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5 0 5

X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED JULY », 192«±.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital

Surplus

Total
Resources

DISTRICT NO. 4.
Union Trust Company,
Greensburg, Penna.

$400,000

-

$1,6*2,559

CHANGES IN STATE BAM MEMBERSHIP:
Change of T i t l e .
The Newton State Bank, Newton F a l l s , Onio, has absorbed the
F i r s t N a t i o n a l Bank of Newton F a l l s and changed i t s t i t l e to tne
F i r s t S t a t e Bank.
Voluntary Wi thdrawal.
E r i e County Trust Company, E a s t Aurora,

y.

• . Withdrawal.
Fanners & Stockgrowers Bank, Montour, Idaho.
Absorption of Non-member.
Tne Wachovia Bank & Trust Co., Winston-Salem, N. C. , has absorbed
tne S a l i s b u r y Bank & Trust Co. , S a l i s b u r y , N. C.
Merged with Non-member.
Tennessee^Vctlley ^ k




Al^^Ao^membtr!

PERMISSION GRANTED TO EXERCISE 'TRUST POWERS:
F r a n k l i n National Bank, F r a n k l i n , N. H.
Barnett National Bank, J a c k s o n v i l l e , Fla.
J i r s t National Bank of Montezuma, Ind.

(Supplemental)

X-1530
EgDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE WEEK ENDED JULY 11, 1934.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capi t a l

$500,000

$250,000

Total
resources

Su.rpl~us

DISTRICT NO. 3,
Peoples Trust Company,
Wyomissing, Pa,

$2,823,168

CHANGES IN STATE BANK MEMBERSHIP:
Change of T i t l e .
The American Bank of Commerce & Trust Co. , L i t t l e Rock, Ark. ,
a s changed i t s i t i t l e t o tus American Trust Company.




Taken Over By Superintendent of Banks.
The Bank of I o t a ,

Iota,

Louisiana.

Withdrawn:
Pembersille Savings Bank Co. , Pemberville, Ohio.
Insolvent.
Bank of Waynesville,

Waynesville,

Mo.

PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Watkins National Bank, Lawrence, Kansas,
Corpus C h r i s t i National Bank, Corpus C h r i s t i , Texas.




X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED JULY 18, 1924.
ADMITTED TO THE FEDERAL RESERVE. SYSTEM:
NONE

CHANGES IN STATE BANK MEMBERSHIP:
Reopened:
Tne Bank of Camilla,

Camilla, Georgia.

Consolidation;
The Easpar S t a t e Bank, Cnic»go, 111., a member bank,
and the American State Bank, Cnicago, 111. , a non-member,
have consolidated under the name of Easpar American State
Bank.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Closter National Bank, C l o s t e r , N, J.
F i r s t National Bank, B e l l e f o n t e , Pa.
Peoples National Bank, Lebanon, Pa.
Bozeman Waters National Bank, P o s e y v i l l e , Ind,
F i r s t National Bcmk, Ordway, Colo.
Fourth National Bank, Wichita, Kans.
Lincoln S t a t e National Bank, Lincoln, Nebr.

•L. C S

X-1530
IEDERAL EE SERVE BOARD ANNOUNCEMENT
WEEK ENDED JULY 25, 1924.
ADMITTED 10 THE FEDERAL EE SERVE SYSTEM:
Capi t a l

Surplus

Total
resources

$150,000

$ 50,000

$2,691,196

25,000

5,000

160,741

DISTRICT NO. 1.
Columbus Exchange Bank,
Providence, R. I .
DISTRICT NO. 9,
F i r s t StatecBatifc,
"
B u f f a l o , S. Dak.




CHANGES IN STATE BANK MEMBERSHIP:
Absorbed by a National Bank.
Zillaix S t a t e Bank,

Z i l l a h , Washington.

X-1530
EEDERAL EE SERVE BOARD ANNOUNCEMENT
WEEK ENDED AUGUST 1, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
CHANGES IN STATE BANK MEMBERSHIP:
Absorbed by S t a t e Member.
The Guaranty Bank & Trust Company, Memphis, Tennessee, has
been taken over by tne Union & P l a n t e r s Bank & Trust Company of
Memphis, a member i n s t i t u t i o n .
Absorbed by Nonmember.
The St. Lawrence T r u s t Company, Ogdensourg, N. Y. , has been
absorbed Dy the Ogdsns'burg Bank, Ogdensourg, N. Y. , a nonmember.
Tne Rutherford County State Bank, Murfreesboro, Tennessee,
aas been absorbed by tna Commerce Union Bank, N a s n v i l l e , Tennessee,
a nonmember.
Succeeded by Nonmember.
The Empire and S t a t e Bank, Lewis town, Montana, has been succeeded. by tJae Central Bank & Trust Company, Lewis town, Montana, a
nonmemoer.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Commercial N a t i o n a l Bank,




Cnarles City, Iowa.

X-1530

FEDERAL RESERVE BOARD AffiTOUNCEMENT
WEEK ENDED AUGUST 8, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE.

CHANGES IN STATE BANK MEMBERSHIP:
Merger:
Tiie Security T i t l e & Trust Co. , York, Pa., a nonmember:,.
has merged w i t h the Guardian Trust Company of York, a member.




Voluntary Withdrawal:
The Hamilton Bank, Baltimore, Maryland.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Peoples National Bank, Skippensburg, Pa,
Alexandria National Bank, Alexandria, Va.
F i r s t National Bank, M i l l e r , S. Dak.

- ^ r

X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED AUGUST 15, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE

flOTWffES TTJ STATE BANK MEMBERSHIP:
The S t a t e Bank of Winfield, Kansas, has absorbed the
P r o g r e s s i v e S t a t e Bank, Winfield, Kansas, a noranember.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Merchants and P l a n t e r s National Bank, Gaffney, S. C.
F i r s t National Bank, Newport News, Va.
F i r s t National Bank, Park Rapids, Minn.




—- • *
<i —
*

X-1530
INDERAL HESEEVE BOARD ANNOUNCEMENT
WEEK ENDED AUGUST 22, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital

Surplus

$1,500,000

$810,000

Total
resources

DISTRICT NO. 2.
C e n t r a l Mercantile Bank,
New York, N. Y.

CHANGES IN STATE PANIC MEMBERSHIP:
Closed.
Tne Brighton S t a t e Bank,

Brignton, Iowa.

Succeeded by Noraaember S t a t e Bank.
Tne Alto S t a t e Bank,

Alto,

Texas.

PERMISSION GRANTED TO EXERCISE TRUST POWERS:
F i r s t National Bank,




Woodbridge, New Jersey.

$9,775,534




?

X-1530
FEDERAL RESERVE BOABD ANNOUNCEMENT
WEEK ENDED AUGUST 29, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE.
CHANGES IN STATE BANK MEMBERSHIP:
NONE.
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE
UP TO 100 PER CENT OF CAPITAL A D SURPLUS:
N
Foreman National Bank, Cnicago, I l l i n o i s .
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
F i r s t National Bank,
F i r s t National Bank,

Wadesboro, N. C.
Waynesboro, Va.

L I S




X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED SEPTEMBER 5, 1924.
ADMITTED Tf> T T WTOCTAL RESERVE SYSTEM:
HC
NONE
CHANGES IN STATE BANK MEMBERSHIP:
NONE
PERMISSION GRANTED TO EXERCISE TRUST POWERS.:.
National City Bank, Troy, N. YP a c i f i c Natioiicd Bonk, Los Angeles, C » l i f .




X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED SEPTEMBER 1 2 , 1 9 2 4 .
ADMITTED 10 THE EEDERAL RESERVE SYSTEM:
N 0 N E

CHANGES IN STATE BANK MEMBERSHIP:
NONE
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Middle town National Bank,
Hamilton National Bank,
Manoning National Bank,

Middle town, Conn. (Supplemental)
New York, N. Y.
Youngs town, Obio.




FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED SEPTEMBER 19, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:

NONE
CHANGES I N STATE BANK MEMBERSHIP:

NONE

PERMISSION GRANTED TO EXERCISE TRUST POWERS:

C i t i z e n s National Bank & Trust Co. , Newark, N. J .
F i r s t National Bank, Lake Charles, La.
F i r s t National Bank, C o r v a l l i s , Oro. (Supplemental




X-1530
FEDERAL HE SERVE BOARD AFNOUNCEMENT
WEEK EtTDED SEPTEMBER 26,1934.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
II 0 R E
CHANGES IN STATS 3AM MEMBERSHIP:
Voluntary withdrawal:
Leelanau County Savings Bank, Buttons Bay, Mien.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
The National Bank of P n o e n i x v i l l e , P h o e n i x v i l l e , Pa.
The Farmers National Bank, Remington, Ind.

!•

l ! 8

X-iodO
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE WEEK ENDING. ^OCTOBER1 3 , 1924.
ADMITTODTO FEDERAL RESERVE SYSTEM:
Capital

DISTRICT NO. 3.
West Side T r u s t Company,
Kings ton, Perun.

Surplus

Total
Resources

$250,000

$50,000

$1,264,250 '

100,000

25,000

1,100,376

DISTRICT NO. 8
Granite C i t y T r u s t & Savings
Bank, Granite City, 111.




CHANGES IN ST5TE BANK MEMBERSHIP:
NONE

'

PERMISSION GRANTED TO EXERCISE TRUST POWERS:
The Firat-Merchants National Bank, La l a y e t t e , Indiana.
The F i r s t N a t i o n a l Bank, N o b l e s v i l l e , Indiana.
The Miami County Nationa.1 Bank, p a o l a , Kansas,

FEDERAL RESERVE BOARD ANNOUNCEMENT
"WEEK ENDED OCTOBER 1 0 , 1 9 2 4 .

ADMITTED TO T T FEDERAL RESERVE SYSTEM.
TE
DISTRICT NO. 9 .

TOTAL

Columbia State Bank,
Columbia Heignts, M m . ,

$25,000

Soalst
$5,000 •

$131,766.59

CRSNGES IN STATE BANK
Voluntary Withdrawal.
F i r s t S t a t e Bank of Mission, Mission, Texas.
Consolidation.
Aooerican Trust Company, and Southern Trust Company, L i t t l e
' •Arkansas., c o n s o l i d a t e d under t i t l e "American Southern T r u s t
Company".




PERMISSION GRANTED TO EXERCISE TRUST POWERS.
NONE

.

FEDERAL RESEBVE BOARD ANNOUNCEMENT
WEEK ENDED OCTOBER 17, 1924.
ADMITTED TO EEDEBAL BESEfiVE SYSTEM.
NONE
CHANGES IN STATE BANK MEMBERSHIP.
Voluntary wi thdrawal.
Reliance S t a t e Bank, Chicago, I l l i n o i s ,
Absorbed by National Bank.
Tb° Hen t o n s i a t e Bank, Ronton, Wasbingt on, a. member
bank, has been absorbed by t h e F i r s t National Bank ef
Ren t e n , Washington.
Absorbed, by Member S t a t e Bank,
The American Bank of San F r a n c i s c o , has a b s o r b e d the
Affleric an Bank of Oakland, C a l i f o r n i a , and the First
National Bank of Oakland, C a l i f o r n i a .




PERMISSION GRANTED TO EXERCISE TRUST POWERS.
The F i r s t National Bank of M&cneola, Mineola, N„ Y.
The F i r s t National Bank of Monroe, Monroe, Wis.
The P a c i f i c National Bank of Boise, Boise, Idaho-

X-1530
FEDERAL RESERVE BOARD AFNOUrTCEMENT
WEEK ENDED OCTOBER 24, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
DISTRICT NO. 8.
Capi t a l

Total
resources

$200,000

The Baden Bank,
St. Louis, Mo.

Surplus
$100,000

$3,312,154

DISTRICT NO. 10.
F i r s t Trust Company,
King City, Mo.

50,000

-

379,395

CHANGES IN STATE BANK MEMBERSHIP:
Closed:
Pickens County S t a t e Bank, Carroll ton, Ala.
Absorption of National Bank:
The I l l i n o i s Merchants Trust Co. , Cnicago, 111. , a member
bank, has absoroed the Corn Exchange National Bank, Chicago, 111.




Voluntary Withdrawals;
C a l i f o r n i a Bank of San Mateo County, San Bruno, OAlif.
S t a t e Bank of Sevier, E i c n f i e l d , Utah.
AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF T C B N T
OCA C:
UP TO 100 PER C C T OT CAPITAL AND SURPLUS.
TN
F i r s t National Bank, Eagle Pass, Texas.
S t a t e National Bank, Corpus C h r i s t i , Texas.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
F i r s t National Bank, P o r t l a n d , Conn.
Pemigcwassot National Bank, Plyaoutn, N. 11.
Amsterdam C i t y National Bank, Amsterdam,, N. Y.
National Bank of Delaware, Wilmington, Dela.
F i r s t National Bank, Paulsooro, N. J.
F i r s t National Bonk, Shipponsourg, Pa.
National jj&nk of Aiuerico., P i t t s c u r g n , Pa. (Supplemental)
F i r s t National Bank, P a r i s , ArkC i t i z e n s National Bank, Alton, 111.
Merchants National Bank, St. Cloud, Minn.

.

X-. f*--:.

X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED OCTOBER 31, 1924.
ADMITTED TO E E FEDERAL RESERVE SYSTEM:
Capi t a l

Surplus

Total'
resources

DISTRICT NO. 8.
F i d e l i t y Bank & Trust Co. ,
Memphis, Tern.'




$1,000,000 $100,000

CHANGES IN STATE SANK MEMBERSHIP:
Voluntary Withdrawal
Central Savings Bank & Trust Co. , Monroe, La.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
F i r s t National Bank, p n i l i p s b u r g , Penna.
F i r s t National Bank, Gastonia, N. C.

$2,407,983

X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
. WEEK ENDED NOVEMBER 7, 1924.
• ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
CHANGES IN STATE BANK MEMBERSHIP:
Change of T i t l e and Location
Tha Bank of Castle f o r d , C a s t l e f o r d , Ida.no, has
cnanged i t s t i t l e to tne S e c u r i t y S t a t e Bank and i t s
l o c a t i o n to Bunl, Idaho.




Voluntary Witndrawal
Tno Rossford Savings Bank, Rossford, Ohio.
PERMISSION GRANTED TO EXERCISE TP.UST POWERS:
Tno Wallaslay National Bank, Wolloslo yt Mass.
F i r s t National Bank, P l a i n f i e l d , N. J.
F i r s t National Bank, Canton, Onio '(Supplemental).

X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED NOVEMBER 1<±, 192%.
ADMITTED TQ THE SEDER AL RESERVE SYSTEMCapital

Buipplus

Total
(resource s

$9,352

$183,907

DISTRICT IJO. d.
Peoples S t a t e Bank,
Mapluwood, Mo,

$60,000

CHANGES IN STATE BANK MEMBERSHIP:
NONE
PERMISSIONfi-RANTEDTOEXERCISE TRUST POTZERB:
-larrisburg National Bank, H a r r i s burg, Ponna.




x. - / S ,

X-1530

FEDERAL RESERVE BOARD AMOIMCELEETO
WEEK EHDED HOVH.IBER 21, 1924.
A3MITTED TO THE FEDERAL RESERVE SYSTMT

HONE
OHAMTES M STATE

" AOT MTmBRfiTTTP.
BTT

Closed.
Pnoplea S t a t e Batik, Corwith, Iowa,
Maloom Savings Bank, Malccm, Iowa.
Voluntary Withdrawal*
Union & Hew Haven T r u s t Company, Hew Haven, Connecticut,
Voluntary L i q u i d a t i o n ;
C i t i z e n s S t a t e Bank, Hewton, Iowa,
PERMISSION GRAM1 ED TO EKERCISE TRUST POWERS«

The
The
The
The




Merchants Rational Bank of Bangor, Bangor, Maine.
n a t i o n a l Bank of 61 ens F a l l s , Glens F a l l s , Hew York,
Peoples n a t i o n a l Batik of S t e u b e n v i l l e , S t e t i b e n v i l l e , CSiio.
American n a t i o n a l Batik of Bellingham, Bellingham, Wash.

XrOSSO

I1ED><RaL RESERVE BOATiD AmOTHCM-ZT'
V.B5-: HID"© NOVEJBER 28, 1924.
AIMITTED T C T E E S FEDERAL PJ3SE3.VE S Y S T M ;

OcrMkmity T r u s t Crrapany of BloomfielcL, BloamfielcL, N. J .
CHARLES IN STME BANK injUTRlgRRTTTPClosg&L
F i r s t S t a t e Bank, Walnut Grove, i l i n n e s o t a .
Bank cf D o n a l s c m r i l l e , D c n a l s o n v i l l e , G e o r g i a .
Peoples Batik of Georgetown, Georgetown, S o . C a r o l i n a .
PERMISSION GRAM ED TO EXERCISE TRUST POWERS;

Thn B l a i r County n a t i o n a l Batik of Tyrone, Tyrone, Pa.
The Mellon N a t i o n a l Bank of P i t t s b u r g h , P i t t s b u r g h , P a .
P a c i f i c N a t i o n a l Batik of San F r a n c i s c o , San F r a n c i s c o , Cal«




1

FEDERAL RESERVE BOARD AKNiUNCEMENT
WEEK ENDED DECEMBER 5, 1924.
AIMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
CHANGES IN STATE BANK MEMBERSHIP:
Closed:
Bank of Commerce, E a r l e , ArKansas.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
N a t i o n a l Bank of Orange County, Chelsea, Vt.
Factory Point National Bank, Manchester Center
Champaign N a t i o n a l Bank, Urbana, Ohio.
Concord N a t i o n a l Bank, Concord, N. C.
F i r s t National Bank, Winslow, A r i z .




1

1-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED DECEMBER 12, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
Capital

DISTRICT NO.

' Sur-plus

To t a l
resources

N0rthe^st-Tacony Bank & Trust Co.,
P h i l a d e l p h i a , Penna.
$250,000
$100,000
#1,424,737
(Succeeded S t a t e member of same t i t l e * ' but under a new c h a r t e r i
CHANGES IN STATE BANK MEMBERSHIP:
N e r the a s t -Tacony Bank & Trust Co.> P h i l a d e l p h i a , Penna.
(Succeeded by above named S t a t e member)
Closed:
North Georgia T r u s t & Banking Co., Winder, Ga.
Cheyenne S t a t e Batik, Cheyenne, Wyo.
Consolidated with S t a t e Member:
F i r s t S t a t e Bamc, Drummond, Idaho (Consolidated with and under
t i t l e of S e c u r i t y S t a t e Ba-nk, Ashton, Idaho, a member).
Voluntary Withdrawal:
Guaranty Bank & Trust Co., Memphis., Tenn.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Tenth N a t i o n a l Bank, P h i l a d e l p h i a , Penna.
Peoples N a t i o n a l Bank, Kansas C i t y , Bans.
Omaha N a t i o n a l Bank, Omaha, Nebr.







I.

H

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED DECEivBER 19, 1924.
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
CHANGES IN STATE BANK MEMBERSHIP:
Closed:
Farmers & Traders S t a t e Bank, Leon, Iowa.
Lockridge Savings Bank, Lockridge, Iowa.
C i t i z e n s S t a t e Bank, S t . P e t e r , Minn.
Insolvent:
Brighton S t a t e Bank, Brighton, Iowa.
Peoples S t a t e Bank, Corwith, Iowa.
Voluntary Withdrawal:
S t a t e Bank of Richmond, Richmond, Utah,

1 2 9




0

x-1530
FEDERAL BESERVE BOARD ANNOUNCEMENT
W x K END&D DECEMBER 2b, 1924.
Eu
ADMITTED TO THE FEDERAL RESERVE SYSTEM:
NONE
CHANGES IN STATE BANK MEMBERSHIP:

N Q N,E

PERMISSION GRANTED TO EXERCISE TRUST POWERS;
Mechanics National Bank, M i l l v i l l e , N. J .
Exchange National Bamc, Tampa. F l a .
F i r s t National Bank, Jackson, Miss.
F i r s t National Bank, North L i t t l e Rock, Ark.

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD

J u l y 10, 1924.
x-4iog
SUBJECT:

Code words t o be used i n connection w i t h w i r e
t r a n s f e r s of Treasury Motes and T r e a s u r y C e r t i f i c a t e s of I n d e b t e d n e s s .

Dear S i r :
In order to reduce t h e number of e r r o r s which have o c c u r r e d
i n t r a n s m i t t i n g t h e t i t l e s of v a r i o u s i s s u e s of Government o b l i g a t i o n s
i n telegrams between t h e F e d e r a l Reserve Banks and t h e Treasury Department, and t o eliminate, r e s u l t a n t c o n f u s i o n , i t h a s been s u g g e s t e d
t o t h e Board by t h e Commissioner of P u b l i c Debt t h a t a d d i t i o n a l code
words, s u p p l i e d from t h e F e d e r a l Reserve Telegraph Code, be d e s i g n a t e d
t o cover t h e names of such i s s u e s i n t h e telegrams between t h e Treasury
Department and t h e Banks and Branches i n connection w i t h t h e wire t r a n s
f e r s of such Government o b l i g a t i o n s .
This s u g g e s t i o n meets w i t h t h e B o a r d ' s a p p r o v a l , and you a r e
a d v i s e d t h a t , commencing w i t h August 1, 1924, t h e f o l l o w i n g code words,
t o d e s i g n a t e t h e t i t l e s of i s s u e s of Treasury Notes and Treasury C e r t i f i c a t e s of Indebtedness in t e l e g r a m s , w i l l be used by t h e Treasury Department and t h e F e d e r a l Reserve Banks and Branches:
Treasury C e r t i f i c a t e s of. Indebtedness
S e r i e s TD-1924
"
TD2-1924
"
TM-I925
Treasury Notes
Series
"
"
"
"
"
"




B-ig24
A-1925
B-I925
C-19 2 5
A-I926
B-I926
A-I927
B-I927

Code Word
BEFOOLED
BEFOOLING
BEFOREHAND
Code Word
INGRATING
INGREDIENT
INGRESS
INGRESSION
INGULFS
INHALE
INHALERS
INHALING

x-Uicg

-2-

The above l i s t of code words w i l l be supplemented from
time to time by a d d i t i o n a l words, necessary t o d e s i g n a t e new i s s u e s
of such Government o b l i g a t i o n s , as w i t h i n c l a s s i f i e d , and p e r i o d i c a l l y announced by t h e Secretary of the Treasury.
I t i s a l s o requested t h a t the code words "BEFOOLED" t o
"BEFOREHAND", i n c l u s i v e , and t h e code words "INGRATlNG" t o "INHALING"
i n c l u s i v e , i n d i c a t e d in t h i s l e t t e r , be added to t h e bottom of
pages 24 and 125, r e s p e c t i v e l y , of the new code book to follow the
supplemental code word "BEGET" on page 24 and the code word "INGRATE"
on page 125Yours very t r u l y ,

Walter L. Eddy,
Secretary.

TO GOVERNORS OF ALL F. R. BANKS,




' <> r)
r

FEDERAL RESERVE BOARD
WASHINGTON
ADDRE'SS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

J u l y 12, i g z k .
X-Ulll
SUBJECT:

Code words f o r use between the Federal Reserve Bank of
New York and other Federal Reserve Banks i n connection
with c e r t a i n t e l e g r a p h i c t r a n s a c t i o n s in U. 3. Government
Securities*

Dear S i r :
In order t o reduce the phraseology in telegrams between Federal
Reserve Banks in connection with c e r t a i n t r a n s a c t i o n s in U, S* Government
S e c u r i t i e s f o r account of the Treasury and the Open Market Investment Comm i t t e e of t h e Federal Reserve System, i t has been suggested t h a t a d d i t i o n a l
code words be supplied from the Federal Reserve Telegraphic Code,
The Board has approved t h i s suggestion, and e f f e c t i v e J u l y 21st,
t h e following code words w i l l be used between t h e Federal Reserve Bank of
New York and other Federal Reserve Banks, covering t h e t r a n s a c t i o n s r e ferred to:
"MIXEDLY" Treasury has a u t h o r i z e d under date of ( d a t e ) the p u r chase of (amount and i s s u e ) Government s e c u r i t i e s a t not exceeding
( p r i c e ) f o r account of (account) which w i l l have precedence over
a l l orders f o r t h i s i s s u e placed through Committee except outstanding Treasury orders* Please wire condition market in your
d i s t r i c t f o r t h i s i s s u e or issue# advising amount and p r i c e of any
o f f e r i n g s made*
"MIXING" Reference exchange of wires regarding Treasury 1 s a u t h o r i z a t i o n t o purchase Governments you a r e a u t h o r i z e d to purchase
(amount and i s s u e ) Government s e c u r i t i e s a t ( p r i c e ) wibang d e t a i l s
t o Under S e c r e t a r y of the Treasury and t o us on day purchase i s
made. Charge General Account Treasurer United States$>cancel se*»
c u r i t i e s and forward t o Washington on date of s e t t l e m e n t i n usual
manner.
"MIXTURE" Reference exchange of wires regarding Treasury*s a u t h o r i z a t i o n to purchase Governments f o r (account) you a r e a u t h o r i z e d
to purchase (amount and i s s u e ) Government s e c u r i t i e s a t ( p r i c e )




-2-

x-4iil

advising us as purchases are made. Hold s e c u r i t i e s i n s a f e - k e e p i n g uncancelled
subject to order of S e c r e t a r y of Treasury f o r t h i s account and charge New York
bank with d e t a i l e d w i r e advice.
"MIZZEN" Reference exchange of wires regarding Treasury 1 s a u t h o r i z a t i o n to purchase Governments f o r (account) you a r e a u t h o r i z e d to purchase (amount and i s s u e )
Government s e c u r i t i e s a t ( p r i c e ) advising us a s purchases a r e made, Hold sec u r i t i e s uncancelled i n s a f e - k e e p i n g subject t o the order of Secretary of Treasury
f o r t h i s account and charge Treasurer*s account in usual mannerw
"MIZZENMAST" United S t a t e s Treasury order (account) dated ( d a t e ) has been completed* Please consider a l l a u t h o r i z a t i o n s thereunder cancelled and confirm by
wire t o t a l amount purchased by you.
"MIZZLING" The new r a t i o of apportioning Government s e c u r i t i e s and b i l l s p u r chased by the System based on the estimated d e f i c i e n c y of earnings f o r the year
as revised on the l a s t day of t h e previous month gives your bank
jo r a t i o
subject to f u r t h e r r e v i s i o n monthly as changes occur in earning a s s e t s . Earnings
and t r a n s a c t i o n s w i l l be apportioned t h i s month on the new r a t i o . As purchases
Governments since f i r s t of month aggregating $
have been temporarily d i s t r i b u t e d on previous
fo r a t i o an adjustment of
Treasury notes «and
$
c e r t i f i c a t e s i s necessary. E n t r i e s covering adjustment of Government
s e c u r i t i e s w i l l be given under separate wire while bankers acceptances w i l l be adj u s t e d through your p a r t i c i p a t i o n in f u t u r e purchases.
"MOANED" R e f e r r i n g a c t i o n Committee a t meeting May 29, 1924, a u t h o r i z i n g temporary s a l e s Government s e c u r i t i e s from Special Account t o n e u t r a l i z e abnormal
money conditions during q u a r t e r l y tax periods under s u i t a b l e p l a n f o r repurchase
f o r Special Account, in handling these t r a n s a c t i o n s t h e same procedure as outl i n e d our wire June 14, 1924, w i l l be followed* We t h e r e f o r e c r e d i t you today .
$
your p a r t i c i p a t i o n i n
„ Government s e c u r i t i e s sold under r e purchase agreement from Special Investment Account to member banks today*
"MOANFUL" R e f e r r i n g temporary s a l e s to member banks under repurchase agreement
or
of Government s e c u r i t i e s h e l d i n System Account, have repurchased $
system today# We charge you $
your p a r t i c i p a t i o n . Please c r e d i t u s ,
"MOANFTTLLY" R e f e r r i n g temporary s a l e s t o member banks under repurchase agreement
of Government s e c u r i t i e s held in System Account of which $
-— ^ a v e ® en r e
purchased f o r System Account thus completing t r a n s a c t i o n , we c r e d i t you o ay
your share net earnings r e p r e s e n t i n g accrued earnings l e s s cost a t
r a t e of
fo per annum during the time s e c u r i t i e s were held by member a s<
"MOANING" Have a r r a n g e d w i t h Treasury f o r s u b s c r i p t i o n by r e s e r v e banks t o new
issue to r e p l a c e maturing i s s u e s held in Special Investment Account*
i
y°u
r
t h e r e f o r e place s u b s c r i p t i o n f o r $_
r e p r e s e n t i n g y°^- propor ion o new
s e c u r i t i e s , a d v i s i n g Treasury t h a t payment w i l l be made by $
—— ^ U r ^ n
c e r t i f i c a t e s and $
maturing n o t e s . Please wire us amount of V ov *
allotment on t h i s exchange s u b s c r i p t i o n , a l s o s e r i a l numbers t o be used^ y
York bank in forwarding t o Washington maturing Governments held in Special




I'
-3-

X-Ulil

Account. Upon a d v i c e from Washington of allotment please request them
to i n s t r u c t u s to make allotment d e l i v e r y new issue through C P U f o r
your account which s e c u r i t i e s a r e t o be held in Special Account. Please
charge Treasurer d i r e c t and c r e d i t New York f o r maturing par amounts
and c r e d i t Treasurer and charge New York f o r new i s s u e . .
]

The code words i n d i c a t e d should be i n s e r t e d i n the Federal Reserve Telegraphic Code a t the end of page 153» following the code word
"MIXABLE".
Very t r u l y y o u r s ,

J . C. Noell,
Assistant Secretary.

TO GOVERNORS OP




ALL P . R .

BATES

r'*>er

V

I. J

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-4112
J u l y 11, 1924.
SUBJECT:

EXPENSE MA.IN LINE, Leased Wire System, June, 1924.

Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph s t a t e ments, X-Ull2-a and X-4ll2-b, covering i n d e t a i l o p e r a t i o n s of
the main l i n e , Leased Wire System, during the month of June,
1924.
Please' c r e d i t the amount payable by your bank i n the
general account, T r e a s u r e r , U, S., on your books, and i s s u e
c/D Form 1, National Banks, f o r account of " S a l a r i e s and Expenses, Federal Reserve Board, Special Fund", Leased Wire System,
sending d u p l i c a t e C/U t o Federal Reserve Board,
Very t r u l y yours,

F i s c a l Agent.
(Enclosures)

To Governors of a l l banks (except Chicago)




< . ;w S
L

X-Ull2-a
PJCPORT SHOWING CLASSIFICATION!® NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF JUNE, I92U.
P e r c e n t of
T o t a l BankBusiness(*)

Treasury
Dept.
Business

35,361
250.56S
55,602
93,726
73,559
75,194
136,546
88,074
50,629
85,948
68,726
130,591

3.09
21.92
4.86
8.19
6.42
6-57
11.93
7.69
4.42
7.51
6.00
11.40

7,747
15,452
7,973
7,277
6,837
6,335
12,247
8,593
5,092
7,6l4
5,081
15,420

1,144,924

100.00

106,173

Fed. Res.
Bank Business

From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s c o
TOTAL

War
Finance Corp,
Business

To t a l
43,10s
266,420
63,575
101,003
80,396
82,029
*148,793
96,672
55,721
93,562
73,807
146,011

—

-

—
-

-

—
-

-*

1,251,097

-

Board

291,193

114,016

277

405,486

Total

1,436,117

220,189

277

1,656,583

Percent of T o t a l

86.69$

13.29#

,02#

Bank Business 1,436,117 words or SG.Jl'p
Treasury Dept.
220.189
"
" 11.29/o
TOTAL

1,656,306

"

" 100. OOf.
(*) These p e r c e n t a g e s used i n c a l c u l a t i n g t h e
pro r a t a share of l e a s e d wire expenses a s
shown on t h e accompanying s t a t e m e n t ( 4 l l 2 - b )

FEDERAL RESERVE BOARD,
Washington, D. C.
J u l y 11, 1924.




REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM JUNE, 1924.

Name of Bank

O p e r a t o r s ' Operators' Wire
S a l a r i e s Overtime
Rental

Boston
$ 250.00
1,422.65
New York
200.00
Philadelphia
440.00
CIeveland
Richmond
315.00
Atlanta
255.00
Chicago
(#)U,97S.3l
S t . Loui s
251.00
Minneapolis
297.96
Kansas City
346.64
Dallas
251.00
San F r a n c i s c o
38O.CO
Fed. Res. Board
TOTAL

$9,387.56

Total
Expense

X-4ll2-b

Pro Rata
Share of
Total
Expense

Credits

418.49
252.00 $
1,422.65
3,333-68
200.00
854.55
440.00
1,337-11
1,078.05
315.00
1,170.60
255.OO
4,978.31 (*>2,389.67
1,417.62
251.00
661.12
297.96
1,282-92
346.64
251.00
1,050.92
380.00
2,093.64

;
3

2.00

252.00 $
670.49
1,422.65
4,756.33
200.00
1,054.55
44o.oo
1,777.11
315.00
1,393.05
1,425.60
255.00
2,588.64
4,978.31
1,668.62
251.00
959-08
297.96
346.64
1,629.56
251,00
1,301,92
38O.OO
2,473.64
$17,013.85 17,013.35

$

$

2,00

$17,013.S5$26,403.41
(a)4.704.82
$21,698.59

$9,389-56

$

$21,698.59

(#) Includes s a l a r i e s of Washington o p e r a t o r s .
(*) C r e d i t .
( a ) Received $4700/00 from t h e Treasury Dept. and $4.82 from
War Firanbe Corporation covering b u s i n e s s f o r t h e month of June, 1924.
(&) Amount reimbursable t o Chicago
FEDERAL RESERVE BOARD,
Washington, D. C.
J u l y 11, 1924.




Payable to
Federal
Reserve
Board

$14,698.70
W2.189.67
$12,309.03

* £29
THEASTIR Y DEPARTMENT
O f f i c e of the S e c r e t a r y
WASHINGTON
J u l y 9, 1924.

X-4113

The Governor
Federal Reserve Board.
Sir:
You a r e hereby advised t h a t the Department has r e f e r r e d to the Disbursing
Clerk, Treasury Department, f o r payment, the account of the Bureau of Engraving
and P r i n t i n g f o r preparing Federal reserve notes during the p e r i o d June 23 to
June 30, 1924, amounting t o $4,440. 00, as f o l l o w s , Federal Reserve Notes, Series 1914
|5
32,000
34,000
11,000
—
11,000
10,000
96,000

Boston
New York
Philadelphia
Cleveland
Chicago
San Francisco

|10
3,000
—
—
10,000
—
2,000
15,000

£20

Total

7,000
—
—
—
—
—.
7,000

42,000
34,000
11,000
10,000
11,000
12,000
120,000

120,000 sheets a t $37 per M . . . . .

$4,440.00

The charges a g a i n s t t h e several Federal Reserve Banks a r e as f o l l o w s , Sneets

Compensation

Boston
000 $ 882.00
New York
000
714. 00
Philadelphia . . . • 11, 000
231. 00
Cleveland
. i o , 000
210.00
. 11, 000
231,00
San Francisco
. 12, 000
252. 00
120, 000 2,,520. 00

Plate
Printing

Materials

$ 178. 50
$ 409. 50
144. SO
331. 50
46.75
107. 25
97. 50
42. 50
46,75
10?. 25
51.00
117. 00
$510. 00 $1,170.00

Inc. Compensation
$ 84.00
68. 00
22. 00
20.00
22. 00
24. 00
$240. 00

Total
$ 1,554. 00
1,258. 00
407. 00
370. 00
40?. 00
44<±. 00
$4,44 0. 00

The Bureau a p p r o p r i a t i o n s w i l l be reimbursed i n the above amount from tne
i n d e f i n i t e a p p r o p r i a t i o n "Preparation and Issue of Federal Reserve Notes, Reimbursable" , and i t i s r e q u e s t e d teat your board cause sucn i n d e f i n i t e approp r i a t i o n to be reimbursed i n l i k e amount.
Respectfully,
S. R. Jacobs,
Deputy Commissioner.




FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS
For Immediate Release.
4:30 o ' c l o c k . p . m .

,

J u l y 1|), 1924.
X-4114

The Federal Reserve Board announces t h a t t h e
Federal Reserve Bank of Dallas has reduced i t s rediscount
r a t e froip 4g^ t o 4£ on a l l c l a s s e s of paper of a l l mat u r i t i e s , e f f e c t i v e immediately.




I

CM

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD

X-U115
J u l y 16, 1924,

Subject:

A d d i t i o n a l holiday during J u l y .

Dear S i r :
R e f e r r i n g t o the Board's l e t t e r X-U097. concerning
h o l i d a y s during J u l y , we a r e .now advised t h a t t h e F e d e r a l Reserve Bank of D a l l a s , t o g e t h e r with i t s El Paso and Houston
Branches, w i l l be closed on Saturday, J u l y 26th, account P r i mary E l e c t i o n Day.
T h e r e f o r e , those o f f i c e s w i l l not p a r t i c i p a t e i n
e i t h e r the r e g u l a r Gold Fund Clearing or the Federal Reserve
Note Clearing of t h a t d a t e , J u l y 26th. Please include your
c r e d i t s f o r J u l y 26th with your c r e d i t s f o r July 23th f o r
t h o s e o f f i c e s i n your Gold Fund Clearing telegrams of J u l y 28th,
and make no shipment of D a l l a s Federal Reserve Notes, f i t or
u n f i t , t o t h a t o f f i c e or t o Washington, r e s p e c t i v e l y , on d a t e
of h o l i d a y .
Kindly n o t i f y . Branches»
Yours very t r u l y ,

J . C. N o e l l j
Assistant Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.




'•

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

,

x-4n6

J u l y 15, 1924,

SUBJECT:

Increased cost of copies of r e p o r t s of examinations of
National banks.

Dear S i r :
At the May, I92U Conference of Governors, c o n s i d e r a t i o n
was given t o a proposal of the Comptroller of the Currency t o i n crease from $4.50 t o $10.00 t h e charge made by h i s o f f i c e f o r copi e s of r e p o r t s of examinations of National banks f u r n i s h e d t o Fede r a l r e s e r v e banks. The Conference terminated i t s d i s c u s s i o n of
'the question with the understanding t h a t t h e Comptroller would submit h i s proposal to the Federal Reserve Board with a view t o having some d e f i n i t e p l a n agreed upon by the Board and n o t i c e thereof
forwarded to the reserve banks.
The Board, a t i t s meeting today, formally considered t h e
Comptroller's proposal and adopted the following r e s o l u t i o n :
"Counsel having advised the Board t h a t t h e r e i s
no law r e q u i r i n g the Comptroller of the Currency to
f u r n i s h copies of examination r e p o r t s to Federal r e serve banks and t h a t Federal r e s e r v e b a n t s may l a w f u l l y
purchase such copies from the Comptroller;
Be I t Resolved, t h a t the Federal Reserve Board
has no o b j e c t i o n t o the purchase of such copies by Fede r a l r e s e r v e banks a t p r i c e s to be agreed upon from
time to time between t h e banks and t h e Comptroller."
Very t r u l y yours,

Walter L. Eddy,
Secretary.

TO GOVERNORS OF ALL F. R. BANKS.




C-l

2

( C o p y )
X-4117
Supreme Court
of Rhode I s l a n d
Herbert L. Carpenter, Atty. Gen.
M. P. No. 417

v.
Aquidneck National Bank
OPINION

S1EETLAND, C. J . The above e n t i t l e d proceeding i s an
information i n the nature of quo warranto, prosecuted by the
Attorney General f o r and i n behalf of the S t a t e .

Therein the

Court i s informed t h a t t h e defendant although p r o h i b i t e d by
the laws of t h i s s t a t e has been and i s , by u s u r p a t i o n , e x e r c i s i n g
the powers of an executor, and a l s o has been and i s a c t i n g as
t r u s t e e , and i n other f i d u c i a r y c a p a c i t i e s .

The informant prays

t h a t judgment be entered a g a i n s t the defendant excluding and
o u s t i n g i t from the f u r t h e r exercise of such powers.
In i t s p l e a the defendant admits t h a t i t i s a c t i n g as
executor and a s t r u s t e e a s a l l e g e d i n the information; but s e t s
up t h a t i t i s not a c t i n g in contravention of the laws of t h i s
s t a t e ; because such laws authorize and permit t h e e x e r c i s e of
s i m i l a r powers by t r u s t companies organized i n the s t a t e , which
t r u s t companies compete with n a t i o n a l banks l o c a t e d i n the s t a t e .
For support of i t s p l e a the defendant r e l i e s upon the p r o v i s i o n s
of the Federal Reserve Act of December 23, 1913, Section I I ,




L
-2-

< ' ^ -9
•

x-4117

s u b - s e c t i o n k, as amended September 26, l g i S , c o n f e r r i n g upon
t h e Federal Reserve Board a u t h o r i t y "To grant by s p e c i a l p e r mit to n a t i o n a l banks applying t h e r e f o r , when not i n contravent i o n of S t a t e or l o c a l law, t h e r i g h t t o a c t as t r u s t e e , execut o r , a d m i n i s t r a t o r , r e g i s t r a r of stocks and bonds, guardian of
e s t a t e s , a s s i g n e e , r e c e i v e r , committee of e s t a t e s of l u n a t i c s ,
or in any other f i d u c i a r y capacity in which S t a t e banks, t r u s t
companies, or o t h e r corporations which come i n t o competition
with n a t i o n a l banks a r e permitted to act under the laws of t h e
S t a t e i n which the n a t i o n a l bank i s l o c a t e d .

Whenever t h e

laws of such S t a t e a u t h o r i z e or permit the e x e r c i s e of any or
a l l of the foregoing powers by S t a t e banks, t r u s t companies, or
o t h e r c o r p o r a t i o n s which compete with n a t i o n a l banks, the g r a n t ing t o and the e x e r c i s e of such powers by n a t i o n a l banks s h a l l
not be deemed to be i n contravention of S t a t e or l o c a l law w i t h i n the meaning of t h i s A c t . "
The defendant shows t h a t i n conformity with t h e Federal Re- .
serve Act a s amended i t has been granted by t h e Federal Reserve
Board the r i g h t to a c t , under the r u l e s of the board, as t r u s t e e ,
executor, a d m i n i s t r a t o r or i n any other f i d u c i a r y c a p a c i t y i n
which t r u s t companies which come i n t o competition with i t a r e p e r m i t t e d t o a c t under the lc.ws of the S t a t e of Rhode I s l a n d .
By t h e p r o v i s i o n s of the s t a t u t e s of t h i s s t a t e , now Chapt e r 271, General Laws 1923, a t r u s t company, e s t a b l i s h e d in




X-4H7
accordance with our laws and which has conformed t o t h e regul a t i o n s t h e r e i n p r e s c r i b e d , i s empowered, among other t h i n g s ,
t o accept and execute a l l t r u s t s committed to i t by any p e r son, c o r p o r a t i o n or court of t h i s s t a t e , or of the United S t a t e s ,
and t o accept and execute the o f f i c e of executor, a d m i n i s t r a t o r , guardian of the e s t a t e and other o f f i c e s , i n the chapter
named, having s i m i l a r f i d u c i a r y c h a r a c t e r .

Any court of p r o -

b a t e i n t h i s s t a t e i s empowered i n i t s d i s c r e t i o n t o appoint
such a t r u s t company t o e i t h e r of said o f f i c e s of t r u s t .

The

power t o act i n such f i d u c i a r y capacity i s not conferred by
our law upon a s t a t e bank, savings bank, or any other c o r p o r a t i o n
in t h i s , s t a t e ; and probate courts a r e without j u r i s d i c t i o n under
our s t a t u t e s t o appoint any corporation except such a t r u s t company t o t h e o f f i c e s of executor, a d m i n i s t r a t o r , guardian or t h e
like.
Ihen a n a t i o n a l bank has the permission of the Federal Reserve Board, Congress has conferred upon such bank a u t h o r i t y to
a c t in a f i d u c i a r y capacity, and the a u t h o r i t y to so a c t becomes
a p a r t of t h e corporate powers of the bank.

Without q u e s t i o n

a n a t i o n a l bank can e x e r c i s e such corporate powers i n t h i s
s t a t e when t h e i r e x e r c i s e i s not in contravention of our domestic law.

C e r t a i n of t h e corporate powers which Congress has

thus c o n f e r r e d ;upon n a t i o n a l banks r e l a t e t o t r u s t s which
a r i s e i n connection with o f f i c e s r e q u i r i n g f o r t h e i r e x e r c i s e t h e
appointment of a probate c o u r t .

Save a s such t r u s t s we see no

reason t o question t h a t a n a t i o n a l bank may e x e r c i s e i n t h i s s t a t e




-4-

x-4117

i t s corporate powers of a f i d u c i a r y n a t u r e which i t has acquired
i n conformity with the act of Congress.
In Aquidneck Hational Bank

Jennings , 44 R. I . 435, the

defendant h e r e , in an attempt t o place i t s e l f on a p a r i t y w i t h
t h e t r u s t companies of the s t a t e , sought by irandarnus t o compel
the s t a t e t r e a s u r e r t o accept from i t United S t a t e s bonds i n a
c e r t a i n amount, t o be held by the t r e a s u r e r a s s e c u r i t y f o r t h e
performance by t h e defendant of i t s d u t i e s i n a f i d u c i a r y capacity.

The Federal Heserve Act provides t h a t when t h e laws of

a s t a t e r e q u i r e t h a t a t r u s t company of such s t a t e s h a l l deposit
s e c u r i t i e s f o r t h e p r o t e c t i o n of t r u s t s held by t h a t company,
n a t i o n a l banks in such s t a t e s h a l l be r e q u i r e d t o make s i m i l a r
deposit of s e c u r i t i e s f o r the p r o t e c t i o n of p r i v a t e and court
t r u s t s held by them i n t h e i r f i d u c i a r y c a p a c i t y .

In that

p e t i t i o n f o r mandamus, without passing upon the corporate powers
of t h i s defendant bank to a c t as a t r u s t e e in t h i s s t a t e , the
court denied the p e t i t i o n .

The denial was p r i n c i p a l l y upon t h e

ground t h a t , without the sanction of t h e general assembly, n o t h ing in the Federal Reserve Act can be regarded a s r e g u l a t i n g or
extending the d u t i e s of the t r e a s u r e r as one of the general o f f i c e r s of the s t a t e , and t h a t Congress can not give the n a t i o n a l
banks in t h e s t a t e the r i g h t to demand t h a t t h e general t r e a s u r e r
s h a l l perform f o r t h e i r b e n e f i t the same d u t i e s which, under our
lav/, he performs f o r t r u s t companies in t h i s s t a t e .
In Aauidneck Bank v. Jennings, supra, we have h e l d t h a t




•

-r-5-

X-U117

a n a t i o n a l bank can not be admitted t o an apparent standing
of e q u a l i t y w i t h t r u s t companies.

We can not say, however,

t h a t the e x e r c i s e i n t h i s s t a t e by the defendant bank of i t s
power t o a c t i n a f i d u c i a r y capacity i s i n contravention of our
s t a t e law, save as t o the execution of those t r u s t s which a r i s e
i n p r o b at e proceedings.

In Aquidneck National Bank v . Jennings,

supra, we d e c l a r e d t h a t " t h e devolution of the e s t a t e s of decedents , the c o n t r o l of the property of i n f a n t s and l u n a t i c s ,
the j u r i s d i c t i o n of our probate c o u r t s , and the l e g a l r e g u l a t i o n
of the t r u s t s which aritss i n t h e a d m i n i s t r a t i o n of probate law
a r e m a t t e r s which p e r t a i n exclusively t o the powers of a s t a t e
over i t s domestic a f f a i r s .

Under the s t a t e law no c o r p o r a t i o n

o t h e r than a t r u s t company, organised under t h e Bhode I s l a n d
s t a t u t e , may be appointed executor, a d m i n i s t r a t o r or guardian
by our probate court or may accept and execute the d u t i e s of
such o f f i c e " * * * "

In t h e absence of the express s a n c t i o n of

the general assembly t h e appointment of a n a t i o n a l bank t o execute
the t r u s t s which a r i s e i n probate proceedings, or the attempted
execution of such t r u s t s by a n a t i o n a l bank, would be i n c o n t r a v e n t i o n of our s t a t e law."

In the case b e f o r e us now, where

the matter i s d i r e c t l y p e r t i n e n t t o t h e i s s u e s , we a r e s t i l l of
the same o p i n i o n .

In conformity with i t s conclusion o f t e n s t a t e d ,

the Supreme. Court of the United S t a t e s declared, in T i l t v . Kelsey,
207 U. S. 43, t h a t " i n r e s p e c t to the settlement of the succession
t o p r o p e r t y on death the s t a t e s of the union a r e s o v e r e i g n . n Yonley




-6v . Lavender. 88 U. S. 2J6; United S t a t e s v . Fox.

X-4117
U. S. J13*

In t h e Federal Reserve Act when f i r s t enacted i t was provided
t h a t the Federal Reserve Board nay grant n a t i o n a l banks the r i g h t
to a c t a s t r u s t e e s , executors, a d m i n i s t r a t o r s , guardians, e t c . ,
'•when not in contravention of s t a t e or l o c a l law."
s t i l l remains.

This p r o v i s i o n

In People v . Brady. 271 111*100. the court h e l d

t h a t a u t h o r i t y given "by the Federal Reserve Board t o a n a t i o n a l
bank t o a c t as t r u s t e e or the personal r e p r e s e n t a t i v e of a decedent was i n contravention of the law of I l l i n o i s .

In F i r s t Na-

t i o n a l Bank v . Union Trust Co.. 244 U. S. 4l6, the Supreme Court appeared to recognize the a u t h o r i t y of the court of l a s t r e s o r t of a
s t a t e t o construe the s t a t u t e s of such s t a t e and t o determine
whether such a u t h o r i z a t i o n did contravene the l o c a l law.

Apparently

to meet t h i s s i t u a t i o n , in the i n t e r e s t of n a t i o n a l banks, Congress
i n 1918 amended the Federal Reserve Act by passing the e x t r a o r d i n a r y
amendment which became the l a s t sentence of t h a t p o r t i o n of t h e a c t
quoted above as f o l l o w s :

"Whenever the laws of such S t a t e a u t h o r i z e

or permit t h e e x e r c i s e of any or a l l of the foregoing powers by
S t a t e banks, t r u s t companies, or other corporations which compete
with n a t i o n a l banks, the granting t o and the e x e r c i s e of such
powers by n a t i o n a l banks s h a l l not be deemed to be i n c o n t r a v e n t i o n
of s t a t e or l o c a l law w i t h i n the meaning of t h i s a c t . "

Our s t a t u -

tory p r o v i s i o n s r e g u l a t i n g the j u r i s d i c t i o n of probate courts i n
the i s s u i n g of l e t t e r s testamentary and of a d m i n i s t r a t i o n , and i n




-7-

appointing
/ g u a r d i a n s a r e not of doubtful i n t e r p r e t a t i o n .

x-Uiiy
I t i s the

p r a c t i c e of the Federal Supreme Court t o adopt the c o n s t r u c t i o n
placed upon a s t a t e s t a t u t e by the court of l a s t r e s o r t of t h a t
state.

We f e l t confident t h a t t h e United S t a t e s Supreme Court

would not hold a s v a l i d and c o n s t i t u t i o n a l the amendment of
1918, which assumed a r b i t r a r i l y t o place a l e g i s l a t i v e construct i o n upon s t a t u t e s of a s t a t e , r e g a r d l e s s of t h e i r p o s i t i v e terms,
or the c o n s t r u c t i o n placed upon them by the supreme court of
such s t a t e .

In Aquidneck National Bank v . Jennings. supra T , we

said t h a t "we do not admit the power of Congress t o control t h i s
court i n the c o n s t r u c t i o n of the s t a t e laws of Rhode I s l a n d . "
I t appears t h a t we were not j u s t i f i e d in our confidence as to
the p o s i t i o n which the supreme court would take i n the m a t t e r .
In the r e c e n t case of S t a t e of Missouri v- Duncan, opinion rendered
A p r i l 28, 1924, the United S t a t e s Supreme Court of Missouri, 257 S.W.
784, t h e Supreme Court of Missouri, i n a c a r e f u l l y considered opinion, held that under the probate law of t h a t s t a t e a n a t i o n a l bank
having a ..permit from the Federal Reserve Board could not be appointed and act as executor, and t h a t the e x e r c i s e of such f i duciary f u n c t i o n s i s "in contravention of the law of Missouri, t h e
l e g i s l a t i v e p o l i c y and t h e express s t a t u t e . "
held i n r e l a t i o n t o the amendment of

I9IS,

The court f u r t h e r

t h a t : " I t cannot be

contended that Congress by t h i s amendment took away from the
courts of a s t a t e the r i g h t to i n t e r p r e t i t s own s t a t u t e s and to




-8-

X-4117

determine t h i s p a r t i c u l a r q u e s t i o n . "

Upon review i n the United

S t a t e s Supreme Court i t was h e l d , in a m a j o r i t y opinion, t h a t
notwithstanding the p r o v i s i o n s of the probate law of Missouri
a n a t i o n a l bank having a permit from the Federal Reserve Board
may a c t as an executor if s t a t e t r u s t companies competing w i t h
i t have-that power, and t h a t "the s t a t e can not lay hold of
i t s general control of a d m i n i s t r a t i o n to deprive n a t i o n a l
banks of t h e i r power to compete t h a t Congress i s a u t h o r i z e d to
sustain."

From the m a j o r i t y opinion Mr, J u s t i c e Sutherland

and Mr. J u s t i c e McReynolds d i s s e n t e d .

The vigorous opinion of

Mr. J u s t i c e Sutherland, based upon the former d e c i s i o n s of
the Supreme Court, and the j u s t r e l a t i o n which e x i s t s under the
c o n s t i t u t i o n between the powers of Congress and those of the
s t a t e a u t h o r i t i e s in matters of l o c a l concern, appears to u s
t o be eminently sound and convincing.

In conclusion he says,

"The probate courts of a s t a t e have only such powers as the
s t a t e l e g i s l a t u r e gives them.

They a r e wholly beyond the j u r i s -

d i c t i o n of Congress, and i t does not seem to me t o be w i t h i n
the competency of t h a t body, on any p r e t e x t , to compel such
c o u r t s t o appoint a s ' e x e c u t o r or a d m i n i s t r a t o r one whom the
s t a t e law has declared s h a l l not be appointed,

The p a r t i c u l a r

invasion here sanctioned n^y not be of great moment; but i t i s
a precedent, which, if c a r r i e d to the l o g i c a l extreme, would go
f a r towards reducing the S t a t e s of the Union to the s t a t u s of
mere geographical s u b d i v i s i o n s .

The case i s one, to use the

phrase of Mr. J u s t i c e Brewer i n Fairbank v . United S t a t e s . 181




-9-

x-4117

U. S. 283, 291-2, f o r t h e a p p l i c a t i o n of t h e maxim obsta p r i n c i p i i s . not de_ minimia non curat l e x . "
The f i n a l determination of t h e c o n s t i t u t i o n a l v a l i d i t y of
congressional a c t i o n i s in the Federal Supreme Court,

The matter

presented here i s in a l l r e s p e c t s i d e n t i c a l with t h a t b e f o r e
the Supreme Court of Missouri and t h e United S t a t e s Supreme
Court in t h e cases we have j u s t considered.

In t h e case b e f o r e

us we are constrained to be governed by t h e m a j o r i t y opinion i n
S t a t e of Missouri v . Duncan, supra.

Therefore our d e t e r initia-

t i o n i s t h a t the defendant should not be ousted from the f u r t h e r
exercise of the power a l l e g e d i n the information.
Judgment i s entered f o r t h e defendant.




C.

( C o p y )
The Commonweal tb-At1ant i c National Bank of )
Boston, P e t i t i o n e r ,
)
The F i r s t National Bank of Boston,
Petitioner
Middlesex. EssexPresent:

)

Argued December 14, 1923.

f'Cc'

X-1+11S

Supreme vU&ifcial C'.-urt of
Massachusetts.
Opinion f i l e d June 14, 1924.

RUGG, C.J. , BRALEY, CBOSBY, PIERCE ,& CARROLL, JJ .

