe as
Oncemo.re let me say, that we will do
better to take ou:r chances in a. world that is getting on well, rathex- than
in a world that is staning fo1r the need of our food su,.plus, but has
nothing with Which to buy.
From the date of the Armistice, all the diagnosticians of Europe's
troubles have insisted that what Eu:rope most needed was to get back to
p-roducing.
Likewise they have been insisting that what
'!ifJ_
n:.ost needed was
to have Eu-rope get back to producing and the:r.efo:re to the ability to buy.
Now, I challenge the rr.ost enthusiastic pessimist to deny that Eu:t'ope has
made real progr-ess to getting back to production in this yea:r 1923.
r
Europe's crops a.re proba.bly the best in a.ny yea:r since the war.
There is
-reassu:ring indication that industrial production will be :resumed in the
Ruh:r. Basin, which means imrr..ed iately be tte:r conditions for both France and
Germany.
If the fortunate European si tU8tion as to a.gric,.ll ture this yeax-.
seems momentarily to account for some pa.rt of the depx-ession in our a.g:ricul tut"al values, we w.a.y find consola.tion in the outlook for a general
bette.rment of Europe's industrial condition in the coming months.
That
bette:rment not unlikely will presently resto:r.e to a. considera.ble extent
our a.g:r icul tural balance.
Vle will do well to a.void too much of prophecy.
But we may safely
let our vision of the futut"e take same tones from our pictu'l"e of the present.
The yea.r.- 1923 might have been one of disa.ster-s.
Many predicted it would be.
,
-16-
X-38b0
There might have been a. huge convulsion in the Near East be tween Turkey
and Greece.
It was avoided.
drawing in half the world.
The:re might have been·a Gl"ec:o-Ita1ian war,
It did not
corr.e~
:t'evolution in Germany, but there wa.s not.
The :re migpt have been
The Anglo-F:t:'ench entente
might have been wTecked unde:r the stt'ains i t sustained.
But it was not.
Eur.opta might have had bad c:rops, starvation, typhus, universal turbulence.
These have not 1::efallen.
Mexico might have had an explosion, involving
Instead Mexico is in better postul'e than for at least
our ovvn country.
a deca.de, and our relations with her rr.o.r.e satisfacto:ry.
to multiply cases.
we have avoided
1
It is needless
Let us merely keep in mind how many of possible evils
how much of positive bette:rment we have gained.
The:re is genet'a.l disposition to conserva-tism in both industry and·
finance·
This is particularly to be commended at a. time when the price
level of the woX'ld is p:retty plainly tending downward,
For us, this
adjustment to a gene ra1 downward tendency will be the rr.o:re difficult because of the continuing flow of gold to this count:ry.
There is always
tempta.tion to infla.tion of the CUt'rency when the supply of gpld is so
generous.
A few years ago. every added million of gold that ca.me wa.s
g.:reeted as fu.t'the:r gua:rantee of soundness and prosperity.
lt wa.s a well-
nigh universal a.ssumption that we ¢-ouldn 1 t have too muc};J. rnoney ci:rculating, provided it wa.s all solidly based on gold •
bette:r now.
.At least, we know
That is son:ething gained, and something imrr.ensely important.
Nobody has yet found a. way to stop the movement of gold to usj but many
thoughtful people on both sides the Atlantic at least realize the menace
of this condition, and a:re giving ea:mest thought to it.
In that fact
is a. sign of bette:r undtn•standing, more accurate ,.g:ocesses of thinking.
-. r
.·-
-17Be:re in the United States all classes of business men recognize the very
:real danger of having too lllllch gold and the necessity of avoiding inflf:Jticn
by reason of it.
This is proof of a great p:rogt"ess towa.l"d sa.fe ty) sanity,
and the sound basis fo:r business.
The final analysis of the whole ma.tter is tha.t the cul'rent yea:r ha.s
been on the whole a. year of conservation and rr:ode:ration in both business
and politics.
The g:rea.test difficulty a.bout economic :t>ehabili ta.tion since
the war has been tha.t the world ha.s had to deal with its economic problems
in an EJtmosphe:re surchat-ged with politics.
been inext:r ica.bly mixed •
Politics and economics have
In both business and the b:t>oad field of world
relationships, we find ·disposition to caution, to rr..odera.tion, to pa.tience
and rea.sonableness.
This should be altogether gratifying.
The situa.tion
II'ay not be to the liking of those ext:.:-emists who believe things ~annot
begin to get better until they have got very much vrorse.
It may not be
satisfa.cto:t>y to the opposite gt"oup, who believe that by this time we ought
to be in the midst of a.n <3conomic millenium.
Bnt i t does conta.in many
elements--let me sa.y, a. decided preponderance of the elements-- of rea.ssurance to tha.t grea.t rr.a.jo.rity of people who do not expect and do not
want ei thel' a. millenium o.r a. .t."evolution.
/
\
FEDERAL RESERVE BOARD
WASHINGTON
X-3861
October 13, 1923•
SUBJECT:
Fiscal .Agency Expens-es.
I
Dear Sir:
Dur.ing June, 1923, all Federa.l Reserve Banks
submitted to the ]'edera.l Resei"ve Boa.rd an estima.te of
·:r.eimbursable fiscal a.gency e:kpenses tha.t will be incut'red
during the fiscaJ. yea.-r beginning July ·1, 1923, a.nd ehding
June 30, 1924~ The ba"lks were requested to fu:rnish this
estirna.te fo:r the use of the Trea.sucy Department· (See
Boa.:rd 1 s le.tte:r May 26, 1923, X-3722).
The T:rea.sury Depa:rtrr.ent ha.s a.dvised the Board,
tha.t is of the opinion the :reimbut'sable fi seal a.gency expenses of the Fede:ra.l Rese:rve Banks dul'ing. the fiscal yea.r
1924 will be ve:ry much less than o:riginally estimated,. and.
ha~s a.sked the Boa.:rd to request the Federa.l .Resene Ba-nks
to review thei:r estima.tes submitted last June and promptly
submit a :revision thereof.. In this connection, there is
enclosed a. copy of a. letter received by the Boa:rd f:t"om the
Trea.su.cy Department undeJ:> da.te of October 11th·
Very t:t'Uly your.s,
Walte:r L. Eddy,
·sec:retary.
(Enclosu"t"e)
TO GOVERNORS OF ALL F. R. BANKS
( COPY )
TREASURY DEPARTMENT
WASHINGTON
October 11, 1923•
My d ea:r Govax-nor:
In his letter dated Iv'Iay 25, 1923, the Under Secx-eta:ry of the
Treasux-y advised you that dur-ing the fiscal year 1924 Federal Reserve
Banks would be reimbu~sed for actual expenses incurred in connection
with new issues of public debt securities on the same ba.sis as was in
effect during the fiscal yea.r 1923, and reg_uested th3.t you secw.e f:t"om
the banks estimotes of S'I;.Cb expenses. On June 29, 1923, you transmitted
to the Department 'Lh8 estimates rece1ved from the several Federal Reserve Banks a.gg~·egating sorr:e $650,000.
These estima.tes were compiled while a. gx-eat volume of wo:rk was
in px-ocess a.t the bC~r.l:s ond befo:re refunding opex-a.tions were concluded •
.And they were compiled before the final program of the Treasu:"C"y fox- the
fiscal yeax- 1924 was forecast,
Fiscal agency transactlons a.t the Fedex-al Reserve .Banks are now
normal and from present indications new issues during the yea.r will consist only of the regu:.a:r q_ua.rte.r1y certificate issues, with a. possible
issue of Treesu:c·y notes. The Series of 1919 wa.r-savings certifica.tes
matux-es on Janua.x-y l, ·ilext, and for the time being will cause sorr:e
·.additional work at t:-:e Fede:ral Reserve Banks, but this issue is compara.tively small and will enta.il no grea.t volume of work.
In these circumstances, it would appear tba.t the :reimbursable expenses of Federal Rese:rve Banks du:ring the fiscal yea_.,. 1924 will be
very much less than was originally estirngted. The strictest.economy
in the expenditure of public fur~s is being exercised and expenses are
being reduced wherever practicable. A revision of estimated :r.eimbu'tsable expenditures of Federal Rese:rve Banks is indicated, and accordingly, it is requested th:~tt you ask each Federal Eese:rve Ba.nk to
:review its own esti.ma.tes for 1924 and at the earliest possible da.te
submit a :revision thereof, showing as to reimbursable e:~penoitures;
(a.) a.ctual expend itul:'es for the quq.rtex- ended September 30, 1923, end
(b) estimated expenditures fo:r. the period October 1, 1923, to June 30,
1924. These estima.tes should be sta.ted under the headings ffTrea.su-ry
Certificates of Indebtedness and Treasury Notes", and 11 T:rea.sut'y S<:>vings
Certificates". The expenses of the sales ox-ga.niza.tion should be sta:lied
as a. part of 11 T:t"ea.SU't"Y Sa.vings Ce:rtificates" as a sepat'ate item. Expenses under each head :i.ng should be classified in accord<mce with
Bulletin No. 1 of the General Accounting Office as heretofore.
,..2-
X-386la.
I am sure the Departrr.ent can c0unt on the full coopera.tion
of the Federal Reserve Board and the Federal Rese:r.ve Banks in reGucing expenses to the lowest possible point consistent with efficient service •
By direction of the Secretary.
Very t.ruly yours,
(signed) Gar:rard B. Winston,
G.ARRAHD B. WI lJSTON,
Ass is tan t Se ere tar.y of the T:re asury.
Hon. D. R. C:rissinge:r,
Gove:rnor., Fede:ral Rsse:rve Boa:rd.
X-3862
TREASURY ·DEPART!,:ENT
Off:i.ce of the S!h1·etary
''IASHINGTOl'l
October 5, 1923 ..
The .Governor
Federal Reserve Board.
Sir:
You are hereby a(lvi.sP.d that the De,l)artment has ref8rred to the Di"3burs ing
Clerk, Treasury Depa:rt:!!lent, for pa~rnm:-.t, the accu'mt of the Bureau of Engravin.g
and Printing for prep~;::l.r.·g :ri'ed.eral Re:'le.rve uotes du-rir.g the pori•1d September 1,
1923, to September~. 1923, arnoun'l;i"'lg to ~'/4,~'57.50, as follows,~.e;:~l
~;5
......_
.. ..•
.. .. . •
Boston . •
•
New York
•
Philadelphia • •
Cleveland
Richmond
•
Chicago
. • .
Kansas City.
. .. •
•
..
. •
. . . .. .
•
45,0UO
2'?2,000
114,000
Nr>t~~l4
_!;i;;o
!tc.?Q.
122,000
94,000
113,000
37,000
84,000
68,000
79,000
36,0UO
64,'100
12,000
21,000
450,000 274,000
33,000
79,000
470,000
-----·--
Jg~~L
'$100
194-,0C'I)
29&::,000
21?E· ,noo
,000
2rt
1,000,000
1,759,000
Reserve
~_;tO
2~.~~000
152,000
618,000
eheets at ~42.50 per ~ • • • •
-~:_,~100
2,000
2,000
1, 759,000
ij;i74,757.50
The charges against the several Federal Reserve BankS are as follows,-
...
Sheets
. . ..
. .. .
.
1,759,000
Boston • • •
1~4.000
New York
292
,COO·
•
Philadelphia.
288,000
Cleveland.
• 213,000
Richmond
152,000
Chicago
• 618,000
Kansas City.
2 1000
I~~ ! __q.Q!:!!:.
Cr.•moen-
:PJ.ate
scot:i...£l!...
Pr{nUI!B
Mate:r i.a~.s
;pe.n:~a.:~
$2,619.00
~2,667.50
$2 .2':'9. 50
$ 0'79.00
$8,245.00
3,91~.00
4,015.00
3,960.00
2,928.75
2,090 .oo
8,497.50
27.50
$24,186.25
~.131.()('
1,02~.(0
1~~,1.10.00
-···-····'-
3,888.00
2,875~50
2,052.00
8 t 343.00
27.00
4ji23, 746.50
Total
iO:l
3 ,;3134-.00 l,0CELOO 12.240.00
2,5('2. '15
'145.50
9 ,052. 50
5:.:12.('0
1,786.00
6,4:50 .oo
7,261.50 2,lf>3JIQ 26,26f.00
23.50
~.rr
8'5.00
:jj;20,668.2S $6,156.EO ~74,75'7.50
The Bureau appropriat5.ons wtll be reimbursed in the above amount from the
indefinite appropriation n~repa~ation and Issue of Feder~l Reserve Notes, Reimbursable", and it is requested that ymu· board cause such indefinite appro)riation to be reimbursed in like amount.·
ResJ?eCtfully,
(signed}
s.
R. Jacobs,
Deputy Comrrdssioner.
FEDERAL RESERVE BOARD
WASHINGTON
X-3363
16,
Octobe~
SUBJEC'I':
Dea.l'
Federal Reserve Telegraphic Code Books.
Si~:
The Board has been advised by a number of Federal
Rese:r.ve Rmks that in the Federal Reserve Teleg:r:a:r,hic Code
Books which were distributed by the Board on June 6, 1921,
certa.in pages show conside:ca.ble wea.r by constant :..·efeTence.
Investiga.tion indicates these pa.ges to be 175 to 207, inclusive, showing symbols for dollars, numerals, dates, etc.
In o~d er to prolong the life of the original books,
the Boa.rd ha.s had printed a. supply of add itiona.l sets of
sheets conta.ining pB.ges 175 to 207, inclusive, and is prepa.red to d istx·ibute them upon request of the Federal Reserve
Banks.
To enable the Boa.rd to keep an a.ccur.a.te record of
all additionaJ. sets of ccd~ sheets in use, kindly )~etum
those pa.ges which are '~emoved f>~om the books a.t the time the
new sheets are received from the Board and inserted therein.
Very truly yours,
J. c. Noell,
Assistant Secreta.:ry.
TO GOVERNORS OF ALL F .. Bf, BANKS
~923·
FEDERAL RESERVE BOARD
WASHINGTON
Octobe~
SUBJECT:
Dea~
23, 1923.
Coded ph:ra.se to be used in connection \'Ji th
transfers from Gold Redemption Fund to Federal Rese:rve Agents' Fur:.d a.ccoun-;;.
Sir:
.The Fede:r.a1 Rese:r.ve Telegraphic Code does not
provide a. coded ph:r.ase fo:r the use of the Beard in
advising the Federal Rese~ve Agents of transfers from
either the Banks' or ~gents' Gold Redemption Fund
ac:::ounts with the United States T:re3sure:r to their
:respective Federal Rese:rve Agent 1 s Fund accounts with
the Board, and in o:rde~ to provide a. u.."YJ.ifo:rm coded
phra.se to cover transactions of this kind a.r..d a.t the
same time to :reduce the p:resent ph:ra.seology of these
teleg:rams, you a.re advised tha.t, commencing with
Novembe:r lst, the following code word will be used
by the Boa.:rd in its telegrams to Fede:ra.l Reserve
Agents covering such transfers:
"DUCKED:
You:r a.ccoun t with Fed e :ral Res e:rv e Agent ' s Fund ha.s c :red it f o :r
$___ deposit rr.aa e with Fede~al
Rese.rve Boa_:rd as t:ra.nsfe:r f:t'om
Gold Redemption Fund. 11 .
It is :requf!sted tr...a.t the a.bove code word be inserted a.t the bottom of pa.ge 78 of the 11 Fede:t'a.l Reserve
Teleg~aphic Code", following the supplementa.l code word
"Duckbill II.
You~s
very t:ruly,
J. c. Noell,
Assistant Sec:reta.:ry.
TO .ALL FEDEFAL RESERVE AGZNTS.
..,
.
FEDERAL RESERVE BOARD
WASHINGTON
X-3866
Octobe~
SUBJECT:
Coded
25, 1923.
ph~ase
to be used in connection wi tg
Gold Redemption Fund to Gold
Settlement Fund.
t~ansfers f~om
Dear
Si~:-
In order to reduce the ph:raseolo gy in telegrams
between the Boa.rd and Federal Reserve; Banks, the Board
has adoptc;d, effective Nmre-:-1:heJ· lst) the c.od e word
shovvn below fur use in connec-.t:lonwith trar:sf:n:-s from
eith8J' the Banks' or .Agents' ~1old Redemption Frmd
accounts :m deposit with the U. S. T:reas1.u·e:r, to the
Bank's Gold Settlement Fund a.c.:..ount on deposit with
the Boa.rd:
"DUCKFOOT: You~ a.ccount with Gold Settle...:
n:en t Fund ha.s credit for.$
deposit made with Fede~al Rese:rve Boa.rd
as transfer from Gold Redemption Fund • 11
It is requested tha.t the above code word be ina.t the bottom of page 78 of the "Federal Reserve
Telegraphic Code 11 ) following the supplerr:enta1 code word
"Ducked 11 •
se~ted
Yours
ve~
truly,
J. C. Noell,
.Assistant Sec:re ta.:ry.
TO GOVERNORS OF
1~
FEDERAL RESERVE BANKS·
.......
COPY
MERCANTILE TRUST COMPJ-\NY
San F:ranciseo-Ca.lifo:r.nia
October. lS, 1923.
Bon. A. c. 'Miller.,
Federal Rese:rve Board,
Washington, D. c.
Dear Si:r:Following our conference in San
F:r anci s co , the Secud ty Trust and Sa.v ings
Ba.nk, the Pa.cific Southwest Trust and Sa.vings
Balik, and the Mercantile T:~"Ust Company of
Ca.lifo:rnie., thl"Ough thei:r raspective office:6,
have p:rspa.red a. letter addressed to the Fedel'al
Rase:rve Boa:rd, embodying the views of these
three Banks with :rega.:rd to b:ra.nch banking in
Ca.lifo:rnia..
The letter. is hel"ewith enclosed,
and I have been :requested by my a.ssocia.tes to
a.sk i f you will be kind enough to present it
to the Boa.:rd a.t its next meeting.
Very t:ruly you:rs,
JOHN S. DRUM
President.
Enclosure
X-3667-a.
q0
""/91
San Francisco, Califomia.
1-
Octobe:r 3,
1923·
The Honorable, the
Fede:ra1 Reserve Board,
Washington, D. C.
Sirs:
At the :request of the Security Trust a.nd Savings Bank, the
Pa.cific-Southwest Trust and Savings Ba.nk, the Bank of Ita.ly a.nd the
Mercantile Trust Company of California., t:ne Honorable A.
member of youl' Boa.ru, conducted a meeting in
th~
c.
Mille :r, o.
Federel R3s-::rve Bank in
San Francisco this morning for the purpose of hea.ring the views of the
a.bove named ba.nks with rega.rd to
th~
present and future sta.tus of b:ranc:'l
banking in Califo.rnia.•
In a.dd i tion to Mr. Miller and :representa.tives of three of
the foul' banks named above - the Bank of Italy not being :represented a.t
the meeting - there were present Gove:l"nor J. U. Calkins and Cha.irman
John Perrin of the Federa.l Reserve Bank of this district, the Honorable
J • F. Johnson, Sta.te Superintendent of Bonks, his a.ttol"ney M:r. James M.
Oliver, and Mr. C. B. Winga.te.
These gentlemen were present a.t the re-
quest of the undersigned.
The enti.re ma.tter was discussed a.t length, and we desire nc'N
to place before your Honorable Boa.rd this memora.ndwn of the meeting.
It wa.s the unanimous opinion of the conferees tha.t youl'
Honorable Boa.rd should be urged to ad opt a. definite policy .vi th rega.rd
to the pl"esent position and future progress of branch banking in Ca.lifornia., and with tha.t in view the undersigned respectfully desire to
suggest to you ce:rtain principles which we believe should be of substantial a.ssistance in sta.bilizing the si tua.tion.
792
We feel justified in making these suggestions because we
represent th:ree of the four largest branch banks now ooing bus ire ss in
California, and we believe that applica.tion of these principles would dea.l
justly with our banks as wall as with the smaller b:ranch banks.
In rea.ching a decision on its general policy respecting the
I
granting of pe:r:'Inits to esta.blish branches in California., we beg to _suggest
tha.t the Boa:r.d :review the situation a.s it existed when the unde:rsigped banks
joined the Federal ReseTVe Sys tern.
They were then enga.ged in branch banking
which was 9Uthorized. by the California. Bank Act to the same extent as a.t
p:resent, and a review of the co:r:respondence between these banks cmd the
Federal
Rose~e
Bank of San Fr-ancisco and the :Boa.:rd will dis close thei:r
:respective views and policies a.s of tha.t da.te ..
.As a. basis for the suggestions tha.t follow, it may be well to
)
a.ffi:rm the fact tha.t the sta.te banking sys"tem of California. pe:rmi ts and
encou:ra.ges the development side by side of unit l::enking a.nd b:ranch banking
and tha.t both systems a:t'e necessa.:ry to the continued welfare and development
of the state.
We cannot approve a.ny me3suras tha.t would hampe:r the f:ree
development of unit banks along sound and proper lines, and a.t the sarr.e time
.
we a.ffirm the :right of branch banks to develop also a.long sound and p:rope:r
lines.
We affi:rm tha.t it has been the policy of the California. :Bankers
Associa.tion and the Sta.te Superintendent of Banks, :representing the people
of the Sta.te of California., to maintain the integ:ri ty of both systems so
tha.t -oni t ba.nks shall ha.ve no unfa.ir a.dvanta.ges ove:r b:r:mch banks and branch
banks shall obta.in no unfa.i:r advanta.ges ove:r unit banks, to the end tha.t ·
both systems may be allowed to continue on a. p:ropar
the benefit of the Sta.te.
co~etitive
ba.sis for
J.
X-3357-a
~'93
In order that this policy may r.:ave the widest possible
applic'3tion, we the:rafore :respectfully suggest the following principles
for cons ider:Jtion by your' Honorable
1·
Boa•~d:
Every a.pplication to estoblish a branch bank hereafta:t>
presented to the Federal Reserve Board shall be considered by the Board
separately and upon its rr:erits.
Its apprcval or :t>ejection shall in no
wise depend upon applica.tions presented by any other bank or banks or
upon the status of any other branch bank or branch banks doing business
in California.•
2.
The approval of the Federal Reserve Board shall be obtained
before a.ny branch bank makes any conclusive a.greement for the acquis i ticn,
either directly or indirectly, of any bank or any stockholding interest
in any bank.
3·
In its considera.tion of future applications fo.l'.' branch
banks in California. the Federal Rese:rve Board should examine into the
public convenience and advantage as a.ffected by the esta.blishment of the
particular branch in 'l,Uestion and should consider the following points:
~·
If a. given locality has only one unit bank, the
Board should consider whether or not the a.bsorption
of tha.t unit into a. branch ba.nking o:rganiza.tion would
promote the public advantage and convenience.
£.·
In considering a.n a:wlication to establish a. branch
bank the same principle should apply a.s in the esta.blishment of a. bank de novo, except tha.t i f there is more than
4.
one bank in the locality wh.;;:ra permission to opet'a.te
a. btanch is sou@:lt it bacomas vecy· impo:r.t::mt to
considet' fu:r.the:r whether or not the soundness of the
bank o:r banks in the same loc9.li ty would be jeopa.rd ized
by the establishment of the bl'anch bank.
£.•
The Fedet'al Reserve Board should be cognizant of
the px-a.cticesof banks eithet' in acquiring control of
the b:ra.nch bank or in conducting their existing branches
a.s a. ba.sis for exercising its discretion in dete't'ffiining
whethet' o:r not permission to acqui:re additional branches
shall be granted.
4.
The Feder3l Reserve Boa.rd shall adopt such :rules for the
examina.tion of branch banks in California as the Board shall deom necessary
to make examinations adequate and thorough.
In the event tha.t the Board
r-ega.rds more than one examination a. yee.r uecessa.ry or desirable it sha.ll
consider the possibility of additional exa.minations for a.cy one or all
branch banks.
Thel'e shall be made such examinations of b:r.anch banks in
California. a.s will covel" fully all the a.spects of ea.ch ba.nk' s operations ..
Such examina.tions shall embl"a.ce, in a.ddition to the condition of the ba.nk
examined, the following:
All contingent obliga.tions, the condition of
subsidia.ey corporations and affilia.ted companies, stockholders 1 a.greements
and ethel' colla.tel"al Ol" allied a.l':r.angements, \\bethel" or not the stockholders in every instance shall be the same a.s the stockholders in the
ballk examined.
This is to the end tha.t the Federal Rese:r.ve Board a.t a.ll
times shall ha.ve full and complete knowledge, not only of the condition
..
X-3867 a.
- 5-
of the bank itself 1 but also of its oper.a.ting methods and of the a.ssets
and obliga.tions of the affilia.ted cor.por.a.tions in any fol'ID. or. mannex- owned.
wholly ox- in pa.rt by the bank or. by its stockholders a.s such.
5· If the Federal Reserve Boa.:t"d should adopt all ox- any of
the foregoing suggestions, it might na.tura.lly pla.ce branch banks that are
member.s of the Federal Rese:r.ve System a.t a. disadva.nta.ge in competition
with non-membel' br.a.nch banks, unless the State Supex-intendent of Ba.nks of
Califox-nia. a:pplied the same px-inciples to : .1on-membex- banks a:]?plying to
him fox- pemission to establish br.anches.
6. We affir.m ou't" belief in the wisdom of the r-egulations
promulgated by the Superintendent of Banks governing the exer.cise of his
d iscr.etion in the gr.a.nting
a pemi ts
copy of which is a.tta.ched hereto
mittee of the California. Bankers
for branches.
These r.egu.la.tions,
were app:r.oved by the Legisla.tive Com-
1
.3
Associa.tion and by the Executive Com-
mittee of the California. League of Independent Banker.s.
The suggestions
here presented a.re predica.ted upon an observance of these regu.la.tions and
are dependent upon the univex-sal a:}?plica.tion of these suggijstions in
California.•
We have given a. copy of the for.egoing memorandum to the State
Banking Depa.r.tmerit of California., and have l'equested the depa.r.tment to
infor.m you of its views with l'ega.x-d to these suggestions.
It is our. belief tha.t the substantial adoption of the for.egoing
suggestions by youl' Honorable :Boa.rd will help gX'ea.tly to cla.X'ify the
bx-anch banking si tua.tion in California., and we submit them with the
ea.rnest desire tha.t they rra.y serve this purpose.
.
..
X-3367-a
- 6 -
We desire at all times to co-operate with your Honorable Boa:rd
to the fullest possible extent, and we hope the Fedex-al Reserve Board 1
the State :Banking Depa..rtrr;ent and the undersigned bankers may esta.blish
and continue a sympathetic ur:de:rstand ing that will serve as a foundation
e:J~."Pression,
for adJustment, by confe:rance and full and frank
~tluestions
of a.ny
relating to branch banking in California tha.t may arise in the
futu:re.
Ve:ry respectfully,
MERCANTILE TRUST COMPANY
BY
John
s.
Drum
6
President~
PACIFIC·SOUTWVEST TRUST .AND SAVINGS B.ANK
By
Cha:rlas F. Ste:rn
Executive Vice President.
SECURITY TRUST & SAVING BANK
By
J. F. Sartori
President.
..
..
- 7SUPERINTENDENT'S
RULIN~
Fx-om and a.ftex- this da.te no b:ranch office sha.ll be established
by any ba.nk in a. city ox- locality othex- than tha.t in v.hich its px-incipal
place of business is loc-:ated by the pu:rcha.se of or consolidation or mergel'
with another bank unless both banks
sha~l
ha.ve been open fo:r business for
a.t les.st tttl'ee yea:rs px-ior to sa.id sa.le, consolidation ox- merger unless
the superintendent of banks in his disc:retion sha11 find that the public
convenience and advantage require
itj
in the ca.se of a. na.tional bank tha.t
ha.s been converted into a. s ta.te bank the time required herein sha.ll be
considered a.s running from the da.te of the original
From
organi~a.tion
of sa.id.
and a.fter this date no branch shall be crea.ted in any
locality other than the city or loca.H ty ln which is located the principal
place of business except by pur.cha.se of or consolidation or mex-ger with an
existing bank in said city or locality unless the supe:dntendent of banks
in his discretion sha.ll find tha.t the public convenience and a.dvanta.ge
require it.
The rules hereby enunciated will be
taken up for further
considera.tion and for such changes a.s rr.a.y a:Ppear desira.ble a.t such times a.s
there ma.y be any change in the status of na.tional banks a.s to their right
to opera.te bt'anch offices or agencies in the State of California.•
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE SOARD
X- 3868
(Superseding
X-3424)
Sir:
You are he:reby directed to proceed to
on business in connection with this Boax-d, upon completion
of Which, unless otherwise directed, you will return to
Wa.shington, D. C.
While absent from Wa.shington upon the discha.rge of
the a.bove described duty your actua.l necessa:ry t.raveling expenses, and a.ctua.l expenses for subsistence not to exceed
$5.00 per diem, will be pa.id from funds under the control of
this Board.
In connection with the above tra.vel, you will be
guided by the Federa.l Reserve Boa:rd Travel Regulations issued May 1,
1923 •
G 0 V E R N 0 R-
F E :C E R J, L
RE 2 E E V E
B 0 ;, R D
STATENIE!:.TT FO?. THE PRFSS
X-3870
For Release in Mcrni!"lg Papers,
Monday, October 29, 1923.
The following is a sum.T.ary of general busir.. ess
and financial conditions throughout the several
Federal Reserve Districts, based upon statistics
for the months of September and October, as contained in the forthcoming issue of the Federal
Reserve Bulletin.
Production of basic commodities declined during September,
wholesale trade continued large, while retail trade, though larger than
a year ago, increased less than is usual at this sea3on of the year.
~~Tholes ale
prices, particularly those of agriculturcl products, advanced
during the
rr~nth.
PRODUCTION:
Production in basic industries, according to the Federal Reserve Board's index, declined 5 per cent during September, and was 10
per cent below the peak output of May.
The principal factors in this
decline were the suspension of anthracite coal mining for over two weeks
and a substantial reduction in the production of iron and steel.
production and sugar meltings were larger than in Lugust.
Cement
The decline
in the production index, which is corrected for seasonal variations and
reflects chiefly changes in the output of raw and semi-finished products,
was not accompanied by a reduction of employment at industrial establishments.
New building construction showed about the usual seasonal
decline in September, due to a curtailment in contracts for residences.
Contract awards for business and industrial buiJ.di::;;;s, however, were
larger than in August.
•
•
X-3370
-2-
Estimates by the Department of
Agri~lture
800
on October 1 showed
some reduction from the September forecasts in the yields of corn, wheat,
oats, and tobacco, but increased yields of cotton, potatoes, and hay.
TRADE:
Distribution of all classes of coffiffiodities by railroads continued at a high rate throughout September.
\'tholesale trade, according
to the Federal Reserve Board's index, in September rdached the largest
total in three years and was
9 per cent larger than a year ago. Sales
of meat, hardware, and drugs were considerably larger
while shoe sales were smaller.
t~n
in last September,
Retail trade was slightly larger in
September, but the increase was much less than is usual at this season
of the year.
Department store sales were 6 per cent more than in
September, 1922, and stocks at the end of
t~e
month were 13 per cent
larger than a year ago.
PRICES:
\'lhol esale prices increased over· 2 Jler cent during S 9ptember,
according to the index of the Bureau of Labor Statistics, particUlarly
large increases occurring i.n the prices of clothing, farm products, and
foods.
Fuel prices, on
t~e
other hand, declined in September for the
eighth successive month, and prices of building materials and metals were
also lower.
During the first three weeks of October prices of certain
farm products continued ·to advance, wheat and cotton reaching the highest
points of the current year, while prices of hogs, coal, and metals
declined.
BJI.NK CREDIT :
Demand for bank credit showed a seasonal increase in September
•
h
-3-
X-3370
and the early part of October, loans of member bar!ks in leading cities
increasing by $116,000,000 between September 12 and October 10.
This
increase reflected chiefly the demand for commercial loans, which on
the latter date stood at a new high point for the year, almost $100,000,C'JO
above the total on September 12.
Increases in the holdings of Government
securities by these banks were partly offset by reductions in corporate
security holdings.
The demand for accorrmodation at the Federal Reserve
~anks
in
some of the agricultural districts increased, while at the reserve banks
in the East the volume of discounts for member banks declined.
Federal
Reserve note circulation continued to increase and in the middle of
October was about $100,000,000 above the July level.
In October money rates showed an easier
t~ndency
and after the
fifteenth of the month rates for commercial paper in the New York rr.arket
declined from a range of 5 1/4 ~ 5 1/2 to 5 ~ 5 1/4 per cent
•
FEDERAL
RESERVE
BOARD
X-3371
For
I~~diate
Release.
CONDITION OF .1\CCEPTJ\NCE LIARFFT
SEPTErl!BER 13 TO OCTOBER 10, 1923.
During the first two weeks of the pariod the acceptance
marl<et was ch<?.racterized by general dullness which h3.d prevailed
since
mid-surnme~.
'I'he supply of bills, however, increa;;;ed after the
beginning of October, ani reflected the seasonal demands for funds
for financing the marketing of cotton and
gr~in.
Bills were also
draivn against sugar, silk, wool, and provisions, and to provide dollar
exchange.
The demand was sufficient to absorb offerings during the
first part of the period
b~t
with the increase in the
vol~£
of bills
in October purchases were in excess of sales and at the end of the
period dealers•aggregate portfolios showed slight increases.
with maturities of 30 to 90
d~s
were in the best
de~nd
Bills
and were
purchased principally for foreign account and by interior banks.
remained unchanged during the period at
Rates
4 l/'6 to 4 l/4 bid to 4 to 4
offered for 30-day bills and at 4 1/4 bid to 4 1/S offered for 60 and
90-day maturities.
l/3
803
FEDERAL RESERVE BOARD
WASHINGTON
Oct.ober 30, 2.'):2),
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
X-3872
Condition of Membership No. 18.
Dear Sir:
The Federal Reserve Board • w·hen approving the application for
membership of a. Sta.te ba.nking institution, which a.t the time of appl ica.tion ha.s insufficient ca.pital to entitle it to become a. national banking
associa.tion in the place where it is loca.ted, but which is eligible for
membership under the terms of the Federal Reserve Act, a.s amended by the
Act of Ma.rch 4, 1923, will impose in all cases the following condition:
(18) Tha.t, as provided in the Federal Reserve :Board 1 s Regulation H,
series of 1923, the bank shall increase its paid-up and unimpa.ired capita~ within five yea.:rs after" the approval of its application by the Fede.ral Reserve Board to $
For
the purpose of providing for such increase, the bank .shall set
aside each year in a fund exclusively a.p:plicable to such capital
incr-ease not less than fifty pe:r:' cent of its net ea.rnings for
the preceding year priOX" to the pa.yment of dividends, and i f
such net earnings exceed twelve per cent of the pa.id-up ca.pital
of the bank, then all net ea.rnings in excess of six per cent of
the pa.id-up capital shall be caxried to such fund, until such
fund amounts to $
Whenever such fund shall amount
to $
, or at such other t irr..e a.s the Fed e ra.l Reserve
Boa:rd may require, such fund or as rru.ch the:reof a.s may be necessa:ry sha.ll be converted into ca.pita.l by a. stock dividend o:r
used in any othe:r lli9.nner pe:rmi tted by Sta.te la.w to increase the
capital of the bank to the raquirad aimunt. Such inc:tea.se in
ca.pital may be providM in whole or in pa.rt by the sale 6f additional stock... Provided, that nothing herein contained shall
be construed a.s :requi:dng tha bank to violate any provision of
the law of the Sta.te in which it is located.
In telegra.phic communica.tions this condition will be J'efe:r.red to
as No· 18 and should be included as such under the code word "AJ•che:ry".
Very t:ruly yours,
Wa.lter L. Eddy,
Seer<::: taxy.
TO ALL F. R. AGENTS
804
FEDERAL RESERVE BOARD
WASHINGTON
X-3573
31, 1923.
October
SUBJECT:
Code words to be used. between Fed.er.sl Reserve 2anks in
connection vvith telegraphic purchases and sales of U. S.
Certificates of Indebtedness and Treasury Fetes.
Dear Sir:
In order to reduce phraseology in the large number of certain
telegrams between Federal Reserve Panys, it has been suggested to the
Board by one of the banks that additional code words supplied from the
Federal Reserve Telegraphic Code be designated to cover telegrams between
the banks which have reference to the purchases and sales of U. S. Certificates of Indebtedness and 'rreasury Notes.
This suggestion meets with the approval of the ~oard, and you
are advised that corn.rnsncing with Hovember lOth, the following code word
may be used by Federal Reserve Banks in their telegra~s to othet Federal
Reserve Banks, covering requests for purchase of U. S. Certificates of Indebtedness and Trea~ury Fates:
__
ft~Ju.mera te:
Please purchase at not to e:{ceed
Certificates or Notes Series
account
rnember baru~. Delivery through Commissioner of Public
Debt. .Advise amount and \Ve will credit • 11
$ ........
----
___._
In the same manner the following code word rr.ay be used by banks
in telegrams covering requests for sales of such Government securities:
"Nuchion: Upon authority Cotnmissioner of Public Debt
and payment federal funds please sell at ~.arY.et
$
Certificates or ::rates Series
Transaction 1Jo.
"
It is requested t:b..at the code words "NtJ..'1lerate" and· "truchion 11 indicated in this letter be added to the bottom of page 165 of the Federal
Reserve Telegraphic Cede, to follow the code word "!'Tumerally 11 •
Very truly yours,
J. C. Foell,
~ssistant
TO GOYEilliORS OF F. R.
BA1-ll~S
Secretarff.
FEDERAL RESERVE BOARD
WASHINGTON
X-<~S74
Nove1::1ber 1,
SUBJECT:
~923.
Surrend ~r of Fadar3l Has~rve Bank Stock upon
Reduction of Member Banks' surplus.
Dear Sir:Certain inquiries have b.:;en :r.:oceivad concerning the Board's
Circular IJetter X-3318, dat0d August 25, 1923, on the; abova
subject, and it seerr;s advisa.bL3 to ex:pla.1n certain featu:res
which were not directly consid orad in t:'lat latter.
The purpose of ti:1e ar::andrr.<::v..t to tha .Doa.rdls Hegulation I,
Series of 1923, omitting the rec;uir.:m:c.mt th3t r.~er.,ber banks rr:ust
file a.pplications fo.r tha sur:rendeJ' of F0deral Reserve Ba.nk stock
dhenave:r they make a. reduction in ;:;urplus, wa.io solely to make the
regula.tion confo:rm mora closely to the provisions of tha la.w,
a.s expla.ined in Circula_r Lettar X-3813.
The Board understcmds
that here to fore when mer.ber banlz.s h~:we :reduced their surplus,
it has been the practice of the F'eder31 Reserva Ba.nks to advise
such member banks that they r.:ust surrender stock under the
circurr.stances.
IJ:his practice should be discontinued, and
in ca.ses Nhere merr:ber banks reduce their surplus, they should
be invited by tha Fedet>al haset'Va :Be.nk to nake appliC9tion to
su'~"rend3r the a.pp.ropria.te a.t:.ount of F3de:ral I-i.esarve Ila.nk
stock.
Tha r.:;arrbe:r bank should be ad•:isad, howave:r; tha.t
the Fed0ra1 Hesarve :Boa.rd is of tha opinion tha.t there is no
provision of law wl:icb r aqui r~,s the surrender of capital stack
of Faderal Hase.rve Ba.nks upon tha rc.:duction of surplus by member
ba.nks, and tha.t, therefore, the rrember banks may exerCise their.
option in the ma.tter.
.
In the event a. member bank ·:vhich has :reuuced its surplus
elects not to surrender a.ny of its stock :i.n the Federa.l l\ese:rve
Bank., it will not be neces~a-JJ:· for you to advise the Fede:ral Reserve 3oa.rd, unless a. substantial ar.~ount of stock is involved ten shares or more -;- and such advice will be merely for the purpose of the Boa.rd 1 s .re co:rd s.
Very truly yours,
Wal ta:t' L. Eddy,
Secre ta)'Y •
TO ALL FEDERAL E.ESERVE .AGENTS.
( COPY )
X·3S75
July 16? 1923.
TO the Federal Reserve Po::.rd
)
(
FROM Mr.
~ryat t,
General Counsel.
)
Extent of Board's Power in Prescribing Conditions of Membership
for State Eanks.
The opinion of this office has been requested on the question
v.rhether in admitting State bar.ks to membership in the Federal Reserve
System the Federal Reserve Board has the right to prescribe any conditions of membership \vhich it deems necessary or advisable in order
to carry out the spirit and purpose of the Federal Reserve Act or
whether it rrny prescribe only such conditions as are necessary to carry
out the express provisions of the Act; and specifically whether the
Board may impose a condition prohibiting the establishment of branches
without its consent.
The answer to this question depends upon the proper
interpret~tion
of the following provisions of Section 9 of the Federal Reserve :1ct as
amended:
rrAny bank incorporated by special law of any State, or
organized under the general laws of any State or of the
United States, desiring to become a member of the Federal
Reserve System, may ~ake application to the Federal Reserve
Board, under such rules and regulations as it may prescribe,
for the right to subscribe to the stock of the Federal Reserve bank organized within the district in which the applying bank is located. Such application shall be for the same
amount of stock that the applying bank would be required to
subscribe to as a national banl:. The Federal Reserve Board,
subject to such conditions as it rr.ay prescribe, w.ay permit
the applying bank to become a stockholder of such Federal
Reserve Bank.
"In acting upon such application the Federal R.eserve Eoard
shall consider the financial condition of the applying bank,
the general character of its ~.anagement, and whether or not
the corporate powers exercised are consistent with the purposes
of this act. n
r~ ''~
X-3575 tJL·
-2-
*11 * * * * * * * *
** *
* * ~
f
* * * * * * * * * ** * • • * * * *
Subject to the provisions of this act and to the regu:J._at ions of the :Soard TJ:\de pursuan_"t__J_her-eto, any bank becoming
a member of the Federal Reserve System shall retain its full
charter and statutory rights as a State bank or trust company,
and rr:ay continue to exercise all corporate powers granted it
by the State in which it ~~s created, and shall be entitled to
all privileges of member banks; * * *."
OPIJ:HONS OF :80ARD'S FORMER COUl,YST<:L.
:Pefore discussing the results of my ovvn investigation of this question,
I wish to call attention to the fact that all of my. predecessors in this
office have advised the ~oard that it has power to prescribe conditions for
the admission of State banks to membership which go beyond the express provisions of the Federal Reserve let, andat least two of them have held
specifically that the Eoard is authorized to prescribe as a condition of
membership trdt the applying bank shall not establish any additional
branches except with its consent.
In a memorandum addressed to Honorable A. C. Miller of the Federal
Reserve Eoard, under date of August 2,
1917, Honorable Milton C. Elliott,
who was the first General Counsel to the Federal Reserve Board, said:
In my opinion, Mr. Perrin's letter to Mr. Giannini correctly
answers the question submitted. It rr.ay be well, hmllfever, for
him to supplement these ansvl/ers by calling attention to the
fact that, while Section 9 does not impose restrictions other
than those mentioned by Mr. Perrin, it authorizes the :Board
to impose certain conditions upon membership of State banks
when the corporate powers possessed by the applying bank are
inconsistent with the purposes of the Federal Reserve .;~.ct.
This being true the Eoard might reasonably and probably would,
in acting upon the application of the I'ank of Italy.__ which has
sixteen branches, impose the condition that the number of
branches should not be increased without express approval of
the Federal Reserve Board."
11
In a rr,emorandum addressed to the Board by Mr. George L. Harrison,
its second General Counsel, under date of October
that:
3, 1919, it is stated
X-3875•
-3-
,,, 8..
....--,.~·~,)
"-.J
.-..P
"Under the terms of Section 9 of the Federal Reserve
Act, any State bank which becomes a merrber of the Federal
Reserve System shall, subject to the provisions of the Act
and the Board 1 s regulation, retain its full charter and
statutory rights as a State bank and shall continue to exercise all corporate powers granted it by the State in which
it was created. The Federal Reserve Board, however, :i.s
directed in acting upon applications of State banks to consider whether or not the corporate powers exercised by the
bank are consistent with the purposes of the Act. Consequently, if an applying bank possesses charter pm'Vers which
the roard deems to be inconsistent with the purposes of the
Federal Reserve Act, the Board way properly, as a condition
of admission, require that the State bank agree not to exercise such powers or agree to exercise them in such waru1er
and subject to such limitations as the Board rray impose. 11
And in a memorandum dated December 12, 1921, Mr.
111alt
er S. Logan,
the Board's third General Counsel expressed the opinion that, "Section 9
authorizes the Board to impose its usual condition of membership with
respect to the establishment of branches."
,Copies of these opinions are attached hereto.
MY COJITCLUS ION_!_
In view of the importance of this question and the earnestness with
which the contrary view has been urged upon the roard by eminent Counsel,
I have not been content merely to adopt the opinion of my predecessors,
but have made a thorough, independent, and impartial investigation of the
entire subject, with the very able assistance of Mr. Vest, Assistant
Counsel.
Such investigation has convinced me beyond any doubt that the
conclusions of my predecessors were entirely correct, and that the Board
has power, in admitting State banks to membership in the Federal Reserve
System, to prescribe such reasonable conditions of membership as in its
discretion it deems necessary or advisable in order to carry out the
spirit and intent of the Federal Reserve Pet; that its power is not
limited to prescribing such conditions as are necessary to carry out the
-4express provisions of the J.ct;
at~d
that it may prescribe as a condition
of membership that the applying 'l::ank sha1l not establish any additional
branches without the consent of the Federal Reserve Bo&rd.
HISTORY OF DEVELOPNlE!TT OF SU::'JECT.
It is believed that a much clearer understanding of this question
will result from a chron?logical discussion of the history of its development.
Oriijinal Statute and Practice Thereunder.
Section 9 of
tl~
Federal Reserve Act as originally enacr±ed provided,
in part, as follows:
"The Organization Committee or the Federal Rese,ve I'oard under
such rules and regulations as it nay prescribe, subject to the
provisions of this section, n'ay permit the applying bank to become a stockholder in the Federal Reserve Bank of the district
in which the applying bank is located."
Acting under authority of this provision, the roard has always understood that it has the power to impose on State banks admitted to membership such conditions as in its discretion it deems necessary or advisable.
It acted on the theory that, even if this power were not included in the
power to prescribe rules and regulations, it was an incident of the power
to approve or reject the application of any particular state bank, in
the Board's discretion.
In other words, it acted on the theory tbat the
discretionary power to approve or reject any application included the
power to approve any application on such conditions as it might prescribe.
The
~oard
has consistently exercised this power from the very be-
ginning and has never hesitated to prescribe sucp conditions of membership as in its discretion it deemed necessary or desirable.
conditions, it
custo~arily
Among other
prescribed that before being admitted to
membership a State bank should agree not to establish any branches
with~ut
its consent.
This practice of the Board in irr;posing conditions of
membership had become well established before Section 9 was amended
in any1way.
The amendments, therefore, were enacted in the light of
this administrative practice and must be construed accordingly.
The Federal Reserve Board's letter transmitting its first regulations
with reference to membership of State banks (Regulation M, Series of
1915) cont.ained the following statements which indicate the Board 1 s
understanding of the scope of its power as well as the spirit in which
it approached this problem:
"A unified banking system, embracing in its membership the
well-managed banks of the country, small and large~ State and
National, is the aim of the Federal Reserve fct. ~ere can be
but one American credit system of nation-wide extent, and it
will fall short of satisfying the business judgment and expectation
of the country and fail of attaining its full potentialities if
it rests upon an incomplete foundation and leaves out of its
membership any considerable part of the banking strength of the
country. The way must be opened for State banking institutions
to contribute their share to the capital and resources of the
Federal Reserve I3anhs, in harmony with the intent of the Federal
Reserve Act and in accordance with its provisions. State banks,
trust companies, and national banks have their distinctive
characters and places in the American banking organization, and
these should be respected in coordinating them in the Federal Reserve System. The problem presented is to find a b~sis upon ~.£~ch ...
these different types of banking institutions rray thus be associated which shall be fair to each and which will not require
greater uniformity of operation than rray be necessary to the attainment of the purposes of the Federal Reserve ~ct.
"Appreciating fully that the strength of the Federal Reserve
System is to be measured by the quality and character of its me~
bers, rather than by their number, the Federal Reserve Board is
I2_repared to use the broad discretionc:..ry power vested in it by
the Federal Reserve Ict to bring about this coordination on the
bas is of eguity and practicability. The ~oard has sought, in the
regulations governing the admission of State banks and trust co~
Panies hereto appended, first, to establish only suCh reasonable
standards of admission as will be generally recognized as necessary to protect the Federal Reserve Systemand the national banks,
whose membership in the system is obligatory. against the admission
of any bank which would be a source of weakness rather than of
strength, and, second, to prescribe such regulations governing
X-3675
their conduct as will insure a reasonable conformity to fundamental principles deemed essential to the success of the new
banking system.
* *** * * * ** * ** * * * * *• ** * * ** * * * * * **
"The Board. realizes, however 1 th9-t membership also carries
with it of necessity obligations as well as privileges. The
Federal Reserve Act imposes certain fundamental conditions
governing the membership of State banks in the Federal Reserve
System, and prescribes that banks not organized under the Federal
law rmst comply with the capital and reserve requirements relating to national banks, and must conform to the pr~visions of
law imposed upon national banks respecting the limitation of .:."
liability which may be incurred by any person, firm, or corporation
to such banks, the prohibition against purchases· of or loans upon
·stock of such banks, the withdrawal or impairment of capital, and
the payment of unearned dividends, and must conform to other provisions of the Federal Reserve Act applicable to member banks,
such as restrictions on the amount of acceptances by such banks
and on transactions between such banks and their directors 1 and
to such rules as the Federal Reserve roard may prescribe.
** * * * * ** * * * * * * * * * * * * * ** * * * * * ** *
nThe conditions of membership of State institutions are,
furthermore, prescribed only in general terms in the act, the
further and final elaboration of them being left to the Federal
Reserve Board, which is vested with the necessary discretionary;
authority."
These statements show that when it first considered this subject
the. roard took the position tr.at it was authorized and expected to impose
conditions of membership which should go beyond the express provisions
of the Act and might include any provisions which the roard in its discretion believed necessary to carry out the purpose and intent of the Act.
The text of the regulation (Regulation M, Series of 1915) provided,
in part, as follows:
"In passing upon an application the Federal Reserve Doard will
consider especially "(1) The financial condition of the applying bank or trust
company and the general character of its wanagement.
"(2) 'ITh.ether the nature of the powers exercised by the said
bank or trust company and its charter provisions are consistent
with the proper conduct of the business of banking and with membership in the Federal Reserve Eank.
11 (3)
1,'lhether the laws of the State or district in which the
applying bank or trust company is located contain provisions likely
'
X-3!375
to interfere with the proper l'egulation and supervision of member
banks.
11 * * * ',Jhen~y_~r __ the Boad rray dee::n i t necessary, it will impose
such conditions as wmll ins~ corr:o~iance with the act and these
regulations. 1i'Then the certificate of approval ~nd any conditions
contained therein have been accepted by the applying bank or trust
company, stock in the Federal Reserve faruc of the district in which
the applying banl< or trust company is located shall be issued and
paid for under the regulations of the Federal Reserve Jl.ct provided
for national banks which become stockholders in the Federal Reserve
Banks.
** * ** * ** * ** * ** * * * * * * * ** * ** *** * *** *
"Every State bank or trust company while a member of the Federal
Reserve System "(1) Shall retain its full charter and statutory rights a.s a
State bank or trust company, and rray continue to exercise the same
functions as before admission, except as provided in the Federal
Reserve Act and the regulations of the Federal Reserve Board, including any conditions embodied in the certificate of apProval.
The portions of Regulation M, Series of 1915 above quoted, were
repeated in substantially the same form in the Board's Regulation H,
Series of 1916.
Amendment of June 21, 1g17.
On June 21, 1917, there was enacted into the law a bill which had
been drafted and submitted to Congress by the Federal Reserve Board for
the purpose of making a number of amendments to ·various provisions of
the Federal Reserve Act.
One of the principal purposes of those amend-
ments was to induce more State banks to join the Federal Reserve System,
and this result was sought in two ways; (1) By assuring them that the
liberal interpretation of the law previously adopted by the Board would
not be changed and that the Board would not amend those portions of its
regulations which assured to State member Banks the continued exercise
of the rights enjoyed b¥ them
~der
State law, subject to such conditions
as the Board might prescribe prior to the admission of such banks to
membership; (2) by repealing a number of provisions of the Federal Reserve Act which subjected State member banks to examination by the
X-3875
Comptroller of the Currency and to various provisions of the National Bank
which
Act. In other words, those portions of the bill/pertain to State bank
membership were designed to do two things: (1) To incorporate into law
the Board*s liberal interpretation of the Act and certain provisions of
its regulations based thereon; and (2) To eliminate certain other portions
of the Act which State banks had deemed objectionable.
The original language of that part of Section 9 last quoted above,
was amended by the lctof June 21, 1917, to read as follows:
The Federal Reserve Board, sub,i ect to such conditions as it
ITay prescribe, may permit the applying bank to become a stockholder of such Federal Reserve Bank."
11
The substitution of the word "conditions" for the words "rules and
regulations" which appeared in the corresponding portion of the original
act clearly indicates that Congress intended to sanction the Board's
established practice of imposing conditions of membership {which quite
frequently limited the exercise of the applying bank's corporate powers).
The power to prescribe rules and regulations which was originally conferred on the Board in the first paragraph of Section 9 was covered in
a new paragraph inserted by the amendment of June 21, 1917, as hereinafter explained, and this indicates that Congress intended to ITake a
distinction between (1) conditions of membership prescribed by the Board
and voluntarily agreed to by the applying bank prior to admission and
(2) rules and regulations which the Board might prescribe at any time
and might amend subsequent to the admission of any bank.
The same .Act also :rrade certain additions to Section 9, which are
pertinent to this discussion.
A new paragraph reading as follows, was
added after the clause last above quoted:
•
X-3875
814
"In acting upon such application the Federal Reserve Board
shall consider the financial condition of the applying bank, the
general character of its management, and whether or not the
corporate powers exercised are consistent with the purposes of
this act."
.
fl
comparison of this
pa~agraph
with the above quoted provisions
of Regulation M, ·Series of ·1915, will show that it was merely an
adaptation of the principles previously announced by the Board as a
basis for its action on the applications of State banks for membership.
This demonstrates beyond a doubt that Congress did not intend to change
the Board's established practice regarding the applications of State
banks for membership, but rather intended to confirm and perpetuate
such practice ..
The tenth paragraph of Section 9, whiCh was also
~dded
by the amend-
ment of June 21, 1917, contains the following sentence:
"Sub,iect to the provisions of this act and to the regulations
of the Board made pursuant thereto, aey bank becoming a member
of the Federal Reserve System shall retain its full charter and
statutory rights as a State bank or tru.st company, and rray continue to exercise all corporate powers granted it by the State
in which it was created, and shall be entitled to all privileges
of member banks: * * * n
This new paragraph was also an adoption by Congress of a portion
of Regulation M, Series of 1915, and Regulation H, Series of 1916, and
further indicates the intent of Congress to approve the Board's construction of the Act and its established practice in acting upon applications for membership.
The phraseology of'this provision is sub-
stantially the same as the wording of the Board's regulation, except
that the words "including any condition embodied in the certificate of
approval" found in the regulations are omitted from the Act.
It seems
clear that Congress omitted these words from this portion of the Act, because the power to impose "conditions" was specifically confirmed elsewhere,
-10-
,
i. e.\ in :raragraph 1 of Section g.
It is obvious, therefore, that
of Section 9 were
~ade,
al~
these chanr-es in the language
not for the purpose of changing the suhstance
of the law as it had been construed by the Federal Reserve Board, but
rather for the purpose of clarifying the law and writing into the statute
itself the liberal interpretation which the Board r.a.d given it, thus
assuring the State
ban~s
that the Board would not amend its regulations
in this respect or adopt a different interpretation of the law.
Practice of Board subsequent to Amendments.
That this was the Board's contemporaneous construction of the amendment of June 21, 1917, is indicated by the fact that the above quoted
portions of the regulations of 1915 and 1916 are to be found in substantially the same form in the new regulations issued by the Board on
June 22, 1917, fer the purpose of incorporating the changes made in other
parts of its regulations by the amendment of June 21, 1917.
The Board,
therefore, at the time of the passage of this amendrr.ent must have understood that Congress intended to make no changes in these features of
State bank membership.
This is es.pecially important in view of the fact
that the Board had drafted and recommended this amendment to Congress,
and, therefore, must have been
intended effect.
inti~..ately
familiar with its purpose and
The provisions of the present Regulation H are sub-
stantially the same in the respects discussed, as they WJere when issued
on June 22, 1917, the day after the amendment was signed by the President.
Furthermore, the Board has continued to prescribe
~any
of the very
same conditions of membership (including that with reference to the establishment of branches) as it prescribed prior to the amendment of
June 21, 1917.
At least two or three of these conditions have been
-11-
,
X-3575
prescribed for every State bank aJ.rdtted to w.embership since June 21, 1917.
The Board has thus been entirely consistent in construing the amendment of June 21, 1917, as approving its previQusly established practice
of prescribing conditions of membership Vl:hich go beyond the express
terms of the Act.
THE LA\T AS TO STAT13TORY CONSTRUCT ION BY EXECU"T IVE DEPARTMEJITTS.
The consistent and well established practice of the Board in prescribing for State banks admitted to rr:embership, any conditions which it
deems necessary to carry out the spirit and purposes of the Federal Reserve Act, is to be given great weight in the construction of this
statute, because the Board is the executive authority charged with the
duty of administering the Act, and in such case the uniform construction
of a statute by the executive authority is not to be overruled except
where plainly erroneous.
This is a well settled rule of statutory construction and has been
repeatedly recognized by the United States Supreme Court.
in United
It is stated
States v. Johnston, 124 U. S. 236, by Mr. Justice Harlan:
"In view of the foregoing facts the case comes fairly within
the rule often announced by this court, that the contemporaneous
construction of a statute by those charged with its execution,
especially wJ:len it has long prevailed, is entitled to great
wjejght, and should not be disregarded or overturned except for
cogent reasons, and unless it be clear that such construction
is erroneous."
In the case of RobertsorJ, v. Dovvning, 127 U.S. 607, in discussing the
construction of a statute by the Treasury Department, the court said:
"This construction of the Department has been followed for many
years without any attempt of Congress to change it, and without
any attempt, as far as we are advised 1 of any other Department of
the Government to question its correctness, except in the present
i~$tance.
The regulation of a Department of the Governrr1ent is not
of course to control the construction of an ./let of Congress when
its meaning is plain~ But when there has been a long acquiescence
-12-
X-3575
in a re~lation, and by it rights of parties for ITany years have
been deter~ined and adjusted, it is not to be disregarded without the most cogent and persuasive reasons. United States v. Hill,
120 U.S. 169, 132; United States v. Pnilbrick, 120 U.S. 52, 59;
Brown v. United States, 113 U.S. 56Z, 571."
As pointed out above the practice of the Federal Reserve Board in
imposing conditions on State banys when arunitted to membership existed
prior to the adoption of the amendment of June 21, 1Sl7, and prior to
that amendment the Board imposed the very condi tiun, which is the particular
that
subject of consideration here, ;with reference to branch banl<s. It is well
settled that in re-enacting or amending a law the legislature must be
presumed to have known of the established construction of that law by the
executive department.
ilnd <vhere the legislature, lmowing of that con-
struction, re-enacts or amends the law without in any way indicating its
disapproval thereof, it must be considered to have approved that construction.
Mr. Justice McFenna, speaking for the court in the case of
United States v. Cercedo
Her~anos
y Campania, 209 U.S. 337, said:
11 Te have said that when the meaning of a statute is doubtful
great weight should be given to the construction placed upon it
by the department charged with its execution. Robertson v.
Downing, 127 U.S. 607; United States v. Healey, 160 U.S. 136.
And we have decided that the re-enactment by Congress, without
change, of a statute, which had previously received long continued executive construction is an adoption by Congress of such
construction. United States v. Falk, 204 U.S. 143, 152."
In adopting the amendment of June 21, 1917, Congress not only failed
to indicate in any way disapproval of the Board's construction of Section
9 of the Federal Reserve Let as indicated by its regulations and by the
practice described above, but expressly indicated its approval of this
construction by incorporating them in the law itself.
This it did by
the use of the word "conditions" in the place of "rules and regulations 11
in the first paragraph of Section 9 and by adopting much of the language
-13of the Board 1 s regulations in the second and tenth paragraphs, as explained above.
This action on the part of Congr.ess seems to show beyond
question that it intended to sanction the Boa;:d' s established practice
and permit it to continue to prescribe any conditions of membership which
in the exercise of its discretion it considers necessary to carry out
the
purp~se
of the Federal Reserve Act.
POY::ER TO PRESCRIBE COtTDITIONS NOT QUALIFIED BY
TE!ITTH P1\ RAGRAPH.
It has been argued very earnestly that the power given in the first
paragraph of Section 9 to prescribe conditions of membership is limited
by the following language of the tenth paragraph of Section 9:
11 Sub,iect to the provisions of this act and to the regulations
of the board made pursuant thereto, a.ny bank becoming a 1 rr~mber
of the Federal Reserve System shall retain its full cba~~er and
statutory rights as a State bank or trust company, and rr:d,y continue to exercise all corporate powers granted it by the State
in which it was created, and shall be entitled to all privileges
of member banks."
Specifically, it has been argued that the Board 1 s power to impose
conditions is limited by this assurance that State member banks shall
retain their full charter and statutory rights under State law and
continue to exercise all corporate powers granted by State law.
~ay
But these
rights are to be retained and enjoyed "subject to the provisions of this
Act and to the regulations of the Board.rrade·pursuant thereto."
argued that this
~eans
It is
that the rights enjoyed under State law are
limited only by the express provisions of the Federal Reserve Act and by
regulations of the Board which merely interpret and carry into effect
such express provisions.
One of the express provisions of the Act, how-
ever, is that the Board shall have the poweT to impose conditions of
membership before admitting a bank to the Federal Reserve System, and it
-14-
X-3875
is clear that the Board's power to impose such conditions was intended
as a limitation on the exercise of the powers enjoyed by them
State law.
1L~der
This result is obvious when we consider the fact con-
elusively demonstrated above that the amendment was intended to incorporate into the law the Board 1 s existing regulations, which provided
that:
rrEvery State bank or trust company while a member of the
Federal Reserve System -
"(l) Shall retain its full charter and statutory rights as a
State bank or trust company, and '.rr.ay continue to exercise the
same functions as before admission, except as provided in the
Federal Reserve Act and the regulations of the Federal Reserve
Board, including any conditions embodied in the certificate of
approval."
Furthermore, the interpretation contended for by Counsel for the
State banks would deprive the language of the first paragraph of Section
9 which
authorizes the Board to impose conditions of rrembership of all
meaning and effect.
If the Board may impose only such conditions aG are
expressly stated in the law or are incorporated in regulations based
upon express provisions of the Jet, then it would be useless and unnecessary to prescribe conditions of membership, and thus the grant to the
Board of the authority to
~ose
idle and meaningless provision.
stat~tory
conditions of membership would be an
It is one of the fundamental rules of
construction, that the various provisions of a statute must be
read together and harmonized, if possible, in such a way as to give some
meaning and effect to all the various provisions thereof.
Congress will
not be presumed to have used words in a statute without intending them
to have some meaning, and the · sole purpose of statutory construction is
to seek out and give effect tc that meaning.
X-3875
-15DISTUTCTION BE'F'IDT
11
REGULATIONS" A."'D
11
CONDITIOFS ~"
The regulations to be prescribed by the Board under the authority
contained in the tenth paragraph of Section
9
must be
n~de
pursuant to
the provisions of the .Act, i. e. , they must be based upon ~n:d intended
to carry into effect some express provision of the Act, -
The power to
impose conditions, however, is something entirely different.
It was
given to the Board in order to enable it to prescribe conditions before
admitting a State bank to membership which would cover matters not covered
by aPY express provision of the law and which, therefore, could not be
covered by any regulation made
pur~ant
to the express provisions of the
law.
Furthermore, there is another important practical distinction between
11
conditions 11 and "regulations".
Conditions of membership must always
be prescribed by the Board and voluntarily agreed to by a State bank
before it is admitted to memborship, while regulations
~ade
pursuant
to the terms of the law may be prescribed at any time and may be amended
from time to
ti~e.
This is entirely in accordance with the demands of the State banks
which led to the enactment of the amendment of June 21, 1917.
They had
represented to the Board that before coming into the Federal Reserve
System they wished to know exactly what terms, conditions, and regulations
they would be required to comply with and they wished to be assured before being admitted to membership that the Board would not thereafter
amend its regulations in such a way as to change the terms and conditions
on which they had entered the System.
This desire is fully met by the
interpretation which the Board has placed upon the Act,
Inasmuch as the
f
X-3S75
-16-
Board 1 s ;:_egula.tions regarling State member bar.ks must be based upon
express provisions of the Act, the banks know in advance what such provisions are, and they can not be substantially changed witJ::lout an amendment to the law.
As to conditions of membership. they are equally pro-
tected, because such conditions must be
prescri~ed
before such banks
become members, and when the Board has prescribed the conditions on
which it will admit a particular State bank to membership that banl;: has
the option of voluntarily accepting those conditions and becoming a member
of the System or refusing to accept the conditions and staying out of
the System.
If it voluntarily accepts the conditions and becomei a
member, the Board can not> thereafter change the conditions without· the
bank's .consent, and the bank can not justly··cornplain of the conditions
because it has voluntarily agree.d to them.
The Federal Reserve Board, of
co~se,
has no power to prescribe
arb.atrary conditions or conditions which have no reasonable relation to
the purposes of the Federal Reserve Act.
But on.the other hand, it is
evident that in prescribing conditions the Board is not restricted to the
express provisions of the Act.
It
~ay
prescribe any condition which is
reasonably necessary or incidental to carrying into effect the broad
purpose and policy of the Federal Reserve Act.
POWERS OF STATE
B~TKS INCONSISTE~T
WITH ACT.
The second paragraph of Section 9 of the Federal Reserve Act provides:
"In acting upon such applications the Federal Reserve
Board shall consider the financial condition of the applying
bank, the general character of its management, and whetrer
or not the corporate powers exercised are consistent with
the purposes of this act."
If any of the corporate powers of the applying bank are not consistent
1
~.
-17-
X-3375
with the purposes of the Federal Reserve Act, then the Board is
authorized to reject the application or to prescribe conditions of
admission to membership to reconcile these inconsistencies.
that the Federal
~eserve
It is clear
Board is to exercise its own discretion in ap-
proving or rejecting applications or in prescribing
conditions~
It is
also to exercise its discretion as to what conditions of membership to
prescribe.
If the Federal Reserve Board in the exercise of its dis-
cretion and judgment, believes that a certain condition is necessary in
order to make the powers of an applying bank consistent with the
poses of the Federal Act, it may prescribe such condition.
is one to be
deci~ed
entirely by the Federal Reserve Board.
other reasonable construction of the Act possible.
iri the Act what powers are
inconsiste~t
pur-
The matter
There is no
It is not indicated
with membership and the Federal
Reserve Board, therefore, must be the judge.
In the exercise of its judgment and discretion, the Board may find
that the establishment of an unlimited number of branches is inconsistent
with membership and with the purposes of the .Act.
It might base its
judgment on the grounds that a large number .of branches make the proper
supervision and examination of the member bank impossible, or that an
unlimited number of branches is inconsistent with the independent system
of banking which was the basis upon which the Federal Reserve System
was founded.
In such cases, and in any other cases in which the Board
in its discretion considers it necessary or advisable, it may legally
and validly impose a condition prohibiting the establishment of branches
without its consent.
X- 3375
-18-
POWER TO PRESCRIBE C01'DITIONS lWT A POWER TO LEGISLATE.
It has been contanded that if the Board 1 s interpretation is correct
the grant to it of the power to prescribe conditions of membership is an
unconstitutional delegation of the power to legislate; but such contention is clearly erroneous.
, The power to prescribe the conditions on which the Board will admit
a particular bank to membership is not a power to legislate.
It is merely
a power to enter into a voluntary agreement with each individual bank
which desires to become a member of the Federal Reserve System and in
that agreement to stipulate that certain conditions must be complied with
or agreed to by that bank as a prerequisite of membership.
The con-
ditions prescribed necessarily vary with the different banks which apply
for membership and must be made to fit the facts and circumstances of
each particular case.
In the case of one bank numerous conditions rray
be necessary in order that it may
b~come
suitable for membership in the
Federal Reserve System and rerrain suitable after
admission~
case few conditions or no conditions rray be necessary.
In another
Tihether or not
conditions are necessary and what conditions are necessary are questions
of fact requiring the exercise of administrative judgment in each particular
case.
The Board must consider all facts and circumstances in each case
and impose such conditions as in its judgment it believes to be necessary
or advisable under the peculiar circumstances of that case.
rratter which clearly could not be covered
!tis a
qy general legislation.
It is not possible to have a general set of conditions which would
apply equally well to all banks which make application for membership.
this were true, Congress itself undoubtedly would have prescribed a
If
-19-
X-3375
uniform set of conditions in the law and wlth those conditions all
applying_.- banks would be obl1'r:ed
to comply.5
Sl."'C""
d ~
thl·s "•as
not
"
~os~l.,__le
.t:·
;;, 1,...
j
Congress has vested the Federal Reserve Board with a broad discretion in
prescribing conditions of membership so that the conditions presented rray
fit the facts in each particular case.
It is well settled that Congress
rray vest such discretionary power in administrative officers or bodies
and that it does not constitute a delegation of the power to legislate.
Field v. Clark,
143 U.S. 649i Buttfield v. Stranahan, 129 U.S. 470;
United States v. Grirr.aud, 220 U. S.
United States, 216 U. S.
506, and Monongnhela Bridge Co. v.
177; Intermountain Rate Cases, 234 U.S. 476;
First National Bank v. Fallows, 244 U.S. 416.
CC~ITIONB.
AGAINST
BR~NCRES.
The Board being thus empowered to presctibe such conditions as in
its judgment and discretion are reasonably necessary to carry out the
spirit,
pu~pose
and intent of the Federal Reserve Act, it seems obvious
that there are some circumstances under which it has the power to prescribe as a condition of membership that a State member bank shall not
establish any branch without first obtaining its consent.
If upon in-
vestigation the Board finds that a bank applying for membership has a
large number of branches and th:L t the establishment of more branches would
such
be likely to affect its solvency, the powe? of the Board to impose/a condition would seem to be beyond
Board1s powar might admit
circu.:instances
J
this~
~uestion.
Even those who question the
The Board then has the power, under some
to prescribe the condi ti.on with reference to branches.
this is true, it must necessarily have the power to decide under what
circumstances such a condition :should be re~uired.
It is a rratter of
discretion with the Board as to When this condition is to be imposed.
If
f
....
X-3375
-20-
Ani so it is a matter of discretion with the Board whether or not to
permit a State member tank 'llfhich has a5reed to this condition
regarding branches to establish a particular branch.
It has been argued recently that the question whether or not a
State bank should be permitted to establish a branch is
pri~arily
a local
question for the determination of the State authorities and that the
Board has nothing to do with it.
The question whether or not a State
bank should be permitted to establish a branch and
a~
the same time be-
come or remain a member of the Federal Reserve System, however, is a
question for the determination of the Federal Reserve Board alone.
In
considering this matter the Board must use its own discretion and
judgment independent of the State authorities and must consider the effeet which its consent to the establishment of such a branch would have
upon the Federal Reserve System.
lishrnent of such a branch by
~he
It must determine whether the estabState bank would, or would not, be con-
sistent with the spirit and purposes of the Federal Reserve Act.
With
this question the state authorities have no concern, and the decision of
the State authorities certainly can not control the Board 1 s decision.
If the Board in its discretion finds that a possible injury to the system
would result or that the establishment of a proposed branch would be
inconsistent in any way with the spirit or purpose of the Federal Reserve Act, then it may decline to approve the establishment of that
branch, regardless of the attitude of the State authorities as to the
establishment of such branch.
cmrcLUSION
I am of the opinion, therefore, that in prescribing the conditions
-21-
X-3375
on which it will admit State banks to membership, the Federal Reservg
Board is not limited to such conditions as are necessary to carry out
the express prGvisions of the Federal Reserve .Act, but it rray impose
any reasonable condition which it deems nec-,essary
or advisable to carr7
out the spirit and purpose of the 4ct, and in determining what conditions are necessary or advisable it must use its own discretion and
judgment.
If, in the exercise of this discretion and judgment, the
Board believes that a condition should be imposed upon an applying bank
prohibiting it from establishing branches without the Board 1 s consent,
then it may legally and validly prescribe such a condition as a prerequisite to membership.
Walter \.'yatt
General Counsel
VJ\7 S.AD OMC - F
FEDERAL RESERVE BOARD
WASHINGTON
x~3s76
Nov amba r 1 , 1923 ~
SUbJECT;
Fada:ral Hesarva Bullatin: Subscription Rats fo:r.
Exar,1in.Jrs of Stat.; Banking Depa.:rt;;,;nts.
Daal' Sir:
Rafer:ring to tha Joa.rd's lattd:r
X-3554 of Novamb0r 6,
1922, you a:re advised tha.t the specia.l :ra.ta of $2.00 pa:r. a:.mu1n
fo:r. subsc:r.iptions to the J!'ade:r.al 'Ras:rrva Bulla t~n for tha usa of
Examinars of tha Stata Banking Dapa.rtr::ants will apply du:ring
the
~msuing
yea.:r.
In o:r.de:r. that subsc:r.iptions n:ay begin Nith the Ja.nuary
issue, plea.se forwa:rd to th..J Joard, not lato1:r th.:m Dacemba:r:- lOth,
a. list of tha State Bar.k Exar;,inc :rs in you:r District to
~Vhor.:
tha
bullatin should be supplied.
Tha Boa.:rd fu.rnishss a. cor.::.plimanta.ry copy of the :i3ul-
latin to tha Banking Cowr.1ission;;;:r of each Sta.t0 a.nd therefore the
na.r..:es of thas..J Cor,:xr.ission-:J:r.s r.;a.y be: orr:ittad f:r:-or.: your list.
Very truly y(mrs,
J~
C. Neall,
Assistant Sac:r.~ta.:r.y~
TO .ALL FEDERAL DESERVE .AGENTS.
.....
( COPY )
X-3f)79
Nov. l, 1923.
To
Mr. Dawa s , Cha.irn:an, Exami na.t ion
Co111r.1ittee.
From M:r. Wya.tt, Gene:ra.l Counsel, Faderal
Reserve :Boa.r.d
Subject:
Power of the Board to Adopt
a. Policy with Reference to
B:t"anches of Sta.te Membe:t"
Ba.nks.
You have ret}uested my opinion a.s to whether or not the Federa.l
Reserve Board would be a.cting within its legal rights if it should
a.dopt the following :t"esolution:
VJHEBEAS, the Federal Reserve Act contempla.tes a. unified banking
system in which Sta.te and na.tional banks can pa.r.ticipate on
a. basis fair to both, and,
WHEREAS, Sta.te banks in certa.in Sta.tes have been perr.1i tted by
law or regulation to enga.ge in Sta.te-wide branch banking,
while na.tiona.l banks are restricted by the Federal Sta.tutes
from es ta.blishing branches or offices beyond the limits of
the city in vi.nich the pa.rent bank is lo ca. ted , and ,
WHEI'~AS,
the :Boa:rd believes tha.t this results in an inequi ta.ble
situa.tion which renders it impossiblt;;J for na.tiona.l a.nd Sta.te
banks to exist together in the Federal Reserve System on a.
fa.ir'competitive ba.sis unless the powers of Sta.te and
na.tional member ba.nks to enga.ge in branch ba.nking a.t"e
reconciled 1 and ,
WHEREAS 1 in the interest of the successful administra-tion of
the Federal Reserve System, it appea.rs necessa.:ry and desira.ble to confine the opera.tions of mer:1be:r banks within
:reasona.ble te:r:r.i to:rial limits, a.nd ,
WHEREAS, the Federal Rese:rve Boa:rd is authorized by the Federal
Reserve Act to prescribe conditions under whiCh applying
Sta.te banks rrJB¥ become members of the Federa.l Reserve Sys tam,
NOW, THEREFORE, BE IT RESOLVED, tha.t the Boa.rd continue herea.fter
a.s heretofore to require Sta.te bank:s applying for admission
to the Federal Reserve System to a.g.ree a.s a. condition of membership .tha.t they will esta.blish no branches except with the
permission of the Federal Reserve Board;
BE IT FURTHER RESOLVED, tha.t a.s a. general principle, Sta.te banks
with branches or a.dd i tiona.l offices outside of the corpora.te
limits of the city or town in which they are loca.ted or
territory contiguous thereto ought not be !).dmitted to the
Federal Reserve System except upon condition tha.t they relinquish such branches or additional officesj
-2-
X-3879
BE IT FI:JB.THER BESOLVED, tha.t, a.s a. gene:ra.l principle·, Sta.te
banks which a.re members of the Federal Reserve System ought
not be permitted to establish or ma.inta.in branches or addi tiona.l offices outside the co'I"J)ora.te limits of the city
or town in which the pa.rent bank is loca.ted or terri tory
contiguous thereto;
BE IT 'FURTHER RESOLYED, tha.t in a.cting upon individual al;)plica.tions of Sta.te banks for a.dmission to the Federal Reserve
System a.nd in a.cting upon individual a;pplica.tions of Sta.te
banks which a.re members of the Federal Reserve System for
permission to establish branches or additional offices, the
Board, on and after February 1, 1924, will be guided genera.lly
by the above principles;
BE IT FURTHER RESOLVED, tha.t the term 11 terri tox-y contiguous thereto11 a.s used a.bove shall mean the tex-:ri toty of a. city or town
whose cox-po:r.a.te limits a.t son:e point coincide with the
co:rpora.te limits of the city or to'Jll in which the parent bank
is loca.ted.
:BE IT 'FURTHER RESOLVED, tha.t this resolution is not intended to
a.ffect the sta.tus of a.ey branches o:r additional offices established p:do:r to Feb:rua.ry 1, 1924.
rr..As I interpret it, this :resolution would not establish an absolute,
ha.rd and fa.st :rule a;pplicable in a.ll ca.ses, but would merely s ta.te certa.in
general principles fo:r the guidance of the Board in a.cting upon individual
ca.ses which a.:re presented to it. Being merely a. sta.tement of general
p:rinciples, it would not bind the :Soa.rd absolutely to a. definite cou:rse
of a.ction in eve:ry ca.se tha.t. might a.:rise in the futu:t<e, and the :Soax·d
could make exceptions in any individua.l ca.se in which such general
principles a.ppea:r to be ina.pplica.ble •
.After tho :rough investiga.tion a.nd caxeful study of the :Boa:rd' s power
to p:rescribe conditions of membe:rship, I l"endered an opinion under da.te
of July 16, 1923, in which I reached the conclusion tha.t, in admitting
Sta.te banks to membe:w:-ship in the Fecteral Reset'Ve System, the Fede:ra.l
Resene Board ha.s power to prescribe such rea.sona.ble conditions of membe:rship as in its disc:retion it deems necessa.x-y o:r advisable in order
to ca:r.:ry out the b:w:-oa.d purposes and policy of the Fede:w:-al Resex-ve Act
and is not limited to such conditions a.s are necessa.ry to ca.rry out the
exp:ress provisions of the Act; and tha.t if, in the exe:rcise of its disc:retion a.nd judgment, the Board believes tha.t a. condition should be· imposed upon an applying bank px-ohibi ting it fx-om esta.blishing branches
Without the Board's consent, then the Board may legally and va.lid).y
p:r-esc:ri l:e such a. condition a.s a. prerequisite to membex-ship. I a.lso exp:ressed the opinion tha.t, when the :Boa.:l'd ha.s px-escribed such a. condition
and the bank in question ha.s a.ccepted i t a.nd become a. oember of the
System, the Boa.:rd ha.s a. x-ea.sona.ble d isc:retion in dedding whether o:r
not to penni t tha.t bank to establish a. pa:-rticular branch; and tha.t if
~3-
X-3879
it believes that the establishment of a. pa.:t"ticuls.:r branch would be
inconsistent with the spi:t"it ox- purp0se of the Federe.l Reserve Act,
then it rre.y pX'operly de cline to pex-mit it.
In that opinion a.ttentiol.l. we.s celled to the fact tha.t in a.cting
upon the a.pplice.tion of a. Sta.te ba.nk for admissi.on to the Fede.t'al Rese.t've System, the Fede.t'a.l Reserve Boa.J:'d is exp:cessly X"~qu:i.red to conside:t' "whether ox- not the corpox-a.te powe:rs exero:i.sed a::.-e amsistent
with the purposes of this Act." That :requi:rer:Jent of the Act we.s discussed in p8Xt as folloii'/S (pa.ge 17):
"If any of the co:rpora.te powers of the epplying ba.nk a.x-e
not cons is tent with the pttl.'poses of the Fede:t'al Rese:rve .Act,
then the :Boa:r.d is authox-ized to :reject the applica.tion o:r. to
px-escribe conditions of admission to membership to x-econcile
these inconsistencies. It is clea:t· the.t the Fede:r.el Resex-ve
Boa.rd is to exe.rc~ise its ovm d isc~e tion in a.pproY:i.ng or x-ejecting a.pplic.a.tions or in prescribbg conditinns. It is also
to exeX'cise its d isc:retion e.s to wha.t conditions of membex-ship
to prescribe. If the Fede:ra.l Reserve :Boa.rd in the exex-cise of
its discretion end judgrr;ent, believes tha.t a. ce:r.ta.in condition
is necessary in ox-der to make the powex-s of a.n applying bank
consistent;. with the pu:rposes of the Fedex<al Reserve Act, it
rrJ3.Y px-escribe such condition. * * * It is not indica.ted in the
Act what powe:r.s a:t'e inconsistent with membership a.nd the Fedex-al
Rese:rve Boax-d, therefo:t·e, must be the judge • 11
It appears from the x-epox-t of your Committee rec.ommending the
adoption of the above x-esolntion· tha.t the p:t'inciples sta.ted in tha.t
resolution a.re based upon two p:r.opositiClns: (1) That one of the funda-mental pu:rposes of the Federal Reserve Act is to cx-ea.te a. unified.
system of bar..king in which Sta.te and ne.tiona.l banks can exist togethe:r
on a basis faix- to bothj and (2) that the admission of Sta.te ba.nks
to the iFedera.l Resene System with the unrest:rictRd povve:t' to engage
in Sta.te-wide bx-a.nch ba.nking is inconsistent wi t.h tbis pu:rpose of the
Act, beca:nse i t cJOeates a. competitive situa.tion under which national
banks cannot continue to exist.
If the Boa:?.'d thus finds that the power of a. pe.:rticula.r bank to
enga.ge in State-wide branch banking is inconsistent with the pu"-'poses
of the Federal Reserve Act, i t may, undex- the principles set forth
in my opinion of July 16, refuse to adrr,i t any pa.x-ticula.:r Sta.te bank
having such power o:r. it may edmit i t only on condition tha.t it a.g:ree
not to exe:t'cise such power except with the Boa.rd' s consent •
Having the powex- to impose such a. condition, the Fedex-al Rese:rve Board must necessa.x-ily ha.ve the powex- to e.dopt genex-a.l principles
-4fol' its guidance in a.cting upon ea.ch ind ividua.l case Which is
presented to it. Ina.smuch as the a.bove quoted :t'esolutionpurports
to do nothing rr.o:re than this, I am of the opinion tha.t the BoaJ•d would
be a.cting within its legal :rights in adopting such a. :t•asolution.
Respectfully,
(signed) Waltel' Wya.tt
Gene :r.al Counsel.
. ...
_._
FEDERAL RESERVE BOARD
WASHINGTON
X-}880
November 6, 1923·
SUBJECT:
Adhti.nis tra.tion pf the Clayton Act.
Dear Sir:
The question has been ra.ised in the past, whether a. pel"mit
issued under the Kern .Arr.endment authorizing a. person to serve as
director of a. na.tional bank and some other ba.nk: continues to be effective after such na.tional bank consolida.tes with another na.tiona.l
bank under the provisions of the Act of November 7, 1918. This Act
provides, in part:
nAny two or more na.tiona.l ba.nking associa.tions * >it
may * * * consolida.te into one associa.tion under the
cha:rter of either existing bank * * * .All the rights, ·
franchises and interests of sa.id na.tional bank so consol ida. ted in ar.d to every species of property, personal and
mixed, and choses in a.ction the:re to belonging, shall be
deemed to be tra.nsfel"red to and vested in such na.tional
bank into which it is consolida.ted without any deed or other
transfer, and the said consohdated na.tional ba.nk shall
hold and enjoy the same and a.ll :rights of property, fl"anchises, and interests in the same manner and to the san:e
extent a.s wa.s held and enjoyed by the na.tional bank so consolidated therewith. rt
These provisions necessa.:rily imply that the co:rpora.te existence of the consolidating or constituent banks s:r.a.a~l be termi:ria.ted,
while the corpora.te existence of the a.bsorbing bank continues and
ca:r:ries with it a.ll the rights and interests of the defunct consolidating banks. The consolida.ting banks a.cco:rdingly cease to exist a.s
sepa:ra.te corpo:ra.tions and permits covering them must be deemed simila.rly
to termina.te, unless it can be sa.id tha.t permitted dil'ectorates in such
banks i:l:t'e included in the rights, franchises or interests of a. conso1ida.ting national bank which a.:r:e transferred upon a. consolida.tion
within the meaning of the .Act of November 7, 1918. The Board previously ·
held tha.t a. permit issued under the Kern Amendment is a. pe.r.sona.l
license to the a.pplying director and does not constitute such a. right •
franchise or interest of the consolidating na.tional bank· In cases of
conso].idation of national banks, therefore, the Board ruled tha.t a.
permit will continue to be effective where the consolidation is ca:r.ried
out under the charter of the na.tional bank al:r·eaoy covered by the permit,
but tha.t the permit will lapse a.nd a. new permit will be required where
the na.tional bank cove :red by the pe:rmi t consolida.tes with a.nd under the
charter of anothe.r- national ba.nk.
-·2-
X·-3BBO
The Boerd ha.s recently :1ad occasion to :r.econsic1ex· thh ruling
and 1 afte:r careful study 0f Uie entire q1lS,:s:tion, i t i.s now of the
opinion that the;. e is no waXJ'a.n~ in J.aw :"'c,r th0 d .i.s ti.nc tiion made in
tha.t Ml.ling. W~'J.ile a. pe:--r.ui t :issw'3d ur.tC! ->X' the Ke.1:n Aco~n·i;::;e:nt is primarily
a. pa:rsonal lice:1se to the applying d:'sec:t,(rr 1 giv:i.ng h:i.m the :r:ight to
se:rve ::.n cnx·t.e.in capscities, it ftlso r.cnfe:rs upon the be11..k pnV•)lved a.
definite, th·:mgh incidenta.l, inter8at in '~he oi:::ector 1 s ser'Vices and
the Boa:::·d believes that this :i.nte:r.est of the b:mk shouJ.d be const:>.'<:<ed
a.s includeCI in the d gc1ts, fl'enchises or interests of a consolida.ting
na.tional bank within the mP.a.aing of the Act of Norember 7, 1918. The
dist~ncl;ion d:r·avvn :tn th8 nr)aJ'C Is fo,•mer :rul:i.ng 1''85 based enti.r.ely ~Upon
tbe question of which d.a,·ter wa.s selected a.s the b8sis fox- the consolidat~.on, bnt the Eoa.1d ~.s now of the opinion t.bat ::he rr:er-e choice of
a cha:t:"te:r sho,.;;.ld make no d :i..ffe:t:'ence fo:r- the pu1·poses of a. Clayton Act
permit, since :it was the o"r>v:lou:. in·i·e.1t vf the Act of November 7, 1918,
to t:l'Emsfe:t· to the cnnsoliCia.ted :i.nst.itntirm a.ll thA .rights, interests,
and P'~ivileges of all the cons titu.:=:nt banJ:.:s, i.t'res?ect:i.ve of which
na.tional bc.lllk wa.s selected to continue its charte:t:' and its co.r.po:r:-a.te
entity.
The Board a.cco:rd ingly :r-ules that where a. perrni t is g:r:-a.nted
to a. person to se"ve a.s d5.rector of a. nC~.ticnal oan'k: and some othe:r:- bank,
and the :Ja.ticnC~l bank S'tb:~~q.uently consolid:a.tes with 1mothe:r. na.tiona.l
bank, under. the Act of November 7, 1915, the pe:r:-mit will continue to
be effective and vvi.ll aut'lo:rize the di:t·ecto:r in q11estion to se:r-ve the
consolid?.'ted na.tj.cma.l b&l1k and. the ot.he:r bank, i:rx·espective of which
natior..al bnk ~ha.rt::3:r:- WEtS selected as the basis fox- the consolida.tion.
Su~h pe.;_·mits, howeve:r, will be subject to x·evocGtion a.nd, a.s sta.ted
in the Board's ci::-cular lette:r X-3603, dated Janua-ry 2, 1923, the Boa.:rd
will consider . the revocation of l.Jer"ml ts in cases where existing interlocking d irec~orates have had the effect of J.essening o:r stifling compet Hi on between banks whicll, but for the comn;on di.recto:r:-a.te, would
freely compete. Federal I(8se:r.ve Agents will, therefore, :r.epo:r:-t to
the Board a.ll cases of interlocking d irecto:ra.tes jnvolving na.tiona.l
banks which have consolida.ted whe.re, in the ..<\gent's opinion, the q.uestion
of the :revoca.tion of pe:rmi ts should be considered by the BoaJ·d in
a.ccordance with the p:r.a.ctice herctofo:r:-e indicated'
Very t:r:-uly you-rs,
Walter 1. Eddy,
Se c:re ta.ry.
TO
ALL F.
R.
AGENTS.
FEDERAL
:RESERVE
BOAI\D
STATEMENT :FOF.. 'I'H: ?:tESS
X-3881
Fo :r l-mmed ia te lh:l e os e •
November 7, 1923·
The Federal Reserve :Board, a.t its meeting today,
adopted by a ma.jori ty vote the following report a.nd the resolution contained therein, which was submitted to it by a. Committee of its members who have had under study the development
of branch banking in the United States, with a view of :recommending to the Board the policy which the Boa.:rd should pursue
in admitting tc membership in the Fedenl Reserve System state
banks ma.inta.ining branches outside the corpo:ra.te limits of the
city or to\vn or contiguous territory in WhiCh the parent bank
is loca.ted; a.s well a.s the policy which the :Board should pursu~
in conside:r:ing applica.tions of sta.te ba.nl-r:s already ml3mbers of
the System to establish additional branches or offices outside
the corpo:r.ate limits of the city or town or contiguous te:rritory in which the pa..r.ent bank is loca.ted.
.
'
835
TO
~
FEDERAL RF.SF.RVE
noA~D~
The Examination Committee
Board a resolution accompanied
Counsel of the Board) upon
~Y
~ich
here·~tith
submits to the Federal 'Reserve
an opinion a; to its legality by the
it recommends immediate and favorable action.
The substance of this resolution has be9n a matter of long and intensive
study by all tf the members of the Federal
~eserve
noard and the Board should
be,· therefore, in position to express itself and to take a definite stand on
the su'bject.
The conmittee
desir~s
to submit the follo"1ing reasons for
recommending this resolution 'Vhich lays do-vn certain general principles for
the guidance of the
~oard
in acting upon the individual oases presented to
itt
The organization of the Federal
of the
po~r
~eserva
System was possible because
of the National Gov9rnment to enforce the cooperation of the
national banks.
At its inception it waa primarily an instrumentality of
coordination> imposed upon the existing national system 1 but the full
m~mber
ship of the Federal Reserve System is no·• composed of banks which are otganiwed
under 49 different governmental authorities, operating through the National
Bank Act and the banking laws of the 48 different states.
The intent of the
Federal Reserve Act is necessarily to compromise and reconcile the operations
of the banks under these 49 different sets of laws 1 since a rigid and technical
adherence to a. detailed formula. would make the Federal Reserve
ticable of oper.ation.
~rovidea
~yatem
imprac-
Recognizing this principle the Federal Reserve Act
fer the supervisory control of the operations of the
mem~er
banks
by the Federal Reserve Board and clothed this Board with certain discretionary
powers over the member banks in order that, amongst other things 1 it should
have the duty of seeing that the
11
corporate powers exere ised are consistent
with the purposes of thia Act".
I! a. bank er a group of banks is engaged in a. form of banking or
in practices which are prejudicial to the successful operation of
system~
the
Fe~eral
th~
Reserve Act permits, and indeed requires 1 that the
.
836
]
Federal Reserve
~card
should assert its authority to compel
conformity on the
t.
part of such member '!Janke to the fundamental principles upon ·vhich the Act is
based, as ·•ell as to the specific provisions thereof.
the question ae to wheth>r or not.bra.neh
antagonistic to the Federal Reserve
certain Member
~anke
~anking
~ystem,
"rithout passing upon
is in its fund&menta.ls
the fact ia indisputable that
are privileged in a praetice which ie definitely for'bidden
to other Member Banks and
~hich,
very naturally, has resulted in unfair competi-
This disadvantage applies •qith special force to the National "anks '!l!hich,
tie~n.
in the opinion of t\'Vo Attorneys· 0!3nera.l 1 have not the right to indulge in
any form of corporate activities beyond the limits of th& city or to·vn in
''hioh the bank is located.
It is the opinion of your Committee that the unlimited extension of
the practice of
~tate
Pra~h
:Oa.nking will give to banks operating under liberal
Charters suc'-1 competitive advanta!!es
members of the Federal Reserve
~ystem,
ov~r
the unit
~a.nks
as to impair materially
whioh are
th~ir
use-
!ulness, if it, in fact, does not ultimately result in their extinction.
Your committee believes that it is clearly the duty o! the
Reserve Poard to lay
do~
a policy to the
~eneral
F~dP.ral
end that all banka, National
alld State, nay operate for the good of the ~ystem, and that the good of the
System cannot be subserved ,,. the operation ·dthin ·it of a group whose
activities must essentially endanger the very existence of another group.
"A house divided against itself cannot stand."
The responsibility to effect an adjustm.,nt on fair, broad, general
lines is a very great one, and one i\'hich this 'Soard cannot evade l)y a technical interpretation of the law 'llhich i ! not based upon sound principles of
equity.
It is, in the opinion of your comm1tte'3J ,the duty of the noard to
lay down principles upon whieh member banks may op~rata ~ith a proper regard
ior the good of the SysternJ !!nd to establish a. 1-:a.sit for a. fair adjustment as
between the different me~bar ?anks which eompose it.
State} no bank ehouU enter
'Or
Whether National or
continue in the System 'Vhich is not willing to
.
-\
,
83'7,
":'
waive such of t:Je :;1·ivileges granted to it 1y ti1e .Act under wllicll it is
inco:rpor<...ted as roy be inconsistent with the sener< 1 ._.:url;oses of the
organization to wh,ich it belongs.
It is the duty of the Fecere.l r.eserve
Board to prescribe the basis for this compromise and in so doing to
insist on the teros which cay be necessary in order that the cowpensating
advantages of r.1er:1bershlp in the System -.:;ay be s eoured.
It is na.nifestly unfair for the Board in its current activities to
refrain fror.l notifying the roor.1bers as to such general principles it will
consider in carrying out such adjustments.
lt is unfair to permit a r.1ember
bank umvittingly a.nd innocently to engage in a course Y'hich r.aay, ·without
\varning, r.1eet with the criticism and prohibition of the Board.
Therefore,
the Comr.1i ttee subr.1i ts the attached resolution and urges favo1·able action on
the part of the Board to the end that the
r.~mbers
of the'System nay know to
what extent they will be limited in their activities in this important
matter of branch banking, upon which the Federal Reserve Act expresses itself
only by implication.
It is the opinion of the committee that, in certain specific
instances, the interests of its
n~mbers
require at the present time a clear
a.nd definite statement as to the lioitations and the
recognized.
lt is necessary and only fair that those
engaged in this
fo~1
~Jrivileges
1~1embers
which v:rill be
which are
of banking should be notified in advance of the extent
to ,which their activities r.1ay be carried on ,, i tl1in the System and that those
member banks which are forbidden by lav or have not as c.. 1aatter of policy
engaged in branch banking should kno••, the extent to which other member banks
may be
~Jert.litted
such competition.
to coupete with them within the Syster.1 and the terms of
lt is the opinion of the CorrJl".:.i ttee that the resolutions
prepared offer as fair and reasonable a basis of om.9ramise as is ?ractieable
under the present laws, both State ;;..nd national.
recognition of the oondi tions
vrhicl~
It v:ill be observed that in
may e::ist in certain localities the
State member banl:s ':ould not be affected by this declaration of principle in
the O:;?eration of full branch banl:in[:; lJowers ·;-'fthin the limits of the city in
which the parent bank is located and in contiguous municipalities, and that
thi$ privilege is not impaired
and
denied them in spite of the !act that
National Banks may, under the law, engage in only limited activities beyond
.
/the four walls of their banking house, and those only within the limits of
a single munioipali ty.
This resolution doe" not give the National Banks
facilities equal to those of the member banks operating under the laws of
certain states.
It does,
h~vever,
in the opinion of the
Oot~ittee, rel~eve
the National Banks from the competition of state banks operating from
headquarters in rer.1ote localities.
The co:mmi ttee does not contend. that 1 t
places the State member banks and the National Banks in certain states on
a basis of equality in the System, but it regards the resolution as going
as far as the present laws, both National and State, permit in producing a
condition of equitable adjustment.
by
Complete equity can be established only
the modification of either State or National laws, or perhaps both.
It is the opinion of the Counsel of the Federal Reserve Board that
the Board acts within its rights in passing the resolution herewith submitted.
The Committee, in preparing this resolution, has
recogni~ed
that the aetion
advocated touches upon a vital principle of the Federal Reserve Act, and
the fUndamentals of ArJerican banking.
It believes that its action will be
sustained by the favorable opinion of the general public, the legislative
authorities. and banking sentirnen t.
It recognizes as undesirable, heM" ever,
that in a matter of such basic ioportance, its action be considered as
arbitrary or precipitate.
It is, therefore,
reco~~nded
that the date for
the operation of this policy should be set forv•«rd until February 1st, 1924,
in order that the net1ber banks may have a. reasonable tir.:e to adjust themselves
to its provisions, and that if, in its wisdom, Congress should desire to
curtail or to enlarge the
p~vers
of the Federal Reserve Board as exercised
under this resolution they may }lave an opportunity to do so before it can be
put into effect.
RespectfUlly submitted,
Committee on ExaMinations.
povemoer 7th, 1923.
i·
839
- ....
,,
~JHLK~.:.~, under the terms of the Federal Reserve Act ne.t ional banks are
required. to become members o:f the Federal :Reserve Systetn and cannot withdraw
therefrom, while State 'bs:nkl may become members by voluntary choice and may
withdraw therefrom at will, and,
Vl.H~.
the F•deral Reserve Act contecplates a unified banking system
in which State and National banks can partjcipate on a basis fair to both,
and,
V~, State ba:nks in certain States have been penni tted by law or
regulation to engage in State-wide branch banking, while national baDks are
restricted by the Federal Statutes from establiShing branches or offices
beyond the lirJits of the city in which the parent bank is located, and,
WHEREAS, the Board believes that this results in an inequitable
situation which renders it imposs.ible for national and State banks to exist
together in the Federal Reserve System an a fair competitive basis unless the
powers of State and national manber banks to engage in branch banking are
reconciled, and,
WHEREAS, in the interest of the successfUl administration of the Federal
Reserve System, it appears necessary and desirable to confine the operations
of member banks within reasonable territorial limits, and,
~' the Federal Reserve Board is authorized by the Federal Reserve
Act to prescribe conditions under which applying State banks ma, become
members of the Federal Reserve System,
NOW, msREP'OR.E, BE IT RJ!l)OLV.ED, that the Board continue hereafter as
heretofore to reqaire State b~a applying for a~.uss1on to the Federal
Reserve System to agree as a condition of membership that they will establish
no branches except with ~e permission of the Federal Reserve Board:
B.E IT FURTHER RlmOLVED, that as a general principle, State banks witb
branches or additional offices outside of the corporate limits of the city
or tcmn 1n wh·ich the parent banks are located or terri tory contiguous thereto
ought not be admitted to the Federal Reserve System except upon conditio~
that they relinquish such branches or additional offices;
BE IT FORTimR RESOLVED, that, as a general principle, State 'ballks which.
are menbers of the Federal Reserve System ought not be permitted to establish
or matntain branches or additional otfioes outside the corporate limits ot
the city or t0t1n in which the parent bank is located or terri tory contiguous
thereto:
·
BE I'r FORm~ R:iiBOLV'.ED, that in acting upon individual applications of
State b8Zlks for a4m1ssion to the Federal Reserve System and in acting upon
individual applications of State banks which are rueubers of the Federal
Reserve Syster.1 tor perrnission to establish branches or additional offices,
the Board, an and after February 1, 1924, will be guided generally by the
above principles; ·
B.El IT FURi'HER. RESOLV .ED, that the term "terri tory cont1gu.ou& thereto" as
used above ahall mean the territory of a city or town \thoae corporate limits
at so~ point coincide with the corporate li~ts of the city or town in which
the parent ba.tlli is located;
BE IT li'URTHER RESOLVED, that this resolution is not intended to affect
the status of any branches or additional offices established prior to
February 1, 1924, either tho·se of banks at the present time members of the
Federal Reserve System or tbose of banks subsequently applying for membership
in said System.
STATFMEFT FOR THE PRESS
For Immediate Release.
Following is th8
mino\.~ity
X-3882.
November 7, 192.3.
report of the Board 1 s
committee with reference to the resolutions adopted
by the Fecl.era.l Reserve Board with relation to branch
banking.
.X-3882
November 7, 1923.
The resolutions submitted in tne report of the majority of the
Committee on Examinations are based upon the assumption that it is the
duty of the Federal Reserve Board to
right to exercise
a~y
de~
to any state bank member the
of the powers granted in its state charter that
appear to gi..ve it a marked ad'rantage over national banks in competition,
even though the exercise of these powers r.ray be to the advantage of the
comrr:u.•1ities in which.the barJ.ks are located and even though the powers,
themselves,
~ay
be in acco=dance with the soundest banking principles.
If the Federal Reserve Board Qhould adopt this attitude and pass the
resolutions proposed with relation to branch ·Lanl:h.g, it would be tantarr.ount to an att~mpt to force the· state banks to confcrm to the national
banking laws. and would be a complete reversal of the position the Board
has taken, not only in the matter of bl'anch banking but in all matters
touching competition between state and national banks where the practices
of the state banks have been deemed to be sound banking.
The Board 1 s annual reports from the o:;.·ganization of the Federal Reserve System bear witness to the fact that the Board has always taken a
progressive position.
It has not so11ght to r8press ani hold back state
banks from the exercise of sound baru:ing pl·ivileges, but has always recommended amendments to the National Banking Act, or the Federal Reserve Act
broadening the powers of the National Bariks:
Excepting the Act of 1900, which was chiefly an effort to increase the
attractiveness of the note-issuing privilege, though it also provided for
r;. ~
t . ''] ..
x... 3ss2
-2-
national banks with a minimum capital of $25,900, very few
cr~nges
were
made in the laws ~ffecting national banks prior to the passage of the
Federal Reserve Act.
State banks by the abolition of their note issuing
privilege through the 10 per cent tax, rrade effective in 1866, were reduced from 1562 in 1860 to 247 in 1863, and almost all of the surviving
247 were in the eastern fi11ancial centers where deposit banking bad begun
to assume considerable proportions.
Federal Reserve
~ct
Long before the passage of the
they had overtal:en and passed the National Banks in
numbers, and the chief increase had taken place not in the financial
centers but in the agricultural west.
srrall banks.
Nor was the increase confined to
During the ten years 1899 to 1909 state banks with a capital
above $50,000 increased in practically the same numbers and at a much
greater percentage than national banks.
Companies", 222-223).
(Barnett "State Banks and Trust
The fact is that national banks had been held very
.narrowly to certain~;pes of comrr.ercial banking, and nearly all pro~ess in
banking had been made by state banks, which steadily gained as the note
iss~ing
monopoly of the national
bar~s be~ame
of less and less importance.