PROBATE COURT, J u r i s d i c t i o n . WILL, I d e n t i t y of c o r p o r a t i o n d e s i g nated as executor. TRUST COMPANY. NATIONAL BANK. EXECUTOR AND
ADMINISTRATOR.
Appeal by the p e t i t i o n e r , The Commonwealth-Atlantic National Bank of Boston,
from a decree, entered i n the Probate Court for the county of Middlesex, by
order of LEG-GAT, J . , dismissing a p e t i t i o n f o r proof of the w i l l of Edward
E. Parks, l a t e of Belmont, and t&e appointment of the p e t i t i o n e r and the
widow of the t e s t a t o r as executors; also a r e s e r v a t i o n and r e p o r t by WHITE, J . ,
of a p e t i t i o n by The F i r s t National Bank of Boston for the proof of the w i l l
of B. Parker B a bbidge, l a t e of Salem, and the appointment of the p e t i t i o n e r
as executor.
RUGG, C. J . These two cases present the same fundamental q u e s t i o n .
Each i s a p e t i t i o n , by a n a t i o n a l banking a s s o c i a t i o n p o s s e s s i n g a s p e c i a l
permit to act as executor of w i l l s uni er Act of Sept ember 26, 1918, c . 177,
Sec. 2, 40 U.S. S t s . at Large, 967, amending c. 6, Sec. 11 (k) of the Federal
Reserve Act of December 33, 1913) 38 U. S. S t s . a t Large, 262, f o r 1he proof
of a will of a deceased r e s i d e n t of t h i s Commonwealth and t h e issuance of
l e t t e r s testamentary to i t , where i n the instrument o f f e r e d f o r probate as the
w i l l there was named as executor a then e x i s t i n g Massachusetts t r u s t company
which l a t e r than the date of the said instrument became converted i n t o a
n a t i o n a l bank under the p r o v i s i o n s of Rev. S t s . of U. S. See* 515*+, and
t h e r e a f t e r consolidated with another n a t i o n a l bank under the c h a r t e r of su&t
other national bank with the approval of t h e comptroller of t h e currency, i n t o
one national banking a s s o c i a t i o n , in conformity with Act of Congress of
November 7, 1918, c . 209, ^0 U. B. S t s . a t Large, 1043, such consolidated
n a t i o n a l banking a s s o c i a t i o n b e i n g the p e t i t i o n e r - In one case t i e n a t i o n a l
bank i n t o which the t r u s t company was converted was granted a s p e c i a l permit
under the n a t i o n a l bank law to a c t as executor before i t s c o n s o l i d a t i o n with
the other n a t i o n a l bank, and i n t h e other case i t was n o t . We do not regard
t h a t f a c t o r as of s i g n i f i c a n c e i n t h i s connection. The q u e s t i o n i s , whether
such n a t i o n a l bank i s e n t i t l e d to the issuance of l e t t e r s testamentary to i t
as the person named as executor i n the w i l l , although t h e t e s t a t o r named as
h i s executor a S t a t e t r u s t company, which t h e r e a f t e r became converted i n t o a
national bank and s t i l l l a t e r e f f e c t e d a c o n s o l i d a t i o n with the p e t i t i o n e r
under i t s c h a r t e r A trust company organized under the laws of t h i s Commonwealth may be




- 2 -

X-4llg

appointed executor of a w i l l "under the same circumstances, i n the same
manner and s u b j e c t to t h e same c o n t r o l by the c o u r t having j u r i s d i c t i o n of
the same as a . l e g a l l y q u a l i f i e d i n d i v i d u a l . " G.L, c. 172, S e c . . 52- There
i s no s t a t u t e of t h i s Commonwealth touching t h e appointment of a national
bank as executor. By v i r t u e of Act of September 26, 1918, c- 177, .See^ * 2,
40 U. S. S t s . a t Large, 9&7, amending the Federal Reserve Act of December 23,
1913, 38 U. S. S t s . a t Large, 262, c. 6, _,:Sec» 11 (k) , as i n t e r p r e t e d by F i r s t
National Bank of Bay City v» Fellows, 244 U. S. 4 l 6 , ard S t a t e of Missouri v.
Dure an, 266 U. S.
, decided April 28, 1924, the oourts of t h i s Commonwealth are r e q u i r e d to appoint national banks a s executors upon the ssrae cond i t i o n s as they would appoint t r u s t companies organized under the laws of t h i s
Commonwealth. Of course we a c c e p t , as we a r e bound to accept, t h a t p r i n c i p l e
i n a l l i t s amplitude and with a l l i t s i m p l i c a t i o n s . That p r i n c i p l e does not
reach to the f a c t s here presented. I t seems to us to have no c o n t r o l l i n g
e f f e c t on the p r i n c i p l e on which the cases 31 bar ought to be decided /
Express and d e t a i l e d p r o v i s i o n i s made by U- S. Rev- S t s . ;Sec. 5154,
for the conversion of a State bank i n t o a n a t i o n a l banking a s s o c i a t i o n . There
has been compliance with a l l provisions of t h a t act. and the issuance of the
c e r t i f i c a t e to t h a t e f f e c t by the comptroller of the currency i n each c a s e .
There i s now no p r o v i s i o n in our s t a t u t e s , such as formerly e x i s t e d , a u t h o r i z i n g a S t a t e bank or t r u s t company to become converted into a n a t i o n a l bank.
Our e a r l i e r s t a t u t e s on t h a t s u b j e c t were repealed by Pub. S t s . c . 224. That
i s not a d e c i s i v e consideration- We a t t r i b u t e no weight t o i t because in
Caeey v- G a l l i . 94 U'. S. 673, i t was said a t 678 t h a t "No a u f i o r i t y from the
S t a t e was necessary to enable the bank so to change i t s o r g a n i z a t i o n - The
option to do t h a t was given by the f o r t y - f o u r t h s e c t i o n of the Banking Act of
Congress, 13 S t a t . 112. The power there conferred was ample, and i t s v a l i d i t y
cannot be doubted. The act is s i l e n t as to any assent or permission by t h e
S t a t e - I t was as competent f o r Congress t o a u t h o r i z e the transmutation as to
c r e a t e such i n s t i t u t i o n s o r i g i n a l l y . " That p r o p o s i t i o n must be regarded a s
s e t t l e d and c o n t r o l l i n g i n a l l cases to which i t i s a p p l i c a b l e .
I t i s provided by U. S. Rev. S t s . Sefc. - 5154, as amend ed by the Act of
December 23, 1913, c- b, ge"C-. 8 , 38 U- S. S t s . at Large, 258, 259, t h a t upon
the conversion of the S t a t e bank into the n a t i o n a l bank, the l a t t e r "shall
have the same powers and p r i v i l e g e s , and shall be s u b j e c t to the same d u t i e s ,
l i a b i l i t i e s , and r e g u l a t i o n s , i n a l l r e s p e c t s , as s h a l l have been prescribed
by the Federal Reserve Act and by the national banking Act f o r a s s o c i a t i o n s
o r i g i n a l l y organized as n a t i o n a l banking a s s o c i a t i o n s . "
The f o r c e and e f f e c t of the f e d e r a l s t a t u t e s concerning t h e conversion
of a State bank i n t o a national bank have been adjudged i n several c a s e s . I t
was held in A t l a n t i c National Bank v. H a r r i s , 118 Mass. 147, an a c t i o n of
contract on a claim running t o a S t a t e bank which had been converted i n t o the
p l a i n t i f f national bank, t h a t the completion of t h e conversion without f u r t h e r
action c a r r i e d to the national bank by o p e r a t i o n of law the r i $ i t to a l l the
p r o p e r t y , and the assignment and t r a n s f e r of a l l personal property and r i g h t s
of a c t i o n and t h e l i a b i l i t y to pay a l l debts of the S t a t e bank. The case of
Metropolitan National Bank v . C l a g g e t t , l 4 l U» S. 530, was an a c t i o n brought
on b i l l s issued by a S t a t e bank a g a i n s t the national bank i n t o which i t had
been converted, The a c t i o n was in t h e nature of a c o n t r a c t . I t was held
at
the change or conversion did not c l o s e t h e business of banking by t h e S t a t e




-3-

X-411S

i n s t i t u t i o n , "nor d e s t r o y i t s i d e n t i t y or i t s corporate e x i s t e n c e , "but simply
r e s u l t e d i n a < n t i n u a t i o n of t h e same body with the same o f f i c e r s and s t o c k D
h o l d e r s , the same p r o p e r t y , a s s e t s and tanking business under a changed j u r i s d i c t i o n ; t h a t i t remained one and t h e same bank and went on doing business
u n i n t e r r u p t e d l y . " In Michigan Insurance Bank v. Eld red. IU3 U. S, 293>
a c t i o n was brought on a judgment- With r e f e r e n c e t o t h e e f f e c t of the conv e r s i o n i t was said t h a t the S t a t e bank had "become a national bank and i t s
name had been changed accordingly without a f f e c t i n g i t s i d e n t i t y or i t s r i g h t
to sue upon o b l i g a t i o n s or l i a b i l i t i e s incurred to i t by i t s former name."
The e f f e c t of fee consolidation of t.ro n a t i o n a l banks i s s t a t e d i n Act
of Congress of November 7> 1918, c- 209> :Sec- 2, 40 U. S. S t s . a t Large,
104-3, i n these words: "And a l l t h e r i g h t s , f r a n c h i s e s , and i n t e r e s t s of t h e .
said national bank so consolidated i n and t o every species of property ,
personal and mixed, and choses in a c t i o n thereto belonging, s h a l l be deemed
to be t r a n s f e r r e d to and v e s t 3d i n such n a t i o n a l bank i n t o which i t i s consolidated without any deed or other t r a n s f e r , and the said consolidated
n a t i o n a l bank shall hold and enjoy t h e same and a l l r i g h t s of p r o p e r t y , f r a n chises , and i n t e r e s t s i n t h e same manner and to the same e x t e n t a s was held
and enjoyed by the n a t i o n a l bank so consolidated t h e r e w i t h . " So f a r as we
are aware there has been no i n t e r p r e t a t i o n of t h i s s t a t u t e by the Supreme
Court of the United S t a t e s - We do not regard i t necessary f o r t h e purposes
of t h i s case to make a c r i t i c a l a n a l y s i s of t h e meaning of t h i s s t a t u t e . I t
may be assumed t h a t i t s purpose was to continue the i d e n t i t y of t h e old bank
i n the bank i n t o which i t i s c o n s o l i d a t e d . See P r o p r i e t o r s of Locks & Canals
v- Boston & Maine R a i l r o a d , 245 Mass. 52, 58, 59 and cases t h e r e c o l l e c t e d ,
City National Bank v. Phelps. 97 N. Y. 44, Matter of Ber gdorf, 206 N. Y- 309 >
Chicago T i t l e & Trust Co - v . Z ins er , 264 111. 31. Chicago T i t l e & Trust Co. v.
Doyle. 259 111- 4g§, Coffey v . National Bank of S t a t e of Missouri, 46 Mo - l 4 o .
The record does not d i s c l o s e to what extent the r e s p o n s i b l e management ,
the d i r e c t o r s and e x e c u t i v e o f f i c e r s of e i t h e r of the o r i g i n a l t r u s t companies
i s continued in t h e p e t i t i o n i n g n a t i o n a l bank. The c a p i t a l stock of each
p e t i t i o n e r i s l a r g e l y i n excess of t h a t of t h e o r i g i n a l t r u s t company. I n ferences of important changes in executive c o n t r o l mi g i t be warranted by t h i s
f a c t . This circumstance is n o t regarded 3s d e c i s i v e .
The naming of t h e t r u s t company a s executor in the w i l l was not a t h i n g
which, under the terms of t h e s e v e r a l s t a t u t e s , passed a s p r o p e r t y or an
a s s e t when the t r u s t company was converted i n t o a n a t i o n a l bank or when t h a t
bank was consolidated i n t o the p e t i t i o n e r . The d e s i g n a t i o n i n a w i l l of
one as executor does not confer a p r o p e r t y r i g h t upon t h e person so d e s i g nated. However precious may be the mark of confidence bestowed by such nomin a t i o n , i t does not anount to p r o p e r t y . There i s nothing tangible about i t .
Nothing v e s t s in a person so nominated by t h e mere execution of t h e w i l l .
I t can stand on no f i r m e r ground than a devise or bequest i n the w i l l of a
l i v i n g person- The w i l l i s ambulatory and may be charged, revoked or canceled
by t h e maker a t any time during h i s l i f e . Even under the s t r i c t r u l e s of the
common law as to the d i s q u a l i f i c a t i o n of witnesses on t h e ground of i n t e r e s t ,
i t was held t h a t an executor who was not a l e g a t e e misfit be a witness to
prove the execution of the w i l l and the s a n i t y of t h e t e s t a t o r - He only
became d i s q u a l i f i e d by accepting the t r u s t and thus rendering himself l i a b l e
under the s t a t u t e t o t h e p o s s i b i l i t y of c o s t s . Sears v . Dillingham, 12 Mass.
358, 360. ffyman v. Symmes. 10 A l l e n , 153* Those d e c i s i o n s a r e at variance




X-4l 18
with t h e idea of a p r o p e r t y i n t e r e s t of any n a t u r e a r i s i n g from a designation
as executor. Persons executing a t r u s t of t h i s c h a r a c t e r have been held to
have no such i n t e r e s t in the emoluments l i k e l y t o flow from t h e i r continued a d m i n i s t r a t i o n of the t r u s t as to c o n s t i t u t e them on that ground
persons "aggrieved" by an order t e r m i n a t i n g t h e t r u s t f o r reasons not connacted with t h e i r wrongdoing. Ensign v. Faxon, 224 Mass, 1U5, 150. Hayden
v . Keown. 232 Mass, 259.
The s i t u a t i o n i s that a t r u s t company organized under the laws of t h i s
Commonwealth was named 3 s h i s executor by a man i n executing h i s w i l l * That
t r u s t company became converted f i r s t i n t o a n a t i o n a l bank organized under
the laws of the United States and t h e n that n a t i o n a l bank consolidated into
another n a t i o n a l bank under other laws of #ie United S t a t e s . That l a s t bank
p e t i t i o n s for appointment of executor of t h e w i l l of t h e man, who i n the
meantime has died* There i s no e x p l i c i t provision i n any of the governing
s t a t u t e s to the p r e c i s e e f f e c t t h a t the converted or consolidated n a t i o n a l
bank s h a l l succeed to a l l the p r i v i l e g e s and r i g h t s with respect t o unproved
w i l l s which any of i t s predecessors named a s executors may have had. Since
testamentary r i g h t s a r e derived from l e g i s l a t i o n , the argument would be
strong t h a t a s t a t u t e of t h a t kind by a l e g i s l a t i v e body of competent j u r i s d i c t i o n would be e f f e c t i v e . That question i s not presented on t h i s record.
No such l e g i s l a t i o n e x i s t s i n t h i s Commonweal th» There i s no s t a t u t e vhich
by f ? i r implication covers such a s i t u a t i o n . The t e s t a t o r in h i s w i l l named
a t r u s t company organized under the laws of t h i s Commonwealth to a c t as his
executor* A f t e r he is dead a corporation under a d i f f e r e n t name organized
under the laws of t h e United S t a t e s comes forward aid contends t h a t i t i s
e n t i t l e d to appointment as executor because of the nomination of the t e s t a t o r .
Confessedly i t i s not named in the w i l l . That contention i s grounded on the
p r o p o s i t i o n t h a t the l a s t c o r p o r a t i o n i s the same i n the eye of t h e law as
the corporation named as executor i n t h e w i l l , though bearing now a d i f f e r e n t d e s i g n a t i o n . For many purposes the new c o r p o r a t i o n i s the successor
of the old and continues i t s b u s i n e s s i d e n t i t y There a r e fundamental d i s t i n c t i o n s between a t r u s t company organized
under the laws of t h i s Commonwealth and a n a t i o n a l bank organized under the
a c t s of Congress w i t h r e s p e c t to being e x e c u t o r .
They a r e organized under the laws of d i f f e r e n t j u r i s d i c t i o n s . They owe
a l l e g i a n c e to d i f f e r e n t s o v e r e i g n t i e s . They are c o n t r o l l e d by d i f f e r e n t lawsTrust companies a r e governed in r e s p e c t to t h e i r a d m i n i s t r a t i o n of
t r u s t s , including what they may do &s e x e c u t o r s , by G* L. c. 172, See. 4g
to 59, both i n c l u s i v e , In reviewing these s e c t i o n s i t m i l be convenient
to consider executors and t r u s t e e s together, since the same p r i n c i p l e s govern
and in one of the w i l l s here involved the t r u s t company was named as t r u s t e e
as well a s executor»
A t r u s t company may be appointed executor or t r u s t e e " s u b j e c t to the
same control by t h e court having j u r i s d i c t i o n of the same , as a l e g a l l y
q u a l i f i e d i n d i v i d u a l . " There i s no s i m i l a r p r o v i s i o n i n the a c t s of Congress
on t h i s s u b j e c t . We do not pause to d i s c u s s whether a national bank once
appointed executor can be made so s u b j e c t i n every p a r t i c u l a r * That
question may sometime r e q u i r e d i s c u s s i o n .
There are i n G. L* c» 172,
» 49 to 59> s p e c i f i c l i m i t a t i o n s and
d e f i n i t e d i r e c t i o n s a s to the investment, care and s e c u r i t y of funds so held




X-UllS
"by a t r u s t company. There i s express provision that i t may invest such funds
"in the same way, to the same a x t e n t , and under the same r e s t r i c t i o n s as an
i n d i v i d u a l " i n a l i k e p o s i t i o n . TS*c. 53- These r u l e s a r e f a i r l y well s e t tled f o r t h i s Commonwealth- Harvard College v . Amcry, 9 P i c k . 446. Kimball
v . Whitney, 233 Mass. 321, 331. I t i s matter of common knowledge t h a t d i f f e r e n t r u l e s e x i s t in other j u r i s d i c t i o n s . What r u l e s may be ad opted with r e spect to national banks cannot be f o r e t o l d with c e r t a i n t y - Although i t may be
that , when appointed by our c o u r t s t o ' t r u s t p o s i t i o n s , net ional banks may be
held t.c the same degree of r e s p o n s i b i l i t y as our individual e x e c u t o r s , t h e r e
i s now no p r o v i s i o n on t h i s s u b j e c t in the a c t s of Congress. How f a r the
j u r i s d i c t i o n of Congress over t h i s s u b j e c t by f u t u r e enactments maybe held
to extend i s wholly p r o b l e m a t i c a l .
I t i s provided i n .c5—>c5^ that money, p r o p e r t y or s e c u r i t i e s received
by a t r u s t company in a t r u s t capacity s h a l l be "a special d e p o s i t " ard the
accounts kept s e p a r a t e . "Such funds and t h e investments or loans thereof
s h a l l be s p e c i a l l y appropriated to t h e security and payment of such d e p o s i t s ,
s h a l l not be mingled with the investments of c a p i t a l stock or other money or
property belonging to such corporation* or be l i a b l e for the d e b t s or o b l i gations t h e r e o f . " Similar p r e v i s i o n s in Sac.* 6 l , b2, as to investments in
savings departments of t r u s t companies have oeen i n t e r p r e t e d so a s to be a
genuine p r o t e c t i o n to such s p e c i a l d e p o s i t s - Commissioner of Banks v . Cos mopolitan Trust Co- 24o Mass. 2^4• Commissioner of Banks i n r e Prudential
Trusyb Co • 240 Mass. 478 - I t is provided in Act of December 23, 1913 > c. 6,
Sac. 11 (k) , 38 U. S. S t s . a t Large, 262, that n a t i o n a l banks " s h a l l segregate a l l a s s e t s held i n any f i d u c i a r y capacity from the general a s s e t s of
the bank « .
5"unds - - . held i n t r u s t by the bank awaiting investment s h a l l
be carried in a s e p a r a t e account and shall not be used by the bank i n the conduct of i t s business u n l e s s i t s h a l l f i r s t s e t a s i d e in the t r u s t department
United S t a t e s bonds or other s e c u r i t i e s approved by the Federal Reserve Board."
W do not know how t h i s p r o v i s i o n may be i n t e r p r e t e d . I t s only s i g n i f i c a n c e
e
in t h i s connection is t h a t i t i s m a t e r i a l l y d i f f e r e n t from the governing
s t a t u t e of t h i s Commonwealth r e s p e c t i n g t r u s t companies.
By G- L. c. 172 Sac.
the capital stock of a t r u s t company "with
the l i a b i l i t y of the b lockholders thereunder s h a l l be held a s s e c u r i t y for the
f a i t h f u l performance" of the t r u s t of executor or t r u s t e e - Similar p r o v i s i o n s
Sec.
63, for the p r o t e c t i o n of deposits i n savings departments of t r u s t
cun1j.,3mes have been found to be a genuine s e c u r i t y in case of l i q u i d a t i o n of
a t r u s t company. Commissioner of Banks in r e Prudential Trust Co. 244 Mass.
64. There is no provisi'em3imilar to t h i s in the f e d e r a l s t a t u t e s . There i s ,
however, a clause i n
SOG. 11 (k) to the e f f e c t t h a t , i n t h e event of f a i l u r e
of a bank, "the owners of funds held i n t r u s t f o r investment s h a l l have a
l i e n on bonds or other s e c u r i t i e s so s e t a p a r t (under the clause l a s t quoted
from t h a t s e c t i o n a s c o n d i t i o n for u s i n g t r u s t funds i n i t s b u s i n e s s ) in a d d i t i o n to t h e i r claim a g a i n s t the e s t a t e of t h e b a n k . "
We do not undertake to determine #1 e t h e r the s t a t u t e s of t h i s Commonwealth or t i e f e d e r a l s t a t u t e s a f f o r d g r e a t e r s e c u r i t y i n t h e s e p a r t i c u l a r s
to the e s t a t e of a t e s t a t o r and i t s b e n e f i c i a r i e s . The relevancy of t h i s comp a r a t i v e review of t h e i r several provisions i s that the s t a t u t e s d i f f e r i n ess e n t i a l aspects one from the o t h e r .
The s u p e r v i s i o n of a national bank and i t s p e r i o d i c examinations a r e
under the general d i r e c t i o n of t h e comptroller of the c u r r e n c y under powers




4 V

| ' I'rr PH
• X. %
,:
-6-

X-Ullg

conferred and mandates imposed by Congress . See Rev. S t s . of U, g?
Sec.
5240 as amended by Act of December 2 3 , 1913, c- 6, Sec. 21, 33 U. ' s / t i t s .
a t Large, 271* The s u p e r v i s i o n of t r u s t companies i s vested i n the commissioner of^banks under G. L, c- 167> Soc. 1 t o 11, both i n c l u s i v e . These
p r o v i s i o n s of the s t a t u t e s in the two j u r i s d i c t i o n s a r e divergent i n imp o r t a n t ways The l i q u i d a t i o n of a n a t i o n a l bank in case of f a : l u r e under the f e d e r a l
laws i s d i f f e r e n t i n m a t e r i a l p a r t i c u l a r s from t h a t of a t r u s t company under
the s t a t u t e s of t h i s Commonwealth. Compar9 Rev. Sts - of U. S. S*c. 5234
to 5242, and a c t s in amendment and i n a d d i t i o n , with G- L. c. l b / , 2 2
to 3b.
By G. L. c, 192 Soc. 4, when a w i l l has been proved and allowed, "the
prooate c o u r t s h a l l i^sue l e t t e r s t h e r e o n to the executor named t h e r e i n . . . . "
Our law has held with some s t r i c t n e s s t h a t the person a c t u a l l y named as
executor i s the one to s e r v e - The p r o v i n c i a l and common law p r a c t i c e of
making the executor of a deceased executor the executor of the f i r s t t e s t a t o r
was e a r l y changed. Davis, p e t i t i o n e r . 237 Mass. 47 , 49• The only ground on
which the p e t i t i o n e r in each of t h e s e cases can seek proof of the w i l l and
appointment as executor is t h a t i t i s designated in the m i l as executorNomination of a person to act as h i s executor by one making h i s .will imports
signal t r u s t and confidence i n the p a r t i c u l a r person so named. Such .nominations
with r e s p e c t to n a t u r a l persons as rretter of common knowledge are i n s e r t e d
i n a w i l l because the one executing t h e w i l l reposes s p e c i a l r e l i a n c e upon
the i n d i v i d u a l i n t e g r i t y , s a g a c i t y , c a p a c i t y , good f a i t h , f r i e n d l i n e s s and
sympathy with t e s t a m e n t a r y wishes on t h e p a r t of the s p e c i f i e d person- A t r u s t
company or bank, although a c o r p o r a t i o n , i s not i n t h i s r e s p e c t u t t e r l y impersonal . One making h i s w i l l well may be thought to have a p r e f e r e n c e b e tween such i n s t i t u t i o n s as to t h e one to c a r r y out h i s t e s t a m e n t a r y d e s i r e s .
One naming a c o r p o r a t i o n t o act 3s executor or t r u s t e e cannot rejLy ' upon
continuance of the same management - Capital stock may change hands. O f f i c e r s
may d i e or be dismissed and o t h e r s of widely v a r y i n g c h a r a c t e r i s t i c s and
temperaments be s u b s t i t u t e d . P o l i c i e s may be a l t e r e d . Reputation may
f l u c t u a t e - All t h e s e and l i k e hazards must be taken by a person who nominates
a c o r p o r a t i o n a s h i s executor or t r u s t e e - These f a c t o r s do not c o n s t i t u t e
a change in the l e g a l p e r s o n , however much they may a f f e c t the a c t u a l
character of the i n s t i t u t i o n . I t p i s t be recognized, a l s o , t h a t s i g n i f i c a n t
m o d i f i c a t i o n s may be wrought by t h e law governing or a f f e c t i n g a c o r p o r a t i o n
without i n t e r r u p t i n g i t s continued i d e n t i t y - P r o p r i e t o r s of Locks & Canals v .
Boston & Maine R a i l r o a d , 24$ Mass. 52, 59- The p e t i t i o n e r i n each of t h e c a s e s
a t bar f o r most, perhaps f o r a l l , b u s i n e s s purposes under t i e a u t h o r i t y of
decisions already c i t e d , i s i d e n t i c a l with the t r u s t company of whose p r o p e r t y
and a s s e t s i t has become p o s s e s s e d . Nevertheless, i t seems t o u s t h a t , with
regard to b e i n g executor of the w i l l of a p e r s o n who named the t r u s t company
organized under the laws of t h i s Commonwealth, the p e t i t i o n e r cannot r i g h t l y
be t r e a t e d as t h e p e r s o n so named i n t h e w i l l . The p e t i t i o n e r i s a n a t i o n a l
bank and not a t r u s t company. The p e t i t i o n e r i n each case i s not the person
a c t u a l l y named as executor in the w i l l . I t possesses powers d i f f e r e n t from
those possessed by the person so named. I t i s governed by laws u n l i k e those
c o n t r o l l i n g the kind of c o r p o r a t i o n named i n t h e w i l l . I t is created by
and t h e s u b j e c t of a d i f f e r e n t s o v e r e i g n t y . The p e t i t i o n e r is not governed




-7-

X-411S

by tiie p o l i c y of t h i s Commonwealtb as t o i t s c o r p o r a t e powers, d u t i e s and
r e s p o n s i b i l i t i e s . Those a r e and must <Dntinue to be delimited by a l e g i s l a t i v e body over which t h i s Commonwealth has no j u r i s d i c t i o n . The duty of
c o u r t s commonly i s to c a r r y out tjtie purposes of t e s t a t o r s a s expressed i n
t h e i r w i l l s . This p r i n c i p l e a p p l i e s to t h e appointmeit of e x e c u t o r s .
All these c o n s i d e r a t i o n s lead to the conclusion t h a t the p e t i t i o n e r i s
not hhe "executor named" w i t h i n t h e meaning of those words i n G. L. c . 192,
Soo. 4, i n the instrument o f f e r e d f o r probate as the l a s t w i l l of each
decedent
In The Commonwealth-Atlantic National Bank of Boston, p e t i t i o n e r , the
decree dismissing fee p e t i t i o n i s a f f i r m e d , In The F i r s t National Bank of
Boston, p e t i t i o n e r , a decree may be entered d i s m i s s i n g the p e t i t i o n .
So o r d e r e d .
J- W. Worthen & S. C. Rand, (S. B. Ecker with them,) f o r The Cornnonweal th-Atlantic Nati o r a l Bank of Boston.
C. L. F s v i n g e r , f o r The F i r s t National Bank of Boston.




y

:
>

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

J u l y 17, 192UX-4l20

SUBJECT:

Volunt ary Services*

Bear Sir :
The Federal Reserve Board has 1given c o n s i d e r a t i o n
to and approves of the recommendations contained i n the Rep o r t of t h e Committee on Voluntary Services assumed by the
Federal r e s e r v e banks, as submitted to the Board following
the l a s t Governors' Conference, t h e r e p o r t in question cove r i n g only t h e following s e r v i c e s : Currency and Coin Operat i o n s , Safe keeping of S e c u r i t i e s , and Transfers of Funds.
Very t r u l y y o u r s ,

Walter L, Eddy,
Secretary.

TO GOVERNORS OF F. R. BiNRS




CO

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-4121
J u l y IS, 1924.
SUBJECT:

Bank Holidays during August, 1924.

Dear S i t :
For your information, the following Federal Reserve
Banks and Branc%s# w i l l be closed on d a t e s s p e c i f i e d during
August, 1924, account h o l i d a y s :
Friday

Aug. 1

Denver

Colorado Day

Tuesday

Aug. 5

S t . Louis
Kansas City
Oklahoma City

Primary E l e c t i o n

Thursday

Aug. 7

Memphis
Nashville

)

State Election

Therefore, on the dates i n d i c a t e d , the banks a f f e c t e d
w i l l not p a r t i c i p a t e in e i t h e r the r e g u l a r Gold Fund Clearing
or the Federal Reserve Note Clearing.
Please include your c r e d i t s f o r the banks a f f e c t e d
on each of the holidays with your c r e d i t s f o r t h e following
business day in your Gold Fund Clearing telegrams, and make no
shipments of Federal Reserve Notes, f i t or u n f i t , t o Head Off i c e or to Washington, r e s p e c t i v e l y , on t h e holidays mentioned.
Kindly n o t i f y Branches.
Yours very t r u l y ,

J . C. Noell,
Assistant Secretary,
To Governors of a l l F. R. Banks




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-U122
J u l y IS, 1924,

SUBJECT:

Observance of Holidays.

Dear S i r :
There i s enclosed herewith f o r your information
and guidance copy of an opinion rendered by the General
Counsel of the Federal Reserve Board, and formally concurred
in by the Board, t o the e f f e c t that a Federal reserve bank
may not l a w f u l l y close and suspend a l l banking operations
on any day unless such day i s a l e g a l holiday throughout
i t s Federal reserve d i s t r i c t .
By d i r e c t i o n of the Federal Reserve Board.
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

Enc.

TO THE GOVERNORS AND CHAIRMEN OF AIL F. R. BANKS.




X—4l22—a
SUBJECT: Holidays of Federal Reserve Banks.
Questions have a r i s e n involving the observance by Federal r e s e r v e
banks of l o c a l , S t a t e , or n a t i o n a l holidays and t h i s o f f i c e has been asked t o
prepare a memorandum d i s c u s s i n g the r i g h t of Federal r e s e r v e banks t o close
on such days.
In my opinion a Federal reserve bank may not l a w f u l l y close and suspend a l l banking operations on any day u n l e s s such day i s a l e g a l holiday
throughout i t s Federal r e s e r v e d i s t r i c t . My. reasons f o r t h i s conclusion w i l l
be s t a t e d below.
I t may be argued t h a t i f there i s a l e g a l holiday i n the S t a t e i n which
a Federal r e s e r v e bank i s l o c a t e d , the Federal reserve bank need not t r a n s a c t
any business on t h a t day and w i l l not be held responsible f o r f a i l u r e to
t r a n s a c t b u s i n e s s . This argument i s based on the generally e s t a b l i s h e d p r i n ciple that the laws of a State operate on Federal corporations doing busine ss
t h e r e i n in the same way t h a t they operate upon other persons and corporations
within the S t a t e , u n l e s s such laws ( l ) a r e i n c o n f l i c t with a c t s of Congress
r e g u l a t i n g the Federal c o r p o r a t i o n s , (2) f r u s t r a t e the purpose f o r which the
corporation was created, or (3) discriminate a g a i n s t Federal c o r p o r a t i o n s .
There i s no p r o v i s i o n of Federal lav/ d e a l i n g with Federal r e s e r v e bank h o l i days with which a S t a t e s t a t u t e d e c l a r i n g a S t a t e holiday might c o n f l i c t and
i t can hardly be s a i d t h a t such a s t a t u t e would f r u s t r a t e the purpose f o r
which Federal r e s e r v e banks a r e created, since observance of a holiday i s
not compulsory and f o r t h i s reason the s t a t u t e would not preclude Federal r e serve banks from serving member banks in other S t a t e s of t h e i r r e s p e c t i v e d i s t r i c t s . I t is obvious a l s o t h a t a s t a t u t e d e c l a r i n g a S t a t e holiday would
not d i s c r i m i n a t e a g a i n s t Federal reserve banks. The above argument appears
to be sound in so f a r as concerns t r a n s a c t i o n s within the S t a t e and i t may be
conceded t h a t a S t a t e s t a t u t e a u t h o r i z i n g the c e s s a t i o n of s e c u l a r business
on a p a r t i c u l a r day would excuse a Federal reserve bank l o c a t e d i n t h a t S t a t e
from performing any a c t w i t h i n the S t a t e which was nominally r e q u i r e d to be
done on that day.
Federal r e s e r v e banks, however, a r e q u a s i - n a t i o n a l i n s t i t u t i o n s i n the
sense t h a t the scope of t h e i r operations i s not confined t o a s i n g l e S t a t e
and consequently the r i g h t of a Federal reserve bank to cease a l l operations
on a day which i s a holiday i n the S t a t e of i t s l o c a t i o n cannot be determined
by r e f e r e n c e to the laws of that State a l o n e . Federal r e s e r v e d i s t r i c t s were
expressly c r e a t e d under Section 2 of the Federal Reserve Act without regard t o
State l i n e s , but r a t h e r with regard to the convenience and customary course of
business, and the d i s t r i c t s of a l l Federal reserve banks include p a r t s or the
whole of more than one S t a t e . Moreover, Section 4 of t h e Federal Reserve Act
provides i n p a r t t h a t d i r e c t o r s of Federal reserve banks " s h a l l administer
the a f f a i r s of said bank f a i r l y and i m p a r t i a l l y and without d i s c r i m i n a t i o n in




- 2 -

X-Ul22-a

favor of or a g a i n s t any member bank or banks," so t h a t the o p e r a t i o n s of each
Federal r e s e r v e bank mast be c a r r i e d on with due regard t o a l l i t s member banks
and not merely those i n the S t a t e of i t s l o c a t i o n .
In considering the r i g h t ' o f a Federal reserve bank to close, t h e r e a r e
two main p o i n t s t o be observed: ( l ) The general duty of a Federal r e s e r v e bank
t o give a l l i t s member banks the s e r v i c e s contemplated by the Federal Reserve
Act as the ordinary p e r q u i s i t e s of membership, such a s f u r n i s h i n g currency, extending c r e d i t , discounting paper, e t c . ; (2) The o b l i g a t i o n of a Federal r e serve bank under the Negotiable Instruments Law to perform t h e a c t s i n c i d e n t a l
to c o l l e c t i n g checks and d r a f t s forwarded to i t by i t s member and nonmember
c l e a r i n g banks.
With regard t o the f i r s t point noted above, t h e underlying purpose f o r
which Federal reserve banks were created was to serve a l l the member banks
within t h e i r several d i s t r i c t s by supplying t h e i r currency and c r e d i t r e q u i r e ments. While t h e r e seems t o be no s p e c i f i c p r o v i s i o n of the Federal Reserve
Act r e q u i r i n g Federal reserve banks to f u r n i s h currency or accommodation to
t h e i r member banks a t any p a r t i c u l a r time, i t must be contemplated t h a t these
services should be rendered whenever reasonably needed by the member banks i n
the ordinary course of t h e i r business and c l e a r l y the underlying purpose of
the Act would be f r u s t r a t e d i f member banks in one State were deprived of the
p r i v i l e g e s of membership merely because of a holiday in some o t h e r State in
which they were i n no way concerned. If f o r example, a member bank i n the
D i s t r i c t of Columbia, where t h e r e was no holiday, r e q u i r e d immediate accomodat i o n and was unable to obtain i t because the Federal Reserve Bank of Richmond
had closed i t s doore in observance of a State holiday i n V i r g i n i a , i t can hardl y be doubted t h a t the Federal reserve bank would have been d e r e l i c t i n i t s
duty to serve i t s member banks. The po^nt would be brought out even more f o r c e f u l l y i f the member bank were i n a c r i t i c a l condition and f a i l e d because i t
was unable t o obtain the needed accommodation.
I t must always be remembered t h a t Federal reserve banks a r e n e c e s s a r i l y
c a l l e d upon to t r a n s a c t business in other States than the S t a t e s of t h e i r r e s pective l o c a t i o n s and while a Federal reserve bank may be excused from p e r formance of a c t s w i t h i n the S t a t e because of a holiday t h e r e i n , a c t s to be p e r formed i n other S t a t e s in i t s d i s t r i c t a r e not a f f e c t e d by the h o l i d a y . I t
would seem c l e a r , t h e r e f o r e , both from the standpoint of general l e g a l o b l i g a t i o n and of business policy t h a t a Federal reserve bank, notwithstanding a l o cal State holiday, should not sever i t s contact with member banks of other
S t a t e s , but should r e t a i n s u f f i c i e n t working f o r c e on hand t o care f o r t h e i r
l e g i t i m a t e needs.
With regard to the o b l i g a t i o n s of a Federal r e s e r v e bank i n c i d e n t a l t o
the clearance and c o l l e c t i o n of checks, t h e same l i n e of reasoning a p p l i e s .
Section 194 of the Negotiable Instruments Law, which has been adopted in every
S t a t e except Georgia, provides generally "Where the day, or the l a s t day, f o r
doing any a c t h e r e i n r e q u i r e d or permitted to be done, f a l l s on Sunday or on




# V

f

•' ^ ft

X-4l22-a
a holiday, the a c t may be done on the next succeeding s e c u l a r or business day,*
Wi#% pegard s p e c i f i c a l l y to payment, Section 85 of the Negotiable Instruments
law provides "Every n e g o t i a b l e instrument i s payable a t the time f i x e d ^ h e r e i n
without grace» When the day of maturity f a l l s upon Sunday, or a h o l i d a y , t h e
instrument i s payaole on the next succeeding business day *11 The normal a c t s
required t o be done in c o l l e c t i n g a check or d r a f t or other n e g o t i a b l e i n s t r u ment are demand and presentment f o r payment, and p r o t e s t in case of non-payment.
These a c t s must be done a t the place of payment, which i s o r d i n a r i l y s t a t e d in
the instrument or, i f n o t , i s generally a t the place of business or residence of
the party p r i m a r i l y l i a b l e * If the place of pigment of a check forwarded to a
Federal r e s e r v e bank f o r c o l l e c t i o n i s within the S t a t e i n which the Federal r e serve bank i s l o c a t e d and the due date f a l l s upon a holiday in t h a t S t a t e , the
Federal reserve bank i s excused from the a c t s of demand, presentment and p r o t e s t
under the above quoted provisions of the Negotiable Instruments Law. I f , however, a Federal r e s e r v e bank holds f o r c o l l e c t i o n a check payable i n another
State of i t s d i s t r i c t , where t h e r e i s no holiday, the a c t s i n c i d e n t a l t o c o l l e c t ing the check, being governed by the law of the place of payment, a r e in no way
a f f e c t e d by the holiday in the State of the Federal r e s e r v e bank 1 s l o c a t i o n . In
such a case the Federal reserve bank, although excused from t r a n s a c t i n g business
within the S t a t e of i t s l o c a t i o n , would be g u i l t y of negligence i f i t f a i l e d to
present the check f o r payment or p r o t e s t f o r non-payment in the place where the
check was payable* Since Federal reserve banks normally handle many checks payable without the S t a t e s in which they are located they should be prepared t o
make due c o l l e c t i o n of such checks, i r r e s p e c t i v e of holidays a f f e c t i n g merely
the States of t h e i r s i t u s .
The above general p r i n c i p l e s are in iry opinion equally a p p l i c a b l e to Fede r a l r e s e r v e branch banks, which also should not suspend a l l o p e r a t i o n s u n l e s s
there i s a holiday throughout the t e r r i t o r y served by them.
In reaching the conclusion t h a t a Federal reserve bank may not l a w f u l l y
suspend a l l i t s banking a c t i v i t i e s unless there i s a holiday a f f e c t i n g i t s ent i r e d i s t r i c t , I do not imply that the Federal reserve bank may not properly !
cut down i t s personnel t o meet an expected decrease in the amount of business t o
be t r a n s a c t e d on a c e r t a i n day Because of a holiday i n some p a r t of i t e d i s t r i c t .
This, question i s purely one of i n t e r n a l management and may properly be l e f t to
the d i s c r e t i o n of the Federal reserve banks.




FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS

X-4124

For Release in Morning Papers
Monday, J u l y 25, ig24The following i s a summary of general business and f i n a n c i a l conditions throughout the several Federal Reserve
D i s t r i c t s , based upon s t a t i s t i c s f o r the months of June
and J u l y , as contained in the forthcoming i s s u e of t h e Fede r a l Reserve B u l l e t i n ,
Production of oasic commodities and f a c t o r y employment showed f u r t n e r l a r g e d e c l i n e s during June*

Trade, both a t wholesale and r e t a i l , a l s o

decreased during t h e month and was in smaller volume t h a n a year ago.
PRODUCTION;
The Federal Reserve Board*s index of production in b a s i c i n d u s t r i e s ,
a d j u s t e d t o allow f o r seasonal v a r i a t i o n s , declined about 9 per cent in June
to a point 22 per cent below the l e v e l of the f i r s t two months of the year e
Irbn and s t e e l and cotton manufacturing i n d u s t r i e s continued to show the most
marked curtailment of a c t i v i t y , and decreases were general in other industries.

Factory employment decreased 3 per cent in June, the metal, automobile,

t e x t i l e , and l e a t h e r i n d u s t r i e s r e p o r t i n g the l a r g e s t r e d u c t i o n s i n f o r c e s ,
Value of b u i l d i n g c o n t r a c t s awarded in June was g per cent smaller than i n
May, though k per cent l a r g e r than in June of l a s t y e a r .
Condition of the corn crop on J u l y 1, as r e p o r t e d by the Department
of A g r i c u l t u r e , was the lowest on record f o r t h a t date and i n d i c a t e d a probable
y i e l d about 5^0,000,000 bushels l e s s than l a s t year * Condition of the cotton
crop was r e p o r t e d l e s s s a t i s f a c t o r y than a month e a r l i e r , while f o r e c a s t s f o r
wheat and oats were l a r g e r than in J u n e .




L
*•

-Z~

R-R A

^

.

..

^j)

X-4124

TBABE:
Railroad shipments decreased i n June and were about 15 per cent l e s s
than a year ago, owing t o smaller loadings of a l l c l a s s e s of f r e i g h t except
grain and l i v e s t o c k ,

Wholesale t r a d e showed a f u r t h e r s l i g h t d e c l i n e i n June

and was 11 pgr cent smaller than a year a g o .

Sales of hardware, drugs, shoes,

and dry goods decreased, while s a l e s of g r o c e r i e s and meat incre ase d s l i g h t l y .
Sales of department s t o r e s and chain s t o r e s showed more than the usual seasona l decrease ..during June and were smaller than l a s t y e a r .

Mail order s a l e s i n

June showed l e s s than the usual seasonal d e c l i n e and were l a r g e r than a year
ago.

Department s t o r e s f u r t h e r reduced t h e i r stocks of merchandise and

s l i g h t l y increased t h e i r outstanding o r d e r s .
PRICES:

Wholesale p r i c e s , as measured by t h e index of t h e Bureau of Labor
S t a t i s t i c s , d e c l i n e d more than one per cent in June t o a l e v e l
below the high point f o r t h i s y e a r .

5 P e r cent

P r i c e s of a l l groups of commodities, ex-

cept c l o t h i n g , showed d e c l i n e s and decreases were p a r t i c u l a r l y l a r g e f o r b u i l d ing m a t e r i a l s .

During the f i r s t t h r e e weeks of J u l y quotations on wheat,

corn, and hogs advanced sharply, while p r i c e s of sugar, c o t t o n goods, and iron
and s t e e l products were lower.
BAHK CREDIT:
Commercial loans a t member banks i n leading c i t i e s during June and
the f i r s t two weeks of J u l y remained a t a r e l a t i v e l y constant l e v e l , considerably below the peak reached i n A p r i l , w h i l e investment holdings and loans s e cured by stocks and bonds increased r a p i d l y and c a r r i e d t o t a l loans and i n vestments to the high point f o r the y e a r .




Dezrand d e p o s i t s , owing p a r t l y to

-3-

X-4124

the growth of bankers 1 balances a t f i n a n c i a l c e n t e r s , advanced to a record
level*
At the r e s e r v e banks t h e r e was a continued d e c l i n e in discounts and
an increase in purchases of government s e c u r i t i e s in the open market•

As a

consequence, t o t a l earning a s s e t s in the middle of J u l y were only s l i g h t l y l e s s
than a t the beginning of June * Member bank reserve b a l a n c e s increased r a p i d l y t
r e f l e c t i n g a r e t u r n flow of currency from c i r c u l a t i o n and f u r t h e r imports of
gold; t o t a l d e p o s i t s a t the r e s e r v e banks on J u l y l 6 were l a r g e r t h a n a t any
time since the o r g a n i z a t i o n of the system.
Money r a t e s i n J u l y were comparatively steady but continued t o show a
somewhat e a s i e r tendency*

Discount r a t e s a t t h e Federal Reserve Banks of Kan-

sas City and Dallas were reduced during July from 4 l / 2 t o 4 per cent*




X-U125
FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS
For Immediate

Release

July 26, 1924.

CONDITION OF ACCEPTANCE MARKET.
June 12 to J u l y 9•
Continued easy money r a t e s during the four-week period ending
July 9 were the most s i g n i f i c a n t f a c t o r a f f e c t i n g the acceptance markst.
During the closing weeks in June the c a l l money r a t e continued a t 2 per
cent and a s acceptances were o f f e r e d to y i e l d a s l i g h t l y higher r a t e the
demand was in excess of the supply of new b i l l s coming i n t o the market,
which continued in only moderate volume.

The r e s u l t of the se conditions

was a s u b s t a n t i a l r e d u c t i o n in d e a l e r s ' p o r t f o l i o s in the l a t t e r p a r t of
June and a gradual r e d u c t i o n i n d e a l e r s ' r a t e s from 2 - 5 / 8 per cent b i d
and 2^ per cent o f f e r e d to 2-'l/S per cent bid and 2 per cent o f f e r e d .

Late

in June, however, c a l l money advanced to 2§ per cent and t h i s was immediately r e f l e c t e d i n a very s u b s t a n t i a l f a l l i n g off in t h e demand f o r
b i l l s , while the supply continued in about the same moderate volume.

The

period closed with a s l i g h t increase i n d e a l e r s ' p o r t f o l i o s from the p r e ceding f o u r weeks, but r a t e s were lower.

The closing quotations by

d e a l e r s in Few York f o r b i l l s with 30 to $0 day m a t u r i t i e s were 2 - l / S to
2-1/U per cent b i d and 2 per cent o f f e r e d as compared with 2 - 5 / 3 per cent
b i d and 2§ o f f e r e d f o r t h e period ending June 11.

The demand f o r b i l l s

came p r i n c i p a l l y from banks in t h e l a r g e r centers and t h e volume o f f e r e d
to the r e s e r v e banks was considerably smaller than i n the preceding four
weeks.

B i l l s coming into the market were drawn p r i n c i p a l l y a g a i n s t g r a i n ,

s i l k , sugar, cotton, wool, and p r o v i s i o n s .




FEDERAL RESERVE BOARD

*

(

WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-HD-7
August 1, I92U,
SUBJECT:

Federal Reserve Bank Holidays.

Dear S i r :
The Board has given f u r t h e r c o n s i d e r a t i o n to
the question of the observance by Federal r e s e r v e banks
of h o l i d a y s , as discussed in the Board's c i r c u l a r l e t t e r
X-U122, dated July 18, and in various r e p l i e s t h e r e t o
which have been r e c e i v e d . I t has reached the conclusion
t h a t no Federal Reserve bank or branch bank should c l o s e
f o r business except on Sundays and such holidays as are
generally observed throughout the United S t a t e s and have
come by common custom &nd usage to be regarded as n a t i o n a l
h o l i d a y s . In reaching t h i s conclusion t h e Board was i n fluenced l a r g e l y by a consideration of t h e b a s i c duty of
Federal reserve banks to perform the f u n c t i o n s which a r e
contemplated by the law of t h e i r c r e a t i o n and which necess a r i l y involve a c t i v i t i e s of a nation wide c h a r a c t e r . In
some r e s p e c t s , Federal reserve banks may be a f f e c t e d by
the laws of the S t a t e s in which they are s i t u a t e d . In
many other r e s p e c t s t h e i r operations m y be l i m i t e d to
Federal r e s e r v e d i s t r i c t l i n e s , but fundamentally they were
c r e a t e d t o serve as banks of issue, of d i s c c u n t , and of r e serve f o r the whole n a t i o n , and are the i n s t i t u t i o n s through
which the great m a j o r i t y of the banking t r a n s a c t i o n s of the
country a r e c l e a r e d , and because they a r e e s s e n t i a l l y
n a t i o n a l , r a t h e r than l o c a l , i n s t i t u t i o n s , t h e i r operations
should be conducted with primary regard to t h e i n t e r e s t s
of the n a t i o n as a whole.
You are accordingly advised that the Board w i l l
approve the following days as holidays f o r a l l Federal r e serve banks and branches:




x-4te«
January
1 - New Yearns Day
February 2 2 ' - Washington's Birthday
July
4 - Independence Day
;

Labor Bay
Thanksgiving Day
December 25"- Chri s t r a
Day
As noted i n the Board's c i r c u l a r l e t t e r , X-4122,
the Board w i l l leave to the d i s c r e t i o n of the Federal r e serve banks the question of c u t t i n g down t h e i r personnel on
days when t h e r e i s a l o c a l holiday a f f e c t i n g t h e i r o p e r a t i o n s .
This r u l i n g i s e f f e c t i v e August 1% 1924.
By d i r e c t i o n of the Federal Reserve Board.
Very t r u l y yours,

J . C. Noell,
.Assistant S e c r e t a r y ,

TO GOVERNORS /ND CHAIRMEN OF ALL F. R. BJSNFS,




FEDERAL

E S S E E 7 E BOARD

STATESNT FOR TEF BiSSS
For Immediate Release.
2:30 o ' c l o c k , p. ra.

An .gust 7, Z-QHU,
" X-hl2Q „

The Federal Reserve Board announces that the Federal
Reserve Bank of New York has reduced i t s rediscount r a t e from
3i?/8 to 3CP on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e
August 8 t h .




TBEASICY 3EPABTTC/1T
O f f i c e of
Secretary
lYAS-IIFC-rO^

X--4J.30
'
' '
Au.gu.st 7, 1934.

14.3 Governor
Federal Seserve Board.
Sir:
You c-ra kereoy advised t n a t tn.e Department nas r e f e r r e d t o tne Disbursing
Clerk, Treasury Department, f o r p»yr.3nt, tne account of the Bureau of Engraving ana P r i n t i n g f o r preparing Federal reserve notes durir± £ t n e perioa. J u l y 1
to J u l y 51, IS<4, amounting to $105,570. UO, as xollows:Federal Passive Jo t e s . 1914
|5
Boston.
100,000
New York.
501,000
P h i l a d e l p h i a . . 300,000
Cleveland
100,000
Bio—-ona.,.. . .
—
—
Atl^iOcv
. 185,000
C^ic-^o
*±56,000
ZUisas C i t y , . . 200,000
San Francisco. 276,000
2,119,000

$10
136.000

$20
|50
80,000

130,000

100,000
100,000
—
— 25,000
—
—

flvy
10,000

40,000 •
40,000
—
——
—

—
10,060
— —
25,000
—
266,000 330,000 90,000

Total
326,000
501,000
570,000
240,000
——
25,000
—186,000
456,000
5,000
215,000
—301,000
15,000 2,820,000

2,820,000 sheets a t $33. 50 r e r M*108,570, 00
Tne charges a g a i n s t tne several Federal Beserve Banks a r e as follows:
CoicpenSheets s a t i o n
boston. <»»» . . . . 326,000 $ 5,7 86. oO
8,392.75
Uevv York.
. 501,000
p n i l a d e l p n i a . . . 570,000
10,117.50
Cleveland
4,260. 00
. 2*0,000
RicnnoncL
4-±3.?5
25,000
. 186,000
3,301.50
Atlanta
Cni C VQ «*"•••. 456,000
—^.
8,09-±. 00
Kansas C i t y . . . . 215,000
3,816. 25
5,342. 75
San Francisco. . 301,000
2,820,000 $50,055- 00

Plate
Printing
$ 2,6bb. 68
093.18
4,562. 60
1,963. 20
20*.50
1,521.4.8
3,730.08
1,758.70
2,462.18
$23,067,60

Materials
$ 4,097.82
6,297. 57
. 7,164. 90
3,016. 80
314. 25
2,33d. 02
5,731.92
2,702. 55
3,7 83. 57
$35,447.40

Total
$ 12,551. 00
19,283.50
21,945.00
9,240.00
962. 50
7,161,00
17,556. 00
8,277.50
11,588.50
$105,570. 00

I-e Bureau a p p r o p r i a t i o n s w i l l be reimbursed i n tne aoove amount from the
i n d e f i n i t e a p p r o p r i a t i o n "Preparation &.nd Issue of Federal Reserve Notes, Eeizouraaole", and i t i s requested t n a t your board cause sucn i n d e f i n i t e a p p r o p r i a t i o n to 03 reimbursed i.: l i k e amount.




Respectfully,
(Si :nea)

S. B. Jacobs
Act ing Cottird s s ioner.

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-U132
August lU, I92U.

SUBJECT:

EXPENSE MAIN LINE, Leased Wire System, J u l y , 1924.

Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph s t a t e ments, X-Ul32-a and X-Ul32-b, covering i n d e t a i l o p e r a t i o n s of
t h e main l i n e , Leased Wire System, during t h e month of J u l y ,
1924.
P l e a s e c r e d i t t h e amount payable by your bank i n t h e
general a c c o u n t , T r e a s u r e r , U. S . , on your books, and i s s u e
C/D Form 1, National Banks, f o r account of " S a l a r i e s and Expenses | Federal Reserve Board, Special Fund," Leased Wire System, sending d u p l i c a t e C/D t o Federal Reserve Board.
Very t r u l y y o u r s ,

F i s c a l Agent,
(Enclosures)

To Governors of a l l banks (except Chicago).




X-4l32-a
REPORT SHOWING CLASSIFICATION AND NUMBER OP WORDS
TRANSMITTED OVER M IF LIKE CF THE FEDERAL RESERVE
A
LEASED WIRE SYSTEM FOR THE MONTH OF JULY, ig?U.

Percent of
Total Bank
Business(*)

Treasury
Dept.
Business

War
Finance Corp,
Business

From

Fed. Res.
Bank Business

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas C i t y
Dallas
San F r a n c i s c o

31,095
190,126
43,804
74,251
61,268
70,071
116,990
76,308
44,393
' 75,795
58,909
109,501

11.50

4,792
8,223
5,306
4,648
4,165
4,135
7,656
.5,695
3,028
4,811
3,323
9,688

.952,511

100.00

65,470

18

1,017.999

TOTAL

3.2b
19.96
4.6o
7-80
6.43
7.36

12.28
8.01
4.66
7.96

6.18

Total
35,527
193,349
49,110
73,917
65,433
74,206
124,646
82,003
47,421
80,606
62,232
119,189

—

18
—
—

-

-

Board

279,564

39,038

1024

319,676

Total

1,232,075

104,558

1042

1,337,675

Percent of T o t a l

92.10#

7.82>

.08f,

Bank Business 1,232,075 words or 92.18^
Treasury Dept.
104.558 "
"
7.82^
TOTAL

1,336,633

FEDERAL RESERVE BOARD,
Washington, D. C,
August 14, 1924.




"

" 100.OOf
(*) These p e r c e n t a g e s used i n c a l c u l a t i n g
t h e pro r a t a share of l e a s e d w i r e
expenses a s shown on t h e accompanying
statement ( 4 l 3 2-b) .

REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, JULY, 1924,

Name of Bank

Operators' Operators'
Salaries
Overtime

Boston
$ 250.00
New York
1,549.98
200.00
Philadelphia
440.00
Cleveland
Richmond
315,00
Atlanta
255.00
Chicago
(#)4,807.79
S t . Louis
225.00
Minneapoli s,
298.33
Kansas City
373.79
Dallas
251.00
San F r a n c i s c o
38O.OO
Fed. Res, Board
TOTAL

$9,3^5*89

$

Wire
Rental

-

-

4.00
-

-

$16,999.30
$

4.00

Total
Expense
$

-

$16,999.30

250.OO $
1,549.98
200,00
440.00
315.00
255.00
4,811,79
225.00
298.33
373-79
251,00
380.00
16,999.30

$26,349.19
(a)l.715,0Q
$24,634.10

(#) I n c l u d e s s a l a r i e s of Washington o p e r a t o r s .
(*) C r e d i t ,
( a ) Received $15.09 from War Finance Corp, and $1700.00 from
T r e a s . Dept. covering b u s i n e s s f o r month of J u l y , 1924,
(&) Amount r e i m b u r s a b l e t o Chicago,
FEDERAL RESERVE BOARD,
Washington, D. C»
August 14, 1924.




Pro Rata
Share of
To t a l
Expense
803.07
4,916.97
1,133.17
1,921.46
1,583-97
1,813.07
3.025.07
1,973.19
1,147.95
1,960.87
1,522.39
2,832.92

$24,634.10

X-4l32-b

Credits
$

Payable t<
Federal
Reserve
Board

250.00 $
553.07
l;549.98
3,366.99
200.00
933.17
440.00
1,481.46
1,268.97
315.00
255.00
1,558.07
4,811.79 <*)1,786.72
225.00
1,748.19
849.62
298.33
1,587.08
373.79
251.OO
1,271.39
380.00
2,452.92

$9,349.89

$17,070.93
U ) 1.786.72
$15,284.21

I

Y-,4134

FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS

For immediate r e l e a s e
3:00 o ' c l o c k , p , m.

August l 4 , 1924

The Federal Reserve Board announces t h a t the Federal
Reserve Bank of Cleveland has reduced i t s rediscount r a t e from
4$ to 3!# on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e
August 15th.




* AJ
_
.

< -0 %
L

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-U135
August l 6 , I92U.

SUBJECT:

Charges on Messages r e Telegraphic T r a n s f e r s
of Funds.

Dear S i r :
There i s enclosed herewith, f o r your i n f o r m a t i o n ,
copy of a l e t t e r addressed to one of the Federal r e s e r v e
banks "by the Governor of the Board, with r e s p e c t to the
a c t i o n of t h e bank in a d v i s i n g i t s members t h a t i t w i l l '
absorb t e l e g r a p h i c charges on messages sent by them t o
o t h e r member banks, both w i t h i n and without i t s own d i s t r i c t , i n s t r u c t i n g wire t r a n s f e r s o f funds to the Federal
r e s e r v e bank or i t s branches,
Very t r u l y yours,

J . C . Noell,
Assistant Secretary,
(Enclosure)

To the Governors of a l l Federal r e s e r v e banks.




X-Ur><5-a
August lU, I92U.

Dear Governor —

•

The a t t e n t i o n of the Board has "been c a l l e d t o
your c i r c u l a r l e t t e r of
__ on the subject "Free Telegraphic S e r v i c e , " advising t h a t e f f e c t i v e
, your
bank and i t s branches w i l l absorb t e l e g r a p h i c charges on a l l
messages sent by your member banks in connection v i t h c e r t a i n t r a n s a c t i o n s , among them the f o l l o w i n g :
" ( a ) I n s t r u c t i n g any member bank w i t h i n t h e
i. Federal Be serve D i s t r i c t t o make
wire t r a n s f e r of funds t o us or to
our branches f o r your c r e d i t . .
(b) I n s t r u c t i n g any member "ban!' outside
the
Federal Reserve D i s t r i c t to
make wire t r a n s f e r of funds to us or t o
our branches f o r your c r e d i t in m u l t i p l e s of $100.00."
The Federal Reserve Board has considered t h e
d e s i r a b i l i t y of a Federal reserve bank absorbing such t e l e g r a p h i c
charges and has taken the mattsr up with the Committee on Volu n t a r y Services, which concurs in the view of the Board t h a t
the a b s o r p t i o n by Federal r e s e r v e ban! s of the cost of telegrams
exchanged between member bant s, on any subject , i s net only tind e s i r a b l e but e n t i r e l y unwarranted.
You a r e d i r e c t e d , t h e r e f o r e , t o immediately i s s u e
a c i r c u l a r l e t t e r to your member banks r e s c i n d i n g t h e two p a r a graphs above quoted. Please f u r n i s h the Board, f o r i t s f i l e s ,
with a copy of your l e t t e r .




Very t r u l y yours,

(Signed) D. E. C r i s s i n g e r ,
G o v e r n o r .

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

August 18,1924
X-4136

S u b j e c t : Holiday, Monday, September 1 s t ,
Dear S i r :
In accordance with Board's l e t t e r X-412S, of
August 1,1924, t h e r e w i l l be no Gold Settlement Fund
or Federal Reserve Note Clearing on Monday, September
1 s t , on account of observance of Labor Day, and
Board's books w i l l be closed". P l e a s e advise Branches.
Yours very t r u l y ,

J . C. Noell,
Assistant Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE B/MS




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-4138
August 22, 1924.

SUBJECT:

Employment of Special Counsel in the Case of the
Pascagoula National Bank vs, the Federal Reserve
Bank of A t l a n t a , e t a l .

Dear S i r :
copy of
Bank of
Bank of
f o r the

There i s enclosed herewith, f o r your i n f o r m a t i o n ,
a b i l l of complaint brought by the Pascagoula National
Moss Point, M i s s i s s i p p i , a g a i n s t the Federal Reserve
A t l a n t a , et a l , i n the United S t a t e s D i s t r i c t Court
Northern D i s t r i c t of Georgia.

In view of t h e f a c t t h a t the i s s u e s r a i s e d i n t h i s
case w i l l determine the l e g a l i t y and s t a t u s of t h e par c l e a r ance p l a n of the Federal Reserve System, the Board contemplates
r e t a i n i n g s p e c i a l counsel to defend the s u i t and i s of the opinion t h a t the expense involved should be pro r a t e d among the
twelve Federal r e s e r v e banks, as was done in connection with
previous par clearance c a s e s .
Please advise the Board a t your early convenience of
your bank*s w i l l i n g n e s s to bear i t s p r o p o r t i o n a t e share of t h i s
expense.
Very t r u l y yours,

D. R. C r i s s i n g e r ,
G o v e r n o r .
(Enclosure)

TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS,




X-4131
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA

PASCAGOULA NATIONAL BANK
VS

IN EQUITY

FEDERAL RESERVE BAM OF ATLANTA,
ET AL.

TO THE HONORABLE, THE JUDGES OF THE DISTRICT COURT
OF THE UNITED STATES FOR THE NORTHER!! DISTRICT OF GEORGIA.
The Pascagoula National Bank of Moss Point, w i t h a branch
a t Pascagoula, M i s s i s s i p p i , b r i n g s t h i s b i l l of complaint in i t s own
behalf and in behalf of other banks in l i k e s i t u a t i o n and a l l e g e s
t h e following f a c t s :

1.

P l a i n t i f f i s a National Banking A s s o c i a t i o n under t h e laws
of the United S t a t e s maintaining i t s p r i n c i p a l o f f i c e and place of
b u s in e s s a t Moss P o i n t , M i s s i s s i p p i , and a branch bank a t Pascagoula
M i s s i s s i p p i , as a u t h o r i z e d "under i t s c h a r t e r .

Organization of said

bank and i t s branch was completed under i t s c h a r t e r and i t s business
as a National Bank began on or about the l 4 t h day of March, 1907, and
i t has been continuously operating a s a National Bank ever s i n c e .

2.
In due course a f t e r the enactment of t h e Federal Reserve Act
by Congress, and the organiz a t i o n of the Federal Reserve System
thereunder, p l a i n t i f f became a stockholder i n and a member of the




#

-2-

' 'T

X-U131

Federal Reserve Bank of A t l a n t a , as i t was compelled t o do upon p a i n
of f o r f e i t i n g i t s c h a r t e r a s a National Bank, and has so continued to
the p r e s e n t t i m e .
. 3.
The Federal Reserve Bank cf A t l a n t a i s a banking c o r p o r a t i o n
created and e x i s t i n g under the laws of the United S t a t e s w i t h i t s p r i n cipal o f f i c e i n t h e City of A t l a n t a , Georgia, w i t h i n the Northern Dist r i c t of Georgia, and operates in the Sixth Federal Reserve D i s t r i c t and
i s made a p a r t y defendant t o t h i s b i l l .

I t maintains a branch bank i n

the City of New Orleans, Louisiana, as a p a r t of i t s corporate organizat i o n as provided in the Federal Reserve Act.

4.
Under Section 10 of the Federal Reserve Act t h e r e was c r e a t e d
a Federal Reserve Board, c o n s i s t i n g , under the o r i g i n a l Act, of seven
members, and by an amendment approved June 31 1$22, increased to e i g h t
members, two of whom a r e the Secretary of the Treasury of the United
S t a t e s and the Comptroller of the Currency of the United S t a t e s , f o r the
time being in o f f i c e , a s Ex O f f i c i o members, and t h s remaining s i x memadvice
b e r s are appointed by the President of t h e United S t a t e s by and with the /
and consent of the Senate.
The. Act a l s o provides t h a t the Secretary of the Treasury s h a l l
be ex o f f i c i o chairman of the Board and t h a t the President s h a l l d e s i g nate one of t h e appointed members a s Governor, and another Vice Governor,
of the Board.

The said Board a c t s as an o r g a n i z a t i o n and i s a quasi

corporation having i t s p r i n c i p a l o f f i c e s in the Treasury Building of the




-3-

X-U131

United S t a t e s in the City of Washington, and under said a c t the Board i s
r e q u i r e d to maintain a l o c a l o f f i c e on t h e premises of each of t h e twelve
Federal Reserve Banks c r e a t e d and operating under the Federal Reserve Act,
and t o designate from among Class C D i r e c t o r s , a l l of whom a r e appointed by
the Federal Reserve Board f o r each Federal Reserve Bank, a Federal Reserve
Agent, who i s a l s o Chairman of the Board of D i r e c t o r s of the Federal Reserve Bank where he i s l o c a t e d .

The Federal Reserve Agent a t the defend-

ant Federal Reserve Bank a t A t l a n t a a t the present time i s Joseph A. McCord
and a - p a r t of h i s d u t i e s under the law i s t o maintain a l o c a l o f f i c e of t h e
Federal Reserve Board on the premises of said Federal Reserve lank oi Atl a n t a where he i s required t o , and does, act as the o f f i c i a l r e p r e s e n t a t i v e
of the Board in the performance of i t s f u n c t i o n s under the Act, and especi a l l y of those f u n c t i o n s in the Sixth Federal Reserve D i s t r i c t t h a t opera t e upon p l a i n t i f f , and other member banks in said d i s t r i c t , of which comp l a i n t i s h e r e i n a f t e r made»

5Said Joseph A. McCord r e s i d e s in t h e City of A t l a n t a , w i t h i n the
Northern D i s t r i c t of Georgia, and maintains h i s o f f i c e as Federal Reserve
Agent, as a f o r e s a i d , on the premises of the Federal Reserve Bank of A t l a n t a ,
in the City of A t l a n t a , in the Northern D i s t r i c t of Georgia, as r e q u i r e d b$r
law, and as such i s the o f f i c i a l r e p r e s e n t a t i v e of the Federal Reserve Board
within the S i x t h Federal Reserve D i s t r i c t , as well as Chairman of the Boar:
of D i r e c t o r s of defendant Federal Reserve Bank.
the Federal Reserve Board i s as f 6 l l o w s :




The p r e s e n t personnel of

-b-

X-U13I

A. VJ. Mellon, Ex O f f i c i o , S s c r s v a r y of t h e Treasury,
Chairman
Henry
Dawes, Ex O f f i c i o , Comptroller of t h e Currency.
D. B* C r i s s i n g e r , Governor
Edmund P l a 1 1 V i c e Governor
Adolph C. M i l l e r
Chas* 3. Haniin
Geo, 3* James
Edward H* Cunningham
b*
Said Joseph A« McCord, as Federal Reserve Agent, and s a i d Fede r a l Reserve Board, a s a Board* of which s a i d McCord i s t h e o f f i c i a l
r e p r e s e n t a t i v e in s a i d d i s t r i c t , a r e made p a r t i e s defendant t o t h i s b i l l .
7•
The F e d e r a l Reserve Act f i x e s the s a l a r i e s of t h e personnel
of the Federal Reserve Board and provides f o r t h e payment t h e r e o f by
semi-annual assessments upon t h e twelve Federal Reserve Banks i n p r o p o r t i o n to t h e i r c a p i t a l stock and s u r p l u s , i n c l u d i n g t h e e s t i m a t e d o p e r a t ing expenses of t h e Federal Reserve Board f o r t h e h a l f y e a r succeeding
the l e v y i n g of each assessment, t o g e t h e r with any d e f i c i t c a r r i e d f o r ward from t h e preceding h a l f y e a r .
S»
The F e d e r a l Reserve Board i s c l o t h e d w i t h a u t h o r i t y under
the Federal Reserve Act t o examine such Federal Reserve Bank, t o r e q u i r e t h e F e d e r a l Reserve Banks t o r e d i s c o u n t c e r t a i n d e s c r i b e d commercial paper a t r a t e s of i n t e r e s t t o be f i x e d by the Board; to suspend
any r e s e r v e requirements s p e c i f i e d i n the Act; to s u p e r v i s e and r e g u l a t e the u s e and r e t i r e m e n t of Federal Reserve n o t e s ; t o r e q u i r e each
Federal Reserve Bank t o maintain the r e q u i r e d gold r e s e r v e s a g a i n s t the




-5-

x-4%31

Federal Reserve notes; to c l a s s i f y the several c i t i e s in the country
as Federal Reserve c i t i e s and to r e c l a s s i f y the same; t o suspend or
remove any o f f i c e r or d i r e c t o r of any Federal Reserve Bank^ to r e q u i r e
tne w r i t i n g off of doubtful or worthless a s s e t s upon the books of any
of the several Federal Reserve Banks; to suspend t h e operations of any
Federal Reserve Bank and, when deemed a d v i s a b l e , to l i q u i d a t e or r e r
organize i t ; to r e q u i r e bonds of Federal Reserve agents and make regul a t i o n s f o r the safeguard of c o l l a t e r a l , r e s e r v e notes, money or prope r t y deposited in the hands of such agent; to grant to National Banks
the r i g h t t o a c t as Trustee, Executor, Administrator or R e g i s t r a r of
stocks and bonds; to employ a t t o r n e y s , e x p e r t s , a s s i s t a n t c l e r k s or
other employees deemed necessary t o conduct the business of t h e Board;
and, f i n a l l y , t o e x e r c i s e general supervision over a l l Federal Reserve
Banks created and e x i s t i n g under the terms and p r o v i s i o n s of the Federal
Reserve Act*
9.
P l a i n t i f f i s advised by counsel, and thereupon a l l e g e s t h a t
under t h e l e g a l machinery of the Federal Reserve Act, as h e r e i n b e f o r e
o u t l i n e d , and more f u l l y s e t f o r t h in the Act i t s e l f , of which the Court
w i l l take j u d i c i a l cognizance, t h e r e i s created a "Federal Reserve
System" endowed w i t h a l l the corporate powers necessary t o r e g u l a t e the
National Banks of the United S t a t e s , including the twelve Federal Reserve Banks, t h e primary f u n c t i o n s of which are the establishment of a
f l e x i b l e currency and the s t a b i l i z i n g of c r e d i t s throughout the e n t i r e
system, upon which the Federal Reserve Board i s superimposed as the u l timate and c o n t r o l l i n g d i r e c t o r a t e *




——
6

X-4131

10,
P r i o r t o the passage of t h e Federal Reserve i c t i n 1913»
checks drawn upon "banks in other l o c a l i t i e s than t h a t of t h e payees or
holders of such checks, were customarily c o l l e c t e d through Clearing
Houses or C o l l e c t i o n Bureaus and remitted f o r by n a i l t o the bank i n
which they had been deposited f o r c o l l e c t i o n i n the form of a d r a f t
on the drawee's deposit i n some reserve c i t y .

For t h e s e r v i c e rendered

by the drawee bank in so r e m i t t i n g in funds a v a i l a b l e f o r use a t the
place of the deposit of the checks, i t was a common p r a c t i c e to nake a
small charge c a l l e d "exchange," and to deduct the amount thereof from
the r e m i t t a n c e .

11.

The Federal Reserve Act, as o r i g i n a l l y enacted, a u t h o r i z e d
the Federal Reserve Board to r e q u i r e member banks to remit by mail, or
otherwise, to t h e i r r e s p e c t i v e Reserve Banks, the proceeds of checks
drawn upon such members, sent to them f o r c o l l e c t i o n and r e m i t t a n c e , the
f u l l f a c e value of such checks without the customary deduction f o r exchange .

This p r o v i s i o n of t h e o r i g i n a l Federal Reserve Act was not en-

forced a g a i n s t member banks u n t i l the Summer of 1916.

12.
Under the p r o v i s i o n s of t h e Federal Reserve Act, as o r i g i n a l l y
passed, t h e c l a s s of checks which the Federal Reserve Barks might r e ceive was l i m i t e d as to each Reserve Bank t o those checks which were
drawn upon i t s own members.

By an amendment t o the Federal Reserve Act

of September J t h , 1916, the c l a s s of checks which the Reserve Banks were
p e r m i t t e d t o r e c e i v e was expanded so as t o include a l l checks on whomso-




?

-7-

X-U131

ever drawn which were payable upon p r e s e n t a t i o n "within the d i s t r i c t of
the r e c e i v i n g Federal Reserve Bank.

13.
According t o the l e t t e r of the o r i g i n a l a c t , the Federal Reserve Board was authorized to require member banks to forego the r i g h t
t o charge exchange f o r the c o l l e c t i o n and . remission of checks presented
f o r payment through t h e i r r e s p e c t i v e reserve banks,
14.
P l a i n t i f f i s advised t y counsel, and thereupon a l l e g e s t h a t by
an amendment of the Federal Reserve Act of June 21st, 1917» known as the
Hardwick amendment, member banks regained the r i g h t to charge exchange,
within c e r t a i n l i m i t a t i o n s , but i n the meantime the Reserve System had
e s t a b l i s h e d , or were undertaking t o e s t a b l i s h , a u n i v e r s a l system f o r
the c o l l e c t i o n of checks throughout the United S t a t e s and known a s the
"Par Clearance System. n

This purpose and system has been continued up

t o the f i l i n g of t h i s b i l l .
15.
That t h i s was the purpose of the Federal Reserve system, i s d i s closed by the o f f i c i a l d e c l a r a t i o n of the then Governor of the Board —
W. P. G. Harding, in the following statement which p l a i n t i f f i s informed
he made t o t h e Chairman of the House Committee on Banking and Currency.
"The Board b e l i e v e s t h a t i t i s charged w i t h the duty and r e s p o n s i b i l i t y of inaugurating a complete check c l e a r i n g system throughout
the United S t a t e s , t h a t the Federal Reserve Banks in compliance with the
evident purpose of t h e law and in f a i r n e s s to a l l t h e i r member banks rftisit
exercise t h e i r power to r e c e i v e f o r c o l l e c t i o n fi'om these member banks




-g-

X-U131

•checks upon whomsoever drawn which a r e payable upon p r e s e n t a t i o n , "
l6.
That i t i s t h e i n t e n t i o n of the p r e s e n t F e d e r a l Reserve Board
t o continue t h i s system, i s f u r t h e r shown "by the d e c l a r a t i o n of i t s
p r e s e n t Governor—D. R. C r i s s i n g e r , which defendant i s informed was
signed by him, a s f o l l o w s :
FEDERAL RESERVE BOARD
WASHINGTON
OFFICE OF GOVERNOR

September 5, 1923.

"Your p r i n t e d l e t t e r t o n;e, dated September 1, 1923, has been
r e c e i v e d and brought to the a t t e n t i o n of the Federal Reserve Board which
d e s i r e s t o s t a t e t h a t i t i n t e n d s t o continue t h e par c l e a r a n c e system
under the p r o v i s i o n s of the F e d e r a l Reserve Act, a s c o n s t r u e d by t h e Supreme Court of the United S t a t e s , "
Very t r u l y yours,
D. R, C r i s s i n g e r ,
Governor.
Mr, L. R, Adams, General S e c r e t a r y ,
National and S t a t e Bankers P r o t e c t i v e A s s o c i a t i o n ,
512 Haas Howell B u i l d i n g ,
A t l a n t a , Georgia.
P l a i n t i f f i s informed and b e l i e v e s , and 30 c h a r g e s , t h a t t h e
p r i n t e d l e t t e r t h e r e i n r e f e r r e d to was addressed t o the Governor of the
Federal Reserve Board by the National and S t a t e Bankers P r o t e c t i v e Assoc i a t i o n , and a copy t h e r e o f i s h e r e t o a t t a c h e d , marked "Exhibit A."
This l e t t e r p o s t - d a t e d c e r t a i n d e c i s i o n s of the Supreme Court i n t e r p r e t i n g
S e c t i o n s 13 and l 6 of the F e d e r a l Reserve Act,

P l a i n t i f f i s a, member of

t h e N a t i o n a l and S t a t e Bankers P r o t e c t i v e A s s o c i a t i o n and t h i s l e t t e r was




-9-

X-U131

w r i t t e n i n the i n t e r e s t of t h i s p l a i n t i f f and a l l o t h e r member banks i n
like situation,
17.
In order to supply machinery f o r the establishment of u n i v e r s a l
par c l e a r a n c e , t h e Federal Reserve Board issued a c e r t a i n r e g u l a t i o n
known as R e g u l a t i o n J , which p l a i n t i f f i s informed i s s t i l l of f o r c e
throughout the system, providing t h a t member banks w i l l be r e q u i r e d by
t h e Federal Reserve Board to^provide funds t o cover a t p a r a l l checks r e ceived f o r t h e i r account i n the Federal Reserve Banks, and t h a t t h e Fede r a l Reserve Banks i n handling such items f o r member banks w i l l a c t as
agents only, without any l i a b i l i t y except f o r t h e i r n e g l i g e n c e .

Plaintiff

i s informed t h a t during the e a r l y h i s t o r y of t h e a c t i v i t i e s of the system,
the cost of c l e a r i n g checks-was taxed a g a i n s t t h e Banks r e c e i v i n g the
b e n e f i t t h e r e o f , but a l l charges f o r such s e r v i c e s have been withdrawn
and the member banks, i n c l u d i n g the p l a i n t i f f h e r e i n , a r e , under s a i d
r e g u l a t i o n , r e q u i r e d to remit the proceeds of a l l checks p r e s e n t e d t o
them through t h e defendant Federal Reserve Bank by mail without any ded u c t i o n whatever f o r the s e r v i c e rendered i n the t r a n s f e r of f u n d s i n volved i n such t r a n s a c t i o n s ,

18.

P l a i n t i f f i s informed by Counsel, and thereupon a l l e g e s , t h a t
t h i s course of b u s i n e s s i s i n d i r e c t c o n f l i c t w i t h the express tarms of
Section 13 of the Act r e s e r v i n g t o member banks the r i g h t t o make t h e
s e r v i c e charge f o r c o l l e c t i n g and r e m i t t i n g proceeds of bank checks
handled f o r c o l l e c t i o n , because t h e p r o h i b i t i o n of t h e payment of such
charge was designed s o l e l y f o r the p r o t e c t i o n of t h e revenues of t h e Fed-




—0
1—
e r a ! Bank.

X-U131

Inasmuch a s t h e Federal Reserve Bank under t h e s a i d r e g u l a -

t i o n of the F e d e r a l Reserve Board a c t s as agent only i n c o l l e c t i n g such
checks, the s e r v i c e charge f o r t h e i r conversion i n t o cash a t the p l a c e
where s a i d cash i s a v a i l a b l e t o the payee or endorser of s a i d check,
operates a s a ipatter of law a g a i n s t t h e p a r t y f o r whom the Federal Reserve Bank i s a c t i n g as c o l l e c t i n g agent and i s not a charge a g a i n s t t h e
Federal Reserve Bank i t s e l f .
19.
P l a i n t i f f i s informed by Counsel, and thereupon a l l e g e s , t h a t
under t h e p r o v i s i o n s of Section l 6 of the Federal Reserve Act, every Fede r a l Reserve Bank i s r e q u i r e d t o r e c e i v e on deposit a t par from member
banks or from other Federal Reserve Banks checks or d r a f t s drawn upon any
of the d e p o s i t o r s i n t h e Federal Reserve Bank r e c e i v i n g such d e p o s i t , and
t h i s s e c t i o n p r e s e r v e s t o t h e member banks the r i g h t to charge t h e i r
a c t u a l expenses i n c u r r e d i n c o l l e c t i n g and r e m i t t i n g funds or f o r exchange
t o t h e i r p a t r o n s , t h e amount of such charges, i n case of c o l l e c t i o n and
r e m i t t a n c e through the Federal Reserve Banks t o be f i x e d by t h e Federal
Reserve Board*

P l a i n t i f f a l l e g e s t h a t under t h e r e g u l a t i o n s of t h e Fed-

e r a l Reserve Board a l l of the Federal Reserve Banks, i n c l u d i n g t h e de~
fendant r e s e r v e bank, a r e f o r b i d d e n t o comply with t h e p r o v i s i o n s of t h i s
s e c t i o n , t o t h e i n j u r y of p l a i n t i f f and other banks, i n t h a t checks so
tendered f o r d e p o s i t and f a l l i n g w i t h i n the d e s c r i p t i o n of t h i s s e c t i o n
a r e not r e c e i v e d on deposit and c r e d i t given t h e r e f o r a t p a r , but a r e r e ceived f o r c o l l e c t i o n only w i t h c r e d i t t o the deposit account of the dep o s i t o r d e f e r r e d u n t i l t h e proceeds of s a i d checks or d r a f t s have been




-li-

"

a c t u a l l y r e c e i v e d by t h e Federal Reserve Bank.

X-U131
P l a i n t i f f i s informed

as a m a t t e r of law t h a t such d e f e r r e d c r e d i t i s not compliance w i t h t h e
mandate of S e c t i o n l 6 of t h e Federal Reserve Act

t o r e c e i v e on d e p o s i t

a t p a r t h e checks thus tendered under the p r o v i s i o n s of s a i d s e c t i o n .
P l a i n t i f f a l l e g e s as a m a t t e r of law t h a t a d e p o s i t i n a bank, which i s
the c h a r a c t e r of t h e d e p o s i t here d e a l t w i t h , i s a r e c e i p t of money,or
i t s e q u i v a l e n t , by the bank upon an engagement t o repay the sum so dep o s i t e d on demand in the u s u a l and customary form of checks or d r a f t s
a g a i n s t such c r e d i t ,

A bank deposit i s immediately and c o n s t a n t l y sub-

j e c t t o the check of the d e p o s i t o r and i s always payable on demand unl e s s i t be by s p e c i a l c o n t r a c t known as a time d e p o s i t b e a r i n g i n t e r e s t .
Said Section l 6 does not deal with d e p o s i t s f o r c o l l e c t i o n f o r they a r e
s p e c i f i c a l l y d e a l t w i t h i n Section 13.

Section l 6 d e a l s w i t h general

d e p o s i t s only , and e x p r e s s l y r e q u i r e s t h a t checks and d r a f t s drawn upon any of the members of t h e system s h a l l be r e c e i v e d on deposit a t
par.

P l a i n t i f f a l l e g e s as a m a t t e r of law t h a t t h i s requirement makes

such checks and d r a f t s the equivalent of l a w f u l money and r e c e i v i n g such
checks on d e p o s i t i s , t h e r e f o r e , equivalent t o r e c e i v i n g l a w f u l money
f o r which immediate c r e d i t mast be given.

There b e i n g no q u a l i f i c a t i o n

of t h e word " d e p o s i t " as used in s a i d S e c t i o n 16 of t h e F e d e r a l Reserve
Act, i t t a k e s t h e meaning a p p l i c a b l e t o a bank d e p o s i t .

Plainti?f is

informed by Counsel t h a t the Supreme Court of t h e United S t a t e s has decided t h a t a d e p o s i t i n bank c r e a t e s , a t the same time the d e p o s i t i s
made, an o b l i g a t i o n on t h e bank t o pay t h e amount of the d e p o s i t , or any
p a r t of i t , a s soon a s t h e d e p o s i t o r sees f i t t c draw a check a g a i n s t i t .




r *r>r
-

•

-12-

X-U13I

That clause of said Section r e f e r r i n g to deposits by one Federal Reserve
Bank i n another Federal Reserve Bank i s rendered "unnecessary and u s e l e s s
by the establishment of what i s known as the Gold Settlement fund
through which a l l t r a n s a c t i o n s between Federal Reserve Banks i n t e r sese
are l i q u i d a t e d ,
20.

'

Under said r e g u l a t i o n s of the Federal Reserve Board no d e p o s i t s
under Section l 6 of said Act a r e received a t par from i t s members by any
Federal Reserve Bank in the system, save and except where checks and
d r a f t s so deposited a r e c o n v e r t i b l e into a c t u a l money i n the town where
the Federal Reserve Bank, so r e c e i v i n g i t , i s l o c a t e d on or b e f o r e the
close of banking hours of the day on which said d e p o s i t s a r e tendered*
If a s i n g l e b u s i n e s s day, or more, i s r e q u i r e d t o a c t u a l l y r e c e i v e the
proceeds of such checks and d r a f t s , the amount thereof i s withheld from
a v a i l a b i l i t y t o the depositor u n t i l such proceeds a r e a c t u a l l y r e c e i v e d .
In order t o prevent the accounting necessary t o provide f o r d e f e r r e d
c r e d i t on e^ch item, p l a i n t i f f i s informed t h a t a system has been i n augurated by the Federal Reserve Board under which the amount of time
elapsed before a c t u a l c r e d i t on such items i s given t h e d e p o s i t o r i s
averaged over t h e geographical t e r r i t o r y of the United S t a t e s by a d j u s t ment t o the mail f a c i l i t i e s f o r the t r a n s m i s s i o n of such checks and
d r a f t s to the bank upon which drawn and the r e c e i p t of t h e i r proceeds
i n r e g u l a r course»

This i s known as the

n

£im£ schedule" or "zone system

The e f f e c t of d e f e r r e d c r e d i t on the member banks i n said system i s very
material»

I t r e s u l t s i_n depriving the member banks of the use of the

amounts of money r e p r e s e n t e d by checks and d r a f t s c i r c u l a t i n g




through

!r
-13-

X-4131

the channels of commerce f o r t h e period of time involved, i n t h e i r t r a n s mission t o t h e banks upon which they a r e drawn and t h e . r e t u r n of t h e i r
proceeds*

As t o a l l of the banks in the system, p l a i n t i f f i s informed

that the amount of c r e d i t s thus congealed in t r a n s i t and commonly c a l l e d the
" f l o a t , t f averages about f i v e hundred m i l l i o n d o l l a r s continuously, t h e
i n t e r e s t on which according t o the lowest r a t e on bank balances of 2$
per annum would amount t o t e n m i l l i o n d o l l a r s per annum*

21.
P l a i n t i f f i s informed by Counsel as a matter of law, and t h e r e upon a l l e g e s , t h a t as a r e s u l t of the r e f u s a l t o give immediate c r e d i t
f o r checks and d r a f t s r e q u i r i n g one or more days for. a c t u a l c o l l e c t i o n ,
the banks upon which such items a r e drawn a r e e n t i t l e d to charge exchange
f o r the transmission of t h e i r proceeds, and, conversely, banks so d e p o s i t ing. them a r e e n t i t l e d t o charge excJonge on the checks presented to them,
but i f immediate c r e d i t i s given f o r such items, and t i t l e i s thereby
vested in the Federal Reserve Bank so r e c e i v i n g them on deposit t h e n the
r i g h t to charge exchange would be destroyed by the p r o h i b i t i o n of the
proviso of Section 13, i f t h a t proviso i s c o n s t i t u t i o n a l as a p p l i e d t o
member banks, but would s t i l l leave the member bank making the c o l l e c t i o n
and remittance e n t i t l e d to i t s s e r v i c e charge a g a i n s t the member bank f o r
whose account the deposit was made-

22.
P l a i n t i f f a l l e g e s as a matter of law t h a t i f the p r o h i b i t i o n of
exchange charges a g a i n s t t h e Federal Reserve Banks, a s expressed i n the




I

-14p r o v i s o of s a i d Section 13 t h e r e o f i n these words,

X-U131
ll

but no such charges

s h a l l be made a g a i n s t t h e Federal Reserve Banks, n i s so i n t e r p r e t e d as t
r e q u i r e p l a i n t i f f and other member banks t o perform the s e r v i c e of r e m i t t i n g the proceeds of checks drawn upon them beyond t h e i r r e s p e c t i v e
banking houses, t h e said enactment i s in c o n f l i c t w i t h t h a t clause of
A r t i c l e f i v e (5) of the Amendment t o the C o n s t i t u t i o n of t h e United
States providing t h a t , "No person *** s h a l l be deprived of ***
p r o p e r t y , without due process of l a w . "
P l a i n t i f f p l e a d s the u n c o n s t i t u t i o n a l i t y of s a i d p r o v i s i o n of
Section 13 of t h e Federal Reserve Act as a p p l i e d to i t , and to any
other member bank i n l i k e s i t u a t i o n becoming a p a r t y to t h i s cause a s
being obnoxious to s a i d clause of t h e F i f t h amendment to the F e d e r a l Cons t i t u t i o n , when i t o p e r a t e s to prevent a reasonable charge f o r t h e
v a l u a b l e s e r v i c e rendered by a member bank in t r a n s m i t t i n g t h e funds repr e s e n t e d by checks drawn upon i t beyond i t s own banking house*




?
. i5 -

'

X-U131

23Following i n s t r u c t i o n s from the Federal Reserve Board as cont a i n e d i n said Regulation "J" and i n the said "time schedule" or "zone
system" as to the f l o a t , the defendant Reserve Bank issued a c i r c u l a r
known as "G" l S l , under which the p r a c t i c e s h e r e i n b e f o r e d e t a i l e d were
adopted by i t i n the Sixth Federal Reserve D i s t r i c t and a r e s t i l l enforced
against p l a i n t i f f and a l l other member banks in the d i s t r i c t .
24.
While ¥ . P. G. Harding was Governor of the Federal Reserve Board,
p l a i n t i f f i s informed t h a t a policy of coercing member and non-member banks
into par remittance was inaugurated and c a r r i e d out as to both member and
non-member banks u n t i l such p r a c t i c e s as to non-member banks were condemned
by the Federal Courts in such cases a s Brookings S t a t e Bank versus Federal
Reserve Bank of San
p o r t e r , pags 222;

Francisco (12 Federal Reserve D i s t r i c t ) 281 Federal Re

Farmers and Merchants Bank of Cat-lettsburg, Kentucky,

versus the Federal Reserve Bank of Cleveland, Ohio, (4th' Federal Reserve
D i s t r i c t ) 286 F e d e r a l , 586, 610;

American Bank and Trust Company versus

the Federal Reserve Bank of A t l a n t a , Georgia, (6th Federal Reserve D i s t r i c t
S56 United S t a t e s , 350;

and Farmers and Merchants Bank of Monroe, North

Carolina, v e r s u s the Federal Reserve Bank of Richmond, V i r g i n i a (5th Federa l Reserve D i s t r i c t ) 262 United S t a t e s , 649.

By reason of membership and

the consequent o b l i g a t o r y d e a l i n g s with the Reserve Banks, the member banks
have h i t h e r t o submitted under duress to the i l l e g a l p r a c t i c e s a f o r e s a i d
r a t h e r than embarrass t h e i r patrons and r i s k r e p r i s a l s upon t h e i r n e c e s s i t i
in the matter of r e d i s c o u n t s .




When the said s e c t i o n s 13 and l 6 of the Fed-

- IS -

X-U131

e r a l Reserve Act were i n t e r p r e t e d by the Supreme Court, in i t s opinions
found, in 2^6 United S t a t e s 350, and 262 United S t a t e s , pages 6U3 and 6U9,
p l a i n t i f f , and o t h e r member ta.nl s v l t h which p l a i n t i f f c o n f e r r e d , expected
and had a r i g h t t o expect t h a t t h s Federal Reserve Board would, so modify
i t s r e g u l a t i o n s p e r t i n e n t t o the s u b j e c t as t o abandon a c o l l e c t i o n system
t h a t the Supreme Court said i t was under no duty to adopt, and t h a t was i r r e c o n c i l a b l e w i t h the p r o v i s i o n s of S e c t i o n 13 of the Federal Reserve Act a s
amended, and t h a t Congress never intended i t t o e s t a b l i s h .

More t h a n a year

has e l a p s e d , and p l a i n t i f f i s informed t h a t t h e only change of method a u t h o r ized by t h e Federal Reserve Board has been to withdraw s p e c i a l c o l l e c t i o n
agents i n whose hands checks on non-member banks ( r e f u s i n g to remit a t p a r )
were placed t o be p r e s e n t e d a t t h e counters of drawee banks and payment
thereof demanded i n currency over the c o u n t e r ;

a p r a c t i c e which t h e Supreme

Court s a i d was w a r f a r e on s t a t e i n s t i t u t i o n s and would s u b j e c t country banks
to s e r i o u s l o s s by d e p r i v i n g them of t h e i r ircoirs from exchange and reducing
*- t h e i r income producing a s s e t s to an
jnt t h a t might render them i n s o l v e n t , (2b2 United S t a t e s 557-3)•

But t h e

par l i s t s a r e s t i l l c i r c u l a t e d and s t i l l drawing to the F e d e r a l Reserve banks
for collection

t h e l a r g e volume of checks t h a t could otherwise be p r e s e n t e d

i n other ways; d e f e r r e d c r e d i t i s s t i l l p r a c t i c e d without a l l o w i n g any i n t e r e s t on c r e d i t b a l a n c e s , and the income producing a s s e t s of a l l d e p o s i t i n g
members thereby reduced and no income from customary exchange charges t h e r e on p e r m i t t e d .

Since v o l u n t a r y a c t i o n by d e f e n d a n t s looking to the c o r r e c t i o n

of these p r a c t i c e s seems u n l i k e l y , t h e p l a i n t i f f now a p p e a l s to a court of




X-4i3i
equity f o r r e l i e f , on th- ground that such p r a c t i c e s are i l l e g a l and the
damages s u f f e r e d by tho p l a i n t i f f , and s i l oth :r m:.rnb^r banks i n 1 ike
s i t u a t i o n , cannot be adequately s s c . r t o i n j d 'and recovered, and they arc
t h e r e f o r e romadiless a t law,
25P l a i n t i f f i s inform ,d by counsel, and thereupon a l l : g e s , t h a t
under t h v. p r o v i s i o n s of s a c t i o n 1} of th- Federal Reserve Act, Federal
Reserve Banks a r c not authorized t o r ecsive f o r c o l l e c t i o n any check or
d r a f t except from t h e i r r e s p e c t i v e members, or d e p o s i t i n g non-m-mbers,
and no check or d r a f t that i s not payable on p r e s e n t a t i o n w i t h i n tho
d i s t r i c t of th. Federal Reserve Bank r e c e i v i n g i t .

Plaintiff further al-

leges on l i k e information t h a t no check or d r a f t , drawn a g a i n s t d e p o s i t s
i n p l a i n t i f f bank, or in any other member bank i n t h e Sixth Federal Reserve D i s t r i c t , t h a t has be_n negotiated and deposited in any bank that i s
e n t i t l e d by membership or a f f i l i a t i o n to clear through a Federal Reserve
Bank, i s l a w f u l l y r e c e i v a b l e for c o l l e c t i o n by argr Federal Reserve Bank
outside of the Sixth Federal Reserve D i s t r i c t , nor by defendant Roserva
Bank except from one of i t s m-mb^rs or depositing non-numbers.

Plaintiff

f u r t h e r a l l e g e s on information and b -1 i „ f t h a t , under the said r e g u l a t i o n s
of th- Federal Reserve Board t h e defendant Reserve Bank does r s c e i v - f o r
c o l l e c t i o n chocks and d r a f t s from i t s members t h a t are payable i n Fed o r a l
Reserve D i s t r i c t s other than i t s own, and r e c e i v e s checks and d r a f t s f o r
c o l l e c t i o n from members in other d i s t r i c t s t h a t ar , payable in the Sixth
D i s t r i c t ; that oth or Federal Reserve Banks, under the same r e g u l a t i o n s do
r e c e i v e f o r c o l l e c t i o n * checks and d r a f t s payable in the Sixth Federal Reserve D i s t r i c t , i n c l u d i n g checks drawn a g a i n s t p l a i n t i f f , that are forwarded




X-U131

across d i s t r i c t l i n e s to defendant Federal Reserve Bank and r e m i t t a n c e
t h e r e f o r required w i t h o u t compensation.

P l a i n t i f f a l l e g e s t h a t such

p r a c t i c e s a r e u n l a w f u l as to i t and cause t o i t l o s s and damage h e r e i n after set forth.
2b.
P l a i n t i f f a l l e g e s upon i n f o r m a t i o n and b e l i e f

t h a t such p r a c -

t i c e s are a p a r t of t h e scheme to e s t a b l i s h u n i v e r s a l par c l e a r a n c e as
hereinbefore described;

t h a t said scheme i s i r r e c o n c i l a b l e in law with

said Hard wick amendment and with the l i m i t a t i o n i n Section 13 to checks
payable w i t h i n the d i s t r i c t r e c e i v a b l e only from members of the Federal
Reserve Bank t o which such checks a r e delivered f o r c o l l e c t i o n , and i t s
enforcement has h i t h e r t o i n f r i n g e d the l a w f u l r i g h t s of p l a i n t i f f , and
a l l other member banks, and c o n t i n u a t i o n thereof w i l l i n f l i c t i r r e p a r a b l e
damage and i n j u r y upon p l a i n t i f f and a l l other member banks i n l i k e s i t u ation.
27On or about J u l y 29, 1924, p l a i n t i f f tendered t o the d e f e n d a n t ,
Federal Reserve Bank of A t l a n t a , a t i t s branch i n New Orleans two excha ig
bank d r a f t s , payable a t p a r , in the aggregate sum of $4,gOb-97 t o cover
the proceeds of c e r t a i n checks drawn on p l a i n t i f f ' s bank and forwarded to
said defendant by i t s member banks f o r c o l l e c t i o n and mailed t o the p l a i n
t i f f by said d e f e n d a n t f o r c o l l e c t i o n and r e m i t t a n c e (said forwarding being by mail and known as "Daily B e t t e r s " ) .

The amount of said exchange

d r a f t s equaled the f a c e of said checks, l e s s r e m i t t a n c e charges thereon




- 19 x-i+131
(called exchange) aggregating $4,80, same being a t the r a t e of 10 cents
for eaflfc hundred d o l l a r s of the aggregate amount of said checks, as provided by Section 13 of the Federal Reserve Act.

At the same time and

place p l a i n t i f f tendered to the d e f e n d a n t , the Federal Reserve Bank of
A t l a n t a , two exchange bank d r a f t s i n t h e aggregate syraeof $554,93 to cover
proceeds of c e r t a i n checks drawn on p l a i n t i f f ' s bank srd forwarded to
p l a i n t i f f by members of other Federal Reserve Banks in other d i s t r i c t s of
the Federal Reserve System, and not manbers of the Federal Reserve Bank
of Atlanta , vfco forwarded sane to said defendant across Federal Reserve
D i s t r i c t l i n e s f o r c o l l e c t i o n and i t forwarded same to p l a i n t i f f f o r payment and remittance as a f o r e s a i d .

The amount of said remittance d r a f t s

was 55 cents l e s s t h a n the aggregate face of said checks, said deduction
being made to cover exchange thereon a t the a f o r e s a i d r a t e .

Said defend-

ant r e f u s e s to accept said d r a f t s , or ei t i e r of them, without adding to
the amount thereof said deductions f o r exchange, %hich deductions plain't i f f clMmed the l e g a l r i g h t to make and c o l l e c t under t h e p r o v i s i o n s
of Section 13 d>f the Federal Reserve Act h e r e i n b e f o r e r e f e r r e d to Thereupon, p l a i n t i f f was compelled to forego said exchange charge and to
pay said a d d i t i o n a l amounts, to i t s l o s s , bee ays e of the greater i n j u r y
i t would have s u f f e r e d by embarrassing i t s d e p o s i t o r s who drew said checks
against adequate balances on d e p o s i t to t h e i r c r e d i t with the p l a i n t i f f .
Said payment

of said exchange charges; was made under p r o t e s t , and was en-

forced by duress a f o r e s a i d in order to avoid g r e a t e r l o s s to p l a i n t i f f ' s
business-

Defendant's r e f u s a l to permit said deduction for exchange was

a v i o l a t i o n of p l a i n t i f f ' s r i g i t s under the laws of t h e United S t a t e s
aforesaid,



! 600
-

^ 2G -

28.
P l a i n t i f f f u r t h e r a l l e g e s t h a t Jaici d e f e n d a n t , said Federal
Reserve Bank of A t l a n t a , a c t i n g under mandatory i n s t r u c t i o n s of the Fede r a l Reserve 3oai'd, has refused t o permit p l a i n t i f f to charge exchange
f o r r e m i t t a n c e s tc cover checks drawn upon i t and forwarded to i t f o r
c o l l e c t i o n and r e m i t t a n c e , in a l l r e s p e c t s l i k e the s p e c i f i c tenders and
r e f u s a l s s e t for oh above, continuously since the f i r s t day of August, up
to date.

The aggregate of checks thus forwarded and remitted f o r by

p l a i n t i f f f o r account of member banks i n the Sixth D i s t r i c t since August
1, 1913, Tip to J u l y 15, igzlt, is approximately $4,750,000*00, snd p l , i n t i f f has been thereby i l l e g a l l y deprived of the value of i t s s e r v i c e s in
making said remittances in t h e sum of not l e s s t h a n $4,750.00 by reason
oi i l l e g a l r e g u l a t i o n s of defendants as a f o r e s a i d -

During the same per-

iod p l a i n t i f f has been required by defendant, under said r e g u l a t i o n s , to
remit to defendant proceeds of checks drawn upon p l a i n t i f f f l o a t i n g
outside of the 6th Federal D i s t r i c t without p e r m i t t i n g an exchange charge
f o r said s e r v i c e s i n an aggregate of approximately $3,500,000+00, the l e g i t i m a t e exchange charges on .vhidb would have been not l e s s t h a n $3,500.00*
P l a i n t i f f was e n t i t l e d to charge and c o l l e c t such exchange under the p r o v i s i o n s of Section 13 of the Federal Reserve Act, out was not permitted tc
do so under d e f e n d a n t s r e g u l a t i o n s as aforesaid»
29.
P l a i n t i f f f u r t h e r a l l e g e s that defendant r e s e r v e Bank, under
said r e g u l a t i o n of t h e Federal Reserve Eo^rd , r e f u s e s to receive on dep o s i t a t p a r , from P l a i n t i f f or from any other member bank i n l i k e s i t u -




I

i
-

a t i o n , checks and d r a f t s drawn against other member banks i n the 6th
Federal Reserve D i s t r i c t as provided in Setetion l 6 of Federal Reserve
Act, but d e f e r s c r e d i t a v a i l a b l e to p l a i n t i f f , e i t h e r t o increase i t s
r e s e r v e s or f o r other u s e s , f o r the length of time necessary to t r a n s mit said checks by mail to t h e i r several drawees and r e c e i v e t h e i r proceeds i n r e t u r n .

P l a i n t i f f a l l e g e s t h a t said r e f u s a l to give i t immed-

i a t e c r e d i t f o r such funds i n f l i c t s i r r e p a r a b l e i n j u r y upon i t , and has
forced i t in the; p a s t to adopt and employ other means f o r the h a n d l i n g
of such c r e d i t s , to i t s i n j u r y , and the c o n t i n u a t i o n of such p r a c t i c e
by the defendant Reserve Bank m i l i n f l i c t i r r e p a r a b l e i n j u r y upon
p l a i n t i f f ard a l l other member banks i n l i k e s i t u a t i o n *
30+
On or about July 2$, 1924, p l a i n t i f f presented to the said
f e d e r a l Reserve Bank of A t l a n t a , at i t s New Orleans Branch, checks drawn
upon and payable by other banks i n the Sixth Federal Reserve D i s t r i c t ,
each of which banks was a member of said Federal Reserve Bank, (and r e quired by law to maintain continuous d e p o s i t s t h e r e i n ) , aggregating
$4,006«51*

Each of said checks was duly endorsed to the order of said

Federal Reserve Bank of Atlanta , and p l a i n t i f f requested the face amount
of such checks to be placed to the c r e d i t of i t s r e s e r v e account on d e p o s i t at par as of the d a t e same were tendered, md t h i s r e q u e s t was den i e d , and only d e f e r r e d c r e d i t given to p l a i n t i f f , r e s u l t i n g in the l o s s
to p l a i n t i f f of the use of the moneys represented by said checks f o r
about t h r e e days.




The i n t e r e s t value of said funds to p l a i n t i f f f o r said

r

4" *> A

KJ

•_ Jil

x-4i3i
time was $2,00, of vthieh p l a i n t i f f has "been deprived by reason of said
i l l e g a l r e f u s a l of said defendant to r e c e i v e said checks on deposit at
p a r , as provided "by. Section lb of the Federal Reserve Act.

Plaintiff

a l l e g e s t h a t said defendant , said Federal Reserve Bank/ has always h e r e t o f o r e refused to r e c e i v e from p l a i n t i f f l i k e checks on deposit at p a r ,
r e s u l t i n g in p l a i n t i f f having t o use i t s correspondents to cl ear i t s
checks and r e t a i n balances w i t h them as compensation t h e r e f o r , in a d d i t i o n to the reserve balances p l a i n t i f f i s required by law to keep with
said Federal Reserve Bank-

The amount of income-producing funds, thus

required to be k e p t i d l e by p l a i n t i f f by reason of the i l l e g a l r e f u s a l
of defendant, Federal Reserve Bank, to comply with the provisions of
Section l 6 of the Federal Reserve Act, has caused a l o s s t o p l a i n t i f f
of approximately $4,500 since August 1 , 1913.
31*
P l a i n t i f f a t t a c h e s h e r e t o and makes a p a r t hereof with u s u a l
leave of r e f e r e n c e , marked Exhibit

n

B!T, a copy of the w r i t t e n r e f u s a l

of defendant * the Federal Reserve Bank of A t l a n t a , dated J u l y 31* 1924,
to accept the r e m i t t a n c e s f o r d a i l y l e t t e r s , l e s s exchange charges, as
alleged i n paragraph 27 $ aid r e f u s i n g to r e c e i v e on d e p o s i t at par the
checks on other banks i n the said Federal Reserve D i s t r i c t t h a t are members of the Federal Reserve Bank of A t l a n t a , as alleged in paragraph 33
of t h i s b i l l *




?

~25 ™

rV O

x-i+131

33.
P l a i n t i f f f u r t h e r a l l e g e s , as a matter of 1 aw, t h a t n e i & e r
Section 13 nor Section l6 of the Federal Reserve Act f o r b i d s p l a i n t i f f
or any o t h e r member bank t o charge exchange except a g a i n s t Federal Reserve Banks themselves;

on the contrary said Act expressly a u t h o r i z e s

and p r e s e r v e s the r i g h t of p l a i n t i f f and other member banks to make
reasonable charges against each other , to be determined and regulated
t>y the Federal Reserve Board f o r the c o l l e c t i o n and payment of checks
and d r a f t s arri the remission t h e r e f o r by exchaage or otherwise.

Plain-

t i f f a l l e g e s that the continued i l l e g a l operation of the c o l l e c t i o n department of the Federal Reserve System as h e r e i n b e f o r e s e t dtvfc,";in which
a l l of the defendants p a r t i c i p a t e , w i l l deprive p l a i n t i f f , snd a l l other
member banks i n l i k e s i t u a t i o n , of the b e n e f i t of t h i s r i g h t to i t s and
t h e i r i r r e p a r a b l e injury*

33*
P l a i n t i f f f u r t h e r a l l e g e s as a matter of law that the c o l l e c t ion and clearance f u n c t i o n s of defendant Reserve Bank, as a p a r t of t h e
Federal Reserve System, are limited by the memoership of banks f o r which
they may act as c o l l e c t i n g agents, and by the r i g h t of p l a i n t i f f and other
member banks i n l i k e s i t u a t i o n to charge exchange as h e r e i n b e f o r e s e t out.
The defendants h e r e t o have disregarded these l i m i t a t i o n s i n the p a s t , and,
by their r e f u s a l to modify said r e g u l a t i o n s , evidence their purpose to
continue such disregard in the f u t u r e , and thereby p l a i n t i f f and o t h e r
member banks i n l i k e s i t u a t i o n are deprived of t h e i r r i g h t s under said
law, to i t s and t h e i r i r r e p a r a b l e i n j u r y -




- & -

X-U131

5.

"R <-•

34.
P l a i n t i f f a l l e g e s on information and "belief t h a t Sie expense
of o p e r a t i n g the c o l l e c t i o n system of t h e Twelve Federal Reserve Banks
has reached such p r o p o r t i o n s as t o s e r i o u s l y threaten the a b i l i t y of a l l
of them, and e s p e c i a l l y the defendant Reserve Bank, of %hidi p l a i n t i f f
i s a member and stockholder, to earn the s i x per cent per annum d i v i dends t h a t member banks arc limited to by s t a t u t o r y compulsion, on the
c a p i t a l stock of said Reserve Banks paid in by them.

Plaintiff alleges

on information and b e l i e f that the expansion of t h i s i l l e g a l c o l l e c t i o n
system has caused defendant to e r e c t a l a r g e a d d i t i o n to i t s b u i l d i n g
i n t h e c i t y of A t l a n t a , and to employ and compensate l a r g e numbers of
clerks t h a t would be unnecessary i f defendant bank was permitted by the
Federal Reserve Board to confine i t s c o l l e c t i o n or t r a n s i t department
to i t s own members and a f f i l i a t e d members and checks and d r a f t s l i m i t e d
ano described i n t h e Federal Reserve Act os aforesaid*

P l a i n t i f f has

reason to f e a r that the i n c r e a s e of t h i s expense t o meet the normal i n crease of the volume of business as the country grows w i l l r e s u l t i n
enforced increase of discount r a t e s , or in assessments on the members, i n cluding p l a i n t i f f , to make up the consequent d e f i c i t of earnings to meet

<

o p e r a t i n g expenses, to the i r r e p a r a b l e i n j u r y of p l a i n t i f f and o t h e r stock- •
holders in l i k e s i t u a t i o n ,

35*
P l a i n t i f f a l l e g e s t h a t t h e i l l e g a l r e g u l a t i o n s and p r a c t i c e s a f o r e s a i d d i c t a t e d by the Federal Reserve Board, and c a r r i e d out by the
Federal Reserve Bank of Atlanta a f o r e s a i d , h c v e i n j u r e d and damaged p l a i n t i f f i n the sum of $12,750*CO p r i o r to the f i l i n g of t h i s b i l l and t h e continuance of said p r a c t i c e w i l l i n f l i c t i r r e p a r a b l e l o s s , i n j u r y and damage
upon p l a i n t i f f , snd upon a l l other member banks in t h e Federal Reserve system.