The Federal Reserve Act provided not only for the banding together
of national banks in a cooperative system but it also liberalized the
'.
National Banking Act by adopting some of the best features of some of
the best State banking legislation - notably in the recognition of a difference between time deposits and derr.and deposits in reserve r equirernent s,.
It contained an attempt to allow the exercise of certain trust powers
t·.O national ba:riks, and provided tba t the larger national banks might
establish f orei·gn branches.
ojl
1 •
.._#
,,.
"
X-3BB2
-3-
~~
'·.~'J
ltot long after the Federal Reserve System was organized the attention of the Boe.rd was directed to the fact that the competition of
the state banks had not lessened and to the losses arrDng national banks
which were co!lstantly. being converted into trust companies, but instead
of endeavoring to prevent state bank members from exercising trust
powers the Board recornreended and in fact prepared a bill for amendment
to the Federal Reserve Act broadening Section 11 (k) so that national
bar..ks might exerc).se trust powers.
This was passed in 1916.
The effort of the Board has been to rmke the national banking system
as inclusive as possj.ble, but it has at the same time sought constantly to
add to the state bank memben:hip and has not attempted to restrain state
bank members from the exercise of proper te.nking powers enumerated in
their charters.
It has been actuated by desire to benefit the business
interests of the country rather than the interests of any particular group
of banks.
The Board favored the amendments of 1917, which provided that
state banks might be admitted to the system retaining their charter rights,
and an examination of the correspondence that preceded the admission of
the California state banks maintaining branches will show that they were
clearly admitted with the understanding that their charter right to such
branch extension as should be f~U1d consistent with sound banking would
not be denied.
recQUll"~/ld.ed
Several times the Board as well as the Comptroller have
that national banks should be given branch banking privileges
within the states where branch banking is permitted by state law, and the
Board at one time
recorr~ended
that national banks should be given branch
banking privileges within city limits without regard for state law.
This
was at one time recol!'..mended also by the Federal Advisory Council. The Board
in 1916 and 1918 recorr~ended the enactment cf a bill providing for
branch banking within county limits, or within a radius of 25 miles
from the rarent bank.
-4-
X-3832
If, now, the lios:rd :reverses i tsdf ano a.ttempt:;; to :rast:rict sta.te banks
condition~
th:rough the :right to in.pose
be in effect a.ttemiJting to
r,;ak·~
w'b.8n they-a.pply fo:r r.JerLbership it will
state b:mks conform to the National banking act,
and become practically national banks, so fa.r a.t least as branch banking is
conce:J:"ned.
Limited branch banking within municipal limits has :recently been extencied
the national banks through new :regula.tions from the Comptroller. following a.
rr.o:re libe:ral interpretation of the law by the Attorney General.
If the Boa.rd
had any :reason fo:r believing tha.t branch banking bayond city limits must
necessa.rily be unsound there would be e,round fo:r the complete :reversal
of its position but the majority r-eport does not claim that it is unsound and
a.pparently has abandoned the assumption that it is contra.ry to the Fede:ral
Rese:rve Act.
Such cla.ims, in fact, could not be sustained by the F..zde:r.al
Rese:rve Boa.rd a.t this time.
B:ranch banking beyon:; city limit:;; ha.s existed
in the Federal Rese:rve System since its o:r.ganiza.tion, in nationa.l Danks
a.s vvell as in state banks, ana the National banking act, itself, has since
1865 provided fo~ b:r.anch banking through the autho:r.iza.tion fo:r. the conversion
of sta.te banks with
b~a.nches
is a.utho:r.ized in a. numbe:r. of
into na.tional banlr..s.
southe~n
State--..vide b:r.anch banking
sta.tes and in the state of Rhode
Island, and limited b:r.anCh banking, either by counties or- in dist:r.icts
contiguous to cities, is authorized in a number of other states.
:Bafore
the Civil Wax· and the pa.Ssage of the Na.tional banking a.ct branch banking
wa.s common throughout the West and South.
Nearly eve:r.y western sta.te before
1360 had developed systems of state ..wide branch banking and sor.-1e of these
systems, as in Indiana and Ohio, wer-e nota.oly successful.
a.s many as 40 branches
we~e
In some states
ma.inta.ined and these sta.te-wide systems migb.t
a.ll ha.ve been b:r.ought into the na.tional banking system under the Act of 1365.
... ' '
X-3332
-5-
It cannot be maintainaa , if one nay judge from the history of state banking
in the United St&tes, that o:ranch banking necessarily implies the des tructicn
of unit ba.nking.
The two existed side by side in Ohio and in othe:r middle
weste:rn states, as well as in the South, befo:re the Civil Wa:r, and in the
southern states b:ranch banking has made comparatively slow p:rog.ress even where
fully au tho .ri zed by law.
It is undoubtedly true, as the rna.jo:ri ty :repo:rt says, tha.t in branch
banking beyond city limits certain rr.e:nbex- banks are engaging in a p:ra.ctice
which is definitely fo:r:-bidde n to other- membe:r banks.
T1~is
a.t once :ra.ises
the question whether the:re is good rea;,on to continue to forbid the p:ractice
to the othe:r rr.eml)er banks.
Unless the :3oc:;rd is willing to take a :ret:rogressive,
repressive position in a m-;;tte:r primarily of co;petition ·oetween two classe;;;
of banks, and without reg3rd to the public convenie~ce and the interests of the
corrmJ.nitie~
ser-ved, it should in my opinion instruct the Committee to work out
regula.tions which will guide and d i:rect tile 3xtansion of b:ranch banking 1n
California without attemptmg to deny all fur-thex- extensions, and to that end
full consideration should be given the :iette:t" of October 3, 1923, add:t"essed to
the Board by the responsmble executive officers of three of the largest Sta.te
banks engaged in b:ranch banking in that State.
Tha.t lette:r ap}Jea:rs to me to
present frankly a sound basis fo:r such :r.::gulations.
Economic developrr.ents,
such as the recent growth of ·branch banking in California, uo not tSJke place
without a reason, and should not be a.rbi t:rarily repressed by any t:;,ove:rnmental
body.
They should :rather be studied and guided with the pu:t"pose of determining
whethe:r they may not represent a :real advance in Jurerican banking·
• .(?'
. :.\_)
-
0
-
X-3832
3:ranch bankin::., has bdn recogr.ized i.,y
t;D:O
foremost authorities on banking in
the United St:Jtes as a natural methoJ oi' extend i:1g 0a.nl::ing facilities to s!T'.all
comr:uni ties, as
pr~senting
o:t-portuni ties fo:r diffusing business :risks over large:r
a:r-eas than at .L:c:rt:;sent with a g3in a.nalagous to that which such diffusion brings to
insu:rance, and as having the advantage of ability to make loans fx-om a common fm,d
of ca 1;i tal and deposits in acco1·dance with the u.naqual ond varying der:r;ands of
T'ne.,..e is :reason to beli;;:ve that the
d iffe:rent industries and sections served.
ag.,..icultu:ral sections of the United States would be far better served, and with
the derosits of the farmers rruch more a.dequately safeguarded, unde:r systems of
b:ranch banking, whethe:r limited to counties
Cl"
state v.ride, than at J!Y'esent. Cali-
fo:rnia iS trying the exrjeriment, and no evidence ha.s so fa.:r been I-l"esented to
show that it is not se:rving the peol-'le of the State well.
(Signed)
EDMUN'D PLATT·
.
X-38115
:)ffic~
of the
~ecreta.ry
...~~--l.L~l.:f':.i.U
November 5, 1923.
The
G~vernor
ieC:..era.l Reserve
B~ard.
Sir~
You are hereby advised that t~1e De ..k.rtrne~lt nas referred to the Disbursing Clerk, ~reo.s1.,1~; De_Jartment, fo:c ?--T:1e~1t, t11e account of the Bureau of
Ene,ravin~ <...no. ~-rilni..lt.:- fol- preiL-:: L __ .c'eC..e::ul :~ese1ve notes liu.rinc the ....~eriod
October l -co Octoter 31, 1':123, cu.:.o1..1...:.tL~ to ~-ll2,412.50y as follows:
ie~er~l icse~ve
·-~
iotes, 1914
Total
&
,lJ
108,0Ju
54,0v0
• 35I~OOu
• l35,0uu
• 135,000
• 81,000
167,000
54,0uu
108,000
135,000
594,000
Dallas • • • • • • • • 135,0uv
1,431,000
28j ,000
61,000
679,000
130 ,ooo
27.000
461,000
Boston . . . .
New York • • • • • •
Philadelphia • • • •
Cleveland • •
Richmond • • • • • •
C:lica§:O •
162,uOu
351 ,OuO
437,000
351,000108,000
. 1,013,000
223,00\J
2,645,000
27 ,OJO
27 ,ouo
27-,UOU
• • •
54,000
2,645,000 sheets at '11'42.50 per I:l •. • • • • • • ~112,412,50
The charges against the several
Com~en-
i:ihoets
Boston • • • 162,000
New York • • 351,000
Philadelphia. 437,000
Cleveland. • 351,000
Richmond • • 108,000
Chicago • .1,013,000
Dallas • • • • 223,000
sation
,187.00
4,738.50
5,899.50
4,738.50
1,458.00
13,675.50
3,010. 50
2,645,0u0 ~35 '707 .50
~2
Feder~l
Reserve Banks are as follows:
Inc. Co.m.c>rinting
Iilaterials pensation
Total
~late
;,.. 2,227.50
4,826.25
6,008.75
4,826.25
1,485.00
13,928.75
3,066.25
~36, 368.75
* 1,903.50
4,124.25
5,134. 75
4,124.25
1,269.00
11,902.75
2,620.25
~31 ,078. 75
~
567.00
1,228.50
1,529.50
1,228.50
378.00
3, 545.50
780.50
~
6,885.00
14,917.50
18,572.50
14,917.50
4,590.00
43,0 52.50
9,477.50
~9,257.50~112,412.50
The Bureau appropriations vvill be reimbursed in the above amount from the
indefinite a.p~JropriatiOJ.l ".2re..,;...,rat Lm and Issue of lt'ederal Reserve Notes, Reimbursable" a.ncl it is requeste(..,. L ..,.t your bJard cause such indefinite apJ:'ropria.tion to be reimburseQ in like amount.
Respectfully,
(bigneciJ
b. R. Jacobs,
Deyuty Commissioner.
.
-'
X-3886
FILING PL.AJ."\1'
- - - - -- - - --- - ----- - -- - -- -- - -- -000.
Miscellaneous.
000. General.
000.0
General folder (containing items not deemed of sufficient
importance to justify a separate folder).
000.1
Travel irtformation (railroad time tables, fares, etc.)
000.2
Hotel reservations.
)00. 3 Maps and charts.
000.4
000.5
Miscellaneous lists.
.--
001. Quasi-official relations of the Federal Reserve Board.
001.01 Acknowledgment of receipt.
- 001.02
Letters of introduction.
Letters of congratulation,
001.1
Invitations.
001.2
Photographs.
001.3
Autographs.
001.4
Speeches, addresses, articles, pamphle s, books, etc.
001.5
Bankers association (meetings, etc.)
001.6
Visits of Board members to various reserve districts
and Federal Reserve Banks, Itineraries, etc.
001.7
Miscellaneous interview appointments, etc., with
individuals. (See also conferences with Board, etc.)
002. Newspapers and periodicals.
\
Christw~s
001.03
002.1
Newspaper clippings.
002.2
News summaries.
greetings, etc.
. ,...,
c_~ -~·- ·.~)
-2..
010.
1'·ar TJepartmen t.
011.
Trec,su.:y Depc:;.rtment.
011.01
·~rar
011.02
:Jar Risk Insurance.
Oll.l
Secrstacy of the Treasury ~and Chief Clerk)
Relief
r.~atters,
1914.
011.11 I..nnouncerr.ents and statements for publication,
011.12 Pan-American financial conferences.
011.121 International High Commission.
Oll. 2
Comptroller of the Currency (for reports of condition
of l''ational l'a:nl.s - See file 430.2)
011.21 ",1iscel1c.neous stater:1ents, announcements and
reports.
011.3
Bureau of Engraving and Printing.
011.4
Corr.missioner of Internal Revenue.
011.5
Director of Mint.
012.
Post Office Department.
013.
Department of Agriculture.
(For crop statistics, see File 511.1)
013.1 l\Tisce1laneous statements, announcerr:ents and
reports.
014.
Department of Commerce.
014.1
't
Bureau of the Census.
015.
Department of State.
016 •.
Department of Interior.
017.
Department of Labor.
018.
Navy Department.
019.
Jcpartment of Justice.
020.
Government Commission and Independent :Sureaus.
- 3 -
021.
Civil S3:rvica Co;;.r;;ii3sion (Sse; a.lso undax- Sta.ff - Fadax-al
R3 :> ~n'V 2 :Joard) •
022.
Gova rnr.:,M.ct P.rintir.15 Office (Suparint-:md ant of Docur:..:.-mts,
Public I)rintGr - Al;;;o sa a Ptg. &: Sta.t. F.R.:Jd. & F.R.
:!ullatin).
022.1
023·
F;;de:ral·Tr3da Cor.:r..ission.
023-1
100.
Publications (Saa also Crdit :Ourc:au - F.R. :Oar..l-:s
for publication of Fad. T.r. Co~).
025.
Fed s,..a.l Fa:rr:. Loan :t3oa.:rd •
J26.
Ta.:riff Cor::J:J. s s ion.
027.
:au,..eau of Efficiancy (Soa also undar Sta.ff- Fad. Ras. 1d.)
c2e.
All othax- bureaus.
FEDERAL HESERVS SYSTEI1.
100.0
110.
Public Docur...ants 1 Idst of publications 1 ate.
G:ma:ra.l
101.
Histo:ry of thG Syster...
102.
Pu.blication dasc:r.iptiva of.
102.1
Co.rpora.tion Tl"Ust Cor..pany service.
102.2
Cha.rts and r.:a.ps sho·Ning o:r.gani za.tion of systeru•
103.
Inquiries ra1a.ti·n to gana:ra.l f va.tu:res, banefi ts and
opa.rations of systa~.
104.
Lette:rs of a.pproval and a.s"'istance.
105.
Letters of criticism.
Legislation.
111.
Federal Reserya .Act a.nd ana.cted ar:.e~'1dLants. (Iligest)
111.1
P:roposed amenan:ants.
- 4112.
120.
Rala.ted legisla.tion.
112.1
Proposed
112.2
Ena.ctsd
Trade Corrmission Act, 1915.
112.22
Na.tion~l
112.23
Aldrich-Vreeland Act. (.Act of May
(Including all pape.rs on National
Corr.miss ion, axcept list of their
tions of the Govexnment Printing
112.24
Clayton Anti-Trust Act.
112.25
112'.26
Federal Far-m Loan Act.
112. 2)1 Ag:ricul tu:r.al & Othe:t' Rural C:rcdi ts :Bills.
War Revanue Act.
112.27
Negotiable instruments law.
Bank Act.
30, 1908)
Monetary
publicaOffice ,022.1)
Rese:rve Bank O:r.ganization Committee
121.
Hearings.
122.
Dacisions.
122.1
130.
112.21
(Petitions and Haa.:rings and Decisions on 'l"ed istricting.
For papers rela.ting to transfers of stock etc., rasulting from radistricting decisions, see under Capital
subsc:riptions Bed. Res. Ba.nks, 302.1)
FEDERAL .ADVISOTIY COUNCIL.
131-
Functions and powers • and duties.
132·
Personnel
133·
132.1
Election and term.
132.2
Fees
Maetings.
- 5 -
1}4.
Comn,unicatior~s f:ror... Council
I-te comr::-:md 3 ti ons.
134.2
200.
Questions and inta:rpallations.
"FEDERAL HESEliVE 130.ARD.
201.
200.1
Seal design
200.2
Oath of office, r.-.embe:rs
Meetings.
201.1
Dockets.
201.2
Minutes
201.3
Resolutions, etc.
201.4
O:rdc;rs.
202.
H.oarings and confe:t"ences with the Bca.rd.
203.
i>y-laws.
204.
Merr.o:randa by offices of the Board. (Envelope fo:r each n:.;;mbe:t" and
S..;c:reta.:ry and Chief Cl e:rk)
205.
Men~be:rs of Federal Reserve :iJoard.
210.
Functions, powers, and dutiJs.
220.
Office manageir.ent, and practice.
220-1
Budget, a.ssessrr,ents for -:.xpenses
221.
Expense accounts of
222.
Staff
222.1
(Envelope for each r.:erilbe:r and
Se c:r at a:ry)
r..er.1ber~
1
etc.
and staff.
Appointments.
222.11
Applications for appo1ntment 1 endorserr•.:mt.
222.12
Examinations.
222.13
List of aligibles for appoinkent.
- 6 -
223.
222.2
Expor-ts (Official rapor-te:rs, etc.)
22~-3
Author-ity, duties, etc. of employees.
222.4
Sala:r.ias (Also insuranca, pensions, ate.)
222.5
L-a~wes of a.bsenca. (Sick and annual)
222.6
Discipline.
Mat3:ria1 and supplies.
223.1
Bids, price quota.tions, ate.
223.2
Requisitions.
223.21
Jills and vouchers.
223.3
:Blank forr:. for office usa.
223.4
Machanic:Jl devices for offica usa.
223.5
Printing and sta.tiona:r.y.
223.51
Corraspondenca with Public P:r.int2r and
Joint Committee on printing.
223.6 Office furniture and fixtures.
224..
230 •
223.7
Office quarters.
224.2
Postal R.:lgula.tions.
224.3
Ma.ilin6 schedules.
225.1
Codes and code books.
Ivla.il .
226·~-- ·
Express s G .rv ice •
227•
Jortds for officers and employe2s-
(F:rankine:, p.:rivilege)
CorrJ:":i t t a e s •
230.1
P~:r.sonnal
and time of meeting.
- 7-
240.
230.2
Call of Commit tees.
231.
Reports.
Divisions.
Accounting and othar forms used by Federal Reserve
Banks in reports to and requests for approval
of Board, etc.
241.
Division of Audit and Examination.
Examination of Federal Reserve Banks. (Branch Banks)
241.2
241.11
Examina.tion of accounts of Fed e:ral
Reserva Agents.
241.12
Merr,os. of Boaro memb2rs on such examinations.
Examination of Membe:r :::;anks.
241.21
National Banks (National Bank Examiners)
241.22
State Danks
242.
:;_<ure::m of crc::dit inforr;£Jtion.
243.
Division of Bank Op3ra.tions.
Cotr:;;spondence re :reports of t:ransactions by
Fed..:;ra1 Reserve Banks, etc.
244.
Research & Sta.tistics.
244.1
245.
Ba.n.'lc Debits.
Division of Issue and Rederr"ption.
Fede:ra.l Reserve Notes-
Ganaral and Public.
245.101
Shiprr.ent and relaese orde:rs;
245.102
Heports and sta.tements, F.H. notes.
245 .. 103
Issue of notes (for gold and substitutions)
245.104 Notes through Treasury U.S.
- g -
245.11
Form of Federal :rasa:rve notes (Design)
245.12
Shipm..:Jnts of Fed e:ral R;se:rv::: Not.Js and cur:rency.
245.121 Postage and Insuranc::J Rates.
245.122 Form of packa.gas
f o:r sea.ling etc for
F;;daral rasa:rve notas.
245.13 Redemption and destructicn of F .. R. nc..tas.
245.131
Reports; unfit notes received for
destruction.
245.14 Launde:ring of Federal
245.15 Cost of
57o :redemption fund.
245.17
Counterfeit currency.
245.31
246.
notas.
is~uing Federal rase:rv..:J notes.
245.16
245.2 Federal R.asa:rve
:re~..:Jrva
Bank notes.
(Er:Jargency cu:rrancy)
Law Division
246.01
246.1
Miscellanaous legal opinions ra F.H. syst<.n...•
Opinions of Counsel
246.2 Opinions of Attorney G2nera.l.
246.3 Opinions of Postcg.star Gen<:lral.
246.4 . Opinions of Comptroller of the T:re.JSU:t'Y·
246.5
Cou:rt Decisions.
246.6 Opinions of Corr,r;:ission0r and Solici tol", Internal B.0v •
246.7
Coz:-.ptl"oller General of Uni tad Sta.tes.
247.
Libra:t>y
248 ·
Division of files • Office of Sacr.::ta.ry.
24g.
Division of Foreign Exchange.
-·-,.
,
·-·- ,..,..
I·
~-
- 9-
Public3tions of Fcde:ral R:::;serve Board.
250.01
G;;me:rgl :requests for publications, ci:rcul9rs, etc.,
of th-.; Board.
250.02 Mailing list.
251.
Annual :report to Congress.
252.
Circulars and :rcgula.tions, rulings, ate.
252.;
Preliminary drafts.
253·
Announcerrents and staten.ent for publications.
254.
Federal Re_,e:rve :i3ulletin.
255·
254.1
Subscriptions (Mailing list, exchange list, etc.,)
254.2
Letters enclosing copy and correspondence with
banks :regarding copy.
Hulings and decisions of Boa,rd (Digest of.)
~
..
. __·ft
256 ·
Uniform AC!counting
300- FEDERAL RESERVE J3ANKS
301-
302.
Location.
(DISTRICTS)
Also Location of Br.Jnch
301.1
B:rs:1chc:s (Also tempor3ry ocmc:.stic a.gencias)
301.2
Foreign correspondents and agancies,
Organization, capitalization and seal.
302.01
Opinion:;; and data on proper time of opening
the Fade:ra1 Reserve Banks.
302.02
Execution of organiza.tion ca:rtificates.
302.1
Capi ts1 Stock (Imlay)
302.11
Subscription by public.
303 •
By:.:;.La.ws
304.
Circulars, regulations, bulletins, and annual reports
of the 12 Fade :ral Re serve Banks.
304.1
Circula:rs, :regulations, etc.
304.2
Annual :reports from B::mks in circular fo:rm.
310. Functions and Powers,
311.
As fiscal a.gents of tha United States.
311-l
320.
Governm:mt Bond.;.
Ma.na.gerrent and orga.niza.tion of for-ce.
321.
Per~onnel·
321.1
Director~ (General
321.101
Cla,,a 11 N 1 and
321.101.1
321.101-2
321.102
Cla:s..;
11
11
B11 Director;;,.
Election.,.
Oa.th of office
C11 Director5.
321.102.1
321.102.2
321.102.3
321.102.L~
) A.B.C.
Application fo:r po.coiticn of
Cla ..,s C Dir;;ccor,endorserr,;,nt.:..
Appointmenta and re,;;;ignaticn
of Clacs 11 C" Dir-:=;ctor-s.
lhognphica1 :ol-.:.etches of Cl3 ::. . .;
11 C11 Dir;:;ctor'S.
Oath of office.
-11321.103
321.11
Meetings of Directors (Minutas)
321.111
321.12
321.2
Branch B3nk o i rae ton (.Applic3tion
a.ppoiutrnants and oa.ths)
Joint Confarance of directors.
Comp3nsation of directors.
Officen and amployaas.
321.201
321.21
.Applications for employment with
Reserve banks and branches.
Office of and duties and powars of officers
and employaas.
321.211
Of Federal Reserve Pgents, and Deputies.
321.212
Assistants.
321.213
Of Governors and Deputies.
321.22
S3la:ries of offic.J:rs and employaa s.
321.23
Bonding of officers and employees.
321..24
Travel Expense
322. ti{fice Operations and Buildings.
Vault.:; and vault space.
322.10
323.
Joint custody
322.2
(Auditing and other d epa.rtm;mts)
322.3
Credit informa.tion ou:reau (Credit statements)
322.4
Equipment
322. 5
Bonding and Insurance •
322~6
Welfs.:re Clubs and Public:otions - Pension Plan.
Ea.rnings and expenses.
323.1
Dividends of Fad3ral R.:Jsarve Banks·
324.
Confe:renca of Governors.
325.
Conference of Federal Reserve .Agants.
326.
Memba:rship of banks in Banke:r:s' Association.
326-1
Membership of banks in .As;:.ociations, etc.
-12327.
.l1Q..:_
Publicity Work (.t\dvoJrtising) •
Operations of FJd ;ral R;sJ:rve Banks.
330.1
Corr;;spond;.;nca with }'oJeral l.{esarv;:; l'.~.,ynts (folder for aa.ch)
330-2
Condition of :F'der3l Reserve Banks.
330.21
330-23
330.24
330-25
330-26
330-3
Statarr.ent of :B'adt>nl Reserv 3 Boa.:rd (Vveekly)
W<1ekly statem:mts of Fedaral Reserve Banks.
Monthly Reports of Fade:ral Rase:rve Bank::>.
Compa.ra.tive yea.:rly report.
Condition of F.R. :Oanks of European
Central E;;mks of Issue.
Fade:ral Re::>el""'ve Bank Rase:rvas.
330.31 Reports of cordi tion of reserv0s.
331.
332·
Deposits.
331-1
Merr.ber barlk deposits (Reserves g:me:ra1)
331.2
Gove:rnm;mt deposits, ':i:':reasury Na.rrants and checks.
Commissioner of Int2rnal R:;V·Jnu-:.
331·3
Deposits of gold ate., for Jccount of for.aign llanl'-s•
Diacount3 :md 3dvances.
332.1
Policy and :rates.
332.11
Discount :rates 3no rates on adv;3nce;;; of
all F.R. Bonks (Tabulated statements).
332-12
Applic9tions for changa of :rat"'s. (12 folda:rs)
332-13 Total bills <Jiscount;.od and bought of all
Fed.;;ral Has0rv_; :Da.nks (J3co-bson)
332-2
Loans and
Invast~ents.
332.201 Definition of.
332-21 Baru:ars 1 Accoptancas.
332.210.1
332.210.2
.Applica~ion;:; for parr;ii::,S ion to accept
-up to 100)-' of c9.pit,Jl 3.r::d surplus.
Waakly and monthly r~ports.
332.211
i3ased on importations and
of goods.
332.212
Based on doma.;tic bill.,.
~;;xportation
f
•
..
856
-13-
332· 22 Agriculture and livestock papar.
332-24 Tr·add Acceptances·.
332.25
332.3
Cornnodit;y pa.par.
Fifteen'-da.y, secured pa.pe:r- of member- banks (a.clvances)
332.4 Governm-::lnt Bond Pa.per.
332·5
333·
Investments.
333.1
Rediscounting between Federsl Rese:rva Banks •.
Open Ma.:r-ket.
United Stat.:Js Bonds.
333.101 Investment bulletins, ci:rc1.:.la.:r-s, etc.
333·11 Allotment and conversion of bonds,·under Section 18.
333.2 Municipa.l obliga.tions.
334.
(Warrants)
Exchange •
334.1
Foreign exchange (including Foreign Loans).
334.101
Gold Exchange Fund, 1914.
334.2 Domestic Exchange.
335·
Clea.:rings and tr-ansit opeT"a.tions.
335.1
Definition of "Deposit a.t Par".
335-2 Eoa.:rd's Regulation on Clear-ings (Rag. 1, Se.ries, 1916).
335.21 Data. collected on clea.:rings, tenta.ti ve plans.
335·22 Prelimina.ry dra.fts of circular.
335·3
Operation of ClaaJ•ing Plan.
335·31 As between Federal Resa:rve ::Sa.nks.
335-311
335-312
335-313
Gold Settlements Fund a.nd Federal
Rese:rva Agents Fund.
Feda:ral Reserve Exchange.
Sllve:r- and legal fund.
335-32 .As betneen F.R • .Banks a.nd thei.r member banks
(letters of criticism, approval, ate.)
-14-
85'(
335· 321
Collaction of ch.:Jcks th:rougp postma.sta:r..
337·
Services for membe:r banks.
~
MEMBER BAJIJICS.
401.
410.
Dist:ribution of mem"be:r. and non-member banks within· d ist:r.icts.
.Admission to o-r withd:rawal. from Federal Rase:rve System.
410.1 List of member banks.
411.
412..
420.
Na.tiona.l Ba.nks.
411.1
G:ra.nting of cha.:rte:r.s to· na.tional banks and
conversion f:rom Sta.te Banks.
411.2
Liquida.tion of na.tiona.l banks and withd:ra.wals
from system.
411.3
Suspension (Insolvent)
Sta.te banks and trust companies.
Powers, dutios, ~tc.
421.
Dranch banks,
421.1
421.2
In the United Sta.tes.
In fo:reign co1mtries (including joint stock banks
in foreign countries)
421.21
422.
Na.tional banks a.s trustees, e.xecuto:rs, etc.
423·
Time and demand deposits.
424.
Na.tional bank note issues and :redemptions
425·
Cent:ra.l :raserve and :reserve cities.
426.
Loans, general.
426.1
426.2
~
Co:rpora.tions formed under Edge Act.
(5c;o Fund)
Loa.ns on improved city :real estate·
Loans on fa:rm lands.
427.
Na.t ional banks a.s insu:rance a.gen ts •
429·
Fees to office:rs and enployees (Sec. 22)
Condition of member banks.
430.1
F:rom :repo:rts of Fede:ral Reserve Ba.nk.s.
( Ca.ll)
'
•
"'
From -raports of Conpt:roll.::r of th-:: Currency.
430-2
431·
Govex-nm..;nt daposi ta.•~L;;;.
450·
Other banking end c-r2dit institutions (fo-rait,n b.:mks in
this country).
46o.
Interest rat8s cha.-rc,ed.
(Call)
500. ECONOMIC CONDITIONS.
501.
General
501.1
Rcpo,~ts
on businass and financial
conditions in tlh:J United States.
501.11
501.12
510.
Trade and financia.l letters.
;otc;t:::rr,ents of clea:ring
houses.
Weekl~v
501.2
Reports on busines~ conditions in foreign
countx-ies.
501.3
Illora.todum - rr.ora.to:ria..
Agricul tun.
Sll..
Crops - food.
511.1 Cx-op a stimatas, D;;pa.rtrr.ent of Agriculture·
511.2 C-rop moving.
511.21
Cotton
5ll.2ll
512.
Livestock
520.
Mining
530 •
Monufactu:r ing.
540.
Transpo:rta.tion and Comrr:unications.
550.
lvione ta:ry Stock (Gold)
550.1
551.
Weekly and other :repo:t:>ts of gold i;:,po:rts
and exports.
Silve:r Coin
551-~
551.2
Cotton Lo:m :Fund, 1'jl4.
Import & Ex~ort
Silver and M::. .• o:r Coin
., .. .,.
.
-16-
6oo.
552·
.All Coin Gane:ra.l
560.
Foreign Trade (lt:l.ports and exports)
For.eign Banl<:s.
November 1, 1 92 3 •
860
X-33S7
IN THE SUPREME COURT OF THE STATE OF WASH!lJGTON •
0. B. r~ILLIAMS 1 sole t:ra.de:t",
doing business unde:t" the
fi:t"m nama a.nd style of
o. :a. :'TILLIAT,£ & co. I
Appellant,
Vt
JOHN P. DUKE, Supervisor of
Banks, R. A. LANGLEY, Cnief
Deputy SUi)e:rvisor of Banks,
liquida.ting The Scandina.vian
Ame:rican Bank of Saa.ttle, a.
co:rpo:ra.tion, and the FEDERAL
RESE!l.VE :OANK, Twelfth District,
a. co rpo :ra. ti on ,
Respondents.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Ho.
17766
Deva.:rtrr.ant One
Filed IV'J.Sy 25, 1923 •
A gene:r.:>l demur:re.r wa.s susta.ined to the compla.int in
t:is c:Jse ana the pb.intiff, l'efusing to plea.a fuT"thel', ha.s
a.ppealed from a. judgment dismissing the a.ction.
Substantially, the compla.int al bges a.::> follo•VS:
May, 1921, a.ppel.l:mt executed and delivel'ed his ..
:;,oo.:..oo
net,otia.ble pl'omissory note due August 20, 1921, to the
Scandina.via.n American Ba.nk of Sea.ttle (hereina.fter ·spoken of
a.s the Scandina:vie.n Ba.nk:) and in June, 1921, he executed and
delivered his $20,000.00 negotiable p:romi&sory note due
Septemoor-1}, 1921, to the same ba.nk.
::Oefo:re na.turi ty of
the notes they were transferred and. negotia.ted fo:r value by
the payee bank to the Feder-3.1 Reserve Bank of Sa.n Ft-ancisco.
On June 30, 1921, the Scandina.vian Bank fa.iled and was taken
over by the supe:rvi soX" of ba.n};:s of the Sta.te of Wa.shington,
for the fUr.pose of settling its a.ffa.i:rs,
At the time the
bank failed the appdllant had on deposit in tha.t bank
In
17766
X•3387
- 2 -
.'
861
$11 .398· 52 and a.t tha.t time the Federal Reserve .Bank held
colla.te.:r.a.l pledged by the Sca.ndina.via.n :Bank, unde:r the ta:rrns
of an a.g:reement, a.s security for the payment of any and all
indebtedness of the Scandinavian Bank to the Federal Rese:rve
:Bsnkt and such colla.teral exceeded the anount of all the
lia.bilities of the Sca.ndina:vicm :Bank to the Federal Reserve
:Bank.
It i:> furthe:r alleged in the compl3int tha.t the liquida.ting a.gent of the Scand ina:via.n Bank has been making 1 t a. practice
to allow make.:r.s of notes held by the bank to offset a.ga.ins t the
notes the s.mo1.mts of the it' deposits • a.nd tha.t at the time of
the :respective ma.turitie.:; of the notes in question appellant
demanded tha.t the Fede:ra.l Rese:rve :B.9nk and the Scandinavian
Bank and its liquidating a.gent pe:rmit him to offset a.gainst
his notes the amount of his deposit in the Scand ina.via.n :Bank
a.t the time it failedj
tha.t the requests were rafused and in
o:r.de:r. to a.void li tiga.tion and protect his credit he 1Ja.id the
notes in full, under protest.
The a.ppella.nt ha.s presented a.
cla.im and d err.and to the supe:r.visor of ba.nks for the amount of
his deposit, as a. preferred cla.im,
w~:ich
wa.s :rejacted a.s such.
It is fu'r:'ther a.lleged in the COII:\Pla.int tha.t the allowance
of a set-off to makers of notes held by the Scandina.vian :Ba.nk
a.t
t~'le
time it closed its doors and the denial of a. simila.:r.
p:r.ivilege to makers of notes discounted and sold by the Scand ina:?.
vian :Bank wol.Lld result in a.n unwarranted preference of one class
ove:r anothe:t'•
'lhe p:ra.yer of the compla.int is ·to enjoin the Fed-
e:ra.l Rese:rve Bank fX"om returning to the Scand~na:via.n Bank o:r its
liquida.ting a.gent the colla.te:ral held gene:t'ally t but tha.t the colla.te:ral be impounded and . applied, to the extent necessa.t'Y, to the
pa~nt of appellant's cla.im in the sum of $11,398·52·
After the sale a.nd delivery of the notes by the Scandina.vian :Bank it no longe:r had any interest in them as owne:r..
The Federal Reserve Ba.nk beca.m3 the owner of a.ll inte·l"est in
17766
- 3 -
X-3837
862
them having purcha.sed them before ITl.a.tu:r.i ty, in good faith and
for value.
The ca.se is not one vmerein the payee bank pledged
the notes a.f:l colla.tera.l, thus :reta.ining a.n inte:t'est in them a.s
ownar, like the case of In re.Bank, 7l Minn. 394, 73
N.w.
1096, cited and relied on by the appellant, but it is a. ca.se
identical in p:t'inciple, with the ca.se of Munger v. Albany City
Na.tional Bank et al., 85 N.Y.· 5¢0, wherein MutJger had $3,000.00
in a. bank in Rochester represented by a certifica.te of deposit
in his fa.vo:t', which he continued to hold until the bank fa.iled.
B~
further dealing he gave the Rochester bank his promissory
note for $1,500.00 which that ba.nk discounted a.nd transfer:t'ed
to the Albany bank.
The Rochester bank ha.d already furnished
the Albany bank gene:t>al colla.te:t"a.l a.ssut>ing the payment of all
discounted items.
In disposing of the :rignts of Munger the
cou.rt of ail:pea.ls concluded:
tlVJhen the bank a.t Rochester t:ransfer:red to the bank a.t
.Albany the note of the pla.intiff 1 no eq_ui ty existed empowering him to set off his deposit aga.inst th.9.t note.
The Rochester
bank. did just vma.t he gave i.t lega.l and equi ta.ble rie}:l t to do.
It transferred his note-, and topk the a.va.ils of the transa.ction,
and became a. debtor colla.tera1 or contingent to him.
Those
avails entered into its property.
The securities tha.t i t had
before tha.t pledged undeX' the general a.g:reement were its property •
.All were its a.ssets, held by it for the security of all of its
creditors - other cred i to:rs a.s well as the pla.intiff. He ha.ving no right of set-off or stoppa.ge or a.pplication 'hhen his note
wa.s transferred, we .fa.il to see how a pa.ramount right thereto
now axises to him from the fa.ct tha.t the Rochester bank ha.d put
with the Albany bank certain seC\U"i ties a.s colla.tera.l for a.
geneX'al indebtedness, or general contingent lia.bility.
They
were put there before this note wa.s r~Ja.de, a.s a. gener-al and continuing ~ecu:rity for any :ndebtedness of the bank at Roches te:r
a.rising from the fa.ilu.'(-'3 of promiso:rs to pa.y, and with tha e.xpecta.tion tha.t paym3nt should fi:Y"st ba sought f:t<om those
promiso:rs. ***
And When there cama insolvency and b~nk
X"'lptcy upon the bank a.t Rochester, a.s there were not then in
fa.ct and in law mutualfdebts or credits between it a.n~ the
pla.intiff, why did not· the legal rights of other cNdlto:rs and
their eq_uitiaS 1 as grea.t as those of tha pla.intiff, intervene
o:r take equal rank?"
This :rule ha.s baBn covered by sta.tute in this state•
191,
~m.
Comp .. Sta.t., p:rovides:
n* * *
negotia.bla pa.par
of ha.s pu:r.cha.sed
the Qwner of a.ll
Sac.
no countar cla.im or offsat sha.ll ba plaa.dad a.ga.inst
a.ss igned befo:t'e due, and whera the hold el". therethe same in good faith and for va.lue, a.nd iS
inta:t'ast thaN in."
17766
X-3SiH'
- 4-
266, Rem. Comp. Sta.t. also p:rovides a.ga.inst set-off
Sc:c.
in a.ctions upon nagotia.ble promissol'y notes, o:r bills of excha.nge, nagotia.ted in good fa.ith and without notice
b~fo:r.a
due.
The ~ppellant invokes the ~id of equity to relieva"him
fl'Om tha fo:r.ce of the sta.tutol'y rule.
Tha case involves
negotia.ble pa.pel', and must be determined upon considera.tion of
tba l'ights of the holda:t' of the pa.pal' as well a.s those of the
maker.
Under provisions of the negotia.ble instl'tunants la.w,
sees.
3443
Bank
baca~
3450,
and
Rem, Comp. Stat., the Fedel'~l Rese:t"ve
the hold eX' in due cou:tse, bafora ma.turi ty and foX'
value, of the not as in question, 11\hile undel' other sections of
the code, a.lrea.dy refe:rr.;:o to, there is no l'igb.t of set-off
a.ga ins t them.
Thel'e is no la.ck of positiveress in the law.
In such situa.tion aquity doi:lS not a.ttempt to a.ssa.il o:r abrogate
but follows and is subox-dina.te to tha la.w.
p:rinciple tho:;
supr~llld
a.l. v. Thomson,
In aiscussing this
cou:rot of the Unit<:}d State::. in M3.gnia.c et
56 U. S, 281, 14 L. Ed. 696,
::;aid~
11 'lha.t
whel'eve:r the :rights or the situa.tion of the parties
aN clea.:rly defirud and esta.blished by la.w. equity bas no power
to change OX' unsettle those :rights o:r tha.t situa.tion. but in
a.ll such instancas the maxim equi ta.s s agui tur legem is st:rictly
a.ppli ca.ble • 11
Upon tha same subj~ct, see also:
Beeson v. Brotherhood
of Locomotive Fi:reman a.nd :≤!,ineman, 101 Ka.n. 399,
466;
166 Pee.
Allen v .. Kitchen, 16 Idaho 133, 100 Pac. 1052.
Holding such to ba the la.w, it is unnacessa.x•y to
dis cuss the a.lL~ga.tions of tha compla.int tha.t the appallant
pa.id the Fada:ral Ros.:lrve Bank to avoid l i tiga.tion, to save
his c:redit and und_er pl'otest.
He only aisch~rged his
promise to pa.y to ond enti tlad to receive it, without any
:r.ight to. set-off and without any a-ccompanying right to raduce Fro tanto the general coll~te:«:-~1 held by the Fadclral
17766
X-3077
- J -
Resd:t'Ve i3ank. belonging to th<> Scandinavian Bank, tha original
pay88 in the not<:ls.
Affi.rmad.
(Signed)
We concu:r-:
(Sign;;d)
.r .
Jv._:nn,
c.
J•
II
Mackintosh, J.
It
.Jridgcs,
J•
"
Holcomb.
J.
Mitchell, J.
~.
--,.~A"
.,,
·-" ,-\ r:'"
. .._...)
~
MEMOR.hFDUri TO
AGET-TT'S CONFER:-CE
from
FEDER.".t RESERVE Bl)fBDI S
Cet'!I'UTTEE O'H ECONOMY & EFFICIENeY
The Federal Reserve BLard t s Co:1mi ttee on Economy and Efficiency desires to refer the follo·.'ling rrdt ters to t~"e Jgents for their
considerc:.tion ani for such action as L;.ay IT'ay desire to tate.
1.
Recorrmendation for investigation and comparison of the ex;ense~ of the various activities carried on in all bank<> as a rr.atter of' ~olicy.
L comparison of the c0st of the vs.rious c:wtivities carried
on as
rn:;.tter of ;JOlicy, most of wh:cr_ activities are un:iar the sup-
o.
ervisicn of the Agents, indicates a wide variation in the policy at
the several banks.
It is apparent that either some cf the baru-s are expending
too '11\lch for these purposes or other be:mls are not exrending enough.
It is reasond.ble to assume there will be a tendency on the
part of each bank, with
pro~ortionately
ing
ty
~.nd
~es~::ect
to those items for which it is expend..
less than the other banks to
incre~se
its activi-
there is thus bound tc result a subaL,ntial iucrei.i. e in the ex-
penses of all the banks.
It is the julgmen': of this
._,r:~.i ttee L~._ t
for these rurposes should be re.;l.oo ~:Ltly in
~;n.
crt icn at ,;;"ll banks
and that t}:e :;;olicy shcn..'Ll be rec:-.:; nably u::1i"'• r:-·
tem.
ths e.x·_- er:ii tures
t:C.r~·u~::-_(
·; '- t:-:a Sys-
Ill '
•
- 2-
It is therefore Recorrmended that the Agents give consideration to this matter and designate a Committee of two to advise with
the Board's Committee on Econorey- and Efficiency with respect to such
activities.
2.
Re commendation for survey by the local Committee on Economy and Efficiency of the Agents
Department of each Bank.
This Committee understands that in several banks there has
been no survey wade of the Agents Department by the local committee.
In the judgment of this Committee this is a mistake.
It is
presurnei that the work of the local committees on Econorey- and Efficiency is carried on under the direction of the Board of Directors of
each bank of which Board the Agent is Chairman ani it is difficult to
see how the work can be fully effective unless similar standards are applied to the Departments under the immediate control of the Agent and
Chairman as are expected to be applied to the rest of the bank.
It is the view nf this Cowmittee that it is in the interest
of Economy and Efficiency that all employees under the supervision of
the Agent and Chairman should be subject to the same rules ani regulations and measure up to the sarne standards as other employees of the
bank and also that the work of the Agents Departments should be subjected to the same study and tests as to operating, organization,and efficiency as is the work of the rest of the: bank.
This Committee Recol!lr'lenis tha.t all ./'.gents 1vho have not already
done so invite a survey of their departments by the locJ.l Committee with
a view to the elimination of any durlication that may exi:s: with other
• •
,,
:-- '("'14'-1
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'
:
- ~
~·
departments of t}J.e bad.r, ?.-ls0 in arry cases \vhere it ·hc:.s not
~lready
been done, that ex;:Jenditures of all kinds incurred in connection with
the operation of the .,.'l.gents Departments be subj:acted to the same scrutiny and tests as are those incurred for other departments of the same
bank.
November 12, 1923.
•
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~......,
I_ . •
,_,
X-3639
MEHOIWTDUM TO
GOVSPNOES 1 CONFEP.ENCE
fl'Om
~CARD'S
COMMITTEE ON ECOl,iOMY & EFFICIENCY
FEDERAL RESERVE
Tha Federal Resal"Va 13oa:rd's Corm:itt~e on Econorr;y and Efficiency dasi.,.~s
to refer the following ma.tters to the Gov.;;rno:rs for their consid ara.tion and
for such a.ction a.s thay ma.y desi:ra to taka.
1.
Racommanda.tion for the a.ppointrrent of an op~rating
COIIJT;1i t tea to s~anda.T'd ize the principal su~oplies used ,
and in all cases wha:re sa.vings can be eff~cted by s.o
doing, to a.rrange for joint pur-cha.sing of such supplies.
In connection with the study of the Currency and Coin functions, this
Comrnittee investigated the variety and cost of tho p:rincipa.l supplies used.
T'na i:nforma.tion obta.inad clea.rly ino ica.tes tha.t there is opportunity f o:r sub ..
stantial savings th.T"ough standa.rdiza.tion of sizes and quality, and in some instances, through joint pu:rcha.sing.
In the ca.sa of money bands, of Which the syste9 uses about 20,000,000
annually, there wa.s found to be a. g,.ea.t vat"iety of sizes and a. wide :range in
the quality of pa.pe:r with prices ranging f:t'om
33 cents to
~4.00
pe:r thousand,
most of tha banks paying f:rom $1.00 to $1.50, the prices bea.,.ing veey slight,
1f any, :rela.tion to the quality of paper.
A simila.:r situa.tion exists with respect to money ba.gs, of which the
System uses a.bout 7?0 ,000 par a.nnum.
The:re wa.s also found to be a. wid.;: va.:ria.tion in tri:l prices pa.id for
soma standa.T'd products such a..s L.3ad saa.ls, on 1r1hich prices rangad from $6.25
..
( ....
X-3369
- 2 -
to
$13.76 par- thousano, rr.ost of tha banks purcha.sing
~
:."'•
("',
... •\)
th-:: product of but two
rr-anufa.ctu:ra:r-s.
With :raspJCt to SU.J:;J:lios the fi:rat nacessa.:r-y stap toward aconomy is
to standa.rdiza both q_uality ana size, a.ftar which p:roba.bly with :raspect to rr.o<>t
itarrs, ona bank can purcha.sa as chea.ply a.s another.
On soma few itarr.s, how-
aver, low6r j_)ricas can ba obta.inad through ·joint pu:rcha.sing.
also b.;
som~
T.'1ar-e should
a.rrangement for tha exchange of inforn.a.tion concerning prices
CJtC•
It is Racomuanded tha.t the Governqrs dasigna.te a. cornmitt..;e with po~
to standa.:rd ize anJ to obta.in th;:; usa of such sta.ndard izad supplies by all
ba.nks, and also to a.r:range fo:r the joint pu:rcha.sJ of su]:.Jplies in all cases
where substantial aconomias can be effected by such sta.nda.:rdiza.tion o:r purcha.se.
2.
Recomr;landa.tions conca:t'ning Insu:ra.nca •
.At the. r:tq,usst of the Federal R;s..;rv..3 Boa.rd the Comr;:ittaa has invastiga.tad tho Insurance ca.r:riad by a.ll banks.
Tha:ro ha.s baen not ad a. consid era.ola
va.:t'ia.tion in the amount a.nd kinas of ineu:rance ca.r:riad, an:l esp..;cia.lly in the
11
limits 11 spacifi.;;d fo:r th.:l va.:r.ious typJs of liability insu-ra.nca, but the con-
di tions unoal' which the s ava:ra.l banks ar,;; opa:ra.ting va.r-y so gr-eatly tha.t the
Comrnittda consido:rs it a.dvisa.ble to Jafe:r a.ny -racomzr,and3tion with :respect to
this type of insul'anca until tha banks a.ra in thair- new buildings.
T.ha:ro s.:r3, howova:r, two classes of insurance conc3l'ning which the
Commi ttoe makos :rt:corrm:mdations a.s follows:
- -
X-)239
)
(a.) En:pioya2s Gro1.:p Life Insurance.
The Couni'cte-.; hos obtain:.::d consid2rable data. on this subject.
of tha banks hav.a practically identical policies
issu~'d
Six
by tha s.:JJne company,
The Equi tabla Lif a .As au:rance Society, a mutUCJl company issuing participa.ting
policies unda:r which tha real cost is detanninad by the size of the annual dividend.
Four of the banks have policias issued by the Aatna Insurance Com-
pany, a stock company issuing non-pa.rticipating polici as wh,:;re tb;; cost is
fixed by the pramiurr; rate, tl1e rata baing ad,'Justed
with the
11
_;xparience of the group".
f:ron~
tima to tirre in l1ne
The r.:;:::aining two banks hove policias in
sapa.rata compani.:.:s, on-2 a stock and th,:; oth ::r a mutual corrpany.
The cost of group life insuranc2 is in part date:l"'Dined by the .axpex-ience of each saparata group.
The weight giYen the
11
exparianca" va.:r.ies
greatly with the siza and age of the group, srrall groups r2ceiving J:lractically no
ban,~fi t
frOQ a favorabl a expe:r-Lmco, but tha banefi ts gradually
incx-ease until with groups of 10,000 err;ploya-:;s or n:ore which have baan in
existanca fo:r. from ten to fiftean yaars th..; cost is d3t3:l"'Dined almost .:Jntirely by the y:;a.r to y.Ja.r
11
exp.;;;rienca 11 of the group.
It is the aim of the oorr.panias to ultirLa.t2ly vv:rit_;; this insura.nc2
for large g:roups a.t a rra.rgin of about
157o
above cost, that is losses •
.As a.ga.inst this theoretical cost th2 cost to tha twalve l'es.:;:rv:;
ba'nks has, during the: pa.st thr.oe yaa.rs, avarag-.:d about
657o
abov.;; loss.;;s, dill
to th.; fact that non-.3 of tho groups are larg0 Jnough to g.:::t the full b.Jnafi t
of th-::i:r fa.vox-a.bla ..oxp-.;:r.i..onca, and in pa.rt to th.; l..ongth of tim.;;
hav2 b.; . m in op.;ration.
th~.,
groups
TI:1J cost to th.; Systerr: is a.bout $100,000 p0r annum-
..
- 4-
X-3S69
Ha.d a.:r:ra.ngsmonts baan rEade in th-.;; beginning so tha.t tha twelve ba.nks
could ha,ve b3an considarad as on.3 group, th-:; cost to the banks up to this tima
would ha.v a ·bac;n very nmch l-'ss than it ha.s b.;;en.
Th.;;:Y'o a:re two possible ways of r-Jducing th.; cost of tnis insuranco:
:Ey placing all the insurance -.vi tn on.3 company with an
ar1·angement unda r which tha :rate will b3 d et.;: :rmined on
t!le ba.sis of the 0xpe:rience of sll ba.nks consid e:r3d as
on3 group, thus astablishing a group of 12,000 lives.
'By self insurance.
Tnis Committa-J thinks fa-vorably of self insu--r:-anca for this risk,
and, the:refo:re,
R.3comm~
tha.t tha ma.tt..;:r ba nfa:rrad to the Insurance
Commit tee of the Gove:rno:rs' Confer.:: nee fo:r thorough inv 3S tigation and :rapo:rt
with a plan of opa:ration.
(b)
Automobila Insurance.
This item of insur-anca is costing the
~~10,000
pal' annum.
th.:: ca.:r
0"1'
S~rstem
a.pproxirnately
'lh,;; l'a.tes va:ry g:raatly with th.:: size of the city where
truck is opa:rated.
The only way in Which the cost can ba :reducad a.ppaa:rs to be
by pla.cing the busin;:)ss entirely through one company.