-£5-

X-41jl

36.
P l a i n t i f f a l l e y s that the controversy s e t f o r t h in t h i s b i l l
a r i s e s "finder the C o n s t i t u t i o n and Laws of the United S t a t e s and t h e matt e r i n controversy exceeds, e x c l u s i v e of i n t e r e s t and c o s t s , t h e sum or
value of Three Thousand ( $ 3 , 0 0 0 . 0 0 ) D o l l a r s ,
PRAYERS 07 TEE PILL
WHEREFORE , the premises c o n s i d e r e d , p l a i n t i f f prays f o r the
issuance of t h e w r i t of i n j u n c t i o n of t h i s Honorable Court d i r e c t e d to
the d e f e n d a n t s , t h e i r o f f i c e r s and a g e n t s permanently e n j o i n i n g them
as f o l l o w s ;
1*

That t h e defendant Federal Reserve Bank of A t l a n t a be perman-

e n t l y enjoined from d e f e r r i n g c r e d i t on a l l d e p o s i t s made or tendered to
i t by the p l a i n t i f f , as 3 member bank, of a l l checks and d r a f t s drawn a gainst d e p o s i t s i n any other member bank in the Sixth Federal Reserve D i s t r i c t , and t h a t pending f i n a l decree a r e s t r a i n i n g order to the same e f f e c t
be g r a n t e d .
2.

That the defendant Federal Reserve Bank of A t l a n t a be p e r -

manently enjoined from a c c e p t i n g f o r c o l l e c t i o n any check or d r a f t drawn
the
u p o n / p l a i n t i f f f o r account of any o t h e r member bank or Reserve Bank i n the
Federal 2ieserve system without p r o v i d i n g f o r t h e d e d u c t i o n from t h e p r o ceeds t h e r e o f 3 r e a s o n a b l e exchange charge not exceeding t e n cents tor each
hundred d o l l a r s or f r a c t i o n thereof to be paid or allowed to the p l a i n t i f f
f o r t h e s e r v i c e of r e m i t t i n g the proceeds of a l l such checks or d r a f t s from
i t s banking house to t h e F e d e r a l Reserve Bank t h a t p r e s e n t s such checks or
d r a f t s i n r e g u l a r c o u r s e , and t h a t pending f i n a l decree a r e s t r a i n i n g o r ^ e r
to t h e same e f f e c t be g r a n t e d .




3*

That the Federal ReserveBank of Atlanta be enjoined from

a c c e p t i n g f o r c o l l e c t i o n or d e f e r r e d c r e d i t from any bank other than
i t s own members any check or d r a f t , and from i t s own members any check
or d r a f t t h a t i s not payable upon p r e s e n t a t i o n w i t h i n the Sixth Federal
Reserve D i s t r i c t , and t h a t pending f i n a l decree a r e s t r a i n i n g order t o
the same e f f e c t be granted.
4*

That t h e Federal Reserve Board, and Joseph A* MeCord, o f f i -

c i a l Representative of s a i d Board in the Sixth Federal Reserve D i s t r i c t ,
be e n j o i n e d from promulgating and enforcing the p r o v i s i o n s of Regulation
,T ,!

J

t h a t o p e r a t e to deprive p l a i n t i f f of i t s r i g h t to charge lawful

r a t e s of exchange f o r the c o l l e c t i o n and remittance of the proceeds of
checks and d r a f t s drawn upon p l a i n t i f f and presented f o r payment by or
through t h e Federal Reserve Bank of Atlanta in r e g u l a r banking channels
by mail, i n a l l cases where such checks and d r a f t s a r e received by said
defendant Federal Reserve Bank f o r c o l l e c t i o n f o r account of i t s members,
or f o r account of any member of any o t h e r Federal Reserve Bank, and t h a t
pending f i n a l decree a r e s t r a i n i n g order to the same e f f e c t be gzanted.
That the Federal Reserve Bank of A l a n t a be enjoined from
exacting of p l a i n t i f f , or any other member bank in the S i x t h Federal
Reserve D i s t r i c t , the service of c o l l e c t i n g , paying and r e m i t t i n g the
proceeds of any check or d r a f t drawn upon p l a i n t i f f or any member bank
i n l i k e s i t u a t i o n , without compensation t h e r e f o r , f i x e d by lav- at not exceeding t e n c e n t s per hundred d o l l a r s ($100*00) or f r a c t i o n t h e r e o f ,
based on the t o t a l of such checks and d r a f t s p r e s e n t e d a t any one time,
and t h a t pending f i n a l decree a r e s t r a i n i n g order to t h e same e f f e c t be
granted.




•'
- 27 X-U13I

6,

That an accounting be had between the p l a i n t i f f and

Federal Reserve Bank of A t l a n t a cf the amconts of exchange and i n t e r e s t earnings of v.'hich i t has been i l l e g a l l y deprived up to date
of decree, by reason of v i o l a t i o n of said p r o v i s i o n s of Section 13
and l 6 of the Federal Reserve Act by defendant; and t h a t decree be
rendered a g a i n s t said defendant, Federal Reserve Bank of A t l a n t a , f o r
the recovery of said sums,.
7,

That an accounting be had between the Federal Reserve

Bank of A t l a n t a and a l l o t h e r member banks that s h a l l h e r e a f t e r be
allowed to intervene as p a r t i e s p l a i n t i f f in t h i s cause, of the amounts
of exchange and i n t e r e s t l o s s e s of which said i n t e r v e n e r s have been
i l l e g a l l y deprived to date of decree by reason of the v i o l a t i o n of
the said p r o v i s i o n s of Sections 13 and 16 of the Federal Reserve Act,
by defendant; and that decree be rendered a g a i n s t said defendant. f o r
the recovery of said sum.
S.

P l a i n t i f f prays f o r the w r i t of subpoena to be issued

and served a s usual under the Rules of the Court, and f o r such other
general r e l i e f as m y t o the Court be deemed j u s t and e q u i t a b l e .
Smith, Hammond & Smith,
A t l a n t a , Georgia,
Denny & Heidelberg,
Pascagoula, Miss.
of Counsel.




_

Solicitor for Plaintiff

- I

STATE OF MISSISSIPPI

)

COUNTY OF

j
P e r s o n a l l y appeared before the undersigned a u t h o r i t y H. C,

HERRING-, P r e s i d e n t of the P l a i n t i f f in the above cause, who, being duly
sworn as to the t r u t h of the a l l e g a t i o n s made in the above b i l l , says th
he has read the foregoing b i l l and knows the con-cents t h e r e o f , and that
the same i s t r u e to h i s own knowledge, except as to m a t t e r s t h e r e i n s t a t
on information and b e l i e f , and as to those m a t t e r s he b e l i e v e s them "•?
»>
«
to be t r u e .
Sworn t o and subscribed
before me t h i s

\

day of

N. P.

)

,1924.

County, Miss.

)

)

The foregoing b i l l has been p r e s e n t e d to me and i s sanctioned
and ordered f i l e d .

Let defendants be served as usual and show cause bef•

me a t the U. S. Court House, A t l a n t a , Georgia, at 10:00 a 4 c l o c k A. M.
October 2nd, 1924, why an i n t e r l o c u t o r y i n j u n c t i o n should n o t issue as
prayed.




This August 8th, 1924.
Samuel H. S i b l e y
U. S. Judge

EXHIBIT' A X-41J1
NATIONAL AND. STATE BANKERS' PROTECTIVE ASSOCIATION
P r e s i d e n t Chas. De B. Claiborne
Vice-President Whitney-Central National Bank
New Orleans, l a .
. .

GENERAL COUNSEL
Alexander W. Smith
A t l a n t a , Ga^
Washington, D. C.

GENERAL SEC'TY-TREAS.
L. R. Adams.
SECRETARY-TREASURER COUNTRY BANKERS'
ASSOCIATION OF GEORGIA
ATLANTA, GEORGIA512 Haas-Howell Bldg.
A t l a n t a , Georgia.
,

AT L FT A, GEORGIA, September 1, 1523.
A

HON. D. R. CRISSINGER,
Governor Federal Reserve Board,
Washington, D. C.
Dear Sir
Six years ago, pursuant to i t s conception of i t s d u t i e s and powers,
the Federal Reserve Board inaugurated a system of s o - c a l l e d "universal
par clearance" and thus assumed, in the F e d e r a l Reserve System, the sole
• r e s p o n s i b i l i t y f o r the p o l i c y i n r e f e r e n c e t h e r e t o which has governed a l l
Reserve Banks in t h e i r o p e r a t i o n s up to t h i s time.
Out of t h a t p o l i c y has grown a controversy which f o r y e a r s has divide:
t h e banking f r a t e r n i t y into p r a c t i c a l l y two opposing camps, and has r e s u l t e d
i n long dravm out l i t i g a t i o n between Federal Reserve and non-member banks;
and apparently the end i s not y e t .
With a l l of t h i s you a r e , of course, e n t i r e l y f a m i l i a r .
f h e r e a s o n s , aims, purposes and motives of the Federal Reserve Board in
adopting t h i s p o l i c y have been much controverted and debated i n banking c i r c l e
and were o f f i c i a l l y announced from time to time by former Governor Hording,
under whose a d m i n i s t r a t i o n t h i s p o l i c y was adopted.
I n a l e t t e r to Hon. Edmund P i a t t , Chairman of the Houaa- Committee on
Banking and Currency, d^ted May 5. ^ 0 ,



Governor Harding started:

I
Exhibit ,4 No. 2. 1

r / r
—*- '

v

The Board b e l i e v e s t h a t i t i s charged, with t h e duty ana
r e s p o n s i b i l i t y of inaugurating a complete check c l e a r i n g system throughout the United S t a t e s , that the Federal Reserve Banks in compliance with
the evident purpose of the law and in f a i r n e s s to a l l t h e i r member banks
must exercise t h e i r power to r e c e i v e f o r c o l l e c t i o n from those memeet
banks checks upon whomsoever drawn which a r e payable upon p r e s e n t a t i o n .
* * * *

While banks a r e s t i l l authorized to charge each other f o r such

s e r v i c e , they a r e p r o h i b i t e d from charging t h e Federal Reserve Banks, which
a r e required to r e c e i v e from member banks a t p a r a l l checks which a r e
payable upon p r e s e n t a t i o n .
Before the House Committee on Rules, On flay 4, 1920, Governor Harding
made the f o l l o w i n g statement:
"All the Board i s t r y i n g to do i s to carry out t h e law as we
understand i t j and the p o i n t we want to make i s t h a t i f the law should be
amended so t h a t non-member banks may be p e r m i t t e d to charge exchange,
t h a t the law be amended in a way broad enough t o permit member banks to
make the same c h a r g e . "
On May

1920, a t a h e a r i n g before the Federal Reserve Board on

complaints of S t a t e banks of Nebraska and o t h e r s a g a i n s t a l l e g e d methods
of check c o l l e c t i o n of Federal Reserve Banks, Governor Harding m=4e the
following s t a t e m e n t s :
We have no r i g h t , nor have we ever attempted, to manufacture
the law.

That i s not our p r o v i n c e .

I t i s our duty, however, t o carry out

the p r o v i s i o n s of the Federal Reserve Act, as we understand those
p r o v i s i o n s and as they have been i n t e r p r e t e d to u s . * * * *
Now, u n f o r t u n a t e l y , t h e r e i s a d i f f e r e n c e of opinion as to whet
the law means.



The Federal Reserve Board has considered t h e matter very

E x h i b i t A No. 3<
X-U13I.
c a r e f u l l y - n o t h a s t i l y in any v,ay - and. »ve have load i t f o r t h r e e y e a r s
now, and we a r e s a t i s f i e d t h a t what we a r e doing i s along t h e l i n e of
c a r r y i n g out the i n t e n t of the Federal Reserve Act, t h a t i s , t h e r e s n a i l
be a u n i v e r s a l c l e a r i n g house e s t a b l i s h e d f o r American checks * * *' *
The Board does net f e e l that i s has any option under the law
as i t now s t a n d s ,

We f e e l t h a t we a r e bound to at tempt to p u t t h a t

p o l i c y i n t o e f f e c t , to put i n e f f e c t a u n i v e r s a l system, and i f o b s t a c l e s
a r e thrown i n our way to such an extent t h a t we cannot do i t ,
n o t our f a u l t .

then i t i s

.

* * * * but the Federal Reserve Board cannot be guided by sentiment.
Vie have a duty to perform; we have taken a solemn, oath of o f f i c e to t r y
t o i n t e r p r e t the law c o r r e c t l y and a d m i n i s t e r i t in accordance with the
i n t e r p r e t a t i o n which we have conceived to be c o r r e c t .

If we a r e mis-

taken in t h a t you have the Court to appeal t o , on one s i d e , and the
Congress to appeal to on the o t h e r .
These u t t e r a n c e s s t i l l remain the l a s t pu o l i c s t a t e u e n t of the Board's
aims, purposes and p o l i c y i n r e g a r d to t h i s m a t t e r , and u n t i l superseded by
some l a t e r o f f i c i a l d e c l a r a t i o n , must be taken as s t i l l r e p r e s e n t a t i v e of
i t s position,
Tne suggested appeal to the Courts was taken and, s i n c e those
statements were made, n o t only has the p e r s o n n e l of the Board l a r g e l y
changed, out upon three occasions the Supreme Court of the United

States

has handed down opinions end d e c i s i o n s on the law governing the c l e a r i n g
f u n c t i o n s of t h e Reserve Banks, and c o n s t r u i n g the Federal Reserve Act in
relation thereto.




Exhibit A No. 4 .
X-4-131.
Inasmuch, as these opinions d i f f e r widely, in ir.any uiaterial r e s p e c t s ,
from the Board's previously announced o f f i c i a l c o n s t r u c t i o n of the law,
i t would seem t h a t a l l i n t e r e s t e d banks (and that includes every bank
in the United S t a t e s ) are now e n t i t l e d to be s p e c i f i c a l l y enlightened a s
to the p r e s e n t Board's f u t u r e p o l i c y on t h i s m a t t e r , and we f e e l sure that
the Board w i l l be glad to give u s a f u l l and f r a n k reply to the many
questions upon which the Board's present p o s i t i o n i s now in doubt.
This A s s o c i a t i o n i s composed of both member and non-member banks,
and i s t h e r e f o r e i n t e r e s t e d i n the whole s u b j e c t of par c l e a r a n c e equally
from the s t a n d p o i n t of both c l a s s e s of banks.
These questions a r i s e wholly apart from any c o n s i d e r a t i o n of the soc a l l e d Claiborne-Adams p l a n , and would not be wholly answered even in t h e
contingency of t h a t plan being adopted.
We r e g r e t t h e n e c e s s i t y of going i n t o the mattar to the extent of
the unusual l e n g t h of t h i s l e t t e r , but mast p l e a d the g r e a t importance
and complexity of the s u b j e c t as j u s t i f i c a t i o n .
Although i t may be u r g j d by some t h a t t h e Supreme C o u r t ' s opinion
in c e r t a i n p a r t i c u l a r s may be capable of dive rge nt c o n s t r u c t i o n , yet
i t must be conceded t h a t , f o r the most pu.rt, i t s f i n d i n g s a r e s e t out
i n language too c l e a r and unequivocal to be misunderstood,
In view of the Supreme C o u r t ' s statement regarding the a l l e g e d
duty imposed by the law to e s t a b l i s h a system of u n i v e r s a l par clearance
from which we quote as f o l l o w s :
Congress did not i n terms confer upon the Federal Reserve
Board or the Federal Heserve Banks a duty to e s t a b l i s h u n i v e r s a l par



E x h i b i t A Fo. 5-

•

i~*

c l e a r a n c e and c o l l e c t i o n of checks; an-: t h e r e i s nothing in the o r i g i n a l
a c t or i n any amendment from which such duty to compel i t s a d o p t i o n
may be i n f e r r e d .

The only s e c t i o n s which i n any way d e a l w i t h e i t h e r

c l e a r a n c e or c o l l e c t i o n a r e 1 j and 16.

In n e i t h e r s e c t i o n i s t h e r e

any suggestion t h a t t h e Reserve Board and the Reserve Banks s h a l l become an agency f o r u n i v e r s a l c l e a r a n c e .

On the c o n t r a r y S e c t i o n lb

s t r i c t l y l i m i t s the scope of t h e i r d u r a n c e f u n c t i o n s .

I t provides

t h a t the F e d e r a l Reserve Board:
may a t i t s d i s c r e t i o n e x e r c i s e tne f u n c t i o n s of a c l e a r i n g house
f o r such F e d e r a l Reserve Batiks * * *

and may a l s o r e q u i r e each sach

bank to e x e r c i s e the functions, of a c l e a r i n g house f o r i t s member banks.
There i s no r e f e r e n c e whatever to "par 11 in S e c t i o n 13, e i t h e r
as o r i g i n a l l y enacted or as attended £,-om time to time.

There i s a

r e f e r e n c e to "par 11 in Section l o j and i t i s so c l e a r and e x p l i c i t as t o
p r e c l u d e a c o n t e n t i o n . t h a t i t has any a p p l i c a t i o n , to non-member banks;
or to t h e o r d i n a r y p r o c e s s of check c o l l e c t i o n h e r e involved —
we d e s i r e t o i n q u i r e i f the F e d e r a l Reserve Board s t i l l a d h e r e s to tne
view t h a t i t i s under any duty or mandate to e s t a b l i s h such "par c l e a r a n c e
system" and to maintain and c o n t i n u e to o p e r a t e t h a t v»nich i t has
established?
Or must we not assume t h a t t h e Borrd h a s adopted t n e opinion of one
Supreme Court, t h a t the law imposed no euch d u t y , and c o n t a i n s nothing
from which i t might be i n f e r r e d ?
I f , as t h e Supreme Court has s t a t e d , "The Federal Reserve Board may
a t i t s d i s c r e t i o n , e x e r c i s e t h e f u n c t i o n s of a c l e a r i n g house f o r such
F e d e r a l Reserve Bank * * * * and may a l s o r e q u i r e each such bank to
e x e r c i s e the f u n c t i o n s of a c l e a r i n g house f o r i t s member b a n k s , "



~

J*

E x h i b i t A. No, 6.
X-4131
such
i s i t n o t e q u a l l y w i t h i n i t s d i s c r e t i o n to a b o l i s h / a c t i v i t y ?
I t has been claimed and. seems to be conceded t h a t i t i s the duty of
t h e Reserve £®ard to c o n s t r u e t h e Federal Reserve Act f o r t h e System,
to announce p o l i c i e s r e q u i r e d by or p e r m i t t e d under the Act and to p r o v i d e r e g u l a t i o n s f o r p u t t i n g same i n t o e f f e c t , and t o s u p e r v i s e t h e
execution of such p o l i c i e s by t h e Federal Reserve Banks and t h e i r a g e n t s .
If i t i s t h e B o a r d ' s duty to see t h a t p o l i c i e s p r o p e r l y promulgated
under t h e terms of t h e Act a r e c a r r i e d o u t , i s i t n o t e q u a l l y the B o a r d ' s
duty to immediately abandon a p r e v i o u s p o l i c y t h a t h a s been d e c l a r e d by
t h e Supreme Court t o be beyond t h e purview of t h e law and t o see to i t
' t h a t a l l F e d e r a l Reserve Banks and t h e i r a g e n t s cease e f f o r t s to enforce
such p o l i c y ?
I s i t n o t a l s o the B o a r d ' s duty t o s u p e r v i s e and p r e v e n t and f o r c e
i f n e c e s s a r y t h e d i s c o n t i n u a n c e of u n l a w f u l and u l t r a v i r e s a c t s of the
agents of t h e Reserve Banks?
Again q u o t i n g from the C o u r t ' s o p i n i o n :
The power of the F e d e r a l Reserve Board t o e s t a b l i s h par c l e a r a n c e
was, t h u s , l i m i t e d by the u n r e s t r i c t e d r i g h t of u n a f f i l i a t e d non-member
banks to make a charge f o r exchange and t h e r e s t r i c t e d r i g h t of members
and a f f i l i a t e d non-members to make the charge t h e r e f o r f i x e d a s reasona b l e by the F e d e r a l Reserve Board.
How, when, and to what e x t e n t does the F e d e r a l Reserve Board now
purpose to r e c o g n i z e and a b i d e by the l i m i t a t i o n s upon i t s power to
e s t a b l i s h p a r c l e a r a n c e , which t n e Supreme Court says the law p l a c e d
upon i t ?




/ !

Exhibit A. No. 72-4131.
What power, i f any to e s t a b l i s h p a r c l e a r a n c e , does the Board now
claim to p o s s e s s , or undertake to e x e r c i s e , which to any e x t e n t renders
nugatory or in any way a c t s t o abridge or to prevent the e x e r c i s e and
exchange
enjoyment of trie r i g h t s of member or non-member banks to charge |as thus
described by the Supreme Court?
Not only i s the power of the Board to e s t a b l i s h par c l e a r a n c e l i m i t e d
by the r i g h t s of banks to charge exchange as s e t out by the Court, to an
extent which, i f recognized and observed would render i t s establishment
impossible, but the court a l s o s a i d :
Moreover, the contention t h a t Congress has imposed upon the
Board the duty of e s t a b l i s h i n g u n i v e r s a l par clearance and c o l l e c t i o n of
checks through the Federal Reserve Banks i s i r r e c o n c i l a b l e with the
s p e c i f i c p r o v i s i o n of the Hardwick amendment which d e c l a r e s t h a t even
a member or an a f f i l i a t e d non-member may make a limited charge (except
to Federal Reserve Banks) f o r "payment of checks and * * * remission
t h e r e f o r by exchange or o t h e r w i s e , "
If i t s establishment i s i r r e c o n c i l a b l e with the s p e c i f i c provision
of the Hardwick amendment ( t o the Federal Reserve Act) as the Supreme
Court says i t i s , how i s i t p o s s i b l e to r e c o n c i l e the continued operation
of the system as e s t a b l i s h e d and which d e f e a t s the purpose of the Hardwick
amendment as i n t e r p r e t e d by the Supreme Court?
The Supreme Court f u r t h e r s a i d :
The r i g h t to make a charge f o r payment of checks, thus regained
by merit)er and p r e s e r v e d to a f f i l i a t e d non-member banks, shows t h a t i t was
n o t intended, or expected, t h a t the Federal Reserve Banks would become



E x h i b i t A. No, 8.
X-41J1.
the u n i v e r s a l agency f o r c l e a r a n c e of checks.

For, since a g a i n s t these

tne f i n a l c l a u s e p r o h i b i t e d the making of any charge, tnen i f the Reserve Banks were to become the u n i v e r s a l agency for c l e a r a n c e , there
would be no opportunity f o r any bank to make as a g a i n s t any bank a charge
f o r the "payment of checks."
The Supreme Court having said " i t was n o t intended, or expected (by
Congress) t h a t t h e Federal Reserve Banks would become the u n i v e r s a l
agency f o r t h e clearance of checks", and the p r e s e n t system avowedly
having t h a t o b j e c t , what change, i f any, does the Board contemplate
making i n the p r e s e n t c l e a r i n g system in order to comply with the i n t e n t i o n
and expectation of Congress as enacted in the law and pointed out by the
Supreme Court, so as to cease to be "the u n i v e r s a l agency f o r the
clearance of checks?"
Qaoting the Supreme Court f u r t h e r :
The purpose of Congress in amending Section 13 by the act of
1917, was to enable the Board to o f f e r to non-member banks the use of
i t s f a c i l i t i e s which i t was hoped would prove a s u f f i c i e n t inducement
to them t o forego exchange charges; but t o p r e s e r v e i n non-member banks
t h e r i g h t to r e j e c t such o f f e r ; and to p r o t e c t the i n t e r e s t s of member
and a f f i l i a t e d non-member banks ( i n competition with t h e n o n - a f f i l i a t e d
s t a t e banks) by allowing a l s o those connected with the Federal system
t o make a reasonable exchange charge t o o t h e r s than the r e s e r v e banks.
The power of the Federal Reserve Board t o e s t a b l i s h par c l e a r a n c e was,
t h u s , l i m i t e d by the u n r e s t r i c t e d r i g h t of u n a f f i l i a t e d non-member banks




J

,;* .<? W
•- •

E x h i b i t A* No, 9»
x-4131.
to make a charge f o r exchange and the r e s t r i c t e d r i g h t of members and
a f f i l i a t e d noh-members to make the charge t h e r e f o r f i x e d as reasonable
by the Federal Reserve Board.
The reasons which impelled the Supreme Court to conclude thau t h i = vvas
n e t intended nor expected r e l a t e to member banks and
members and n o t tc- u n a f f i l i a t e d non-members.

affiliated

non-

And tne Supreme Court

p o i n t s out t h a t through the Hardwick amendment member bauks regained
"the r i g h t to make a charge f o r the payment of cnecks.»
I s i t , t h e n , the purpose of the Federal Reserve Board t o recognize
t h a t member banks have regained the r i g h t t o charge exchange?
How w i l l i t be recognized?
Ihen w i l l the member banks be p e r m i t t e d t o begin making such charge?
To what extent w i l l t h i s r i g h t be recognized?
On what c l a s s e s of checks w i l l members be p e r m i t t e d t o make such a
charge?
As Reserve Banks now c l e a r a l l checks on member .8 m;.J, and permit no
charge, what c l a s s e s or d i v i s i o n s of checks w i l l the Reserve Banks d i s continue h a n d l i n g so as t o allow member banks t o e x e r c i s e t h e r i g h t to
make the charge which the Supreme Court said they regained t h e r i g n t to
make?
Through u s , member ba_nks a r e now saying t o you:
"Due t o a m i s i n t e r p r e t a t i o n of the law by the Federal Reserve Board,
which was charged with the duty and r e s p o n s i b i l i t y of i n t e r p r e t i n g and
a d m i n i s t e r i n g the law, we nave f o r s i x y e a r s been wrongfully deprived




of

E x h i b i t A* No. 10.
X-4ljl

*

a l a r g e p a r t of our r i g h t f u l revenue which t h e Supreme Court has said
Congress i n t e n d e d f o r u s to h a v e , and we now ask the Board i f i t i s
going to s t i l l maintain a system and p o l i c y wnicn w i l l c o n t i n u e to deprive
us of t h i s revenue in the f u t u r e as i t has in the p a s t ?
"Or, on the other nand, w i l l you change t h a t p o l i c y and system
so as to r e s t o r e to us the enjoyment of t h a t revenue?
"On June 11, l>-3* t h e Supreme Court announced t n a t oy t h e Hardwick
amendment member banks r e g a i n e d tne r i g h t t o charge exchange - t h e
Hardwick amendment ^as enacted June 21, 1$17,

yet six years l a t e r ,

we are s t i l l denied the p r i v i l e g e of e x e r c i s i n g and enjoying t h e b e n e f i t s
of t h a t r i g h t s
"A p o l i c y adopted by your board deprived u s of our r i g h t , wnich we
want - must we not assume t h a t the Board w i l l now follow the Supreme
Court*s d e c i s i o n aid r e s t o r e i t ?
"The a d m i n i s t r a t i o n of former Governor Harding i n a u g u r a t e d t h i s
p o l i c y of p a r c l e a r a n c e , and was l a r g e l y r e s p o n s i b l e f o r i t s o p e r a t i o n
up to June 11, 1923, but s i n c e the Supreme C o u r t ' s d e c i s i o n s on t h a t
d a t e , does not t h e s o l e r e s p o n s i b i l i t y f o r i t s continuance i n l i g h t of
those d e c i s i o n s r e s t on the p r e s e n t Board?
"Must we n o t f e e l t h a t t h e present Board w i l l be r e s p o n s i b l e f o r
whatever exchange revenue we may be deprived of since t h a t d a t e ? "
What i s the B o a r d ' s c o n s t r u c t i o n and a p p l i c a t i o n of t h a t c l a u s e of
t h e Supreme C o u r t ' s decision in the A t l a n t a c a s e , as f o l l o w s :
But the c l a s s of checks to which the Reserve Bank's c o l l e c t i o n
s e r v i c e might l e g a l l y be a p p l i e d , was l e f t by the amendment as those
"payable upon p r e s e n t a t i o n w i t h i n i t s d i s t r i c t . "



f)

I

^

'
Exhibit A.

No. 11.

X-4131.
I s n o t t h i s l i m i t a t i o n upon the c l a s s of checks v,hich may be l e g a l l y
received by the Federal Reserve Banks j u s t as d e f i n i t e as though t h i s
sentence r e a d :

"Bat the c l a s s of checks to which the Reserve Banks'

c o l l e c t i o n s e r v i c e nay be l e g a l l y applied a r e those payable w i t h i n i t s
district?"
To give f o r c e tc t h i s q u a l i f i c a t i o n riuot i t not be h e l d t h a t the
c o l l e c t i o n system of each Federal Reserve Bank i s l e g a l l y r e s t r i c t e d to
checks payable within i t s own d i s t r i c t , and to receive checks payable in
any other

d i s t r i c t save i t s own i s an i l l e g a l a p p l i c a t i o n of i t s c o l l e c t i o n

service?
I t i s undeniably true t h a t there a r e today thousands of banks on
the par l i s t as a r e s u l t of the statements and r e p r e s e n t a t i o n s made to
them by the Federal Reserve Board, and i t s then Governor, and the Federal
Reserve Banks and t h e i r o f f i c e r s and s e r v a n t s , t h a t the law r e q u i r e d the

.

establishment of a u n i v e r s a l p a r - c l e a r a n c e system, and t n a t t h e law had
deprived these banks of the r i g h t to charge exchange,
The Supreme Court having completely exploded both of the se contentions
and having held t h a t t h e r e was no such duty imposed by t h e law, and
nothing from which i t may be i n f e r r e d - t h a t i t was not intended or expected t h a t i t would become the u n i v e r s a l agent f o r the c o l l e c t i o n of cnecks,
t h a t i t s ;ower t o e s t a b l i s h such a system was l i m i t e d to such an extent
as to render i t impossible of accomplishment and f i n a l l y t h a t the
establishment of i t s system i s i r r e c o n c i l a b l e with the e g r e s s p r o v i s i o n of




Exhibit A, No. 12.
X-Uljl.
t h e Hardvrick amendment - what expression or a c t i o n i s the Board now
going to take to c o r r e c t t h e s e erroneous statements as to the law and i t s
r eqc-i rement s ?
As a r e s u l t of these m i s i n t e r p r e t a t i o n s by the Board of the law and
i t s requirements millions of checks are being d a i l y c l e a r e d a t p a r , which
would otherwise be subject to exchange c h a r g e s .

I s the Board content f o r

the system to remain, the b e n e f i c i a r y of misplaced r e l i a n c e on the
c o r r e c t n e s s of the Board's c o n s t r u c t i o n of t h e law?
Or, will you say to these s t a t e Ocnks in e f f e c t ,

"We were mistaken;

we misconstrued the law and mistakenly s t a t e d i t s requirements t o you;
we a r e not r e q u i r e d to inaugurate u n i v e r s a l par clearance and i t was
not expected or intended t h a t we should become u n i v e r s a l agency f o r the
clearance of c n e c k s , "

Are you going to t e l l these s t a t e banks t h a t

the Federal Reserve Act did not and does not undertake to d e s t r o y the
s t a t e banks' r i g h t to charge exchange, but on the other hand t h a t the
s t a t e banks are f r e e to accept or r e j e c t the par clearance system and to
withdraw from t h e par l i s t without f e a r of open or s e c r e t r e p r i s a l s ?
All of tne questions which we nave h e r e i n propounded being important
and p e r t i n e n t t o a matter of p u b l i c p o l i c y s o l e l y within the d i s c r e t i o n
and j u r i s d i c t i o n of the Board, we t r u s t i t w i l l be e n t i r e l y convenient
and agreeable f o r you to give u s an e a r l y , f u l l and d e f i n i t e r e p l y to
each, as our immediate f u t u r e conduct must n e c e s s a r i l y be l a r g e l y i n fluenced t h e r e b y .




Respectfully,
(Signed)

L« R. ADAMS.
GENERAL SECRETARY-

' - • I'" JJL.

E x h i b i t B.

X-4131.

N S / ORLEANS BRANCH
TV
FtL'DEEAL RESERVE BANK OF ATLANTA
New O r l e a n s , J u l y 31, 1$24.
Pascagouia N a t i o n a l 3?IIK,
Pascagoula, Miss.
A t t e n t i o n Mr. K. C. E a r r i n g , P r e s i d e n t .
Pascagouia N a t i o n a l Bank,
Moss P o i n t , Miss,
Gentlemen:
We have yours of the 2 3 t h , enclosing d r a f t on the Marine Bank and
T r u s t Company f o r $2,263.21 which you ^ t a t e i n your l e t t e r i s to cover
proceeds of cash l e t t e r of the Federal Reserve Bank of A t l a n t a (New
Orleans Branch) dated J u l y 2 6 t h , 1924; l e s s a charge thereon of $2,>6
which you hav3 deducted on account of the Remittance.
In your l e t t e r you s t a t e , "We claim the r i g h t to deduct the f o r e going r e m i t t a n c e or exchange charge under p r o v i s i o n s of S e c t i o n 13 of the
Federal Reserve Act as amended, as lawful c h a r g e s . "
\7e a l s o have your l e t t e r of July 29, e n c l o s i n g d r a f t on t h e Marine
Bank and T r u s t Company, f o r $332*96 which you s t a t e in your l e t t e r i s t o
cover proceeds of cash l e t t e r of the F e d e r a l Reserve' Bank of A t l a n t a
(New Orleans Branch) dated J u l y 26, 1924, l e s s a charge of 3 3 c e n t s , which
you have deducted on account of the r e m i t t a n c e .
In the l a s t mentioned l e t t e r you s t a t e "In as much as the endorsements
on t h e s e checks show t h a t t a e y have come t o you from banks i n other




Exhibit B.

No. 2,

X-4131.
F e d e r a l Reserve D i s t r i c t s , and. t h a t you a r e a c t i n g as C o l l e c t i o n Agent
only, we c l a i m t h e r i g h t to deduct t h e f o r e g o i n g r e m i t t a n c e or exchange
charge under p r o v i s i o n s of S e c t i o n 13 of the F e d e r a l Reserve Act as
amended, as l a w f u l c h a r g e s . »
lie a l s o have your l e t t e r , l i k e w i s e , of J u l y 29, 1924, e n c l o s i n g
d r a f t on the Canal Commercial T r u s t and Savings Bank f o r $221.97, which
you s t a t e in your l e t t e r i s to cover proceeds of our d a i l y l e t t e r of
J u l y 28th, l e s s a charge thereon of 22 c e n t s , which you have deducted
on account of t h e r e m i t t a n c e .
In t h i s l a s t l e t t e r you make the same o b s e r v a t i o n with r e s p e c t t o
t h e reason f o r deduction t h a t you make i n the l e t t e r c o n c e r n i n g the d r a f t
f o r $332.96,
We a l s o have your l e t t e r of July 29 e n c l o s i n g your d r a f t on the
Canal Commercial Trust and Savings BsnK f o r $ 2 , 5 ^ 3 - > which you s t a t e
i n your l e t t e r ,

i s to cover proceeds of our d a i l y l e t t e r of J u l y 23th

l e s s a charge thereon of $2.$4 which you have deducted cn account of
the r e m i t t a n c e .
In t h i s l a s t mentioned l e t t e r you c l a i m the r i g h t to make the deduction
"because the i t e m s covered by t h i s r e m i t t a n c e have been handled f o r the
account of t h e s e v e r a l banks sending the same t o u s .
With r e s p e c t to eacn of t h e aforementioned d r a f t s you say "If t h i s
r e m i t t a n c e i s n o t a c c e p t a b l e , p l e a s e r e t u r n i t at o n c e . "

Inasmuch as

t h i s Bank i s f o r b i d d e n by law t o pay exchange i t cannot a c c e p t a r e m i t t a n c e
d r a f t f o r the amount of the checks minus exchange.




We a r e t h e r e f o r e r e -

I
E x h i b i t B.

<t
-x

No, 3.

X-U131.

turning to you a l l of the d r a f t s above g e n e r a l l y described and r e s p e c t f u l l y
request t h a t you e i t h e r remit in f u l l at par f o r our cash l e t t e r s or r e t u r n
the checks

contained t h e r e i n to u s .

We a l s o have your l e t t e r s of J u l y 29, 192*+, the one enclosing two
checks a g g r e g a t i n g $1,025*00 as per your cash l e t t e r Number 59^9, %rid the
other enclosing two checks aggregating $2,981.59
Fumber 5971.

as

per your l e t t e r

In both l e t t e r s you request t h a t we give you immediate c r e d i t

in your r e s e r v e account, f o r the f u l l amount of the checks in question.
I t appears t h a t three of the items f o r which you d e s i r e c r e d i t are
drawn on Mobile Alabama .and the other said item i s d r a m on Jackson Miss.
The Federal Reserve Banks are forbidden by the r e g u l a t i o n s of the
Federal Reserve Board, to give immediate c r e d i t f o r checks received f o r
c o l l e c t i o n , except as permitted/under the time scneaule, a p p l i c a b l e to
such c a s e s .

We r e g r e t , t h e r e f o r e , that we a r e unable to accede to your

request f o r immediate c r e d i t .

You have, however, been given d e f e r r e d

c r e d i t f o r the checks enclosed, in accordance with the time schedule.




Yours very t r u l y ,
MARCUS WALKER,
Manager.

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD

X—Ul39
AugUSt 20, 1^24.

Personal and C o n f i d e n t i a l .

Dear Mr. Yrooman:
I mist apologize f o r not having sooner answered your
l e t t e r of J u l y 23rd. When i t a r r i v e d in Washington, I was on my v a c a t i o n
a t Mattapoiefett,from which I have j u s t returned, and I had no d a t a a t hand
from which to w r i t e you.
formation.
ate »

I send t h i s l e t t e r f o r your personal and c o n f i d e n t i a l i n The f i g u r e s s t a t e d thereon have been checked up and a r e accur-

You ask.why the Federal Reserve Board r a i s e d the discount
r a t e s of the Federal r e s e r v e banks two points "at one f e l l swoop," j u s t
p r i o r to the " p r e c i p i t o u s and ruinous d e f l a t i o n of the f a r m e r s . "
I assume that you r e f e r to the increase in discount r a t e s
made by most of the Federal reserve banks in January, 1A20, and the f u r t h e r
increase made in June, 1920.
The Federal Reserve Board did not make these i n c r e a s e s ;
they were made, in f a c t , by t h e Federal reserve banks, and r e p r e s e n t e d the
best judgment of the d i r e c t o r s of those banks; they were, however, i n f a c t ,
approved by the Federal Reserve Board.
These r a t e s were not advanced two p o i n t s a t any one time;
on the contrary, i n January, 1920, the maximum advance was I15 p o i n t s on
90-day commercial paper, while on a g r i c u l t u r a l s i x months paper the maximum
advance a t t h a t time was one point at New York, P h i l a d e l p h i a , and Richmond,
and from one-half t o t h r e e - q u a r t e r s of one point a t the other Federal r e serve banks.
The 6$ r a t e e s t a b l i s h e d in January, 1920, was the same a t
a l l the Federal r e s e r v e banks f o r both 90-day commercial paper and f o r s i x
months a g r i c u l t u r a l paper, - c e r t a i n l y no d i s c r i m i n a t i o n a g a i n s t the farmer.
You ask as to the reason f o r the se i n c r e a s e s in discount
rates.




- 2 -

X-U139

I am sure you w i l l r e c a l l the s p e c u l a t i v e wave which
spread over the country, and was in f u l l operation when t h e s e increases
were made. The Federal Reserve Board had given repeated warnings which
were unheeded; the s p e c u l a t i v e movement went on i n c r e a s i n g s t e p by s t e p ;
l a r g e stocks of merchandise were held in storage f o r s p e c u l a t i v e purposes
awaiting an expected f u r t h e r increase in p r i c e s . The Federal reserve J
bank discount r a t e s had been kept at a r e l a t i v e l y low l e v e l from the nec e s s i t y of a s s i s t i n g the Treasury in i t s f i s c a l o p e r a t i o n s , and i t was
f e l t t h a t an immediate increase in discount r a t e s was necessary to cont r o l f u r t h e r s p e c u l a t i o n which would i n e v i t a b l y r e s u l t in g r e a t d i s a s t e r .
In 1919 a n ( l 1920, c r e d i t extension by member banks and
t h e i r use of r e s e r v e bank c r e d i t was increasing a t an alarming r a t e ; the
borrowings of member banks from Federal reserve banks had increased from
1 , 8 b i l l i o n s in June, 1919, to 2 , 1 b i l l i o n s in December, 1919; the loans
and discounts of member banks had increased from 15-5 b i l l i o n s in June,
1919, to I S . 3 b i l l i o n s in December, 1Q19; Federal Reserve notes in c i r c u l a t i o n had increased from 2.U b i l l i o n s in June, I Q I 9 , to over 3 b i l l i o n s
in December, 1919. In a d d i t i o n to t h i s , the United S t a t e s had l o s t over
300 m i l l i o n s of gold, n e t , between June, 1919, and December, 1919*
On the other hand, the r e s e r v e s held by the Federal r e serve banks a g a i n s t t h e i r deposit and note l i a b i l i t i e s had been s t e a d i l y
d e c l i n i n g , f a l l i n g from 53^ in June, 1919, to U3.7$ by January 2, 1920.
This decline brought the r e s e r v e s p e r i l o u s l y near the minimum p o i n t . As a matter of f a c t , t h r e e Federal reserve banks would have
been a t that time below the l e g a l reserve minimum had i t not been f o r i n t e r - F e d e r a l r e s e r v e bank r e d i s c o u n t s .
Under t h e s e circumstances there seemed nothing t o do
other than to i n c r e a s e Federal Reserve discount r a t e s in order to control
the d a i l y increase in s p e c u l a t i v e a c t i v i t y . The r a t e s f i x e d in January,
1920, above r e f e r r e d t o , were found powerless to control t h i s s p e c u l a t i o n ,
and e a r l y i n June, 1920, they were increased again a t four Federal reserve
banks t o 7$ on both a g r i c u l t u r a l and commercial paper. This advance was
made t o p r o t e c t t h e Federal reserve banks 1 r e s e r v e s , which were well down
to the l e g a l minimum, and t o i n d i c a t e to the p u b l i c t h a t f u r t h e r c r e d i t
expansion was f r a u g h t with danger. Legitimate c r e d i t needs, however, continued t o be s u p p l i e d ,
These r a t e increases did not d i s c r i m i n a t e a g a i n s t a g r i c u l t u r e ; on the c o n t r a r y , the Federal r e s e r v e banks 1 a g r i c u l t u r a l c r e d i t s
were n e a r l y t h r e e times as great in 1920 as in 1919.




f
/*

—

#

X-I4139

-,3~

I am sure you w i l l a p p r e c i a t e t h a t t h e d e c l i n e in p r i c e s
i n 1920 - a d e c l i n e which took p l a c e over the whole world, - was not
caused by c o n t r a c t i o n of c r e d i t s by banks, when you consider t h a t while
wholesale p r i c e s d e c l i n e d from an index number of 247 i n May, 1920, to
179 in December, 1920, the loans of member banks to t h e i r customers i n creased between t h e s e same dates over 269 m i l l i o n s of d o l l a r s , w h i l e Fede r a l r e s e r v e bank l o a n s to member banks i n c r e a s e d during t h e same p e r i o d
by l6S m i l l i o n s ; so a l s o the money i n c i r c u l a t i o n o u t s i d e of t h e Treasury
and t h e Federal r e s e r v e banks i n c r e a s e d between January 1, 1920, and Hovember 1, 1920, 316 m i l l i o n s of d o l l a r s . Surely no one would contend
t h a t t h e s e increased c r e d i t s caused a d e c l i n e in p r i c e s , and some other
cause must be found t o e x p l a i n t h i s d e c l i n e .
The r e a l cause of the d e c l i n e in p r i c e s was t h a t t h e y had
been boosted out of p r o p o r t i o n to wages, and other economic c o n d i t i o n s ,
and t h a t a s p e c u l a t i v e boom i s bound to c o l l a p s e sooner or l a t e r ,
Furthermore, an examination of t h e p e r i o d from A p r i l , 1921>
when r a t e s were decreased down t o the p r e s e n t time, w i l l show c o n c l u s i v e l y
t h a t t h e lower d i s c o u n t r a t e s were not followed by h i g h e r member bank b o r rowings, but t h a t on t h e c o n t r a r y , such borrowings decreased from over 2
b i l l i o n s on A p r i l 15, 1921 to 260 m i l l i o n s a t t h e p r e s e n t time, while
t h r e e of t h e banks have a present r a t e as low as 3 a n & t h e *&te a t t h e
Federal Reserve Bank of New York i s only 3$•
This d e c l i n e in the borrowings of member banks from the
Federal r e s e r v e banks was made p o s s i b l e because of the enormous gold imp o r t s coming i n t o the United S t a t e s , e n a b l i n g t h e member banks not only t o
care f o r t h e i r customers f needs, but a l s o t o pay o f f t h e i r r e d i s c o u n t s
with t h e F e d e r a l r e s e r v e banks. The n e t imports of gold between November
1, 1920, and August 1, 1924, were n e a r l y 1 . 5 b i l l i o n s of d o l l a r s .
You w i l l see from t h e above f i g u r e s t h a t i n c r e a s e d discount
r a t e s i n f a c t were f o l l o w e d by increased l o a n s , while decreased d i s c o u n t
r a t e s have in f a c t been followed by a decrease i n t h e l o a n s of the rnemoer
banks from t h e F e d e r a l r e s e r v e banks,
These f a c t s b r i n g out c l e a r l y t h a t i t was the d e c l i n e i n
p r i c e s which u l t i m a t e l y caused t h e l o a n s t o d e c r e a s e ; t h a t .is t o say, t h e
d e c l i n e i n p r i c e s came f i r s t , and t h e decrease i n loans followed the de~^
d i n e , because l e s s money and l e s s c r e d i t was needed t o c a r r y on the b u s i ness of t h e c o u n t r y a t the then lower l e v e l of p r i c e s ,
I hope I have made t h i s c l e a r to you, but i f n o t , do wr±te
me a g a i n .
Hon, Carl Vrooimn,
The Pen and Brush Club,
16 E, 1 0 t h S t r e e t ,
New York C i t y .



S i n c e r e l y yours,
(Signed) C• S, Hamlin,

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD

Subject:

X-4i4o
August 22, 1924

Sales and Regulations Governing Announcements of
Bate Changes.

Dear S i r :
The Federal Reserve Board, under d a t e of June l 4 t h , addressed
a l e t t e r t o you on the s u b j e c t "Announcements of Rate Changes, n a d v i s i n g
of the t e n t a t i v e adoption of c e r t a i n r u l e s and r e g u l a t i o n s governing the
announcement of r a t e changes and r e q u e s t i n g suggestions and comments
thereon* Replies have been received from t h e m a j o r i t y of t h e Federal r e serve banks, which have been considered by the Board*
You a r e now advised t.inat the Board has adopted t h e f o l l o w i n g
r u l e s and r e g u l a t i o n s , e f f e c t i v e immediately2
(1) All t e l e g r a p h i c communications d e a l i n g w i t h r a t e changes
s h a l l be i n code*
(2) No information of any kind with r e s p e c t to any r a t e change
s h a l l be published u n t i l the Federal r e s e r v e bank in quest i o n s h a l l have been advised t h a t such change has been a p proved by t h e Federal Reserve Board. D i r e c t o r s and o f f i c e r s of Federal r e s e r v e banks a r e cautioned t o r e f r a i n
from d i s c u s s i n g p r o s p e c t i v e and a c t u a l r a t e changes o t h e r
than with those connected with the Federal Reserve System,
(3) Announcements of r a t e changes which have been approved
s h a l l be made as nearly as p o s s i b l e simultaneously by t h e
Federal r e s e r v e bank concerned and the Federal Reserve
Board and such announcements s h a l l be made immediately a f t e r
the c l o s e of b u s i n e s s at the bank concerned on the day on
which the r a t e change was approved and not sooner,
(4) The new r a t e s h a l l be e f f e c t i v e a t the beginning of t h e
f i r s t b u s i n e s s day following t h e day on which the announcement of the change was made#
(5) In view of the dual c a p a c i t y of the Federal Reserve Agent
as Chairman of t h e Board of D i r e c t o r s of the Federal r e serve bank and as l o c a l r e p r e s e n t a t i v e of the Federal Reserve Beard,
p u b l i c announcements w i t h r e s p e c t t o r a t e
changes on the p a r t of the Federal r e s e r v e bank s h a l l be
made by him and he w i l l be held s t r i c t l y r e s p o n s i b l e f o r
compliance w i t h these r u l e s and r e g u l a t i o n s . Notices to
member banks may be sent out over th« s i g n a t u r e of the Governor as h e r e t o f o r e .




I
-UlUO
(6) All announcements to other Federal r e s e r v e banks w i t h
r e s p e c t to such r a t e changes s h a l l be made by the Fede r a l Reserve Board.
In t h e i n t e r e s t of s a f e t y and economy, t h e f o l l o w i n g new code
words a r e to be used i n a l l messages exchanged between the Federal Reserve
Board and the Federal reserve banks with regard to r a t e changes:
MASCULATE *

MASCULINE -

MASCOT MASHBALL MASHIEST MASKERS MASKING- MASON MASONIC MASONRY -

Our Board of D i r e c t o r s today voted t o e s t a b l i s h
rediscount r a t e of (per cent) on ( c l a s s e s of
paper - see below), e f f e c t i v e the f i r s t b u s i n e s s
day following t h a t on which approved by the
Federal Reserve Board.
Our Executive Committee, under a u t h o r i t y of
Board of D i r e c t o r s , today voted t o e s t a b l i s h
rediscount r a t e of (par cent) on ( c l a s s e s of
paper - see below). e f f e c t i v e the f i r s t business
day following '..at on which approved by the
Federal Reserve Board.
Federal Reserve Board today approved f o r your
bank rediscount r a t e of (per cent) on ( c l a s s e s of
paper - s " : . low). e f f e c t i v e ( d a t e ) .
Federal. -Reserve Board today approved f o r (name of
bank) rediscount r a t e of (per c e n t ) on ( c l a s s e s
of paper - see below), e f f e c t i v e ( d a t e ) .
Commercial, a g r i c u l t u r a l and l i v e stock paper mat u r i n g w i t h i n 15 days, including member banks
collateral notes.
Commercial, a g r i c u l t u r a l and l i v e stock paper mat u r i n g w i t h i n from l 6 t o 90 d a y s .
A g r i c u l t u r a l and l i v e stock paper, maturing over
90 days but w i t h i n 9 months.
Bankers Acceptances, maturing w i t h i n 90 days.
Trade Acceptances, maturing w i t h i n 90 days.
All c l a s s e s of paper of a l l m a t u r i t i e s .

I t i s requested that the above code words be added t o the bottom
of page lUU of t h e Federal Reserve Telegraphic code, to follow code word
MARVELOUS.
This l e t t e r supersedes a l l previous communications on the subject,,
Very t r u l y yours,

D, R. C r i s s i n g e r ,
G o v e r n o r .
TO GOVERNORS AND CHAIRMEN OF ALL F. R. BANKS.




I

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD




X-UlUl
August 23, 1924

SUBJECT: Board*s Regulations, Series of 1924.

Dear S i r :
As requested by you, t h e r e a r e today "bei n g forwarded t o your bank, in mail sacks,
copies of the Board's Regulations, r e p r i n t e d a s
S e r i e s of 1924,
For an explanation of changes irade i n
t h e s e Regulati r -is, p l e a s e r e f e r t o the p r i n t e d
l e t t e r of tranr... t t a l contained in the f r o n t of
t h e pamphlet,
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

TO BE SENT TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.

X-4i42
FEDERAL

RESERVE

BOARD

STATEMEHtfT FOR THE PRESS
Forbilirmediats Eel ease,
3:00 o ' c l o c k , p.m.

August 23, 1924.

The Federal Reserve Board announces t h a t t h e
Federal Reserve Bank of San Francisco has reduced i t s r e d i s count r a t e from 4f t o 33$

a l l c l a s s e s of paper of a l l ma-

t u r i t i e s , e f f e c t i v e Monday, August, 25th.




'

C21

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

August 25, 1924.•
X-41U3
SUBJECT:

Report of Gold Payments and Receipts (X-3991)«

Dear S i r ;
In comparing t h e monthly r e p o r t s of gold payments
and r e c e i p t s submitted by the Federal r e s e r v e banks i n r e sponse to Board's request of March 3, 1924 (X-3991), i t app e a r s t h a t the items included i n t h e amounts r e p o r t e d under
the s e v e r a l c a p t i o n s a r e n o t uniform. These r e p o r t s a r e i n tended t o r e f l e c t , i n so f a r as p o s s i b l e , the movement of
gold i n a c t u a l c i r c u l a t i o n . They should include as r e c e i p t s ,
t h e r e f o r e , only f i t and u n f i t c e r t i f i c a t e s and c o i n received
from member and non-member banks and i n d i v i d u a l s , and as
payments, only new and f i t c e r t i f i c a t e s and coin p a i d to
member and non-member banks and i n d i v i d u a l s , with payments
to United S t a t e s d i s b u r s i n g o f f i c e r s r e p o r t e d s e p a r a t e l y All shipments of coin t o and from the Mints, or
shipments of c e r t i f i c a t e s to and from the Treasury Department,
or t r a n s f e r s between Head O f f i c e and branches, should be
t r e a t e d a s s t a c k and should not be included i n the r e p o r t s .
P l e a s e advise your branches.
Very t r u l y yours,

J . C. N o e l l ,
Assistant Secretary.

TO GOVERNORS OF ALL F . R. BANKS, except N W YORK.
E




I

FEDERAL

BESJSVE

-r>- < *
1

BOARD

STATEMENT FOR THE PRESS
For Release i n Morning papers
Wednesday, August 27, 1924.

.

x-4l44

The following i s a summary of general b u s i n e s s
and f i n a n c i a l conditions throughout t h e several
Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s
f o r the months of July and August, as contained
i n the forthcoming i s s u e of the Federal Reserve
Bulletin.
Production i n b a s i c i r . d u s t r i e s , a f t e r a c o n s i d e r a b l e d e c l i n e i n
recent months, was maintained in J u l ^ a t the same l e v e l a s i n June,
employment continued to d e c l i n e .

Factory

Wholesale c r i c e s increased f o r t h e f i r s t

time since e a r l y in the y e a r , r e f l e c t i n g c h i e f l y the advance in the p r i c e s
of farm p r o d u c t s .
PRODUCTION;
The Federal Reserve Board's index of production in b a s i c ind u s t r i e s , which had declined 22 per cent between February and June, remained
p r a c t i c a l l y unchanged d u r i n g J u l y .

Iron and s t e e l and woolen i n d u s t r i e s

showed f u r t h e r c u r t a i l m e n t , while production of f l o u r , cement, c o a l , and
copper was l a r g e r than in June.

Factory employment decreased 4 per cent i n

July owing t o f u r t h e r -.reduction of f o r c e s i n t h e t e x t i l e , m e t a l , and a u t o mobile i n d u s t r i e s .

Building c o n t r a c t awards showed more than the u s u a l

seasonal d e c l i n e i n J u l y , but were 10 p e r c e n t l a r g e r than a year ago.
Crop c o n d i t i o n s , a s reported by the Department of A g r i c u l t u r e , were
higher on August 1 than a month e a r l i e r .

Estimated production of n e a r l y a l l

of the p r i n c i p a l crops except tobacco was l a r g e r than i n J u l y and the y i e l d s
of wheat, o a t s , r y e , and c o t t o n are expected to b e considerably l a r g e r than
•last year.



-2-

X-^144

TRADE:
Railroad shipments increased in J u l y owing to l a r g e r loadings of
miscellaneous merchandise, g r a i n , and coal*

-Wholesale t r a d e was 3 per cent

l a r g e r than in June, owing t o increased s a l e s of meat, dry goods f and drugs,
but was 3 per cent smaller than a year ago*

R e t a i l trade showed the u s u a l

seasonal d e c l i n e in J u l y , and department s t o r e s a l e s were one per cent g r e a t e r
and mail order s a l e s 7 p e r cent l e s s than a year ago.

Merchandise stocks a t

department s t o r e s continued to decline d u r i n g July and were only s l i g h t l y
l a r g e r a t the end of the month than a year e a r l i e r *
PRICES:
Wholesale p r i c e s , a s measured by the index of the Bureau of Labor
s t a t i s t i c s , increased more than one per cent in July*

P r i c e s of farm products

foods, and c l o t h i n g i n c r e a s e d , while p r i c e s of b u i l d i n g m a t e r i a l s again dec l i n e d sharply and p r i c e s of metals, f u e l , and house f u r n i s h i n g s a l s o decreased.

During the f i r s t h a l f of August quotations on c o r n , beef, sugar,

s i l k , copper, rubber, and a n t h r a c i t e advanced, while p r i c e s of c o t t o n , f l o u r ,
and b r i c k s d e c l i n e d .
BANK CREDIT:
Commercial loans of member banks in leading c i t i e s , owing p a r t l y to
seasonal i n f l u e n c e s , i n c r e a s e d considerably e a r l y in August*

Loans secured

by stocks and bonds and investments continued to i n c r e a s e , so t h a t a t the
middle of August t o t a l ,loans and investments of those banks were l a r g e r than
a t any p r e v i o u s time*

F u r t h e r growth of demand d e p o s i t s c a r r i e d them a l s o to

t h e h i g h e s t l e v e l on record*
Between the middle of July and the middle of August Federal r e s e r v e
bank discounts f o r member banks declined f u r t h e r and t h e i r holdings of




-3~
acceptances decreased somewhat.

x-4i44

United S t a t e s s e c u r i t y h o l d i n g s i n c r e a s e d ,

however, and t o t a l earning a s s e t s of Federal r e s e r v e banks remained
p r a c t i c a l l y -unchanged*
Continued easing in money r a t e s i n the New York market during
July and e a r l y August i s i n d i c a t e d by a d e c l i n e of l / 4 of one per cent i n
p r e v a i l i n g r a t e s f o r commercial paper to 3~3

P 3 r cent.

A f t e r the middle

of August- t h e r e was some advance in open-market r a t e s f o r b a n k e r s ' a c c e p t ances and s h o r t term government s e c u r i t i e s .

Curing August t h e discount r a t e

a t the Federal Reserve B&nk of New York was reduced from 3 1 / 2 to 3 P e r

Cen

*

and a t t h e Federal Reserve Bank of Cleveland and of San F r a n c i s c o from 4 to
3 1 / 2 per c e n t .

August 26, 192U,




L.. ^ < v)

FEDERAL

RESERVE

BOARD

Statement f o r the P r e s s
For Immediate Release

X-414-5
August 27, 1924.

CONDITION OF ACCEPTANCE MARKET,
J u l y 10 to August 13»
Continuation of low money r a t e s was the most important f a c t o r a f f e c t ing the acceptance market during the four-week p e r i o d ending August 13. Late
in July when c a l l loan r a t e s were steady a t 2 per cent and discount market
c a l l r a t e s were f l u c t u a t i n g around 1 l / 2 and 1 3 / 4 p e r c e n t , the demand f o r
acceptances was e x c e p t i o n a l l y good.

A f t e r the f i r s t of August, however, ac-

ceptance r a t e s were lowered to 1 7/8 per cent f o r 30-day m a t u r i t i e s and 2
per c e n t f o r 60-90 day b i l l s , a smaller derrand f o r b i l l s f o r s h o r t p e r i o d i n vestments r e s u l t e d .

The supply of new b i l l s coming i n t o the market was l i k e -

wise i n f l u e n c e d by the exceedingly low money r a t e s and was l e s s than the demand, but by the c l o s e of the period d e a l e r s aggregate h o l d i n g s had i n c r e a s e d
from t h e low p o i n t reached in July.

Considerable demand f o r funds was e v i -

dent f o r h a r v e s t i n g and marketing the g r a i n crops in J u l y but on account of
the low r a t e s the borrowers were r e p o r t e d to be r e l y i n g on d i r e c t l o a n s r a t h e r
than acceptances which was responsible i n p a r t f o r t h e smaller supply of new
b i l l s e n t e r i n g the market.

A f t e r the t u r n of August, however, g r a i n b i l l s be-

gan t o appear again and considerable drawings a g a i n s t sugar, c o f f e e , c o t t o n ,
h i d e s , and l e a t h e r were a l s o n o t e d .

On the P a c i f i c c o a s t b i l l s drawn t o

f i n a n c e canned products were p a r t i c u l a r l y s i g n i f i c a n t and i n d i c a t e d a conside r a b l e volume of goods i n warehouses awaiting d i s t r i b u t i o n .




? 636

-2-

X-4145

Rates in the New York market at the c l o s e of the period ranged
from 2 to 1 7/8 per cent bid and 1 7/6 t o 1 3 / 4 per cent offered for 30-day
b i l l s to 2 1/8.per cent bid and 2 per cent offered f o r 90-day b i l l s .

Longer

maturities were demanding s l i g h t l y higher rates but the greater volume of
b i l l s was with maturities of 30-90 days.




)

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD




X-4i47
August 25, 1924.

SUBJECT:

Joint Conference of Federal Reserve Agents
and. Governors,

Dear Sir:
The Board has designated Monday, Movent er 10th,
as the opening date for the annual conference of Federal
Reserve Agents and Governors of Federal reserve banks.
As in the past, both joint and separate s e s s i o n s w i l l be
h e l d . The programs w i l l be prepared in the usual way
and copies w i l l be placed in the hands of each Governor
and Federal Reserve Agent about October 1 s t ,
Very t r u l y yours,

Edmund P i a t t ,
Vice-Governor.

TO BE SENT TO ALL GOVERNORS AND FEDERAL RESERVE AGENTS.

FEDERAL

RESERVE

BOARD

•

STATEvIEN ? FOR THE PRESS
For Release i n Morning
P a p e r s , Tuesday, Sept. 2, 192U.

August 7,0,
X-UlUg

John R. M i t c h e l l , of St. Paul, Minnesota, has been
appointed by t h e Federal Reserve Board as. a Class C Director
of the Federal Reserve Bank of Minneapolis, to f i l l the unexpired term of John H. Rich, deceased.
The Board has a l s o designated Mr. Mitchell as Fede r a l Reserve Agent f o r the Ninth Federal Reserve D i s t r i c t and
as Chairman of the Board of D i r e c t o r s of the Federal Reserve
Bank of Minneapolis.




( COPY )

X-U150

And thereafter, on the 28tk day of July, 1924, the Court f i l e d
Findings of Fact and Law, as follows:
IN THE DISTRICT C U T OF THE UNITED STATES
OR
IN AND FOB THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION.
THE CITY OF DOUGLAS, a
Municipal Corporation,
Plaintiff,
No. 347 - Law.

vs.
FEDERAL RESERVE BANK
OF DALLAS,
Defendant,

)

Messrs. Boyle, Knapp & P i c k e t t , and
Messrs. Whitaker & P e t i c o l a s ,
Attorneys for P l a i n t i f f .
Messrs. E. B. Stroud, J r . , and Turney, Surges, Culwell,
Hoilidgy & Pollard ,
Attorneys for Defendant.
This i s an action at law brought "by the City Of Douglas, Arizona, a
municipal corporation, against the Federal Reserve Bank of Dallas t o recover
$5,000.00 alleged to be the amount of a check drawn by the Count#; Treasurer
of Cochise County, Arizona, to the order of said City, upon the Central Bank
of Willcox, Arizona.
The c t r - k was drawn on December 22, 1920, and was delivered to the City
of Douglas on December 24, 1920, at which times and at a l l times up to December 31, 1920, the Treasurer of Cochise County had on d e p o s i t in the
Central Bank of Will cox s u f f i c i e n t funds to meet said check.
On December 24, 1920, the check was properly endorsed by the City of




Douglas and deposited with the First National Po-nk of Douglas, Arizona, for
c o l l e c t i o n and c r e d i t .

The f u l l amount of the check was by said "bank entered

as a credit in a pass or deposit hook and delivered to the City of Douglas,
on which pass boci-itac© was a printed indorsement as follows: "All out of town
items credited subject to f i n a l payment."

There was no other contract or

agreement made between the City of Douglas and the said F i r s t National Bank
of Douglas thsn such as Srose impliedly from the acceptance by said bank of
said check for c o l l e c t i o n .

And there was no s t a t u t e of the State of Arizona

upon the subject which entered into or changed or modified said contract in any
respect.
The First National Bank of Douglas was 3 member of the Federal Reserve
Banking System created by Congress.

Said bank immediately transmitted said

check by mail to the EL Poso Branch of the Federal Reserve Bank of Dallas for
collection.

I t was received by said Branch Bank on December 21, 1920, and was

by i t forwarded direct to the Central Bark of Will cox for payment, reaching
said drawee bank on December 30, 1920.

Thereupon the Central Bank of Willcox

charged the County Treasurer of Cochise County with the amount of the check
and in payment therefor is sued'and mailed to said El Paso Branch Bank, instead
of cash, i t ' s Cashier's Check, drawn on the Central Bank of Phoenix, Arizona,
for the sum of $6,426.17, which included some small items other than said
$5,000.00 check.
Upon r e c e i p t of said Cashier's Check the EL Paso Branch Bank forwarded
same to the Branch Bank at Los Angeles of the Federal Reserve Bank of San
Francisco for c o l l e c t i o n .

On January $, 1921, said Los Angeles Branch Bank

forwarded sajld Ggshiar's Check d i r e c t to the Central Bank of Phoenix, drawee,
T

for payment, reaching said bank on January g, 1921, and was on said date protested for non payment because of the want of s u f f i c i e n t funds of the Central




-3-

>•

f*
<

'

: •'

-X- -kL.

Bank of Willcox with the Central Bank of Phoenix to cover the check.
On January 1 0 , 1921, both of these l a s t named banks, being insolvent,
closed their doors and ceased to do business.

Thereupon, the El Paso Branch

Bank charged the F i r s t National Bank of Douglas with the amount of said
$5,000.00 original check, and in turn the F i r s t National Bank charged i t to
the account of the City of Douglas and credited the amount thereof to the defendant.
I t i s charged by the City of Douglas, the p l a i n t i f f herein, that the E
H
Paso Branch of the Federal Reserve Bank of Dallas, defendant h e r e i n , was negl i g e n t in sending the check d i r e c t to .the drawee, the Central Bank of Willcox,
and in accepting i t s Cashier's Check in payment thereof instead of cash.
In view of the conclusion I have reached i t i s necessary that I consider
and discuss but one question and t h a t i s : Can t h i s action be maintained by the
p l a i n t i f f , the City of Douglas, against the Federal Reserve Bank of Dallas?
Stating the question in another form:

I s the F i r s t National Bank of Douglas

with which the check was deposited by the City of Douglas for c o l l e c t i o n alone
responsible to the City or i s the Federal Reserve Bank of D a l l a s , to which the
check was forwarded for c o l l e c t i o n by the i n i t i a l bank of d e p o s i t , d i r e c t l y
l i a b l e to the City of Douglas?
Upon t h i s question the s t a t e decisions are in c o n f l i c t beyond the p o s s i b i l i t y of r e c o n c i l i a t i o n .

Some of the states following the "New York Rule", so

c a l l e d , have held that the i n i t i a l bank alone i s responsible to the owner and
that there i s no d i r e c t l i a b i l i t y to the owner on the part of the correspondent
bank.

On the other hand many of the s t a t e s following the "Massachusetts Rule",

so c a l l e d , have held exactly the contrary, v i z : that the i n i t i a l bank by the
mere f a c t of deposit for c o l l e c t i o n , i s authorized to employ sub-agents, who




thereupon "become the agents of the owner and d i r e c t l y responsible tc him for
their d e f a u l t s .
Our Supreme Court after reviewing these two l i n e s of d e c i s i o n s approved
the "New York Rule", Exchange National Bank. v s . Third National Bank, 122 U.S.
276; and t h i s d e c i s i o n has been followed bythe i n f e r i o r federal courts without
exception so far as I have been able to a s c e r t a i n , Taylor & Bourinque Co* v s .
National Bank of Ashtabula, 2o2 Fed. l6g; F i r s t National Bank of Denver v s .
Federal Reserve Bank cf Kansas City, Mo., 283 Fed. 700.
I t i s recognized of course that t h i s r u l e may be varied or changed by con%
t r a c t , express or implied.

For instance i t was held in Federal Reserve v s .

Malloy, 264 IB. S. 160, that a Florida statute controlled the r e l a t i o n s of the
drawee to the i n i t i a l bank of deposit with reference to which i t was presumed
they d e a l t with each other.

In that case the d e p o s i t for c o l l e c t i o n was made

i n the State of Florida and the court held that t h i s s t a t u t e "had the e f f e c t of
importing the Massachusetts Rale into the contract with the r e s u l t that the
i n i t i a l bank had implied authority t o intrust the c o l l e c t i o n of the check to a
sub-agent and that sub-agent- in tvirn to another; and the r i s k of any default
or neglect on their part rested upon the owners".

I think t h a t the inference .

i s clear that in the absence of the Florida statute the court would have applied and enforced the New York Rule in that case; and that there can be no
doubt that the New York Rule s t i l l prevails in the federal courts.
In Texas the Massachusetts Rule i s now the s e t t l e d rule of decision.
Arizona the court of l a s t resort has not passed upon the question.

In

Neither i n

Texas nor in Arizona i s there any l e g i s l a t i o n a f f e c t i n g the question.
However, as I view the question Hinder consideration i n t h i s case whatever
may be the rule of d e c i s i o n in Texas or Arizona the federal court should apply
i t s own rule - the New York Rule - inasmuch as the question to be decided i s one



?

rn

-5of general commercial law 3rd not the construction or a p p l i c a t i o n of any s t a t e
statute.

Even had the Massachusetts Rule been established by the courts of

Arizona where the contract was made, the New York Role would s t i l l be the r u l e
of decision i n this court.
On th question of general or commercial law, such as the l i a b i l i t y of a
bank accepting f o r c o l l e c t i o n commercial paper, the federal courts are not
bound by decisions of the s t a t e i n which the contract was made or to be performed but they must upon their independent judgment determine the question
of l i a b i l i t y by reference to a l l the a u t h o r i t i e s .

Swift v s . Tyson, 16 Pet. 1>

B. & 0. By. Co. v s . Baugh, IU9 U.S. )6g; Taylor & Bourtoque Co. v s . National
Bank of Ashtabula, 262 Fed. l6g; Spokane & Eastern Trust Co. v s . United States
S t e l l Products Co., 290 Fed. 3SU; St. Nicholas Bank v s . State National Bank,
13 L.R.A. 2Hl; Faulkner v s . Hart, 82 NtY* 413; Liverpool S.S. Co. vs.
Phoenix Life Ins. Co., 125 U.S. 397*
This our Supreme Court has done in the determination of t h i s question,
and the rule laid down by i t mast be followed by t h i s and a l l other i n f e r i o r
federal courts.

And under t h i s rule there i s no l i a b i l i t y on the part of the

Federal Reserve Bark of Dallas, defendant, t o the p l a i n t i f f , the City of
Douglas.

Counsel f o r p l a i n t i f f contends that the contract for c o l l e c t i o n of

the check was not of the ordinary type but was varied by the special s t i p u l a t i o n
printed on the pass or deposit book i n which the credit entry was made; that
said special s t i p u l a t i o n had the e f f e c t of importing the Massachusetts Rule
into the contract.

I do not think t h i s contention sound.

This s t i p u l a t i o n

added nothing to the contract and did not take anything from i t .

Checks faken

for c o l l e c t i o n and credited ere always in the absence of special agreement
subject to f i n a l payment•




From what has been said i t follows that I am of

i.

, ~ " /i
--V

•£.

-6-

opinion judgment should be rendered f o r defendant, and i t i s so ordered.
(signed)

W.

Smith,

U. S. D i s t r i c t Judge.

To which Findings of Fact and Law the p l a i n t i f f f i l e d i t s exceptions,
on the 28th day of July, 1924, a s follows:
IN THE UNITED STATES DISTRICT C U T
OR
FOll T E WESTERN DISTRICT OF TEXAS
H
' EL PASO DIVISION.
CITY OF DOUGLAS,
Plaintiff
No. gkj Law

vs.
FEDERAL RESERVE BANK
OF DALLAS,
Defendant.
i.

'

Comes now the P l a i n t i f f and excepts t o t h e Findings of Fact and Law (or
opinion of the Court) i n that the same makes no finding with reference to
whether or not the Federal Reserve Bank of Dallas was negligent i n accepting
the c a s h i e r ' s check of the Central Bank of Willcox instead of cash.
II.
The said Findings of Fact and Law (opinion) are excepted to because the
evidence shows that the Federal Reserve Bank was negligent i n accepting the
c a s h i e r ' s check in l i e u of cash and the Court should have so found.
III.
P l a i n t i f f excepts to the said Conclusions of Fact and Law (opinion)
"because the Court found that there was no other contract between the City of
Douglas and the F i r s t National Bank of Douglas than such as arose impliedly




-

from the acceptance of said Bank of said check f or c o l l e c t i o n and the endorsement on the pass book, "because Mr. Graves, a witness, t e s t i f i e d
s p e c i f i c a l l y on t h i s subject and showed clearly that t h i s check was merely
taken for c o l l e c t i o n to be forwarded for c o l l e c t i o n and that no f i n a l credit
was to be given the City of Douglas jpntil the check had been c o l l e c t e d ,
IV.
The P l a i n t i f f excepts to the Court's Conclusions of Law and Fact
(opinion) because the Court finds that., the contract for c o l l e c t i o n was such
that i t did not have the e f f e c t to import the Massachusetts rule into the
contract, i t being apparent under the decisions that the d i s t i n c t i o n between
the New York rule and the Massachusetts rule i s determined e n t i r e l y by the
contract between the parties*

If the check i s discounted or sold to the Bank

so that i t becomes i t s property, then the New York rule might have applied,
but i f the check i s deposited for c o l l e c t i o n so that i t i s within the contemplation of the parties that the i n i t i a l Bank w i l l have to send the check
to some other Bank a t some other place to make the c o l l e c t i o n and w i l l not
give credit u n t i l the check i s f i n a l l y paid, then the Massachusetts rule
enters into the contract even under the Federal Court decision.
V.
P l a i n t i f f excepts to the Conclusions of Law and Fact (opinion) because
the.same find f o r the Defendant and do not find f o r the p l a i n t i f f .
VI.
P l a i n t i f f excepts to the Final Court Findings of Law (opinion) because,
while he finds that the New York rule may be varied by contract - express or
implied - he erroneously f i n d s that i t was not so varied in t h i s instance,
and P l a i n t i f f shows that the f a c t s with reference to the contract between




the City of Bougies &nd the First national Bank of Douglas contained i n the
Record show c l e a r l y that i t was contemplated by the p a r t i e s that the check
'would be taken for c o l l e c t i o n ; that no d e f i n i t e credit would be given against
i t u n t i l f i n a l payment; that i t was also conterrplated that i t should be f o r ward ed to some d i f f e r e n c e bank i n a foreign c i t y , and thereby p a r t i e s imp l i e d l y agreed that the l i a b i l i t y of the F i r s t National Bank of Douglas should
only be to s e l e c t the competent c o l l e c t i n g agent and that i t should not be
l i a b l e for the negligence of such agent.

Wherefore, the Massachusetts rule

i s properly shown to have applied with the fabts in t h i s case.




Khapp, Boyle & P i c k e t t ,
and
Whitaker & P e t i c o l a s ,
Attorneys for P l a i n t i f f .

*

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD




X-U152
September 4, 1924.
SUBJECT:

Pascagoula National Bank v s . Federal Reserve
Bank of A t l a n t a , et a l .

Dear S i r :
A week or t e n days ago the Board sent t o
a l l Federal reserve banks a copy of t h e b i l l of comp l a i n t brought by the Pascagoula National. Bank, of
Mosspoint, M i s s i s s i p p i , a g a i n s t the Federal Reserve
Bank of A t l a n t a , et al.., in the United S t a t e s D i s t r i c t
Court f o r the Northern D i s t r i c t of Georgia.
Governor Harding of t h e Federal Reserve Bank
of Boston has since sent to the Board a memorandum
p r e s e n t i n g an a n a l y t i c a l d i s c u s s i o n of the complaint
which the Board b e l i e v e s w i l l be of i n t e r e s t to you
and t o t h e Legal Department of your bank. Two copies
of the memorandum, i n question a r e enclosed herewith.
Very t r u l y yours,

D. R. C r i s s i n g e r ,
Governor.

TO GCTEENOFS OF ALL F. R. BANKS,
except Governor Harding.

I
( COPY )

X-4I49

Comments onCoraplaint of Pascagoula National Bank against the Federal
Reserve Bank of Atlanta, e t . a l . i n tiie United States D i s t r i c t Court
for the Northern D i s t r i c t of Georgia.

Without-*-attempting to d i s c u s s p l a i n t i f f ' s preliminary technical a l l e g a t i o n s
necessary for the i d e n t i f i c a t i o n of p a r t i e s , j u r i s d i c t i o n , e t c . , the following
comments w i l l deal only with certain paragraphs of the a l l e g a t i o n s having r e f i :
erence to the merits of the case.
Paragraph 12.




The statement as tc the checks which Federal Reserve Banks may
receive i s not correct.

Section 13 as o r i g i n a l l y enacted read

in part as follows:
"Any Federal Reserve Bank may receive from any of
i t s member Thanks, and from the United States, dep o s i t s of current funds i n lawful money, n a t i o n a l bank notes, Federal reserve notes, or checks and
d r a f t s upon solvent member banks, payable upon presentation; or, s o l e l y f o r exchange purposes, may r e ceive from other Federal reserve banks deposits of
current funds i n lawful money, national-bank notes,
or checks and d r a f t s upon solvent member or other
Federal reserve banks, payable upon presentation."
The Act of September J , 1916 amended the foregoing part of the
Section to read as follows:
"Any Federal Reserve Bank may receive from any of
i t s member banks, and from the United S t a t e s , d e p o s i t s of current funds i n .lawful money, national
bank notes, Federal reserve n o t e s , or checks and
d r a f t s , payable upon presentation, and a l s o , for
c o l l e c t i o n , maturing b i l l s : or, s o l e l y for purposes
of exchange or of c o l l e c t i o n , may receive from other
Federal reserve banks deposits of Current funds in
lawful money, national bank notes, or checks upon
other Federal reserve banks, and checks and d r a f t s ,
payable upon presentation within i t s d i s t r i c t , and
maturing b i l l s payable within i t s d i s t r i c t - 1 1
On June 21, 1917. t h i s part of the Section was again amended
by inserting the words "notes and» a f t e r the word "maturing"
i n the s i x t h l i n e and i n twelfth l i n e as written above and by

I
V.

-2-

-

x-UiUg

adding the following vhich c o n s t i t u t e s the so-called Hardwick
Amendment:
or, s o l e l y , for the purposes of exchange or of c o l l e c t i o n ,
may receive from any non-merrher "bank or trust company
deposits of current fends in lawful money, nationalbank notes, Federal reserve notes, checks and d r a f t s
payable upon presentation, or maturing notes and b i l l s :
Provided, such non-member bank or t r u s t company maintains with the Federal reserve bank of i t s d i s t r i c t a
balance s u f f i c i e n t to o f f s e t the items in t r a n s i t held
for i t s account by the Federal reserve bank; Provided,
further, That nothing i n t h i s or any other Section
of this Act shall be construed as prohibiting a member
or non-member bank from making reasonable charges, to be
determined and regulated by the Federal Reserve Board,
but i n no case to exceed ten cents per' $100 or f r a c t i o n
thereof, based on the total of checks and d r a f t s pre-*
sented at any one time, for c o l l e c t i o n or payment of
checks and drafts and remission therefor by exchange
or otherwise; but no such charges s h a l l be made against
the Federal reserve banks."
The part of the section dealing with checks has not been amended
since June 21, 191? and now reads as indicated above,
. I t w i l l be noted that there i s no limit so far as place of
payment i s concerned as to the checks end d r a f t s which a Federal
reserve bank may receive from i t s member banks and that there
i s likewise no limit as regards the place of payment of checks
and drafts which may be received from non-member clearing banks.
The only place where the vtords "within i t s d i s t r i c t " occur i s in
that part of the Section dealing with checks and d r a f t s which
may be received from other Federal reserve banks f o r purposes
of exchange or of c o l l e c t i o n .
The Section as i t now reads confers upon any Federal reserve
bank the r i g h t to receipt deposits of checks and d r a f t s payable
upon presentation as follows:



-3-

X-U1U9

!• ' ~ : f

1.

From member "banks, checks and d r a f t s payable anywhere.

2*

From other Federal reserve banks checks upon other Federal
reserve "banks and checks and drafts payable within the
d i s t r i c t of the r e c e i v i n g Federal reserve bank when received
f o r purposes of exchange or of c o l l e c t i o n .

3•

From any non-member c l e a r i n g bank or trust company checks
and d r a f t s payable anywhere.

Paragraph lg«

There i s nothing in the Federal Reserve Act to indicate t h a t the
prohibition of payment of exchange charges by Federal r e s e r v e
banks was designed s o l e l y f o r the p r o t e c t i o n of the revenues of
the Federal reserve banks.

There i s , on the other hand , ample

indication in the history of check c o l l e c t i o n in the United
States both before the Federal Iljserve Act was passed and during
the operation of the Federal reserve banks prior to the amendment
of J-une 21, 1917> to indicate that Congress intended to f r e e any
check which could be collected through the Federal reserve banks
from these so-called exchange charges.

The r i g h t was conferred

upon Federal reserve banks to receive deposits of checks from
member banks as well as from non-member banks -under c e r t a i n
conditions and i t must be supposed that Congress, not having
indicated otherwise, expected that Federal reserve banks would
receive such deposits in the way that they are generally r e ceived by banks and that o r d i n a r i l y , t h e r e f o r e , the Federal r e serve bank mig&t be acting as an agent i n the c o l l e c t i o n of such
checks.

I f t h i s conclusion i s correct, Congress must have intend-

ed member banks which c o l l e c t checks through the Federal reserve
banks to get the b e n e f i t of exerrption from exchange charges, i r 


-kjrespective of any question of agency.

X-U1U9
This view i s supported

by the f a c t that so far as checks drawn on member banks are
concerned, the Federal res'erve banks mast, under Section l 6 ,
r e c e i v e such checks at par and i f t h i s requirement i s to be
given the indicated e f f e c t the Federal reserve banks cannot
assess the charges on such checks against the depositing banks.
The view that the agency function of the Federal reserve bank
in the c o l l e c t i o n of checks i s not a determining t e s t i n deciding whether exchange may be charged by the drawee banks i s further supported by the f a c t 'that the same Act (June 21, 1917)
which inserted prohibition against such charges in Section 13
a l s o amended Section 19> dealing with r e s e r v e s , in such a way
as to indicate that the Federal Reserve bank cannot count as
reserve for 9 member checks deposited by that member bank but
not yet c o l l e c t e d .
August 8 , 1923•

See opinion of Counsel, Mr. Weed, dated
In other words, by preventing the credit of

checks to the reserve account before the proceeds are obtained,
the amendment of Section 19 ifi the Act of June 21, 1917 i n
e f f e c t p r a c t i c a l l y amaided Section 13 so that checks received
from member banks are received for c o l l e c t i o n , that i s , Federal
reserve banks act as agents i n obtaining payment of checks.
Paragraph 19 » The provision in Section 16 that every Federal reserve bank




must "receive on deposit at par from member banks . . . . checks
and d r a f t s drawn upon any of i t s depositors

" i s not a

requirement that Federal reserve banks mast give immediate
c r e d i t in the depositing bank 1 s reserve account ot that the

-5-

x-UiUg

Federal reserve bank i s under an o b l i g a t i o n to pay the amount
of the checks deposited or any p a r t of the deposit as soon as
the depositing member bank sees f i t to draw a check against i t .
P l a i n t i f f 1 s a l l e g a t i o n in this paragraph i s evidently based upon an erroneous interpretation of the words "deposit" or "on
deposit" as applied to ordinary banking p r a c t i c e and as used
in the Federal Reserve Act.

So far as the deposit of money

i n an open account i s concerned, i t i s undoubtedly true that
the depositor has a right to draw a check against the deposit
at any time he may e l e c t , but t h i s may or may not be true of
checks or other negotiable instruments deposited, depending on
the circumstances*

A check may be deposited in a bank in such

a way as to constitute a s a l e of i t or i t may be deposited for
collection.

As stated by Tiffany on "Banks and Banking", when

a negotiable instrument i s endorsed generally, or, being payable
t o bearer, i s delivered to and Deposited with a bank, the trans-




action may be a s a l e of the paper or a deposit for c o l l e c t i o n ,
according to the agreement of the p a r t i e s .

The agreement of

the p a r t i e s may be evidenced by general n o t i c e s which are printed
on the pass books or deposit s l i p s or otherwise brought home to
the depositor, or an agreement may be presuired from general u s ages obtaining in a l o c a l i t y or by s t a t u t e .

I t is true that

some courts hold that where a d i f f e r e n t understanding does not
a f f i r m a t i v e l y appear, Hie t i t l e to negotiable instruments deposited in a bank i n the ordinary course of business immediately
passes to the bank, which becomes a debtor to the depositor for

——
6

X-Ui I49

the amount, "but even vdiere there i s no affirmative understanding as to agency or as to the deposit for c o l l e c t i o n ,
other courts have held that the practice which i s followed by
some "banks of crediting deposits of checks at once to the dep o s i t o r ' s account or "by allowing him to draw against such dep o s i t s , i s a mere gratuitous p r i v i l e g e , as stated by Tiffany,
the p r i v i l e g e being s l s o extended where the paper i s endorsed
"for collection" as well as where i t i s endorsed without r e s t r i c t i o n , the bank being able to revoke the p r i v i l e g e at any
time and, consequently, unless i t affirmatively appears that
the credit i s irrevocable, the beneficiary ownership of the
paper i s not transferred and

the transaction constitutes a de-

p o s i t for c o l l e c t i o n .
The words "deposit" or "on deposit" as generally used , therefore,
*

are capable of a broad interpretation and so f a r as the Federal
Reserve Act i s concerned, Congress has indicated that the broader
interpretation must apply.

For example:

Section 13 r e f e r s in

several instances to deposits of checks and drafts for purposes
of exchange or of c o l l e c t i o n and also indicates that maturing
notes and b i l l s may be deposits for c o l l e c t i o n .

All of which in-

dicates that the framers of the Federal Reserve Act had in mind
that a deposit may consist of items upon which immediate a v a i l a b i l i t y i s deferred, and a Federal reserve bank, therefore, has
the r i g h t to defer immediate credit i n the" reserve account u n t i l
the proceeds are obtained.

One must go even further than t h a t .

The Federal Reserve Act, prior to the amendment-of June 21, 1917,




-7-

x-UlUg

recognized s right t o defer c r e d i t but since the amendment of
June 21, 1917, i t imposes a p o s i t i v e duty upon Fsderal reserve
banks to defer c r e d i t . f o r checks deposited u n t i l the proceeds are
obtained, because the only balance of a member bank i n a Federal
reserve bank which can be checked against i s the required balance
carried as a reserve, and t h a t balance, under Section 19 as
amended June 21, 1917, must be "an actual net balance".

An actual

net balance means a collected balance and not a balance created
by giving immediate credit for checks not yet collected*

See

opinion of Counsel, Mr. Weed, dated August 8, 1923 » The Act of
June 21, 1917, c o n s t i t u t e s , therefore, i n e f f e c t an amendment of
that part of Section 13 dealing with the deposit of checks, as a l ready stated , and also that part of Section l 6 dealing with the
same subject.
Paragraph 21.

P l a i n t i f f * s a l l e g a t i o n that s i n c e the Federal reserve bank defers
credit the drawee banks are e n t i t l e d to charge exchange, i s
evidently based upon the t e s t of agency which p l a i n t i f f seeks to
e s t a b l i s h , because the further allegation i s made that i f immediate credit i s given, t i t l e being thereby vested i n the Federal
reserve bank receiving the d e p o s i t , the r i g h t to charge exchange
against the Federal reserve bank would be destroyed by the proh i b i t i o n in Section 13,

As pointed out e l s evil ere, the mere d i f -

ference between principal and agency does not a f f e c t the matter.
Section 13 makes a p o s i t i v e declaration that "no such charges
shall be made against the Federal reserve banks", and there i s no
q u a l i f i c a t i o n to that prohibition expressed or implied anywhere
i n the Act.






-s~

x-UiUg

As already related , Congress evidently intended that any bank
which clears checks through the Federal reserve bank should get
the b e n e f i t of this exemption from exchange charges-

In f a c t

i t i s this reciprocal b e n e f i t in clearance that i s one of the
considerations i n requiring member banks, at any rate> to pay
at par for checks drawn upon themselves.

This consideration of

the mutual b e n e f i t of par clearance was evidently i n the mind
of the Supreme Court in i t s decision i n the Farmers and Merchants
National Bank of Monroe, North Carolina against the Federal Seserve Bank' of

Richmond, because the Court i n speaking of the

amendment of September, 1916 and of the provisions of the later
amendment (June 21, 1917) by which non-member barks were given
the right to clear through Federal reserve banks, uses the f o l lowing language:
" I t was recognized t h a t non-members were l e f t f r e e to
r e f u s e a s s e n t to par clearance . . . Reserve banks could
not under the then law, make c o l l e c t i o n s f o r nonmembers, I t was believed t h a t i f Congress would grant
Federal r e s e r v e banks permission to make c o l l e c t i o n
a l s o f o r non-members, t h e Board could o f f e r to a l l banks
inducements adequate to secure t h e i r consent to par
c l e a r a n c e , A f u r t h e r amendment to Section 13 was t h e r e upon secured by t h e Act of June 21, 1917 •••"»
(the Supreme Court thereupon quoting that part of Section 13 which
permits the c o l l e c t i o n of checks f o r non-member banks).

Un-

doubtedly, the inducement which the Supreme Court had in mind
was the r i g h t t o have checks which banks might deposit, collected
without payment of exchange•

I t should be added that Section l6

compels the reception of certain checks at par from member banks.
I t should also be added t h a t n e i t h e r Section 13 nor Section l 6
either expressly or impliedly imposes any duty upon Federal reserve

t.,... u
-9-

x-4i4g

"banks t o a c t as the agent of a drawee bank, from which i t has
received payment for checks, i n c o l l e c t i n g from the banks dep o s i t i n g those checks, the drawee barik*s charges for remission
of the proceeds.
Paragraph 22*

I t seems highly improbable that a member bank could successf u l l y attack the c o n s t i t u t i o n a l i t y of the prohibition of Section
13 against the payment of exchange charges by Federal reserve
banks.

With respect to national banks i t may be said that as

long as such a bank continues to operate under a national
charter i t must accept any reasonable regulations imposed by
act of Congress.

I t has, however, an a l t e r n a t i v e ; i t may r e -

linquish i t s charter and operate under such s t a t e charter as
i t may obtain.

A s t a t e bank likewise has an alternative; i t

may abstain from or withdraw from membership i n the Federal Reserve System.

This prohibition i s a condition of membership

imposed upon a l l member. banks, national banks havirg had a
certain period. within vthich t o choose whether they should become members, and i f membership i s retained or accepted, i t
would seem to be binding and the conditions having been assumed
or accepted voluntarily by member banks, i t i s d i f f i c u l t to see
that the prohibition i s open to attack on the ground of constitutionality.
Paragraph 2%.




The Supreme Court decisions quoted d e a l t with the matter of exchange charges by non-member banks and one of them had r e f erence to exchange charges by a non-member bank in a s t a t e which
by s t a t u t e s p e c i f i c a l l y permitted a drawee bank to pay fey draft




-10-

x-UiUg

for checks presented through a Federal r e s e r v e bank.

The

question of the right of a Federal reserve bank t o defer c r e d i t
on checks received from member banks, was, t h e r e f o r e , not
raised.
Neither of the Supreme Court d e c i s i o n s questions the r i g h t of
a Federal reserve bank to c o l l e c t checks from member banks without the payment of exchange charges.

In American Bank & Trust

Company against the Federal Reserve Bank of Atlanta which d e a l t
only with the question of the right of a Federal reserve bank
to c o l l e c t checks payable in i t s own d i s t r i c t by presenting
checks over the counter of the drawee bank, the Supreme Court of
the United States ruled as f o l l o w s :
"Federal reserve banks a r e , thus, authorized by
Congress to c o l l e c t for other reserve barks, f o r
members, and for a f f i l i a t e d non-memters checks on
any bank within t h e i r r e s p e c t i v e d i s t r i c t s , i f
the check i s payable on presentation and can i n
f a c t be c o l l e c t e d c o n s i s t e n t l y With the l e g a l
r i g h t s of the drawee without paying an exchange
charge. Within t h e s e l i m i t s Federal r e s e r v e banks
have ordinarily the same r i g h t to present a check
to the drawee bank f o r payment over the counter
as any other bark, s t a t e or n a t i o n a l , would have".
Part of p l a i n t i f f *«' complaint i n t h i s a l l e g a t i o n appears to be
that the par l i s t i s s t i l l circulated aid s t i l l drawing t o the
Federal r e s e r v e banks for c o l l e c t i o n a l a r g e volume of checks
that could otherwise be presented in other ways, but the Supreme
Court in the same d e c i s i o n j u s t mentioned, i n d i c a t e s that t h | s
i s not a proper cause of complaint against Federal reserve banks,
the Court having taken cognizance of the f a c t that l a r g e l y because of the superior f a c i l i t i e s of the Federal r e s e r v e banks,

L

r" - o

most checks on country banks a r e now routed through the
r e s e r v e banks and the Court having s t a t e d t h a t

11

Country banks

are not e n t i t l e d to p r o t e c t i o n against l e g i t i m a t e competition.
Their l o s s h e r e shown i s of the kind to vdiich b u s i n e s s concerns are commonly subjected when improved f a c i l i t i e s a r e i n troduced by o t h e r s o r , a more e f f i c i e n t competitor e n t e r s the
field 1 1 •

Even i n the case of a North Carolina bank where the

s t a t e s t a t u t e permits the drawee,bank to remit by d r a f t on a
correspondent, the Supreme Court, while denying the o b l i g a t i o n
of the Federal r e s e r v e bank to c o l l e c t checks from non-member
banks, admits t h a t they may do so*

The Court used the f o l -

lowing 'language :
"But n e i t h e r Section 1) nor any other provision
of the Federal Reserve Act imposes upon r e s e r v e
banks any o b l i g a t i o n to r e c e i v e checks for c o l l e c t i o n . The Act merely c o n f e r s a u t h o r i t y to
do s o " .
Paragraph 25*




The a l l e g a t i o n t h a t "Federal r e s e r v e banks a r e not authorized to
r e c e i v e f o r c o l l e c t i o n any check or d r a f t except from t h e i r
respective^/nembers or d e p o s i t i n g non-members and no check or
d r a f t t h a t i s not payable on p r e s e n t a t i o n within the d i s t r i c t
of the Federal r e s e r v e bank r e c e i v i n g i t " , i s not supported by
the p r o v i s i o n s of Section 13*

Those p r o v i s i o n s are quoted i n

the f o r e g o i n g comments upon paragraph 12 of the a l l e g a t i o n s .
The t h r e e groups of checks which Federal r e s e r v e banks may r e ceive are summarized i n the comments on t h a t paragraph-

With

regard t o checks from member banks and non-member c l e a r i n g banks,
t h e r e i s no d i s t i n c t i o n a s t o the place where a check or d r a f t
may be payable*

Moreover, Section 13 does not i t s e l f r e s t r i c t




-12-

x-UiUg

the purposes f o r which d e p o s i t s of checks may be made by
member banks, although, as s t a t e d elsewhere, the amendment
of June 21, 1917 to Section 19 does in e f f e c t c o n s t i t u t e a
r e s t r i c t i o n that such checks are received for c o l l e c t i o n .
Though i t i s not so e x p l i c i t l y s t a t e d , the b a s i s of p l a i n t i f f ' s
contention t h a t i t i s e n t i t l e d to charge exchange against the
Federal reserve bank, appears to c o n s i s t of the argumaat that
there i s a c o n f l i c t between the right of drawee banks to c o l l e c t "
exchange recognized by the Federal Reserve Act, and the proh i b i t i o n a g a i n s t the payment of such charges by the Federal
reserve banks, which can be reconciled only i n the way e v i dently advanced by p l a i n t i f f , the determining p r i n c i p l e obv i o u s l y being whether the Federal reserve bank acts as an agent
in the c o l l e c t i o n of checks deposited with i t .

The q u e s t i o n of

agency has been discussed elsewhere i n these comments*

As a

matter of f a c t , there i s no c o n f l i c t between the various prov i s i o n s of the Federal Reserve Act dealing with exchange
charges.

Section 13 s p e c i f i e s that member and non-member banks

are not prohibited from making reasonable changes w i t h i n
c e r t a i n maximum l i m i t s , f o r the c o l l e c t i o n or payment of checks
and d r a f t s and t h e remission therefor.

At the same time that

t h i s r i g h t i s recognized, the e x p l i c i t d i r e c t i o n i s made that
no charges s h a l l be made against the Federal r e s e r v e banks*
The Supreme Court of the United States i n Farmers' & Merchants
Bank of Monroe, N.C., v s . Federal Reserve Bank of Richmond,
recognizes the d i f f e r e n c e between a charge for c o l l e c t i o n and




-13-

X-UI49

par clearance i n the following language:
"Par clearance does not mean that the payee of a check
who deposits i t with h i s "Dank f o r c o l l e c t i o n rail "be
credited i n h i s eccoxint with the f a c e of the check i f
i t i s c o l l e c t e d . His bank may, despite par clearance,
make a charge to Mm f o r i t s service i n c o l l e c t i n g
the check from the drawee bank. I t may make such a
charge although both i t and the drawee bank are members
of the Federal Reserve System; and some third bank
which aids i n the process of c o l l e c t i o n may likewise
make a charge for the service i t renders. Such a
c o l l e c t i o n charge may be made not only to member banks
by member banks, national ot s t a t e , but i t may be made
to member banks also by the Federal reserve banks for
the services whicia the l a t t e r render. The c o l l e c t i o n
charge i s expressly provided for i n Section l 6 of the
Federal Reserve Act which declares that 'the Federal
Reserve Board shall by rule f i x the charges to be c o l lected by the member banks from i t s patrons whose checks
are cleared through the Federal reserve bank and the
charge which may be imposed for the service of clearing
or c o l l e c t i o n rendered by the Federal Reserve Bank 1 .
Par clearance r e f e r s to a wholly d i f f e r e n t matter. I t
deals not with charges for c o l l e c t i o n but with charges
incident to paying. I t deals with exchange".
Any member Whk dealing with other member banks or with nonmember banks may make charges for c o l l e c t i o n or payment of
checks and the remission therefor.

It simply cannot make such

charges against the Federal reserve bank.

I t should be further

noted that Section l 6 provides that the charges to be collected
by member banks when checks are cleared through the Federal r e serve bank, are to be collected from the patrons of the member
banks, the language used being as follows:
"The Federal Reserve Board s h a l l , by r u l e , f i x the
charges to be collected by the member bank(s) from
i t s patrons whose checks are cleared through the
Federal reserve bank . . .
There i s , therefore, no c o n f l i c t i n the provisions of the Federal
Reserve Act.

If the drawee bank deals d i r e c t with other banks




i
»l4-

X-U.1U9

i t may c o l l e c t exchange; i f i t deals d i r e c t with the Federal
reserve bank, i t may not c o l l e c t exchange, but in that case
i t p r o f i t s from the right to clear checks i t s e l f through the
Federal reserve bank and a l s o i s permitted by the Federal Reserve Act to c o l l e c t from i t s patrons such diarges for their
checks which are cleared through the Federal reserve bank, as
the Federal Reserve Board may sanction.

\

v...- ...

C. O P T

v v,
• ..
•
x-Umg(a)

HERRICK, SMITH, DONALD & FARLEY
BOSTON

August 8, 1021+.
Honorable W. P. G. Harding,
Federal Reserve Bank,
Boston, Mass,
llbj dear Governor Harding:
You have asked my opinion a s to whether as a matter of law a Federal Reserve
Bank has any a u t h o r i t y to give immediate c r e d i t on checks deposited with i t f o r
collection.
So f a r a s member oanks a r e concerned, t h i s question n e c e s s a r i l y involves the
question of reserve requirements under Section 19 of t h e Federal Reserve Act•
I n Ejt opinion a "reserve balance" r e q u i r e d by Section 19 and which i s defined
a s an "Actual net balance" can not'- include u n c o l l e c t e d checks, and hence a Fede r a l Reserve Bank has no a u t h o r i t y to grant immediate c r e d i t on checks deposited
with i t and thereby give member banks the b e n e f i t of u n c o l l e c t e d items in t r a n s i t
in computing reserve b a l a n c e s .
My reasons

a r e as f o l l o w s :

•
P r i o r t o t h e adoption of the amendment of

June 21, 19171 Section 19 provided in sub stance as f o l l o w s :
n**********]£very subscribing member bank s h a l l e s t a b l i s h
and maintain r e s e r v e s as f o l l o w s :
(a)




A bank not i n a reserve or c e n t r a l reserve c i t y
************ s^al1 hold and maintain r e s e r v e s
equal to twelverper centum of the aggregate
amount of i t s demand d e p o s i t s , and f i v e per
centum of i t s time d e p o s i t s as f o l l o w s :
In i t s v a u l t s f o r a period of t h i r t y - s i x
months a f t e r said date $ / l 2 thoreof and p e r manently t h e r e a f t e r 4 / 1 2 .

x-UiUgU)
-

2

^

-

-

In the Federal r e s e r v e bank of i t s d i s t r i c t ,
f o r a p e r i o d of twelve months a f t e r s a i d d a t e ,
2 / l 2 , and f o r each succeeding six months an
a d d i t i o n a l l / l 2 , u n t i l 5/12 have been so deposited,
which s h a l l be the amount permanently r e q u i r e d " .
I t i s unnecessary f o r the purposes of t h i s opinion t o quote in t h e i r ent i r e t y t h e somewhat e l a b o r a t e p r o v i s i o n s of Section 19 a s o r i g i n a l l y drawn.
I t i s s u f f i c i e n t t o note t h a t a member bank was r e q u i r e d t o hold and maintain
c e r t a i n " r e s e r v e s " and t h a t a p o r t i o n of those r e s e r v e s might be "in the Federal
Reserve Bank", the p o r t i o n s i n t h e Federal Reserve Banks t o i n c r e a s e u n t i l the
f i n a l amounts "have been so d e p o s i t e d " .
Banks counted a s r e s e r v e s .

Thus

amounts d e p o s i t e d i n t h e Reserve

I t i s t o be noted t h a t t h e r e was nothing s p e c i f i c

as to whether these r e s e r v e d e p o s i t s might or might not include checks which had
been deposited but which had not been c o l l e c t e d .
A f t e r t h e amendment adopted on June 21, 191?. Section 19 provided in substance a s f o l l o w s :
"Every bank, banking a s s o c i a t i o n , or trust.company
which i s or which .becomes a member of any Federal
Reserve Bank s h a l l e s t a b l i s h and maintain r e s e r v e '
balances with i t s Federal Reserve Bank a s f o l l o w s :
(a)

If not in a reserve or c e n t r a l r e s e r v e c i t y
******** 1 s h a l l hold and maintain with the
%
Federal Reserve Bank of i t s d i s t r i c t an
a c t u a l net balance equal t o not l e s s than
seven per centum •********<'.

I t i s unnecessary f o r the purposes of t h i s opinion t o quote the o t h e r p r o v i s i o n s of

Section 19 r e l a t i n g to r e s e r v e s .

The words " a c t u a l net balance"

appear i n the amendment of June 21, 1917 f o r the f i r s t time and should be caref u l l y noted.

What do these words mean?

Clearly t o my mind the words "Actual"

and "net" q u a l i f y and l i m i t the word "balance" , and q u i t e a p a r t from any l i g h t
which may be thrown on t h e i r i n t e r p r e t a t i o n by r e f e r e n c e t o congressional debat
or banking usage I should construe these words t o exclude checks i n t h e process
of c o l l e c t i o n .



.However, I b e l i e v e t h e h i s t o r y of the L e g i s l a t i o n and banking

-3-

X-4l49(a)

usage a s s i s t m a t e r i a l l y i n t h e i r i n t e r p r e t a t i o n .
The proposal t o amend t h e r e s e r v e requirements of Section 19 emanated from
the Federal Reserve Board and i n p a r t i c u l a r the words "actual n e t balance" seem
t o have o r i g i n a t e d with t h e Board.

The statement which the Board made t o the Com-

mittees of Congress i n proposing the amendment i n q u e s t i o n i s t h e r e f o r e p e r t i nent.

This statement appears i n the February B u l l e t i n of 1917 and reads i n p a r t

as f o l l o w s :
"A minimum amount of currency t h a t the member banks should
be required t o keep i n t h e i r v a u l t s i s , t h e r e f o r e , p r e s c r i b e d .
The amount suggested i s 5 p e r cent of the demand d e p o s i t s , so
t h a t the t o t a l requirements - cash and r e s e r v e - w i l l remain
p r a c t i c a l l y unchanged. While the e f f e c t of some of the p r o posed changes w i l l be to reduce somewhat the r e e e r v e r e q u i r e m e n t s , the r e s e r v e s w i l l be increased by the abrogation of the
p r a c t i c e h i t h e r t o observed of counting items i n t r a n s i t or
" f l o a t " as reserve*. The permission given member banks to
use t h e i r own d i s c r e t i o n a s to the c h a r a c t e r of currency i n
t h e i r v a u l t s , w i l l enable them t o r e l e a s e t h e gold they now
h o l d , with the important r e s u l t t h a t the s u b s t i t u t i o n of
Federal Reserve notes f o r gold and gold c e r t i f i c a t e s w i l l be
f a c i l i t a t e d by t h i s change in the law. Without some such
change member banks w i l l continue to ask f o r gold c e r t i f i c a t e s
i n small denominations, because as long a s t h e y must have
gold, or lawful money to count as r e s e r v e i t would be impossible
f o r t h e batiks t o exchange them f o r Federal Reserve n o t e s " .
The above statement i s i n no (way) ambiguous and i t i s p e r f e c t l y c l e a r t h a t i n
proposing the amendment to Section 19 the Federal Reserve Board intended to e l i m i n a t e items i n t r a n s i t or " f l o a t " , or i n o t h e r words, t h e Federal Reserve Board
intended to preclude the p o s s i b i l i t y of g i v i n g immediate c r e d i t on deposited
checks i n computing r e s e r v e balances.
The debates i n Congress when t h e amendment to Section 1 9 was b e f o r e the House
of Representatives f o r c o n s i d e r a t i o n a s H. R. 3675 a r e e n l i g h t e n i n g .

Repre-

s e n t a t i v e McFadden o f f e r e d an amendment reducing t h e 7f° r e s e r v e as contained
i n H. R. 3673 to 5^0. R e p r e s e n t a t i v e McFadden made the f o l l o w i n g comments, i n d i c a t i n g t h a t the proposed law, i f enacted, would e l i m i n a t e from the




''
- 4 -

5

x-UiUg(a)

reserve r e q u i r e d to be maintained the " f l o a t " or u n c o l l e c t e d items:
"Mr. McFadden, Mr. Chairman, t h i s amendment proposes t o
reduce t h e l e g a l requirements of t h e r e s e r v e s of country banks
from 7 t o 5 per c e n t , a s proposed i n t h i s Federal Reserve Amendment, but i t i s a well-known f a c t t h a t while under the old law
the l e g a l r e s e r v e of 12 per cent a p p l i e d t o country banks, those
banks, notwithstanding t h i s f a c t , a r e keeping an average reserve
of about 27 p e r cent. The country banks have never confined
themselves t o the l e g a l requirements. Under t h e s e Federal
r e s e r v e amendments a s now proposed they w i l l be compelled not only
t o keep a l l the r e s e r v e s they now keep in the Federal Reserve
Banks, but t o increase them 2 per c e n t , or from 5 p e r cent t o
7 per cent - and t h i s mist be a net balance of 7 p e r cent whereas p r e s e n t requirements a r e a gross requirement. That i s t o
say, the banks mast carry the f l o a t amounting on the average t o
l ^ per cent, being t h e checks in process of c o l l e c t i o n - so, t h e r e f o r e , t h e banks must carry
i n s t e a d of 7 per c e n t .
"Mr. Cannon.

Will the gentleman y i e l d f o r a question?

"Mr. McFadden. Yes, I w i l l .
"Mr, Cannon. Does the gentleman, say t h a t t h e country banks
v o l u n t a r i l y keep 57 per cent r e s e r v e with t h e r e g i o n a l banks
under t h e Federal Reserve Act?
"Mr. McFadden.
"Mr, Cannon.

Oh, not a t a l l .
With t h e i r correspondents?

"Mr. McFadden. With the c i t y correspondents of t h e bank and
the r e g i o n a l banks combined.
"Mr, Cannon.

Upon which they get 2 per cent i n t e r e s t ?

"Mr. McFadden. That i s one point I was coming t o . The c i t y
correspondent banks pay them i n t e r e s t u s u a l l y a t the r a t e of
2 per cent, but t h e regional banks pay no i n t e r e s t . • That i s one
of the reasons f o r my amendment reducing t h i s requirement t o 5 per
cent.
"Mr. Cannon.

And they get no i n t e r e s t from the Federal Reserve Banks?

"Mr. McFadden. No; a s a matter of f a c t , t h e i r combined r e s e r v e s
today a r e about 27 p e r c e n t . They a r e p e r m i t t e d under t h e p r e s e n t
law to keep a small p o r t i o n of t h a t with other banks in r e s e r v e
c i t i e s , and under t h i s law, i f adopted, t h e r e w i l l be a complete




X-4l49(a)
- 5 mobilization of a l l reserves into the 12 regional reserve banks
inmeditately. Now, the purpose of t h i s amendment i s t o permit
these country banks to keep a portion of their reserves with other
than Federal reserve banks and thus receive more compensation in
the way of interest and other emoluments, such as services which
are known only to the country banks. These c i t y banks perform
many forms of services for the country banks and are repaid by
a compensating balance from the country banks. I might add here
that in the Senate a b i l l has been reported from the Senate
Banking and Currency Committee in which they have provided that
the reserves of the country be f i x e d at 6 per cent.
"So that t h i s amendment of mine would be 1 per cent lower than
the Senate amendment. When you consider that t h i s i s a net reserve, and that the banks must carry the f l o a t or the checks in
t r a n s i t , and that amounts to on the average 1-f per cent the
country over, i f you f i x the required reserve at 7 per cent i t
means the banks must carry actually 84 per cent reserve to meet
the l e g a l requirements; whereas i f you make the l e g a l requirements 5 per cent and then add the f l o a t or checks in process of
c o l l e c t i o n , amounting to if- per cent, you then have the correct
statement of what w i l l then be required of the country banks namely, 64 per cent under my amendment or 8f per cent under the
proposed amendment of the Federal Reserve Board."
It seems to me from the above that i t may be stated without fear of contradiction that Congress adopted the amendment of June 21, 1917 with f u l l and
complete understanding that the words "actual net balance" eliminated uncoll e c t e d checks*
I have made inquiry of the o f f i c e r s of two of the l a r g e s t banks in Boston
as t o whether

in banking c i r c l e s there i s any common usage of terms so as to

indicate what a"net Balance" or an "actual net balance" might mean as d i s tinguished from a "balance".

I am informed that i t i s customary among banks,

in computing the balances of t h e i r depositors, to make a very marked d i s t i n c t i o n
between ledger balances and net or c o l l e c t e d balances.

I f i n d that for the

purpose of computing i n t e r e s t and for other purposes, i t i s common p r a c t i s e
among bankers to r e f e r t o balances and net balances, meaning by net balances
the balances of t h e i r depositors a f t e r eliminating uncollected items.



I was

I
- 6 -

v..- .. i

X-Ul49(a)

informed by one banker t h a t "net balance" might i n some cases be used by a
commercial bank t o mean t h e balance e s t a b l i s h e d a f t e r giving
amounts due t o and from other banks.

effect to

Nevertheless he f e l t t h a t t h e term "net"

or "actual n e t " balance as commonly used in banking c i r c l e s would be i n t e r *
p r e t e d t o e l i m i n a t e u n c o l l e c t e d items or " f l o a t " .
Thus, in a d d i t i o n t o the l i g h t which i s obtained from the debates in
Congress, I t h i n k we may f a i r l y say t h a t the term "net b a l a n c e " or " a c t u a l
balance" a s coimonly used i n banking c i r c l e s would be construed t o e liminate
the " f l o a t " .
As above s t a t e d , so f a r as member banks a r e concerned, t h e question of
immediate c r e d i t n e c e s s a r i l y involves t h e question of r e s e r v e requirements.
I b e l i e v e t h i s r e q u i r e s no argument.