If all banks will a.g:re0 to placa this pe.:rticular insu:t>:;Jnce th:rough
om company it is b~liovad that a. saving of approxirre.taly 207~ can be offectad from the local w~nua1 ra.tos now bdng pa.id by a11 banks·
This reduction would be obtained in pa.:rt b0cause of th a a.rr.ount
of the insurance to b~ written and in pa.rt on tha ground that the banks rapr.3sant a prefarred risk.
.
.
.. 5 -
Each b<m.k would of coul"'se
b~
,··· I>"
X-3339
/~ .. ,_J
a.t libarty to fix it.s ovm limits and
to coma into tha a.r:l"angJrDnt with the a.xpi:l"ation of its j)resent insu:l"ance.
Tnis Corrmitt..::.s :i.i.acornkmds the a.cceptc:mc.s of tho plan by all banks.
Ir. the 0vant of favorable a.ction on the abov a .recomrr.enda.ticn the deta.ils ca.n be compL;tad ai the:r. by this Committd or by tha Insurance Committee of the Gove:rno:rs' Conf.;:rence.
3·
Recomrrnndation fo:r th3 Investigation of the Cost of
sacu:ring Credit Info:rma.tion.
In connection vvi th th.:1 study by the CornmittJe of th;; "Loa.ns, Red iscounts and· Invastmant 11 functions of the banks i t wa.s no ted that thsre is a.
wide va:r.ia.tion in the cost of operating the seva:ral C:redi t D;;,.r:e.:rtments •
This ComrDitteJ
obtein~d
from each bank a. statement of its policy
in S.)CU.ring credit infoma.tion, a.nd from this de.ta. it would app.;a.:r that
eith;;:r soma of the banks a.re doing too much in this r.3spect, o:r othe:rs a:re not
doing anough.
The Commi tta.:; does not consid eX' that it can make any cefini t3
sug~
-
gastions on this subject and Recomm~nds the:r::;fo'T'e tha.t tha ma.tte:r b3 refe'T'Nd
by the Gov0:c-nors to a. Committee of Fade:ra.l R.Js0rve Cr..;di t rem for investigation and :raport.
4.
Recommand at ions concerning cost of f:raa sa:rvices and
otha:r a.ctivi ties ca.:r:rLJd on as a. ma.tta:r of policy.
The Corrmittee has found upon an analysis of tha cost of the fx-ee services and other activiti0s carried on as a. ma.tt;;;:r of policy tha.t there is a.
wide variation in th0 polici-.3s of the sav0ral banks with raspact to thsse expans as, some banks axp-:mding much more than othJrs en ca:rtain items and naar--
•r"l
•.
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b -
X-)339
ly avz~y bank .JXpar.ding a. -.:ompar-a.Uvely la:rge sum on at laast ona iter.1 ..
This condition leads to tha conclusion that av~ntua.lly, as th:Jse
vices
a.:r~
more unifo:l':mly usaJ in all dist:ricts, avar-y bank will, with
r-esp~ct
to each sepa.:ra.ta i tam, lev.:;l t:..p r:roportionately to th:; high bank, in which
case the expenses coming under these heads will iricr8a.se very ma.terially in
eve :ry ba.nk.
It is not the provinca of this Comr.1::.. ttc:G to make recomrr,and stions for
the Nduction of p:rese::1t activitles of tha banks in this connection.
believe it is its duty,
hovvev,~x-,
It does
to point out that a. continuance of the p:resont
policy is bound to rasul t in a vs:ry great incraosa in th.::se expenses ov aX' a
period of yoars ar.d tha.t the banks should know how much they a.re likaly to be
ultimately obliged to 3Xpend, so that i f it is considar3d nec.:;;ssa:;.•y, steps maY
be taken to control these items.
It is tha:refore Recommended tha.t the Governors take steps to determind for each bank and for- the Systam as a. Whola, wba.t may be the approximate
ultirna.ta total cost of each frae sarvice now being given, a.ssuming esch service is used to the fullest extent by all banks.
With this informa.tion ava.ila bla it should ba possible to de te:r.mine
whetha :r o:r not th<:J total for a:ny i tern is more than th0 System would b.J wa.:r:rantad in expanding fo.:r the purpose, and in the avent tba.t the total for any item
is considered .::xcessive, steps could at once bs taken to control it.
November 12, 1923·
(-.,
(
BEFORT
COM~iiiTTEE
X-3890
OF
ON ECOltOMY .ft..ND EFFICIENCY
TO THE
FEDERAL P.ESERVE BOARD
This Committee was appointed by the Federal
Reserve Board on September 20th, 1921, for the purpose of
initiating a program :1t,)r greater econorey and efficiency in
the operation of the Federal Reserve System.
During the two years of its existence muCh
information has bee.n gathered and a number of definite objectives accomplished.
In this, the first formal report of the Committee, there is presented a history of the work up to this
time, together with a number of conclusions that have been
reached, and a statement of the problem as it now exists.
R~spectfully
submitted.
A. C. MILLER
Chairman.
November 12, 1923.
,,,..
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PE.BS0l\"}TEL OF COMMITTEES:
The original Committee as appointed by the Board consisted of:
Mr. A. c. Miller, Chairman
Mr. J. R. Mitchell
.,.
There was subsequently appointed on November ~r. 1921, an Auxiliary Committee representing the banks, as follows:
Mr. D. c. VTills, Chairrran, Federal Reserve Bank of Cleveland.
11
11
Mr. G. W. Norris, Governor,
"
Philadelphia.
11
11
11
Mr. J. U. Calkins,
"
San Francisco.
Still later an Advisory Committee was named consisting of the
following:
Mr. J. F. Herson, Chief,Federal Reserve Examiner.
Mr. ~r. 7T. Paddock, Deputy Governor, Federal Reserve Bank of
Boston.
Mr. E. L. Smead, Chief, Division of Bank Operations, Federal
. Reserve Board.
Q.Ip~.:t-TGES
U1 PERS01T1TEL OF COMMITTEES:
Mr. J. R. Mitchell resigned as a member of the Federal Reserve
Board in May, 1923. He was succeeded by Mr. G. R. James who was appointed to this Committee in June;. 1923.
Mr. J. U. Calkins resigned as a member of the Auxiliary Committee early in 1922 as he felt it was not practicable for him to
attend weetings of the Committee from so great a distance. He was
succeeded by Mr. S. B. Cramer, Deputy Governor, Federal Reserve Bank
of Chicago, who was subsequently elected Secretary of the Board's Committee and served in this capacity until March 1, 1923, When he resigned
as Deputy Governor of the Chicago Bank.
Mr. }. H. Vogt, Controller of Accounting, Federal Reser.ve Bank
of Chicago succeeded Mr. Cramer on the Auxiliary Committee and also
as Secretary on March 1, 1923, resigning one month later.
In January, 1923, Mr. L. R. Rounds, Controller of Accounts,
Federal Reserve Bank of New York, was added to the Advisory Co~ittee,
and in April, 1923, he was elected Secretary of the Board's Committee and a member of the Auxiliary Committee.
PRESENT PERS01T1mt OF COMt1ITTEES:
The Committees at this time consist of the following:
s
X-3!390&
-2-
-.., ....... '.·':""
r
Board's Committee:
Mr. A. C. Miller, Chairman
h1r, G. R. James
Auxiliary Committee:
Mr. D. C. V!ills, Chairman, Federal Reserve Be.nk of Cleveland.
11 ::
Mr. G. vr. Norris, Governor,
II
II
Philadelphia.
Mr. L. R. Rounds, Acting General Auditor, Federal Reserve
·
Bank of l!ew Yor:Y.
Advisory Committee:
Mr. J. F. Herson, Chief Federal Reserve Examiner.
Mr. 'JJ. rr. Paddock, Deputy Governor, Federal Reserve Bank of
Boston
Mr. E. 1. Smead, Chief, Division of Operations, Federal Reserve Board.
THE EXPENSES OF THE
~FEDE'RllL
RESERVE SYS'IEM:
The operating expenses of the twelve banks for each full year
since their organization have been as follows;
1915
1916
1917
1913
1919
1920
1921
1922
$1,961,732.
2, 459' 439.
5,465,656.
12,177,938.
20,341,798.
29,SS9,307.
36, o66, 065.
30,347,587.
The expenses increased rapidly from 1915 to and including 1921,
when the expenses of the twelve banks had reached a total of more than
$36,000,000. per annum, the providing of which, together with the amount
required for dividends and other necessary charges, compelled the constant
investment of more than $1,000,000,000., regardless of credit conditions or
other considerations, this amount being approxiiTately one-third of the
greatest amount of credit the Federal Reserve System has ever been called
upon to provide at one time.
It is at once appP.rent that a fixed charge of so huge a sum might
'~
-3easily be a serious handicap to the exercise of the real functions of a
reser~e
banking system.
The Committee has considered itself charged with a responsibility,
not only with respect to the economical and efficient operation of the
System, but also to study the
.{
expen~s
·of the System to determine to what
extent they are increased because of policies and the carrying on of work
which, while desirable, may not be absolutely necessary.
There is attached a statement (Exhibit C) Showing theexpenses of
the twelve banks classified according to functions, a summary of which is
as follows:
(These figures are on an annual basis coruerted from the actual
expenses for the first quarter of 1923 and include a pro rata distribution
of overhead.)
PRESENT
f}'1\1UAL
E\'"PE:t-JSE
---
E!Penses of Functions essential
to the operation of the System
under the Federal Reserve Act.
~17, 757,904.
PER CE1TT
OF
TOI'.At
53-30
(This total includes cost of the
following functions:
Loans, Rediscounts and Investments
Currency and Coin
Check Collection
Federal Reserve Agent
and the expenses of the
Federal Reserve Board.)
Expenses incurred as Fiscal Agent
of the U. S. GoverTh~ent.
24.07
EA~enses
incurred as a Depository
of the U. S. Government.
(This represents the cost of
handling Government checks and
coupons.)
624,276.
01.87
-4-
X-3890a
PRESEL\T
PER CENI'
.AN1lU.AL
OF
TOTAL
EXPDTSE_
Expenses incurred as a Matter of
Policy in Connection with Services
Rendered to Member Banks.
$ 4,426,468.
13.28
(This represents the cost of
the following services:
Securities for safe-keeping.
Non-cash Eollections.
~ransfers of Funds.·
Currency and Coin Shipments.
Shipping Charges on Securities.
Purchase & Sale of Securities, etc.)
Expenses of Activities Carried on as a
Matter of Policy.
2, 492,688.
07.413
$33.320,012.
100.00
(This includes the cost of the
following:
Bank Relations.
Bank Examinations.
Statistical & Analytical.
Publications.
.
Employees Group Life Insurance.
GRJI.ND TOTAL
The above figures, which were not available.at the time this Committee began its work, are presented at this point as being of special
interest.
METHOD OF
PROCEDUR~ :_
Following its appointment, the Committee gave serious consideration to the choice of a method of procedure for the accomplishment
of its task.
While several methods were considered; the final choice rested
between the two following:
(a)
The establishment possibly-with assistance from without the
System, of a standard and uniform practice in all banks with
respect to each and every operation, thus permitting of an
arbitrary determination of costs more or less in line with
commercial practice.
-?(b)
-\
The assignment to each bank of the task of dealing with its
own problem, the Committee giving assistance in the wqy of
providing comparisons of costs of one bank with another and
in so far as practicable securing the adoption in all banks
of those methods which had proven merit and in generally coordinating the effort of all the banks to as nearly as
possible the same degree of efficiency in all operations .
•
After careful consideration it was felt there were objections to
the adoption of the first method, among others the following:
(a)
The considerable difference in the size of the bank organizations ranging from about 350 to nearly 3,000 clerks, making
it unwise to adopt uniform methods in all banks.
(b)
The probability that in many cases the banks were already·
followingthe procedure best 'suited to their conditions with
respect to many operationa, although such procedure in the
different banks might vary greatly.
(c)
The fact that nothing would be accomplished by insisting upon
a change for the sake of uniformity in cases where different
bank~, although following quite different methods with respect to a given operation, were accomplishing the task with
equal efficiency.
It was therefore decided to follow the second plan for the following reasons:
(a)
The belief of the Committee that the real responsibility for
the efficient and economical operation of each bank must,,
in the final analylis, rest upon the Directors of the· several
banks.
(b)
The opinion of the Committee that it could best accomplish
its objective by acting as a clearing house of information,
both of methods and costs, of similar operations in the
several banks, so t J:a t every bank would ha. ve an opportunity
of comparing its methods and costs with those of the other
banks.
(c)
The belief of the Committee that there probably would be
found already in operation in one o r more of the banks the
procedure which would prove most efficient'in a majority of
the banks with respect to most, if not all, of the functions
performed, and that the securing of comparative cost figures
would automatically compel the adoption of the most efficient
methods in a~ case where less efficient methods were in use.
(d)
The securing of the competitive effort and cooperation
of the officers and department heads in all banks and
the utilization of the experience and ability whiCh
the Committee believed existed within the organizations
of the several banks •
.
HISTORY OF THE COMMITTEE'S VTORK:
Very shortly after its organization the Committee requested the Governor
of each bank to designate a local committee for the purpose of making a survey
of each department of the respective banks with a view to increasing the efficienqy and reducing the expense of operation.
It was requested that the Chairmen of these Committees report to this
Committee from time to time with respect to the progress of the work and the
results_ accomplished.
REPORTS:
The Committee was faced at the beginning with a problem in securing what
it has considered from the first to be essential, a comparative statement ot
the expenses of all Reserve Eanks and EranChes.
Without such figures it would
be impossible to draw conclushms. as to the comparative efficiency of the opera· tion of the several banks.
Pr·ior to the appointment of this Committee, the Federal Reserve Board had
received monthly reports in detail of the current expenses of each bank arranged
according to the object of expenditure, (Form 96).
This report permitted ot
comparisons between banks only in the most general way, as there was no relation
of the expenditures to the work of the bankJ and no attempt
~ad
been made to
secure from the banks reports of expenses along either organization or functional
lines ..
It was apparent that any figures obtained to be of value would have to refleet the cost in each bank and branCh of eaCh of the major operations or
functions.
\-~~
- 7-
z:-3830a
~
. .Jll
The first attempt to secure any such figures was made in December, 1921,
when all banks were requested to report on forms provided for the purpose,
the expenses for the year 1921 classified according to certain prescribed
operations and departments.
Prior to this time a few of the banks had prepared for their own use
departmental classifications of expenses, but in most of the banks this had
not been attempted.
A study of the reports received for the year 1921 indicated such
apparently wide variations in the expenses of the several banks as to make
the reports of very little value.
Upon investigation these variations were
found to be due very largely to differences in the organizations of the banks,
the allocation of the work and also wide differences in the interpretation of
the work intended to be covered under the several headings or departments.
There was then appointed in March, 1922 a Sub-Committee consisting of
Messrs. Wills and Cramer, with Messrs. PaddoCk and Herson acting in an advisory capacity, to prepare a uniform form of report for the use of all banks and
also to
prep~re
a manual defining the expenses to be included under each head.
SCHEDULE "E":
In the preparation of the new report, known as Schedule E, it was
decided to disregard entirely the departmental organizations of the banks and
to secure, if possible, accurate cost figures for each complete operation of
the system, regardless of whether or not performed in corresponding departments in all banks.
A
meeting of the representatives of all banks was called for the purpose
of discussing the proposed report and manual.
This meeting was held in Chicago,
April 24 and 25, 1922, and was attended by Messrs. Miller and Mitchell of the
-8-
X-3890a
Board t s Committee, Messrs. 1!Tills and. Cramer of the Auxiliary Comnittee ,Messrs.
Herson and Paddock of the Advisory Committee and also by one representative
from each Reserve Bank.
At this meeting the proposed form of report and manual
was thoroughly discussed and finally adopted, with the understanding that the
first report would be prepared by all banks for the month of July, 1922.
Reports were subsequently received on this form from all banks for each
month from July to December, 1922, inclusive.
In December, 1922 a second conference of the rspresentatives of the banks
with the Boardfs Committee was held at which a revised form of repmrt and manual
was approved which has been in use since
Jan~ry,
1923.
CO:NIPARIS01T OF M8THODS IN PRIFCIPAL Ft.WCTI OriS:
At the December, 1922, conference with the representatives of the banks,
there was also discussed and approved a proposed plan for a study and
co~
parison of methods and expenses in the four principal functions of the banks,
namely:
Currency and Co in
Check and Collections
Loans, Red is counts and Investments
Accounting
This plan provided for a stydy of each
fu.~ction
separately through refre-
sentatives to be designated by each bank for each of the four functions.
For
the study of eaCh function it was proposed to divide the banks into three
groups, each group to include the banks doing most nearly the same volume of
business and under most similar conditions.
Each bank through its representative was requested to rrepare a statement
in detail of its procedure, together with a set of the forms used. and a flow
chart of the work.
One representative in each group was d.esigreted as chairman of the group
for the purpose of collecting the data and reporting the progress of the work.
! ....
--n
(
- 9-
X-3890"'
A conference of the Group Chairn.on with the Committee was held in
ryashington, January
29 and 30,
19~3,
at which a definite
progr~m
for the work
was approved.
Following the preparation of the data by each bank, there were held between April 5 and 17, 1923, twelve group meetings at which the representatives
of each of the four banks in each group met for a study and comparison of
detailed methods and expenses.
The chairman of each group was requested to
prepare a report of his group meeting, to include such
reco~mendations
as the
group might have agreed upon and to prepare himself generally for a meeting of
the group chairmen with the Board's Committee for a discussion of the work of
each function separately.
During the weeks of May
7 and 14 the Board's Committee held a series of
conferences with the three group chairmen for each of the four functions, at
which time the
repo~ts
of the chairmen were gone over in detail, the problems
were discussed and a number of recommendations made which have since been
transmitted to the banks for their information and attention.
CO:t-,lTACT l!TITH THE BAl\iKS :
The Committee has endeavored to
~aintain
a close contact with the banks
through the officer designated by each bank as Chairman of its local Committee
on Economy or Procedure.
Several communications have also been addressed to
the Chairmen and Governers informing them of the progress of the work.
Copies
of the Comparative Exhibit of the Functional Expenses have been furnished
regularly for the information of all banks.
All the banks have manifested interest in the work of the Committee and
c
the promotion of economy within their own organization, and it is apparent that
by bringing together in conferences the representatives of the banks, and also
by making available the comparative exhibits of the expense figures of all
•
X-3890a
- 10 -
banks, a great deal has been accomplished in the way of economy.
It is
believed also that there has been a considerable improvement in methods and
in the efficiency of certain operations entirely apart from the economies
.
that have been effected •
RESULTS:
It is difficult to state in .figures with an,y degree of accuracy just
what results have been obtained from the Committee's work.
Prior to February, 1923 when the Committee initiated the study and comparison of the work of the four principal functions already referred to, its
influence on the expenses of the banks . iliad been almost entirely such as
resulted from the distribution of the comparative exhibit of expenses in
creating among the officers of the several
ba.nl~s
a spirit of competition,
As a result of the study and camparison of the four principal functions
of the banks, a number of important changes in pro cedu·re have taken place
which will result in considerable economy.
It was found that several banks
were carrying on expensive operations which other
eliminate.
ban1~s
had beBn able to
The economies resulting from voluntary changes in procedure during
the course of this study and later will amount to a considerable sum.
There is attached a statement (Exhibit A) showing in comparative form the
expenses of all banks combined for the year 1921 and 1922, from which it will
be noted that the total current expenses of the banks were reduced from
$36,066,065 in 1921- to $30,347,587 in 1922 (the last figure including the item
of furniture and equipment in order that it may be comparable with 1921), a
I
decrease of $5, 718.,4713, which is equivalent to 15.13t;%.
More than half of this
saving appears in the items representing the cost of currency, but a very
over
substantial amount, $2,210,674, appears in those items of expense / which the
system has direct control.
-.~
X-3S90a
-11-
There is attached another statement (Exhibit B) in which the total
expenses of each bank are shown for the yeevr
year 1921.
19~2
in comparison with the
This statement shows that every one of the twelve banks succeeded
in reducing its expenses very materially.
This decrease in expenses
~as
no doubt in part resulted from the
more steady volume of work being performed.
It is also in no small measure
due to the effort which has been made in all of the banks to bring about
greater economy in operation.
This result was accomplished in the face of a constantJ..y increasing volume of business, for while the total volume of work at the banks
has not increased in the last two years, at anywhere nearly so rapid a rate
as the increase which occurred up to about two years ago, there has nevertheless been, and there still continues to be a steady increase in the total
work of the banks as represented by volume of currency, cashand collection
and other items handled.
The decrease in work in the Loan and Fiscal Agency
departments is considerably more than offset by the increase in other departments.
During the year beginning with July 1922 the Committee bas received regular reports of the expenses of all banks classified along
functional lines as
alrea~
described.
This method of classification was an
experiment, and, while it is still far from satisfactory as giving a true
picture of expenses, it has nevertheless very largely accomplished the results for which it was designed.
Large variations in expense and numerous
apparent inconsistencies continue to appear for the following reasons:
(a)
Marked differences in the departrrental organization of the
banks due to the difference in their size, and resulting
differences in the allocating of ope rat ions.
X-3Sj0a
-12-
(b)
The difficulty of securing a comparable unit of measurement
as to the volu.'Tie of actual work performed.
T~ere
are
~arked
differences in the departmental organization of
the several banks and as a result of this, in the allocation of work to '. he
departrr,ents.
These differences are
;10
greater than might be reasonabJ y ax-
pecteJ. in organizations which vary in size from a staff of 350 to a staff
of nearly 3,000, for it is at once obvious that methods of doing work in
the srr.aller organization will not prove to be efficient or economical in the
larger organization, or vice versa.
':'hile it is po3si"!::lle to measure witb. reasonable accuracy a consi:lerable pro:rortion of the 1Nork in any reserve bank, it is not possible, except in a very few instances, to secure a measure which will be exactly
in all banks.
co~~arable
To illustrate it might be assumed that the cost
of handling 10,000 checks should be substantially the same in all banks, but
it is
foun~
that there ar::; a number of fo.ctors affecting the cost, such
(a)
(b)
(c)
(d)
(e)
as~
The number of tanks that have derosited the items.
The time the items are received on deposit. (which i-n many
cases is a rratter of local custom).
The time items are cleared at the local clearing house.
The number of banks in the local clearing house.
The extent of the sort required for branches, etc.
and in the case of country checks, the cost is very greatly affected by (f)
(g)
The number of banks to which items are routed.
The proportion of items sent to banks in the same district
in comparison with the it ems sent to the other reserve banks,
the items sent to other reserve banks requiring considerably
more labor in the listir~ than those sent to banks in the
same dis-trict.
There are similar conditions affecting practically all of the operations
of the
banl·~s,
an1 it is differences of this character which account for rrany
of the apparent inc.onsistencies in the reported cost figures.
It is necessary to remember, therefore, that the exhibit of the
-13-
X-3S90a
expenses of all banks as compiled is not an entirely true comparison of
the relative efficiency of the several banks.
ANALYSIS OF EXPENSES:
By the use of the functional expense reports, to vmich reference
has already been
~ade,
it is now possible for the
firs~
time to secure
reasonably accurate costs of the several operations carried on by the
banks.
There is attached a statement (Exhibit C) showing the functional
expenses for all twelve banks for the three months ending MarCh 31, 1923.
Assuming that the figures for the balance of the year 1923 will be approximately in the same proportion. there have been extended on this statement the annual expenses as
esti~ated
for the year 1923 for each fundion
and operation of the banks.
The expenses of the several functions of the banks have been
grouped under five heads, after the distribution on a pro rata basis of
the "Administrative and General Expenses", as shown in the following
summary:
-14-
X-3S90a
SUMM./RY
Direct Expenses Before DisAfter distribution of
trioution of Administrative
Administrative and
and General Expenses
General Expenses
Per Cent
Per Cent
Annual Expense of Total
Annual Expense of Total
Administrative & General
Including Expenses incident
to Provision of Space,
Personnel, Service and
Overhead
$11,352,7SG.
0
0
$17,757,904.
53·30
Expenses of Functions essential to the operation of
the Federal Reserve System
under the Federal Reserve
Act
11,640,463.
Expenses Incurred as Fiscal
Agen~ of the United States
Government
4,686,240.
14.06
8,013,676.
24.07
364,900.
01.10
624,276-
01.87
Expenses Incurred as a ~atter
££ Policy in co~nection with
Services rendered to M3mber
Banks.
3,173,316.
09-53
4,426,468.
13.28
Expenses of Activities carried
on as a ~atter of Policy
1,501,800.
Expenses Incurred as a Depository of the United
States Government
$33,320,012.
07.48
100.
$33,320,012.
100.
From the above it will be noted that 53~ of the present expenses
of the System represents the cost of those functions or duties imposed upon
the banks by law.
Approx~ately
performed for the United States
pository.
The
26% represents the expense of the work
Govern~ent
either as fiscal agent or as de-
remainder of the expenses, nearly 21~, is controlled almost
entirely by policy representing the cost of those services for member banks
-·r.
.)
~-15-
X- 3890a
which have been voluntarily assumed, and the cost of various activities
which have been asswmed as a matter of policy.
The expenses grouped together as representing the cost of services performed for member bar$s amount to a little wDre than
total and it is an item which is steadily increasing,
13% of the
It has been observed
that certain of these free services have been made available to the member
banks in some districts to a much greater extent than in others.
This ap-
plies particularly to "securities for safekeeping," the handling of
11
non-
cash collections", the furnishing of "wrapped coin 11 and the "purchase and
sale of securities".
The use of the transfer privilege and the absorption
of the cost of currency and coin shipments appear to be reasonably uniform
throughout the System.
It is apparent, however, that should all of the
banks in the System perform all of these services to the extent that they
are now performed in a few of the districts, this e:xpense would be very
~aterially
increased.
Particular attention is called to the detailed statements com-
prising Exhibit C showing an analysis of these expenses; also to Exhibit D
showing the expenses of each bank for each of the free services rendered
to member banks and for each of the activities carried on as a matter of
policy.
PROGRAM
The Committee has referred to the Governors and Agents several
watters which in its judgment require their consideration as follows:
1.
Recommendation for an operating committee to standardize
supplies used and to arrange for joint purchasing where
economies can be effected by so doing.
2.
Recommendations concerning Employees Group Life Insurance
and Automobile. Insurance.
-
3.
Recommendation for an investigation of the cost of
securing Credit Information.
4.
Recommendation concerning cost of free services and
other activities carried on as a ITatter of policy.
5.
Recommendation for a survey by the local Committees
on Economy and Efficiency of the Agents Departments
at each Bank.
The Committee has secured data concerning the cost of express
shipments of currency and coin and is petitioning the Interstate Comrrerce
Commission for a reduction in the rates being charged.
The express charges on money shipments were increased throughout the country a year ago by
50~
and the System is now paying the Ex-
press Companies approximately $300,000. - per annum.
The Committee believes
the banks have a good case and hope that a very substantial reduction
~ay
be obtained.
The Committee has not as yet wade any survey with respect to
cost of providing - Space, Personnel, or General Service believing consideration of these functions should be deferred until the banks have moved
into their new buildingsafter which conditions should be reasonably comparable.
The functions which the Committee is proposing to next consider
are:
Fiscal Agency
Agents Departments
Auditing
Custody of Securities
The last mentioned the Committee considers of especial importance
as it is apparent that the activities of the banks in this respect are likely
to increase greatly as they move into new quarters with ample vault facilities.
It is important that this work be done not only economically but
efficiently and with safety to the banks.
·~
-17-
X-3830a
BRANCH BANKS
The question of the operation of branch banks is an important
one and has a very material effect upon the expenses of the System.
There
are now being operated 23 branches and one agen"''Y at a cost of approximately
$6,000,000. per year, which is about 181. of the total cost of operating the
System.
The prirr.ary object in the opening of branches has been to extend
the service of the Federal Reserve System and there can be no question but
that the operation of the branches brings this service much closer to a
number of member banks, undoubtedly resulting in advantage to them.
There is a considerable variation in the functions performed by
the different branches, some branches performing practically every function
that is performed by the parent bank, while in others the operations are
restricted to the handling of currency, and Checks and in some cases the
making of loans.
Some branches maintain the accounts of the members in
their immediate districts while others do not.
t
It is apparent that in cases where the branch territory is within approximately 15 hours' mail time from the parent bank, the benefits of
the branch bank are practically restricted to those banks located in the
same city with it, for i f the ·country banks can reach the parent bank with
overnight mail service they can do no betterwith the branch.
branch territory is more than
Where the
15 hours' mail service from the parent bank
there are also some additional benefits to those member banks located outside
the branch city.
The benefits derived by the member banks through the establishment of branches may be stated briefly as follows:
;-·" r: .. :
•\.'!
!
X-3390a
-13-
(a)
The banks in the same city with the branch can very
materially reduce the amount of their vault cash and
in cases where the branch territory is more than overnight mail service from the parent bank, the outside
banks can also benefit to a lesser extent in the same way.
(b)
The banks located in the same city with the branch will
save a day's time in the handling of transit items on
a11 country points within the same reserve district.
This advantage would also be shared by the co1L~tr.y banks
in the branch territory provided they are more than overnight roail service from the parent bank.
(c)
Such benefits as will result from the closer contact
that the member bank can have with the branch bank, and
in the case of those branches operating a loan department,
some saving in time in the roaking of loans.
In the operation of branches there is a certain amount of duplication of expense with the rarent bank.
In roany instances probably the entire
overhead expenses of the branch including the provision of space and general
service, represent an additional cost.
A study of the expenses of the
branches would seem to indicate that if the work now being done at the
branches was performed at the main banks, it could be done at a cost not
exceeding two-thirds the cost of operating the branches and possibly for as
little as one-half the present branch expense.
The geographic extent of a number of the districts roakes the
operation of branches a practical necessity.
There can be no que'stion,how-
ever, but that the total cost of operating the System is very materially affected by the number of branches operated, and that serious consideration
should be given to this problem before additional branches are authorized.
This Committee intends to make a study of the cost of branch bank operations
and will later submit additional data on this subject.
FUTUF.E COURSEOF EXPEl'JSES
~bile
the Committee believes there are further substantial
893
X-3890a
-19economies that can be effected, it is ver,y much
d~bted
if the total ex-
pense accounts of the banks will again show a decrease from a preceding
year if. the banks continue to perfor.m the same functions, for the following
reasons:
1.
The economies already effected have removed the opportunity
for further large savings.
2.
The work of the banks is continuing to increase in most departments, which increase will be sufficient to take up whatever economies can be effected in operation.
3· Within another year practically all of the banks will be occupying their own buildings and it is pro l::able that in every
case the actual expense of operation will be increased thereby:
the items of taxes, building upkeep and operation being considerably in excess of the rent previously paid.
It is of in\erest to note in this connection that the two banks
showing the smallest percentage of reduction in expenses in 1922, as
co~
pared with 1921 (EXhibit B), are the two (Boston and Chicago) which moved
into new buildings during 1922.
In going into these new buildings the banks will secure maqy advantages which cannot be measured in dollars, the principal one of which is
greatly increased safety of operation and there will probably be obtained
some econorru in departmental operations, but the total expenses of the banks
will be considerably increased.
There will probable be a gradual decrease for some time in the
expenses incurred as Fiscal Agent which now amount to about 241b of the total.
There is slight possibility of a decrease in any other item, but on the
other hand there is bound to be a substantial increase under the present
policy in the expenses representing services to member banks, which now amount
to about 13~ of the total.
.~
-20-
X-3890a
RECOMME1lDAT IONS:
The expenses included under the two heads:
Expenses Incurred as a Matter of Policy in Connet,tion
with Services Rendered to Member Banks.
Expenses of Activities Carried on as a Matter of Policy
amounting in the aggregate to nearly
21~
of the total expenses of the
System, are the only expenses susceptible of any considerable reduction.
The policies of the several banks differ greatly with respect to
the
expense~
coming under both of these heads.
It is therefore RECOMM:E1lDED that consideration be given to the
several items of expense included under these heads for the purpose of (a)
formulating a definite policy for all banks with respect
to those ·items of service now being performed free of
charge for member banks
(b)
determining the value of the activities included under
the second head in relation to their cost and establishing
a definite policy for all banks with respect thereto.
..
...
..
,,.
··!
,., •
X'-339o .. a.gg5
COMPARATIVE EXHIBIT 01? CURR11:HT EXPENSES
TNELVE FF.:DERAL T...ESERVE B.AiJKS COMBIJ:JED
1921 .AlJD 1922
Sala.~ies
Bank Office:rs
Clarical sta.ff
Spocial officers and wa.tchmen
All othel"
1921
~.·.:
$2,383,994.
15 ,201 ,393.
789,879·
l ,102, 984.
$2,461,323·
14,222,02J.,
818,772.
1,310,524.
7,~1·
5, 515·
4,029.
9,063.
146,084.
Goval"no:rs' Confe:rences
Fed. Res. Agents• Confe:t'ences
Fede:ra.l Advisory Council
Directo:rst ~atings
Tl'a.veling Expenses
Assessment fo:r F.R. Boa~d Expenses
Laga.l Feas
4,
3.
10,522·
168 .556·
EXHIBIT ...J..
Inc:rea.se
Dec:t'ea.se
$77,329.
$979,372.
- 28,893·
207,54o·
2,236.
414.
1,459·
22,472·
~~:J9£:
1~1:~~6:
1~~:~~:
Insu:rance (Life, fide1ity,ca.sualty,
wo:rkmen' s compansa.tion and genaJ."al
liability)
532,307.
433,273·
Banking House
Taxes
Fi:re Insu:rance
Light, hea.t a.nd powel"
Repa.i:rs and al te:t."ations
All Othel"
178,178.
20,073·
119,408.
163 ,655·
70,231·
270,915·
9,238•
175,908·
89,638·
33,122·
1,508,923.
788,244.
720,679·
1,312,799·
Rent
17,492·
Fire. Ins. • Fum. & Equip.
593,742.
Office and Othe:r Supplies
1,022,540.
P:t'in ting and Sta.tione:ry
201,997·
Telephone
. Teleg,.-a.ph
610. 763·
Posta.ge (OthaJ." than on money and
1,085,206.
secu.~ity shipments)
Ex:p:r.essa.ge (Othe:t' than on money and
46,024.
s.ecu:r.i ty shipmants)
118,592·
Secu:rity Shipments
Cu:r.~ency and Coin Sh1pm;nts
928,387·
8~2t826.
All Other Expenses
1,040,949.
11,099·
443,193·
739, 715·
203 ,023·
573,858·
271,850·
6,393·
150,549.
282,825·
Fu.:mi tul'e and Equipment
TOTAL
4g ,166.
15,156·
99,034·
92,737·
10,835·
56,5()0.
74,017.
37 ,109·
1,026.
36,90:>·
l ,118 ,151·
32,945·
49,084.
139.392·
1,078,518·
1161801·
3,06o.
20,800·
150,131·
$30,241,229· $28,030,555·
Fede:t'a.l Rese:t'Ve Cu.,.:r.ency:
O:riginal cost, including shipping
che.:r.ges
·
4,208 ,211.
Cost of :r.edemption,including
924,286.
shipping cha~ges
,
~·a.x on Fade:t."a.l Re 5 e:rve :Sa.nk Hote
Ci:r.cula.tion
L
63,322.
111.02~·
$2,210,674.
1 .578,?92·
434 ,179·
304,261.
3,507 ,8~
,- ·~J··
X-3390-a.;
E..iliibit - B.
CO~IlPARATIVE
·· '-
EXHIEIT
CURRENT EXPENSES OF TWELVE FEDERAL RESERVE BM1\:S
l 921 AND 1922 •
1921
1922
D.;c:rca.se
of Dac:rea.sa
$2,239,007.
$2,155.506.
$83 ,501·
.0373
Naw Yo:rk
g ,1671 7o0o
6,826,702.
1 ,341,078·
.1642
Phi1a.d elphia.
2,766,443.
2,096. 850·
669,593·
.2420
Clavela.nd
2,956,302.
2 '504,045.
452,757·
ol53l
Richn:ond
2,127,174.
1,696,066.
431,103.
.2027
Atlanta.
1 ,530,585·
1,310,440.
270,145.
·1709
Chicago
4,852,256·
4,3131980 •
533,273.
.1099
St. Louis
1,961,250·
1,667,977
f
·293 ,273.
.1495
Minnaa.pol is
1,325,867.
1,109,582.
216,2S5·
.1631
Kansas City
2,411,079·
2,070,943.
34o ,131·
.1411
Da.llas
1,360,356·
1,543,101.
312,755·
.16;n
San F:rancisco
3,816,964.
3,042,390·
774,574.
.2029
$30,347,587. $5,71S,47S•
.1568
Boston
$36,066,065·
X-3390-a. .
Exhibit - C.
(' :~·7
EXHIBIT OF CURRElJI.J.l E.xPENS~;s
Cla.ssificd a.cco:rding to Fu.nctions
TWELVE FEDERAL RESERVE BANKS CONIBINED
Actua.l Figu:res fo:r Qua.r te:r Ending Ma.:rch 31, 1923.
(From Schedule E)
.Annual Figu:r.es Estima.tad in Proportion
Di:t'act Expdnsas Befo.ra Dist:r.i bution of kministra.Uv.:>
and General E~panses
Pa:r Cent
.Annual Exp~~
of Total
.Adm, & Gen 1 1 Expanses
Inc. Expenses incident to
Pr.ovis ion of Spa.ca, Pe :rsonnel, Service & Ova:rh'd
Expenses of Functions
essential to the opa:r.a.tion of the F,R. System
under the F.R • .Act.
Exp.Incu:r.r.ed as Fiscal_!g!
of the U.S.Gove:rnment
Exp. Incu:t"red a.s a. Depositary
~f the U.S,Governmant
Exp. Incu:r:r.ed a.s a. ma.t ter of
Policy in conn~ction with
Sa:r.vices :r.ende:r.ad to Member.
Banks
$11,952,768.
After Distribution of
Administ:ra.tiva and
Gena:r.a.l Expenses
Pa:r Cant
.Annual Expense
of IJ:'ota1
0
11,640,468.
0
$17.757,904.
4,636,240.
14.o6
g ,018,676.
364,9QO.
01.10
624,276.
3,173,316.
09·53
4,426,468.
01.87
Expenses of Activities ca.:r:ried
on as a. matte:r of Policy
__;1=.1~..o5!..::0:=1...L,6::::.:0::.:0::.:•:.....___0::...4;...;•. .e.5. ::.l_ _ _ _--=2:..t.,....:4~9.::;.2,L.;,6::.;:g::..:g~,---=O;.J..7..:...•..:...48~
GRAND TOTAL
---------
$33,320,012.
100.
$33,320 ,012·
100.
X-3890•a.
Exhibit C-l·
1:
898
ADMINISTRATIVE AND GEN'.!l:RAL EXPENSES
Including Expanses incident to P~ovision of
Spa.c<il, Pal"sonn~l, Service & Ova.T.'hda.d.
Actual Expenses
Fi:rst Qua.~tar
1923
Gene~a.l
P;;r C~nt of
Total xpenses
·0528
Ovex-head
$4~9,813·
~11 72~,222·
.Administration
435,144.
497·
4,1721
1,740,~76.
755,2J6.
),020,944.
16,735·
455,603·
· 2s2 ,s4s.
67,140.
1,622,412.
1,131,392·
131 ,6s2.
526,726.
16,042.
43,899·
23,531·
32,619·
10,591·
64,168.
175,596·
114,124.
130,476·
42,364.
695,921.
2,]3),684.
1S,JOl.
24,710.
24,974·
55,004.
10,695·
23,147.
82,546.
49,003·
24 .150·
225,334·
31 ,119·
10 ,849·
40,186.
73,204.
98 ,840.
99,396.
220,016.
42,780·
92,583.
330,134.
196,012.
303s612.
96,6oo.
901,336·
124,476.
43,396·
160,744.
. 228,697.
914,783·
.Q2i5
282zll6.
.oos6
410.:22~·
1 1641 1 280.
.0492
35,099·
70,850·
14S 1 224.
140 ,396·
2S3,400•
?92,396·
36,166.
49,366.
344,664.
197,464.
30,153·
120,612.
,oo
224.~11·
3~~.¢¢4.
.0270
39,G73·
1S2 1 0~o·
1;9,492.
740,}92·
$2 t 988,197'
$11,952,733.
Governo~s' & F.i.Agt\.confer~nces
Feder.al Advisory Conferences
frovision of Spa.c@.:,
Administ~ation
Banking House
Rented Px-ope:rty
ProVision of Personnel
Administ:ra.tion
Hiring Emp. & Emp, Records
Edu ca.tion and Training
Welfa.:r~ and Medical
Ca.fetel'ia.
General Servic§!
Administration
Purcha.s ing
Stock Room
Telephone
Tal. e gt' a.ph
Coding
Ma.il
Registex-ed Mail & Exp:ress
Filing & Old Re co ,.d s
Dupl ica.ting
Protection
Office boys a.nd pa.ges
Automobile
Equipment a.nd Rapa.irs
Insut'ance
Administ:r.a.tion
Gene:tal Books
'Member Bank Accounts
(Including Resel"Ve Deficiencies)
Federal Reserve Bank Accounts
Expend i tul'es
Planning
Auditins
Administra.tion
.All Othe1"
l.I!AN!!' XQ!AIL
.o9:)6
.0158
·0835
<
71!~2~·-
Accountins
~
1, 33·
16,6ss.
75,90~.
Posta.git
I
I
Annual Ba.sis
52,760.
20,~.
::
..: ::2 F
11! ~· ';ll'i"f' ..(
'"'~
,
t~536
,~~MI->
...... .,
x... 3390-a..•
Exhibit C-2 .~
. 1*""•1"'
'.. ' ..__.}
.
EXPENSES OF 'FU&T:JTIONS ESSEHTIJI.L TO TE:8 CPERATION
OF THE FEDERAL RESERVE SYS 1:PEM UNDER THE ~'EDE1<AL DESERVE ACT •
Loans, Rediscounts & Inv.
Actua.l Expenses
Fi.rst Qua:r.ts:r
1923
Annual Be.si s
Pa.r Cent of
Total Expenses
-~353,501._
$1,4141004.
.0424
Ad minis t:ra.t ion
Ma.int;dning.Cr. Info:rma.tion
Racording Loa.ns & Rediscounts
Recording Invastmants (Proportion Custody of Disc. Colla.tara.l
(Including pro 1 tion of Admn)
55, 76L
168,816.
31.311.
125,244.
:Fa.iled Banks
237,3684
Currency & Coin
4,732,100.
Administration
Currency-Reo. & Sorting
11
. -All Other
Coin
Cost of Cu:r.rency (Incl. a.l1 Transporta.tion chgs, a.xcept to and fl'om
member and non-rr.embe:t' banks.)
33,982.
359,495·
120,820.
71,775·
36,746".
323,110.
92,653·
32,427.
531,786.
80,734.
Fadera.l Reserve Agent
Assessment fo:r F.R. Boa.rd Expenses
~lRECT
EXPENSES
Add a proportion of Adm. and
Genera.1 Expenses
.1420.
135,923.
1,437,980483,230.
2Z7 ,100.
146t934.
1,312,440.
370,612.
129,708.
2,127,144.
322,936·
146,0£54.
.oo44
26,533.
9,938·
162, 772·
651,083·
2,910,117•
ll,64o,46s.
1,529,359·
$4,439t476.
.oos6
4,409,824.
Administration (P:ropo:r.ation)
Receiving & Proving Checks
City Checks (Claa.rings)
11
11
(Othel' than Claa.:rings)
Country Checks
Retu:r.n Items
Administration
Fade:ral Reserve Note Issues
{.0090)
2,367,812.
Check Collection
TOTAL
235,044.
293,216.
5C6,6s4.
74,554
146,671.
42,204.
$17.757,904.
·5330
X-3890-a.
Exlli bit C- 3
EXPENSES INCULRED AS A !.LATTER OF POL! CY
IH COUHECTION 1~fiTH SEEVICES RENDERED TO MET,JBEH DANKS •
.Ac tua.l Expcinsa s
First Quart2r
1923
Sacur.itL::s fOT' Safabaping
(Incl. proportion of Adrrn)
$60,377.
!Jon-Cash Collection
246,643.
Administration (P.ropO'~" .tion)
Non-Cash City Coll:sction
11
11
11
Country
Coupon Collactions (Except Govt.)
Transfars of Funds
"l"Incl uding pl'oportion of Admn.)
111 9o9•
?5 ,955·
133,034.
42,665·
~
x-?41- ' 50'~c •
6
45,62.§.:__
.0072
4 7,956.
235,320.
432,136.
17o,66o.
.0131
1,224,244.
23,996._
Cost of Wrapping Coin
Total Expenses
.0296
105,021.
Cost of Currancy & Coin Shipmanti?_
to and from Mamba.r and lJon-lvkmba.r :Jks 306,061.
Shipping chg3. on Sacuritias
Annua.l
132,204.
.0367
.0007
.0055
.0002
Gold Abrasion
1,459·_
Supplies
5,417.
~1,66s.
.0007
Purcha.se & Sale of Securities and COriliDs?X'cial Pa.pe:r
13,051.
52,204.
.ool6
793,454.
3,175,.:a6.
.0953
313,163·
1 ,252,652~------
fu.rnishad to Member Banks
TOTAL DIRECT EXPENSES
Add a. pro 1pn of Admn. and
Gane:ra.l Expense: s
G R AN D
-----
TQO T A L
-----
$1 ,106',617'
X-- 33~;0a
~
Exhibit C-4
EXPENSES OF ACT IiTITIES CA ~lUED
Jct1::..e.:L
},ir~;t
Ol!
AS A MATTER OF POLICY
F~xpenses
~)u.aJ.··ter
1923
-
Ban¥ Relations
Administration
Office Expense
Road Men & Traveling Expenses
Eank
ExaminatioR~
Administration
All Other
Stat is tical and Analytical
Administration
Statistical
Monthly Letter
Library
·Publications
~~loyees
GrouE Life
Insuranc~
TOTAL DIRECT EXPENSES
,
Add a proportion of Administrative
General Expenses
Annual Basis
$6h.Qll_.____
$268,124.
Per'Cent of
Total Expenses
,0079
20,989.
7,122.
38,920.
83,956.
28,488.
155,680.
132.5.10.
r)30.040.
18,467.
114,043.
73,868,
456,172.
140,581.
C)62.32l+.
13,022.
31,422,
22,613.
23,524.
52,088.
325,638.
8~_139.
)2,')56.
.0010
27,139.
108.756,
,0033
375,4)0.
.0159
,0169
90~452.
94,095.
1,501,300,
.0451
247~~2~2~·------9~3~0~·~8~8~8~·-----------------
$623,172.
C; ~ -,«
.1'..
''-'r •
$2,492,683,
~·
)
X- 3890a
f.
Exhibit C-5
902
EXPENSES UTCURRED AS FISCAL AGENT OF THE UNITED STATES GOVERNMENT •
.Actual Expenses
First Q~arter
Per Cent of
Annual Basis Total Expenses,
1923
Administration
$43,197·
$172,788.
Government Issues
335,214.
1,340,856.
Accounting
50,405~
201,620,
Tiar Finance Corporation
63,278.
253,112.
Custody of Securities
28,140.
112,560.
587,342.
2,349.368.
63,984.
255.936.
$1,171,560.
$4,686,240.
833.109.
3.33:Z,436.
$2,004,669.
$8,018,676.
·Treasury Savings Securities
Go~ernment
Sales Organiza ion
TOTAL DIRECT EXPENSES
Add a proportion of Administrative
and General Expenses
~lit!!!
1:9.!!.1
.1406
EXPENSES I:NCURRED .AS A DEPOSITORY OF 'IHE UNI'I'ED STATES GOirERNMDTT
Government Checks
(Including proportion of Administr&tive)
$ 37.453·
Government Coupons
(Including proportion of Administrative)
53 772,
TOTAL DIRECT EXPENSES
Add a proportion of Administrative
and General Expenses
~g!_t{!?_
!9.!!.1
$
I
$ 91,225.
$
64,844.
$156,069.
149,812.
.0045
215,088.
,0065
364.900,
.OllO
259 I 376 •
$
624,276.
,0187
EXPENSES INCURRE.J AS A MAl'TER O"F· POLICY IN CONNECTION. WI'IR SERVICES
RENDERED TO MEMBER BANKS - FIRST THREE MONTHS OF 1923 ONLY
TOTAL
FOR
SYSTEM
BOSTON
NEW YORK
PHILADEL- CLEVE RICHPHIA
LAND MOND ATLANTA
$29,365
$9.276
CHICAGO
SAINT
LOUIS
X-3890a
Exhibit D
!~NNE-
APOLIS
KANSAS
CITY
SAN FRA.L"{•
DALLAS
crsco
e~rities
for Safekee in
Including pl:'oportion of Adm)
Non..;.Cash Collaction
$60,377 $2,64g
2k§ ,643 20 ,661
Administ:ra.tion (Proportion)
·. 11,989
Non-Cash City Collection
53,955
" · " Country
,.
133,034
·~on Collec 1 ns (Except Govt) 42,665
1,005
2,909
12,123
4,624
3.935
10,367
43 ,6oo
23,04o
103,821
1,965
18,253
Cost of Curren & Coin Shi ts.
to and from Banks
306,061
41,334
61,189
5.999
1,135
4,814
4,094
6,600
T::·ansfel's of !Unds
Including proportion of Adm)
Cost of Wl'apping Coin
on Sacurities
98
c.:rchase & Sale Tr:msactions
TOTAL DIRECT
EXPE~SES
275
$793,454$73,484 $210,137
$2,207
13.507
25,938 10,074
4,000
30,950
10,773
657
3.6o3
3,534
713
1,261
439
5,915 1,980
15,014 6,984
621
3.748
194
1,692
1,946
168
. 1.505
12,233
13,049
4,163
524
3.713
4,964
1.572
369
2,934.
4,257
45
7.355
22,302
357
2,472
4,520
6
1,108
7,129
10,6o6
3.959
7.174
14,649
8,566
13,419
16,070
4,114
346
5,164
122
536
585
4,008
7,437
6
6,997
44,232
33,446 19,573 13,472
37,405
11,987
2,44o
2,022
305
10 ,}41
3,464
30
44
70 -.
1,400
1
625
672
190
250
306
9g
2,04o
90
389
663
149
50
$77,230
$74,433 $39,054$27.897 $t02,314 $37,176 $20,o53 $38,619 $30,891
$61,516 .
.....
•
•
E%PENSES OF ACTIVITiES CARRIED ON AS A MATTER OF POLICY.
FIRST THREE MONTHS OF 1923 ~y
TOTAL
FOR
SYSTEM BOSTON
NEW YORK
PHIL.ADEL• CLEVE- RICH.LAND MOND ATLANTA
PBIA
CHICAGO
LOUIS
APOLIS
KANSAS
CITY
DALLAS
$67,031 $1,135
$15,434
$1.,366
$16,756
$7,213 $1,492
$ 639
$5,624 $ 274
20,989
7,122
35
33,920 1,100
3,399
1,634
5,401
225
384
757
1,753
25
5,812
3~0}.)
Bank Examina.tions
132,510 3,071
17,086
17 756
9,218
E,7}9
Administra.tion
All Othar
16,467 .. 633
114,043 7,433
1,345
15,241
2,627
15,129
1,ij07
7,711
~g
Analytical 140,581 13.445
36,6o6
19,432
5,292
2},719
179
12,535
3,044
3,624
Bank
Ra1a.tions
Administration
Of fica Ex:pclns a
Roa.d Man & Traveling
Sta.ti-atical.
&
Administ:ra.tion
Sta.t is tical
Monthly Latter
Libra.:ry
Pub1i mtion
EXP~mES
*Credit
~.636
4,909
2,459
1,231
27,.189 2,101
8,337
~75,450$27,211
$78 '794
~·139
Employees Group Life Ins.
TOTAL DIRECT
13,022
676
81,422 3~437
22,613 2,396
23,524 1,366 .
j
37*
$38,517
$7.590 $9,453 $
SAINT
x-3309-a
Exhibit D-1
·MINNE-
~ANFRAN
J:rsco
J,166
2,105
11,435
1,394
885
4,934
1,193
294
5
639
6,265
16,682
6,164
6,416
8,730
8,337 19.~
7,331
1,623
4,642 .