As bearing on t h i s p o i n t , however, t h e

following p r o v i s i o n contained i n Section 19 i s i n t e r e s t i n g ;
"The r e q u i r e d balance c a r r i e d by a member bank w i t h
a Federal Reserve Bank may, under r e g u l a t i o n s and
subject t o such p e n a l t i e s as may be p r e s c r i b e d by
the Federal Reserve Board, be checked a g a i n s t and
withdrawn by such member bank f o r t h e purpose of
meeting e x i s t i n g l i a b i l i t i e s ; provided, however, e t c " .
The words "required balance" c l e a r l y r e f e r t o r e s e r v e balances and r e serve balances c l e a r l y r e f e r t o an "actual net b a l a n c e " .

In other words, a

member bank may draw checks a g a i n s t i t s a c t u a l net balance by v i r t u e of t h e
above p r o v i s i o n , and by implication no other balance which i s not an a c t u a l
net balance i s a v a i l a b l e t o be checked a g a i n s t .

I t i s i n t e r e s t i n g t o compare

the p r o v i s i o n quoted above with t h e p r o v i s i o n contained i n Section 19 of the
Federal Reserve Act p r i o r t o the amendment of June 21, 1917•

P r i o r t o the

'•.amendment, Section 19 contained a s i m i l a r p r o v i s i o n , but i t was provided;




- 7 -

X-UlUg(a)

"The r e s e r v e c a r r i e d by a member bank with a Federal
Reserve Bank nay ******** be checked a g a i n s t **********
In o t h e r words, i t would seem t h a t in adopting t h e amendment of June 21,
1917. i t was the i n t e n t i o n of Congress not only t o e l i m i n a t e the " f l o a t " as
/counting in c o n f u t i n g a reserve balance, but a l s o to e l i m i n a t e the power of
a

member bank t o check a g a i n s t any balance which included t h e " f l o a t " .

In

other words, the amendment of June 21, 1917» seems t o be c o n s i s t e n t throughout.
Section 13 of t h e Federal Reserve Act provides t h a t a Federal Reserve
Bank may r e c e i v e from i t s member banks and from the United S t a t e s d e p o s i t s of
checks and d r a f t s payable on p r e s e n t a t i o n , or s o l e l y f o r purposes of exchange
or c o l l e c t i o n m y r e c e i v e from other Federal Reserve Banks d e p o s i t s of checks
upon other Federal Reserve Banks and checks and d r a f t s payable on p r e s e n t a t i o n
w i t h i n i t s d i s t r i c t , or s o l e l y f o r purposes of exchange and c o l l e c t i o n ffi^y
receive from any non-member bank or t r u s t company d e p o s i t s of checks and
d r a f t s payable upon p r e s e n t a t i o n , provided such non-member bank or t r u s t
company maintains with the Federal Reserve Bank of i t s d i s t r i c t a balance
s u f f i c i e n t t o o f f s e t the items i n t r a n s i t held f o r i t s account b$r the Fede r a l Reserve Bank.
In reading S e c t i o n 13, i t should be noted t h a t a non-member bank i s r e quired to maintain a balance s u f f i c i e n t t o o f f s e t items i n t r a n s i t .

The

words used are not "net balance" or "actual net b a l a n c e " , but r a t h e r . a
"balance s u f f i c i e n t t o o f f s e t items i n t r a n s i t " .

I t seems t o me t h a t t h i s

p r o v i s i o n regarding non-member banks has nothing t o do w i t h the p r e s e n t
discussio'n.

A non-member bank i s not r e q u i r e d to carry r e s e r v e s in the Fed-

e r a l Reserve Bank.

A non-member bank i s nnly r e q u i r e d to carry a

balance

which (presumably i n t h e d i s c r e t i o n of the Reserve Bank) must be s u f f i c i e n t
t o o f f s e t items i n t r a n s i t .



Apart from t h i s p r o v i s i o n r e g a r d i n g non-member

v

~ g -

UlU9(a)

banks, I f i n d nothing i n Section 13 which could be construed to r e q u i r e or
authorize a Federal Reserve Bank t o give immediate c r e d i t on account of
checks deposited#
Section lG provides t h a t every Federal Reserve Bank s h a l l r e c e i v e on
deposit a t par from member banks or from Federal Reserve Banks checks or
d r a f t s drawn upon any of i t s d e p o s i t o r s , and, when r e m i t t e d by a Federal Re
serve Bank, checks and d r a f t s drawn by any d e p o s i t o r in any other Federal
Reserve Bank or member bank upon funds t o the c r e d i t of s a i d d e p o s i t o r in
said Reserve Bank or member bank.

Although t h i s p r o v i s i o n of Section l 6

would seem to r e q u i r e a Federal Reserve Bank to r e c e i v e on deposit under
c e r t a i n circumstances checks and d r a f t s * n e v e r t h e l e s s I see nothing in t h i s
Section which would r e q u i r e or a u t h o r i z e a Federal Reserve Bank t o give
immediate c r e d i t on u n c o l l e c t e d checks»
The

e f f e c t of giving immediate c r e d i t on an u n c o l l e c t e d check mast

n e c e s s a r i l y be in the n a t u r e of making an advance t o t h e d e p o s i t i n g bank
p r i o r to the c o l l e c t i o n of the item.

I t seems to me t h a t t h e e l a b o r a t e

p r o v i s i o n s contained in the Federal Reserve Act regarding t h e discount of
paper and the loaning t o member banks on c o l l a t e r a l n o t e s preclude the idea
of a Reserve Bank being authorized t o make advances on u n c o l l e c t e d items*
Thus, on the whole, as previously s t a t e d , i t seems t o me t h a t the ques
t i o n of giving immediate c r e d i t n e c e s s a r i l y involves the question of r e serve requirements, and on t h e question of r e s e r v e requirements I t h i n k
c l e a r l y t h a t , as a matter of law, a c t u a l net balances mean balances a f t e r
e l i m i n a t i n g the " f l o a t " or u n c o l l e c t e d items.
Very t r u l y yours,
(Signed)

AHW/KEO



A. H. WEED

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESEflPVE BOARD

September 6 , 192U.
X-4153
v.. SUBJECT:




Special Counsel i n Par Clearance Case.

Bear Sir:
Referring to the Board's l e t t e r of August
22nd, 1924, advising that special counsel would be
retained in the case of the Paacagoula National Barfc
v s . the Federal Reserve Bark of Atlanta» e t e l . , and
that the expense of such legal service would be prorated among the twelve .Federal reserve banks, you ate
advised that the Board has employed Newton B. Baker,
Esquire, of Cleveland, Ohio, to serve as such c ounse l.
Very t r u l y yours,

D. R . Crissinger«
Governor.

TO CHAIRMEN OF ALL F. R. BANKS.

I

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

September 6, 1924.
X-4i54
SUBJECT:

Observance of Holidays*

Dear Sir:
Referring to the Board*s l e t t e r of August
2, 192U (X-Ul2S), on the subject "Federal Reserve Bank
Holidays* 1 , one of the Federal reserve banks has raised
a question as to the observance of such holidays i n
the event they f a l l on Sunday. The Board has, t h e r e f o r e , voted that 'whenever January 1, February 22, July 4,
or December 25 f a l l s on Sunday, i t w i l l approve the
following Monday as a holiday for a l l Federal reserve
banks and branches.
Very t r u l y yours.

Wal ter L. Eddy,
Secretary.

TO ALL GOVERNORS A D F. R. AGENTS.
M




FEDERAL RESERVE BOARD
WASHINGTON

A D SS ^FCA C R EP N E C T
D R g &g I I L O R SO D N E O
T E FDR L RSR E B AD
H E E A EE V O R

September 10, 1924.
X-U156
SUBJECT:

Code ?ord f o r Wire T r a n s f e r s of Treasury C. of I . ,
S e r i e s TS 1925,

Dear S i r :
The Board's l e t t e r of J u l y 10, I92U ( X - W b j ) d e s i g n a t e d c e r t a i n code words t o be used ii± connection with wire
t r a n s f e r s of Treasury Notes and C e r t i f i c a t e s of I n d e b t e d n e s s .
As the Treasury Department i s now o f f e r i n g a new s e r i e s of
Treasury C e r t i f i c a t e s of Indebtedness, dated September 15, 1924,
S e r i e s TS 1925« the code word "BEFOUL" has been d e s i g n a t e d f o r
use i n connect iorr^with t r a n s a c t i o n s i n t h i s new s e r i e s . The
word should be i n s e r t e d i n the Federal Reserve T e l e g r a p h i c
Code book f o l l o w i n g the supplemental code word "BEFOBEHAND",
on Page 24.
Very t r u l y yours,

.Walter L. Eddy,
Secretary.

TO GOVERNORS OF ALL F. R. BANKS.




6*5*2

X4158 Q 7 3

TREASURY tr^ART^FN?
O f f i c e of t h e S e c r e t a r y
WASHINGTON

September 6 , 1924.
The Governor
F e d e r a l Reserve Board.
Sir:
Yon a r e hereby advised t h a t t h e Department has r e f e r r e d t o t h e Bisburs ing Clerk, T r e a s u r y Department, f o r pay: cent, t h e account of t h e Bureau
of Engraving and. P r i n t i n g f o r p r e p a r i n g F e d e r a l r e s e r v e notes during t-ie
p e r i o d August 1 t o August 31, 1S34, amounting t c $67,837.00, as f o l l o w s , -

Boston
New Y O M
.
P h i l a d e l p h i a . .•.
Cleveland
Ricrunond
Cnicdgo........
Kansas C i t y . . . .

F e d e r a l Reserve Notes. 1914
$20
ttlQ
150

55
100,000

17,000

•381,000

———

136,000

—— —

381,000

161,000

2<5,000

5,000

10,000

198,000

95,000

-*0,000

-±1,000

10,000

186,000

———

— - I —

5 3 , 0 W

53,VU0
15=,000

15*,000
———

29B,COG

296,000

lC.OvO

49, vw
.15,CGv

San F r a n c i s c o . .

Total
— ——

19,000

—— —

———

19,000

9B,0CC

,4,000

o

1 ,55C,000

'

8

19.COG

A

2-t-i ,GCG

59,COG
15,000
282,000
1,762,000

1,762,000 s h e e t s .® i,38.50 p e r M
067,837.00
•The charges a g a i n s t t n e s e v e r a l F e d e r a l Reserve Banks a r e as f o l l o w s : COPTT e n Plate
Sheets
Printing
, sat ion
"'materials
Total
Boston
.136,000
$2, 4l4 .00
$1,112.48
$1,709.52
$5,236.00
New Y o r k . . . . . . .381,000
6,762.75
3,116.58
4,789.17
14,668.50
P h i l a d e l p h i a . . .198,000
3,51-t.50
1,619.64
2,-..88.86
7,623.00
Cleveland
.186,000
3,301.50
1,521.48
2,338.02
7,161.00
Richmond
. 53,000
940.75
433.5*±
666.21
2,040.50
Atlanta
.154,000
2,733.50
1,259.72
1,935.78
5,929.00
Chicago
.298,000
5,285.50
2,437.64
3,745.86
11,473.00
Kansas City . , . . 59,COG
1,047.25
482.62
741.63
2,271.50
Dallas.
. 15,000
266.25
122.70
188.55
577.50
San F r a n c i s c o . .282,000
5,005.50
2,306.76
3,544.74
10,857.00
1 ,762,000 $31,275.50
$14,413-16
$22,148.34
$67,837.00
The l u r e a u a p p r o p r i a t i o n s w i l l be reimbursed in t h e above amount f r o n
t h e i n d e f i n i t e a p p r o p r i a t i o n " P r e p a r a t i o n and I s s u e of F e d e r a l Reserve Notes,
Reimbursable", and i t i s r e q u e s t e d t n a t your board cause sucn i n d e f i n i t e approp r i a t i o n t o be reimbursed i n l i k e x : o u n t .




Respectfully,
(Sig..@d)

S . R. Jacobs
Deputy Conr.iss i o n e r .

r

FEDERAL RESERVE BOARD

674

WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD

X-U139
September 17. 1924.
3JBJECT:

EXPENSE MAIN LINE, Leased Wire System,
August, 1924.

Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph"
s t a t e m e n t s , X-4l59~a and X-4l59~b, covering i n d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of August, 1924.
P l e a s e c r e d i t the amount payable by your bank
i n the general account, T r e a s u r e r , U. S . , on your books,
and issue c / e For® 1, National &nks, f o r account of
" S a l a r i e s ard Expenses, Federal Reserve Board, Special Fund,"
Leased Wire System, sending d u p l i c a t e c / f to Federal Reserve Board.
Very t r u l y y o u r s ,

Fiscal Agent.
(Enclosures)

To Governors of a l l banks (except Chicago).




675
X-4l59-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE M N H OF A G IB T, 1924.
OT
U

Fed. ResBank Business

Frcm
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

Percent of
f . c t a l Bank
J3usiness(*)

Treasury
Dept.
Business

War
Finance Corp.
Business

Total
27,273
141,793
35.880
63,529
54,663
57,436

23,34l
135 > 1 0
31,895
60,236
51,18254,051
85,236
63,934
36,763
61,398
46,452
101,355

3,932
6,383
3,985
3,293
3,481
3,385
5Ms
4,521
2,345
3,777
2,3 91
7,537

751,253

Total

3.11
18-02
4.25
8.02
6.81
7-20
11-35
8.51
4.89
8.17
6.18
13.49
100.00

50,328

801,521

90,73%
62,455

'

-

39,ics
65,175
4 s , 643
102,892

Board

269,813

27,58b

297,399

Total

1 ,021,066

77,914

1,098,980

92,97%

r—

Percent of Total

Bank Business 1,021,066 words or 92.91 /»
« 7-09 1°
Treasury Dept. „ 77,91%
"
TOTAL

1,098,980

"

"100-00
(*) These p e r c e n t a g e s usi
the pro r a t s s h a r e 0:
expenses as shown on
statement (X-4l59b)

FEDERAL RESEBV1 BOARD
Washington, D. C.
September 17, 1924.




REP GET OF EXPENSE
MAIN LIKE
FEDERAL RESERVE LEASED WIRE SYSTEM, AUGUST, 1924,

Name of Bank
Boston
New York
Philadelphia
Clevel and
Richmond
Atlanta

Chicago
St * Louis
Minneapolis
Kansas City
Dallas
Ban F r a n c i s c o
3u » lies » £>oaro

Operators' Operators'
Salaries
Overtime
$

250.00
1,513.9s
200.00
272.00
315-00
255.00
(#) 4 , 3 2 7 9 3
274,60
183-34
346.64
251.00
. 330-00

Total
Expense
$

. $ 2.00
-

'

so,bog.49

WireRental

i 2.00

Pro Rata
Share of
Total
Expense

250,00
1,513'98
200,00
272.00
315.00
255.OO
4,329,93
274,60
183-34 —
346.64
251.00
320,00
$15,979.4% 15,979-42

$

^15,979.42^24,550.91
UUJcoxo
$22,350.91

$22,350,91

Cred i t s

710,66
$ 250.00
4,117,73 . 1,513-98
20c.CO
971.16
272.00
1,832-64
315-00
1,556.15
1,645.27
255.CO
2.593.5S • ^,329.93
l,944.61
274,60
I,H7.4I
183'34
1,366.92
346.64
1,412.19
251.00
3,032.59
380,00

(#) Includes s a l a r i e s of Washington o p e r a t o r s .
(*) C r e d i t
(a) Received $
from the War Finance Corporation and $1,700.00
from Treasury Dept, covering b u s i n e s s f o r the month of August, 1924,
(&) Amount r e i m b u r s a b l e to Chicago #




X-l+159-b

$3,571,49

Payable to
Federal
Reserve
Board
$

460.66
2,603.75
771.16
1,560.64
l,24i.i5
1,390.27
(*)1,736.35
• l ,670.01
934.07
1,520.22
1 ,161.19
2,702.59
$16,015.77
( i ) 1,736.35
n^,27§A:

677
-

x4i6i

(COPY)

IN THE DISTRICT COURT OF THE UNITED STATES,
FOR THE NORTHERN DISTRICT OF GEORGIA.
PASCAGOULA NATIONAL BANK,
VS.

PLAINTIFF,

FEDERAL RESERVE BANK OF ATLANTA,
ET. AL.
DEFENDANTS.

)
)
)
)
)
)
'

NO. 295
IN EQUITY.

ANSWER OF DEFENDANT, FEDERAL RESERVE BANK OF ATLANTA.
And now comes Federal Reserve Bank of Atlanta,, a body c o r p o r a t e under
t h e laws of the United S t a t e s , one of the defendants i n the cause above s t y l e d
and makes answer t o the b i l l of complaint as f i l e d h e r e i n by the p l a i n t i f f ,
and f o r answer s a y s ;
-1-

Upon information and b e l i e f , t h i s defendant admits as t r u e t h e a l l e g a t i o n s
contained i n paragraph 1 of the b i l l of complaint.
-2-

This defendant admits the averments of paragraph 2 of the b i l l of complaint,

-3In response to paragraph 3 of said b i l l , t h i s defendant says t h a t i t i s
a Federal Reserve Bank, organized and e x i s t i n g under and pursuant to t h a t
c e r t a i n Act of Congress approved December 23, 1913, known as the Federal Reserve
Act, a s amended; t h a t i t s p r i n c i p a l o f f i c e i s i n the City of A t l a n t a , in the




r 678
X4i6i
S t a t e o f G e o r g i a , w i t h i n t h e N o r t h e r n D i s t r i c t o f G e o r g i a , and t h a t i t i s t h e
Federal R e s e r v e Bank f o r the S i x t h Federal Reserve D i s t r i c t .

It maintains a

branch i n t h e C i t y o f New O r l e a n s , i n t h e S t a t e of L o u i s i a n a , p u r s u a n t t o t h e
p r o v i s i o n s o f S e c t i o n 3> o f t h e F e d e r a l R e s e r v e A c t , t h r o u g h w h i c h "branch i t
t r a n s a c t s c e r t a i n of i t s b u s i n e s s #
-4~
Paragraph 4 of said b i l l of complaint c o n s i s t s l a r g e l y of l e g a l conclusions
and o f s t a t e m e n t s a s t o t h e t e n o r and e f f e c t o f v a r i o u s o f t h e p r o v i s i o n s o f
t h e . F e d e r a l Reserve Act and, to t h a t e x t e n t , the same r e q u i r e s no answer * This
defendant d e n i e s t h e a l l e g a t i o n t h a t the Federal Reserve Board

,T

is a q u a s i

corporation, 1 1 and i t d e n i e s , a s charged, the averirsnt in said paragraph to the
e f f e c t t h a t Joseph A* McCord, Federal Reserve Agent, i s a c t i n g f o r the Board
with p a r t i c u l a r r e s p e c t to n those f u n c t i o n s i n t h e S i x t h Federal Reserve
t h a t operate upon p l a i n t i f f , and other member banks in said D i s t r i c t , 1 1
D i s t r i c t ^ ' / of which complaint i s i n said b i l l made • This defendant admits the
t r u t h o f t h e a l l e g a t i o n s c o n t a i n e d i n t h e f i r s t s e n t e n c e o f p a r a g r a p h 4 and
t h a t the F e d e r a l R e s e r v e Board h a s i t s p r i n c i p a l o f f i c e s i n t h e T r e a s u r y B u i l d ing of the United S t a t e s in the City of Washington, as a l l e g e d in the b i l l .
~5~
I n response t o p a r a g r a p h 5 of said b i l l of complaint, t h i s d e f e n d a n t says
that Joseph A* McCord r e s i d e s i n t h e City c f A t l a n t a , and m a i n t a i n s on the
premises of the Federal Reserve Bank of A t l a n t a , under the terms of t h e Federal
Reserve Act and f o r t h e purposes s p e c i f i e d in said A c t , a l o c a l o f f i c e of said •
Board

and t h a t he i s , t o the e x t e n t s p e c i f i e d i n said Act and not o t h e r w i s e ,

the o f f i c i a l r e p r e s e n t a t i v e in the Sixth Federal Reserve D i s t r i c t of t h e Federal




-

(2)

,„L 679
Reserve Board for the performance of t h e .functions c o n f e r r e d upon i t by said Act.
H e i s a l s o C h a i r m a n o f t h e Board o f D i r e c t o r s o f t h i s d e f e n d a n t .

This defendant

5
admits as correct the averment in said paragraph/as to the present personnel of
the Federal Reserve Board.
——
6
This d e f e n d a n t says t h a t i t i s advised by counsel

that paragraph 6 of said

b i l l requires no answer.
-7Paragraph 7 of said b i l l o f complaint c o n t a i n s o n l y s t a t e m e n t s as to p r o v i s i o n s o f t h e F e d e r a l R e s e r v e A c t and , t h e r e f o r e , r e q u i r e s n o a n s w e r .
- S -

Paragraph S of said b i l l

contains only a r e c i t a l of what the p l a i n t i f f s t a t e s

a r e t e r m s and p r o v i s i o n s o f t h e F e d e r a l R e s e r v e A c t t o u c h i n g t h e p o w e r a n d
a u t h o r i t y o f t h e F e d e r a l R e s e r v e Board and w h i l e t h e s a i d r e c i t a l o f t h e t e r m s
and p r o v i s i o n s o f t h e F e d e r a l R e s e r v e A c t i s p a r t i a l a n d i n c o m p l e t e , t h e s a m e
requires no answer.
-9paragraph 9 of the b i l l

of complaint contains o n l y s t a t e m e n t s of c o n c l u s i o n s

and, therefore, r e q u i r e s no answer.

This defendant d e n i e s , ho -ever , that the

Federal Reserve System i s i t s e l f a l e g a l e n t i t y with corporate peters> but says
t h a t t h e t w e l v e F e d e r a l R e s e r v e B a n k s a r e t w e l v e s e p a r a t e and d i s t i n c t c o r p o r a t i o n s
a n d t h a t t h e F e d e r a l R e s e r v e B o a r d i s n o t a c o r p o r a t i o n o r quasi c o r p o r a t i o n ,
b u t i s a g o v e r n m e n t a l e s t a b l i s h m e n t o r b o a r d e x e r c i s i n g governmental p o w e r s
among w h i c h p o w e r s i s a g e n e r a l s u p e r v i s i o n o v e r a l l




t h e Federal R e s e r v e B a n k s .

xUili 6 8 0
—0
1—
This defendant i s informed and , upon such i n f o r m a t i o n , s t a t e s t h a t the
method of c o l l e c t i n g checks described i n paragraph 10 of said b i l l was a method
l a r g e l y employed in the c o l l e c t i o n of checks p r i o r to the passage of the Federal
Reserve Act of 1S13*

This defendant i s f u r t h e r informed t h a t t h e r e was then a

p r a c t i c e among some banks f o r the r e m i t t i n g bank to rake a small charge called
"exchange" and to deduct the amount thereof from the r e m i t t a n c e , but t h a t such
p r a c t i c e was not u n i v e r s a l or customary and was modified or abated by various
i n t e r bank arrangements, so t h a t i t ^as n e i t h e r c e r t a i n nor uniform*
—1
1—
Answering paragraph 11 of said b i l l , t h i s defendant says t h a t the averments
of the f i r s t sentence thereof appear to be s u b s t a n t i a l l y correct*

In further

response to paragraph 11 of the b i l l of complaint t h i s defendant says t h a t i t
i s true t h a t i t was not u n t i l the summer of 1916 t h a t the Federal Reserve Board
required of the various Federal r e s e r v e banks, i n c l u d i n g the defendant Reserve
Bank, t h a t they act as c l e a r i n g houses f o r t h e i r r e s p e c t i v e members*

This

defendant f u r t h e r says, however, t h a t a t B time p r i o r to l $ l b or subsequent
O
thereto has i t paid remission or exchange charges on checks collected by or
through i t *




c 4 )

G81
^l2r

X4l6l

Paragraph Id of s a i d b i l l ^ s e t s up mere conclusions of the p l e a d e r and, t h e r e f o i e , r e q u i r e s no answer*

This defendant says, however, t h a t the e f f e c t of the s a i d

amendment of September 7i 1916, was t o a u t h o r i z e any F e d e r a l Reserve Bank to r e c e i v e
from i t s member banks checks and d r a f t s . payable upon p r e s e n t a t i o n without l i m i t a t i o n
e*s to the d i s t r i c t where payable and from o t h e r F e d e r a l Reserve Banks checks and
d r a f t s payable upon p r e s e n t a t i o n w i t h i n i t s d i s t r i c t .

By the Act of June 21, 1917,

Section 13 of the F e d e r a l Reserve Act was amended so as t o a u t h o r i z e F e d e r a l Reserve
jjanks to r e c e i v e a l s o from nonmemher banks checks and d r a f t s payable on p r e s e n t a t i o n
without any l i m i t a t i o n as to the d i s t r i c t where such checks a r e p a y a b l e ; provided,
such nonmember banks m a i n t a i n with t h e Federal Reserve Bank of t h e i r own r e s p e c t i v e
D i s t r i c t s balances s u f f i c i e n t to o f f s e t the items in t r a n s i t .
known as

,f

Such banks a r e now

non member c l e a r i n g hanks* 11
—lj"*

Paragraph 13 of s a i d b i l l s e t s up mere conclusions of the p l e a d e r and, t h e r e f o r e , r e q u i r e s no answer.

This defendant says, however, t h a t t h e F e d e r a l Reserve

.board was not only a u t h o r i z e d by t h e o r i g i n a l Act, but i s now a u t h o r i z e d by the Act,
as amended, to r e q u i r e member banks t o remit a t par f o r items d r a m upon them and
sent t o them f o r c o l l e c t i o n and remittance by t h e i r r e s p e c t i v e r e s e r v e banks.

More-

over, member banks a r e forbidden by law t o make exchange charges f o r checks s e n t t o
them f o r payment and r e m i t t a n c e by or through .Federal Reserve Banks, and Federal
Reserve Banks a r e f o r b i d d e n to pay exchange charges#




( 5 )

xUl6l

r 682

~lU—

This defendant says t h a t by Act approved June 21, 1917, c e r t a i n language,
known as the Hardwick Amendment, was i n s e r t e d i n Section 13 of the Federal
Reserve Act to the following e f f e c t :
"That nothing in t h i s or any other s e c t i o n of t h i s
a c t s h a l l be construed as p r o h i b i t i n g a member or nonmember
bank from making reasonable charges, to be determined and
regulated by the Federal Reserve Board, but i n no case
to exceed 10 cents ~ per $100 or f r a c t i o n t h e r e o f , based on
the t o t a l of checks and d r a f t s presented a t any one time,
for c o l l e c t i o n or payment of checks and d r a f t s and remission t h e r e f o r by exchange or otherwise; but no such charges
s h a l l be made a g a i n s t the Federal r e s e r v e banks"«
This defendant f u r t h e r says t h a t the plan and purpose of t h i s defendant since
J u l y , 1916, has uniformly been to c o l l e c t for those e n t i t l e d to use t h e c o l l e c t i o n f a c i l i t i e s of the Federal Reserve System, a l l checks which might l e g a l l y
be c o l l e c t e d by i t , t h a t i s to say, such checks es i t could c o l l e c t a t p a r .
This defendant f u r t h e r says t h a t i t s p l a n and purpose in t h i s regard h a s been
and now i s i n accord with the provisions of the Federal Reserve Act and the
r e g u l a t i o n s of the Federal Reserve Board made pursuant t h e r e t o .

Any averments

i n paragraph l 4 i n c o n f l i c t with t h i s s e c t i o n of t h i s answer a r e denied *
-15This defendant i s informed that the Hon. W P» G. Harding, while Governor
«
of the Federal Reserve Board , mad e a statement to the House Committee on Banking




^
and Currency s u b s t a n t i a l l y as quoted i n paragraph

of said t i l l .

683

The other

a l l e g a t i o n s of said paragraph contain only conclusions of the pleader and, f o r
t h a t r e a s o n , no f u r t h e r answer i s made t h e r e t o .
-lbThis defendant i s informed t h a t on or about September 5> 1923* the
Hon#

R« Cr i s s i n g e r , now Governor of the Federal Reserve Board, wrote to

Mr* L. R. Adams, General Secretary of the National and S t a t e Bankers 1 P r o t e c t i v e
A s s o c i a t i o n , a l e t t e r .in the form s e t out i n paragraph 15 of said b i l l .

Upon

information and b e l i e f , t h i s defendant says t h a t the same was w r i t t e n in reply
to the printed l e t t e r , a copy of which i s attached to said b i l l of complaint as
^Exhibit "A" t h e r e o f .

This defendant i s without information upon which to make

further, answer to said paragraph 16 of said b i l l .

-17In response to paragraph 17 of said b i l l , t h i s defendant denies the averments thereof except t h a t t h i s defendant admits t h a t i n t h e year 1916 the
Federal Reserve Board i s s u e d , pursuant to the terms and provisions of the Federal
Reserve Act, a c e r t a i n r e g u l a t i o n upon the s u b j e c t of check c l e a r i n g and c o l l e c tion.

Said r e g u l a t i o n has been revised and changed from time to time and , as

revised and changed, i s now of f o r c e and i s now known as Regulation J ( S e r i e s of
3-924) •

S&id r e g u l a t i o n d i r e c t s each Federal Steserve Bank to " e x e r c i s e the

functions of a c l e a r i n g nqu.se and c o l l e c t c h e c k s , a n d p r e s c r i b e s the general
terms and conditions upon which such Federal r e s e r v e banks s h a l l a c t as c l e a r i n g
houses and c o l l e c t checks.. Among such terms and c o n d i t i o n s a r e t h e following-2
••••




V
x

fl6l6@4

"(1) Each Federal Reserve Bank w i l l r e c e i v e
a t par from i t s member banks and from non-member
c l e a r i n g banks in i t s d i s t r i c t , checks drawn on a l l
member and nonmember clea r i n g banks, and checks
drawn on a l l other nonmember banks which a r e c o l l e c t a b l e a t par in funds acceptable to the Federal Reserve
Bank of the d i s t r i c t i n which such nonmember banks
are l o c a t e d .
"(S) Each Federal Reserve Bank w i l l r e c e i v e
a t par from other Federal Reserve Banks, and from
a l l member and non-member c l e a r i n g banks i n other
Federal Reserve D i s t r i c t s which a r e authorized to
r o u t e d i r e c t f o r t h e c r e d i t of t h e i r r e s p e c t i v e
Federal Reserve Banks, checks drawn on a l l member
and nonmember c l e a r i n g banks of i t s d i s t r i c t , and
checks drawn on a l l ot' er nonmember banks of i t s
d i s t r i c t which a r e c o l l e c t a b l e at par i n funds
acceptable t o the c o l l e c t i n g Federal Reserve Bank,
"(3) No Federal Reserve Bank s h a l l r e c e i v e
on d e p o s i t or f o r c o l l e c t i o n any check drawn on
any non-member bank which cannot be c o l l e c t e d a t
par i n f u n d s acceptable to the Federal Reserve
Bank of the d i s t r i c t in which such nonmember bank
is located."
Said r e g u l a t i o n a l s o provides "checks received by a Federal Reserve Bank, on
i t s member or non-member c l e a r i n g banks, w i l l o r d i n a r i l y be forwarded or presented
d i r e c t to such banks and such banks w i l l be required to remit or pay t n e r e f o r a t
par i n cash or in bank d r a f t acceptable to the c o l l e c t i n g Federal Reserve Bank".
P r i o r to 1916 n e i t h e r t h i s defendant nor any other Federal r e s e r v e bank had
a t r a n s i t or c o l l e c t i o n department, maintained as such.

R e l a t i v e l y few checks

reached t h i s defendant f o r c o l l e c t i o n and such checks were items s e n t by member




( S )

x^ifi

6 8 5

banks, or by other Federal reserve banks , for d e p o s i t , c o l l e c t i o n and credit#
No charge was made for t h i s service by this defendant and such checks so deposited,
being drawn upon i t s member banks, were collected a t par and without deduction
for exchange or c o l l e c t i o n charges.

On or about the 15th day of July, 1916, this

defendant, pursuant to instructions issued by the Federal Reserve Board, began
the operation of a t r a n s i t and c o l l e c t i o n department.

For a short time, a

nominal charge was made by this defendant for such c o l l e c t i o n s , b u t no charge for
remittance was included therein or permitted to be made.

Subsequently such items

were handled without charge to the extent of f i v e hundred checks per month for
any one bank.

On or about the 15th day of June, 1918, t h i s defendant and other

federal reserve banks began to c o l l e c t for the account of members, and others
entitled to use the c o l l e c t i o n f a c i l i t i e s of the Federal Reserve System, without.
any charge therefor,, a l l items which i t might l e g a l l y deceive on deposit for'
c o l l e c t i o n , and such service i s now being given and such c o l l e c t i o n department
i s now being maintained.

I t i s not true that a l l members, including the p l a i n t i f f ,

are, under the regulations aforesaid and under the law, required t o remit
the proceeds of a l l checks presented to- them through this defendant -by
mail without any deduction because of the remittance. On the contrary, they
are given the option of remitting d r a f t s in payment thereof by mail i n addressed
end stamped envelopes furnished by the Federal Reserve Bank or paying such checks
by mailing or shipping cash to the Federal Reserve Bank at the expense and r i s k
of the Federal Reserve Bank.
- IS Paragraph lg of the b i l l of complaint sets forth mere conclusions of the
pleader and , therefore, requires no answer.




(9)

This defendant denies the soundness

xui^

0 8 6

of such conclusions and f u r t h e r says t h a t , i f i t should he considered tiset
saifd paragraph contains any i s s u a b l e averments of f a c t , any and a l l of such
aver rants a r e d.enied*
-19Paragraph 19 of said b i l l of complaint contains only conclusions of the
pleader as to s e t t e r o :f law and , t h e r e f o r e , r e q u i r e s no answer*

I f , however,

i t "be considered t h a t said paragraph contains any i s s u a b l e averments of fact>
the same, and each t h e r e o f , are denied.

Defendant f u r t h e r says in response to

said paragraph t h a t i t i s not t r u e t h a t t h i s defendant i s r e f u s i n g to obey the
mandate of Section l 6 of the Fed eta 1 Reserve Act to t h e e f f e c t t h a t ;
"Every Federal Reserve Bsmk s h a l l rGlaive on
d e p o s i t a t par from member batiks or from Federal Reserve
Banks checks and d r a f t s drawn upon any of i t s d e p o s i t o r s ,
and when remitted by a Federal Reserve Bank, checks and
d r a f t s drawn by any depositor i n any other Federal Reserve Binok or member banks upon funds t o the c r e d i t of
said d e p o s i t o r in s a i d reserve bank or member bank,**
Every cash item received for deposit by t h i s defendant from the p l a i n t i f f and.
from a l l of t h e other member banks of defendant is received f o r d e p o s i t a t par
without any deduction whatever»

I t i s t r u e t h a t i n c a s e s where t h i s defendant

receives f o r d e p o s i t a t par cash items which may not be collected during banking
hours on t h e same day i n which received, c r e d i t i s given i n accordance with the
time schedule r e f e r r e d to i n said b i l l of complaint; but t h i s defendant says t h a t
a c r e d i t a t par of an item, to be a v a i l a b l e to a member bank for i t s r e s e r v e
account and as funds a g a i n s t which a check may be drawn i n accordance with said
time schedule, i s not a d e n i a l to the member bank of i t s r i g h t to d e p o s i t such
items a t par *




(10)

xUith. 6 8 V
*- SO —
This defendant d e n i e s , as charged, the averments contained i n par a graph 20
of the "bill of complaint*

I t says t h a t i t is t r u e t h s t in cases where <jfa$h

items deposited "by a member can not be immediately c o l l e c t e d by d e f e n d a n t , as
in the next preceding s e c t i o n of t h i s answer more f u l l y s e t o u t , c r e d i t i s given
a t par and without any deduction whatsoever, i n accordance with said time
schedule#

Def end ant f u r t h e r says t h a t said time schedule r e p r e s e n t s the ex-

perience of t h i s d e f e n d a n t as t o the usual time f o r a c t u a l c o l l e c t i o n of items
as indicated t h e r e i n , but t h a t , i n accordance with said time schedule, the
amount of each cash item so received is n©de a v a i l a b l e to the r e s e r v e account
of each member bank a t the e x p i r a t i o n of the time stated i n said time schedule,
whether or not the same be then a c t u a l l y collected«

Were immediate c r e d i t given

as demanded by complainant each member bank could count as a p a r t of i t s
reserve and draw checks a g a i n s t items not collected and while the same were s t i l l
in the

11

float 1 1 *

Such a p r a c t i c e would be economically unsound and c o n t r a r y to

e x i s t i n g banking p r a c t i c e , would r e s u l t i n the c r e a t i o n cf f i c t i t i o u s r e s e r v e s ,
would mean t h e pyramiding of c r e d i t s , and lead to other abuses; and any such
p r a c t i c e would be contrary to t h e purposes and express p r o v i s i o n s of the Federal
Reserve Act*
- 21 -

Paragraph 21 of the b i l l of complaint s e t s up mere conclusions of the.
pleader and, t h e r e f o r e , r e q u i r e s no answer#

This d e f e n d a n t , however, denies

the soundness of such conclusions*




(11)

xUl

-

? 688

22 -

Paragraph 22 of the b i l l of complaint s e t s up merA conclusions and , t h e r e f o r e ,
requires no answer*

This defendant,however, denies the soundness of the con-

clusions i n said paragraph contained, and denies that the proviso i n S e c t i o n 13
contained i s u n c o n s t i t u t i o n a l for the reasons s t a t e d , or f o r Sny other reason,
This defendant says f u r t h e r that at the time p l a i n t i f f became a member of the
Federal Reserve Bank of Atlanta i t v o l u n t a r i l y agreed to comply with the terms
of the Federal Reserve Act and the r e g u l a t i o n s of the Federal Reserve Board*
- 2] In response to paragraph 2} of the b i l l of complaint t h i s defendant says t h a t
i t is true that i t did h e r e t o f o r e issue i t s Circular G-l6l addressed to member
banks and to nonmember banks maintaining c l e a r i n g accounts, which said c i r c u l a r
was on the s u b j e c t of check clearing and c o l l e c t i o n and was in a l l r e s p e c t s in
accord with Regulation J of t h e Federal Reserve Board*
February 2S, 1921.

Said c i r c u l a r was dated

Said c i r c u l a r i s not now of f o r c e , the same having been

superseded by l a t e r c i r c u l a r s on the same subject*

This d e f e n d a n t denies that

the p r o v i s i o n s of said c i r c u l a r s , or any of them, or any of i t s p r a c t i c e s t h e r e - under, were or are i n anywise unlawful or i n c o n f l i c t with any of the p r o v i s i o n s
of the Federal Reserve Act,
- 24 -

Paragraph 24 of the b i l l of complaint s e t s up mere conclusions of the
pleader and, t h e r e f o r e , r e q u i r e s no answer.

I f i t should be considered, however,

that said paragraph contains any proper averment of f a c t , the same, and every such,
averment, a r e denied , except that t h i s defendant admits t h a t i t i s now c i r c u l a t i n g




(12)

xkik

6 8 9

a par l i s t such as t h a t expressly approved by the Supreme Court of the United
S t a t e s in the case of American Bank & Trust Company e t s i . , v . Federal Reserve
Bank of A t l a n t a , e t a l - , 262 U. S. 6U); and except t h a t t h i s defendant admits
i t s p r a c t i c e s with regard to d e f e r r e d c r e d i t s s s i n t h i s answer described and
not o t h e r w i s e .

This defendant p a r t i c u l a r l y denies t h a t the p l a i n t i f f , or any

other member bank, has been under any d u r e s s or the s u b j e c t of any i l l e g a l
p r a c t i c e , and t h i s defendant denies t h a t any a c t done by i t and i n said b i l l
complained of has been i n v i o l a t i o n of any p r o v i s i o n of t h e Federal Reserve Act,
or contrary t o any a d j u d i c a t i o n of the Courts, or any c o n s t r u c t i o n of said Act
as made by the Courts.
- 25 To the e x t e n t t h a t Paragraph 25 of the b i l l of complaint contains mere
conclusions ;of the p l e a d e r , i t r e q u i r e s no answer,

This defendant d e n i e s ,

hovrever, the c o r r e c t n e s s of the conclusion t h a t Federal r e s e r v e banks a r e not

...

authorized to receive f o r c o l l e c t i o n from t h e i r members and c l e a r i n g members
any check or d r a f t t h a t i s not payable on p r e s e n t s t i o n w i t h i n t h e d i s t r i c t
of the Federal reserve bank r e c e i v i n g i t , and f u r t h e r denies the c o r r e c t n e s s
of the conclusion t h a t defendant can not receive f o r c o l l e c t i o n checks payable
within i t s d i s t r i c t deposited with i t f o r such purpose by another Federal r e s e r v e
bank.

This defendant says t h a t i t i s t r u e t h a t i t r e c e i v e s for c o l l e c t i o n from

i t s members and from i t s non-member c l e a r i n g banks checks t h a t are payable i n
other Federal Reserve D i s t r i c t s , and, denying t h a t i t r e c e i v e s checks f o r any
purpose from the members of other Federal r e s e r v e banks, admits t h a t i t does
receive from other Federal r e s e r v e banks checks t h a t a r e c o l l e c t i b l e a t par and
tiaat are payable upon p r e s e n t a t i o n w i t h i n t h e Sixth Federal Reserve D i s t r i c t .




(13)

X4i6l

V 690
Defendant says t h a t i t s r i g h t and corporate capacity so to do a r e p l a i n l y stated
i n the Federal Reserve Act, as now amended.
— 26 —

Paragraph 26 of the b i l l of complaint, as charged, i s denied.
— 27 "
In response to Paragraph 27 of the b i l l of complaint this defendant says
that i t i s true that the checks referred to therein, aggregating $4,806*97» were
tendered to i t i n settlement of certain d a i l y l e t t e r s , as alleged i n said
paragraph, and that such checks represented r e s p e c t i v e l y the amounts of said
d a i l y l e t f e r s , l e s s an attempted charge for remittance which the p l a i n t i f f sought
»

to impose upon t h i s d e f e n d a n t .

I t i s , furthe rmore, t r u e t h a t the p l a i n t i f f did

also tender to t h i s defendant two c e r t a i n bank d r a f t s i n the aggregate sum of
$55^-93

88

being i n payment of c e r t a i n checks drawn on p l a i n t i f f and s e n t by

defendant t o p l a i n t i f f f o r payment and r e m i t t a n c e .

The checks so sent have

been deposited with t h i s defendant by other Federal r e s e r v e banks, and n e t by
the members thereof a s a l l e g e d , and had, t h e r e f o r e , come to defendant from
outside the t e r r i t o r i a l l i m i t s of the Sixth Federal Reserve D i s t r i c t .

Said l a s t

mentioned batik d r a f t s represented the aggregate of the checks so sent f o r payment and r e m i t t a n c e , l e s s a charge for remittance which t h e p l a i h t i f f attempted
to impose on t h i s d e f e n d a n t .

This defendant says t h a t the said attempts of

the p l a i n t i f f to impose on defendant such charges were contrary to the Federal
Reserve Act, and, f o r said r e a a o n , i t refused to accept said d r a f t s , and each
of them, and, thereupon, requested the p l a i n t i f f e i t h e r to remit in f u l l a t




(14)

X4i6l
p

•

691

P^r for said cash l e t t e r s , and each thereof, or to return to defendant the
Items which had oeen sent to p l a i n t i f f by defendant for payment and remittance.
I-i refusing to accept said d r a f t s , this defendant wrote the p l a i n t i f f the
l e t t e r of July ) 1 , 1924, a copy of which i s attached as "Exhibit B" to the
b i l l of complaint.

This defendant says that the p l a i n t i f f was, under the law,

required to remit for said items without deduction and, therefore, denies the
averment that the p l a i n t i f f was compelled by an i l l e g a l act of thiti defendant
to forego said exchange and to pay said additional amounts, to i t s l o s s .
Defendant denies the other averments of said paragraph 27*
- 25 In response to paragraph 23 of the b i l l of complaint, this defendant
says that, under the provisions of the Federal Reserve Act and of Regulation J ,
the p l a i n t i f f has at a l l times been bound to remit to t h i s defendant at par
for items drawn upon the p l a i n t i f f and sent to i t by t h i s defendant for payment and remission of proceeds.

This defendant says t h a t , except i n the

particular cases described i n paragraph 27 of the b i l l of complaint, p l a i n t i f f
has made no demands upon this defendant touching the remission for items i n
amounts l e s s than the par value t h e r e o f .

The p l a i n t i f f and t h i s defendant, as

member bank and as Federal reserve bank r e s p e c t i v e l y , have had between themselves many transactions, the p l a i n t i f f sending to t h i s defendant cash items
for deposit, the defendant sendi% to the p l a i n t i f f cash l e t t e r s for payment
and remittance, as to' the aggregate whereof this defendant i s not informed.
In no case, however, except those s p e c i f i e d in the b i l l , has the p l a i n t i f f
un#ertaken to remit l e s s than the f u l l amount of ehy cash l e t t e r ; nor has the




(15)

xUl

£ 692

"plaintiff neretofUBB demanded the immediate c r e d i t to i t s r e s e r v e account of
items not immediately a v a i l a b l e to i t under the provisions of the time schedule
aforesaid.

Except as h e r e i n s p e c i f i c a l l y admitted, the averments of paragraph 23

of the b i l l a r e denied so f a r as t h i s defendant has any knowledge t h e r e o f , and
so f a r as t h i s defendant i s without knowledge thereof they are denied f o r that
reason#
- 29 Paragraph 29 of said b i l l , as charged, i s denied•
- 30 In response to paragraph 30 of said b i l l , t h i s defendant says t h a t i t i s
true that on or about J u l y 29, 1924, the p l a i n t i f f presented to i t checks of
the kind and character g e n e r a l l y described in said paragraph and f o r the
aggregate amount t h e r e i n s t a t e d , and requested t h a t said dhecks be placed to the
immediate c r e d i t of p l a i n t i f f i n i t s r e s e r v e account, and that the defendant
declined t o accede to such request f o r reasons s e t out i n t h e l e t t e r of J u l y 311
1924, w r i t t e n by t h i s defendant to the p l a i n t i f f , a copy of which i s attached
as "Exhibit B11 to said b i l l , namely; t h a t , under the r e g u l a t i o n s of the Federal
Reserve Boatfd 9 c r e d i t could be given t h e r e f o r only i n accordance with said
time schedule*

Defendant denies the other

a l l e g a t i o n s of said paragraph, and

says that the p l a i n t i f f was not e n t i t l e d to r e c e i v e immediate c r e d i t to i t s
r e s e r v e account f o r funds then uncollected; nor was the p l a i n t i f f e n t i t l e d to
i n t e r e s t thereon, and t h a t no i n j u r y to p l a i n t i f f , a t law or i n e q u i t y , r e s u l t e d
from the a c t i o n of the defendant i n t h i s regard

the p l a i n t i f f having no r i g h t

to u t i l i z e uncollected funds as a c o l l e c t e d balance t o i t s c r e d i t *




(16)

Defendant

XUlfrl
further says that p l a i n t i f f was immediately given credit at par i n a deferred
account for the f u l l amount of such checks without any deduction whatever, and,
upoh the expiration of the time stated in the aforesaid time schedule, p l a i n t i f f
was given credit at par in i t s reserve account for the f u l l amount of such
cnecks without any deduction whatever, in accordance with the terms of Regulation J.

Defendant further says that the p l a i n t i f f has at no time, prior to

July 29, 192^, made any demand upon defendant for immediate credit in i t s
reserve account for any checks which, under the regulations of the Federal Reserve Board, are receivable for deposit and deferred credit to i t s reserve
account,in accordance

with said time schedule; and that said request of

July 29, 192%, was the f i r s t request or demand made by the p l a i n t i f f of the
defendant to that end invoking i t .
-31 This defendant admits that i t wrote sod delivered to the p l a i n t i f f the
l e t t e r referred to in paragraph 31 of said b i l l of complaint; but denies that
such l e t t e r constituted a refusal to receive such checks on deposit at par within
the meaning of Section 16 of the Federal Reserve Act.
-.32 This defendant denies the a l l e g a t i o n s contained i n paragraph 32 of said b i l l
of complaint.
- 33 ~
To the extent that Paragraph 33 of said b i l l contains mere conclusions of the
pleader the same requires no answer.

Defendant, however, denies the allegations

of f a c t s e t forth in said paragraph arai particularly that this defendant has
at any time disregarded any l i m i t a t i o n imposed upon i t by law.




I 17 )

xUl6l

r 894
- 34 In so f a r as paragraph 3^ of said b i l l contains any i s s u a b l e averment of
f a c t , t h e sane i s d e n i e d .

- 35 - •
The a l l e g a t i o n s of paragraph 35 of said b i l l of complaint are d e n i e d .
~ 36 ~
The a l l e g a t i o n s contained i n paragraph 36 of said b i l l of complaint are
admitted.

- 37 I f i n any of those p a r t s of the b i l l of complaint which t h e defendant has
r e f e r r e d t o as containing only statements of conclusions t h e r e be any a l l e g a t i o n s
of f a c t contrary to the admissions in t h i s answer contained , defendant denies
each and every one of said a l l e g a t i o n ^ .
- 38 Defendant denies each and every a l l e g a t i o n of f a c t contained i n the b i l l
of complaint, except those a l l e g a t i o n s which defendant has s p e c i f i c a l l y a d mitted in t h i s answer, and except those a l l e g a t i o n s as to which defendant has
stated in t h i s answer t h a t i t i s without knowledge or i n f o r m a t i o n .

- 39 And now, having f u l l y answered the p l a i n t i f f 1 s b i l l , defendant shows to the
Court, by way of f u r t h e r d e f e n s e , as f e l l o w s :
A.
P r i o r to the enactment of the Federal Reserve Act, h e r e t o f o r e r e f e r r e d t o ,
the monetary and f i n a n c i a l s i t u a t i o n of the United S t a t e s had become such as to
cause grave apprehension and i n s i s t e n t demands for l e g i s l a t i o n by Congress to




(IS)

x4i6l

'' 695

p . o t e c t both the n a t i o n

and i t s people a g a i n s t the havoc wrought by r e c u r r i n g

depressions, c r i s e s , p a n i c s , v i o l e n t f l u c t u a t i o n s i n the r a t e of i n t e r e s t and
an general the consequences which always threatened and o f t e n d i s a s t r o u s l y
a f f e c t e d p u b l i c and p r i v a t e business a l i k e .

These e v i l s were caused i n l a r g e

p a r t by an i n e l a s t i c currency, based upon disappearing bonded indebtedness of
the general government, and the general p r a c t i c e which had grown up with regard
to reserves required by law to be maintained.

Such r e s e r v e s , required by law

to bear a fixed r e l a t i o n to the d e p o s i t l i a b i l i t y of the banks, were kept i n
p ^ r t in cash f o r d a i l y counter t r a n s a c t i o n s and i n l a r g e r p a r t consisted of
balances i n other banks, v&ich other banks in turn s i m i l a r l y maintained t h e i r own
reserve requirements.

The r e s e r v e s thus maintained by c r e d i t s i n other banks

were sometimes r e c i p r o c a l , sometimes cumulated and u t i l i s e d by many banks at
the same time, and the tendency of such reserves * r , 0 f i i m l l y to accumulate i n
the great f i n a n c i a l i n s t i t u t i o n s in c e n t r a l r e s e r v e c i t i e s where they were
f r e q u e n t l y loaned out f o r s p e c u l a t i v e purposes on c a l l .

Reciprocal and c i r -

culating c r e d i t s to r e s e r v e s thus rendered such r e s e r v e s i n l a r g e p a r t
f i c t i t i o u s , and pyramided a l a r g e imaginary r e s e r v e upon an o r i g i n a l small
actual d e p o s i t for r e s e r v e purposes.

Hie consequences of these p r a c t i c e s were

that the actual r e s e r v e s of the banks were s c a t t e r e d and t h e i r a v a i l a b i l i t y
depended upon the

febility

of other banks in time of s t r e s s e i t h e r to r e -

capture t h e i r own r e s e r v e s or cecal1 l o a n s .

At the f i r s t s i g n of f i n a n c i a l

disturbance banks hoarded t h e i r cash, brought d i s t r e s s i n g and sometimes
d e s t r u c t i v e p r e s s u r e to bear upon commercial and i n d u s t r i a l i n t e r e s t s to




(1?)

.

.

'

x4i,6l

ccrcpel payment

896

ox l o a n s , and with i n c r e a s i n g panic found d e c r e a s i n g a b i l i t y to

r e a l i z e e i t h e r upon t h e i r own r e s e r v e s i n other banks or pay the other bank
balances held by them as r e s e r v e f o r those other banks.

Such s i t u a t i o n s

occurred with p e r i o d i c a l and i n c r e a s i n g frequency and led to business and
bank suspensions and f a i l u r e s and attempts a t r e l i e f by the issuance of unauthorized forms of currency by c l e a r i n g houses and a s s o c i a t i o n s of banks - a l l
expedients which, unusual and r e s t r i c t i v e , increased the panic they were
designed to a l l e y .

This s i t u a t i o n was aggravated by the p r a c t i c e of counting

as r e s e r v e the socalled " f l o a t " c o n s i s t i n g of checks deposited f o r c o l l e c t i o n
and c r e d i t but s t i l l i n t r a n s i t and uncollected and which upon p r e s e n t a t i o n
in times of d i s t r e s s were met e i t h e r by delays or r e f u s a l s , or by payments i n
other c r e d i t s r a t h e r than money, such as checks or d r a f t s which i n t u r n could
not be collected when presented for payment, thus a c c e n t u a t i n g the f i c t i t i o u s and
unreal character of the r e s e r v e s upon which the i n t e g r i t y of the system depended.
Thus the very stringency which gave r i s e to the need of r e s e r v e s f o r use
rendered them unavailable*

Meantime t h e currency a v a i l a b l e to the country was

r i g i d l y l i m i t e d by i t s bond b a s i s and could not expand however g r e a t t h e need.
In 1907 the causes above described produced a d i s a s t r o u s p a n i c throughout
the United S t a t e s and challenged p u b l i c a t t e n t i o n s h a r p l y to the u n s t a b l e
basis of both p u b l i c and p r i v a t e finance i n the United S t a t e s .

Continuously

t h e r e a f t e r the s u b j e c t was considered by Congress; extensive h e a r i n g s were had,
committees and conferences were organized by p u b l i c a u t h o r i t i e s , by business
and banking groups, and f i n a l l y , informed and e x p e r t

opinion moulded the

Federal Reserve Act which was passed by Congress to r e d r e s s the e v i l s above




(20)

697
x4i6l
described by providing p r i m a r i l y f o r the i n s t i t u t i o n of the Federal Reserve
System, supervised on b e h a l f of the Government by t h e Federal Reserve Board,
but administered and operated by the twelve Federal r e s e r v e banks, each, bank
operating independently i n i t s own d i s t r i c t except as the s e v e r a l banks a r e
required t o cooperate i n t h e p u b l i c i n t e r e s t to meet n a t i o n a l emergencies.
The o b j e c t of the Federal Reserve Act i s to bring about the establishment
of a s t a b l e f i n a n c i a l s t r u c t u r e i n the United S t a t e s s t r o n g enough t o support
the great f i s c a l operations of the Government i n times of peace and war and
f l e x i b l e enough to meet the c r e d i t and currency needs of the commerce and
industry of the country.

To the and above s e t f o r t h the Federal Reserve Act#

operating compuleorily upon n a t i o n a l banks and seeking to induce the voluntary
cooperation of S t a t e banks and t r u s t companies, c r e a t e s an a c t u a l r e s e r v e
f i n a l l y mobilized i n the Federal Reserve Banks and t h e r e represented by actual
net b a l a n c e s , of which not l e s s than 35/3 cmst be kept by the Federal Reserve
Banks i n the form of gold or lawful money.
In i t s o r i g i n a l form the Federal Reserve Act authorized member banks to keep
a p a r t of t h e i r r e s e r v e with other banks and a p a r t as a balance witu tne
the Federal Reserve Banks.