3,455
1},227
526
5,633
1,095
5.321
756
7,974
6o5 2,a~n
7,732 16,159
10,790
4,032
3.546
21,951
4,727
3,411
5,022
5,149 12,470
1,135
3,761
2,829
3,065
217
2,}92
740
683
413
2,078
391
164
2,046
12,975
2,538
4,392
350
2,153
1,423
796
461
1,466
727
757
559
1,809
1,450
1,204
483
3,081
678
902
1,206
6,913.
3,2ll
1,142
259
281
1,929
699
167
1,114
2,552
1,948
1,131* 1,523
1,395
1,357
3,430
933
5.512
1,597
3,567
$30,409 $21+,458 $11 ,4Qg
$60,835
1,343
777
3,004
3
271
$17,622 $1},009 $17,4oo $20,467 $35,270
-=-·,::-~
0
~
... ,
(;v.,v
" r::
FEDERAL RESERVE BOARD
WASHINGTON
X-3691
Novereber 14, 1923.
SUBJECT:
Code Words for use between Federal Rese:cve Banks, in
Tal65ra.rns incident to Purchases ar:..d Sal:;;s of U. s.
Certificates of Ind.ebtedness and Treasury Notes.
Dear Sir:
In Board's circular letter X-3&73, dated October 31st,
you were advised that code words 11Nu:r.erate 11 and 111Juchion 11 , as supplied from the Federal Reserve Telegraphic Coae, ~ght be used by
your bank in co!'.nection with telegraphic purchas~s and sales of
U. S. Certificates of Indebtedness and Treasury Notes.
With reference to the use of such words, the Board ~1as
received a further suggestion from one of the banks t~at additional
code words be furnished to cover certain other aavices incident
to such traYlsactions. InvesUgation of the number of these i terns
which are routed through the Board's telegraph office, the nature
of which is indicated beJcw, a:J?pears to fully warrant coded phrases
being furnished for use in such tra'1sact 10:'1S 1 and you are advised!'·
that, commencing with December 1st, the following code word may
be used by :&'ederal Reserve Ba.nks in telegrams to ot:her Federal Reserve Banks, requesting delivery of certain securities for their
account:
"NUMERIC: Upon rece1pt of auL'lority Commissioner of
Public Debt, .deliver to
on----------Certificates or Notes Series
upon payment
of
in federal funds. Our transaction
No. _ _ _ _ _ n
In the same manner, the following code word may ·be used
by banks in telegrams requesting that certain securities be re•
ceived for tbeir account:
11
NU:r..IEROUS: Accept delivery
from----------- Certificates or Notes Series
at
~~d intereQt.
Total charge
Forward authority Comnissioner of Public Debt."
..
..
X-3591
-2It is rer;.ussted t~c.t thr~ coC:.e worils nNumeric" and
be aJd.ei to t~1e bottom of pa3a 165 of t;ha Federal
h.:os.:.:;rvt:J Telegra.J!hh.: Cocle, tv follow the suppL=.Hnental code word
11 Nuruerous 11
"Nucl:ion. 11
v~ry
trilly yo\lrs,
J, C. Noell,
Assi~tar~t
Secretary.
c· ...
~·~
V''
·.,
. ~.
FEDERAL RESERVE BOARD
WASHINGTON
X-3&92
14, 1923
Nove~ber
SUJ3JECT:
EXPENSE NLUH LINE, Leased Wire Sy;;tem, October, 1923
Dear Sir:
Enclosed herewith you will find two mimeograph
statements, X- 3o92a and X- 3b92b, coverine; in detail operations of the rr.ain line, Leased Wire System, during the
month of October, 1923.
Please credit the amount payable by your bank in
the general account, Treasurer1
on your books, and
issue CjD Form lt Natiohal Banks, for acc9unt of nSalaries
and Ezpm1ses 1 Federal Reserve Beard, Special Ftmd 11 , Leased
Wire System, sendin6 duplicate C/D to .Federal Reserve Board.
u.s.,
Very truly yours,
Fiscal Agent.
(Enclosure)
TO GOVERNORS OF ALL B;\.N::s
.u
'··~
~
(~
,. . r
..._.,,··. -:.......
X-3892a
REPORT
AND WJMBER OF WORDS
TBE Jr£DERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF OCTOBER, 1923.
SHO\~NG C~SSIFICATION
TRANS~UTTED OVER N~IN LINE OF
From
Treasury
Dept.
Business
Percent of
Total BC'nk
Bank Business Business (*)
War
Fina.Ylce Corp.
:Dusiness
Total
---------------------------------------------------------------------------------Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
~{ansas City
Dallas
San Francisco
$ 4o,238
2)8 ,625
70,696
101,853
79,213
87,672
161, 799
103,718
.63,193
96,510
90,638
135,602
$ 4,814
15,8}3
5,869
4,109
3,889
4,384
7,294
4,644
4,106
5,011
2,081
G,223
3·17
18.79
5-57
8.02
6.24
6.90
12.74
8. J.7
4.97
7.60
7.15
10.68
$
28
58
45,052
254,458
76,565
105,962
83,102
92,056
169,093
108,362
67,327
101,521
92,97 7
143,825
Total
F· R. Banks·
Washington
Grand Total
70,25 7
86
1,340,300
2041;272
70 !2.22
701
27~!208
1,574,329
140,492
787
1,715,608
1,269,957\
Percent of Total
Bank Business
Treasury
100.%
~.19%
91.76%
.05%
1,574,329 words or 91.61%
II
II
140 1 492
8.19~
TOTAL
100.
%
(*) These percentages used in calcnla.ting the
pro rata share of leased wire expenses as
shown on the accompanying statement (X-3392b)
FEDERAL RESERVE BOARD,
Washington, D. c.
November 14, 1923.
• •
J
•l)
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE lEASED WIRE SySTEM OCTOBER, 1923.
X-3392b
;<------------------------------------------------------------------------------------------------Payable to
Operators• Operators•
Salaries
Overtime
Name of Bank
Wire
Rental
Boston
$ 250.00 $ . New York
1,2(4.42
Phi lad.e lphia
190.83
Cleveland
383.00
Ficbmond
315.00
240.00
Atlanta
Chicago
(#1 l.~,&76.5l
2.0C
St. Louis
2.00
225.53
Minneapolis
275.00
Kansas City
y+6.64
Dallas
251.00
San Francisco
.360.00
Fed. Res, Board
Total
Expense
$
~J. 7'021. 7 6
250.00
1,274.42
190.&3
388.00
315.00
240.00
4;378.51
227-53
275.00
346.64
251.00
360.00
Pro Rata
Share of
Total
Expense
$
675-30
4,002.81
1,186.57
1, 703.49
1,329,30
1,469.90
2,713.99
l, 740.44
1,058. 75
1,619.02
1,523.15
2,275·15
Credits
$ 250.00
1,274.42
190.83
388.00
315.00
240.00
4,378.51
227 ·53
275.00
346.64
251.00
360.00
Federal
Reserve
Board
$
425·30
2, 728·39
995·74
1,320.49
1,014.30
1,229.90
(*) 2,164.52
1,512.91
783.75
1,272·38
1,272.15
1,915.15
17,021.76
---------------------------------------------------------------------------------------------------------------------TOTAL
$14,470.46
(&)2,164.?2
$12,305.94
(#)
Includes salari0s Gf Washington operators.
( &)
(*)
Amo1m t reimbursable to Chicago,
Credit.
Received $15.52 from War Finance Corpcration and $1+, 700.00
from Treasury Dept. covering business for month of October, 1923.
FEDERAL RESEnVE EOARD
Washington, D. C.
November 14, 1923.
(a)
~
c.··
r
f!...i_L_:.,_;.
FEDERAL RESERVE BOARD
WASHINGTON
X-3893
Nov.ambar 22, 1923.
SUBJECT:
Code Wo:rds incidantal to talegra.phic purcha.ses and
sales of U. S. Cc::rtifica.tas of lndebtadnass and
T:raasu:ry Notas.
Daa.:r Sir:
With :r:-afe:rance to code words 11 Nuchion" and "Nu.n::.;;ric", inJica.ted in :Bo3:rJ 1 s ci:rcula.r lett.a:rs X-3873 and X-3891, dstaJ Octo'oa:r:3lst and November 14th respectively, ·!Vhich ware supplied from the
Federal Reserve Telegraphic Code for use by Fedaral Reserve J3a.nks in
telegrams incident to the pul"cha.ses anJ sales of U. S. Ce:rtifica.tes
of Ind ebtednass 03nd T:rea.su:ry Notes, you a:r<:J advis..:Jd tha.t transla.tions
of these code wol"dS, as indica.ted below, :r. . a.vd baen so amanded as to
mora fully meet the :requi:remonts of sonz of tha Banks with :reference
to such transa.c tions:
"Nuchion: Upon authority Comrnissione:r of Public Debt (and
payment f.;;d<.;ral funds) plaase sell a.t (amount or
ma.rkat) $
_ Certifica.t.as o:r Notes
Series
, T:ransa.ction No. ___ ."
nNU!'ne:r.ic: Upon :receipt of a.utho:ri ty Commissiono:t' of Public
Debt, deliver $_______ to ---------~ on ----~----Certificates o:r Notes SeridS
(.2£:ymont $____
federal funds) (without payment) Our t:rans9ction
No.
"
It is r.aq_uastad that necessary cor:ractions be made em pa.ge
of your copies of the Telegraphic Coda, in o:rder to conform with
the above changes.
165
Va:ry truly
J.
yo~rs,
c.
NoCJll,
Assistant Secretary.
TO GOVERNORS OF .ALL FEDERAL RESERVE DANKS.
'•
- . ..,..'
'l./' -
F E DE
nAL
RE
s
E
a vE
D
oA
h
n
For Release in I!orning P3:t-er:;;
Wednesd a.y, November 28, 1923 •
Th~
following is a su.rn;:;a.ry of g:m.=ral business
and financial condi:.ions throu;.;hout the sev.crr3l
Fc::d aral R:>serva Districts, baseJ upon statistics
fo:r. the rr:onths of October and lJovembe:r, as contained in the forthcoming issue of the Federal
Reserve Bulletin.
Production of basic comrLOd i ti.::s and retail trade increased
during Octob:;;:r., and the volume of freight shipm:Jnts and wholesale t:r.3de
continued large.
The level of whol.;sale p:ric.:Js ond the volu.'T.e of em-
ploymant showed but little change.
The Federal Resarvo::3 BoaTd 1 s index of production in basic indust,...ies advanced
months.
3 par cent in October, after h<Wing declined fo:r- four
The inc:r-ease for the month, while due in part to the :r-esumption
of anth:ra.ci te coal mining 1 also :reflected inc.reas-as in t0xtiles, lumber,
and suga:r, and most other industries included in tha imL;;x.
Employm3nt
at industrial astablishments show2d practically no change batween
Septambe~
and October.
Contract avv13:rds for new buildings inc:r.aas8d throughout the
count:ry considerably mora than is usugl at this season, and w2re
cant la.rger than in
Sclpt,~mb
.;,:r.
25 p.:lr
R::.Jsid ential projects fo:rmad a la:rge:r.
proportion of the total than in any aa:rlie:r month of the yaa:r.
Crop 0stimatas ·oy the Deps:rtm:mt of Agriculture on November 1
indicated a. substantial :reduction from the Sept0mber fo:reca;;;t in the
yiald of cotton, but la.rgar yields of corn, potato<;;s, and appL;;s.
~
- _,L_
• •
_·"
X-3396
-2-
sul ted in October in the lar~est railro::hl shipr:;ants of any month on .record.
leading lin..:;s ;;:xc.:::_r;t sho'"s
13
show~d
fer cent lar;el" th:m l:Jst
inc:rea.sas.
O~tobc:r
Da_[..·artment sto.r,o s:J1e-s w;;:re
and sa:es of tna.il o.l"d.J:r houses were
PhiCES:
accordir.g to tha in,;ex of th8 .Du.re:m of Labor Sta.tistics and stood ap--
month w-are d.:::clinc;s in the pricas of fnsl, clothint; 1 met31S 1 anJ animal
_b;l"OJUCtS
1
Vtbile :iholeSJlO }?rj.CeS Of cropS
1
.bJcLrtiCulady COttOn, inCl"88S0d •
During th3 first half of lJcvamb3r tha prices of V>·l1ea.t 1 hogs, pig i:ron,
and hides r(;)C2jed, and 1-ricas of cotton and cotton goods, cament, ond
copper advuncJd.
Since the mi3Jle of Octobor there ha.s ba,:;n a slii):lt de;cline in
02r::anJ for credit fo:r:- commercial and a.gricultura1 pur.I:JOSes gt mamber
banks in leading cities.
Considerable decreases in borro-.vings for the sa
purposes in the New York and Chicago Jistricts wc;re. partially offset by
increases in otha:r Jist:ricts.
•
Loans secured by stocks a.nd bonds in-
c:rc:Gscd som.cwhc:;t, ··.vhile invcstnmts continued to d;:;cline Dnd rea.ch;;d the
low l)Oint fo:r tha y::;a:r.
Th..; total number bcwJ::. accor;;r;.o.;:;;tion ot Fedcrgl r6serva ba.nks
.
[""'
~--·· __.,_f··->
#I
..
X-3896
-3d dCl in~d be twe i:3n Octo b~:r 17 and Novambe.:r 21
was th.;; lowest since the midol!J of the year.
reserve bank credit
bac·)USJ of incrdase.;
o·~.ttst.3nd:ng,
purchas~s
'
:'1',
and on thd la.t ter d a.te
'i'he total volwr.a of Federal
however, .rarr.aJrad .relatively constant
of ';;;ills in the op.;r.
:r..sr~cet-
Th-3 volume
of Fcde:ra.l Ns.;;.rve note c~:rcula.tion decl:i.r.ed by a·oC'ut $50,000,000 during
the :period, wl1il:.; other forms of rr:oney in circulation increa$ed.
pa.rt of Nov.;mb.;;:r tha
declineJ frorr:
5- 5
O_!?..:n
rr;arkat ra.te on corru::.ercial paper in New York
1/~ to
5 per
cent.
-
..
..-~
·~
'
~--~· -·. ' .....~
FEDERAL RESERVE BOARD
WASHINGTON
X- 3G97
Novamber 26, 1923
SUBJECT: Circulars of Federal Reserva Banks.
Dear Sir:
Under date of Augu~t 4, 1921, the Board Sffi1t a
circular letter (X-31GO) to the Federal Rederve B~1ks requesting that there be forwarded to the Board as issued
six co~ies of all circular letters addresBed to member b~1ks.
Recently some of t:il.e Federal Reserve Banl::s :iave not been
furnishing the Board with t:L1e required !lum-Oer of COfies of
their circular letters, ru1d the fUTpose of this communication is to renew the request contained in the Board's letter
of August 4, 1921.
Very truly yoursj
J. C. Noell,
Assistant Secretary
TO GOVER.l'JORS OF LLL FEDERAL RESERVE
B.t\Ni~S
I.
'.L"··~·
F'EDERAL
.RESERVE
:SOARD
Statement for the Press
X-3898
For Immediate Release
f.Q~!TJON
OF ACCEPTXNCE M.AffiffiT
Octobar 11 to November 14.
After a period of dullness, which had characterized the
acceptance market since mid-summerr th.:;. volume of new bills which
became available during the period ending November 14 showed a substa_ntial increase.
Seasonal drawings for funds to finance the mar-
keting and exportation of cotton contributed to tile increased supply of acceptlli1Ces offered in October.
Bills were also issued to
provide funds for financing the storage and exportation of grain,
the imp or tat ion of sugar and silk, the domes tic financing of provisions, and to provide dollar exchange.
While some improve:ment was
noted in the demand for bills, it did not increase to th.a same exte..<t
as the supply, and at the end of the period, dealers' aggregate portfolios showed considerable increases.
l3a.<ks in both the financial
centers and the interior were the principal purchasers of bills with
short maturities and commercial demand centered in bills maturing
within
60 and 90 days.
iod at
4-1/8 to 4-l/4 bid, and 4 to 4-1/8 offered for 30 to 90 day
bills.
T.~1s
is
Rates remained unchanged throughout the per-
~ractically
maintained since rr.id-summ8r.
Washington, D. C.
November .:::.3, 1923.
the same level at which rates have been
..
'~
·-
~
•
t-·
;_:., -'
FEDERAL RESERVE BOARD
WASHINGTON
Novamber 28, 1923.
SUBJECT:
D~ar
Administration of Clayton Act.
X-3839
Six-:
Ref~:rcnce is ma.Je to the Board's circular let tar of· Jenua.ry 2,
1923, (X-3603).
In that lattar the· Board stated that afta:r C3.l'oful consid e:ration of the c;_ues tion of what policy it should a.d opt as to :revoking
Clayton Act permits the:ratofore g:r.anted, it had decided not to :revoke
penni ts in any case 11\he:r.e the inte:t"locking d i:recto:ra.te ha.d resulted in
the growth of competition between the banks involved.
Some criticism has bean made of v.hat is called the anomalous
situa.tion thet-eby created, :resulting ft"om the feilct that the :Ooard e1lows previously g:t"anted ,pe:t'mi ts to :rema.in in effect, although it will
not g:rant new permits to sex-ve the same banks.
You .are directed, the:rC!fo~e, to forwa:rd to the :i3oa.rd not
la.t..,:r than _J;>ecembet" 7, 19231 <'l. comprehensive reviaw of the si tua.tion tii.ffecting interlocking directorates in your district, design~d
to info:r.m the Boa.:rd in deta.il whether. th~ te:rms of Section 8 of tha.
Clayton Act a.re being compli.;;d withj and with partioulS.t' ra:fa:r:enca to
all ca.sas involving banks having inta:t'locking diractora.tes which we:r.e
g:r:anted a.t a. time when no substantial cornpa ti tion axis tad,. but which
could not now ba granted unde:r: the terms of the Ka:r:n Amendment to the
Clayton Act baca.use the· institutions a.ffected have since oacoma substantial competitors.
By di:r:ection of the Federal Reserve Boa.rd.
Wa.l ter L.. Eddy,
6 e c r e t a r y •
TO ALL FEDERAL. RESERVE AGENTS·
II>
.1""'
:'
FEDERAL RESERVE BOARD
WASHINGTON
...
X-3900
November 28, 1923.
Subject:
Ext:ra Comp.:msation Payrr.tents.
Dea.:r Sir.:-
:i3y direction of tha Fddar.al Rasa:rva Lloa:rj, I ha.va
to advise you of thcJ following :resolution a.doptad by tha
Iloa.rd, and to :rar;uast tha.t you b:ring this lattar to the
a.ttantion of tha di:r..;;cto:rs and officars of your bank:
"BE IT I~ SOLVED, That a.ll Fad e:ral :rc; serve
banks ba notifiad tha.t nci bonus or ext.:ra.
compansa.tion pa.yments of any ch.s.ractar will
ba app:rovad by tha Fada:ral RaseJ"va I3oa.rd,
and tha.t the FadeJ"al Jiese:rva Iloa.rd is of tha
opinion tha.t the propa:r m.:>thoJ of. conpansa.ting
its own employees and the employees of the
Fede.l'al reserve banks is by paymant to tham a.t
:regular intervals - weekly, semi-monthly, or
monthly - of the full amounts ea.:rnad by them on
thd ba.sis of the it.' fixed a.nnual companaation. 11
Vary truly your.s,
Wal te:r L. Eddy,
Sac:retary.
TO .ALL CH.AIIlHEN
<: • ~
FEDERAL RESERVE BOARD
WASHINGTON
X-3902
Dacambe~
SUBJECT:
1, 1923.
Stocks of Unissued F. R. Notes.
You a.:re requested to prepare and subrni t to the
Feda:ra.l Rese:rva Boa.:rd, before Janua.ry l, 1924, an
estima.te of the amount of each denomination of the
Federal Rese:rve notas of you:r bank you rr,ay be callad
upon to issue du.:ring the calenda~ year 1924.This
info:rma.tion is d a six-ad fo:r the purpose of ragulating
th·e p:roduction of Feda:ral Rese:rve notes dut'ing the
coming yea.~.
Fo~ you.r guid a nee , I would s ta ta tha.t the Boa.:rd
is of the opinion tha.t. its stock Of u."lissued Fede~al
Rese:rv 3 notes should a.t all times include approxirna.te1y a. twelve months' supply of each denomination of the
notes of each bank, and tha.t not rrore than a. six months'
supply of ea.ch denomina.tion of unissued notes should be
in the custody of the Federal Rase:rva AgantsJ
By direction of tha Federal Reserve Board,
Yours vary t:ruly,
Wal te:r L. EdJy,
Secreta:ry.
TO ALL FEDEP..AL RESERVE AGENTS.
<;L/ -
~-..:'
,.
A
DDRE S S
by
E. H. CUNlTINGH.Arr:, T.'IENIDER
FEDERJ;L RESERVE BOARD.
l."F.ASHING-TON, D. C.
Delivered December 12th, 1923.
AMERICAN FAliM BUREP_U FEDERATION CQlllVEFTION
Chicago, Illinois.
Released for Publication December 12th, 1923. (noon).
X-3903
,.-.
TI-<:E FEDERLL F.ESERVE
SYS~EM
X-3903
The general purposes of the Federal Reserve System are well defined
in the title of the Federal Reserve Act, which w-as p.:'>.ssed in 1313 o.nd approved on December 23 of that year.
The full title of this Act reads as
follows:
"An
.~ct
to provide for the establishment of Federal
Reserve Banks, to furnish an elastic currency, to
afford means of rediscounting comnercial paper, to
establish a more effective supervision of bariliing
in the United States, and for other purposes."
The two princiral functions mentioned in the title of the Act are thus to
furnish an elastic currency and to afford means of rediscounting corrJT,ercial paper.
Both of these purposes clearly indicate that the Federal Re-
serve System is intended primarily to supply short-term credit, because
elastic currency must necessarily be based on current transactions, and
the rediscounting of "comnercial 11 paper means the extension of credit on
paper arising out of the current needs of production or distribution in
agriculture, industry and trade.
the Federal Reserve System is a
Both funttions, therefore, indicate that
co~mercial
tanking system organized to finance
current short term operations, as distinguished from the Farm Loan System
and the Intermediate Credit Banks, which were organized for the purpose of
providing longer term credit.
The limitations upon the character and
~..aturity
of the paper eligible for discount by the Reserve Panks, therefore, arise
from the fundamental purposes for which the System was created.
NlF.MBERSHIP
For purposes of Reserve Banking the United States is divided into
X-390J
-2-
.-
·.~>,
-. J/f,
twelve districts, each district having a Federal Peserve Bank, which
in rrany respects is entirely independent of the otber Reserve Banks and
of the Federal Reserve Board.
long to the Federal Reserve
All the national banl:s in a district be-
S~rstem
and must subscribe as their share
to the bank•s capital an amount equal to six per cent
capital and surplus, three per cent
(6%) of their own
(3%) of which must be paid in cash
at the time the membership is acquired; the rerrainder being subject to
call.
Banks having state charters are permitted to join the Federal
Reserve System i f they so desire end if their capital and the character
of their business are s;;.ch as to rr.a.Jr·e them eligible for membership.
Upon
joining the System they are required to subscribe to the capital stock
of the Reserve Bank on the same ratio as national banks.
State bar~s
which join the System retain all their charter privileges so far as they
are not ·in conflict with the Federal Reserve Jet and State banks rray
withdraw from membership at any time upon six months' notice.
The Federal
Reserve System, threfore, is owned by its member banks who are the stock•
holders and no part of the stock belongs to the Government.
It is not a
Governmental institution, but a co-operative enterprise of bankers o\vned
and largely controlled by them.
ORG.ANIZAT ION
The Federal Reserve Banks are administere1 ty a Board of nine (9)
Directors divided into three classes:
Class '~" Directors are selected
from among leading bankers in the district;
Class "B" Directors represent
commercial, industrial, and agricultural interests in the district, and
Class "C" Directors are appointed by the Federal Reserve Board to represent
the Government and the general public.
Class "A" and Class "B" Directors
j'-
\
-3-
--.. (..,..
,L,,,
X-3903
{',·'
are e.lected by the Member fanl:s, the Government appointing only onethird of the Directors.
For the p1rpose of selecting Class rrAn and
Class "D" Directors the banks in each Federal Reserve District are
divided into three groups, consisting respectively of large, medium
and srrall banks, each class having in the aggregate an equal
of votes.
rr~ber
This insures the Federal Reserve Banks from being controlled
largely by the big banks as they would be if the votes were in proportion
to resources, or by srrall banks as would be the case if every member
bank had one vote regardless of its size.
This plan assures the banks
of a directorate representative of the business interests and of the
various classes of banks in the district.
The Federal Reserve Board consists of eight members, the Secretary
of the Treasury and the Comptroller of the Currency ex-officio, and six
other members appointed by the President of the United States and confirmed by the Senate,
"In selecting the six appointive members of the
Federal Reserve Board, not more than one of whom shall be selected from
any one Federal Reserve District, the President shall have due regard
to a fair representation of the financial, agricultural, industrial, and
commercial interests, and geographical divisions of the counvy.n
So
that the Federal Reserve Board is a body of men selected fromvarious parts
of the United States who are representative of the various activities of
the country, and to these men is entrusted the function of welding the
twelve regional Reserve
Ba1~s
into one System which is operated on con-
sistent principles and can be depended upon for united action when emergency
arises.
There is a clear distinction between the Federal Reserve Banks and
... 4...
the Federal Reserve Board.
X-3903
This distinction is very often overlooked
when criticisms are offered as against the function or operation of the
System as the Board is often criticised for action taken, when, in reality,
it is the action of the Federal Reserve Bank,
~~d
vica versa.
As the
Federal Reserve Danks are held responsible for their capital stock, and
as the business of banking varies in different sections of the country,
Congress deemed it advisable to make each Federal Reserve Bank a separate
corporation and defined the limits of a bank's corporate powers in the
act, while it left to the Federal Reserve Board the determination of broad
questions of policy in order that the banks might function harmoniously
as a unit and rally to the aid of each other in times of special stress
or combine their force in case of a national emergency.
FUFCTIONS OF THE B.AFYS.
The chief functions of the Federal Reserve Eanks rray be briefly
described as follows:
e.A) Rediscounting for Member Banks.
'V!hen a member
bank finds that its customers are in need of more credit than it is
able to give them on the basis of its own resources, it can turn to the
Federal Reserve Bank and rediscount with it some of the paper upon which
it has made loans to its customers.
This paper, however, in order to be
eligible under the law must generally arise out of an actual transaction
connected with the production or distribution of corrmodities.
Paper can-
not be rediscounted with a Federal Reserve Bank if the proceeds were used
for speculation; for perrranent investment, or for carrying stocks and
bonds, except
obli~tions
of the United States Government.
So that the
Federal Reserve Banks' operations are specifically intended to serve
current credit needs • .Another limitation upon the paper, having the same
X-3303
-5-
'-L''
general purpose, is in connection with the length of t irne for which
Reserve Banks are permitted to discount paper.
For ordinary commercial
and industrial paper the maturity is limited to 90 da;{s and for
cultural paper to nine (9) rr:onths.
agri-
The re&son thal agricultural p_aper
is allowGd. longer rraturi ty is that agricu1tural operations generally re-
operations.
There is in this no departure from the principle that Re-
serve Bank credit
mu~t
be employed to finance short-term current operations
rather than long-term enterprises.
In extending credit to their members
the Reserve Dan}:s are guided by their ::.:-oards of Directors and by loan
co~plete
committees appointed by Directors who have
w.atter under the law.
discretion in the
In 'rediscountir..g paper or obtaining ad.vances from
the Federal Reserve Banks, the Member Banks deal only with the Federal Reserve tanks and the Federal Reserve
act within the law.
~oard
cannot interfere so long as they
The Federal Reserve Joard cannot require any Federal
Reserve :an}: to make any loan or rediscount any paper nor can it require
any Fe1eral Reserve Dank to refuse any loan or to refuse to reiiscount
any paper which is eligible for rediscount.
(B)
The Fe1eral Reserve Danks are authorized to issue Federal Reserve
Notes in exchange for gold or for paper eligible for discount.
Througt
this power of note issue the Reserve Ilan}~s are able to supply the Member
Danks with liquid currency that allows theri, to meet every legitimate denand of the district for add.itional credit beyond the ba:rt..ks' mvn resources.
If I might presume to give you a clear picture of this idea in
practice I would assume that a given corrmunity has an a-ctual need for
additional credit.
local bank.
The need is apparent ty the requestsfor loans at the
The bany
•
in order to meet the needs of its customer, turns
-6 ..
X-3903
to the Reserve Bank and borro1t1S say $100,000 from its Federal Reserve j;lank
by radiscounting some of its
eligiole paper.
The Federal Reserve Dank
needing additional f1mds to take care of the needs of its Member
~anks,
pledges this $100,000 of rediscounted paper with the Federal Reserve Agent
and obtains flOO,OOO in Federal Reserve notes, which it pays over to its
Member Bank for the paper rediscounted by it.
pays out this
~100,000
The Member Dank lends or
of Federal Reserve notes in its community, and thus
they are put into circulation and the total volume of currency in circulation increased or "expanded" in t!le amount of $100,000.
V?hen the re-
discounted paper pledged as security for the Federal Reserve notes matures
and is paid off, the Federal Reserve Bank must either substitute other
collateral (eligible paper or gold) or retire the notes.
needs of the
co~nronity
If the credit
have decreased in the meantime, the notes probably'
will have been returned to the Federal Reserve Bank, either through its
Member
~ank
them.
Possibly some of them will be paid to the Federal Reserve Bank in
or through other Federal Reserve Banks, and it will retire
payment for the very paper which it had pledged as collateral for their
issuance, and their retirement will be practically
auto~atic.
\Vhen the
underlying commercial paper is paid off and the Federal Reserve notes are
retired the total value of currency in circulation will have been decreased or "contracted" $100,000.
In this way the total
vol~e
of Federal
Reserve note currency automatically expands and contracts to accommodate
the changing needs of commerce, industry and agriculture.
A Federal Re-
serve Dank cannot get Federal Reserve notes without putting up lOOfo commercial or agricultural paper or gold itself as security, and when the
volume of available commercial or agricultural paper decreases it must
-7-
X-3303
either retire the currency or put up gold as security.
If I have made myself clear
you
have in your mind a picture of how
the elastic currency of the Federal Reserve works in practice.
You have
seen (1st) •~ere the necessity for it originated out in the district;·(2nd)
how the Member :Dank acquired it by offering eligible paper of its customers
equal to lOO(o as security; (3rd) how the money went into general circulation
through the channels of trade and industry; (4th) how the currency is retired
auto~atically
when the credit needs of the community no longer re-
quire its circulation.
The Reserve Danks have no power to issue notes except in exchange for
gold or eligible paper.
They cannot create currency out of nothing.
The
need for the notes must arise out of the actual requirements of the community.
The Federal Reserve Notes are first liens on the assets of
the
Reserve ranks and are also obligations of the United States Government.
They are
redee~able
in gold at the Treasury of the United States and in
gold or lawful money at any Reserve
t~nl:.,
and a 40 per cent minimum gold
reserve must always be naintained againstthem.
In the early periods of the system, the use of Federal.Reserve Notes
as additional currency credit was not generally re.sorted to in times of
increased demand
continued and
.2!_.neces~ity
~inally
for additional credit, but as the i'!orld
involved America the
de~.and
~.'Tar
for currency with which
to carry on and adequately finance the business needs on account of the
great inflation in prices.
increased very rapidly.
On January
lst, 1917, just before we went into the war, the outstanding Federal Reserve
~otes
amounted to $17,558,100.
On January 1st, 1915, the amount was
$1,350,764,225.
On January lst, 1919, the amount had increased to $2,S59,S43,920.
•
.. g..
X-3903
On January lst, 1920, this amount had increase to $3,235,789,145.
Jlnd on December 23rd, 1320, it reached its peak of t3,404,j31,000. in actual
circulation.
Since that date the tendency in the main has been dovv.nward and on November 28th, 1923, it stood at $2,245,000,000.
The high discount rate of six per cent (6~) effected by the Reserve
Danks in January and February 1 1920, was undoubtedly to be taken as a
warning that expansion was reaching a hiih point and having its effect on
:legal reserves which were declining, with the thought, undcubtedly,that
this high rate of discount would have the effect of slowing down the derrand for money.
On the contrary - and to the surprise and astonishment
of all, past experiences and practices reversed themselves and the demand
for money began to increase.
of the Reserve :Sanks to
71:
Early in June the rate was increased in four
without any apparent effect upon the demand for
money which reached its high point in. December, 1920, when the total amount
of Reserve notes issued and in circulation totaled- $3,404,931,000.
The statement made by a former Comptroller of the Currency to the
effect that the largest amount the National ranks of the country had ever
borrowed in one year prior to 1313 through
r~discounts
and bills payable
was - $100,000,000 brings most forcibly to our attention the almost incomprehensible figures to which the country's credit had_ been expanded since
the inauguration of the Federal Reserve System.
The discount rates of the System have varied greatly at different
times,
However, when we recall the conditions through which the country
has passed since the System was established in 1914, it does not appear
in any sense unjustified.
In view of the
ahnor~al
conditions resulting
- ,X-3903
from the World V'ar with its attendant inflation, so natural to carrying en
war activities, the Post-':":ar period when every line of production was more
or less over-stimulated together with the tendency toward extravagance and
speculation and added thereto, the further obligation of the Federal Reserve System to act as Fiscal .Agents for the Goverl'l!pent in financing the
war Which required the floating of over
~20,0QO,OOO,OOO
of ronds together
with a large amount of short time government obligations, it quite naturally
was to be expected that discount rates should or would vary quite materially.
The discount rate of six per cent
in 1914.
(5~)
was established with the System
Between 1914 and January, 1920, ·the rate varied but never again ·
reached G~ until the latter part of January, 1920, and later in 1920, went
up to 7~ in Boston, New York, Chicago and Mi~~eapolis.
(C)
The Federal Reserve Banks hold all the lawful reserves of the Member
I:a.nl<s, that is, nothing that a Member :ank holds, h1>.t even gold or other
cash in its vaults, counts as reserve by law, except the
deposit with the Federal Reserve
~an}.
arr~unts
held on
The concentration of reserves and
rraking them available at any point within the System, and at any time, has
made it possible to reduce reserve requirements and at the same time renders
banking much safer throughout the country.
The Reserve Act has reduced
the requirements for reserves on demand deposits from twenty-five per cent
(25~) in reserve cities to ten per cent (10~), and on time deposits from
twenty-five per cent (25%) to three per cent (3~)j and in country banks the
reduction has been from fifteen per cent (151) to seven per cent (7~) on
demand deposits and from fifteen to three per cent (3~) on time deposits,
·There is no doubt that the Federal Reserve System through its reserve
policy is rendering the country a great service in rr.aintaining the integrity
-10-
X-39C3
of deposit reserves, and in pooling these reserves in order that they may
be available in time of need to the Hember I?anl s and to any other function
of the System.
One of the greatest deficiencies in the old banking system prior to
the enactment of the Federal Reserve Act, was the system of maintaining
bank reserves consisting partly of cash in vault and partly of balances
with correspondent banks which in turn carried psrt of their reserves in
the form of balances with other banks which were permitted to lend a large
part of such reserve deposits to their customers so that the ultimate reserves of the country were invested in loans which might not be collectible
in the time of need.
filld the greatest deficiency in our present banking
system results from the continuance of this very same practice by banks which
are not members of the Federal Reserve System.
A reserve intended to protect
the iepositors of a ban¥ which consists largely of loans to the patrons of
the correspondent banks cannot in its final analysis
ce
considered any more
of a reserve than the notes in the portfolio of the original bank, and it
cannot compare as a deposit protection to the reserves held in the Federal
Reserve System, which must always be protected by a gold reserve of not less
than thirty-five (35~) and in addition having the advantage of being available
for use at any point of emergency.
The history of past financial panics which have caused so much trouble
and worry
w
bankers and depositors will show in
~ractically
evary instance
that the reserves which were intended as a protection to depositors, had in
nearly every case, been dissipated and as a consequence reserve protection
was not available in the time of need.
This cannot happen under Federal Re-
serve Banking.
(D)
In addition to clearing intra-district checks the Federal Reserve
-11-
X-3903
System has set up a ms.chinery by which talances cetneen districts can be
settled lty book entries without the shipmant of cash.
This is done through
the gold settlement fund in Vlashington held in custody by the Rederal Reserve Board.
Each reserve bank has placed with the Reserve :card a part
of its reserves and whenever one reserve bank wishes to transfer funds to
another it does so by wiring to the Doard to
the bool.s of the gold settlement fund.
~ake
an appropriate entry on
The Board daily notifies each Re-
serve Dank of the total debits and credits to its account and of the amount
of gold it owned at the end of the previous day'a business.
This plan has
done away with exchange charges for drafts within the country; has eliminated much time lost and expense incurred in the shipment of currency and
has made business dealings between different parts of the country more
expeditious and e conomi cal ..
EARNINGS.
Par.
55-
Section
7.
"-After all necessary expenses of a Federal Reserve Dank
have been paid or provided for, the stockholders shall
be entitled to receive an annual dividend of six per
centum on the paid-in capital stock, which dividend shall
be cumulative. After the aforesaid dividend claims have
been fully met, the net earnings shall be paid to the
United States as a franchise tax except that the whole of
such net earnings, including those for the year ending
December 31, 1918, shall be paid into a surplus fund
until it shall amount to 100 per centum of the subscribed
capital stock of such bank, and that thereafter 10 per
centum of such net earnings shall be paid into the surplus."
The plan for providing a surplus equal to 100% of the subscribed capital
was not a part of the original Act but came as an amendment in March 1913.
At this time the Federal Reserve Danks with the exception of the Federal
Reserve Jank of Dallas, Texas. have a reserve of not less than 100~ built
up out of net earnings.
The last statement as to net
earnin~s
and their
.....
-12-
X-3303
distribution was as follows for the System:
Dividends paid
................. ,. . $ 37,395,205.
Transferred to surplus
218,369' 549.
Franchise tax to Govt.
135,387 ..341.
Under this system of a fixed dividend, the incentive for earning unusually
large profits is largely removed.
The earnings of the Reserve Danks are
largely govern4d by the volume of credit needs of the country and necessarily will vary in accordance with the volume of business.
During the years when the Reserve Janks were handling the governmental
war rtmance activities 1920-1921, the Reserve
Ban~s
$120,000.000; in 1922 they paid about $10,000,000.
paid the Government
The necessity of meeting
all overhead expense of the Federal Reserve System including the expense
of the Federal Reserve E-oard at v·ashington, is a direct obligation of the
Reserve Banks~ as the Government is under no expense for or on account of the
Federal Reserve System or any of its branches.
The surplus which the ranks
accumulate belongs to the Government in case the bank or banks should be
liquidated.
The member banks under the law can under no cirCQmstances receive
more than the return of their capital and six per cent
(6~)
interest on their
investment.
I hope I have made this point clear to you.
The earnings in this in-
stitution to its stockholders can in no event exceed six per cent
(6~).
The
earnings during the years /imerica was actually engaged in the war were very
~eavy
on account of the large volume of Government financing that was cleared
t:.1rough the Reserve System, and in addition thereto, the
profit that
naturally accrued to the system through the large volume of note issues and
...1....
X-3303
12-1/2
rediscounting necessa:cy to care for the increased volume of business
that on account of high prices necessarily required a greater volume
of credit in order to function.
Observations of the past few months as
to the tendency of income would lead one to the conclusion that under
normal conditions the problem of the future will be how to meet the
overhead expe·nses of the system, rather than one of curtailment of net
earnings.
To go into minute detail of the operation of the Federal Reserve
System would take a great deal of time and in the end would no doubt
leave you so confused as to querlt
what is it all about.
I have en-
deavored to give you a clear picture of the fundamental principles and
how they
operate~
1st As to the purpose of the Act
2nd As to the membership of banks in the system
3rd The organization of the twelve original banks
4th .As to the. class of paper eligible for rediscount
~
......
/~
X- 3303
5th.
6th.
7th.
3th.
9th.
The power of note iSS'lle,
The method of note iss..1e.
The purpose of the reuiscount rate~
The reserves and how the Act changed the legal
requirements.
Distribution of Earnings.
If I might ask your further indulgence without
encroachin~
too largely
upon the time of others, it would be for the purpose of commenting briefly on
the System both from the standpoint of its shortcomings as well as its
ad-
vantages as I have come to understand them during the past few months' experiences.
Many complaints have come to me especially from the Middle Fest with respect to the high interest rates prevailing in rr.any States. The remedy for the
criticism which in rr:any instances is warranted must come from the hands of the
legislators of those states where exor"itant rates are exacted.
Many, if not
allt. states have an established Jn:.ximum legal rate and the custom in the States
is to adopt it as the current rate for loans.
The remedy is- the State; as the
Federal Reserve :Soard has no power to control interest rates charged borrowers
by memaer canks.
The Federal Reserve ::::anks at this time have a uniform discount rate of
percent.
4l
The rate is the sarr.e to all banks in the System. No discrimination
is permitted in the established rate of the Federal Reserve Iank as against any
of its members.
The rate to the borrower, however, in many States, appears to
be very much in excess of the reserve rate and in some instances, the spread
between the Federal Reserve rate and the legal rate is so
wid2t~Bt
it tends to
encourage banks in "borrowing from the Federal Reserve and loaning tc, their customers for the profit that can ce made on the spread.
~,"here
the practice is
followed of loaning money at maximum legal rates as fixed by State lawst naturally
fopows that a low Federal Reserve rate could have no bearing on the ratespaid
by the customer of the bank, as they are governed by the State Law.
- 14-
X-3903
It must ba said, howava:t:', in fairness to the banl::e:r that tha pra.ctice
of holding closely to a maximum lega.l sta.te :t:'ate does not appea:r. to be the
genera1 rule as the:t:'e a:t'e Ir.any avidences in Jifferent pa.:rts of the count:t'y
· tha.t money is loa.nad on a. ve:ry small margin, while, in othe:rs the cri ticisms made a.:re justified a.s the sp:read appea.:rs to be too wide.
'lhe :px-inciple undedying the Fede:r.a.l Rese:rve System is not one tha.t
encou.l:"a.ges :profi teex-ing by membax- banks.
'lhe evident intent of Cong:t:"ess
wa.s tha.t the Federal Rasex-ve Bank should be :rega.:rd ed as an institution
to be used in tilnes of emax-gency, o:r. to meet sea.sonal :requirements foxadditional c:radit and finance whenever. local banks we:re unable to do so
out of their own :resoul:"ces.
It is not inconceiva.ble that the custom of following lagal state ra.tes
a.s a. guide for CUr":t'ent rates, may have contributed largely to tha expansion
in ou:r c:redits tha.t developeJ so rapiJly in 1919 and 1920.
intent of the Federal Reserva Boa:rd in increasing the ra.te to
The evident
6%
in Janua.x-y,
1926, wa.s to wa:rn the countx-y of the dangers tha.t would follow if the
axpansion of credit continued, a.s the resex-ves, a.t tha.t time, indicated a.
:ra.the:r ma.terial :reduction in the ra.tio.
But, cont:ra.r.y to all p:recedent
o.r. expecta.tion, tha :reverse of wha.t was hoped fo:r happened, as the inc:rea.se
in the ra.te did not lessen the darr.a.nd for credit.
the ra.te wa.s :ra.ised to
7%
.And a few months la.ter
in fou:r banks of the System;
sane intent and pu:rptOSe in mind.
evidently, with the
H<3re a.ga.in the inc:raase in the rato wa.s
without immadia.te results as the expansion continued fo:r several rr;Onths
following;
and it might not be an un:reasona.ble deduction to infe:r tha.t the
borrowex-s in the country ( the MiJdle Wast and South we:re heavy bo:r:rowe:rs)
we:re not fully informed of the s e:rious expansion tha.t wa.s taking placs
throughout the count:cy and could not be disturbed by any inc:reasa in the
... 15 ...
discount :t"a.tes they we:re and had ba;;;n
X-3903
pa.yir~g.
tha r;.aximum state :rate which
could not have the effect of a.cting as a nota of warning as the :ra.te was not
unUS1J91.
It did, howeve:t", se:r:va a.s a. wa:r.ning to the bankers of tru count.r.y.
They were man of expa:t"ienc3 who }::new that this g:raat increase in the Fade:r.a.l
Rasa:t"Ve :ra.te haJ for its pu:rposa but ona objsct a.nd tba.t wa.s! to, in some
manna:r., effect a. slowing down in the demand for c:r.edit.
This warning should
have been heeded, and in a11 probability, was to some extent;
but in ma.cy
instances the natu-ral prudence a.nd caution that was to ba expected from
the conservative banking class was ei the:r submar ged in tha ir J asi:re for
profits;
or the situation ha.d gone beyond their. control.
'Ihe :reco:rd shows that the Fede:ral Rese:rve System wa.s q_uite gene:r.a.lly
used by the member. banks for. raJ iscounting paper. aft;;;:r. Amar.ica ente:r.od
the wa.r anj la.te:r. on m.:lmbe:r. b3nks d iscount...;d very ext...;nsively for non-member
banks.
In the MississipJ?i Valley, whe:re production is heavy .;md the ma:rket-
ing of fa:r.m commodities, including liv.; stock, assumes la:l:'ge proportions, tha:ra
is a g:r.eat mcessity for heavy financing throughout scasona.ble lJO:rtions of
the yea.:r.
This is asp;:;cially true wha:re co-op2:r.a.tive ma.:rketing ha.s developed
to the point where it is handling th.::: larger portion of fa,r.m r)roducts of that
'Ihe MiJdle West section wa.s a. heavy borrower throughout the years of
a.rea.
1919 and 1920 which at its h~ight bacame very amba:r.:rassing to some m::lmbars of
the Federal
Ras~rve
System.
The .1·ecords of membo:rship disclose the fa.ct tha.t
not over one-thi:rd of the banks in the Mississippi Valley wa:re
~embers
of the
'
Federal Rasarve System a.nd that many of thosa tha.t were members of the Fede:ral R..:sa:rve System wa:r0 not discounting any papGr, consaq_uantly, vv.a:re giving
no extra service to the community beyond thei:r own resources.
Tha Savanth District, vvhich is
Sd"dd
by tha Chica.go Fadc:r.a.l Rdse:r.ve
Bank, showed that on December 30th, 1920_ tha.t bank ha.d a. rr.amb3rship of 1421
banks in th0 dis t:rict;
358 of which w2.re state banks and 1063 w-2-ra rational
... 16 ba.nks.
'llw:re may hava baan soma slight
r~co:r.ds
date, but the
X-3903
inc.r~a.se
in tho membc:J:"Ship at this
will show that sinc3 th;; 1923 .Amenda'l.nt to tha Act
th.:;r3 a.:ra 3074 ;:ligibl3 banks in th.; S.:;v.mth Dist:rict.
T.ha high point fo:r.
loans in this district was r .;achad in Octo bar, 1920, and on tba t da.ta th3ra
was a total of 813 banks bo:r:rowing and locat.;d in tha following statesof
Illinois - 175;
th.J Dist:rict;
and Wisconsin - 64;
Indiana. - 103;
Iowa. - 369;
Michigan - 104;
thus w0 hav:: at th.:: tima of .::ma:r.gancy only 813 out of
a.pp:r.oxirr:ataly a total of 2000 aligibla banks in thJ d ist:r.ict that
war~
.:;n-
d aavo:ring to be of s e:rvice to thJ d ist:rict at a. tirr:a of rn tional amc:rgancy
This lack of mamb"'rship cont:r.ibut6d g:r.aat1y to
such as p:r .::vail ad in 1920.
tha amba.:r:ra.ssm.Jnt of tha discounting banks and cu'"tailJd n:r.y rr.a.taria.lly the
efforts of tha RJs;;rve 'Ba.nlt to s.:rve th_; distr-ict.
the country banks to
b~coma
T.h:; disinclination of
rr.o;;mba:rs of tha syst::;m work.Jd a. ha:rdship on such
banks a.s a.ttempt ad to serve th.: country in that th..3Y wa:r.c
count o.l' borrow to such an ;;xtant tbat
axtand.Jd :md
dang~t'ous.
th~i:r.
oblig~d
condition soon
to :r3dis-
b~camc ova:~:"-
T.h.;;; pX'a.ctic-.:l of country banks functioning through
cox-raspond .3nt city banks has g:rown .;;>no:rmously and it is not unusual fo:t:'
city banks to a.ct a.s co:r:respond.:.mt foX' hund:r<::ds of individual countX""y banks.
And in Q;t!dex- to r;;tain tha country bank accounts, th3 city banks pl..::dgc
thems ~lv 3S to como to the financial a.id of the country banks in t irr.0 s of
naad, a.nd, in order to do so., oft:m find it n3C3SSa.l'y to bor:row ve:r.y h3avily
from th 3 Federal R3serva Banks in .;~rr:ounts wholly out of all proportion to
their ca.pital and su:rplus.
Under the; old system of national banking, banks wor.: p3 nr.i ttcd to
:rod is count to th~ amount of thd r capital stock and su:Y"plus;
under p:r..>sent
b<>nks
hav0 fiXJd th0 ba.sic lin.:: for borrowing rr..;mb;;;:t"
cond 1·t·10ns th-' r·s~-y-,
~
~
v ~
'"'
v
.
.•
X-3903
- 17 banks at
consid~rab1y
bayonJ th:.;t point.
To
illustrat~,
taka a. hypothatical
case - Tb.a basic lin a in r;:os t cases would be ~ t irre s its cspi tal, o:r $1,500,000
foT" a. bank with a capitalization of six hunJ:rad thousanj Jolla.rs.
daposi ts total seven million
J
olla.rs.
( $7,000 ,000).
Its indiviJual
This bank borrowad from
the Fedaral R.;serve Bank of its district Fou,. and One-half Million DolJ.a:rs
($4,500,000), or seven tirr.es its capital.
Comrwn sensa anJ oT"dina.:ry business
prudence would cause any r.::an in this audience to inquire as to how the Directo:r-s in a bank of that kind could justify this cor.a it ion-
While the il-
lust:ration is not an actual pictu,.e of any bank, it is typical f:r-om tha standpoint of Ras.s:rve
a.ru
Capital to its :rediscount liabilitias.
'iTo illustrate
fuTther, suppose this bank had, app:roximataly, two hundred country banks as
clients.
Woula it not ha.ve baen the bdte:r pa.:rt of wisdom for those two
hundred country banks to have joined the System and placed thair institutions
in a ]!OSition to make thei:r loans direct with the F;;;de:ra1 Reserve Bank and by
so Joing avoia the aJJitional chcn:-ge to thd corresponJant bank anJ allowed
this cha.rg;;; to acc:ru.a to the bcnefi t of bor:rowe:r, which in itself wouU ha:va
been
D
substantial sSJving, when conside:r0d in the light of the laT'ge volume
of ,.eJiscounting n-;;ce;;;sa:ry in this count:ryi
The 1 iabili ty to the Federal
Reserv<> Bank woula have b--:;an no greate:r- tha.n it was to the city bank, anJ tha
local bank woulJ have been in a much better position to s6rva its customers
a.ccording to thdr" n.;03s anJ tha needs of the comrruni ty.
The incentive of the bor:t·owcr should be to un,Jert9ka to p,.ocu:re his
necessa.ry loans at th.3 ver:y lowest rat-:; ano his bank should be willing to
offer every facility that wouU amble him to Jo so.
It should be the pur-
pose of the local bank to :reach as d i:ractly and ch;:;aply as possible the
X-3903
- lS -
founta.in-hc::a.d of its .Jii•i.l:l'.'g;;;ncy r.JsourcJs and this can ba don-.> through a
m.;;mb.:;:rship in th8 F..;d0ral Rasorv:.; Syst.::rr..
Th.;;ra ar-3• as I viaw it, rr.any obsta.cl"'s to ov3:r.coru bafore tha mzmbc:r.ship in th.;; eystoru will nach th..; point that will .:Jnabl<:J .:;vary comrruni ty to
gat tha most di:r.Jct b.Jn.;;fit.
Som.J non-m;.;rr:b a r banks , in r:.any ins tanca s , hav a
not r-aa.chad tha point whaN thay can s_;.;; any
aJvantag~
in b.Jing a. m.Jn:b;;r.