I n i t s z e a l , however, to assure actual and a c c e s s i b l e

r e s e r v e s , Congress, by amendment to t h e Act, required member banks to keep t h e i r
e n t i r e r e s e r v e s i n Federal r e s e r v e banks and prescribed t h a t such r e s e r v e s must
c o n s i s t of "an actual n e t balance", thus excluding uncollected checks and items
in t r a n s i t .

The Federal Reserve Banks a r e required t o a s s u r e tne maintenance of

t h i s a c t u a l n e t balance "by the imposition of i n c r e a s i n g l y severe p e n a l t i e s upon
delinquent member banks.




(21)

B

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698

In order that the member banks may maintain the a c t u a l net balances
required t o be kept a s r e s e r v e s , i t was e s s e n t i a l t h a t Federal r e s e r v e banks
possess the power to c o l l e c t checks deposited f o r c o l l e c t i o n and c r e d i t
t h e r e t o , s i n c e i t i s by means of checks - t h a t bank balances are b u i l t up, and
a check must be c o l l e c t e d before the amount thereof can be considered as
c o n s t i t u t i n g "an a c t u a l net balance 11 within the meaning of the Act.

The

checks and d r a f t s which the p l a i n t i f f sends to t h i s d e f e n d a n t f o r c o l l e c t i o n
and c r e d i t to i t s r e s e r v e account a r e credited by t h i s d e f e n d a n t , not
immediately upon d e p o s i t but i n accordance with the time schedule and t h e
r e g u l a t i o n s of the Federal Reserve Board.

The checks and d r a f t s which the

defendant sends to the p l a i n t i f f f o r payment and r e m i t t a n c e a r e those
which to a very l a r g e e x t e n t , i f not e n t i r e l y , have been deposited by dither
member banks of t h i s defendant or of other Federal Reserve Banks f o r the
purpose of b u i l d i n g up and maintaining t h e i r r e s p e c t i v e r e s e r v e accounts*
Under the p r o v i s i o n s of Section l 6 of the Federal Reserve Act, each
Federal Reserve Bank i s required to accept at par from i t s members and
from other Federal Reserve Banks such checks and d r a f t s as may be placed
with i t on d e p o s i t for c o l l e c t i o n and c r e d i t , or on d e p o s i t f o r - c o l l e c t i o n
and the remission of proceeds when c o l l e c t e d .

The member banks of t h i s

defendant, including the p l a i n t i f f bank, a v a i l themselves to a l a r g e
extent of the c o l l e c t i o n f a c i l i t i e s a f f o r d e d by t h i s d e f e n d a n t , and other
Federal Reserve Banks forward to t h i s defendant such checks and d r a f t s ,
payable upon p r e s e n t a t i o n i n the Sixth Federal Reserve D i s t r i c t , as may be
collected a t p a r , and t h i s defendant i s r e q u i r e d , under the p r o v i s i o n s of




(22)

xUl$1

699

the Act and of the r e g u l a t i o n s a f o r e s a i d , to receive such items a t the face
or par value thereof«

Being i n h i b i t e d by law from paying exchange charges, and

being by law required to give c r e d i t a t par t h i s defendant cannot a t the same
time permit the drawee bank t o deduct exchange charges.
C.
A f u r t h e r reason a c t u a t i n g Congress in passing the Federal Reserve
Act was to provide for an e f f e c t i v e and prompt c l e a r i n g and c o l l e c t i o n of
checks and d r a f t s , an) i t was i n order to carry cut t h i s purpose that Regul a t i o n J was promulgated.

The advantage and b e n e f i t of a systematic,

expeditious and economical c o l l e c t i o n of checks i s i n c a l c u l a b l e in i t s
d i r e c t b e n e f i t s to the e n t i r e country.

P r i o r to the i n s t i t u t i o n of the

Federal Reserve System, with i t s f a c i l i t i e s f o r the o r d e r l y and prompt
c o l l e c t i o n of checks, the banks of the country maintained c l e a r i n g a r r a n g e ments among themselves.

Such arrangements o f t e n involved the c i r c u i t o u s

r o u t i n g of checks in order to escape the payment of an exchange charge *
Each bank was s t r i v i n g to s e t t l e the problem of c o l l e c t i o n for i t s e l f ,
namely; by c o l l e c t i n g checks deposited with i t for the purpose in such manner as to avoid the payment of exchange charges, and many of these banks were at
the same time charging exchange on checks drawn a g a i n s t them.

The r e s u l t

was sn expense to business and a t o l l upon i n d u s t r y , with the inconvenience
and Gangers a r i s i n g from delayed c o l l e c t i o n s and the i n d i r e c t r o u t i n g of
•checks .

I f the p l a i n t i f f and other member banks had t h e r i g h t at w i l l

to disregard the p r o v i s i o n s of Regulation J , i t would mean that such o b j e c ing member banks would s t i l l have the r i g h t , under Section l6 of the
Act, to forward to t h i s defendant for deposit f o r c o l l e c t i o n and c r e d i t
at p a r such cash items as the p l a i n t i f f might d e s i r e to have c o l l e c t e d
at par and which could be by the defendant collected a t par; whereas,




(23)

x4i6i

7 0 0

the p l a i n t i f f would r e s t under no r e c i p r o c a l duty to r e m i t f o r i t s own
checks without d e d u c t i o n .

In other words, the p l a i n t i f f seeks to

u t i l i z e f o r i t s own advantage the c o l l e c t i o n f a c i l i t i e s of d e f e n d a n t ,
maintained under the p r o v i s i o n s of Regulation J , and at tne same time to hold
as i n o p e r a t i v e upon i t the said r e g u l a t i o n , which was passed under the Act and
as required by the Act, and. without which there could be no e f f i c i e n t c o l l e c t i o n of checks by t h i s defendant.
D
As h e r e t o f o r e pointed o u t , the Federal Reserve Board h a s , in and by said
Regulation J , required each Federal Reserve Bank to e x e r c i s e the f u n c t i o n s of
a c l e a r i n g house and c o l l e c t checks f o r such of i t s member banks as d e s i r e to
avail tnemselves of i t s p r i v i l e g e s and f o r such nonmember S t a t e banks and t r u s t
companies a s may maintain with the Federal Reserve Banks balances s u f f i c i e n t to
q u a l i f y them under the p r o v i s i o n s of Section 13 of the Federal Reserve Act to
send items to Federal Reserve Banks for purposes of exchange or of c o l l e c t i o n .
I n and by said Regulation J , each Federal Reserve Bank i s required to e x e r c i s e
the f u n c t i o n s of a c l e a r i n g house and c o l l e c t checks under the general terms
and c o n d i t i o n s s e t f o r t h i n Regulation J -

This defendant avers t h a t i n promul-

gating Regulation J the Federal Reserve Board was a c t i n g pursuant to the aut h o r i t y Vested in i t by the Act a f o r e s a i d , and was actuated by the d e s i r e (as
set f o r t h in said Regulation J)

11

to a f f o r d both to the p u b l i c and to the v a r i -

ous, banks of the country a d i r e c t , e x p e d i t i o u s , and economical system of check
c o l l e c t i o n and s e t t l e m e n t of balances".




(24)

This d e f e n d a n t , t h e r e f o r e , has the corporate c a p a c i t y and power i n and
"by the Federal Reserve Act, as now amended, conferred upon i t to accept from
i t s members and c l e a r i n g members f o r d e p o s i t and c o l l e c t i o n checks and d r a f t s
payable upon p r e s e n t a t i o n , r e g a r d l e s s of whether they a r e payable w i t h i n i t s
own d i s t r i c t .

I t h a s , furthermore, the corporate c a p a c i t y and power to accept

on deposit f o r c o l l e c t i o n from other Federal Reserve Banks checks and d r a f t s
payable upon p r e s e n t a t i o n w i t h i n i t s d i s t r i c t .

Any checks so deposited f o r col-

l e c t i o n or c r e d i t must be accepted by defendant a t p a r , under the p r o v i s i o n s
of Section 1J of the Federal Reserve Act.

Under the p r o v i s i o n s of Section 13

of the Federal Reserve Act, t h i s defendant i s i n terms prohibited from paying
any charge to any bank for the c o l l e c t i o n or payment of checks and d r a f t s
and remission t h e r e f o r , by exchange or otherwise.

All of the f o r e g o i n g

powers and p r o h i b i t i o n s a r e established and upheld by the Supreme Court of
the United S t a t e s i n the cases of American Bank and Trust Company, e t al» v .
Federal Reserve Bank of A t l a n t a , e t . s i . , 262 U. S . , 6U3, and Kernsrs & Merchants Bank of Monroe, North Carolina e t a l * v* Federal Reserve Bank of
Richmond, 262 U. S. 649 •
P l a i n t i f f bank has u t i l i z e d , and now u t i l i z e s , the c o l l e c t i o n f a c i l i t i e s
maintained by t h i s defendant and other Federal Reserve Banks, and a v a i l s i t s e l f
thereof in order to secure the handling without expense to i t s e l f of items
which are c o l l e c t i b l e a t par through the Federal Reserve C o l l e c t i o n System.
E

-

The regulation of the Federal Reserve Beard requiring checks, not
immediately c o l l e c t i b l e , to be credited to the reserve account of a member




702
X4i6l

bank i n accordance with t h e time schedule i s not only p e r m i s s i b l e and l a w f u l ,
under the Federal Reserve Act, but i s required by business prudence and by
fundamental economic c o n s i d e r a t i o n s .

This defendant and the ether Federal

Reserve Banks r e p r e s e n t i n t h e aggregate the mobilized r e s e r v e s of the
country, the r e s e r v o i r of c r e d i t , and t h e p r i n c i p a l medium of note currency
issue...

Considerations of inherent s t a b i l i t y of bank r e s e r v e s and of c r e d i t

extensions and of s e c u r i t y f o r note i s s u e s r e q u i r e t h a t the r e s e r v e s carried
by the member banks be r e a l and not f i c t i t i o u s .

To allow each member hank

the u n r e s t r i c t e d r i g h t to count as a p a r t of i t s l e g a l r e s e r v e an u n c o l l e c t e d
balance s t i l l i n the " f l o a t " could only mean t h e establishment of an erroneous
and unsound b a s i s f o r the computation of r e s e r v e s ; because the items i n t r a n s i t
f o r c o l l e c t i o n , while s t i l l u n c o l l e c t e d , would not only determine, to the f u l l
extent t h e r e o f , the r e s e r v e of the bank d e p o s i t i n g the same with a Federal. Reserve Bank, but would, u n t i l a c t u a l l y p a i d , be a l s o r e f l e c t e d in the r e s e r v e
of the drawee bank.

I t i s impossible t o a n t i c i p a t e with any c e r t a i n t y

the aggregate of the " f l o a t " , f r o m day to day, and i t is l i k e vise impossible
to s t a t e h e r e i n any a c c u r a t e f i g u r e s of averages, but t h i s defendant does aver
(as i s a l s o alleged by t h e p l a i n t i f f i n the b i l l of complaint) t h a t t h e r e i s p r o bably a t o t a l of " f l o a t " i n the Federal Reserve System i n each day of not l e s s
than $500,000,000.

I n order t o prevent t h i s " f l o a t " which c o n s i s t s of 'uncollected

checks, from being used as bank r e s e r v e s , Congress amended Section 19 of the
Federal Reserve Act on June 21, 1917, so as to r e q u i r e that the r e s e r v e s of
member banks should c o n s i s t not merely of "balances" with the Federal Reserve




(26)

*

Ai6i"

/

7 0 3

Bank, but of "an a c t u a l n e t "balance11, which i s commonly understood in banking
c i r c l e s to mean a net balance c o n s i s t i n g of a c t u a l l y c o l l e c t e d funds with a l l
" f l o a t " or uncollected checks eliminated*

The only s a f e r u l e i s t h a t thus

adopted by Congress and incorporated in Regulation J by the Federal Reserve
Board, namely, t h a t c r e d i t f o r a check deposited with a Federal Reserve Bank
shall be given in the c o l l e c t e d funds or reserve account of each member only
a t the approximate time when the check a c t u a l l y has been c o l l e c t e d .

The p l a i n -

t i f f i s not e n t i t l e d t o the immediate use of the proceeds of a check which i s
s t i l l uncollected*

Nothing in. the Federal Reserve Act gives to p l a i n t i f f t h i s

p r i v i l e g e and such p r i v i l e g e , i f extended, would be c o n t r a r y to business usage
and the fundamental c o n s i d e r a t i o n s of sound business p o l i c y , as well as contrary
to the express p r o v i s i o n s of Section 19 of the Federal Reserve Act-

'This d e f e n -

dant says t h a t the acceptance on d e p o s i t for d e f e r r e d c r e d i t to . the r e s e r v e
account of a member bank, in accordance with the time schedule, i s not a
denial to the p l a i n t i f f of i t s r i g h t to have such items received f o r d e p o s i t
a t par by the d e f e n d a n t , because the r i g h t to d e p o s i t a t par does not irnply
the r i g h t to demand immediate a v a i l a b i l i t y for u n c o l l e c t e d items, and f o r
tne f u r t n e r reason t h a t t o give the p l a i n t i f f immediate c r e d i t f o r u n c o l lected checks would be c o n t r a r y to the p r o v i s i o n s of Section 19 of t h e
Federal Reserve Act*
? •

This defendant f u r t h e r says t h a t were i t to allow i t s members to
check a g a i n s t and otherwise u t i l i z e as c o l l e c t e d funds t h e a n t i c i p a t e d
proceeds of uncollected items, the" member banks would thereby a c q u i r e ,
without cost by way of i n t e r e s t charge or o t h e r w i s e , the constant use ofl a r g e amounts of money a t the expehse of t h i s defendant*




( 27 )

Member banks would

then seek to employ t h e s e funds by l e a d i n g them out or i n v e s t i n g them and
t h i s wgrnld lead to widespread i n f l a t i o n with consequent high p r i c e s to
the g r e a t detriment of the e n t i r e country.
(Phis d e f e n d a n t , t h e r e f o r e , says t h a t the Federal Reserve Act
and the amendments t h e r e t o c o n s t i t u t e a c o n s i s t e n t Act of Congress
.addressed to the remedying of grave e v i l s of a p u b l i c character and seeking by i t s

several p r o v i s i o n s , requirements, and a u t h o r i t i e s to e r e c t a

s t a b l e f i n a n c i a l s t r u c t u r e i n t h e p u b l i c i n t e r e s t and f o r the w e l f a r e and
convenience of the p e o p l e ; t h a t the demand of the p l a i n t i f f t h a t immediate
c r e d i t be given f o r uncollected checks would destroy the i n t e g r i t y of the
reserve the establishment of which was the p r i n c i p a l purpose of the Federal
Reserve Act and would be a t variance with the express language of said Act,
that t h e demand of the p l a i n t i f f that i t and other member banks i n t h e Federal
Reserve System be authorized to charge exchange upon checks presented for payment
and remission would l i k e w i s e impair the u s e f u l n e s s of the System to the banks and
business of the country and be i n c o n f l i c t with the express requirements and
p r o h i b i t i o n s of the Federal Reserve Act; t h a t a l l of the a c t s of t h i l defendant
i n the r e s p e c t s complained of are h e r e i n b e f o r e shown to be i n harmony with the
purpose of the Federal Reserve Act and s t r i c t l y w i t h i n the powers granted to
by Congress and that no i n j u r y hasbeen done to the p l a i n t i f f , bat t h a t on the
contrary the p l a i n t i f f d i r e c t l y and as a p a r t i c i p a n t i n t h e general bu i e
w e l f a r e of the country has g r e a t l y advantaged t h e r e b y .




( 2S )

For t h e f o r e g o i n g rea

X4i6l

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70S

this defendant says that the injvmction and other r e l i e f i n said b i l l sought
against i t should not "be granted,
V/HSEEFCES this defendant prays that this s u i t be dismissed against i t with
i t s reasonable costs in t h i s behalf expended.
Hollina N. Randolph

Robert S. Parker
S o l i c i t o r s for Defendant Federal
Reserve Bank.of Atlanta*

Walter Wyatt
Montgomery B. Angell
Newton D, Baker
Of•Counsel»




( 29 )

FEDERAL

RESERVE

706

BOARD

STATEMENT FOR THE PRESS

X-U163

For Release in Morning Papers
Saturday, September 27, 1924,
The following i s a summary of general business
and f i n a n c i a l conditions throughout the several
Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s
f o r t h e months of August and September, as cont a i n e d in the forthcoming i s s u e of the Federal
Reserve B u l l e t i n .
Production i n b a s i c i n d u s t r i e s was maintained during August a t
about the same l e v e l a s i n the two preceding months and f a c t o r y employment showed a s l i g h t i n c r e a s e ,

Wholesale p r i c e s , e s p e c i a l l y those of

a g r i c u l t u r a l products, showed a f u r t h e r advance.
PRODUCTION:
The Federal Reserve Board's index of production in b a s i c i n d u s t r i e s ,
a d j u s t e d to allow f o r seasonal v a r i a t i o n s , continued in August a t the
same l e v e l as in June and J u l y .

Production of s t e e l was s u b s t a n t i a l l y

l a r g e r than in July and the output of pig i r o n and m i l l consumption of
cotton a l s o increased.

Sugar meltings and production of a n t h r a c i t e and.

zinc, on the other hand, were smaller.

Factory employment increased

s l i g h t l y i n August and average weekly earnings increased 4 per cent owing
to l e s s p a r t - t i m e employment.

Larger working f o r c e s were r e p o r t e d i n

t h e t e x t i l e , l e a t h e r , and automobile i n d u s t r i e s .

Building c o n t r a c t s

awarded, contrary t o the usual seasonal t r e n d , were 3 per cent l a r g e r
in August than in J u l y .
Crop c o n d i t i o n s showed f u r t h e r improvement in August and t h e
September 1 e s t i m a t e s of production by the Department of A g r i c u l t u r e
were l a r g e r f o r wheat, c a t s , b a r l e y , and p o t a t o e s .
corn, c o t t o n , and tobacco, however, were s m a l l e r .



Estimated y i e l d s of
Harvesting has

X-U163

7 0 7

proceeded r a p i d l y t h i s y e a r , and the August marketing of wheat wag
l a r g e r than in e i t h e r of the l a s t two years •
TRADE:
Bank d e b i t s , which r e f l e c t the volume of business t r a n s a c t i o n s
s e t t l e d by check, showed about the usual seasonal decrease in August,
but were l a r g e r than a year ago.

Railroad shipments increased s l i g h t l y ,

as a r e s u l t of l a r g e r loadings of miscellaneous merchandise, g r a i n and
coal•

Wholesale t r a d e was 7 P e r cent l a r g e r than in J u l y , owing t o

seasonal i n c r e a s e s in s a l e s of dry goods, shoes, and meat, but continued
to be smaller than a year ago.

Department s t o r e s a l e s showed l e s s than

the usual increase i n August and were 7 P ej * cent smaller than l a s t year•
Mail order s a l e s increased more than usual a t t h i s season and were one
per cent l a r g e r than in August, 1923#

Merchandise stocks of department

s t o r e s at the end of August f o r the f i r s t time t h i s year were smaller
than on the corresponding date of 1921.
PRICES:
Wholesale p r i c e s , as measured by the index of the Bureau of labor
S t a t i s t i c s , increased 2 per cent in August and were a t about the same
l e v e l a s a year ago.

The advance was due l a r g e l y to f u r t h e r i n c r e a s e s

in p r i c e s of farm products and foods, though a l l other commodity groups
except metals and f u e l a l s o advanced*

During the f i r s t t h r e e weeks of

September p r i c e s of wheat, rye, wool, and rubtrer increased while those of
cotton, s i l k , petroleum

and metals d e c l i n e d .

BAW CREDIT:
loans and investments of member banks in leading c i t i e s continued
to increase during the four-week period ending September 10 and on t h a t
date reached a record f i g u r e about $1,000,000,000 above the l e v e l of three



-3months e a r l i e r ,

XU S ' 708
- 13

The l a r g e s t i n c r e a s e was ir. loans on stocks and bonds

and commercial loans a l s o i n c r e a s e d , owing p a r t l y t o seasonal demands f o r
credit*

The growth of investments by member banks continued though at

a somewhat slackened r a t e ,
At the Federal r e s e r v e banks t h e r e was a f u r t h e r i n c r e a s e in the
holdings of government s e c u r i t i e s and of acceptances with t h e r e s u l t t h a t
i n the middle of September, although d i s c o u n t s were a t t h e low point f o r
the y e a r , the t o t a l volume of r e s e r v e bank c r e d i t was h i g h e r than a t any
time since l a s t s p r i n g .

Seasonal i n c r e a s e in tnc demand f o r currency was

r e f l e c t e d in a d e c l i n e in cash r e s e r v e and a t the r e s e r v e banks i n c e r t a i n
of the a g r i c u l t u r a l d i s t r i c t s in an i n c r e a s e of Federal r e s e r v e note c i r culation.
S l i g h t l y f i r m e r c o n d i t i o n s in the New York money market in l a t e
August and e a r l y September were r e f l e c t e d i n a s l i g h t advance in the r a t e
on commercial paper from 3-3 l / ^ t o 3 l/1-1 V3T

sent.

A f t e r the middle of

September a r e c u r r e n c e of e a s i e r c o n d i t i o n s followed Treasury o p e r a t i o n s *
The September 15 o f f e r i n g of one-year T r - u s m y C e r t i f i c a t e s bore 2 3 / 4
per cent i n t e r e s t , t h e same r a t s as the six-months 1 i s s u e s o l d i n J u n e .

September 25,




FEDERAL

RESERVE

?0 9

BOARD

Statement for the Press
X-U164
For Immediate Release

September 27, 1924.
CONDITION OF ACCEPTANCE MARKET.
August 14 to September 10-

During the four-week period ending September 10 a c o n t i n u a t i o n of
low money r a t e s and the increased demand for funds to meet the seasonal
need for c r e d i t a r i s i n g i n connection with the marketing of c o t t o n and
g r a i n , were the p r i n c i p a l f a c t o r s a f f e c t i n g the acceptance market.

The

supply of new b i l l s which came i n t o the market during the e a r l y p a r t of the
period was s u b s t a n t i a l l y l a r g e r than the demand and in view of ample money
a t low r a t e s t h e r e was a s u b s t a n t i a l i n c r e a s e i n d e a l e r s ' aggregate p o r t folios .

In the c l o s i n g weeks of August and e a r l y i n September when b i l l s

drawn to finance the seasonal movements of cotton and grain began to reach
the market, d e a l e r s ' o f f e r i n g r a t e s were increased to 2 and 2 l / s per cent
f o r t h i r t y day b i l l s , and to 2 l / s to 2 l / 4 f o r s i x t y and ninety-day b i l l s ,
i n response to an increase i n c a l l money r a t e s .

A f t e r the advance i n r a t e s

t h e demand f o r b i l l s increased r a p i d l y and early, i n September d e a l e r s ' port*f o l i o s were gradually reduced and a t the c l o s e of the period were smaller than
a t any previous month t h i s y e a r .

The demand f o r b i l l s from commercial banks

was s l i g h t l y l e s s than in t h e preceding p e r i o d , but s a l e s to the r e s e r v e
banks were l a r g e r .

The p r i n c i p a l commodities against which new b i l l s were

drawn were g r a i n , sugar, c o t t o n , s i l k , c o f f e e , and p r o v i s i o n s .
Rates i n the New York market a t the c l o s e of the period ranged
from 2

l / s to 2 l / 4 per cent bid and 2 t o 2 l / g per cent o f f e r e d f o r




X-4i64

30 day " b i l l s , to 2 3 / s to 2 1 / 2 per cent "bid and 2 l / 4 per cent o f f e r e d
f o r 90-day b i l l s .

Longer m a t u r i t i e s were demanding h : gker r a t e s but

the g r e a t e s t volume of b i l l s which came i n t o t h e market was drawn with
30 to 90-day m a t u r i t i e s 4




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-U165
September 30,192U=

Subject: E l e c t i o n of Class "A" and "B" D i r e c t o r s .

Dear S i r :
This w i l l confirm my telegram to you of t h i s
d a t e a d v i s i n g t h a t t h e Board has designated November
17> 1924, as the d a t e f o r opening the p o l l s f o r the
e l e c t i o n of Class "A" and "B" d i r e c t o r s and t h a t group
c l a s s i f i c a t i o n s for t h e e l e c t i o n would be the same as
those i n e f f e c t s i n c e 1918Very t r u l y your s ,

J . C. N o e l l ,
Assistant Secretary,

TO BE SENT TO ALL CHAIRMEN-




712

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

x~4i6s

October I I , 1924.
SUBJECT: Expense Main Line, Leased Wire System,
September, 1924.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph
statements, X-Ul68-a and X-4168-b, covering in d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of September, 1924.
Please c r e d i t the amount payable by your bank
in the general account, Treasurer, U. S., on your books,
and issue C/D Form 1, National Banks, f o r account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund," Leased Wire System, sending duplicate C/D to Fede r a l Reserve Board*
Yours very t r u l y ,

Fiscal Agent.
•- (Enclosures)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.
I




713
X-4l6S-a
REPORT SHOWING- CLASSIFICATION AND NUMBER OF W R S
OD
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR TEE M N H OF SEPTEMBER,
OT
1924.
Percent of
Total Bank
Business (*)

Fed. Res.
Bank Business

From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

Treasury
Dept.
Business

22,498
157,475
33,246
63.605
45,249
60,478
85,288
64,221
41,925
62.606
52,849
99,421

6,569
8,426
6,925
6,936
5,626
6,968
10,2568,321
4,409
6,899
4,535
I5,bl2

788,861

Total

2.85
19.96
4.21
8.06
5.74
7.67
10.81
8,14
5.32
7.94
6.70
12.60
100.00

91,282

Board
Total

Total
29,067
165,901
40,171
70,541.
50,875
67,446
55,544
72,542
46,334
69,505
57,184
115.033

-

380,143

-

76,710

1,056,003

$

.45

343,897

167,992

267,142

Percent of Total

War
Finance Corp.
Business

.45

1 ,224,040

13.724#

86.272#

.004#

Bank Business 1,056,003 words or 86.28#
Treasury Dept .
167*992
"
" 13*72 #
TOTAL

1,223,995

"

"100.00#
(*) These percentages used i n c a l c u l a t i n g
the pro r a t a share of leased wire
expenses as shown on the accompanying
statement (X-4l6S-b)

FEDERAL RESKBVE BOARD,
# s h i n g t o n , D. C.
October 11, 1924.




REPORT 03 EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, SEPTEMBER, 1924,

Name of Bank

Operators'
Salaries

Boston
$ 250.00
New York
1,471.98
Philadelphia
200.00
Cleveland
272.00
Richmond
315-00
Atlanta
255,00
Chicago
(#)3,S63,34
St- Louis
200,00
Minneapolis
IS3.34
Kansas C i t y
265.64
Dallas
251.00
San Francisco
380,00
Fed. Res. Board
TOTAL

$7,907.30

Operators'
Overtime
$

$

Wire
Rental

Total
Expenses

1.00
2.00
-

$15,572.46

$

3.00

$15,572.46

251.00
1,471.98
200.00
272-00
315.OO
<255.00
3,865,j4
200.00
183,34
265,64
2)1.00
380,00
15,572.46

$23,482.76
(a)l,700.99
$21,781.77

(#) Includes s a l a r i e s of Washington operators.
(*) C r e d i t .
(a) Received $0.99 from War Finance Corporation and $1,700.00 from
Treasury Dept. covering business f o r month of September, 1924.
(&) Amount reimbursable to Chicago.




Pro Rata
Share of
Total
Expenses
$

620.78
4,347.64
917.OI
1,755.61
1,250.27
1,670,6b
2,354,61
1,773.04
1,158,79
1,729.47
1,459-38
2,744.51

$21,781,77

X-41o8-b

Credits

Payable to
Federal
Reserve
Board

$

251.00
1,471.98
200.00
272.00
315.00
255.00
3,865.34
200.00
IS3.34
265*64
251.00
38O.CO

$

369,7S
2,875.66
717.OI
1,483.61
935-27
1,415.66
(*)1,510.73
1,573.04
975.45
1,463,83
1,208.38
2,364,51

$7,910,30

$15,322,20
(&)1,510.73
$13,871.47

715

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

October 11, 1924.
X-4169
SUBJECT: Deposits of Uninvested Trust Funds.
Dear S i r :
You are advised that the Federal Reserve Board has
r e c e n t l y ruled that a member bank l e g a l l y authorized to a c t as
t r u s t e e , e t c . , may deposit t r u s t funds awaiting investment or
d i s t r i b u t i o n in i t s savings department, as well as in i t s s t r i c t l y
commercial department, provided that the terms of the t r u s t permit
and that appropriate c o l l a t e r a l s e c u r i t y i s deposited in the b a n k ' s
t r u s t department, as provided in Section V of the Board's Regul a t i o n F, Series of 1524, and t h a t such deposits may be treated
as time deposits f o r reserve purposes, provided they conform to
the relevant provisions of the Board's Regulation D, Series of
1924.
Whether or not deposits of uninvested t r u s t funds i n the
banking department of the t r u s t e e bank give r i s e to demand, or to
time deposit l i a b i l i t i e s w i l l depend upon the conditions under
which such deposits are made, and t h i s question i s to be determined
i n the l i g h t of the Board's r u l i n g s and regulations defining demand
and time deposits.
I t i s to be remembered, of course, t h a t such deposits
should not be permitted to remain in the savings or commercial department of the t r u s t e e bank f o r an unreasonable time, since the
law c l e a r l y contemplates and the Board's Regulation F provides t h a t
only t r u s t funds awaiting investment or d i s t r i b u t i o n may be employed
in t h e t r u s t e e bank's banking department. All such deposits should,
t h e r e f o r e , be withdrawn from the banking department when ready f o r
d i s t r i b u t i o n or as soon as an opportunity to invest them in more
appropriate and remunerative channels a r i s e s . In view of these
considerations, i t would seem inappropriate in most cases to make
deposits of t r u s t funds subject to notice of withdrawal.
Very t r u l y yours,

TO GOVERNORS
OF ALL' F. R» BANKS.




Walter L. Eddy,
Secretary.

716
X-4170
TREASURY DEPARTMENT
O f f i c e of tne Secretary
WASHINGTON
October 4, 1924.
The Governor
Federal Reserve Board.
Sir:
You are hereby advised tnat tne Department has r e f e r r e d to tne Disbursing Clerk, Treasury Department, for payment, tne account of the Bureau of Engraving and Printing for preparing Federal Reserve notes during the period
September 1 to September 30, 1924, amounting to $36,960, as f o l l o w s , Federal Reserve Notes. 1914
New York.
CniccLgo
Dallas
San Francisco

$5
400,000
300,000
160,000
100,000
960,000

'

960,000 sneets a t $38.50 per M
follows,-

-

Total
400,000
300,000
160,000
100,000
9b0,000"

$36,960

The cnarges against the several Federal Reserve Banks are as

New York.
Cnicago
Dallas
San Francisco

Sneets
400,000
300,000
160,000
100.000
960,000

CompenPlate
sation
Printing
$7,100.00 $3,272.00
5,325.00
2,454.00
2,840.00 1,308.80
1.775.00
818. 00
$17,040.00 $7,852.80

Materials
55,028. 00
3,771.00
2,011.20
1.257.00
$12,067.20

Total
$15,400.00
11,550.00
6,160.00
3.850.00
#36,960.00

Toe Bureau appropriations w i l l be reimbursed in tne a:ove amount from
tne i n d e f i n i t e appropriation "Preparation and Issue of Federal Reserve Notes,
Reimoursaole", and i t i s requested tnat your board cause sucn i n d e f i n i t e
appropriation to oe reimoursed i n like amount.




Respectfully,
, (Signed) R. W. Barr,
Acting Deputy Commissioner.

'
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

October l 4 , 1924«
X-U171
SUBJECT: Exercise of Trust Powers by State Banks.
Dear Sir:
The Board has received an inquiry from one of the Federal
Reserve Banks as to whether a State member bank which has made app l i c a t i o n to the State banking department for permission to conduct
a t r u s t department, should be required to obtain the consent of the
Federal Reserve Board before engaging in such t r u s t business. The
inquiry i s based on the f a c t that a t the time of the admission Of the
bank to membership there was imposed upon i t the Board 1 s general
condition of membership providing as follows:
"That except with the approval of the Federal Reserve
Board there shall be no change in the general character of
your a s s e t s or a broadening in the functions now exercised
by you, such as will tend to a f f e c t m a t e r i a l l y the standard
now maintained and required as a condition of membership ***."
The Board f e e l s that the exercise of t r u s t powers by a State
member bank which has h e r e t o f o r e exercised only the general powers of
commercial banking, c o n s t i t u t e s a very material broadening i n the functions of the bank, and for t h i s reason the consent of the Federal Reserve Board should be obtained, in accordance with the general condition
of membership to which the bank is s u b j e c t , before the bank undertakes
any business of a f i d u c i a r y character.
Very t r u l y yours,

Walter L. Eddy,
Secretary.

TO BE SENT TO ALL FEDERAL RESERVE AGENTS,




717

718

X-U172

FEDERAL

EESEETE

BOARD

STATEMENT FOR THE PRESS

For immediate r e l e a s e
4:00 o'clock p. m.

October 14, 1924.

The Federal Reserve Board announces t h a t the
Federal Reserve Bank of Minneapolis has established
a rediscount r a t e of 4 per cent on a l l classes of
paper of a l l m a t u r i t i e s , e f f e c t i v e October l $ t h .




E 719
FEDERAL

RESERVE

3 0 AE D

STATEMENT FOR THE HESS

X-U175

For Release in Morning Papers
Monday, October 27, IS24.
The following i s a summary of general business
and. f i n a n c i a l conditions throughout the several
Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s
f o r the months of September and October, as contained in the forthcoming issue of the Federal
Reserve B u l l e t i n .
Production of basic commodities, f a c t o r y employment, and d i s t r i bution of merchandise increased in September.

During September and e a r l y

in October t h e r e was a considerable i n c r e a s e in the volume of borrowing
f o r commercial purposes.
PRODUCTION:
The Federal Reserve Board's index of production in b a s i c industries.,
adjusted to allow f o r seasonal v a r i a t i o n s , rose 9 psr cent in September,
the f i r s t advance since l a s t January.

Increased a c t i v i t y was reported in

many l i n e s of ,industry including t e x t i l e s , iron and s t e e l , and c o a l .
Factory employment increased 2 per cent during September, r e f l e c t i n g
larger working forces i n n e a r l y a l l r e p o r t i n g i n d u s t r i e s .

Average weekly

earnings of i n d u s t r i a l workers increased s l i g h t l y , owing to a decrease i n
the extent of part-time employment.

Building c o n t r a c t s awarded showed a

small seasonal decline in September, but were considerably larger than a
year ago.
Crop conditions, as reported by the Department of A g r i c u l t u r e , showed
a f u r t h e r s l i g h t improvement during September, and the estimates cf production f o r spring wheat, o a t s , b a r l e y , and white p o t a t o e s on October 1
were l a r g e r than the month before.

Estimates of the y i e l d s of corn, tobacco,

and c o t t o n , however, were reduced.

Marketing of wheat was exceptionally




•
-2r

720

X-4175

heavy in September ana exports of wheat and cotton were l a r g e r tha» f o r the
same month of any recent year.
TRADE:
Distribution of commodities, as r e f l e c t e d in r a i l r o a d shipments, increased
during September and was groats* than l a s t year, owing to larger loadings of
miscellaneous merchandise, g r a i n , and coal.
Haclesale trade was 11 per cent larger than in August, as a r e s u l t of
increased business in almost a l l reporting l i n e s .

Sales of groceries and

drugs were l a r g e r than a year ago, while s a l e s of meat and shoes were smaller.
Beta.il trade showed more than the usual seasonal increase in September, and
sales of department stores and mail order houses were considerably l a r g e r than
l a s t year.

Merchandise stocks a t department stores increased more than usual

during September, but continued to be s l i g h t l y smaller than a year ago.
PRICES:
Wholesale p r i c e s of farm products, clothing, f u e l , and

metals

declined

somewhat in September, while p r i c e s of food products, b u i l d i n g materials, and
chemicals advanced.

The general level of p r i c e s , as measured by the Bureau

of Labor S t a t i s t i c s ' i n d e x , was s l i g h t l y lower in September than im August.
During the f i r s t half of October quotations on wheat, f l o u r , c a t t l e , hogs,
wool, and rubber increased, while prices of cotton, lumber, and gasoline declined.
BANK CREDIT:
Daring the f i v e weeks ending October 15 loans and investments of reporting
member banks in leading c i t i e s increased by more than $600,000,000-

Credit

deirand f o r financing the marketing of crops and t h e f a l l a c t i v i t y of trade
vias r e f l e c t e d in increased commercial loans throughout the country and the




721
->

-X-4275

t o t a l volume of these loans rose to a level considerably above the peak of
October, 1923.

Member bank investments in s e c u r i t i e s continued to increase

and loans on stocks and bonds a l s o advanced.

A f u r t h e r growth of demand de-

p o s i t s c a r r i e d t h e i r t o t a l to the highest f i g u r e on record.
At the Federal reserve banks, discounts changed but l i t t l e in September
\

and declined in tlie f i r s t three weeks of October f vihile holdings of acceptances increased considerably and there was a l s o scire increase in United
States s e c u r i t i e s *

As a consequence* t o t a l earning a s s e t s were larger than

at any time since early in the year,

larger currency requirements p a r t l y

seasonal in character were r e f l e c t e d betw&en August 1 and October 1 in an
increase of $140,000,000 in t h e t o t a l volume of money in c i r c u l a t i o n .
Money r a t e s in the New York market re:uaizied r e l a t i v e l y constant in the
l a t t e r p a r t of September and the early part of October.

On October 15 the

discount r a t e of the Federal Reserve Bank of Minneapolis was reduced from
4-1/2 to 4 per cent.




FEDERAL RESERVE BOARD

?22

WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD

October 25, 1924.
X-41J6
SUBJECT:

Cooplinentary Copies of Federal Reserve
Bulletin f o r State Bank Examiners.

Dear S i r :
I t has been the p r a c t i c e of t h e Federal
Reserve Board to g.uote a special r a t e to the Federal
reserve banks f o r subscriptions to the Federal Reserve B u l l e t i n f o r the use of examiners of s t a t e
banking departments.
For the year 1925, however, the Board has
decided to issue complimentary copies of the B u l l e t i n
to s t a t e examiners. You a r e requested, t h e r e f o r e ,
to send to the Beard, not l a t e r than December 10th,
a l i s t of the s t a t e bank examiners in your d i s t r i c t
to whom the Bulletin should be forwarded, f r e e of
charge, beginning with the January, 1925, issue.
Yours very t r u l y ,

Walter L. Eddy,
Secretary.

TO ALL FEDERAL RESERVE AGENTS.




FEDERAL

R E S E E V E ' B 0 AH 3
3

Statement f o r the Press
X-4l?8
For Immediate Release

October 2S, 1924
CONDITION OF ACCEPTANCE MARKET
September 11 to October 15, 1924

Seasonal increases i n the demand for funds to finance the marketing and expor tationgof a g r i c u l t u r a l commodities were evident in .September, and October and
for the period ending October 15 the acceptance market was characterized by the
g r e a t e s t a c t i v i t y f o r the year*

The volume of new b i l l s was l a r g e r than f o r any

e a r l i e r month t h i s year and exceeded the t o t a l f o r t h e same period in 1923- F l u c t u ations i n money r a t e s . caused frequent changes in dealersV r a t e s and the dtexrand f o r
b i l l s was i r r e g u l a r •

Total sales did not increase to the same extent as the supply

and d e a l e r s 1 aggregate p o r t f o l i o s at the end of the period were 30 per cent heavier
than a month e a r l i e r . I n the middle of September c a l l money was p l e n t i f u l and the
demand f o r b i l l s from banks in the f i n a n c i a l centers was good but near the close of
the month the money market became firmer and the demand f o r acceptances f e l l off ,
while the supply continued to increase*

Early in October d e a l e r s 1 r a t e s were ad-

vanced and t h e d emand showed some improvement but i t was not s u f f i c i e n t to absorb
the increased supply and d e a l e r s ' aggregate p o r t f o l i o s increased•

Banks were the

p r i n c i p a l purchasers i n September but with a l a r g e r volume of b i l l s in October and
a firmer money market o f f e r i n g s by dealers and banks to t h e Federal reserve banks
increased*

Cotton, g r a i n , sugar, s i l k s , h i d e s , l e a t h e r , and provisions were the

p r i n c i p a l commodities against which b i l l s were drawn, but acceptances against cotton
and grain were in l a r g e s t volume*.
Rates in the New York market a t the close of the period were 2-1/g per cent
bid and 2 per cent o f f e r e d for

day b i l l s , 2~l/4 per cent bid and 2 w l/S per cent

o f f e r e d f o r 60 day b i l l s , and 2-3/8 per cent bid and 2-1/4 per cent o f f e r e d f o r
90 and 120
 day b i l l s *


724

a-4160

FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS

October 31 > 1924,
For Immediate Release.

The Federal Reserve Board announces the appointment,
e f f e c t i v e January 1, 1925» of Mr. 9scgr Newton of Jaeksen,
M i s s i s s i p p i , as Class C Director of the Federal Reserve
Bank of Atlanta, f o r the unexpired term of Mr. Jos. A*
McCord, resigned, ending December 31# 1926.

The Board

has also designated Mr. Newton to succeed Mr. McCord
as Federal Reserve Agent and Chairman of the Beari ef
Directors ef the Atlanta Bank for a term of one ye a r ,
beginning January 1, 1925.




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

October 31, 1924.
X-4181
SUBJECT:

P r i n c i p l e s governing research, s t a t i s t i c a l and.
publication a c t i v i t i e s .

Dear S i r :
The Board, a f t e r c a r e f u l consideration of the
problem of reorganizing and coordinating the work of
research and s t a t i s t i c s of the Federal Reserve System,
in the i n t e r e s t both of economy and e f f i c i e n c y , h a s reached
c e r t a i n conclusions, a copy of which i s herewith enclosed.
You are requested to come to the conference on
November 10th with s p e c i f i c suggestions to a s s i s t the
Board's Director of Research and S t a t i s t i c s in giving e f f e c t to t h e p r i n c i p l e s l a i d down by the Board which aire
to become e f f e c t i v e January 1, 1925«
You are also requested to prepare and submit
to the Board for approval not l a t e r than December 15, 1924,
a budget of expenditures covering work in research,
s t a t i s t i c s and publication to be carried on during the
year 1925 by you or in your department* This budget must
conform c a r e f u l l y to the scope and purpose of research,
s t a t i s t i c s , and publication as defined in the Board's
statement of p r i n c i p l e s .
By direction of the Federal Reserve Board.
Yours very t r u l y ,

(Enclosure)

TO ALL FEDERAL RESERVE AGENTS




J . C. Noell,
Assistant Secretary.

X-Ulgl-a
PRINCIPLES GOVERNING RESEARCH, STATISTICAL A D
N
PUBLICATION ACTIVITIES OF THE FEDERAL RESERVE
BANKS A D THE FEDERAL RESERVE BOARD.
N

Scope and Purpose. The purpose of the work of the
research and s t a t i s t i c a l divisions of the Federal reserve
banks and the Board i s to c o l l e c t and d i g e s t information
hearing on the problems with which the Federal Reserve
System i s concerned, either as a matter of current operation
or as the b a s i s of Federal reserve p o l i c i e s .
All such work s h a l l be under the supervision and d i rection of the Federal Reserve Board acting through i t s
Division of Research and S t a t i s t i c s ,
While research studies and s c i e n t i f i c investigations
may be undertaken on the i n i t i a t i v e of the Federal reserve
banks or of t h e Federal Reserve Board, the Federal reserve
banks must before any expense i s incurred f o r t h e i r prosecution secure the approval of the Federal Reserve Board.
In conducting such studies the Director of the Board's
Division of Research and S t a t i s t i c s may make assignments
to one or more of the Federal Reserve Banks of such p o r t i o n s
as may seem d e s i r a b l e .
P u b l i c a t i o n s ; Beginning with January, 1925> the
monthly p u b l i c a t i o n s of the Federal reserve banks s h a l l not
exceed eight pages.
Free d i s t r i b u t i o n of such p u b l i c a t i o n s shall be made
only to member banks, to other Federal reserve banks, to
the Federal Reserve Board and to firms reporting s t a t i s t i c a l
information. To a l l others a charge shall be made to cover
costs.
The Monthly Reviews published by the Federal Reserve
Agents s h a l l be under the general e d i t o r i a l supervision of
the Director of Research and S t a t i s t i c s of the Federal Reserve Board, who shall be responsible to the Board f o r the
proper conduct of the research, s t a t i s t i c a l and p u b l i c a t i o n
a c t i v i t i e s undertaken by the Board and authorized for the
several banks.




727
FEDERAL RESERVE BOARD
WASHINGTON

November 4, 1924. .

ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD

From the 1 viewpoint of edhndmyj the Treasury Department
i s desirous of increasing the c i r c u l a t i o n of standard s i l v e r
d o l l a r s . The Federal Reserve Boswd ia in syinpattoy with the
movement and s o l i c i t s op behalf of the Treasury t)apartment
the f u l l cooperation of. each Federal reserve bank. The r e serve banks are requested to c a l l a t t e n t i o n at t h i s time,
through t h e i r member banks, to the p o s s i b i l i t y of the use of
standard s i l v e r d o l l a r s as Christmas g i f t s , and the d e s i r a b i l i t y of t h e i r Use in the cash payrolls of the large concerns
of t h e i r d i s t r i c t s . This action on the part of the reserve
banks, together with steps to be taken by the Treasury Department, w i l l ) i t i s believed, r e s u l t in a demand f o r standard s i l v e r d o l l a r s , beginning with a holiday demand, and i t
i s f e l t t h a t the demand w i l l be stimulated i f met with new
coin, t h a t i s , d o l l a r s of recent mintage and of the new design. The Treasury Department is prepared to begin making
deposits with the Federal reserve banks and branches of new
standard s i l v e r d o l l a r s toHhe extent of $10,000,000, the
cost of insurance and shipping to be borne by the Treasury.:.
Upon r e c e i p t of advice from you, the Treasury w i l l arrange
t o lay down at your bank (and branches) within the next f i f teen days the t o t a l number of pieces desired.
In t h i s connection, i t i s noted that a l l of the Federal
reserve banks are not absorbing t r a n s p o r t a t i o n and insurance
charges on shipments of standard s i l v e r d o l l a r s made to t h e i r
member banks. I t i s suggested that those banks which a r e not
doing so give consideration to the a d v i s a b i l i t y of absorbing
such charges, f o r the purpose of f u r t h e r i n g the e f f o r t s of
the Treasury Department to increase the standard s i l v e r dollar circulation.
Very tr uly yours,

D. R. Crissinger,
G o v e r n o r.
-

TO GOVERNORS OF ALL F. R. BANKS.




;

-i- .

728

X-U1S2
To the Honorable Judge of the Eighteenth J u d i c i a l D i s t r i c t Court,
in and f o r the Parish of Acndia t ; State of Louisiana.
- The p e t i t i o n of James Pousson, Bertrind Pousson, J e s s i e Ni Reed,
Je^n Gay, Jernzime Pousson, Maxila Pousson, Edgar LeJeune, Honore Pousson,
and Dr, L. A. Clark, r e s i d e n t s of the Parish of Ac-dia, Louisiana, with
respect r e p r e s e n t s | ~
-Paragraph 1 That the Bank of I o t a , a banking corporation, organized under the
la\vs of the S t a t e of Louisiana and domiciled in the Parish of Acadia,
Louisiana, having been found i n an insolvent condition by the State Bank
Commissioner, was closed on the f t h , day of July 1Q2U, and t h a t i t i s now
being l i q u i d a t e d under Act 300 of 1910, under the management of and control
said
of t h e / S t a t e Bank Commissioner.
-Paragraph 2That your p e t i t i o n e r s were depositors and c r e d i t o r s of the said
Bank of I o t a , a t the time same w.<?s closed by the said S t a t e Bank Commissioner,
in the following amounts, t o - w i t ;




James Pousson

$219.00 more or l e s s

Bertrand Pousson

821.96

"

"

«

J e s s i e N. Reed

1193.32

11

"

"

Jean Gay

5166,76

"

"

"

12288.17

"

"

"

Maxila Pousson

l6U2.6l

"

"

"

Edgar LsJ euna

151.35

»

«

«

253U.73

"

"

«

7.77

«

«

«

Jerazime Pousson

Ponora Pousson

———-—„

Dr. L. A. Clerk - — - —

-a-

x-4i82

'

and that they appear herein not only in t h e i r own b e h a l f , but in behalf
of a l l the depositors and unsecured c r e d i t o r s of the said Bank of Iotas
-Paragraph 3Your p e t i t i o n e r s f u r t h e r represent that in the Spring of 1923 > the
Bank of I o t a was t o t a l l y insolvent; t h a t i t was a member of the Federal
Reserve System, and that the New Orleans Branch of the Federal Reserve
Bank of Atlanta* domiciled in Orleans Parish, La. had f u l l knowledge
thereof; that the State Bank Commissioner or his r e p r e s e n t a t i v e came
to the Parish of Acadia f o r the purpose of closing the said bank on
account of said insolvency a t that time and that t h e said New Orleans
Branch of the Federal Reserve Bank of Atlanta having f u l l knowledge
of the insolvency of said bank agreed to advance and did advance the
said Bank of I o t a during the year a lar £ .e sum of money for the purpose
of keeping said bank open.
That in accordance with oome agreement, e i t h e r verbal or w r i t t e n ,
the said New Orleans Branch of the Federal Reserve Bank of Atlanta
( h e r e i n a f t e r r e f e r r e d to as the Federal Reserve Ba .k') on learning of said
insolvency in the Spring of 1923, p r a c t i c a l l y took charge of the s a i d
Bank of I o t a , placing a large sum of money in said bank, d i c t a t i n g to the
Board of Directors of the said I o t a Bank in what manner the a f f a i r s of
the bank should be conducted, uaming Mr. Joseph A. Sab&tier to look
a f t e r i t s i n t e r e s t in handling and passing on a l l loans of said Bank
of I o t a and that the Board of Directors of the said Bank of I o t a thereupon by reason of the insistence of the Federal Reserve Bank, appointed
Mr. Joaaph A. Sabatier, ©n March 19th, 1923 Manager of the said Bank
of I o t a , giving him f u l l control over the bank's a f f a i r s with f u l l power
to pass on a l l loans or advances made by the bank and f u l l power to




V29

-3-

X-U182

'

administer g i l the a f f a i r s of the Bank, and that t h i s r e s o l u t i o n of.
the Board of Directors was passed in order to comply with the demands
of the Federal Reserve Bank as s^own in a l a t t e r of date March 18th,
1923.
-Paragraph UThat in accordance therewith the said Federal Reserve Bank advanced
to the Bank of Iota a large sum of money f o r the purpose of caring f o r
and taking off the crop of 1923, and placing i t in an apparently solvent
condition, t h e said Joseph A. Sabatier being in p r a c t i c a l charge and cont r o l of the said bank under the said resolution of the beard and as a
d i r e c t r e p r e s e n t a t i v e and agent of the f e d e r a l Reserve Bank.
Upon «the completion of t h i s transaction as above s t a t e d , the said
Federal Reserve Bank p r a c t i c a l l y controlled,,operated and beeame respons i b l e to a l l of the c r e d i t o r s and espeei&lly the depositors of the B&nk
of Iota, by reason of the f a c t that i t held i t s e l f out to the world as the
governing authority and owner of said bank, putting in i t s money and
g e t t i n g possession of p r a c t i c a l l y a l l of the a s s e t s of said bank by
#

reason of said advances.
That the said Federal Reserve Bank placed at l e a s t F i f t y or Sixty
Thousand Dollars in the said Bank of I o t a , during the year 1923, having
been informed and having f u l l knowledge of i t s u t t e r insolvency, but
in the Spring of 1924, a l l of the money so advanced during the year
1923 was paid, leaving the Bank of Iota in p r a c t i c a l l y the same condition
as i t was in the year 1923, although as a matter of f a c t i t s old indebtedness due the Federal Reserve Bank, a r i s i n g from the slump in p r i c e s of
r i c e , and other farm products in the f a l l of 1920, had been somewhat
reduced and the said old indebtedness put in b e t t e r shape.




r>/>
7OJL

-4X-4182
-Paragraph
Your p e t i t i o n e r s f u r t h e r represent that in the Spring of 1924,

the said Joseph A.. S a b a t i e r , being engaged in other business, was unable
to continue as Manager of the said Bank of I o t a , and that the said bank,
through i t s d i r e c t o r s , then selected L. J . V. Breaux as i t s c a s h i e r , who
was recommended as Manager by the said Sabatier to the Federal Reserve
Bank and which bank accepted the said Breaux as i t s Manager and agent in
l i e u of the said S a b a t i e r .
That the said Federal Reserve Bank i n the Spring of 1924, agreed
to place the necessary money a t the disposal of the Bank of Iota f o r the
purpose of enabling the farmers end business i n t e r e s t s to p l a n t , c u l t i v a t e
and harvest their crops for the year 1924, and that i t did advance and
f u r n i s h money to the Bank of Iota up to approximately the 1 s t , day of
J u l y , 1924.
That a t t h i s time the crops were s t i l l immature, and that the said
Federal Reserve Bank without considering the needs of the farmers or
the business people of I o t a , or the needs of the bank, al though i t was the
p r a c t i c a l owner of the Bank of I o t a , refused to put up any more money and
in the meantime had secured p r a c t i c a l l y a l l the a s s e t s of the Bank of Iota
i n the shape of notes and other negotiable s e c u r i t i e s and the said Bark ^f
I o t a , being thus l e f t without any funds and being insolvent was closed by
the State Bank Commissioner to the great damage and injury of your p e t i t i o n e r s ,
depositors t h e r e i n , and a l l those dependent upon said bank f o r c r e d i t and
money.