Otha:rs a.re not m..m~b..;rs b..;causa of :r.aasons that apply only to th.;; n2.tarial
sid3 of businass - profits.
It is pa.r.f..;ctly natural that any banking
institution should b..; 3liw to the nacassity of t:a:rning dividar,ds on·its
capital, but thJ n.;;c..;ssi ty for giving sa:rvic.; and
is a.
pN:r~quisitz
to _,amings.
.tJrOt~
ction to its pa.trons
W.c..::m th..; custon.:;...rs of a bank hav.:; knowl..;dga
that thai:t' d.3pOSltS ar.; J?rot.;;ct-.;d by a. r.:;sc.;r.v.:; that cannot b.:; dissipa.t:::d,
it b.:;com.Js Lor..; of an ass.:>t to ti.B bank than coulJ po:>sibly accru.J to it
from
2%
on th.:; sr:.a11 r.;sarva now rJ~uirJd.
Tha most SJ:r.ious drawback to tha Fad.:;:r.al R.;s:O.rva Systdr.:. at this
rr.omant is thJ a.ttitud..:: of 1.1any of ou:r p..;opl..; towa.rd
th~
FJd.Jral
R~s;;;:rva
It is r;:;gnttabla that thJ busin..;ss
and fa:r.ming inLN<>ts and borrowing public g,m.;;rally
into a. rr.or.;
intirrat~
confidGnc~
ha.v~
not
b.-~n
takan
and rwr..; fully info:rrr.-.;d on th.;; obj.;cts, pur-
posas a.nd int.mt of this systarr., in ordar tha.t th:;y n.it?P-t
stand its functions and comp:r.:;h.;;nd its 3fLctivan-=lss..
int~llig3ntly
undar-
Tha ma.Jority of lat-
tyrs I :r.'-3C3iv.,; indicat::: v;;:r.y cba.:rly that th0 F-:::d":ral R.Js.;;.rva Systam in its
policiJS and functions is not understood and rr.ony p..;opl_;; a.:r.a wholly uninfo:r.m~d
o:r.
wisinfo~rud
as to its obj...;cts.
If
w.;; JV..:rG
d aa1 ing with a.n or-
dina.ry pi.;;;ca of legislation o:r. sorr.G aca.derr.ic problarr. th-=l mattar would :right
i tsalf b0causa it ·.vould hava thd support of th3 :;.,,t..;r;:)stad cla.ssas who
would
5 .;_,
that it w9 s p:rop;;:rly pr..;sJntad, but h.;;:r.; 1Va havd a corporation -
I
- 19
semi-public in its na.tu:r.e (by
l'd::3SOn of
'·
~
-
-..,-
X-3903
goV3:mrr..:mtal sup..>l'Vision).
It
is p:r.obably thB most pow~-"ful and a.t tha sam.:: tima, tha most far-r.;Ja.ching
in its function of any system that tha wo:rU ha.s av>.:lr known, and, in a.
word, it is lea.st unual'stood.
I, p.;; :rsonally, can lay no cl a.im to any
gl'aat amount of sup<:3:rior knowlaJga of tha Systam but it can ba undarstood
and should ba undal'stood by all tb.p·. .f&O.i.Jl~ th.rougb. tho bJst of info:rn:a.tion tha.t
can b.;; ha.d a.s w~ll a.s tha wiJ;;st .;list:ribution of sm:n!l.
I hav.; no thought of
going into a Jiscussion ovul' th.; charga so oftun rr.a ...L) tha.t thJ F.;d.;:ral
R.;sJMT3 BoaN ha.d ar-bitrarily ol'd-.n•Jd d.:Jflation.
I
JJ~m
it my outy,
howJVal', to l..>aV3 with you thJ information I ha.va on th.; subj.Jct Which I
obta.in.;J la:r.g.;ly from th;;;; rJcor;:is of thJ R.;s.3l'V~ Boa.:r.:i a.n-.~ without going
into JJta.ils, I will say tha.t I finJ no r.;co.,.cl in th.; official minutJS
' f the Boa.rd V\h::;:rJ an o:rdar was pl'omulga.t.Jd or a.ctad upon in aey zr.ann.:;r.
Boa.:rd in
1920 that
no action of any kin..l having for its obj~ct a. J..3Irl8nd
for liqui\Ja.tion, wa.s
<JV~r
takJn.
Th-> Conf~l'Jnco of May 18, 1920) which n;a.ey p~opl.: claimwa.s callud
fol' tha pu:rp0:>3 of darr.ano ing liquiCJa.tion, was onJ of th.::
a.:r-3 h,;:lJ Ja.ch y::.a:r in a.cco:rd anco with th..; p:rovisions of
confG:r.Jr:c~s
th~ Resarv~
v.hich
Act,
a.nd, in o:rder. tha.t you might ha.v.:; th..; full t0xt of thJ Conf .3:r.mc.J a.t first
hand a.nd b3
a.bl~
a.bl~
to study it at you:r L;isu:r..;, I ha:t.TJ b:rougpt
copy with m.::; anj sam.; can b.: ha;J a.t th.:.; S.;cr.3ta:cy's
It would b..:
w~ll
JV.Jry
ava.il-
tabl~.
to k..;ap always in mind th.; thought that th.;
F.-dara~
R.;;sa:rva M.Jr,;b.:;:rs arJ only h'll1Il8n and subj.3ct to human liu,itations, .;xp.:;ri.3nc.J
p:rov..;:s
th~t
humanity is
pron~
to
~r:r.
T.h.3r..;: is no ;,ioubt but wha.t th{l
.. 2G-
Fade:ral Reserve Boa.rd rua.de mistakesj
mistakes;
'·.
X-3903
tha Federal Raserv.-3 Banks ha:ve rna.de
the bankers of the country n>a.ka mistakes;
mistakes and fa.:rmex-s a.ra not imnuna from mistakes.
'businass man make
Uo one who ha.d to do
with tha eventful times and conditions ca.n cla.im a.bsolute imr...:unity f:t"om
blame ..
Wha.t the attitude of the individual Reserve Banks was dUt"ing those
avantful days is unknown to many..
Wha.t the Meno'bar Bank dai11.9nded from its
custon:Brs, I ha.va no way of knowing.
Wha.t the co:r.:respondant city bank
demanded of tha local count:t"y bank will proba.bly n.;vax- be rna.de public.
Wha.t the country bank told its customd:r. can only be irr.a.gined ..
sta.tus of tha borrowax- wa.s a.nd
his loan ws.s ess.:Jntial or non-essential,
But, in the cau:rs;; of tirr.e the histo.ry of our
he alona mutit 'ba the judge.
a.ge will be :t"ecorded.
~Vhethar
Wha.t the
To a. g:raa.t extant it will be a x-epeti tion of the
experiences of war pariods tha.t our countx-y has pa.:.:>;;ed throu€9:1 since its
existence as a. na.tion.
Wa ha:ve bean told of the experiences of the
Itevolutiona.x-y period anu the disa.l:itrous coma tions tha.t followi:ld the war.
The history of the
w~r
of 1Sl2 r8cords tha san2 identical axpariance and
the sama a.ftar-wa.t- disa.strous 8ff.;;cts.
In 1837 the a.gi tat ion and subsequent
lagisla.tion which diso:rge.nized the United Stat.;;s B9nk brought 9bout a. na.tiona.l
ca.lamity.
Following the Civil War we had the usual p<>riod of contra.ction and the
raco:rd of our own timz will show tha.t the ages ha.o not b..; an a.bla to taa.ch the
.American :people how to profit by ex:pari.mca ~nd that they hav a not corr.o to an
a.pp:t"ecia.tion of tha disa.star they would ancountc:r in tha post-war ya9.:r.s of
the World Wa.:r a.nd which are nop known to have 'bean tha :rr.oat disastl'ous that
l
Arr.crica. ha.s av:.r .3xpariencod.
•
- 21 ...
x..,.3903
'!hat soma thing out of tha o ~J ina.t'y must hav o aJ J ad inc,mt i v 3 to
th:.> deflation in co:r.JIT.oJity pricas in 1920 s.;_;rr;s r0asonabl3 to bdL;v.;.
P-:1~sonally, I ha.va haJ rr.any men of unquastiona.bl.3 int..;gl'i ty as sura. rr..; tha.t
arbi t:ra.:cy JJrr.and s war a n:;ad a fo:r 1 iquida.tion and that liqui,Ja.tion to tham
mJant bank:ruptcy.
I hopa the.t thosJ who hav;;;J haJ such an .:)xpa:rien o;; will
sp...;ak up and tell how and by whom an.:i unJar. what circumstances, th-=r were
:raqui:rad to liquida.ta in o:roa:r tha.t full l"3Sponsibility fo:r any 1.mjust
,;afla.tion could ba cJstablish.:;d.
Nothing can .con::a from a.ny
fu~th0:r
a.gi ta.tion
on th-3 subj-Jct ...;xcept es it se:rv.Js as th-:3 rL.:ans of ana.bling us to cr-::a.ta such
safc:-gua.t'Js a.s will obvia.ta anJ .J:.l:Y:"3Vant such ,,isa.st:rous rasults.
My sta.tamant as to wha.t wa.s said anJ who said it and Vvhan and whare,
will always b.: a. subject fo:r discussion without a. solution as to who was
a.t fault unl.:>ss those who ha:J such expc:rianca will speak up and tall wha.t
happened ..
The Fad a:ral Rasa~v8 System is racognizad as an a stablished
institution and its valu.;; to th.;; count:r.y in tiines of 8ID~.rgancy and financial
n~~d
is acknowled gad aven by its .;nami as.
That i t is the last wo:rd in
finance a.nd c:rcd i t and that i t has functioned affici.:mtly in .,,v..;:ry instance
is not ou:r co;:ltention.
Ma.ny suggestions ara offer<:ld f .rom time to tim.:l and
many ar:::andll:dnts have been made by Cong:rass in o:rde:r to incT'ease the
efficiency of tha System to the bor:rowing public.
It is antirely probable
that a,)Jitional chang<ils will be made in the Systam fX'orn time to time and th~se
will be lax-gely ba.s.Jd upon tha knowlaoge we have .sa.inad f:rom ou:r past ..3xpe:riances.
To on.;; who has been privileged to obsex-ve th.; op;;;:rations of the
J
•
••
X-3903
- 22 -
F~deral
Rasarvs Systmr. in }lra.ctics
an~
cor;..i:,a.r;; it with tha financial
rnachina:r:-y of oth.J:r nations, th,;.r.; corr..::s the thought that tha rr.ind tha.t conCciv .:;J th"' .iJaa. wa.s that of a. genius.
the World War which
ha.s
.~var
It not only has stood tha t.ast of
involvaJ th..; rr.ost sav.:3r0 cr.:.:dit stx-a.in tha.t hist~ry
known, but also brought our count:ry to a financial position fa.r
a.bova that of tha oth..:r nations ;mga.gJd ir.
I hold that th-:l first
~ssar.tial
th~
to tha
cor.~.flict.
rr.a.int0nanc;:~
of a. successful
CJ'ddi t and cu.rr.:3ncy systam is a. loyalty of its r::..::rr.bars that will corar.and
th.J confiJenca of tha
1).301)1~
with vvhom thay ;JJa.l.
Tha F.:ldo:ral ruSJrVe Boa.rJ a.t W9Shington and tha Dirdctors of tha
diffJNnt FJdJ.ral R;;;sarvu Banks Jo not J .;al
J
ir.;ctly with tha .i.Juulic, con-
sec...uantly, ha.v J nothing but in-:. ir..3ct conta.ct an..: s.Jcond hanJ info.rrna.tion
This is unfortunate in ona
in tha.t it \JO.JS not giv.:J thJ F.JJ.:;ral·
Ra~orv.;
.T.'.JS_t.~act
Boa:r.:i ox- tha Dir.:;ctors of tha
F..;;;l3ral R.;s.;rv.:> :B9nks tha p.;:rsonal contact with .i.'..30lJL3 of th3 count:cy tha.t
i;) nac0S;;,a.:t•y to a. tho.rough unJ3rstanJing a.n.., con intirnaL knowl.Joge of
conJitions 9.t fix-st hand.
Tha inability or n3gbct of thJ
M~r•.b.;r
Bank
to mak;;; claa.:r. to iti> customJrs on r;;vc;x-y oc...:a.s1on th..J r..3asons fo.r. th:.; bank 1 s
ina.bility to r;~J"t ra;.uosts fox- cr.:.Jdit ha.s crca.t;.;d a. situa.tion tha.t will bJ
y.:.la.rs in th..; unc.oing.
In orJ.:r tha.t this sta.t;;n..;nt r•.ii#lt not be r,,isint.J:rprat.:Jd or tha.t the
impression rnigpt go fo.rth that it was a ,t;.;;rsonal
f~.;;ling
::m.l r.. ora o.r lass
praju::..icial, I want to c~uote you v;.;;x-ba.tim what a. Vi:J.:r.y l-'x-ominclnt bank-:Jr of
Chica.go ha.s saiJ on thi;;> subjdct in a. SlJc.:lCh J>3liverao 3t Atlantic City,
in Sa.~ttamber,
Auocia.tion:
1923, to tha
t;~.SS.;;Jn.blaJ .;;.,;lega.t _,s of the .Ar.a.rica.n J3anka.rs'
..
.
riA
- 23 -
X-3903
•
tr.~.os.;;
thJ conJitions of
irrmaasu,..able
.::ne:pg;;d in :.1.g:ric:ultur-: h
all of u::;
3t1;J
ar.;;
to soma 3Xtent r3sponsibla,
b;;ca.use in soir.a ·:ray r.:ost of us hava
fa.:r.ma:rs•
f~eling
3lr.-.ost
cont:r.ibut,~J
to the
tha.t he:; is not so r::uch tha victirr. of thJ
ci:rcurr,s ts.ncas of his own inJust:ry, as of tho machinations
al~r::.ants
of a.ll
11
As bank..;;:r.s,
to blame
we;;
of businass, fina.nCiJ and gov-:l;rnr;;;;:nt.
cont:ributaJ to this f a~ling vvhan w:;; sought·
ClUr .;, a:.anJ upon th<J fa:rrrG:r fo.:r. lJaym,mt on tha
Rasa:r.va Boa:rJ.
Ou:r cowa.:rJly a.ction in fa.iling to t'-"li ou:r
fal"r.. a:r f:riands tha· t:ruth, which
W8S
tha.t
than that wa wo.ra b-;;ing rc.aja to ..:o so :,y
a.gzncy, is b.:;a:r.ing
of us
3.
abun-.~::mt
'.'\IJ rD ...
sor..:.~
lo:;m:;;:J tOO
&ov;;:rnr;.::mt
f:ru.it today, .sn...•.;.:;;: nav.:; ah;:;,a.d
t:r;;r.: ..m.ious ta.;;;k to ccl":rsct th.;; false ir•. J:--r;.;saion fo:r.
which we ara
r.:1sponsibL~. 11
of its rr.aLb.Jrs, it will b..: .;ifficu:Lt, in;.;aed, to hoJ?:: for .s. i·.;;rrrcrunt continuance of its succass.
Its efficiency will
in ·which tha banks a.s wsll a.s tha
r:1any as tha institution in
.Arr~rica
a.L~ays Japan-.~
.~:·UJlic sup,~;>ort
it.
u 1_.on th:;;: u.mr..,;::r.
It is racognizJd by
thJt is to act st all tin:as
of finance anJ credit anj its .Jfficiancy in sar·ving tha
p..::o:pL~
:3S
a bs.rorc0ta:r.
will aLva.ys
.:Jepand upcn the rrEnru:r. in which all of th.:l a.g:ricul turDl 9n-i businass inta:r.>sts
.~
-··
...
l
\:
--24of tha country
a'~"a
,II'
J_
wa.'~"nings.
In conclusion, I, pax-sonally, can see nothing in the prasent
a:Ppea.'~'S
'"
~.
X-3903
willing to b.;; guioad by its
si tua.tion tha.t in any way appears
... .
alarming~
C'~'adi t
The country as a. Vlhole
to be in an easier si tua.tion financially than a yaa.r a.go.
)g~icul ture,
:recova~y
on the whola, has rr.ade substantial
and while the:re are many :rea.sons
fo~
p:rog~ess
toward
the optimistic feeling over
the pax-tial retul'n of a. mol'e prosperous condition, the situation is not
one to wa.r:rant tha farmer in indulging in any ext:ra.o:rJ ina.:r.y dXtra.va.gance.
Tha.t
th~r.>
ha.s baen a. la.:rge arr.ount of liquiJation on the pa.rt of the fa.:rrr.or
is conceded;
howevex-;
this ha.s not
be~n
dua entiNly to p:rofits on cu:rNnt
opera.tions, a.s the rr.o:r.tga.ge indebtedness on fa:rr.:s has baen matel'ia.lly increased Ju:ring the pr-ocess of liquiJa.tion that ha.s been going on, and this
gave color to the thought that fa.rr..ars have to some axtant :reduced th<i1
loans n·.aJe for cur-rent obliga.tions by incraa.sing r..o-rtga.ge indebtedness on
fa.r-ms which is litex-a.lly trne in many casas, a.nd until tha.t p:roblerr. has been
met and pe:rma.nently a.djusted • agricultur-e Ci:lnnot
post-wa.:r r-ea.djustmants-
b~
said to hava rret a.ll
........
X-3904
·~-
.
• ...,'
. ARTICLE APPEARING IN THE Ni1W YORK JOUffilAL OF COMMERCE
Tuesday, December 4, 1923.
RESERVE BANKS TO
BUY U. S. SE:CURITIES
HOLDINGS ARE FOUND TO BE
ALMOST AT MINIMUM.
Open Ma.xoket Committee Confers
With Board .. Ma.y Obvia.te the
Necessity fo:r:- a. Change in tha
Red is count Ba.tas.
WASHINGTON, Dec. 3 - Renewed pu:rcha.sing of Gove:r.nment secudties in the
open market by the Fede:r:-al Reserve Banks on a. considerable scale wa.s expected
tonight to result from the maeting of the Fcldaral Raserve :Boa.:rd. with its special
committae on open rra.rket opera.tions.
T.he Rase:r:-ve system's holding of Government securities were found to be a.lrrost a.t a. minimum.
The opan ma.rket committe-a, which includes in its merr,ba:rship Governor
Strong, of the New York Reserve Bank, and Governor H~~ding, of the :Boston
&serve Bank, the formal" governor of the boa:r.d, mat today wi tb the board and
was understood to have gone over the Government secu~ity holdings of the various Reserve banks in the light of the .-oroba.bla extent of future pu:rcha.ses under
the system's unifo~ open market policy.
MAY OBVIATE RATE CH.ANGE
Open ma.:rkat ope:ra.tions of the Resene system a.re particula.~ly important
in tha.t their effect holds the poasibili ty of producing results ·,vhich obvia.te
a. necessity for a. change in :rediscount ra.tes.
According to the boa:rd' s la.tes t :rapox-ts, a.s of Novel.lb e:r. 30, the en tix-e
holdings of Gova:r.rm:.ent secu:ri ties of the twelve resel'.'Ve banks is only a.bout
$84,000,000, v1hich is very near the low point fo:r. tba se a.ssets, a.s compared
with a.bout $300,000 1 000. on a:p].froxirr.a.tely the sarr.e date l3.st yea.:r..
Moreovex-, probably a.s much a.s $50,000,000 of the ,t-Nsent holJinbs of Goval"nn:ent
sec~~ities ~ep:r.esent bonJs which the banks woulo be vi:r.tua.lly unable to sell
except a.t a. loss, a.s bonds taken to s2lc~::r.e ci:rcula.tion a.:r.e included in the
tota.l holdings.
it
Hence the shelves of the R~sene banks a.::r.e getting bare. of rr.a.::r.ketable
Government securities anJ it is expected tha.t ·the banks will shortly ~esume
- 2 -
X-3904
pu:r:-cha.sing to :replanish thai:r stocks.
Purchases p:roba.bly will be devoted
in the main to T:raa.sucy certificates of indebtedness.
HOLDINGS OF ACCZPTANCES.
Holdings of banka:rs 1 a.cceptances by the Reserve banks a.gg.r.ega.te the respecta.ble figu:re of $289,000,000, as compared with $259,000,000 a. year ago,
but sales of these bills on any a.ppreciable scale would probably involve a.
change in the rate, so tha.t if the Reserve banks a:re to continue the free use
of the unifonn rr:a.:rket policy it will be necessa.ry to stock up on open Government secu:rities.
Despite the failu:re of the Federal Reserve Council a.t its recent conference with the Reserve Boa.:rd to discuss the :rediscount rate levels, the:re
is a. feeling in sorr;e qua.:rte:rs tha.t a. :reduction of ratas is in order.
However, a. :resumption of purcha.sing in the open rr.a.rket by the rese:ttve banks
would :result in mo:re money being put on the ma.:rket, or in other words, the
extension of credit fa.cilitias by the :rese:rva banks in the na.ture of an
equivalent to a. :reduction in ra.tes.
FEDERAL RESERVE BOARD
WASHINGTON
X-3906
Dece:Dbe.r 7, 1923 ·
SUBJECT:
Schedule of Federal Resa:rve Bank Personnel fo:r 1923
.Annual Report.
Daar Si:r:
For. use in the for-thcoming annual :report of the
Fed e.ral Reserve Board cover.ing x:>pe :rations dur.ing the calendar
year. 1923, i t iS :t:'equested tha.t as soon afte:t' Ja.nua..ry 1, 1924,
as
pr.actic~ble,
you furnish the Board with a. sta.tement :rela.ting
to the personnel of your bank (including branches, if arty),
corresponding in form to the .tables p:r:-inted on pages 235-237
of the annual :repo.rt of tha Boa.rd fo:r 1922, ;:;£wwing figures
as a.t close of business on December 30, 1922, and December 31,
1923·
Thhi sta.terr;ent should be made up on the same ba.sis
as the sta.tement sent in .response to the Boa.:rd 's circula.'t" l.etter
X-3581, Decembex- 12, 1922.
It is requested tha.t the figul"es fo:r 1922 be reconciled with those a.ppea.:ring in the Board 1 s annua.l .report for 1922,
pa.ges 235-237, befor.e the sta.tement is forwa.l"ded to the Board.
Ve:ry truly you:rs,
Wal te:r L. Eddy,
Secreta.ry.
TO ALL CHAIRMEN·
'-
,~
... -- .j ;)\,_- (
1' .... ~ tJRY DEP RT:11ENT
WAS:-i :iNGTON
.December 6, 1923.
Tne Governor
Federal Reserve
Bo~rd.
Sir:
You are hereby advised that the Department has referred to the Disbu.rsing Clerk, Treasury Department, for payment, the account of the :Bureau of
Engraving ~d Printing for preparing Federal Reserve notes during the period
November 1 to November 30, 1923, anount ing to $102,552.50, ~s follows:
Fgeral HQerve Not{M 1914
. .
.
Boston
New York • .
Phil adelr;hi 3.
Cl ev·eland.
Rich'!lond
Chicago. .
Dallas
-.
~
• 200 ,coo
.100,000
.186,000
.150,000
.103,000
.400,000
•
.. .
~
. 2f.i,OCQ
1,235,0CC
150,CCC
15C,OOC
lCC,OCC
50,000
183,000
5Q,OQQ
683,000
1,235,0CO sheets at ~42~50 per
75,CCC
96 ,coo·
100,000
150,000
~
Ci •.
25,000
25,000
~.QQQ
':1:':.:5,000
M:.
50,000
.. .
.
-~102,552.50
T.ne charges against tne several Feder.:>.l Reserve :b.;..n.Ks
Compens~1~e:tSi
:lsat ign
Pla.te
Printing
:Boston
350,000 ~,725.00 ~.812.50
New York .
100,000
1,350.00
1,375.00
Philadelphia 436,000
5, 886.0C
5,995.00
Clevel~d.
371,000
5,008.50
5 ,!1.01.25
Ricbmond
253,000
3,415.50
3,478.75
C11icago.
9,895.50 10,078.75
733,000
l7Q,OQO
Dallas.
2,2~5.0Q
2,337.50
2,413,000 $32,575.50 $33,178.75
.
.
-.
..
.. -
~
350,000
lCC,CCC
4:36;000
371,000
253,000
733,000
l7Q,QQQ
2,413,0CO
l,l75.GC
5,123.CO
4,359.25
2,972.75
8,612.75
1,99'(.50
$28,352.75
as follows:.
Inc. Com-1ensation
:··:at en..:~.ls
~,11G.6C
~~re
~1, .;;;.::;5.
co '
33C.CC
1,526.00
1 ,.d98.50
885 .. 50
2,565.50
595 .oo
$8 ,445.5C
Total
~14,
875-CC
4,250.CC
18,53C.CC
15,?67.50
10.,752.50
:31,1.58.5(
7 t...,)~ .. Q"b
$1r\....rG,!...<'";.,..l.-..;.,v<v
· -' r:: , :::.r
The Bureau appropriations will be. reimbursed in the above amount from
the indefinite appropriation "Preparation c~nd Issue of Federal Reserve notes,
Reimbursable", and it is rec1Uef>ted that your bc~..rd. C':l.USG sucl1 indefinite appropriation tote reimbursed in lik8 a:2:ount.
·
Respectfully,
(signed)
S. R. Jaoobs,
Deputy Cov~~issioner.
FEDERAL RESERVE BOARD
WASHINGTON
X-3908
Dece~ber
SUBJECT:
Janu~ry
S, 1923.
1924 Par List.
Dear Sir:This will advise that data. for the January
(complete) Pal" List should be mailed to T.'each the
Board not later than December 20.
Telegraphic changes
may be rr0de up to and including December 31.
The
lists should be ma.de up as follows:
Wb.an items ci:rawn on <:>11 banks in any given
town or city a.:ra coll<3 ctible at pa.r., opposite the
name of such town in the Par List will a.ppea.r' the
wo.rd s 11 All banks. 11
Wh=ra tha~ s.re seveJ:"al banks
in any given town, one or mo:J:"e of '."lhich will not rami t
a.t par, opposite the name of the town in question will
a.ppea.r the woJ:"d s 11 All national banks, 11 if any, and
thereunder the name of ea.cb State institution which
remits at pa.r-.
Below is an outlina of th~ foro1 to
be used:
GEORGIA.
DISTRICT NO.
6 ---
ATL1U~TA
- All banks.
Albany - Bainbridge - - - - - - All national ba.nks.
Citizens Ba.nk & Trust Co.
DecatuJ:" County Bank.
Camilla - - - - - - - Bank of Camilla.•
Very t:J:"Uly yours,
J. C. Noell,
Assistant Sec:rata.:ry.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS·
FEDERAL RESERVE BOARD
WASHINGTON
X-3910
12, 1923.
Decembe~
SUBJECT:
EXPENSE MAIN LINE, Laa.seJ Wi:r:-e System, !loverrl> e:r., 1923 ..
Enclosed ha~ewi"th you will find two min:eog~aph
sta.tements, X-3910-a. and X-3910-b, cove~ing in deta.il opa.ra.tions of the ma.in line, Laa.sad Wi:r:-e Systam, dur.ing the n:onth
of Novembe~, 1923.
,
P1ea.se C:t>edit the amount [;aya.b1e by your bank in
the gene~a.l account, T:r:-easur.e~, U. S.. , on you~ books, and
issue c/D Fo~ 1, Na.tional Banks, fOX' a.ccount of 11 Sala~T.'ies
and Expenses, F.:lde~al Reserve Boa.:rd, Spacial :Eb.nd 11 , Lea.sad
Wire System, sending duplica.te C/D to Fede:t'al Resene Boa..rd •
Ve~y t~y
you:t's,
Fiscal Agent.
(Enclosure)
TO GOVERNORS OF ALL BANKS
. '-·
- ,.,
.
X-3910-a.
REPORT SHOWING CLASSI FICATIO!T AND NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE O:T TilE FED2RAL RESERVE
LEASED VYIBE SYSTEM FOR THE W.DNT:a: OF NOVEMEER, 1923 •
F:r.om
Pe:r.cent of
Fad • Res.
To tal Bank
Bank Business Business (*)
T:r.aa.su:r.y
DcJpt.
Business
WaJ~
Finance Corp.
Business
Tota1
---------------------------------------------------------------------------------Boston
New York
Philadelphia.
Cleveland
Richmond
Atlanta.
Chicago
St. Louis
Minneapolis
Kansas City
Da1las
San F:r.ancisco
TOTAL
41,229
225,605
64,035
95,559
75,365
88,387
149,870
96,069
59,863
91,464
80,303
135,299
4,904
11,865
5,089
3.382
2,974
3,669
7,625
4,007
2,956
4,235
2,129
8,024
3-42
18-74
5-32
7-~4
6.30
7-34
12.45
7·98
4.97
7·59
6. 7l
11.24
1,204,048
:BoaJ:•d
277,164
Total
1,431,212
Pe:r.cent of Tota-l
100.00
60,909
204
1,265,161
74.500
202
351,366
135,409
406
1,617,027
3.37%
91.60%
:Bank Bl.lsiness
T:r.ea.sury Dept.
1, 481,212 wo:r.d s o:r. 91.62%
tl
11
8 .. ;23~
1~2140~
TOTAL
).,616,621
100.
46,133
237,674
69,124
98,941
78,839
92·056
157,495
100,076
62,819
95,749
32,932
143,323
204
.03%
1o
(*) These pa:t'centa.ges used in c3lcula.ting the.
p:r:-o :t'a.ta. sha.:r.e of 1eElsed wire axpensea as
~ho-wn on the a.ccompanying staterr.ant (X-3910b)
FEDERAL RESERVE BOARD,
Wa.shington, D. C..
De_cembe:t" 12, 1923 •
.""'
•
X-3910-b
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM NOVEMBER, l 923 ·
-------------------------------------------------------------------------------------------------------------Payable to
Nc:une of Bank
Ope:t:'a.tors' Ope:t:'a.tors'
Sala.ries
Overtime
Boston
$ 250.00
Wire
Rental
Total
Expense
Pro Ra.ta.
Sha.re of
Total
Expanse
Credits
Federal
Reserve
Board
-------------------------------------------------------------------------------------------------------------1,100.32
Naw Yo.T.'k
$
$
25·00
Philadelphia.
190.83
Clavela.nd
388.00
Richmond
315.00
24o.oo
Atlanta.
Chica.go
(#) 4,830.68
St. Louis
250.00
Mbneapolis
276.13
Kan<>a.s City
346.68
Dallas
211.00
San Francisco
3t>O.OO
2.00
~17 ,113 .g6
Fed • Res • Board
250.00
1,125.82
190.83
388.00
315.00
240.00
4,832.68
250.00
276.13
346.68
251-00
360.00
"'
't'
726.16 $ 250.00
3.979·02 1,125·82
190.83
l ,129 ·58
388.00
1 ,685·88
315.00
1,337·67
240.00
1,553·49
4,832.68
2,643.48
250.00
1,694·38
276.13
1,055-27
346.68
1 ,611.)7
251.00
1,424.72
360.00
2,386.57
171113.86
476.16
2,853.20
938·75
1,297·38
1,022.67
1,318.49
(*) 2,139·20
1,444.38
779·14
1,264.89
1,173·72
2,026.)7
$
----------------------------------------------·-----------------------------------------------------------$
TOTAL
•
(#)
(&)
27.00
$17,113·86
$2~,940.00
(a) 4•707 , 21
$211232·79
$81826.14
$21,232-79
Includes sa.la.ries of Washington o_pe.r.stors.
Jl.mount :reirr:bu:-r.sa.ble to Chicago.
(*) Credit.
(a.) Received $7.21 from Wa.r Finance Corporation and $4,100.00
frorr. T:reasu:t:'y Dept. covering business for month of Noverrber 1 1923 •
FEDER.P,L RESERVE 130.ARD I
W0shington, D. C.
December 12, 1923·
FEDERAL RESERVE BOARD
WASHINGTON
X-3911
15, 1923.
December
SUBJECT:
~eekly
statements of transactions in Banks' Gold
Settlement Fund and Federal Reserve Agents' Fund.
Dear Sir:
Commencing with Januar,y 2, 1924, the Board will
issue thereafter its weekly statements of transactions in
the Banks' Gold Settlement Fund and Federal Reserve .Agents 1
Fund as of the close of business each ':'Tednesday, rather than
Thursday as at present, transmitting therewith to ooth :anks
and Agents the usual signed reconcilement of balances accredited to their respective accounts, as of those dates.
Very truly yours,
~7alter
L. Eddy,
Secretacy.
TO ALL GOVEP.}TORS fl..ND FEDERAL Fl.ESERVE AGENTS.
,I'
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OI"FICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE SOARD
X-3912
,
Receipt is aclmowledgsd of your remittance
amounting to $
, covering subscriftion to the Fed-
eral Reserve Bulletin.
The subscription price of the Bulletin, effective with th:;; January 1924 issue• is reduced from
$4.00 to $2.00 per annum.
Your reGJitta.nce is therefore
returned 1vith the request that you send yO'n' check, payable to the order of the Federal Reserve Board, to cover
subscription at the rate of $2.00 per annum.
Very truly yours,
J. C. :Hoell,
Assist~nt
Secretary.
·FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
X-3914
5,
THE FEDERAL RESERVE BOARD
Janua.ry
SUBJECT:
Fo:reign and Inte:rna.tional Banking Institutions;
Report of ConJ i tion a.s a.t the Close of Business,
December 31, 1923·
Dea.r. Sir:
Unda:r. authority of tha a.greemant entered into by your
corpo:ra.tion with the Federal Reserve Boa.rd. you a.re he.reby :re.::.
spectfully :requested to furnish the BoarJ with a. :re~ort of cond it ion, a.s a.t the cl os e of business De cembe:r. 31 , 1923 , giving in
deta.il all a.ssets and lia.bilities of your co:rpo:ra.tion and the
da.ta. a.sked for in the a.ccompanying memo:r.andum.
Kindly a.rrange to file the report of your HaaJ office
and domestic branches combined a.s se>cm as possible. Sepa.:r.a.te
N];Jorts of foreign branches and a.ffilia.ted l;lanks should be sent
a.s soon a.s they a.re received by you. It will be a.pp:r.ecia.ted if,
a.fter the repo:ets ha:ve been received from all of your foreign
branches and a.ffilia.ted banks, you will have prepared a. consolida.ted sta.tement of your corpora.tion to be sent to the Boa.:r.d.
While the Boa.rd has ruled tha.t no specific reserve· ha.s
to be ca:t-:ried by foreign branches or a.ffilia.ted institutions of
.Arr:.e:rica.n banking corpora.tions aga.inst deposits a.b:r.oa.J, it, :nevertheless, wishes to be advised a.s to the average reserve carried
by all suc}l branahes a.nd affiliated institutions or corpora.tions
which a.:t'e opet'a.ting under a.gteement \t/ith the Fede:ral Reserve
Board. You are, therefore 1 requested to have each of your foreign
branches, a.gencies, offices and subsidiary banks fu:mish you,
for t:ransmission to the Boa.rd, a. report of the avera.ge :reserve
ca.rried during the month of December, 1923, ag::dnst Jeposit
lia.bili ties in the form shown in the a.ccompaeying memorandum.
Kindly acknowledge receipt.
Very truly yours,
Governor..
(Enclosure)
192~.
·-·
X- 3914a.
HEPOHT OF CONDITION TO FEDEL\L
RESER"IJ'E BO.AJU) •
The following information is desirad in connection with the -report of
condition to be ma.de a» EJt close of business
1. Detailed balance sheet showing all ::>saets 2nd li.3bili ties, including
contingent liabilities. It is requested that the items fo:r. which detailed schedules are :requested below be shown as sep9:r:;te 9CCOU."lts on
the balance sheet.
2. Amount of loans
(a)
(b)
(c)
3·
;md discounts, divided: Secured -· Unsecu-red
Derrc:md
TiLe
Overd:cafts and othex- advances
Total
Detailed list of invest;.~ents (including atock of offiliated institutions) showing:
(a.) I.s"'ui:ng Gove:rnrr.ent o:r corporation
(b) Interest rate
(c) Ivb tu.ri ty
(d) Par va.lue
(e) Book value
(f) Approximate market value
4. Ownex-ship of stock of a.ffil iated institutions:
(a)
(b)
(c)
Per cent owned by yourselves
Per cent owned by foreign Governments
Per cent owned by individuals 9nd cox-po:rations
5~ List of banks, branches, etc. having bala.nces due to you.'t' corpo:rat ion
with amount fox(a)
(b)
(c)
(d)
6.
each bank sepa.rately:
Government bank
Domestic banks
Foreign banks
Fo:rei€:,'11 bx-:mches, agencies and affiliated institutions
List of banks, br3nches, etc. having balances due from your corpox-ation
with amount fo:r each bank sepax-ately:
(a) Dome::;tic banks
(b) Foreign banks
(c) Foreign bx-anches, agenci<;;;;; and affiliated institutions
•
X-3914a.
- 2 -
7. 3ills payable: (Primary oblig:1tion'-i of
Y'·3po rting corpo'·a.tion rep:resent-
int, mon:;y borrowed)
C,) Payable to:
(b) "'x.·ount
(d)
Interdst r~te
Ihtur,ity
(a)
Collataral - give list
(c)
::t.
Redisc~mti> (other
(a)
than
Amount
a.ccept;;,nc:~s solCl JJi t'h i::mo.or.s0m.:mt):
Co)
(c)
!1at\ll'ity
(d)
'7itil ,;norr,
(~·)
Secured or ,.m.oecured- i f s.;;cur:;o., giv;J d..;;tail:;d inforrru.tion r..::garu.in,_:, secu.ri ty.
Rat3
9- Total liability for acc-3pt:mc2s sold
·:1itn ona.or"'.:=;rr:::mt:
10- Deposits in the Unitc:ti St:1t.:s:
(a) Nat dem:mu. ueposi ts (aftar J.;;JO.uctin<:S uncoll:3ctad derrand items payabl::; ·Nithin United States - excb.a.rle;es)
$
Rec>crve B3quired. $·_- - - - - - - (b) Time DepO'; i_ ts ~·
Re sarve Required ~'-~--(c) Tot :::.1 Res..;rv, requireu. at,a.inst u~posit 1 iabih ty $___
Raserva hald:
(d)
(e)
(f)
(g)
Cash on hana. ~------Bank balances ; _____________
Total cas D. res erv..:: ~,dLi ~·-------Exca;;:;s or uefici t of cash :r""erv J held ovrJr r;zserve
raquirau ~-------
11. Accepta.nct:s:
(a) :.cceptances out6tanuin~:
1. I~tQrin 0 in 30 a.ays or lass
2. Matunn::. after 30 daJf:3
Total outstanu.ino accavtanceo
(b) Subscribau. capi tc;.l :mu. surplus
E.xcess ~ over Q_
______
$
,
"
~
,.
<;· _ _ _ _ __
.
('•
)
Acceptances secured
$
Acceptances unsecured
:f
.Arr;ount required to be securau under
agreement aith Federal Hes<:lrve Boaru $
(Give list of security held as required
above; t.iving description and approxima.t3 amount)
-}-
{c)
.Addr.ess
(d)
(e)
List of dl"awers of dr9.fts a.ccepted, with total
a.ggt>eg9.te liability in excess of 10 pe:r.o cent
of subsc:r.ibed capital a.nd surplus showing:
Business
.Aggreg~te
Liability
.Amount of a.ccepta.nces outstanding dra.wn for the purpose
of fu.'t"Xlishing dolla.r exchange.
·
Reserve ag.:dnst outstanding a.ccept!:!nces:
1-Bequi:r.ed: 15% a.ga.inst all a.cceptances outstanding
which ma.tu.l"e in 30 days OJ:' less:$_ _ _ __
3% a.ga.inst all a-cceptances outst~nding
which ma.tux-e in more than 30 da¥s:$_ _ __
Total rese:rve x-equired s.ga.inst
s.cceptance lia.bili ty $
2-Held: Ca.sh and lhnk balances (**) ."~~~.P....----Bankel"S 3-ccephnces
$_ _ _ _ __
Securities approved by
Fede:r.al Reserve ~oard (List
in deta.il)
~----Total reserve held ~-----------------
12. General limita-tions:
Per. cent deposits and a.cceptances outstanding to subscribed
ca.pi tel and sul"J?l us
13·
List of officers and di:r.ectors.
14. List of stockholders, showing nwnber of sha.res owned by ea.ch·
15. List of branches, sub-bx-anches, a.gencies, offices and a.ffilia.ted
institutions - da.te of opening of ea.ch and the loca.tion.
16. Date of la.st examina.tion or audit - by whom made.
(*) If security, sta.te wha.t the secut'i ty consists of, giving qua.nti ty and
a.pp.roxima.te value; if a. bank gua.ranty, give na.rne a.nd loca.tion of bank·
(**) Excess amount a.s shown in 10-(g) not requi:red fo:r reserve s.ga.inst
deposit liability.
•
X-3914a.
-4-
1. Balance .:;~1eet to be furnished by 8ach, showing in detail all as;:;ets
and liabilitL:;s, iDC.Lc<iinc; contin 6ent liaoiliti-as-. It is requastaa. tru.t the items for ilnich i.lctai.Leo. scnad.ulas are requested
below be sho'JVn as separate accounts or. the balance she.:;t.
2. 1\rr:ount of loans ond o.bcounts,
(a) Demand
(b) Time
siwvvin~:>:
Secured - Unsecured
(c) Overdrafts a.nil other a.u.vancss
3.
investrr:~nts, sl...owing:
(a) Issuing Governm8nt or corporation
(b) Interest rate
(c) Maturity
Detailed list of
(d) P:1r value
(e) Book value
(f) ApproxirJate mark<Jt value
4. List of oanks caving balonces due to your branch with amount for
each bank separately:
(a) Government banlc
(b) Banks and bs.nl:ers
(c) Head Office
(d.) Other branches, agencies and affiliated institutions
5·
List of banks having balances due from your bronch with arnount for
each bank separately:
(a) Banks ctnd b.;.nl:8rs
(b) Head. Office
(c) Other branc:o~s, age.c;cias .?.nd affiliated institutions
(Prir:~ary oolie;ations of re~~ortinc: corporation
reprasenting borroJVed money)
(a) Payable to
(b) Amount
(c) Intarest rate
{d) Maturity
(e) Collataral (Give detailed list)
6. Bills payable:
7·
Rediscounts:
(a) Amount
(b) Maturity
(c) With whom
(d) Rate
(e) Sacurad or unsecured ~ if securad, give detailed data
'
.
' .
X-3914a
8. Deposits.
Dollar
Eq~.:.iva
lant
l1st of collataral)
~ ~
~.
Darrl.,.qnd
Tir11e
Ot::,ar J.aposits
) . Dt.m:.:.md
4. Tn:a
'Total
(b) D::;pooi t::, - ";,or; payaola
1. Local Curr3ncy
.::.. Dollar
3. Stc:rl int;
4. Otha n7i .:>0 ---···-----
Tota.l
9· Special Raserv2 Stat2Lant - avar.:lo._:a for month of
depc;~.ts:
1. P~Lyable in local currency
2 . P.:1yabl a in u.oll8.r3
3. Paycibl2 in starl inc
4. P::.clable Ot~1a r:n"' a-------
Total
(b) Reserve:
1. A;;;ou..'1t, i:· any, and composition requirad by
local l
~1·.rvs •
2. J.r;·.ount h,?ld:
l.rr:ount
Per cent to
nat deposits .
(a) Gold ~nd Siiver ... -~
:~
(b) Local currency .... .
(c) Othar cash ........ .
(d) Jal~nce in local .. .
Govt. bank ....... .
(e) Othc:r reserve funds --------------Total
.
• •..
-610.
X-3914a.
Da.te of la.at examina.tion or a:ud it - by whor.:1 mEJ.de.
NOTE:
1.
Where 9 schedule does not :refer to you1" co:rpora.tion,
please ind ica.te this by inse:rting the word "None"·
2.
Reports for foreign b:r:mches, a.gencies, etc., should
be in te:rms of United Sta.tes dol19rs, sta.ting the :rEJte
of exchange at which they were converted.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-3915
Janua.r.y 5. 1924.
SUBJECT:
Edge Act Corpo:r.a.tions;
Report of Condition as at the Close of Business,
December. 31, 1923.
Dear. Sir.:
Unde:r. the provisions of the Board•s Regulation
K, Ser.ies of 1923, governing banking corporations authorized to do for.eign banking business under. the tel"lllS of
Section 25 (a) of the Federal Reserve Act, you ~~e hereby
respectfully re~uested to fur.nish the Board with ~ :r.epo:r.t
of condition, a.s at the close of business December. 31,
1923, giving in detail all a.ssets and liabilities of your
corpo:tta.tion and the da.ta a.sk.ed for in the accompaeying
memorandum.
Kindly a.cknowledge receipt.
Very truly yours,
Governor~
(Enclosure)
TO EDGE ACT CORPORATIONS.
X-3915a.
FcEPOHT OF CONDITION TO FEDElUL
RESERVE BOARD.
The following inform9tion is desired in connection with the repoJ:>t of
condition to be m9de as a.t close of bu:siness.
HEAD OFFICE AND DOMESTIC BB.ANCHES COMBINED
1. Deta.iled balance sheet showing a.ll assets and lia.bili ties, including
contingent liebilities. It is J:>equested th9.t the items foX' which dete.iled schedules 9re J:>equested below be shown a.s sepa.r.EJte a.ccounts on
the balance sheet.
2 •.Amount of loans
( 9.)
(b)
(c)
and discounts, divided: Secured -Unsecured
Deril.3nd
Time
Overdrsfts 3nd otheJ:> edva.nces
Total
3· Detailed list of investments (including stock of affilb.ted institutions) showing:
(a) Issuing Government or corpora.tion
(b) InteJ:>est rate
(c) Matu:d ty
(d) Par value
(e) Book value
(f) Appro.x.ima.te ma.r.ket value
4. Ownership of stock of a.ffilia.ted institutions:
(e.)
(b)
(c)
5·
Per cent owned by yourselves
Per cent owned by foreign Governments
Per cent owned by individuals and corpora.tions
List of ba.nks, branches, etc. ha:ving ba.lances due to you.l." corpora.tion
with amount for each bank sepax-g.tely:
(e.) Government bank
(b) Dorr.estic banks
(c) Fo:r.eign banks
(d) Fo:r.eign b:r.anches, agencies and affilia.ted institutions
6. List of banks, branches, etc. having balances due from you.l" corpora.tion
with amount fo:r.
(a.)
(b)
(c)
ea.ch ber.J..c s epara.tely:
Do>•iestic banks
Fo:r.eign banks
Fo:t'eign bJ:>enches, a.gencies and a.ffilia.ted institutions
("
.
-2-
X-3915a
7. Bills payable: (Primn:ry obligations of r-eporting corpo.ra.tion representing money borrowad)
(a) Payable to:
(b) .Amount
(c) Interest rate
(d) Matu"T"ity
(e) Collateral - give list
3. Rediscounts (other than a.ccepta.nces sold with endorserr.ant):
(a) Arr.oun t
(b) Ma.tu:ri ty
(c) Rate
(d) With whom
(e) Secured o:r unsecu:red - if secured, give detailed
•
info :rmat ion re ga.rd ing se cu:r i ty.
9·
10.
Total liability for acceptances sold with endorsement:
Deposits in the United State:;):
(a.) Net dew.and deposits (after deducting uncollected demand items pa.ya.ble within United Sta.tes - exchanges)
$
Reserve Required $
(b) Time Deposits $
Reserve Re~uired~
--:----(c) Total Heserve rec1uired against deposit liability$
Rese-rve held:
(d) Cash on hand ~~
(e) Bar.k balances 7$ - - - - - (f) Total cash reserve held $
(g) Excess or deficit of cash_r_e_s"'-,:r-.v-e--:-h-e-=-1-::d-ove:r reserve
:req_ui red $
---
11.
Acceptances:
(a)
(b)
Acceptances outstanding:
1. Ma.turing in 30 days or lass
2. Maturing after 30 days
Total outstanding accepta.nces
Subscribed ca.pi tal and surplus
Excess a. over E_
(:-.
Acceptances secured
~
Acceptances unsecured
.,,dArr.ount requi:red to be secu:reCi''under
:regulations of Federal Reserve Boa.rd $
(Give list of security held as x-ey_uix-ed a.bove giving description and
a.pp:roxima.te arr.oun t)
-3(c)
N.<lme
Address
List of drawers of dra.fts a.ccepted, with total
aggregate liability in excess of 10 per cent
of subscribed c~pi tal ...nd su:r.plus showing:
Business
(d)
(e)
X-3915a.
Aggresa.te Lia.bili ty
Security* or
G~.r.anty
Amount of a~ceptances outstanding dr3wn for the purpose
of fu:r.nishing doll a:r exchJnge.
Reserve aga.inst outstanding a.ccept3nces:
1-Requir.ed: 15% a.ga.ins t :Jll a.cceptances outs t~md ing
which ma.tu.r.e in 30 days or. les;; :$._____
3% a.ga.inst all a.cceptances outstanding
which ma.tu.1:e in more than 30 days:$._ _ __
Total rese:r.ve requir.ed a.ga.inst
a.cceptance liability $________
2-Held: Ca.sh and :Sank b3lances (**) $.______
Bankers a.cceptances
$_ _ _ _ __
Securities app:r.oved by
]'edera.l Resene Bo3.:r.d (List
in det3.il)
$._ _ _ _ __
Total reserve held $____________
12. General limi ta.tions:
Pe:t:' cent deposits and a.cceptances outstanding to subscribed
C9.pital a.nd su.r.plus - - - - - - - - · - - - - - - - - - - 13. List of officers and directors.
14. Li.;;t of stockb.oldex-s, showing numbexo of sha.:r.es owned by ea.ch.
15 .. List of br.anches, sub-branches, agencies, offices 3nd a.ffilb.ted
institutions - <h.te of opening of es.ch and the loca.tion.
16 .. Ds.te of la.st examina.tion or a:udit - by whom lil3.de.
(*) If secur.ity, sta.te wha.t the secur.ity consists of., giving quantity and
a.pproxim3.te value; if s. bank gu.:J:rsnty, give name and loca.tion of 'bank.
(**) Excess amount e.s shown in lo-(g) not xoequi:t'ed foX' :reserve a.gainst
deposit 1 is.bili ty.
NOTE: Wb.e:t:"e a. schedule does not refer to your. co:t"pora.tion, plea.se ind ica.te this by inserting the word "None. 11
I
,...
,,., ,.._
;.
.
•._
FEDERAL RESERVE BOARD
WASHINGTON
X-3916
Decembe~
SUJ3JECT:
21, 1923.
Schedule of Fede~al Reserve Bank Personnel
fc~ 1923 Annual Repo~t.
Dea~ Si~!
Refe:r~ing to the Boardts lette~
X-3906 of
D~cellibe:r
7,
1923, on the above subject, I beg to say tha.t it has been decided
to show sep.3.:rately employees whose sa.laJ•ies are reirr:tlul.'sed to tee
Fede:ral :reserve bank, including building err.ployee;;o such a.s ,janito:rs, charwomen, etc., taking ca:re of spa.ce :rented to tenants.
Accordingly, it will be apprecia.ted if the personnel schedule :req_ue~.ted in letter X-3906 is p:repa:teci in the form outlined below:
___Q.f f i c e~~---~a~n~d--=E==m~p.::l-=o.z.y~e..::::e=-s__
Numbe~
1923
Officers:
Chairman and Federa1 Reserve Agent
Governor
Other office~s
Employees by depa:rtrrents:
Banking depa.:rtment
Federal Reserve Agent's depa.1·t¢ant
Auditing Department
Fisca.l Agency Depa.:rtment
Total
I
1922
_,Annual Sala:rie~
I
1923
Fiscal Agency department employees
whose sa.laries are :reimbur-sed by
the T:rea.su:ry Department
Other employees whose sa.la.~ie s s~e
:reimbursed to bank, including building
employees in spa.ce rented to tenants
Total
In transmitting the schedule, kindly indica.te the numbe~ and
salaries of tempo:ra_ry employees in the Fisc31 Agency depa.r-tment Whose
salaries a.re reimbursa.ble by the T:rea.Gur-y D3pCJ.rtment.
Ve:ry truly yours,
TO ALL CHAI BMEN OF F • I~. BANKS
Walter L. Eddy,
Secret3ry.
1922
CONFIDm~TIAL~
X- 3919
Written for publication in Journal of Comrrerce,
New Year's Edition, 1924.
BRANCH B.AN:KJ:NG
"Branch banking has been recognized by the foremost authorities on
banking in the United States as a natural method of extending banking
facilities to small communities, as presenting opportunities for diffusing
business risks over larger areas than at present with a gain analagous to
·that which such diffusion brings to insurance, and as having the advantage
of ability to make loans from a common fund of capital and deposits in accordance with the unequal and varying
sections served.
de~ands
of different industries and
There is reason to believe that the agricultural sections
of the United States would be far better served, and with the deposits of
the farmers much more adequately safeguarded, under systems of branch
banking, whether limited to counties or state wide, than at present.
California is trying the experiment, and no evidence has so far been presented to show that it is not serving the people of the State well."
This is the concluding paragraph of a report
serve Board on November 7th by a minority of a
~aking
~ade
to the Federal Re-
com~ittee whic~
had been
a study of branch banking with particular reference to California.
The majority of the committe.e, and the Board itself by ~ajority vote, decided upon a policy of restriction with respect to further extension of branCh
banking, except within the limits of cities where in accordance with a recent
opinion of the Attorney General National Banks are permitted to open additional offices with somewhat limited powers.
Branch banking is authorized in 17 states, exists to some extent in
-2-
more than half of the 4S states of the Union, and has established itself
also in the District of Columbia.
State wide branch banking bas been au-
thorized for many years in several southern states, but has made little progress except in California and. Rhode Island..
Country bankers throughout
the United States have been considerably agitated about it, and have passed
vehement resolutions denouncing it at rreetings of the American Bankers' Association - but experience shows that they have nothing to fear if they are
well managed, large enough to meet the needs cf their communities, and can
spread their risks over a sufficient variety of industries tc rrake them
safe.
No system of branch banking can grow unless there is real demand. fer
it, unless it meets the needs of the people better than independent unit
banks can meet them.
On the other hand, if in any community it becomes
evident that unit banking is not meeting the needs of the people or involves
too much ris¥ of fail,:;re, nothing can long prevent the people from obtaining
a system that will serve them better.
Branch banking and independent unit
banking will exist together, with very little replacement of the one by the
other, as has long been the case in the southern states, unless unit banks
have failed to meet the need. of the people or some special conditions make
necessary a change.
City branch banking has made rapid pr,ogress :luring the past ten years
because of special
conditi~ns,
the chief of which is the congestion of the
streets in the business and financial centres of our large cities due to the
enormous number of automobiles in use.
The banks in the business centres
have been losing deposits because rrany of their depositors find it increasingly
difficult to get
to them.
Since the people cannot get to the banys it has
been necessary to bring the banks to the people.
The argument is exactly the
-3same as the argument for b:-ar:ch post offices, and is une,nswerable.
A few
cities, the chief of whieh is Chicago, are still resisting the inevitable,
or endeavoring to meet it by the subtert,uge of surrounding themselves with
outlying chain banks, nominally independent but in reality controlled by
downtown institutions.
In some way or other the conditions must be met and
branch banking from the large, well established institutions offers undoubtedly the best solution, both from the standpoint of the people who demand the best service and the greatest security for their deposits, and from
the standpoint of the stability of the banking system of the cities and of
the country.
New York, Boston, Buffalo, Cleveland, Detroit 7 New Orleans,
Los Angeles and San Francisco are cities in which branch banking has made
most progress, and there are a few branch banks in Philadelphia, Providence,
Baltimore, Cincinnati, Indianapolis, Atlanta and some other cities, including nearly all the cities in states which authorize state wide or county
branch banking.
The argument for branch banking beyond city limits, whether state wide
or by counties or limited districts, is very different from the argument for
branch banking within city lirrdts and contiguous territory.
Many branch
banks within the limits of large cities, and suburqan residence territory,
are properly described as "tellers' windows", conveniences for receiving deposits, cashing checks, etc.
They receive money but ITake few loans, because
they have little deiTand for loans.
Branches outside of these limits,
particularly in great agricultural states like California, ere more often
loaning branches.
At times when there is a great seasonal deiTand for
financing the fruit growers, or the cotton growers, or wheat gruNers, such
branches loan much more than they have received in deposits, obtaining their
, _..
If,._,
-4funds from the surplus deposited in the city branches.
In older, thickly
settled eastern states, where there is much wealth in all the small cities
and villages, there would seldom be the same contrast between city and
country and branch banking would be of comparatively small advantage.
If
authorized by counties it would enable a few communities to obtain banking
facilities where now none exist, because the communities are too small to
support independent banks.
Even if state wide branch banking were authorized.
in such states as New York or Massachusetts or Pennsylvania I do not believe
it would make much progress unless forced by a drastic increase in the
amount ofcapital required for organizing banks.
The present country banks
are generally old institutions, with a considerable accumulation of surplus,
and are serving their communities well and at low rates.
Cities are close
together and if the needs of a large industry in one place cannot be fully
met by the banking resources of the town it is easy to arrange for additional accommodation from larger banks in larger places.
It should be re-
membered always that in Canada branch banking is practically required by law.
No bank can be organized within the Dominion with a capital less than
'
$500,000, and if banking facilities are to be extended to small corrfiUnities
at all it must be by branches.
In the absence of laws permitting branch banking several middle western
states have passed laws allowing the organization of banks with a capital as
small as $5,000.
Prof. Charles F. Dunbar, who was for many years the leading
authority on banking in the United States, pointed out as long ago as 1892,
referring to the Nebraska banking act of 1889, that in authorizing banks
with so sJTI.all a capital "the sparsely settled states are attempting to
secure by the multiplication of independent banks, the same advantage that
-5England and Scotland have obtained through the multiplication of branches
by a limited number of banks."
"These considerations,
11
he adds, "undoubtedly
show that the state banking systems, in the present condition of the country,
have an important sphere to fill; and they raise the question, moreover,
whether the national banking system might not be adapted by judicious amendment to rr:eet wants which it cannot now supply. 11
Professor Dunbar did not,
however, advocate the reiuction of the limit of capital for national banks,
then $50,000, but 1eclared that
11
the greatest possible diffusion of banking
facilities, under an admirably guarded system, might be secured if the establishment of branches were encouraged and facilitated by law."
He recognized
that in the present state of opinion branch banks "would have to contend
with some local jealousiesj but any real improvement in commerce or finance
is tolerably sure to
~ake
good its footing.
It is obvious also that if the
multiplication of branches were once fairly recognized again in the United
as
States as a natural method, as it has been in the past, it would be/available
for central banks under the state systems as for national banks."
There fol-
lows a summing up of the advantages of branch banking much as I have given
them in the opening paragraph.
It would be "unnecessary to provide a full
board of directors for ewery ·establishment, large or srulil - a necessity which
is often embarrassing in small :t-·laces. 11
It would "tend to diffuse business
risks over somewhat larger areas than at present, with a gain analagous to that
which such a diffusion brings to insurance."
It would be possible "to apply
banking capital at a given moment according to the unequal and variable needs
of the different
par~of
any section covered by a given institution and its
agencies."
A. B. Hepburn, Comptroller of the Currency in 1892, recognized the advantages of branch banking, but had other and more pressing reforms to advocate.
~6.,.
His successor, James H. Eckles, whose administration felt the full force of
the very serious panic of 1893, advocated in 1896 an arrsndment to the
National Banking Act, permitting national banks to locate branches "in places
not having national banks already established."
As this privilege would be-
open to all national banks he did not believe it could lead to monopoly - the
bugaboo always held up by opponents of branch banking whenever the subject is
brought forward ..
Congress, however, did not enact the proposed amendment, but contented
itself in 1900 with lowering the limit of capital required for national banks
from $50,000 to $25,000, and provided that national bank notes could be issued
to the par value of government bonds deposited with the Comptroller to secure
circulation.
The national banking system lost the opportunity to take the
lead, the measures adopted in 1900 turning out just as Dunbar had predictedt
"palliatives,n which did not go to the root of thE: evils complained of.
Enough $25,000 national banks were organized to ms.ke a fair showing in IllliDbers,
and the profits of all national banks from the note issue monopoly were sufficiently increased to check for a time the tendency to convert into state
banks, but the smallest national banks were not small enough to reach out to
the people of the agricultural states in anything like even competition with
the $5,000 and $10,000 state banks, nor were the larger national banks in the
cities able to do more than hold their own in number.
In the ten years 1899
to 1909 state banks with a capital above $50,000 increased in practically the
same numbers and at a much greater percentage than national banks, and during
that period state banks were beginning to take advantage of the opportunity to
obtain another long lead in some of the cities by establishing branches.
It
was in 1909 that California revised its banking laws providing for state wide
'"
branch banking.
The attempt to diffuse banking facilities among the people of agricultural states by the multiplication of small independent unit banks had
already been recognized as a failure in 1907 and 1908, and the campaign of
1908 for the guarantee of bank deposits was an effort to bolster it up, so
that the small banks could comrr..and sufficient confidence from the farmers and
merchants of the sw..aller towns to keep their deposits.
~ranteeing
deposits failed
Yfhen the campaign for
as a national proposition many of the middle
western and a few southern states took it up and for a tiree the state guarantee
systems seemed reasonably successful, and became an additional means of
building up state banks at the expense of the national system.
California, developing with unprecedented rapidity its wonderfully diversified agricultural resources, would have none of the new panacea but put
her banking structure on a firm foundation, in accordance with the principles
of
~anking
which had proved their soundness and efficiency.
Departmental
banking, the separation of savings departmentsand trust departments from commercial banking, though carried on by the same institution, was one of the
leading features of the new law, and state wide branch banking was another.
Only one institution has taken full advantage of the state wide provisions of
the law and itw development, though reiT..arkable, was not sufficiently rapid to
attract much outside attention until the past few years.
Other institutions
in San Francisco and especially in Los Angeles have entered the field and although their branches do not cover so much of the state they have approached
or surpassed it in numbers.
According to the recent report of the Comptroller
of the Currency 82 State banks in California are operating a total of about
475 branches.
"In the State one bank operates 28 branches, one bank 19
,--
..... ,,.
~
branches, another about 71 branches in
branches.
48 different cities, another about 72
Four banks in California operate a total of
branches in the State."
190 out of the 475
The Comptroller does not explain,
h~~ever,
that a
very large proportion of the branches of the largest institutions are within
city limits.
The largest banking institution in Los
within the city and 12 outside.
~ngeles
has
16 branches
Nor has he said anything about the service
which the branch banking institutions have been able to render the state in
the crisis through which the country has passed.
Recent testimony has shown
that the two branch banking institutions which maintain the most outside
branches have loaned in a dozen different agricultural communities more than
the total deposits of each of those districts - in some of them more than
double their deposits.
No unit banking system can do that, even if borrowing
to the limit from the Federal Reserve System or from correspondent city banks.
Furthermore, it has been shown that in many cases they have lowered the
rate of interest the farmers pay to something approaching eastern rates
(generally from
8~
to
7~)
and have done away with various exchange cbarges
and commissions that were vexatious and sometimes burdensome.
The Comptroller wants to restrain the State banks of California from any
further extension of this excellent service because national banks are not
allowed to engag, in it except in limited degree and at a marked disadvantage.
I disagree with him.
Congress has had the same opportunity to enact pro-
gressive banking legislation that the California legislature has had, and the
Federal Reserve Act does not cure all the ills of unit banking.
banking act of
The California
1909 has so far at least proven itself better adapted to the
needs of California than the national banking laws, and it is a significant
fact that there have been less state bank failures in California not only
since August 1920, but since 1909, than o:~· 'J.:~tivr:.t: t..:..nks ( Lhr,;e state,
six national since
1909).
I do~bt if thare is ar~ other state in the Union
of which that can be said. Besides the bran::h banldng L1stitutions approxirr.ately 263 national banks and 34£: state banks ha':;e no branc:1es.
The leading branch banking instituti0ns of CaJ. ifornia are members of the
Federal Reserve System, but have not at any time been large "corrowers from
the System.
One of the largest has never borrowed, and one or two of the
others have never borrowed except to carry Liberty bonds.
They not only
weathered the recent financial crisi.s better than the independent banl:s, but
furnished nearly a third of the reserve deposits from which the Reserve Bank
of San Francisco helped the unit banks which were hara pressed.
The agri-
cultural crisis was as severe, when the great fall of prices occurred, in
California as anywhere else in the country, but thare was no lack -of credit
from the branch banking systems.
These systems are well rranaged, and are able
to give extraordinary service to the people through their ability to spread
their risks over a wide area, so tbat they obtain the advantage "which such
diffusion brings to insurance," as Dunbar said, and "can apply their banking
capital at a given moment according to
different sections. n
th~
unequal and variable
California is doubtless peculiarly
adapt~d
needs of the
to branch
banking because of its gr;;at extent, its variety of clirr.ate and. of agricultural products, which rmture at different times, and because of the large
demands of its great cooperative rrary0ting orga11izations.
The country branches
have the same loaning power as the head offices in San Francisco and Los
.Angeles, and can rr:ake just as large loans to cc·'.;ton growers in the Imperial
Valley, to citrus growers in the southern counties, or to rice growers in the
Sacramento Valley as to the merchants in the big cities.
The independent
. unit banks have been frequently unable to meet the derrand.s of the grov•ers
.. ,...
-locooperative organizations, and have suffered from inability to spread
their risks.
A unit bank in a citrus growing territo:r:w may fail because
an untimely frost has destroyed a large part of the crop, but the losses
of a branch bank in similar territory are easily absorbed because of gains
in other territory.
The dangers of independent unit banking in one crop territory are well
illustrated by present conditions in the northwestern spring wheat states.
There have been about 4oo bank failures in the Ninth
Feder~
Reserve
District since August 14, 1920, a large. proportion of them having occurred
during the present year and many of them since the harvest of the present
year.
Hugh McCullogh, the first Comptroller of the Currency, declared that
all bank failures are fraudulent and that in every case the bank's officers
should be prosecuted.
Such an extreme statement might have much justi-
fication, if banks always had a fair change for success, but these failures
in the spring wheat territory are an inevitable
system.
result of a faulty banking
The effort to diffuse banking facilities among the people in
sparsely settled agricultural states by the multiplication of small independent banks has broken down.
Its failure has been more disastrous in the
spring wheat territory than elsewhere, but it has been a failure nevertheless
throughout the great agricultural &ections of the middle west.
More than
one thousand banks have failed in the United States in the past three years,
a record Which, it seems to me, is a disgrace to a great commercial country,
especially as nearly all of these failures have been small banks in agricultural states, where the losses have caused the greatest distress.
The effort to bolster up the system of
s~all
independent state banks
through deposit guarantee funds has proven a failure.
Oklaho~a,
the pioneer
I><
'~··I
-11in this interesting experiment, has definitely abandoned it during the past
year, and in several other states the guarantee funds have long been practically bankrupt.
Doublless the Federal Reserve System was expected by some
enthusiasts to function as a sort of deposit guarantee fund, but the experience
of the past three years has shown that you cannot save a
s~all
institution which
has all its resources invested in eggs carried in one basket by lending it
money, if the basket happens to drop and break the eggs, and that is exactly what happens to the small bank in a one-crop neighborhood when the crop fails.
A last effort might be roade to safeguard the small banks in agricultural
states by limiting the amount of their loans to one industry.
National banking
laws, and most state laws, have long recognized the danger of loaning too large
a proportion of a bank's resources to one individual, firm or corporation, but
have not yet recognized the fact that exactly the same risk is involved in
. loaning all or the greater part of a bank's funds to one industry.
If banking·
facilities are going to continue to be extended to neighborhoods solely dependent upon wheat or cotton by means of small independent unit banks with reasonable safety such banks must be prohibited from loaning more than a safe proportion of their funds to wheat or cotton growers even though their deposits
come whollY from such growers.
Such a law would require that .a considerable
portion of the deposits of the people in such neighborhoods must be sent away
from home for investment.
It doesn't seem likely that Congress or any legis-
lature would enact such a law.
There reroains then only one method of diffusing banking facilities among
the people in sparsely settled communities - the method advocated by Dunbar in
1892, carefully guarded branch
banking~
It has been proven successful in
I••
- 12-
other countries and California has done much to prove its success in this
country.
It spreads
barJ~ing
facilities among the people much more widely
than is possible even with our small unstable banking units.
Canada has
more than 4,000 banks,or banking offices, with a population of less than
10,000,000.
If we
r~d
as
~any
in the United States in proportion to pop-
ulation we should have 40,000, instead of 30,000 banks.
Our people are
therefore short twenty-five per cent of the banking facilities they might
well have under a better system.
Nor is that all. • The overhead expenses of the independent banking system
of the United States are inordinately high, and the sn:all independent banks
in agricultural states are forced to pay too much to obtain deposits.
This
inevitably results in high interest rates in communities where money is
naturally scarce and the del!'.ands high, and in low interest rates in tHe
money centres.
In short, popularly expressed, our system
~akes
for cheap
money in Wall Street and dear money in the agricultural states, ani the queer
part of it is that the West or Middle West seems to like to have it so.
The
chief opposition to branch banking comes from the very sections which \7ould
be most benefitted by adopting it.
At some time in the not dist8n~ future,
it seems to rre, the farmers of the Middle 1/Test, from which California was
settled, are going to ask why it is that they ·in an older community have to
pay higher interest rates than the farmers of California pay, and also have
to run gteater risk of having their deposits lost or tied up in closed banks.
In Dunbarts remarks of 1892, he says
11
if the mu.ltiplication of branches
were once fairly recognized again in the United States as a natural method,
,-..
'"
,-
- 13 as it has been in the pas_i," etc.
not new in the United States.
The italics are mine.
Branch banking is
It was generaliy recognized as natural before
the Civil War, and was more generally developed in the West and South, which
needed it most, than in the East.
Indiana, Ohio, Iowa, Kentucky, Missouri,
and several other states at the time of the outbreak of the war had established
after many vicissitudes, sound branch banking systems.
The State Bank of
Indiana had as its President Ifugh McCullough, who became the first Comptroller
of the Currency.
Hepburn in his "History of Currency in the United States"
calls this institution "a model bank in every respecttt and adds "It
is an exemplary illustration of the efficacy of branch banking as a system".
The banks of those days were all note-issuing banks.
Deposit banking had
net yet come into its own, though making progress in the big cities.
It
has been said that notes of the Bank of Indiana and of the Bank of Ohio
were just as good as national bank notes and might be in existance today
if
th~
had not been forced out of existance by the 10 per cent tax that
came into effect in 1866 •
. Bdw did it come about that branch banking, though common throughout
most of the West and South was e.xcluded from, or at least not distinctly authorized in the National Banking Act?
The explanation is to be found in
the fact that New York and some New England States prohibited branch banking, and the New York free banking act as amended in 1848 ~~s the model for
the National Banking Act - in fact whole sections of the New York law were
simply copied in the federal act.
It is significant, however, that the
prohibition of branch banking was not copied, and the Act was amended in
1865 so as to allow state banks to be nationalized and retain their branches.
- 14 -
••
None of the large western systems took advantage of this provision, but some
srr.all banks did, and there are today a few national banks with branches
dating back to the early days of the National Banking system, notably a
couple of national banks in Camden, N.J., which maintain branches in Philadelphia.
Apart from the national banks which have recently acquired branches
by absorbing state banks with branches in some of the large cities, there are
in several states national banks which
beyond city limits.
~aintain
branches similarly acquired
One such system with nine branches, all outside
of the city of the parent bank, and covering several parishes, is in successful operation in Louisiana.
Space will not permit a discussion of chain banking, a device for getting
around the laws against branch banking that has been very widely used in the
West and South.
No comprehensive study of chain banking in this country has
ever been made, I think, but sufficient information is at hand to show that
thousands of the small banks, including some of the same banks whose officers
vote for resolutions denouncing branch banking at meetings of the American
Bankers 1 Association, are not really indep2ndent banks.
They are separately
incorporated but are controlled in chains or systems by holding companies or
by individuals.
Probably the largest system of chain banks is the so-called
nithem chain 1 comprising over 200
s~all
controlled from Athens, Georgia.
banks, some of them national banks,
The Middle
~rest
and the South, and the
Mountain statesof the far West are full of such chains of banks.
wide-spread development could not have arisen without
demand.
sorrB
Such a
strong economic
It proves the necessity of some kind of branch banking.
Such evidence
as there is seems to show that the chain banks while sometimes in trouble are
on the whole rather better
~anaged
than independent banks of the same size
-- J
••
- 15 -
and in similar territory.
Chain banking may be defined as branch banking
without the responsibilites of branch banking and with only a few of the advantages.
The loaning power of each bank in a chain is only that of a sll'.all
independent bank.
They obtain soma advantage
through unified ll'.anagement,
often by able bankers, and obtain some spread of risk by swapping paper among
themselves.
On the other hand they have not the opportunities for applying
banking capital according to the unequal and variable needs of the different
sections served possessed by real branch banking systems, and they have some
special weakness of structure.
A chain is only as strong as its weakest link,
and generally when one bank in a chain fails- the others also go down.
Chain
banking is at best but a clumsy and inefficient substitute for branch banking.
In conclusion I shall quote a few words written by J. Laurence
Laughlin in 1912, at a time when he was professor of Political Economy
at Chicago University, chairman of the executive coll'ffiittee of the
National Citizens League and very active in the preliminary work that
led to the passage of the Federal Reserve Act.
"At present thsre seems
to be little chance that the establishment of branches will be permitted.
This means that there will be a permanent retention of conditions in
which ll'any very Sll'.all banks must exist in order to meet the needs of the
communities they s-erve, and in which there will be no direct control by
one institution, or group of institutions, over another.
The ll'.aintenance
of such conditions necessarily involves some rather serious suffering."
The italics are minv.
EDMUND PLATT
....
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X·-3920
SUBJECT~
Discontinuance of Brief Edition, Fedural Reserve :Bulletin.
Dear Sir:
Effective January 1, 1924, the Federal Reserve Board will
discontinue
the publication of the brief edition of the Federal Re-
serve Bulletin.
The publication of the final edition of the Bulletin
will be continued and distribution will be made shortly after the
first of each month.
The su1:5'scription price of the Bulletin has been reduced,
effective January 1st from $4.00 to $2.00 per annum, single copies
being similarly reduced in price from 40 cents to 20 cents each.
For the benefit of those who have unexpired
~lbscriptions
for the brief edition, the Bulletin will be furnished withont additional
charge throughout the period covered by their
subscri~tions,
to be accepted at the rate of $2.00 per annum.
Very truly yours,
J. C. Noell,
Assistant Secretary.
renewals
,_,
(""':
..
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDEN7E TO
THE FEDERAL RESERVE BOARD
X-3921
SUBJECT~
Reduction in Subscription ?rice of Federal Reserve
Bulletin.
Dear Sir:
Effective January 1, 1924. the Federal Resertte :13oatd will
discontinue
the publice-tion of the brief edition of the Federal Re-
serve Bulletin.
The publication of the final edition of the Bulletin
will be continued and distribution will be made shortly after the
first of each month.
The subscription price of the Bulletin has been reduced, effective January 1st from $4.00 to $2.00 per annum, single copies being
similarly reduced in price from 40 cents to 20 cents each.
For the benefit of those who have unexpired subscriptions
for the final edition, arrangements will be made to extend the subscription for a term commensurate with the amount of the payments already ma.de.
Very truly yours,
J. C. Noell,
Assistant Secretary.
.... ,.,
X-3922
F E D E R A L
R E S E' R
~.7
E
B 0 A R D
STNl'EvTEN'::' FOR THE ?RESS
For Release in Morning rYapers,
Monday, Decerriber 31, 1923,
The January, 1921+, iss,.le of the Feieral Reserve
Bulletin will carry ti.1e following review of banking
and business developments during the year 1923.
The year 1923. - In the business an::l ban1.:ing developments of the year
1923 the outstanding fact has been the high level of industrial ond agricultural output and the derrand for bank credit to finance a volume of production and trade never previously equaled.
Throughout the year the buying
power of consumers, arising out of practically full industrial employment
and increased income of farMers, has been reflected in a growth of retail
trade and in a more active distribution of merchandise than in any other
year.
The increase in the dewand for corrn:erci2,l cred.i t, which began in the
middle of 1922, continued at a rapid rate during the early part of 1923
when there was an unusual degree of industrial activity and was rraintained
at a high level with a further rise during the months of crop moving and fall
tr;>de.
Taking the year as a whole, the credit situation ''vas characterized
by a growth of credit to meet the renewed derrand of active business.
Growth in bank credit. - The extent of the demand for bank credit is
shown by the fact that the total loans of all me:r.ber
ban}~s
increased about
three-quarters of a billion during tho first nine rr;onths of the year.
This
increase of about 4 per cent followed upon an increase 'W.ich tool< place
during the last
nine months cf 1922 at an even more rapid rate.
In tr..at
year the grovrth of loans was accompanied by &.n c:,ven more rapid grcwt11 in
investments; in 192~), ho·.vever, inve~tmer.ts decl ir.ell sl i g:C1tly while loans continued to incre:tse.
The srowth of member ba:1k credit since the spring of
X-3922
-2-
1922
v~s
at a rate rr.ore rapid than tile previ0us lean
li~uidation,
so that by
the middle of 1923 total loans and investm::nt:; were gr85-ter than in November,
deposits, while du.ring the first nine months
demand deposits.
o~
192·3 there was a decrease in
The chj_ef so"'J.I'ce o: incr .:;as3 b m,?mber banl<: funds during
1923 was the growth in
tim:; deposits, supplemer.ted. by additional borrowings
at the Federal Reserve banks.
The growth in member bank credit in the agricultural dis_tricts during
the period was to a much larger extent than in the industrial districts
financed by borrowings at the reserve banks.
The discounts at the six
Federm Reserve Banks located in the agricultural districts (Richmond,
ltlanta, St. Louis, Minnea.polis, Kansas City, and Dallas) increased by 69
per cent between January and
banks increased by
31
~eptember,
per cent.
while discounts at all other reserve
Loans increased rr.ore rapidly in industrial
districts, and this increase was met in part through the sale of investments,
while in the agricultural districts investments continued to increase.
In
the financial centers funds available for commercial loans were also increased through a reduction in loans secured by stocks
of commercial
borrowin~
~nd
bonds.
The volume
at member banks in leaciing cities declined slightly
after the first week in Octcber and the lessened demand for credit was also
reflected in sorr:e''!hat easier money rates.
Constancy of reserve bank credit. - At the Fedsral Reserve Banks disco~ts increased rapidly during the year, but there was a corresponding de-
cline in open-maryet holdings, with the result that total earning assets
remained relatively stable.
In fact, as shewn by the attached chart,
relative stability in the total volume, vJ:ith changes in the composition, ha-s
X-3922
-}·
been the principal charo.cterist ic cf F3dera1 Reserve
past two years.
Ba:-.2~
a ssots durinc tbe
During these two ye.srs t.hs COUJ."ltry steadily used from
In view of this
relatively constant dem:md, L-12 years 1922
a~1d
1923 afford an opportunity
opcn-r.arl~et
of observing the effect of cha1:ges in. the VC!h:crne of
the volume of
:::~em"!ier
bank discounts.
holdi:1gs t<.pon
This changing r,alationship was corr:-
mented on in the May and JuJ.y issues of the Bulletin, ani it Lovv seems appropriate, at th6 close of the year, to r:ake a rr,ore
com~'lete
review of the
relation between the two elements of Federal Reserve credit policy -- reliscount operations and open-market operations.
In the early part of 1922 the reserve bants purc.he,sed a cc:'1Siderablc
volup-C! of short term government securities in the open-rrarl·et, partly for
the purpose of obtaining earnings, while in 1923 they graatly reduceJ their
holdings of these securities.
In tho absence of chc:"nge in the aggregate
derr.and for reserve bank credit, the increases in open-m2.rket purchases during
1922 were offset by a correspon1ing decline in the volu.r::e of discounts, and
in
1923 the
reduction in sscurities was accorr,r:a.r1iel by a ~mtst.::ntially
equivalent increase in discounts.
In 1922 when the reserve banks bought secu:::i ties the
:f1;1rds
·which thEJ;y
paid to the sellers found tl1eir ~.vay into m2mbcr ban1~s &nd permitted t.l1esG
banks to repay an equal amount of their rediscounts.
The; c:.ggrets<=tte :::tr;:ount
of reserve bank credit in use vvas not increased or even rnateri.ally
a certain amount of
11
securities. 11
"rediscounts" v'srt: rnsr0ly thus ccraerted ir;to
But the effect on the
memb~:r
Centers, was to add to their loanable fur;ds
indebtedness at the reserve banks.
ch·~nged;
bar1c.s, IJC::rticul'"rJy :i.n th'" laq;e
CI'
to enable
t:leffi
t
0 rc~J.UC2
t': ril•
UnJcr :;.;uc:l con:L ti :Jns ba:11·s are 1 H:sly
x.. 3922
to lend more fully to their
In
custom~rs [~nl other~;.
1923, on the other hc:.nd t when the re se1·ve bar..ks reduced their se-
curity holdings, t:-tey wi':Ld::-ew from the rrarhet an equivalent arr:ount of funds.
Following the withdraw.?l, the Ir.erl<:et borrowed substantially the same amount
from the banks; and the banks, in turn, rediscounted substantially the same
amount at the reserve
banks~
so t:r..at there was no rr.aterial change in the
total volume of Federal Reserve Bank credit in use.
X-3922
Open-rr.arket policy. - Ths volume of op-on-mar}(E:t holdingc with which
the reserve ban};s entered the 'J"33-r 1:?'2.$ put thfrn in possession of an admirable
instrument for testing U:..e cie,:rsc: of' J<:::r>:;nclence of the crc;dit structure upon
Federal Reserve Bank accom..aocic,tion c..nd. for placing the initiative upon member
banks to determine the volun'e cf reserve bc:nk credit required to mee• the
needs of
bua~f. ~d.
industry.
For in rediscount operations the initiative
is taken by the merr.ber banks, which borrow from the reserve banl:<s at the established discount rate, while in open-r:arl.et opsratior.s the initiative rray
be taken by the reserve banks 1 which buy or sell short term securities in the
market largely at their ovm volition and at market rates.
that the reduction of open-rrarket holdings
du~ing
1923
was
The fact
accor.~anied by
an amount of discounting by member banks approxirr.ately equal to the volume
of funds withdrawn from the market by Federal Reserve Banks indicated that
the total volume of reserve bank credit outstanding was not in excess of requirements.
Federal Reserve credit
in open-market operations.
poli~·
during the year has been reflected chiefly
.As the aggregate demand of the country for re-
serve bank credit way be met either through rediscount or open•rrarket
operations, the Federal Reserve Board felt tbat,these two methods of extending credit should be brought into harmony.
April,
1923,
The Boardt therefore, in
appointed a committee of officers of reserve banks to act in
corQunction with the Board in effecting a more complete coordination of all
open-rrarket operations of the reserve banks, both on their own account and
in the execution of orders in government securities for the Treasur:r as fiscal
agents of the government.
At the time the committee was appointed, the Ferleral 'Reserve BoEtrd
MILLIONS OF DOLLARS
T tal Ear
0------~----~----~-----J--
1 9 2 2
EARNING
~SSETS
1 9 2 3
OF ALL FEDERAL RESER\IE BANKS
...
X-3922
-tr-
adopted the principle:
"That the t irr.;e, rr.anner, character and
volume of oper1 rrarJ:et investments
purcha5ed ·by Fe:Jeral J.es2rvc F.::ml(s
be govern~d vvi th p:..·:irr<J.ry ree:;ard. to the
accorr::nodation of coJT.marce and business
and to the effect of such purchi"33S or
sales on the general credit sit,-t..ation. 11
As the Act provides that discount rates shall be fixed
11
wi th a view
of accommodating comm8rce &nd business," the adoption of this principle
definitely established
policies.
open-~.arket
policies on the same basis as discount
Open-l!'.arket operations provide a cushion of credit between the
direct borrowings of member banks and t.he money rrarket, and have facilitated
the qow of credit into and out of the reserve banks in such a v.ray as to
exerc1se a steadying influence in the market end to
reduce the tendency toward periodical tightness of rr:oney formerly felt by
business in the spring and by agriculture in the auturrm.
Indeed, open-rr.arket
operations, particularly sales of securities, have proved to be a valuable
adjunct to discount policy.
The minor influence which sales of securities
by reserve banks exerts l!'.ay, at times, avoid the necessity for resorting to
the major influence of a change in discount rates.
Discount rate changes in 1923 were fewer than in any other year in the
history of the system.
Advances in discount rates from
4 per cent to 4-1/2
per cent at the Federal Reserve Banks of Boston, New York, and San Francisco
were rr.ade early in the year, and since that time the level of rates r.as been
the same at all the reserve banks.
Tiith the growth of discounts, however,
which accompanied the reduction in the holdings of government securities, the
influence of existing discount rates was extended to a larger proportion of
the total Federal Reserve Bank credit in use, and the cost of obtainins reserve bank credit was borne more directly by member uanks.
Changes of dis-
count rates made with a view of influencing the demand for red.iscount
-~-
X-3922
accomrr:odation from Federal Reserv·e Banl<s are 8attE:;r un1,;;rstooJ by the
general public than
open-rrar}~et
transact ions.
T:1e experience of the past
year, however, shows that chc.nges in th9 volume of
s~~cu::i ties
held by the
reserve banks, when such changas are well t irr.ed, are capable of exerting
an important and useful influence on credit conditions.
The weekly state-
ments of condition of the Fede-::al Reserve Banks sl1ow the amount and con:position of open-market holdings and rr.ake it possible for the public to
follow these changes from week to Vieek.
Open-rr.arket operations during l92J... - In viev; of the importance d-uring
~923
~
of t'ne open-rr.ar1<e t opera t·1ons, a o.e
' t a1·1 e d s t a t emen t o f th e c bu nges
)
during the
year in the composition of open-market holdings and of their
relation to total earning assets is shown in the following table.
-e-
X-3922
..
-'
•
__________ jjn
rr'otal
Change between
Jan. 10 and
Dec. 12
------·-· _ _Q:p_E.J:l.-n-.~~:tet;__ holding§__ ________
.l~C:U.S. Loncls: Treasury
Djscnunts
.
-- .
------January 10
February 14
March 14
April 11
May 9
June 13
July l l
August s
September 12
October 10
November 14
December 12
mi~_.J,_ion§)
··-
1,246
1,191
1,183.
1,135
1,148
1,035
1,134
1 ,C91
1,121
1,143
1,150
512
653
613
6~\
c.:....,
695
70S
847
623
SL2
:-58
--4-
.
---~-------
734
535
570
512
4~~
,)
7.77
.,i i
I
791
762
2'37
268
279
27lf
359
426
250
- 308
869
l,lSS
Total
and Notes: C.ortificates
176
163
161
163
1'-f9
125
94
83
95
S7
79
77
-
39
-
ce2:Jtances
-·-------
226
185
225
274
2S7
332
190
184
75
37
33
7
7
5
5
12
19
,... 6~t
313
+103
2lq
17S
179
132
263
330
.~
....,
..
X-3922
- 9-
Of the two principal types of securities digible for pu.rcho.se by rese:rve
b.:mks -- accept once and U. S. se cu..rit ies --, the volum3 of acceptonces held
by the reserve banks increased by about ~lOC,OOO,OOO during the ~rear, ,vhile
gove:rnrrent securities declined by over
$4oo,ooo,ooo.
The increase in K:Jeral
re.:;erve bank hold ir!gs of acceptances since the r;,iddle of October reflected in
part the seasonal growth in the volurr.e of acceptances created in connection
with the Iincmcing'of ·;:rop exports.
The reduction in holoings of United
Sts tes securities, chiefly certi fica te.:3 of indebtedness, cant irrued a.lrws t without interruption throughout the year, though during NoverEber and De cemcer there
was a slight increase in the holdings of Treasury certificates.
A con;parison
of the composition of earning assets shows that the reduction in open-rr,arlr.et
holdings between the n:iddle of January and the r.:.iddle of Decer:ber wss sorLawhat
larger than the increase in d Locounts, with the result that for the period the
total volllfue of
rese~ve
bank credit decreased slightly.
Stability in the othe:r principal iten:s of the :rese:r:ve bank .;;taten;ent has
also characte:rized the year's operations ..
H.eserves ren;a.ined at about ~3,800,000,-
000; Federal reserve note circulation, afte:r a seasonal declinc'3 early in the year,
continued at about $2,200,000,000; deposits. consisting largely of r;.ernbe:r banks'
reserve balances, declined somewhat, :reflecting the decrease in a errand aepo"'i ts
with n.ember banks; and the :reserve ratio throughout the yea.:r rer..ained n~ar
per cent.
76
This absence of change in the rc::;e:r:ve bank staten;ent durint; 9 year of
gc-owth in business 9Ctivity and of increasing credit and currency derrand is
closely related, 9S was pointed out last rwnth in this H.eview, to the use r:0de
of irrported gold.
Du.:r ing
1923
the inflow of gold coL. tinu:~d in sor,ewha.t
larger volur;,e than during the previous yea.r, net irr,ports of $262,080,000 for the
-10 -
X-3922
fi:r5t ~leven rwnths exce:ding the total of ~;;23B,Ov0,UCO fo:r 1922.
T.hi:s sdditior12l
~;old was not :reflected in an increase in the resa:rves of the Fsde.r·al Hese:rve
b9nks because ce:rtain of these banks rdet the der:ar,d for cur:rency by putting golJ
to
certificates in;circulation.
Thus the increase of the total r;.oney in circulaI
tion of ~307,000,000 bet·,veen Decer:.be:r, 1922 and Decer:,be:r, 1923,
;·JC:JS
largely in
gold certificates, ra the.,. than in Federal rcser·ve notes.
Course of business.
The t:rend of r,,er::ber bonk. credit d'-1:ri:1g the ye3:r, c-athe:t'
th9n of Federal reserve bank credit, ba.;; reflected the cour.:.e of business develorJrr.ent~.
The period of rr.ost rapid increase in th~ der,_am for credit vvss the first
'~uarter of the year:, when trade was active and the volur;.e of prcduction in basic
industc-ies was greater than at any previou.;; tirr.e.
Production reached its peak
for- the year in M:gy, ::md afte:r that tirr.e the grO'ivth in the den.snd for c:r::;dit fo:t'
com;_e:rcial purposes slackened.
The
:rece~sion
in industrial activity during the
surm;er- r;-_onths 1 however, was not Dccompanied by a decline in th::: distrillution of
r.e.rchandise, and in the autumn the deru;md for adciitionJl ·:::redit, l:J:rgely f:ror;,
agricultul':'e, resulted in a fu.,.the:r incre3se in cor:,rr.erci::Jl lo.Jns ot rr.er;,ber bJnks
in leading cities.
'lne slachelning in trade activity during the 13 t ter port of
the ~rear arose rrore f:ror;, the hesitJncy of business conc2rns in pl3cing forw31'd
or:de.rs thJn f:rom
3
lessened der::,Jnd on the part of ultiL:Jte consurnersj
snd
the price declines of the pe.riod were chiefly in rrateri::.:ls used in industry
nthe.,. thJn in consurr.el:'s 1 goods.
The ye3r :;s
3
vvhole
l3:rge industrbl output, prscticslly full er:.ployr..ent,
N3S
3
ch~1r3cte:rized
by s
ou..:;ts.inud consurr.ers'
derr::md fo:r goods, ::md a leval of price:..; core stJble th::m in r:my yeJr since
1915.
,.
.
- lT -
X-_3922
ings of facto:ry worka r..: sr:d l.arbe:r proce0ds f :rorr. the sale of f2nn products fu_rni.:;hed the buying po,·,:;:r to c1bso:rb th::: Y2~Jr 1 s incre.::sed outpl;t of
(;OOOS.
The
income of inuustriJl Ncrkers, as cl;e r:c...sult of a ''Ol':L.C: of employu.ent J_pproxir.:ste-
ly 13 pe:r:- cent l9rge:r th:m in lS22 and of wage advan..::es, g:·e:Jtly exceeded that of
the previous yeJr.
coo
The totJl value of ag:ricul tura1 pro(j-c:.ction was Jbout ~SOO ,OCO,-
gre3te:r th3n in 1922-
This incre:::se in incorr.e
WJS
not Jc::ompani.sd oy
3
cone.sponding :rise in the co.:;t of liv1ng Jnd the .large gro·.rth in s3,;jne;s Jeposit::.
indicates thJt the:re 'v3s a con... identle p;·:'gin of inco;,;e Jtole :3Xfencitures. The
·incr-e3sed buying during the yecn is reflecte-d in the volurr:s of. r:tsil trJde, vmich
W3S
lsrgar for every POnth of 1923 th:m of 1922 so far ;:,s r.cnthly figu.res ZJre
novv 3V2ilJb1e, and ths tot'.ll of dep::;rtn.ent store S8les for ti1e Cen mcntL.:> exceeded
those for the co:r.re3ponding n.onths of l:Jst ye 3 r ·by 13 pe:r cent~
'I'ne dist""ilmtion
mci r,3 rk.e ting of gcod s wos f3cili t3 ted by the in"p:r~ver;::mt of t.r:ms:yortatic;n
fJcili ties Jnd ths vclur:.e of rc~il rood traffic wa::> the lnrgest on reccrd •
In sg.ric-u.lture ths fincl e;;,tirr,ates for the year indicc..te
prcducticn lsrger th3n the ye 3 r before and
3
J
phy~ic_jl ·;olur::e cf
t the prev::Jiline; level of fJ.rrL prices
the tctJl V31ue of the ye 3 r•., c:r:-ops is about 12 per cent :.1bove th:Jt
Fur the:rr:.o:re,
3
1922.
l3rge-r proportion of f3rr,-, incor:e 'HJ::> available for cc.rrrent expenii-
ture since le"s of t .. e income than in preceding years
Ssles cf
E3il
r:unities, incressed uy
L
C>f
t;Js
ussd L
the r'cjJJyment cf
order houses, representing chiefly f>Urchs.ses in rurol cc;~-
31
psr cent in
1923.
'The r e cove r;;r of ag:r i cult-ure, hcv-v :;v er ,
still inccr.;plate, p3rticub:rly in the vr.a:;t ond livestock industries, ::md the
U..'1U3U:Jl bu::>ines::> grov·ilth of th;;; ye3T h3s b,;;,:;n chiefly in the indust r·i.3l sectiun.s ·
It L, the d ecc:md on the p3rt of industri::Jl vvorkers .vhich, ev;:;n with the decre3s2d
fo:r<lign der:,Jnd, hJs result-;;d in
J
better r:.Jrket for ;,t;ricu1tur:3l products.
- 1?. ...
the growth in the ccnstructicn C'f bt:.ilcings .cnrl the;
'l\:nuf'JC'~ura
Tbe uutcmcbile outpt:.t of the ye;r- siE LtGl
'+ ,CGO ,000, ::m increase
tlnn 50 pe:r: cent ever: 1922.
level du.:ring 1922
r'83Ched 3
D;)::JJ:'l.y
of rrt;to:r car-s.
~f
r.o"t'e
T:.e uuildint, ;ctivi1Jy v1bich hc::d bean a.t a high
J.JXi.T:.Qr;, }n
the <<prir,g d' 1923 :md
0h2D
slocken;;:d
Wi tr.
the subsequent decline in c.::nstructi::m ccst.:> .:1ctivity
il::J~;
r:n.:J•.·.·ed [md f
;r
the
:re3pcnd ing rr.::n ths c f 1922,
t'2pidly th::m
CGnst:ru.cti~.n
fc:r bu:3ines;;; and industrial
p 1J<pG::,e~:;
but ccnsti tuted
a larger propo rtivn of the tctJl than in the fcur p:r,~vi.us ya~J:rg.
'Ir.:.e lsrge
vclurr:e of construction n.:•t ..;nly ls·d to incraasad production cf building n.ate :l"i3l s,
but also resulted in lsrge ssles c;f fu:rnitu'~"'e ~)nd cth.:::r hcus::hcl:j gccds snd w0s
an irr:pcrtant L'ct.:or in the demand in rr0ny line'=> of trc-de.
they declin,::d during the l.3ttar p3rt cf the y:oJr, rer ·;ined, :nevc.l:rt:neless, c'~n-
to 0 point bel:.m thDt , f .Nc\'enlJc.::,., 1922, but tLe :vc;'r'Dg>2 f:~r tha ll r;1cnths cf
1923
'.VOS
slig.htly hic:;b.:::r t'.:lan the ~-ve:oge for the yc;:c;r 1922.
!!,ure sit.:Snificant ":.J."ai''.
- 13 -
••
X-3922
prices Gf certain ag.ri.::ultur.Jl pr:jucts ::md tte c:..ntinuad decline in fuel
t:18n at any t in:3 s i -:1ce De: c0r.b2 :r, l '020,
Tt,is rise w:;s due :mti rely tv the
:recessj_on frcrr, th;; unUSU:Jlly hit.h bvelS re.:·ched during the first c1U3rte:r.
c..f advar:ce which cvnld ho:roly oa c.aint:ined
r:.essicn .vhich fcllO'l,Bd
W3S
the business cc;:::u:'lity.
3!1
(;?JV2
The
d.s;;;; t.:.. h.;.:;sit3ncy Jnd the :re-
e.xp.ressicn cf th-2 c·.:..nserv::~tiv:; attitude tJl:en by
Ir, the fJll r:ccnths, :~vwe"i·e:r, nith the: c-::ntinu::mce cf
:Jcti,·e :r::d e :ond an unci i;-; inisl.ed der:.and f.rcm c:.nsur.-..e.rs, tmsiness l.le cJ.r,.e Lcre
c~nfident.
S."broughc..ut 1323,
3
yeJr Nhen ousindSS vc:lur:e, _l:)r·ices, and credit
,vere adjusting therr.s::lves t-., :Le ndw levels, it ;ns priLa.rily the .:1ttitude L-f
tmsir~ess whic...l-J. rr.:ue'"~"t)u b .. th th0 upNa-·d :)nd th::: dc.Jmvard m~ver.:;ents :_,nd ex-
:;rcised 2 stabiliziug
inL~
::r:ce up8n tr::1: ,:; and ir:dustry.
X-3923
FEDEB.dL RESBRVE BO.ARD
Office
o;,
tw Secretary.
I, Walter L. Eddy, Secretary of the Federal
Reserve Boar"', d.o hereby certify t11at tne
to attac1ed. is a true and
co~:1.i.)lete
~)a)er
here-
COJY of the original
certificate issued by the Federal Reserve Board to
granting said bank the rignt to act, v,hen not in contra.vention of ·state or lcco.l l:..c-vi, as trustae, executor
ad.i.1inistrator,
resistl~c.-r
of stocks and bonJ.s, guardbn
of estates, assigl1ee, recsivE.Jr, c·:;r::.:1itteo ,)f estates of
lunatics, or in ;;;.n;:,· _;ther
fic..ucial-~t C'--) .. city
State b<:i!:lks, trust co:D).:mies :)r
::~ther
in which
c..;r "'JGro.ti ons which
come into C;.Jtlpetitivn v,ith n.<::..tiJnal bc.nks are }err:1itted
to act under the laws of the State of
---'-----~-
unto subscribed n;; na.:1e and
c<J.used the sc:J.l of the Federal
Reserve Board to be affixed to
th8se presents in tnc City of
~ashington
aftd District of
ColCL:·,bLl, ti1is________ _
d,;.y of_ _ _ _ _ _ _ _"""'A. D. ,
--~----·----------
.Secretary, Feu.cr.:..l Reserve Board
FEDERAL RESERVE BOARD
WASHINGTON
X-3924
22, 1923.
December
SUBJECT~
Method of Assessing Costs of Examinations of
State Member Banks.
Dear Sir:
One of the Federal Reserve Agents has asked the
Board for permission to deviate from the rules laid down
in its circular letter of August 1, 1923 (X-3797) for ass~ssing state member banks for the costs of examinations.
The bas,is for the Agent •s request is the remoteness of certain ~tate member banks from the Federal Reserve
Bank city, which results in unjustly large assessments made
against those banks) if assessments are made in accordance
with the rules laid down in the circular letter referred to.
~he Board recognizes the inequity of the present
method of assessing state member banks for the cost of examinations and has ruled that the Federal Reserve Banks
need not assess against each State member bank examined the
exact costs of the particular examination, but rray assess
against all of the state member bar~s examined during a
calendar year the expenses of all examinations made during
the calendar year in proportion to the assets or resources
of the banks examined on the dates of the examinations.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL F. R. AGTh'TS
FEDERAL RESERVE BOARD
WASHINGTON
X-Z925
December 22, 1923.
SUBJECT:
ASSESS1!ENT Wh GENERAL EXt'ENSES OF THE FEDERAL RESERVE
BOARD, JANUARY 1 TO JUNE 30, 1924.
·near Sir:
Confirming telegraphic advice of this date there is
enclosed herewith copy of a resolution adopted by the Federal
Reserve ~ard at a meeting held on December 21, 1923, levying
an assessment upon the several Federal reserve banks of an
amount equal to one hundred nine thousandths of one per cent
{.00109} of the total paid in capital stock and surplus of
such banks to defray the estimated general expenses of the
Federal Reserve Board from January 1 to June ~0, 1924.
There is also enclosed a statement showing the basis
upon which the assessment is levied.
Kindly deposit one-half of the amount of your assessment in the General account, Treasurer, u.s., on your books
January 1, 1924, and one-half March 1, 1924, in each instance
issuing a C/D for credit of "Salaries and Expenses, Federal Reserve Board, Special J:<'undu, assessment for general expenses,
and sending duplicate C/D to the Federal Reserve Board.
also
please furnish a statement of your capital and surplus used as
a basis ibr the assessment.
Very truly yours,
Enclosures.
Fiscal .Agent.
(Sent to Chairman of each Federal Reserve Bank}
~
C· ,, ,
"'-·
X-3925-a
RESOLUTION LEVYING ASSESi::IIv'lENT
','-/hereas, under Section 10 of the act approved
December 23 9 1913, and knovm as the Federal Reserve Act,
the Federal Reserve Board is em~owered to levy semiannually upon the Federal reserve banks in pro~ortion to
their capital stQCk and surplus an assessment sufficient
to ~ay its estimated expenses, including the salaries of
its members, assistants, attorneys, ex~erts and employees
for the half-year succeeding the levying of such assessment, together with any deficit carried forward from the
preceding half-year; and
Whereas, it ap.tJears from estimates submitted
and considered that it is necessary that a fund equal to
one hundred nine thousandths of one ~er cent of the total
paid-in capital stock and surplus of the Federal reserve
banks be created for the ~urpose hereinbefore described,
exclusive of the cost of engraving and printing of Federal reserve notes;
Now, therefore,
Be it resolved, That pursuant to the authority
vested in it by law, , the Federal heserve Board hereby
levies an assessment upon the several Federal reserve
banks of an amount equal to one hundred nine thousandths
of one per cent of the total ~aid-in ca~ital and surplus
of such banks as of December 31, 1923, 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 for payments made.
Such assessments
will be collected in two installments of ene-half each;
the first installment to be paid on January 1, 1924, and
the second half on ]:Larch 1, 1924.
41\ ..
X-3925-b
Average monthly encumbrance for veriod
July 1 , 1923, to December 31 ~ 192 Z:
services, • • • • • • • • $ 47,613.75
Non-personal services, • • • • • • 12.y52.85
~ersonal
~
59,966.60
Encumbrance tor December, 1923:
Personal services, • • • • • • • •
Non-personal services, • • • • • .
47,721.74
13,524.50
61,246.24
monthly requirements,
January to June, 1924:
~st~ted
Personal services, ••
Non-personal services,
.. ....
t
•
•
•
•
..
50,000.00
14,750.00
64,750.00
Estimated monthly increase over December,
3,504.00
Total estimated requirements,
January l tb June ZO, 1924:
To cover above estimate, •••
To provide a contingent tQnd, • • •
388,500.00
10,000,00
Estimated unencumbered balance, December 31, 1923,
Amount to be raised by assessment,
Estimated ~aid-in capital and surplus of Federal
Reserve Banks as of December 31, 1923, • • •
An
398,500,00
35,000 100.
363,500.00
332,700,000.00
assessment of one hundred nine thousandths of one per een·t
{ .00109) will produce, • • • • • • • • • • •
~362,643.00
-
iC
FEDERAL
RESERVE
BO.ARD
X-3926
Fo:r.- Relea.;;e in Mor:1in6 Pope:rs
Thursday, December 27, 1923.
The follo·tdng is a summary of g;:;neral business and
fina!!ci:::1l cond i tio~:.s ~h.:roug;1out the sev9ral Feoe:raJ.
i\ese:rve Dist:rjcts, b3.::;ed upon statistics fo:r the
months of H9ve:nber ana December, a>'. contcdned in the
fo.rthcor.;;in 6 issue of the ~ede:ral Reserve :Bulletin.
?:rojuc~ic:l
of b;;;si-; comn;ooi ties 2nd fe.ctory em_tiloyment de-
crea.sed in rovemoe,.-.
Dist:ribution of merch:,mo ise by wr.olesalers and
:retaile:rs wa.s some'Nha.t le:::;s o.·:::tive, and
sl:i.gbt
fu:rthe~
·vvhol~sale
prices showed a.
:recession.
PB.ODUCTION:
Production in b;;wic in:ius !~:ries decr-essed <J.bout 2 per cent
in
Nove:nbe:~.
The C:ecl inE:
VV.3S
dua ci1iefly to reduced production of
iron snd st0el, and sma11a.,.. suga:r
m·~ltir.o.gs.
The Federal Reserve Eoardts
n;;w index o.f f.::;.cto:ry employment a.lso dec;lined, :lue to les.:>ened a.ctiv-
The volunB of em.plCl;y-ment is no•.v 2 psr. cent smaller
establishrr.i3nts.
than in the spring, but
3
per cent larger th::nl
.3.
ye;;lr a.go.
Cont:ra.ct
a:;va.r.ds for new buildings were small-clr in November than in October in
all repO:t"ting
j
istricts except New Yo:rk, bat were 20 pa.r cent la:r.ger
than a. ye ?r' :=:J.go.
er yields o: co:r:r1, oats, to·oa.cco, and cotton tha:::-1 in 1922. and smaller
\
_
_..,
X-3926
- 2 yields of wheat, hay, anc. )Otatoes.
The total
V.JlU\3
o:~'
3-6ricul turol
production at DecJmb.::r' lst _prices v::3s 12 _tJar cent la.rger tt.an in 1922.
Each of the ten principal C'"ops except ·-'rh3'_;_t 'lhoved a.n incre:Jse in
value.
Rail read f;reigh t shipments in November sh0wed a bcut the usual seasonal decline f:rom October, but were in heavier volum:': as compared with _previous ye3~'S.
Wholesale trade
N<Jf:;,
13
per cent less in
Novembe:r than in 0 ctober, vmich i~ n:orc th:m the us11al de crease at this
season, but sales continued to be slightly larger than a year ago.
Sa.les of ha.rdware, dr.ugs, and meat were larg-Jr t!l:m in November, 1322,
while sales of shoes were sr:-::aller.
Octobar in most lines.
Retail bu'=>iness was smaller th::m in
Sales of mail order' h01.1s~s oeclinad mora than
sales of department stores, but Nere 11 per ce:s::t lart;er than a year ago·
PRICES;
The Bureau of Labor Statistics inde.;z or' vvbolesale _;,;rices declined in November to a point 4 per cent lo,·Jer than lost spring ::md
about
3
per cent lower than a yea.r ago.
The chief reductions occurred
in prices of anim3l products, fuel, and house furnishings.
clothing and crops, on the other hand, lncr·eaS•Jd
averaged higher tnan in any month since 1920.
bUd
Prices of
th3 lat-ter group
Durin6 tLa fir'=>t h2lf of
December prices of sheep, bc::ef, sugar, cotton, silk, ana rubt.hF cieclined, while CfL10t3tions on cruoe oil, WL"eot,
3nJ
'dOOl
Nere s.iie:;ntly higher.
ic~:
X-}926
BANK CREDIT:
The total volume of credit extanded by memb8r banks in
leading cities showed but
:it~le
ber and the middle of December.
and
ag:ricultu~"al
change between the middle of !TovemA sea.scnal :reduction in commercial
loans in IY:est dist.T.'icts wa:; a.ccomp&nied by increased
loans on securities, with the .T.'esult that total loans rer.19ined practically constant.
During the same period bor.T.'owings at the Federal reserve
banks wel'e also practically unclwnged.
Holdings of accaptances in-
creased somewhat, partly in connection with the finsncing of cotton
exports.
The inc:reased derr.and for currency for holiday trade was re-
flected in both a. rr.ode,..ate expansion in Fedc3ra1 :re.;:;e,..ve note circulation and
a
:reduction in gold certificates held by tha :reserve banks.
Ra.tes of commercial paper sold in the op:m market continued
to show an easier ten~ency,
35
indicated by ir.creased sales a.t 4~ per
cent, particularly in intarior distx-icts.
yea.r:
The Decen:.bex- issues of one
4i per cent and six n:onths 4 per cent Treasury certificates, co~'
pared with
4-!-
per c~nt on a six months issue sold in September, were
largely over-subscribed.
iC
FEDFRLL
RESERYE
B')}ri.D
X-3927
State~3nt'fcr
tha Press
For Immeiiate Release
Noven_ber 15 to Decen;ber 12.
Sines the be«:innim:: of the cro-p-rro7in:- season the acceptance
marY.et has bec:m ch&-racterize:l by an
provide funds fc:r fL::ancL'l7 the
ties.
incres~se-1
:listributi~'''
sur:l;y of oills .:lra1Nn to
of a ..:.1:ricul tural com:rodi-
During ,.._,"' period endi:n Decemb<Or 12 the supply continued large,
as seascnal dra":inr:r,;;; to finance the 11"2l.r}·et in" and exportation of cotton
were particularly heavy,
Bills were also dra'''n in ccnsiderable volume
against gr,:tir., suP:ar, sill<, coffee, 1\'0cl ,o~n1 to provide dollar exchange.
The de:ran.l for bills h::.s not i:::cre2..sed in recent periods to the same extent as t:1e supply a.r.d
been l&rger
t~'lan
.;;~:;,
a result ::lealers' 2f{PTef!a.te T·ortfclios hctve
in any preceding mc,nth durino: the year.
There was,
honrever, a slir--ht reduction on Deceml:-er 12 from tl;_e volume held on November
14.
The demand. :luring the lattor psrt of Nover:Jber c:_-;_me princi-
pally from b ~nl< s in tte interior "':1er2 fund:; result in:o. from crop returns h::,i accu.Tul2ted,
~~nl
centered in bill.:; ":ith short mc<turities, but
'~':re
in December requests fer lcn::er JT:..:<,turi t ie:.o
the large suy;ly of bi.lls
\'.'h:c~1
.:~·
s have been larger and
their portfclic3 z}lO"'e::l a substanti2.l increa.se.
4
1/8 to
4 1/4
.As a result of
has come u;::n the marlet in the recent
::;eriod.s offer 1.n;:rs to the Feder.::l reserve b;_
and. unchanged at
noted.
bid an:i
4
to
Rates continued firm
4 1/8
offered for 30 to
I
90-day bills, '"hile bills of 120 days ranr:ed from Lf 1/4 to 4 3/8 bid
and 4 1/8 to 4 1/4 offered.
These are practically t~;_e same levels
t:.1at have been maintained throughout the year.
12/27/23
FEDERAL RESERVE BOARD
WASHINGTON
X-~3928
Dece~b€r
SUBJECT:
Corrections.in
Inter~District
28,
Time Schedule.
Dear Sir:
By agreement between the Federal Reserve Bank of
Chicago and the Federal Reserve Bank of Minneapolis. the
following changes should be made in the inter-district time
schedule:
Chicago to Minneapolis
1 day.
Minneapolis to Chicago - 1 day
Very truly yours,
Tialter L. Eddy,
Secretary.
TO GOVERNORS OF ALL F. R. BANKS
1923.
FEDERAL RESERVE BOARD
WASHINGTON
X-3930
Dacember 23, 1923.
SUBJECT:
National Bank Charters.
Dear Sir!
lt is the practice of the Federal Reserve
Agents to submit in some detail their views and recommendations in connection with applications filed with
the Comptroller of the Currency to organize national
bariYs and applications of national banks for permission
to reduce capital stock.
A ~ajority of the Federal Reserve Agents co~
municate their views and recommendations direct to the
Board for transmission to the Comptroller of the Currency. It is requested that hereafter all Federal Re·
serve Agents advise the Comptroller of the Currency
direct and send to the Board copies of their communications to him.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL BE SERVE AGENTS.
·-
X-3931
ADMINISTP..ATION OF CREDIT
UNDER
THE FEDERAL :RESERVE SYSTEM
OF
TEE UNITED STATES
Present Criticisms.
(By William A. Shaw,titt. D.)
(EDITOR'S NOTE -
"In the following article our contributor
discnsses the power of control which the
Federal Reserve System possesses by virtue
of its federal nature, and his conclusion
is that we ba~e everything to gain by imitating
the system.
Certain other aspects of the system which
make for inflation and danger we do not need
to fear.")
From: THE FINANCIAL N'El'TS
LO:NDON
November
27, 1923.
X-3931
·, . • .
lc.··.i:.,,j
,~
(By WM. A. SHAW., Litt. D.)
-
.:.
"For the second tirne in its brief existence the Federal Reserve
system is encou.cltering·heated·criticism and denunciation. The charges
now raised are a repl ic.a of those ·which were levelled against it in 192J..
In the rr.ain, these were twofold, firstly, that in breaking the boom Of
· 1920 the Federal Reserve :3oard had acted much too late, and that when it
f~na1ly did act its ~9asures were so abrupt and savage that for the
moment it srrashed tbe industrial w.achine to pieces.
The facts are still within the memory of us all. The level of wholesale prices, which in 1919 had been 206 in the United States, rose to 226
in 1920 and fell to 147 in 1921. In England the movement was completely
parallei, for within the same period the price level was from 205 to 251,
and then fell to 155. In 1920 the bankruptcies in the States numbered
·7i6 · ... per month. In 1921 they numbered 1. 66S per month, and the average
since has increased rather than diminished. The figures for Great Britain
are even more pronouncad and striking. In 1920 the bankruptcies with us
were 137 per month. From and inc.luding 1921, they have averaged over 400
per ~onth. Very seldom have economists bad so plain a lesson in the
sequei1ce of cause a.nd effect •
.,"""
Me1·cifully· the lt.:sson has been understood, and the banker statesmn
bbth in New York R~d London now realises that if the machinery of credit
control must operate at all it ml1St begi~ its work imperceptibly during
the upward curve· of a boomt a:-1d must follow that upward curV'e with imperceptibly increasing grip until the curve bends down·again, and as the
curve falls so that grip must be relaxed just as gradually and imperceptibly
as before until equilibrium is again reached. Throughout this cycle of
operations the one guide or finger-post to the banker is the index of do- ·
mestic prices.
It is rather disconcerting to find that the present wave of recrimination against the Federal Reserve system has been raised by an almost
perfect instance of such regulative action. The United States recove·red
from the slump of 1921 with amazing rapidity. By the middle of 1922 she was
again in the saddle and from then onwards to F.ebruary of the present year
there was a progressiv~ movement of indust~ial activity and rising prices.By
February the capital flotations had surpassed all records, and the figures
of Stock Exchange loans, approached the highest previous figures. Everything
portended another boom, s~~h as, if realised, ~ould inevitably have been
fo1lmved by another violent slump. But in February last the banker took
hold of the situation, that is, before the development had become so strong
as to be uncontrollable. By the end of February, or the first week in
March, all the twelve Federal Reserve Banks had fallen into line, and had
-2-
increased their re-discou_~t rate from 4 to 4~1/2 per cent. It seems
almost incredible that so slight an increase should have ceen effectual.
Yet so it proved. The incipient boom was scotched, and the scotching was
effected without any violent slur::1p, without ar:y dislocat 5.on of the industrial machine. By the end of April the position had become normalised,
and prices were back at the level of December, 1922.
Q_I;S~'INACY.
Theoretically, the moment that normal had been reached the grip of
the Federal Reserve rate should nave been loosened and the steed should
have been allowed to run with slackened rein. But this was not done. The
enhanced discount rate of Februa~r was rraintained. It is still unaltered
at the moment of writing. The inference, therefore, seems clear that the
subsequent downward movement is attributable to this obstinacy. The reaction since May of the present year has been strongly felt, industrial
activity has slackened off and wholesale prices have fallen from 156 to
150. The situation certainly appears now to call for converse action at
the hands of the Federal Reserve Board, and it is not without significance
that an important session of officers of the Federal Reserve BariYs was
called at Washington for November, 12th instant, to consider the question
of the Federal Reserve discount rates. ~~e decision of the meeting bas so
far not been divulged. But quite plainly the ideal for any governing
banking authority to aim at (whether it be the Federal Reserve Board or
the Bank of England) is to adjust banking credits to the rise and fall of
business (as indicated by prices), and thereby to diminish the undulations
of the business cycle. The moment the wiadom of this simple rule is
grasped and the technique of its manipulation is acquired the battle cries
of inflation and deflation will become empty words.
A RE-ECHO
The second ground on whiCh the Federal Reserve system is now being
assailed is quite different. It is a re-ecl10 of the violent charges which
were brought against the system by John Skelton williams, late Comptroller
of Currency. He attacked it from the point of view of corruption, conceiving that it concentrated credits at the 'burning spots -- the centres
of speculation, mainly, of course, New York, and tmt through dishonest
manipulations the Stock Exchange gamblers in New York were deluged with
credit while the agricultural and industrial industries in the provinces
were being starved of credit. He had the courage of his conviction and
hit out with both hands, and he has met an undeserved reward. His name is
possibly one of the most unpopular in the United States today. But though
the controversy has shifted from this more personal ground, the principle
involved remains essentially the same. The Federal Reserve system does
concentrate credit at the burning spots. Its mechanism for p~ing credit
back to the extremities is not nearly so efficient as its meChanism for
concentrating credits from the extremities, and the best informed opinion
in the States is beginning to realise the danger. In the opinion of the
"Chronicle" "it would ue a distinct advantage if the Reserve Baru;s did not
control so much of the reserv·es of the country, for their inflationary
1.. . ,. .,
~
X-3931
'·~.·-~,.I
..... J
tendency would then be lessened." Underlying the controversy which is
at present agitating the banking world in the United States, the controversy, namely, as to branch banking, there subs::i.sts this fundamental
problem and discussion as to the afuninistration of credit by the Federal
Reserve Board and the J!'edera.l Reserve banks~ The extraordinary feature
of this controversy is th:1t the .American banlrers themselves do not seem
to realise from what source the c.aYlger comes. 'Ilhe real source of' danger
lies in the re-discount provi12. ions of the Federal Reserve system its.elf.
Those provisions permit, or rather prescribe for, an increase of the
monetary circulation of the country pari passu with an increase in the ite~
of discounted bills. The idea, of course, is to obtain an elastic cur··
rency. And it is well known that the late Sir Edward Holden pinned his
faith to this form of an elastic currency.
The point is worthy of most careful examination, for it is exactly
in this article that our English system parts company with the Federal
Reserve system, and it is exactly in this article that the Federal Reserve
system is fraught with gravest danger.
It is admitted on all hands that during periods of boom all forms of
circulating media increase in amount or bulk. The volume of cheques goes
up, the volume of bills of exchange goes up, the circulating medium (handto-hand currency) goes up or increases the velocity of its circulation.
Equally, it is admitted on all hands that the increase of cheques and bills
is absolutely and entirely automatic -- as expressive of the forms of interchange which are liquidated by such media. Ergo, the increase of handto-hand currency ought to be in the srune way wholly automatic as expressive
of the needs of small change or hand-to-hand interchange transactions.
Under our British system we have attained perfection. In the one
sphere cheques and bills expand (or contract) auto~tically, and Treasury
notes expand (or contract) equally automatically in the other domain. Each
being automatic does not affect the other, but reacts only to its own
governing conditions.
DuPLICATION
But in America the system is ~ite different. They have no prov1s1ons
for automatic rise or fall of mrrency, and therefore, being led astray
by the search for ~ elastic currency, they prescri~ for the expansion of
the currency on the basis of the expansion of bills. By this means they
are duplicating the exponent of inflation. If we had the equivalent of
this in the.British system we should have, in addition to our normal
Treas~ note circulation, an issue of t700,000,000 of Treasury notes reposing on the basis of t700,000,000 of Treasury Bills. 1Uld if we had that,
who could measure the violent inflation we Should be subject to? The mistake of the American system is that it does not visualise the fact that
automatically increasing bills and cheques are the completest expression
of an elastic currency, and that, to complete the mechanism, all that is
necessary is an arrangement for a concurrent, but ~ite independent, automatic increase in hand-to-hand currenc,y, the increase in each case operating
-4-
X-3931
under the influence of its own factors or conditions. These factors are
enormously different in the case of bills and in the case of hand-to-hand
currency. Bills and cheques increase of necessity in direct ratio to the
increase of business, wh9reas a comparatively slight increase of hand-to- .
hand currency is capable of carrying an iiTmer.sely increased volume of handf
to-hand interchange. In the case of the British Tx·easury note, which is
completely automatic, the flnctuation between 1917 (t212,000,000) and
maximum (t.367,000,0CO in 1920) and minimum since (t279,000,000 in February,
1923) is under tl50,000,000, or about 40 per cent. In the case of the
United States the figures for the same period are $1,928,000,000 for 1917,
$4,264,000,000 for 1920 maximum, and $2,905,000,000 for July last minimum.
The variation here is over 200 per cent.
IMITATION
_
This item alone of false and unscientific increase of hand-to-hand currency is capable of explaining the enormous inflationary power of the Federal
Reserve system, quite apart from the parallel phenomenon of the concentration
of credit at the burning spots (speculation centres like New York), and the
corresponding starving of the extremities in matter of credit.
It is easy to strike a balance as between those two opposing phases
of the Federal Reserve system. The power of control which the system
possesses by virtue of its federal nature is in itself wholly beneficial,
and certainly will be so in effect from the moment the system is purged of
all connection with American politics. And from that aspect of it we have
everything to gain by imitating the system, viz. by federalising our own
banking world on the same or similar lines. The other aspects ,of the system
which make for inflation and danger we do not need to fear. Under our
branch bank system there is no denuding of the pr0'1inces for the sake of
London. Our system is in close organic touch with the needs of industry
to the remotest parts of the kingdom, and at the sa~e time our Treasury note
system is a safeguard against inflation. All the vices of the American
system are per se excluded from our system, and all that we need to do in
order to achieve a perfect credit control mechanism is to graft on to our
system the federalised form or principle of the Arr.erican system. 1 n
I
I
~
I
I
FEDERAL RESERVE BOARD
WASHINGTON
1014
ADDRESS OI'PICIAL. CORRESPONDENCE TO
THE I'"EDIERAL. RESERVE BOARD
l
July 7, 1923.
St .. 3595.
SUBJECT:
Forrr1 38 - Classification of
Discounted and Purchased Bills.
Dear Sir:
One of the Federal reserve banks has requested
additional copies of Fozm
38 - Classification of discounted
and purchased bills - for use during the remainder of the
present year.
As it will be necessary to have a new supply
of the forrr1 printed, it will be Eq;>pt'eciated if you Will
kindly advise the Board 'Whether your bank has a sufficient
stock on hand to cover its requirements for the remainder
of the present year, and if not, how many additional copies
will be needed.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
DRAFr OF LETTER TO .ALL GOVERNORS EXCEPT GO.VERNOR .AT SAN FRANCISCO
I
,"
1015
\
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T11E-J;'EDERAL RESERVE BOARD
July 26, 1923
State Banking Department,
Gentlemen:
Your courtes1 will be greatly appreciated if you will furnish
the Federal Rese!"'ve Board, for use of' its Statistical Office, as soon
as available, with two copies of abstract of reports of condition of
State banks and Trust companies in your State on June 30, or nearest
date, in continuation of similar abstracts of condition of these banks
on or about April 3, 1923.
Will it be possible for your office to eliminate, or at leastsegregate, the figures for the mutual savings banks, in case the state
totals, as shown in the abstract, are inclusive of figures for this class
of ba.tlks 7 In case the abstract fails to show the numbar of state banks
and trust companies reporting, wiil you alsb be. good enoUgh to state
this number in yr:ru.r letter of transmittal? May we also ask you to segregate the data by Federal reserve districts, in case your State falls
within two districts? ~is will enable us to compile for the first time
the report of condition of all banks in the Vnited States by Federal reserve districts.
We are. very
·states and geographic
est practicable date,
vance or proof copies
until final revision.
desirous of publishing comparative figures by
sections for the country as a whole at the earliand would ask you, therefore, to favor ue with adof the tables and not to defer mailing the data
796 to
statement of the abstracts of reports -of condition on April 3, 1923 of State banks and Trust companies in forty-four
states and the District of Columbia, to which we desire to call your attention. We shall be gald to send you additional copies of the July Bulletin as long as our supply of that number lasts.
·
799)
The July number of the Federal Reserve Bulletin (pages
cont~ins
a
sumrnar~
r
Enclosed please find franked and self-addressed envelope, re-.
quiring no post~, for the transndssion of th~ data,
Very truly yours,
Walter L. Eddy,
Assis_tant Secretary •
.1\'lel osure.
,
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FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OI'I"ICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
September 4, 1923.
St. 3676.
SUJ3JECT:
Member Banks Borrowing in
Exce.ss of Capital and Surplus.
Dear Sir:
In order that the Board may follow more closely the
trend of borrowings in ~he several Federal reserve districts
by those member banks which are more or less continuously borrowing excess amounts from the Federal reserve banks, it will
be appreciated if you will fu~nish the Board with montply reports hereafter on form St. 3677, as per copy attached hereto.
It will be noted that this form provides for reporting the
total amount of paper held under discount on the last day of
the report month for each member bank whose borrowings from
the Federal reserve barik were continuously in excess of its
combined capital and surplus during the month, the amount of
such paper secured by U. S. Government obligations, and the
capital and surplus of the member bank.
It is requested that the first repo:rt be rendered
as of August 31, 1923 1 and that on this first report only
you show in the last column th~ dats since which each menibet'
bank has been borrowing continuously in excess 6f its da.pl•
tal and surplus.
One hundred copies of the form are being forwarded
to you. toda;y under separate cover.
Very truly yours,
Walter L. Eddy,
Executive Secretary.
Enclosure.
LETTER
TO GOVERNOR OF EACH FEDERAL BESERVE BANK.
,
F •.-,R. Board fo'-'ll St. 3677
Seftember
..
192~
1017
.
PAPER HELD UNDER DISCOUNT ON THE LAST DAY OF TEE REPORT MONTH FOR MEMBER
B.ANKS WHOSE BORROVvlNGS FROM THE FEDERAL RESERVE BANK HAVE BEEN CCNTINU- .
OUSLY IN EXCESS OF THEIR COlVlBINED CAPITAL AND SURPLUS DURING THE MONTH OF
~----------~i92 ___
Location
Federal Reserve Bank of - - - - -
Borrowings at end
of month
Name of eamber bank Secured by j
Total
U.S. Govt.
•
obligations
I
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,I
Capital
and
Surplus
--
1018
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.FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OP'P'ICIAL CORRESPONDENCE TO
September 7, 1923.
St. )681.
THE FEDERAL RESERVE BOARD
SUBJECT:
Condition reports 6f State bank and
Trust company members. form 105.
Dear Sir:
There are being forwarded to yoU. todav un(\er separate cover
copies of form 105 ~evised as of May 22• 1923. Please mail three
copies of the form to eaoh State bank and trust company member in your
district for its own use and, in addition, three copies for the use
of each of. its branches (if any) 1ocated outside of the city in which
the head office is located, with instructions to hold the blank forms
pending receipt of a call for condition reports.
In sending out the forms please advise each State bank and Trust
compaD¥ member that its next condition report on form 105 should, as
in the past, represent the condition of the parent bank and all its
dQIIlestic branches ccmbined, but that, in addition, a report should be
submitted for each of its branches which is located outside of the
city in which the parent bank is located. Upon receipt of notice
from the Board of the call for condition reports, kindly notify the
banks thereof by mail if they are located with two days' time from
the Federal reserve bank, or b,y telegram if not within two days• time
by mail, and request them to fill out the reports and mail the~ to
you promptly - in no case later than 10 days after receipt of ·the
calL
In order that the compilation of the 3oard 1 s abstract showitJg
the condition of all state bank and trust company members combined
as of the date of the next call may not be unduly delayed, it is requested that the reports be forwarded to the Board as soon as practicable after they are received by the Federal reserve bank. If it
is necessary to" .comnunicate with a bank regarding apparent errors
in its report, a note to that effect should be made on the report
itself before it is mailed to the Board, and the Board shbuld be
advised of the necessary corrections when the desired information
is redeived from the member bank.
Kindly acknowledge receipt.
LETTER TO
Yours very truly,
Walter L. Eddy,
Executive Secretary.
EACH FEDERAL
RESERVE AGENT.
1019
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
September 15, 1923.
St. 3696
SU3JECT:
Abstract of donditicn Reports ·of
State Bank and Trust Company Mem~ers
and of all Member banks as of
June 30, 1923.
Dear Sir:
'We are forwarding to you undar separate cover
copies of the 3oard 1 s Aostract No. 21 showing
the condition of State :Bank and Trust Company mambers
and of all member banks as at close of business an June
30, 1923.
Consolidated figures for all member banks,
both National and State, are shown on pages 1 and 12.
Please forward one copy of the abstract to
each State Bank and Trust Compaqy member in your district
that has expressed a desire to receive coples of
abstracts as issued.
Very truly yours,
E.L~ Smead~ Chief,
Divisiop of Bank Operations.
LETTER TO EACH FEDERAL RESERVE
AG~TT
1020
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL <;:ORRESPONDENCE TO
October 18,
St. 3750.
THEFIEDERALRESERvEBoARD
SUBJECT:
1923.
Reports of Condition of State
Banks and Trust Companies·
Gentlemen:
Your courtesy will be greatly appreciated if you will
furnish the Federal Reserve Board, as soon as available, with t~
copies of the abstract of reports of condition of State banks and
Trust companies in your State on Sep terr,ber 14, or the nearest date
thereto since June 30 for whic~h you have rec.ei ved reports.
If c~nvenient to your office, we would like to have
separate figures for mutual savin.gs banks and for private banks,
providing there are any such ban~s operating in your state. In
case the abstract fails to show the nurr~ar of state banks and
trust companies reporting, will you also be good enough to state
this nurrJber in your letter of transrnittal 1 IVlay we also ask you
to segregate the data by Federal reserve districts, in case your
state falls vvithin two distt'iots, as the value of these data to the
Board and for purposes of public:ation Will be greatly enhanced if
they can be tabulated·by Federal reserve districts.
In order that figures for the c:ountry as a whole may be
available at the earliest practicable date, it will be appreciated
if you will favor us with advance or proof copies of the tables.
We shall, of c:ourse, be glad to make changes or l~rrec:tions in your
state figures at any time before final proof is sent to the printer.
The October number of the Federal Reserve Bulletin (copy
of whiC\h is enclosed) contains, on pages 1107 to 1110, a 'surr.mary
statement of t}'1e abstrac:ts of reports of l~ondi tion on or about June
1923, of State banks and Trust coffipanies in the 4s states and the
District of Columbia, to VlhiC\h your attention is invited.
30,
There is also enclosed a franked and self-addr·essed envelope,
requiring no postage, for use in transmitting the data requested.
Very truly yours,
Walter L. Eddy,
Secretary.
State Banking Departrr,ent .
En~losures.
••
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FEDERAL RESERVE BOARD
1021
WASHINGTON
ADDRESS OPPICIAL CORRESPONDENCE TO
THE P'aDIERAL IU:SitRvE laOARD
October 29, 1923.
St. 3766
Str.WECTt
Reserve reqUirements of member and
nomnember state banks.
Dear Sir:
With reference to the hearings.J::>eihg conducted by the Joint Congressional Corrmittee to determine the reasons Why eligible state banl~s fail
to·join the Federal Reserve System, the Board is desirous of obtaining as
accurate inforrr1ation as it is practicable to collect showing Whether the
a.--:Dunt of reserve which the several classes of banks in each state would be
required to carry with the Federal reserve banks, if they became members of
the System, is larger or smaller than the reserves which they are now re~uired to carry under state laws.
It will be appreciated, therefore, if you will furnish the Board by
November 15, if practicable, with a statement showing the information outlined below for each class of banks 1 as defined by State law, in the following
states in your district:
In all cases where a state is loc.a.ted in two Federal reserve districts, the
Federal Reserve Agent in whose district the capital of the state is located
is being requested to furnish this information.
(l) Method of deter.mining deposit liabilities upon which reserves are
computed. This statement should ehow ea~~h class of deposit liabilities
against whic-h reserves are required to be carried, and each class of deductj.ons, if any, that may be ri1ade frotn g-oss deposits in the c:alculation of
.. ·net deposit liabilities on which reserves are con;puted. If possible, two
copies of the blartk forms used by each class of banks in corr,puting their deposit liabilities should be enciosed with your reply.
(2) A detailed ca1culation of the <leposit Uabili ty for a typical bank,
or group of banks, in each class and for ea.~h state 1 showing the total amount
and per c:ent of reserves required, the amount and per cent required to be.
carried in vault, the amount and per c.ent that may be held on deposit with
banks designated as approved reserve agents, arid the amount, per cent and
c~raeter of other funds or securities, if any, which the state law authorizes
to be counted a.s a part of the l_egally reqW.red reserve.
In addition to the legally required amounts, the statement should
Show for the banks selected the actual au~unts of cash carried in vault, the
amounts helq on deposit with approved reserve agents and with other banks,
..
St. 3766
...
1022
2 -
and the amounts of reserve carried in other authorized ways. Care
should be taken to select as a.xamples banKs that are typical of their
class in the matter of reserves ~~rried. and in balances with banks other
than approved reserve agents. In case staterr1ents of typical non-merr~er
banks are not a.vailable it will be satisfactory for purposes of this report to use condition repol·ts sUbmitted by some of your pre~ent n1embers
at the time they n~a.de application for membership.
(3) A statement showing the net deposit liability and the amount of
reserve that these typical ban~s vvould be required to carry with the Federal reserve banks in case they became merr:bers of the Fed.eral Reserve System.
A comparison of the required reserve, as sho\m under questions 2 and 3,
should. show wl:urt!1er or net loss of interest on the reserve maintained with
the Federa.l reserve baru::s would be offset by interest on reserve funds released as a result of tbe banK~ JOining the system.
{4) To what extent, if any, have the present state bank members in the
various states in your district, upon ber.orning members of the systerr1, been
able to reduce the amount which as non-n.a:nber banks they had carried wi. th
city correspondents? In general has this amount been sufficient to .offset
the an-.ount that they are now required to carry with the reserve bank?
{5) To \'\hat extent, if any, have the present state bank members been
able, sinca JOilung the system, to reduce their cash in vault?
Very truly yours,
Walter L. Eddy,
Sel~retary.
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LETTER '10 ALL FEDE:;:-diL IESEINE AGENTS.
i023
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FEDERAL RESERVE BOARD
October 30, 1923.
St. 3769 ·
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THEFEDERALRESERvE&oAR~BJECT: Debits to Individual Accounts
Dear Sir:
Enclosed herewith is a copy of a letter sent out in Se:Rters;.ber
by the Federal Res<:irve krent at Mimeapolis, in which he calls attention to
the advisability of having a cOpy of t:1e insttuctions relative to amounts
to be included in debits to individual accounts, in the hands of the persons
in the d i fferen t banks who are preparing the weelr..ly reports of d.e bits to
individual accounts, and to the importance of havin.:; the methods then in
use checked against the instructions issued by the Board.
Responses to
the letter indicated tnat all centers were aprarently reporting correctly
with the exception of Grand Forks, N. D., which had been inc~uding debits
to bank account.
In view of the numerous cl\Qng,es in bank personnel, it may be advisable for you to get out a similar letter to the managers of clearing
houses in reporting centers in your district or to other persons or organizations who collect the weekly fis-ures of debits to individual accounts,
\
in order that errors, if any, in the methOd used in compiling the figures
may be detected.
In case you send cut a letter of this chal"a.cter, and it
should develop that any of the reporting centers have been furnishing incorrect figures, it will be appreciated if you will bring the matter to the
Board's attention, in order that t~e publicaticn of figures for yrior dates
which are not comparable with current figures may be avoided~
http://fraser.stlouisfed.org/
LETTER
TOLouis
ALL
Federal Reserve
Bank of St.
Very truly yours,
Walter L. Eddy,
Secretary.
FEDERAL RESERVE AGENTS EXCEPT MINNEAPOLIS
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1024
FEDERAL
RESERVE
BANK
OF MINNEAPOLIS
September
17, 1923
Dear Sir:
During a period of summer vacations, many changes
take place in the assignment of duties in diffarent banks and the object of this latter is to assure ourselves that the individual person
upon whom the clerical labor falls of compiling your weekly wire to us
of individual de:Jits has at his comnand a detailed descripticn of how
these figures are to be constructed. In fact, I believe it would be
advisable to have a copy of this shown to and understood by parties
in the different barnes who are reporting these figures to the clearing house manager for transmission to us.
It is important that the method of compiling these
figures be c;_1ecked at this time as this has not been done for more
than a year and a half. A similar letter is beinP sent to all clearing houses in this district. For your convenience in supplying me~
bers of your clearing house, we are enclosing what we trust will be
found to be a sufficient :~ber of copies of the instructions which
we shall be glad to have you forward to your rnemvers with a recommendation that their methods of compiling these figures be checked
at this time.
'\
Sincerely yours
J obn H. Rich.
Chairman and Federal Reserve
A~ent.
1025
Office of Federal Reserre Agent
Minneapolis, Minri.
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REPORTS OF TOTAL DEBITS TO INDIVIDUAL ACCOUNT
V'HAT
TO INCLUDE:
Debits to accounts of indhriduals, firms, and corporations
other tr..an banks;
Debits to accounts of tl1e United States Government, including
War Loan deposit accounts;
Debits to savings accounts;
Payments from trust accounts and certificates of deposits
paid.
MUST NOT INCWDE:
Debits in settlement of clearing house balances
Payments of cashiers checkS
Charges to expense and miscellaneous accounts
Correc+ ions and similar charges
Debits to bank accounts .
September,
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1923
3
1026
FEDERAL RESERVE BOARD
WASHINGTON
St. 3506
November 22 1 1923.
I
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SUBJECT:
Closing of Books on December 31 1 1923•
Dear Sir:
In order that the Board may have ample time to pass upon all
charges which your bank proposes to make against current earnings at
closing of books on December 31, 1923, for depreciation allowances,
reserves to take care of probable losses, and other extraordinary purposes, it is requested that the dividend resolution of your Board of·
Directors be mailed in time to reach the Board's offices not later t~an
December 15, 1923.
The dividend resolution.should be accompanied with statements
showing the following inforrration:
1.
Estimated gross earnings, current expenses, proposed
charges to current net earnings, and esti~ated net earnings
available for surplus and franchise tax. for the calendar
year 1923.
2.
Unpaid indebtedness of failed or suspended banks to Federal
reserve bank, giving the names of the banks, indebtedness
of each, character of security, if any, and.estizr.atea
losses.
3.
lndebtedness to Federal reserve bank of member banks which
are considered to be in an unsafe condition, giving the
names of the banks, indebtedness of each, character of
security, if any, and probable losses.
4.
A 9tatement in a form similar to that indicated below,
•
Showing separately for each property,
(a) the cost, estimated market value, reserves now carried,
and net book value of land owned;
(b) the cost to datet estimated replacement cost, of remodeled buildings or of new buildings, either completed
or in course of construction, reserves now carrie.d,
and net book value.
tpj,"J)
Cost
Estimated market value
Reserves now carried
Book value (net)
$_________________
.
J.027
..,
-2TO'l'AL
BANKING HOUSE
St. 3508
BUILDINGS
INCL1ID I:FG
VAUL'.rS
Cost to date
$______~A~'--.
Estimate,i replacement cost
, Reserves now carried
Book value (net)
FIXED MACHINERY
Am EQUIPMENT
$______________
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 against current net earnings, and
for closing of books on December 31.
1. Bank pr~~i~~~· (a) In passing upon requests to set up de~
preciation reserves or to charge off depreciation allowances, the Board
will in general permit a charge against current net earnings of not exceeding 2 per cent of the estiwated replacement cost of bank buildings~
including vaults but excluding fixed rrachinery and equipment. In case,
~owever, the estimated replacement cost is considerably below the net book
value, the Beard will consider requests from Federal reserve banks for
permission to write off a depreciation charge in excess of 2 per cent.
(b) The esti~ated replacement cost, less residual value, of fixed
machinery and equipment, such as boilers, engines, dynamos, motors, pOwer
pumps, elevators, heating, plumbing, lighting and ventilating systems,
pneumatic tubes, refrigeration plants, automatic fire sprinkler equipment,
and vacuum cleaners, should be determined, and a reserve set aside each
year out of current net earnings to cover replacements. Annual additions
to this reserve should be based on the estimated life of the wachinery
and equipment, with a view to the ultimate replacement of the machinery
and equipment, but in no case should the annual charge exceed 10 per cent
of the cost thereof.
(c) No charges against current net earnings will be authorized
by the Federal Reserve Board to cover depreciation on land where the estimated ~arket value of the land is equal to or in excess of its net book
value.
(d) The estimate of the market value of land and of the replacement cost of buildings either completed or in course of construction and
of fixed machinery and equipment, should be obtained from the best available authorities. A copy of the estirra.tes thus obtained should be enclosed with your request for authorityto charge current net earnings with
depreciation on bank premises unless similar estimates formerly submitted
to the Federal Reserve Board are still applicable, in which event reference
thereto will be sufficient. The estimated replac~ment cost of buildings
including vaults, but excluding fixed machinery and equiproont, may be
arrived at by determining the mean of two amounts, namely; (1) the total
actual cost of const~~ction, and (2) the estimated cost of construction
based on the lowest prices that have existed during the last fifteen years.
(e) nbere properties have been purchased with the intention of
razing existing buildings and of erecting new banking ~arters the Board
~
1028
.. ..
St. 3808.
-3-
will consider requests for permission to deduct from current net earnings
an ~ount equal to the difference between the cost of the property and
the market ~alue of the building site exClusive of improvements.
(2) Furniture and equipment. The balance remaining in this
account on December 31 snould be charged to Profit and Loss.
(3) Depreciation on United States securities. Full prov1s1on
should be rr.ade for depreciation (based on market value) on United States
securities before any amount is transferred to surplus account. In case
the present reserve for depreciation is in excess of the actual net
depreciation on total hoJ..di:r)gs of United States securities as determined
by approxirrAte market quotations as of December 28, which the Board will
telegraph to your bank on the morning of December 29, such excess should
be credited to Profit and Loss.
(4) Su~us and franChise taxes. After all current expenses,
d-ividendst depreciation allowances and other extraordinary charge-offs
authorized by the Federal Reserve Board have been provided for out of
earnings, the rerraining net earnings shall be distributed as follows:
(a) Transfer to surplus account all available net
earnings providing the total surplus will not as a result exceed the bank's subscribe~ capital, in which case only such
a~tnt should be transferred as is necessary to increase the
surplus account to an amount equal to the bank's subscribed
capital.
(b) Of the balance of net earnings, if any, 10 per cent
should be transferred to surplus account, and 90 per cent
paid to the United States Governrrent as a franchise tax.
Instructions as to the time and method of payment of the
franchise tax will as usual be issued at a later date by the Treasury
Department.
Very truly yours 7
\'Talter L. Eddy,
Secretary.
TO CHH RMEN OF P. LL FEDERAL RESERVE BANKS
r-
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1029
FEDERAL RESERVE BOARD
WASHINGTON
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November 24, 1923.
St. 3803 ~
SUBJECT:
Revision of Federal Reserve
3ank Balance Sheet Form 34
for use during 1924.
Dear Sir:
There is enclosed herewith an unruled proof copy of th8 daily balance sheet Form 34 to be used by the Federal reserve banks during 1924. The
year's supply of the form requested in your bank's recent telegram will be
mailed to you as soon as received from the printer, which should be about the
middle of Decern-Jer. From an examination of the enclosed proof copy it will
be noted that only a few minor changes have been made in the form now in use,
all of which are self-explanatory.
At the present time some of the Federal reserve banks are estimating each day, on the basis of experience, the amount of each of the several
classes of money included in their holdings of unn.ssorted currency, and distributing such estimated amounts against the corres~onding items on Form 34.
The remaining banks, on the other hand, are making this distribution of unassorted currency only on the last day of each month. On three occasions
during 1923 the last day of the month coincided with the weekly statement
day, Wednesday, and on each of these occasions the amounts of Federal reserve
notes in circulation and of non-reserve cash on hand as shown by the weekly
press statements were from $20,000,000 to $30,000,000 less than for the preceding and following weeks. This decrease in Federal reserve note circulation was, of course, due to bookkeeping methods and not to any actual change
in the amount of notes in circulation. To avoid occurrences of this kind in
the future the Board would prefer that beginning with 1924 all Federal reserve banks estimate each day, on the basis of an experience test, the amount
of each of the various classes of money comprising unassorted currency on
hand, and include such est im:::.ted. amount ~ainst the pro-per caption on the
balance sheet.
In case your bank now reports unassorted currency on Form 34 it
will be appreciated. i f you will advise the Board whether or not it will be
practicable for you to follow the practice outlined above beginning with
Jall\1ary 1, 1924.
Very truly yours,
Walter L. Eddy,
Secretary.· -
Enclosure.
LETTER TO GOVEIDJORS OF ALL FEDERAL RESERVE B.:U'llCS.
1030
•
FEDERAL RESERVE BOARD
WASHINGTON
November 26, 1923.
St. 3813.
SUBJECT:
~ear
Abstract of Condition Reports of
State Bank and Trust Company Members
and of all Member banks as of
September 14, 1923.
Sir:
We are forwarding to you under separate cover
copies of the Board's Abstra~t No. 22 s~owing
the c.ondi tion of State Bank and Trust Company members
and of all member banks as at close of business on
September 14, 1923.
Consolidated f~gures for all mem-
ber banks, both National and State, are shown on pages
1 and 12.
Please forward one copy of the abstract to
each State Bank and Truat Company member in your district that has expressed a dasire to receive copies
of abstracts as issued.
(
Very truly yours,
E. L. Smead , Chief 1
Division of Bank Operations.
LETTER TO EACH FEDEii.AL flESEISE AGENI'
1031
FEDERAL RESERVE BOARD
WASHINGTON
November 26, 1923.
St. 3814.
i
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SUJ3JEGT:
•
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Preparation of Fedaral Rasarve
.Agents r Annual Reports.
Doar Sir:
Follovving th0 ptactiC'.e adopted with ref eren0e to the 1922
annual reports, no part of th~ text of F~deral reserve ag8nts 1 annual
Nports vvill be includad in the :Soard' a raport for the year 1923• Part
II of the Board's report will contain tables for: each Federal reserve
district simih.r to tho sa appearing
last yeat 1 s report and, in addition, a table shoWing the volume of \'JOrk. handled in the principal departments of the bank, ·as p.;:r form <::~rtclosed hetemth. All of the tables,
and the char! chewing the trend in th0 volume of earning assets and in
notes in circUlation for the y.:Jars 1921-'1923, 'Will be prepared by th.a
Board and subm.i tted to your bank as soon after January l' 1924 as
practicabl.;;.
in
In order to axpodite the completion of the annual reports of
both the Board and Federal r.;;serva agents, it is requested that the
taxt of your annual report (to b.;;; submi ttad in dUfllicate), togother
vd th the statistical tables which vvill be praparad in connection therewith, ba -forwarded to tile Board a::; early as practicable after January 1,
1924. Both the text of the report and statistical tables will be handled
by tha Board as e.:xpeditiously as i'o::;::;ible in order that the reports may
be released for publication as uoon as pr~~ticabla.
It will be appreeia'c;od if you will kindly advise tha Board
whether you desire a plate of the chart referred to in the first paragraph of this letter, for use in your annual report.
V.;;ry truly yours,
Walter L. Eddy,
Sacretary.
I
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Enclosure.
LETTER TO
.ALL FEDERi.L PESEF.VE ;,GENTS.
•
SCF!E:CULE 6 - VOUJME OF OPERATIONS IN
l?BINCIPAL DEPAR'l'l,lEl'iJ'TS
1032
St.3814a
1923
NUMBER OF PIECES HANDLED .
...
...
Bills discounted:
A,pplications • • • . •
Notes discounted ••
:Bills purchased for
OVIn ar.,~ount
. . .. . . .
Curraricy received and counted
Coin recei V<3d and count.;:d
Ch~C'.ks
handled
·~
•.
... . .
• • • • •
Collection i ter;;Js handl.~d:
U. s. Governrr;;:;nt coupons paid
All oth~r •• ·• • • • . • • •
U.
. . .. .. .. .'
'
s. securities - issues, redal!Ptions,
and exchanges by Fi sC'.a.l Agency
department .. · • • . . . . • . •
Telegraphic transfers of funds •
Envelopes received. and dispatc.h;;;:d
»DUNTS HANDLED
...
Bills discounted . . . .
Bills purchased for own
Curr~ncy
am~ount
•
•
•
'<f
received and counted
Coin received a!ld counted
Che~ks
handled • • • . . . • .
Collection items handled:
U. S. Government coupons paid • • • •
All oth.ar • • • .
• • . . .
..
U. S. securities - issues, red~tions,
and exchanges by Fiscal Agenr.y
dapartnh?nt • . . · . . .. . . . • . .. . . . .
Telegraphic transfers of funds • • •
. . . ..
1922
1921
r
103:1
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OPJI'JCJAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
November 27, l9Z3·
St.' 3815•
su-BJECT:
1924 Edition .of F. R.. Agent's
Daily Stat.ement, Form F. R. ~A.
5.. ·
Dear Sir:
Th~re
separate cover
are being forwarded to you today under
copies of Federal Reserve Agent's
daily statement Fotm F. R. A.
5. for use during 1924.
You will note that items representing the
gross amount of Federal Reserve notas received from
the Comptroller of the Currency since organization of
the Federal Reserve System and the ame)'Unt returned to
I
the Comptroller of the Cu:t.rency for destruction have
both been eliminated. from the tonn.
'.rhe s e a.moun t s
lihOUld oontime to be reported, however, on ycur
monthly report on Form 44.
Kindly acknowledge receipt of the forms.
Very truly
yours~
E. L. Smead, Chief,
Division of Bank Operations.
LETTER TO ALL. FEDERAL RESERVE AGENTS
I
1034
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OP'P'ICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 11, 1923.
St. 3832.
SU3JECT:
Reports of Earnings, Expenses,
Dividends, and Franchise Tax
P~~nts for 1923.
Dear Si:r:
In order that the Board may have information regarding
the financial results of operat.ions of Faderal reserve banks during the present calendar year as soon as practicable after January 1, it is requasted that
51;a.tement be telagraphed. the Board
on V:ednesday morning, January 2, 1924, showing the following information:
a
r·
I
(Code)
EACH- Gros6 earnings •...............•.... $.___________
EADS- Current exp~rtses ................... .
EARNCurrent net earningci .......•.... ~~··~~$__________
ELBA- Additions to Curremt Net earnings •.•
ENID - Deduct ions from Current Not Earnings _ _ __
Net arldition::> to or deductions
from current net earnings ••.........•..... · : - - EAST- Net earnings available for dividends,
franchise tax, and i.:lurplus ..................•.
--~---
,
•
EYRE - Dividends paid ......•...........................
EMET- Paid to Government ·as franchi~e tax •............
EVEN - Transferred to surplus account ........... ~ ....•.'------
Total (to agree with item EAST) •..........•._ __
C.APP - Subscribed capital January 1, 1924 •............ · - - - - - CEDE- Surplus January 1, ~924 .......................••
-----
'
I
1035
- 2-
It ia also requested that the regular monthly
reports of earnings ar..d expenses on forrr:s 95 7 96, 97, and
97··a be acccmpaniad with an itemized stateme:nt, showing in
detail all additions to and deductions from c~-;.rrent net
earnings (Profit and Loss account) during the year, ar..d
that in addition to the regular balance sheet form 34 for
the last day of the year representing the condition of the
bank after final· closing of the books, a form 34 be submitted showing tha condition of the bank at close of
business but ~1£~ to the making of a~ profit and lose
account entries.
Very tro.ly yours,
E. L. Smead, Chief,
Division of Bank Operations.
LETTER TO BE SENT TO THE GOVERNOR
AT EACH F.E:DERAL RESERVE BA.~.
'1036
FEDERAL RESERVE BOARD
WASHINGTON
December
St.
ADDRESS OPP'ICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
14, 1923.
3841.
Condition reports of State bank
and Trust company members, form 105.
Dear Sir:
There are being fcrrwarde to you today under separate
capias of form 105 ~vi sed as of llo~embar 15,
1923. Please mail three ccpi s of the form to each State
Bank and Trust company member in ~cur district for its own
use and in addition, tbxee c pies for each bf its branches
(if any) not located within t e city in which the head office is located or within citie5 and to~ns adjacent thereto
with instructions to hold tha !blank forms pending receipt
of a call for condition reporis.
cover
I
-I
.l
I
I
r
I
I
~
Upon receipt of not ice from the Board of the call for
condition reports, kindly notify the banks thereof by mail
if they ar<:> located within two days 1 time from the Federal
reserve bank, or by telegram if not within two days' time
by mail, and raquest them to fill out the reports and mail
them to you promptly - in no case latar than 10 days after
receipt of tha call.
In order that the compilation of the Board t s abstract
showing the condition of all state bank and tTI.tst company
members comoined as of th<:J date of the next call may not
be unduly delayed, it is raquested that the reports oe
forwarded to the Board as soon as practicable aftar they
are receivod by the Fi::lderal reserva bank. If it i3 n.::cessary to communicate wHh a bank rogarding apparent errors
in its report, a note to that effect should be made on the
raport itself before it is mailed to the Board, and the
Board should be advi$ad of the necas$ary corrections when
the desired information is recaiv~d from the member bank.
Kindly
aclmowl~dge
receipt.
Yours very truly,
Walter L. Eddy,
,~acrc3tary.
LETI'ER TO EACH FEDERAL RESERVE AGENT.
1037'
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL REIIIERVE BOARD
1923.
s ~. 3844.
Dacamb3r 14,
SUBJECT:
Earnings and Dividands reports
of State Bank and 'l':::·ust Cornpa.ny
members as oi December 31, 1923.
Dear Sir:
-
There are being forwarded to you today undar
separate cover by mail
copies of form 107 for
use of State bank and Trust company mdmbers in submitting thoir semi-annual reports of oarnings and
di•1idend.s.
Please ad'rise the banks that th.;; report is to
cover the six-month pariod ending D~cemJar 31, 1923,
irrasp-.3ctive of whcth;;:r or not they may hav0 closed
th3 ir books on that date:, or whether acy dividends
that may have b3an declarad cover that particular
P.ericd.
Tho report should b>:J submitted. to you in duplicat.:J within ten, days aftar receipt of the blank
forms by raporting banks.
Kind.ly acknowl.:JdJc racdpt.
Very truly yours,
..
•
J
Walter L. Eddy,
SocNtary. ·
Letter to each Federal RBserve .Agent.
..
1038
FEDERAL RESERVE BOARD
WASHINGTON
Decerr~er
20, 1923.
St. 3855.
SUBJECT:
Data. for 1923 AnnUal Report
of the Federal Beserve :Soard.
"'
Dea.r.Sir:
For use in the forthcoming annual report of the
Fed.era.l Reserve Board, will you kindlY. furnish the :Soard
as soon after January ;L, 1924 as practicable with the
.. following data:
1. Classification of U. S. securities held by
your bank (1) under repurchase agreement, and (2)
in investment ac~c~ount, a.s at close of business
December 31, 1923, giving the C'.ha.racter of securities, interest rate, rraturity date, and par
value.
2. Statement showing the nunber of member
banks in ~~h State (or part of State in the
district) acemrmoda.ted through the discount
of paper during the t~alendar year 1923.
Very tru+y yours,
E. L. ~ead , C".ai ef ,
Di Vi. sian of Bank 0.9era tions.
Letter to Governor at each
Federal Reserve Bank,
@FedFRASER