- Paragraph 6 -

X-4ld2

Your p e t i t i o n e r s f u r t h e r represent that the said Bank of I o t a was
doing a l l of i t s business with the Federal Reserve Bank by reason of the
agreements h e r e t o f o r e r e c i t e d and i t Was c u r r e n t l y reported and u n i v e r s a l l y
believed as the Federal Reserve Bank was in c o n t r o l of and backing said
Bank of I o t a , that a l l those doing business with the said Bank of I o t a and
p a r t i c u l a r l y t h e depositors thereof would be protected atyi absolutely secured by reason of the f a c t that the said Federal Reserve Bank had taken
charge of the said Bank of I o t a as above r e c i t e d and that your p e t i t i o n e r s
acting on t h i s b e l i e f and relying upon the f a c t that the Federal Reserve
Bank was thoroughly solvent continued to do t h e i r business with the said
Bank of I o t a during the years 1923 and 1924 and that at the time of the
f a i l u r e of the s a i d Bank of I o t a , they had to t h e i r credit in t h e said bank
the amounts hereinbefore s t a t e d .
- Paragraph 7 Your p e t i t i o n e r s f u r t h e r represent that the Federal Reserve Bank was
created by Congress f o r the purpose of aiding t h e people of the country and
the farmers generally and not f o r the purpose of making an inordinate p r o f i t ,
and that the Federal Reserve Bank everywhere, r e a l i z i n g the c r i s i s a r i s i n g
from the slump of a g r i c u l t u r a l products in the f a l l of 1920, brought about
and caused, your p e t i t i o n e r s believe, by t h e d e f l a t i o n caused by the action
of the governing Authorities of the Federal Reserve Bank i t s e l f , came to the
aid of p r a c t i c a l l y a l l of the banks in the United States and did everything
in t h e i r power to prevent them from becoming insolvent and thus causing more
financial distress.
That not only was t h i s p o l i c y pursued by t h e Federal Reserve Bank
generally, but the New Orleans Branch of the Federal Reserve Barik of Atlanta



-6-

X-4182

^ 3 3

in pursuance of t h i s policy did extend aid to many of the banks in the
S t a t e of Louisiana and your p e t i t i o n e r s having been r e l i a b l y informed and
so believing aver that in several instances, i t permitted the debtor banks
to withdraw and s e l e c t from t h e c o l l a t e r a l notes held by the Federal Reserve Bank a s u f f i c i e n t amount thereof to p r o t e c t the depositors, and your
p e t i t i o n e r s having been informed and so believing aver that t h i s course was
pursued with the F i r s t National Bank of Crowley, Louisiana, and that the
said Federal Reserve Bank permitted the said F i r s t National Bank of Crowley,
Louisiana, or i t s depositors to select a s u f f i c i e n t amount of i t s coll a t e r a l to f u l l y protect the depositors.
That, no doubt, the said Federal Reserve Bank did the same in many
other instances, but although the Bank of I o t a was a member of the said
Federal Reserve System, being merely a State B&nk and not a National one,
the said Federal Reserve Bank refused to permit the d i r e c t o r s or depositors
pf the said Bank of Iota to withdraw any of the c o l l a t e r a l held by i t to
p r o t e c t the d e p o s i t o r s , thus showing gross p a r t i a l i t y and favor to one set
of banks over t h e other in r e f u s i n g to extend the same aid to the said Bank
of Iota,
That the apparent indebtedness of the said Bank of I o t a to the said
Federal Reserve Bank a t the date of i t s c l o s i n g , amounted to $237>702.61
and that the said Federal Reserve Bank held c o l l a t e r a l and other paper to
the amount of $274,604.16, as shown by the statement on f i l e i n the s u i t
of the S t a t e Bank Commissioner vs. The Bank of I o t a , No. 6741, on the C i v i l
Docket of the D i s t r i c t Court of ..Arcadia P a r i s h , being p r a c t i c a l l y the only
c r e d i t o r holding c o l l a t e r a l and other paper with the exception of one other.
That the f a i l u r e of said bank was caused by and due e n t i r e l y to the




734
-7-

X-4183

action of the Federal Reserve Bank and the e f f e c t thereof was t h a t the
Federal Reserve Bank held p r a c t i c a l l y a l l of the a s s e t s of the Bank of Iota,
while the depositors and other c r e d i t o r s of the said Bank of I o t a were l e f t
without recourse or any chance of recovering t h e i r money placed in said
Bank of I o t a upon the f a i t h of the Federal Reserve Bank taking charge
t h e r e o f , the remaining a s s e t s of the Bank of I o t a being of comparatively
l i t t l e value; that the said Federal Reserve Bank by i t s a c t s and conduct
induced the Board of Directors of the Bank of I o t a to continue t o operate
said bank a f t e r same was insolvent in v i o l a t i o n of the S t a t e of Louisiana,
and thereby induced your p e t i t i o n e r s and others similarly s i t u a t e d to dep o s i t t h e i r money in said bank and to continue doing business with i t while
same was in f a i l i n g circumstances in contravention of the laws of said
State.

That the said Federal Reserve Bank i s the d i r e c t cause of the loss

occasioned p e t i t i o n e r s and others of t h e i r money thus deposited and should
be held l i a b l e to p e t i t i o n e r s f o r such l o s s e s .
- Paragraph 8 That acting thru i t s agents and managers, the said Federal Reserve
Bank p r e f e r r e d i t s e l f as a c r e d i t o r by appropriating to the payment of i t s
claims and as c o l l a t e r a l t h e r e f o r p r a c t i c a l l y a l l the a s s e t s of the Bank
of I o t a , which should have been t r e a t e d a s a common pledge f o r a l l the
c r e d i t o r s of said bank and especially of the depositors t h e r e i n .
- paragraph 9 ~
Your p e t i t i o n e r s f u r t h e r represent that by reason of the a c t s of the
said Federal Reserve Bank a f o r e s a i d , the said Federal Reserve Bank held
i t s e l f out to t h e public as the owner of said Bank of I o t a , being in comp l e t e control thereof and t h a t thereby i t became responsible to your



* 755
-S-

X-U182

p e t i t i o n e r s and other depositors and c r e d i t o r s f o r any l o s s t h a t may have
been incurred by them in the p l a c e and stead of the Bank of I o t a .
- Paragraph 10 That the Federal Reserve Bank held most Of the a s s e t s of the Bank of
I o t a a t the time of i t s l i q u i d a t i o n ; that i t protected i t s e l f a t the expense of a l l the depositors, who continued to place t h e i r money in said
bank on the f a i t h of the control of the said Bank of Iota by the Federal
Reserve Bank and t h a t the said Federal Reserve Bank being in complete cont r o l of the said Bank of I o t a cannot take advantage of the s i t u a t i o n to
pay i t s e l f i t s own indebtedness claimed to be due i t by the Bank of I o t a
a t the expense of a l l the other c r e d i t o r s and depositors of the Bank of
Iota.
- Paragraph 11 <
&
P e t i t i o n e r s f u r t h e r aver that the Bank of I o t a acting thru i t s Dir e c t o r s and the Federal Reserve Bank of New Orleans acting through i t s
o f f i c e r s or o f f i c e r , unlawfully conspired and agreed to keep the Bank of
I o t a open, and by the subsequent delivery of the assets of s a i d Bank of
I o t a to the Federal Reserve Bank as security f o r i t s claims and in payment
thereof are j o i n t l y , severally, and in solido l i a b l e to p e t i t i o n e r s and
other similarly s i t u a t e d and said Federal Reserve Bank should b e compelled
to r e s t o r e the s a i d a s s e t s thus unlawfully appropriated by i t f o r the
b e n e f i t of p e t i t i o n e r s and others similarly s i t u a t e d as above set f o r t h .
- Paragraph 12 Your p e t i t i o n e r s f u r t h e r represent that the said Federal Reserve Bank
has a large number of notes and c o l l a t e r a l held by i t , obtained from the
Bank of I o t a to secure i t f o r t%e presumed advances made by i t to the Bank



-9-

X-4182

736

of Iota, and by reason of a l l the f a c t s r e c i t e d above, a l l the said
a s s e t s should be declared the a s s e t s of the said Bank of I o t a and When
collected should be d i s t r i b u t e d pro r a t a among a l l the depositors of the
said Bank of I o t a .
That a l l the said a s s e t s now in the hands of the Federal Reserve
Bank should be j u d i c i a l l y sequestered, brought into court and there held
u n t i l the f i n a l termination of t h i s s u i t and be f i n a l l y decreed to be the
property of the Bank of I o t a and subject to i t s indebtedness, and p a r t i c u l a r l y that of your p e t i t i o n e r s and other depositors.
- Paragraph 13 Your p e t i t i o n e r s f u r t h e r represent t h a t the said Federal Reserve
Bank has c o l l e c t e d large sums of money, the exact amount of which i s unknown from notes held by i t and unlawfully obtained from the Bank of I o t a
as aforesaid and t h a t i t should be compelled to acceunt to the Bank of
I o t a , through the S t a t e Bank Commissioner f o r said sums, and be ordered
to pay over same to the said State Bank Commissioner f o r d i s t r i b u t i o n
among the depositors #f said Bank ef I o t a , f r e e from any claim of the
Federal Reserve Bank and i t i s a l s o proceeding to c o l l e c t ether notes
held by i t to the great damage and prejudice of your p e t i t i o n e r s and w i l l
convert the proceeds thereof to i t s own use and b e n e f i t .
Your p e t i t i o n e r s f u r t h e r represent that a large nujpber of these notes
and other a s s e t s held by the Federal Reserve Bank and obtained by i t from
t h e Bank of I o t a a r e now in t h e hands of Mr. George T. Rives, an enployee
and r e p r e s e n t a t i v e of said Federal Reserve Bank and W. J . Carmouche, an
attorney f o r said Federal Reserve Bank, both r e s i d e n t s of Acadia P a r i s h ,
Louisiana, and same should be j u d i c i a l l y sequestered in the hands of said
parties.




$

it

-10*

X-4152

7 3 7

'1'hey f u r t h e r represent that the New Orleans Branch of the Federal
Reserve Bank of Atlanta has likewise in i t s possession and under i t s
control a large number of notes and c o l l a t e r a l obtained by i t from the
Bank of Iota and that these notes and c r e d i t s should also be j u d i c i a l l y
sequestered.
Wherefor#, they pray that w r i t s of j u d i c i a l sequestration issue 1
h e r e i n , directed to the Sheriff of Acadia Pariah end the Civil Sheriff of
the Parish of Orleans, commanding them or either of them to j u d i c i a l l y
sequester and in t h e i r possession safely keep u n t i l the f u r t h e r orders of
t h i s Honorable Court a l l the notes and other evidences of indebtedness held
by the said New Orleans Branch of the Federal Reserve Bank of Atlanta, i t s
agents, a t t o r n e y s , end employees, and obtained from the Bank of Iota by the
said Federal Reserve Bank, vfoPther the said notes be located i n Acadia,
Orleans or other parishes of the State of Louisiana; that the said Bank of
I o t a , thru i t s proper e f f i c e r s , the State Bank Commissioner, J * S« Brock,
as l i q u i d a t o r of said Bank of Iota end the New Orleans Branch of the Federal
Reserve Bank of A t l a n t a , through i t s proper o f f i c e r s , be duly cited to appear
and answer t h i s demand, and served with a c e r t i f i e d copy hereof end that
a f t e r due and legal proceedings had , your p e t i t i o n e r s do have judgment fof
themselves and a l l other similarly s i t u a t e d , against the Bank of I o t a ,

S.

Brock, State Bank Commissioner, end the New Orleans Branch of the Federal
Reserve Bank of Atlanta, decreeing that the #aid Federal Reserve Bank was
in complete control of the Bank of I o t a ; that i t held i t s e l f responsible for
a l l the debts of said bank; that a l l the a s s e t s obtained by the Federal
Reserve Bank from the Bank of Iota be decreed to be the property #f the




x-uiffi 7 3 8
Bank of l o t s , f r e e from a l l pretended l i e n s , p r i v i l e g e s or claims against
them by tne New Orleans Branch of the Federal Reserve Bank of Atlanta, and
that the said a s s e t s be decreed subject to the claims of p e t i t i o o v r s and others
of l i k e i n t e r e s t , end that the same be ordered restored to the Bank of I o t a ,
thru the State Bank Commissioner end be collected by him and d i s t r i b u t e d '
pro r a t a according to law among a l l the depositors of said bank; that there
be f u r t h e r judgment decreeing that the Directors of the said Bank of Iota
and the Federal Reserve Bank were g u i l t y of an unlawful conspiracy in keeping
said Bank of Iota open contrary to law; that the said Federal Reserve Bank be
ordered to r e s t o r e to the Bank of Iota a l l moneys collected by i t since the
c l o s i n g thereof, from notes unlawfully obtained by i t from the said Bank of
I o t a ; that the pledging or discounting of said notes and s e c u r i t i e s to the
Federal Reserve Bank by the Bank of Iota be declared i l l e g a l , n u l l and void,
and d i r e c t i n g that the said s e c u r i t i e s thus unlawfully pledged or discounted
to said Federal Reserve Bank be restored to the custody of said Bank of Iota
and delivered to i t t h r u the State Bank Commissioner for c o l l e c t i o n by said
o f f i c e r and that the proceeds of said s e c u r i t i e s when collected be d i s t r i b u t e d
pro r a t a «mong your p e t i t o n e r s and other c r e d i t o r s having a l i k e i n t e r e s t
according to law.
They f u r t h e r pray that the w r i t s of J u d i c i a l sequestration h e r e i n
issued be maintained and perpetuated and they f u r t h e r pray f o r a l l orders
necessary and #11 general and equitable r e l i e f .
By t h e i r attorney,
(Sgd.) J . Matt Buatt.
Jesse N. Reed sworn s a y s : That he has read the foregoing p e t i t i o n ; t h a t he i s one of the petloners
t h e r e i n ; t h a t a l l the a l l e g a t i o n s of f a c t therein contained are t r u e and




:

-12-

739

X-Ul?$

c o r r e c t , except as to those a l l e g a t i o n s expressly made on information and
b e l i e f end that as to these the a f f i a n t believes them to be true*
(Sgd.) Jesse N. Heed/
Sworn to and subscribed, before me, a t Crowley, La. t h i s 18th, day
of October, 1924.
(Sgd.) C. W. Breaux
Notary P u b l i c .
ORDER.
Considering the foregoing p e t i t i o n , a f f i d a v i t and the law, l e t writs
of j u d i c i a l sequestration issue h e r e i n as prayed f o r , directed to the Sheriff
of Acedia Parish and the Civil Sheriff of Orleans P a r i s h , commanding them or
e i t h e r of them to s e i z e , sequester and in t h e i r possession s a f e l y keep u n t i l
the f u r t h e r orders of t h i s court a l l of the n o t e s , c r e d i t s and other a s s e t s
held by the New Orleans Branch of the Federal Reserve Bank of A t l a n t a , whether
in the hands of George T. Rives or W. J . Cermouche of Acadia Parish or by the
New Orleans Branch of the Federal Reserve Bank of Atlanta p e r s o n a l l y .
Done and granted, at Chambers, a t Lafayette, Louisiana, t h i s 15th day
of October, 1924.
(Sgd.) Wm. Campbell,
Judge Eighteenth J u d i c i a l
D i s t r i c t of Louisiana.
Filed 10/20/1924.
F. M. Fontenot,
Dy. Clk.




( COPY )

Law Department
423-429 Healey Bldg.
Ho 11ins H. Randolph
Attorney

X-41S3

FEDERAL RESERVE B L I
A TC
OF ATLANTA
October 17, 1924.

Mr. Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
We hand you herewith copy of a l e t t e r written us under date of
October 15th. by Mr. Edward J . Smith, counsel for the Nashville Branch of
the Federal Reserve Bank of Atlanta, and also copy of our reply t h e r e t o .
The enclosures are self-explanatory.
You w i l l of course note that the Circuit Court apparently held
that the Tennessee-Hermitage National Bank was l i a b l e in the premises because i t was negligent in selecting as a sub-agent f o r the purposes of collection, a bank which under i t s rules and regulations proposed to handle a
check in an i l l e g a l way. We think thd Court was c l e a r l y r i g h t in d i s charging the Reserve Bank from a l l l i a b i l i t y , and i t may be that under the
Tennessee law t h e judgment against the member bank was c o r r e c t .
Inasmuch as the case i s apparently of considerable importance to
a l l Reserve Banks, and p a r t i c u l a r l y since we would d i s l i k e to see the Supreme
Court of Tennessee hold in terms that a member bank (operating in a j u r i s diction where the so-called New York r u l e obtains) incurs a potential' l i a b i l i t y whenever i t deposits checks with a Reserve Dank# we have thought i t
best to submit t h i s tiorredporldende to you in order that we may get the
b e n e f i t of any suggestions which you may wish to make in the premises.
I t occurs to us t h a t some steps might be taken to educate the
member banks to the importance of making contracts with t h e i r own customers,
embodying t h e r i g h t to present items d i r e c t to drawee banks and to accept
exchange d r a f t s in payment t h e r e f o r .
We would l i k e p a r t i c u l a r l y to get your views as to the p r o p r i e t y
of so doing.
With personal regards, we a r e ,
Cordially yours,
(signed) Randolph & Parker
RSP-G




General Counsel.

-a( COPY )

x-4163

8

^jL

E W R J . SMITH
D AD
Attorney a t Law
Nashville, Term. October 15th, 1924,
Mr. Hollins N. Randolph,
Attorney at Law,
422-530 Healy Building,
Atlanta, Georgia.
dear S i r :
On July 30th, 1924, in reply to your l e t t e r of July 26th addressed to Mr. Hill McAlister, I wrote to you with reference to the advice
which I had given to the Nashville Branch of the Federal Eeserve Bank of
Atlanta with reference to items handled by i t as c o l l e c t i o n agent f o r
various Nashville banks, which items were presented d i r e c t l y f o r payment
to the payee bank, the Peoples Bank of Springfield.
On September 30th, 1924 a corporation engaged in the t a i l o r i n g
business at Nashville, Tennessee under the name of "Jack and Jake" brought
s u i t before a J u s t i c e of the Peace at Springfield, Tennessee to recover on
a check f o r $72 which had been given to i t by a man named Woolworth in
s e t t l i n g a merchandise account.

"Jack and Jake" sued Woolworth, the Tennessee-

Hermitage National Bank of Nashville, Tennessee, and t h e Nashville Branch
of the Federal Reserve Bank.

On September 30th a judgment was given by two

J u s t i c e s of the Peace a g a i n s t a l l the defendants and a l l appealed to t h e
Circuit Court of Robertson County in which, under our law, cases a r e t r i e d
de novo.
On October 9th the case came on for hearing before Judge Morton,
the Circuit Judge, and on yesterday, October 14th, he rendered a decision to
the e f f e c t that the Tennessee-Hermitage National Bank was l i a b l e but dismissed




-3the

suit

as

to

the

Nashville Branch cf

the

X-4183
Federal Reserve Bank of

74

Atlanta.

I deem i t advisable to put you in possession of a l l the f a c t s of
t h i s case f o r the reason t h a t items aggregating approximately $125,000 were
handled by the Federal Reserve Bank under conditions l e g a l l y equivalent to
those presented in the t r i a l of the above mentioned c a s e .
On July 5th Woolworth gave to "Jack and Jake" the check in controversy, and on July Sth, the 6th being Sunday and as the p l a i n t i f f claimed the
7th being a holiday in Tennessee, the check was deposited by "Jack and Jake"
with the Tennessee-Hermitage National Tank of Nashville, Tennessee f o r collection, and by that bank was transmitted on the same day to the Federal Reserve Bank, which, on the same day, that i s July Sth, forwarded i t with other
items aggregating about $33,000 to the payee bank, the Peoples Bank of
Springfield, Tennessee.
Under the banking custom p r e v a i l i n g in Nashville, and under the rule
of the Federal Reserve Bank, as Mr. p o r t , the cashier, informs me, three days
are allowed for the purpose of c o l l e c t i n g items before n o t i c e i s given t o t h e
p a r t i e s to the instrument.

On July 10th Mr, Fort called up Mr. S t r a t t o n , the

President of the Peoples Bank, and inquired about the items sent to that bank
on July Sth, aid Mr. S t r a t t o n told Mr. Fort that he, S t r a t t o n , would be in
Nashville on the 11th, and on that day he came to Nashville and had a conference with Mr. Fort in which Stratton stated that he was then making arrangements with the American National Bank of Nashville to borrow $50,000,
and would remit f o r the items of July Sth m July 12th.

Relying on t h i s

promise, which i t can be shown was made bona f i d e , Mr. Fort l e t the matter
hang on July 12th, and as the 13th was Sunday, and the l 4 t h also a bank h o l i day, Mr. Fort gave n o t i c e on the 15th on which day the Peoples Bank closed i t s
doors.



X-41S3

743

In representing the Federal Reserve Bank, I made the point t h a t ,
while under the law of Tennessee (Milling Company v. Bank, 120 Tenn. 225)
i t was negligence for a c o l l e c t i n g bank to send an item d i r e c t l y to t h e payee
bank, nevertheless under Regulation J , Series of Regulations of the Federal
Reserve Board of 1923, as well as under a c ir c ula r of the Federal Reserve
Bank of Atlanta dated May 16, 1924, a Federal Reserve Bank, as a f e d e r a l
corporation, had the a u t h o r i t y under these rules and regulations to send
items for c o l l e c t i o n d i r e c t l y to the payee bank, and that these r u l e s and
regulations passed by the Federal Reserve Board pursuant to sub-sections I
and J of Section 11 of the Federal Reserve Bank Act had the same l e g a l e f f e c t
as i f they had been d i r e c t l y enacted by Congress and i n s e r t e d in the Federal
Reserve Bank Act.
To support t h i s proposition, I r e l i e d on numerous decisions of the
Supreme Court of the United States of which Field v. Clark, IU3 U. S. 649;
B u t t f i e l d v. Stranahan, 192 U. S. 470; F i r s t National Bank v. Fellows, 244
U. S. 416, and McKinley v. United S t a t e s , 24$ U. S. 397 are t y p i c a l .
I made the f u r t h e r point that there was no p r i v i t y of contract between "Jack and Jake" and the Federal Reserve Bank, and t h a t , t h e r e f o r e , the
s u i t could not be maintained.

See F i r s t National Bank of Denver v. Federal

Reserve Bank of Kansas City, Mo. 283 Fed. 700; City of Douglas, Ariz. v .
Federal Reserve Bank of Dallas, }QQ Fed. 573*
Also I i n s i s t e d that if the item in controversy had been sent to
another bank a t S p r i n g f i e l d , a s f o r instance the Springfield Bank of t h a t
place, the r e s u l t would have been the same, and t h a t , t h e r e f o r e , the p l a i n t i f f
wa.s not prejudiced.
1405-140?.



2 Michie on Banks and Banking, Sec. 162 (1 b) pages

-5-

X-U153

On yesterday the Circuit Judge delivered h i s opinion in which he
held t h a t under the law of Tennessee the Tennessee-Hermitage National Bank was
g u i l t y of negligence in employing an agent which, under the terms of i t s cont r a c t , reserved the r i g h t to send an item for c o l l e c t i o n d i r e c t l y to the payee
bank.

The Circuit Judge did not however hold that the Federal Reserve Bank

was g u i l t y of any negligence in handling the item in question, but, as above
stated, predicated h i s conclusion as to the l i a b i l i t y of the TennesseeHermitage National Bank solely m the ground that i t had contracted with a
forwarding agent which reserved the r i g h t to send an item d i r e c t l y to t h e
payee bank, and that as such action was in violation of the law of the State
of Tennessee the Tennessee-Hermitage National Bank was answerable to i t s dep o s i t o r , "Jack and Jake", for placing the item in the hands of the Federal
Reserve Bank f o r c o l l e c t i o n .
Of course, i f t h e Circuit Judge had held that there was any n e g l i gence in handling the item or that he could not render judgment against the
Federal Reserve Bank f o r t h e reason that there was no p r i v i t y of contract between i t and "Jack and Jake", I would be inclined to make a motion f o r a new
t r i a l and appeal the case f o r the p l a i n reason that such a judgment rendered
against the Tennessee-Hermitage National Bank would probably form the b a s i s
for an action by that bank against the Federal Reserve Bank in an e f f o r t to
recoup what i t might be required to pay in s a t i s f a c t i o n of the judgment.

As,

however, no such conclusion was reached by the C i r c u i t Judge, i t seems to me
that the only course open f o r the Tennessee-Hermitage National Bank i s to appeal on t h e ground that by employing f o r purposes of c o l l e c t i o n the Federal
Reserve Bank i t was not g u i l t y of negligence, and as t h a t bank was not
negligent in handling the item a f t e r i t s reception no l i a b i l i t y a t t a c h e s to



-6-

.X-4183

*

74i>j>

the Tennessee-Hermitage National Bank.
I have written to you a t length with r e f e r e n c e to the f a c t s of the
case and. the legal p o i n t s made by me because, while the case a c t u a l l y t r i e d
was r e l a t i v e l y i n s i g n i f i c a n t in amount, i t determined a p r i n c i p l e of g r e a t
importance to the Federal Reserve Bank,

as the matter stands, the Tennessee-

Hermitage National Bank cannot recover from the Federal Reserve Bank f o r the
reason that the Circuit Judge did not f i n d that the Federal Reserve Bank was
g u i l t y of any negligence in handling the item so as to make that negligence
the basis of a d e r i v a t i v e l i a b i l i t y to the Tennessee-Hermitage National Bank,
but based h i s decision on the ground above stated.

I am constrained to be-

lieve that the Circuit Judge took an erroneous view of the legal r e l a t i o n between the Tennessee-Hermitage National Bank and the Federal Reserve Bank,
but, as .1 do not represent the former bank, I am not concerned with t h a t
phase of the controversy.
•please l e t me hear from you as to whether or n o t you agree with the
policy which I have adopted in trying t h i s case, as doubtless many others
will be brought in the near f u t u r e which I , of course, w i l l attend t o , and I
w i l l be glad to receive any suggestions you may see f i t to make with r e f e r e n c e
to the conduct of such cases.
Very t r u l y yours,
Sg

5




( E. J . SMITH)

4 *
•
x~iiiS3

746

October 17, lgeU.
Mr. Edward J . Smith,
Attorney-at-Law,
Nashville, Tennessee.
Dear Mr. Smith:
Randolph.

We have your l e t t e r of October 15th, addressed to our Mr.

In our opinion, the points made by you at the t r i a l were well
taken, and we think t h a t the t r i a l court was c l e a r l y r i g h t in holding that
there was no l i a b i l i t y a g a i n s t the Federal Reserve Bank. We gather from
your l e t t e r t h a t the law of Tennessee follows the l i n e of a u t h o r i t i e s which
hold that the bank of i n i t i a l deposit accepts checks from i t s customers f o r
c o l l e c t i o n and c r e d i t with f u l l l i a b i l i t y for the negligent acts or def a u l t s of any sub-agent selected by i t f o r purposes of c o l l e c t i o n , and t h a t
there i s no p r i v i t y of contract between the original depositor and any subagent so selected. If such be the law of your s t a t e , there would be no
r i g h t of action as a g a i n s t the Reserve Bank in the case which you have t r i e a .
Even in the absence of the regulations and c i r c u l a r s determining the cont r a c t between the member bank and the Federal Reserve Bank, the p l a i n t i f f
could not have recovered against the Reserve Bank, f o r the reason s t a t e d .
However, in the absence of an agreement varying the provisions of law which
would otherwise be a p p l i c a b l e , the Reserve Bank would be responsible to the
member bank f o r any negligent act e n t a i l i n g a l i a b i l i t y a s against the member bank.
As between the Reserve Bank and the member bank the r e g u l a t i o n s of
the Board and the c i r c u l a r s of the Reserve Bank are binding, aid we do not
believe that any f i n a l judgment which may be rendered i n your case would f u r n ish the b a s i s for a recovery against the Reserve Bank.
We believe, t h e r e f o r e , that you have handled the case p r o p e r l y , and
we take t h i s occasion of thanking you f o r your c a r e f u l and e f f i c i e n t a t t e n t i o n
thereto.
We assume t h a t under your p r a c t i c e the Federal Reserve Bank of
Atlanta w i l l not be a p a r t y to the record made on any appeal by the member
bank, and t h a t unless the p l a i n t i f f sues out a writ of error to the judgment
of the Court discharging, the Reserve Bank, the immediate case i s terminated
so f a r as the Reserve Bank i s concerned.
Under these circumstances, we see no occasion f o r a motion for a
new t r i a l on the p a r t of the Reserve Bank, and in f a c t i t would seem doubtful
as to whether you would have any grounds f o r excepting to the judgment in
your f a v o r . We think i t would be well, however, f o r you to keep i n touch



with the case and aid the member bank as f a r as p o s s i b l e .
I t i s unfortunate that the Tennessee-Hermitage National Bank
did not have a contract with i t s own customer giving i t the r i g h t to
present items for payment direct to the drawee bank.
If we can be of any help to you at any time you w i l l of course
c a l l on u s .
With personal regards, we are
Cordially yours,
(signed) Randolph & Parker
General Counsel.
ESP-G




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

November 12, 1924.
X-U185
SUBJECT:

Holiday, Thanksgiving Day, Thursday,
November 27. 1924.

Dear S i r :
In accordance with the Board's l e t t e r
X-4l28, of August 1, 1924, there w i l l be no Gold
Settlement Fund or Federal Reserve Note Clearing
on Thursday, November 27th, on account of observance of Thanksgiving Day, and Board's books will
be closed.
Please advise Branches.
Yours very t r u l y ,

J . C. Noell,
Assistant Secretary.

TO GOVEBNOBS OF ALL F. E. BANKS.




X-4186

TREASURY DEP.ABTEiITT
O f f i c e of u J l v Secretary
WASHINGTON
November ?, 1924.
The Governor
Federal Reserve Board.
Sir:
You are nercby advised tnat tne Department nas r e f e r r e d to tne Disbursing Clerk, Treasury Department, f o r payment, tne account of tac Bureau
of Engraving and Printing f o r preparing Federal reserve notes during tne
period October 1 to October 31, 1924, -amounting to ^40,040.00, as follows:
Fsdsral Ecssrvs P o t s s . 1914
New York..
Cnicago
Dallas
San Frcjacisco..

iS
396,000
277,000
150,000
137.000
960,000 '

ilO

^20

50,000
—
50,000

30,000
30,000

1,0*0,000 sheets a t $38.50 per M . . . . . .
Tne Cjiar-v'es against

Total
396,000
277,000
230,000
,137,000
1,040,000

. $40,040.00

several Federal Reserve Banks are as follows:

CouponPlate
Snaets
sation
Printing
New York
396,000 $7,029.00 $3,239.28
Chicago
277,000
*,S16.75 2,265.86
Dallas
230,000
*,082.50
1,881.40
San Freoicisco... .137.000
2.431.75 1.120. 66
1,040,000 $18,460.00 ^8,507.20

Materials
#,977.72
3,481.89
2,891.10
1,722.09
$13,072.80

Total
$15^246.00
10,664.50
8,855.00
. 5,274. 50
$40,040.00

T^e Bureau appropriations w i l l be reimbursed in t w above a&ount from
t^e i n d e f i n i t e appropriation "Preparation and Issue of Federal Reserve Notes,
xieiDbursaole", ^nd i t i s requested t^at your board cause sucn i n d e f i n i t e appropriation to be reimbursed i n l i k e amount.




Respectfully,
(Signed)

S- E. Jacobs

S. R. JACOBS,
Deputy Commissioner.

750
X-*187
SUPPLEMENTAL

PROGRAM

GOVERNORS1 CONFERENCE
November. 1Q2U
Washington.
This program i s composed of topics submitted by the Federal Reserve
Board or Federal Reserve Banks too l a t e to be included in the regular
program previously c i r c u l a t e d .
1.

2,

3•

What amendments to the National Bank Act are necessary in order that national banks may be b e t t e r able
to meet banking requirements and that the development of the national banking system may more closely
follow the trend of banking development in the
country at large so f a r as experience shows that
t h i s development i s along sound and strong l i n e s ?

F.R.Board

What steps should be taken to bring about the
gradual retirement of the national bank currency
and the f i n a l retirement of the legal tenders?

F.R.Board

Reports of Examinations of National Banks
Recommended
That the Office of the Comptroller of the
Currency revise reports of examinations of National
banks so that these reports w i l l contain a separate
schedule showing notes rediscounted with the Federal
Reserve Banks and pledged as c o l l a t e r a l , c l a s s i f y i n g
same slow, doubtful, undesirable and l o s s , with such
other information as would be of value to the Federal
Reserve Banks.

Atlanta

4.

Correspondence between Examiners and Comptroller f s
Office.
Recommended
That the examiners f u r n i s h the Federal Reserve
Banks with copies of l e t t e r s to the Comptroller's
Office by d i r e c t o r s of banks under c r i t i c i s m and the
r e p l i e s to such l e t t e r s by the Comptroller's O f f i c e .
Atlanta

5«

Whether or not a Federal Reserve Bank may properly
receive maturing collection items with i n s t r u c t i o n s
to deposit the proceeds of the collection in some
commercial bank f o r the account of a member bank.




San Fran.

751
-36.

7.

8.

7.-4107

Communication from the Austrian Association of,
Banks and Bankers r e l a t i v e to counterfeit currency.

New York

Member Bank Expense
Discussion of c i r c u l a r s issued by the Federal Reserve Banks of Boston and New York r e l a t i v e
to the comparison of the operations of representative
member banks.

New York

Whether or not i t might be advisable to suggest
to the Federal Reserve Bank of Atlanta the
question of employing a counsel representative
of a l l Federal Reserve Banks to take part in the
pending case of Pousson v. Federal Reserve Bank
of Atlanta.

F.R,Board

H. R. 976s - Congressman Thomas, Oklahoma.
This b i l l would remove the Secretary of the
Treasury and Comptroller of the Currency from
membership on the Federal Reserve Board as
e x - o f f i c i 6 members, provide f o r an additional
appointive member to represent labor, and increase the salary of a l l Board members to
$25,000 per annum, e t c .




F.R.Board

FEDERAL RESERVE BOARD

*^

WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-U189

November 15, 1924.

SUBJECT: Expense Main Line, Leased. Wire System,
October, 1924.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph
statements, X-4lS9-a and X-4lS9-b, covering in d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of October, 1924.
Please c r e d i t the amount payable by your bank
in the general account, Treasurer, U. S . , on your books,
and issue C/D Form 1, National Banks, f o r account of
" S a l a r i e s and Expenses, Federal Reserve Board, Special
Fund," Leased Wire System, sending duplicate C/D to Fede r a l Reserve Board.
Yours very t r u l y ,

Fiscal Agent.
(Enclosures)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO,




753
X—Ul.£^—BREPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED MRE SYSTEM FOR THE M N H OF OCTOBER, 1924.
OT

From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

Fed. Res.
Bank Business

Percent of
Treasury
Total Bank
. Dept.
Business (*) Business

25,654
162,967
35,592
65,647
47,621
62,954
94,416
.71,707
42,101
67,875
A3 *892
106,079

3.O3
19.20
4.20
5.10
5.62
7.44
11.14
5.46
4,97
5.01
7.31
12.52

4,025
6,796
5,57S
4,699
3,725
4,136
6,709
5,955
2,514
5,039
2,759
10,541

347,535

100.00

War
Finance Corp.
Business
Total

62,509

-

—

-

29,679
169,763
41,170
73,346
51,349
67,120
101,125
77,692
44,615
72,914
64,651
116,620
910,044

Board

292,097

34,057

325

326,509

Total

1,139,632

96,596

325

1,236,553

Percent of Total

92.17#

7.31#

Bank Business
Treasury Dept.

1,139,632 words or 92.19$
96.596 "
"
7.51$

TOTAL

1,236,228

.02$




»

" 100.00#
(*) These percentages used in calcul a t i n g the pro r a t a share nf
leased wire expenses a s shown
on the accompanying statement
(X-4l29-b)

X-4l89-b

REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER, 1924

Name of Bank

Operators'
Salaries

$
2^.00
Boston
New Y<irk
920.52
200.00
Philadelphia
272.00
Cleveland
Richmond
315.00
255.00
Atlanta .
Chicago
(#)3,996.05
200.00
S t . Louis
Minneapolis
1*3-34
265.64
Kansas CityDallas
251.00
3*0.00
San Francisco
Fed.Res.Board
TOTAL

$7,455.55

Operators'
Overtime
$

Wire
Rental

10.00

Total
Expenses
$

—

—

—

—

—

—

—

—

—

—

—

*•

—•

*-

—

—

mm

m

•#

—

w

«•

$15,440.50
$ 10.00 $15,440.50

260.00
920.52
200.00
272.00
315.00
255.00
3,996.05
200.00
153.34
265.64
251.00
350.00
%5f#40.50
22,939.35
(a)l.707.2q
$21,232.'%

Pro Rata
Share of
Total
Expenses
$

643.33
4,076.56
591.75
1,719.50
1,193.24
1,579.67
2,365.25
1,796.23
1,055.23
1,700.69
1,552.06
2,653.25

Credits

Payable to
Federal
Reserve
Board

$

$

$21,232.06

(#) Includes s a l a r i e s paid to Washington o p e r a t o r s .
(*) Credit
(a) Received $7.29 from the War Finance Corp. and $l,7 rv "\0~ > from
the Treas. Dept. covering business f o r t h e month of October, 1924.
(&) Anrunt reimbursable to Chicago.




260.00
92"%82
200.00
272.00
315.00
255.00
3,996.05
200.00
IS3.34
265.64
251.00
350.00

3S3.33
3,155.74
691,75
1,447.50
575.24
1,324.67
(*)l,630.50
1,596.23
571.89
1,435.05
1,301.06
2,273.25

$7,493.85

$15,364.01
(&)l.bl0.30
$13,733-21

:

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

November 18, 1924.
X-4190
9UBJECT: Bank S a l a r i e s .
Dear S i r :
In accordance with previous p r a c t i c e and
in view of Section 4 of the Federal Reserve Act which
provides that any compensation t h a t may be provided
by boards of d i r e c t o r s of Federal reserve banks f o r
d i r e c t o r s , o f f i c e r s or employees shall be subject to
the approval of the Federal Reserve Board, i t i s r e quested t h a t you prepare and forward to the Board An
or before December 10 schedules containing the names
of a l l o f f i c e r s and employees and the s a l a r i e s i t i s
proposed to pay them beginning January 1925# together
with present annual s a l a r i e s of a l l o f f i c e r s and of
those employees receiving in excess of $2,500 per annum.
Separate schedules, prepared in accordance with the
sample forms attached hereto, should be submitted for
the Head Office and each Branch.
Very t r u l y yours,

Walter L. Eddy,
Secretary.
(Enclosure)

To Chairmen ef a l l F. R* Banks




7 5 5

756
N M E A D SALARIES OF OFFICERS O DECEMBER 1, 1924.
U BR N
N

X-ltigO-a

Federal Reserve Bank - Branch

Date of
Original
Employment

NOTE:

Name

Title

Present
Annual
Salary

Proposed
Annual
Salary

Functions
Supervised _

Separate r e p o r t as of December 1 should be prepared f o r each Federal
reserve bank and branch and forwarded to the Federal Reserve Board not
l a t e r than December 10.




x-Uigo-b
N M E AllD SALARIES OF EMPLOYEES RECEIVING M R T A $2,500. PEE A N M
U BR
OE H N
NU

*75?7

(Employees recommended for s a l a r i e s in excess of $2,500 should
also be included in t h i s report)
Federal Reserve Bank - Branch
Date of
original
employment

Name

Title

, Dec. 1, 1924.
Present
Annual
Salary.

Proposed
Annual
Salary.

Function
to which
assigned.

function*

•Employees should be grouped according to the functions given in the quarterly
functional expense report, form &.
NOTE: Separate report as of December 1 should be prepared f o r each Federal
reserve bank and branch and forwarded t o the Federal Reserve Board not
l a t e r than December 10.




I »

X-U190-C •

^58

N M E AND SALARIES 9F EMPLOYEES RECEIVING $2,500. O LESS FEE ANNUM.
U BR
R
(Employees recommended, f o r s a l a r i e s in excess of $2,50C.
should not be included in t h i s r e p o r t ) .
Federal Reserve Bank - Branch
i k t e of
original
employment

Name

Title

, Dec. 1, 1924.
Total of salary
increases during
the current year

Salary as
of January
1, 192*5.

function*

*Enployees should be grouped according to the functions given in the quarterly
functional -expense r e p o r t , form E.
NOTE: Separate report as of December 1 should be prepared fof each Federal
reserve bank and branch and forwarded t o the Federal Reserve Board not
l a t e r than December 10.




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

November 19, 1924.
X-4191
SUBJECT: Assistant Federal Reserve Agents, 1925*
Dear S i r :
On or before December 15th next, the Federal
Reserve Board w i l l give consideration to the matter of
the appointment of the Federal Reserve Agents and Ass i s t a n t Federal Reserve Agents to serve during the year
1925» You are requested to send to the Board i n time to
reach i t several days p r i o r to the date mentioned the
names of those whom you desire to be appointed as A s s i s t ant Federal Reserve Agents at the head o f f i c e and the
branches, if any, of your Bank.
Recommendations as to the s a l a r i e s of Assistant
Federal Reserve Agents should be submitted at the same
time as the salary recommendations f o r bank employees.
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

TO ALL FEDERAL RESERVE AGENTS-




759

FEDERAL RESERVE BOARD

760

WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

X-4193
November 24, 1924.
SUBJECT:

Loans on Real Estate and Farm Lands by National Banks
having no Time Deposits.

Dear S i r :
Inquiry has t e e n made of the Federal Reserve Board as
to whether a national bank which has no deposits t h a t are classed
as time deposits may make loans On improved and unencumbered farm
lands and r e a l e s t a t e under the provisions of Section 24 of the
Federal Reserve Act.
The Board has considered t h i s question and i s of the
opinion that the right Of n a t i o n a l banks to make loans on farm
land and r e a l estate should not be r e s t r i c t e d to banks having
deposits which are classed as time deposits. Section 24 provides
in p a r t that "Any national banking association not s i t u a t e d in a
central reserve c i t y may make loans secured by improved and "unencumbered farm land ***** and may also make loans secured by improved and unencumbered r e a l estate *****"„ From t h i s i t seems
apparent t h a t the only r e s t r i c t i o n intended to be placed upon the
r i g h t of n a t i o n a l banks to make r e a l e s t a t e loans i s that they
shall not be situated in a central reserve c i t y , provided, of
course, t h a t the loans comply in other respects with the provisions
of Section 24 of the Federal Reserve Act. The provision of t h i s
section with regard to the aggregate sum which a n a t i o n a l bank may
loan upon r e a l e s t a t e , t h a t i s , up to 25$ of i t s c a p i t a l and surplus or to 1/3 of i t s time deposits, whichever may be the greater,
i s merely a l i m i t a t i o n on the amount of such loans which a national
bank, otherwise q u a l i f i e d , may make and was not intended to r e s t r i c t the r i g h t to make such loans only to those banks having
time deposits.
Very t r u l y yours,

50 GOVERNORS OF ALL F. R. BANKS




Walter L. Eddy,
Secretary.

761
x-UigU
OATH OF DIRECTOR
CLASS "A"
State of

)

(City or County)

of

)

ss.

I, the undersigned, having been elected a Class "A" Director
of the Federal Reserve Bank of
eral Reserve City of
D i s t r i c t No.

, located in the Fed, State of

, and in

, as determined in accordance with the provisions of the

Federal Reserve Act, oeing a c i t i z e n of the United States, and resident of
the State of

, do solemnly swear (affirm) that I w i l l , so

f a r as the duty devolves upon me, d i l i g e n t l y and honestly administer the
a f f a i r s of said bank, f a i r l y and impartially, and without discrimination
in favor of or. against any member bank or banks; that I w i l l not knowingly
v i o l a t e , or w i l l i n g l y permit to be violated, any of the provisions of the
s t a t u t e s of the United States under which t h i s bank has been organized.

Subscribed and sworn (affirmed) to before the undersigned, a
Notary Bu#lic in and f o r the State and
day of




aforesaid, this

, 192_.

Notary Public

X-41$4-a

•

762

OATH OF DIRECTOR
CLASS "1"
State of

)

(City or County)

of_

)

ss.

I , the undersigned, having been elected a Class "B"
Director of the Federal Reserve Bank of
Federal Reserve City of
D i s t r i c t No.

, located in the

, S t a t e of

, and in

, as determined in accordance with the provisions of

the Federal Reserve Act, being a c i t i z e n of the United S t a t e s , and r e s i dent of the State of

, do solennly swear ( a f f i r m ) that

I w i l l , so f a r as the duty devolves upon me, d i l i g e n t l y and honestly administer the a f f a i r s of said bank, f a i r l y and i m p a r t i a l l y , and without
discrimination in favor of or against any member bank or banks; that I
w i l l not knowingly v i o l a t e , or willingly permit to be v i o l a t e d , any of
the provisions of tne s t a t u t e s of the United States under which t h i s
bank has been organized; that a t the time of my e l e c t i o n I was engaged
in

(State occupation)
ployee of any other bank.

; that I am not an o f f i c e r , d i r e c t o r , or em-

Subscribed and sworn (affirmed) to before the undersigned, a
Notary Public in and f o r the State and
this




day of

aforesaid,
, 19

Notary Public

' 763
x-mgu-b
PATH OF DIRECTOR
CLASS "g"
State of

)
°f—

)

ss.

(City orCounty)
I , the undersigned, having been appointed a Class
of the Federal Reserve Bank of
Reserve City of
D i s t r i c t No-

lf

C" Director

, located in the Federal
, State of

, and in

, as determined in accordance with the provisions of

the Federal Reserve Act, being a c i t i z e n of the United States and r e s i d e n t
of the S t a t e of

, do solemnly swear (affirm) that I

w i l l , so f a r as the duty devolves upon me, d i l i g e n t l y and honestly administer
the a f f a i r s of said bank f a i r l y and impartially and without discrimination
in favor of or against any member bank or banks; that I w i l l not knowingly
v i o l a t e , or willingly permit to be v i o l a t e d any of the provisions of the
s t a t u t e s of the United S t a t e s under which t h i s bank has been organized;
that I w i l l well and f a i t h f u l l y discharge the duties of the o f f i c e on which
I am about to enter; t h a t I am not an o f f i c e r , d i r e c t o r , employee, or stockholder in any other bank; and that I take t h i s obligation f r e e l y without any
mental reservation or purpose of evasion.
Subscribed and sworn (affirmed) to before the undersigned, a Notary
Public in and f o r the S t a t e and
day of




•

aforesaid, this

, 192_.

Notary Public.

764
X-Ul34-c
'

OATH 0? CHAIRMAN AND FFDIffAI KSSFJRVE AGENT

0
f

,

State of

)
)

(City orCourity)

s s.

I , the undersigned, a Class "C" .Director of the Federal Reserve
Bank of __

, located in the Federal Reserve City of
.

No,

, State of

, and in D i s t r i c t

, having been designated by the Federal Reserve Board as

Chairman of the Board of Directors of said bank and as Federal Reserve Agent,
being a c i t i z e n of the United Stated and resident of the State of
, do solemnly swear ( a f f i r m ) that I w i l l , so f a r as the
duty devolves upon me, d i l i g e n t l y ana honestly administer the a f f a i r s of
said bank f a i r l y and impartially and without discrimination in favor of ot
against any member bank or banks; that I w i l l not knowingly v i o l a t e , or
willingly permit to be v i o l a t e d any of the provisions of the s t a t u t e s of the
United S t a t e s under which t h i s bank has been organized; that I w i l l well
and f a i t h f u l l y discharge the duties of the o f f i c e on which I am about to
enter; that I am not an o f f i c e r , d i r e c t o r , employee, or stockholder in any
other bank; and that I take t h i s obligation f r e e l y without any mental
reservation or purpose of evasion.
Subscribed and sworn (affirmed) to before the undersigned, a Notary
Public in and f o r the S t a t e and
day of




aforesaid, this
, 192__.

Motary Public.

X,4l94-d
OATH OF DEPUTY CH A TRW,IT

State of

i

(City or County)

of

)

ss.

I, the •undersigned, a Class "C11 Director of the Federal Reserve

Bank of

, located in the Federal Reserve City of
.

.

, S t a t e o,f

, and in District No.

, having been designated by the Federal Reserve Board as Deputy

Chairman of the Board of Directors of said bank, being a c i t i z e n of the
United S t a t e s and resident of the State of

, do

solemnly swear (affirm) that I w i l l , so f a r as the duty devolves upon me,'
d i l i g e n t l y and honestly administer the a f f a i r s of said bank f a i r l y and imp a r t i a l l y and without discrimination in favor of or against any member
bank or banks; t h a t I w i l l not knowingly* v i o l a t e , or willingly permit to
be violated any of the provisions of the s t a t u t e s of the United S t a t e s
under which t h i s bank has been organized; that I will well and f a i t h f u l l y
discharge the duties of the o f f i c e on which I am about to enter; t h a t I am
not an o f f i c e r , d i r e c t o r , employee, or stockholder in any other bank; and
that I take t h i s obligation f r e e l y without any mental reservation or purpose
of evasion.
Subscribed and sworn (affirmed) to before the undersigned, a
Notary Public in and fOr the State and

day of




aforesaid, this

, 192_.

Notary Public

X-4194-8
OATE OF OFFICE OF
ASSISTANT FEDERAL RESERVE AGENT
State of

)

7

(City orCounty)

of

)

ss.

I , the undersigned, having been duly appointed Assistant Federal
Reserve Agent of the Federal Reserve Sank cf

located

in the Federal reserve c i t y of
arid in D i s t r i c t No.

S t a t e of
as determined in accordance with the provi-

sions of the Federal Reserve Act, being a c i t i z e n of the United S t a t e s and.
a r e s i d e n t of the State of

do solemnly swear (affirm)

that I w i l l support an.5 defend the Constitution of the United States against
a l l enemies, foreign or domestic; t h a t I w i l l bear t r u e f a i t h and allegiance
to the same; that I w i l l well and f a i t h f u l l y discharge the 1 cities of the
o f f i c e of Assistant Federal Reserve Agent on which I am about to e n t e r , and
that I take t h i s obligation f r e e l y without any mental reservation or purpose
of evasion; SO HELP MS GOD.
Subscribed and sworn (affirmed) to before the undersigned, a.
Notary Public in and f o r the State and
this




day of

aforesaid,
, 192_.

Notary Public.

• 767
x-UigU-f
OATH OF OFFICE
ASSISTANT FFDFMLJRESSBVE AffijNT
AT~ BRANCH BANKS
State of

)

,

(City or County)

^

)

ss,

I , the undersigned, having been duly appointed Assistant
Federal Reserve Agent of the

Branch of t h e Federal Reserve

Bank of

located in t h e c i t y of

of

State

and in D i s t r i c t No.

as determined in

accordance with the p r o v i s i o n s of the Federal Reserve Act, being a c i t i z e n
of the United States and a r e s i d e n t of the State of
do solemnly swear ( a f f i r m ) t h a t I w i l l support and defend the C o n s t i t u t i o n
of the u n i t e d S t a t e s a g a i n s t a l l enemies, foreign or domestic; t h a t I w i l l
bear t r u e f a i t h and a l l e g i a n c e to the same; that I w i l l well and f a i t h f u l l y
discharge t h e duties of the o f f i c e of Assistant Federal Reserve Agent on
which I am about to e n t e r , and t h a t I take t h i s o b l i g a t i o n f r e e l y without
any mental r e s e r v a t i o n or purpose of evasion; SO HELP MS GOD.

(Signature of A s s i s t a n t Federal
Reserve Agent.)
Subscribed and sworn (affirmed) to before the undersigned, a.
Notary Public in and f o r the State and
aforesaid, this




day of

, 1'32_.

Notary Public.

768
X-419l4-g
OATH OF ,01 EEC TOE
BRANCH B 2 K
AT S
State of

)
,

7

of

ss.

)

(City or County)

I , the undersigned, having been "appointed a Director of the
Branch of the Federal Reserve Bank of
located in the City of
State of

, and i n D i s t r i c t No.

as

de-

termined under the provisions of the Federal Reserve Act, being a c i t i z e n
of the United States, and resident of the State of

do

solemnly swear (affirm) t h a t I w i l l , so f a r as the duty devolves upon me,
d i l i g e n t l y and honestly administer the a f f a i r s of said branch, f a i r l y and
i m p a r t i a l l y , and without discrimination in favor of or against any member
bank or banks; that I w i l l not knowingly v i o l a t e , or willingly permit to be
v i o l a t e d , any of provisions of law p r e s c r i b i n g or in any way a f f e c t i n g the
duties of my o f f i c e .

Subscribed and sworn (affirmed) to before the undersigned, a Notary
Public in and f o r the S t a t e and
day of




aforesaid, this
, 192_.

Notary Public.

x-4i95

769

PROGRAM FOR THE CONFERENCE OF COUNSEL OF FEDERAL RESERVE
BANKS TO BE HELD AT WASHINGTON, D. C. O DECEMBER 5,1924.
N

I.
DISCUSSION OF CASES.
The f i r s t p a r t of the program will be taken tip vVith a discussion of the
cases brought aga.inst Federal reserve banks involving c o l l e c t i o n problems
similar to those a r i s i n g in the case of Federal Reserve Bank of Richmond v.
Malloy Brothers.

These cases w i l l be considered individually and the Coun-

s e l for the Federal reserve bank involved in each p a r t i c u l a r case will make
a brief statement of the f a c t s and the decision in h i s case and follow t h i s
with a discussion of the legal p r i n c i p l e s involved.

This in turn will be

followed by a general discussion by the conference of the l e g a l p r i n c i p l e s
involved in the case under consideration.

This course of procedure will be

followed by taking up the cases in the following order:
1.

Federal Reserve Bank of Richmond v. Malloy Brothers, 44 Sup.
c t . 296;

2.

City of Douglas v. Federal Reserve Bank of Dallas, 300 Fed. 573J

3.

F i r s t National Bank of Denver v. Federal Reserve Bank of Kansas
City, 283 Fed. 700;

4.

National Bank of Commerce v. Federal Reserve Bank of San Francisco;

5.

Jack and Jake v. Federal Reserve Bank of Atlanta, et a l . (Apparently
not r e p o r t e d ) .

6.

Federal Reserve Bank of Richmond v. P e t e r s , Receiver, 123 S.E. 379J

?.

Olive v. Federal Reserve Bank of Dallas (Not r e p o r t e d ) .

S.

C.M. & S t . Paul Railway v. Federal Reserve Bank of San Francisco
(Pending).

9.

Southern Power Co. v. Federal Reserve Bank of Richmond (Pending).

10.

Any other cases of t h i s character which Counsel may d e s i r e to
discuss. •




-2-

X-4195

II.
IMPORTANT GENERAL PROBLEMS
The following topics suggest important l e g a l problems of a general nature which probably will have been discussed more or less thoroughly in connection with the discussion of the above cases, and i t w i l l only be necessary
to discuss such of these topics as have not been f u l l y covered by the discussion of the cases:
1.

E f f e c t of Regulation J , as amended, and new check c o l l e c t i o n
c i r c u l a r s on common law doctrine regarding l i a b i l i t y f o r losses
r e s u l t i n g from sending checks d i r e c t to %»ayee banks and accepting exchange d r a f t s in remittance.

2.

What e f f e c t , if any, have Regulation J , as amended, and new
check c o l l e c t i o n c i r c u l a r s on legal r i g h t s of owners of checks
as against Federal reserve banks:
(a)
(b)

3.

Where New York rule applies;
Where Massachusetts r u l e a p p l i e s .

P r i v i t y of contract between owner of check and Federal reserve bank
(a)
(b)

4.

Where Massachusetts rule a p p l i e s ;
Where New York r u l e applies.

C o n f l i c t s of laws (e. g. where depositary bank i s located in
State in which New York rule i s in e f f e c t and Federal reserve
bank and payee bank are located in s t a t e s where Massachusetts
rule a p p l i e s . )

5.

J u r i s d i c t i o n and venue of actions against Federal reserve banks:
(a)

In Federal courts;

(b)

In State c o u r t s .




-3-

(c)

x-ui55

7 7 1

Bight of Federal reserve bank to question venue of
s u i t a f t e r removing same from State to Federal court.

(d)

Is a Federal reserve bank doing business in a State
within i t s d i s t r i c t , in which i t maintains no branch
o f f i c e , subject to process of State courts in that
State?

(e)

If i t i s not doing business in such a S t a t e as that
above mentioned i s i t subject to attachment as a nonresident or foreign corporation?

(f)

Whether a s u i t brought in a S t a t e court j o i n t l y against
a Federal reserve bank and the payee of a check may be
removed to a United States D i s t r i c t Court when the payee
of the check r e f u s e s to join in the p e t i t i o n f o r removal.

(g)

Various defenses which may be interposed by Federal r e serve banks in such s u i t s .
III.
TOPICS REFERRED TO CONFERENCE OF COUNSEL
BY GOVERNORS' CONFERENCE.

At the conference of Governors of Federal reserve banks held during the
early part of November, c e r t a i n questions were r e f e r r e d to the forthcoming conference of Counsel of Federal reserve banks with the request that i t consider
these questions and make a report or recommendation concerning them.'

The

t h i r d division of the program w i l l be given over to a consideration of these
topics, - which are as follows:
1.

Whether or not a Federal reserve bank in forwarding checks or
non-cash c o l l e c t i o n items to a bank f o r c o l l e c t i o n , and in accepting t h e r e f o r a remittance consisting of a bank d r a f t drawn




-4-

X-4195

7 7

by the remitting bank upon another bank, has the r i g h t to accept s t i l l another bank d r a f t in remittance for the f i r o t bank
draf t .
2.

Whether or not i t would be advisable as a matter cf law to
have the Federal reserve banks issue a uniform c i r c u l a r containing a form cf contract between banks and their depositors,
requesting member and clearing-member banks to amend t n e i r
c o n t r a c t s (contained on deposit s l i p s ana signature cards)
in accordance with the form proposed in the c i r c u l a r *

3.

Whether o r n o t i t would be a d v i s a b l e f o r the Federal r e s e r v e

banks to amend t h e i r check collection c i r c u l a r s so as to provide t h a t the act of submitting checks to Federal reserve banks
f o r c o l l e c t i o n w i l l be construed as a warranty that the depositor has lodged with the depositing bank the required agreements.
4.

Necessity of Federal reserve banks* guaranteeing p r i o r endorsements on nou-casia c o l l e c t i o n items.

5.

Advisability of Federal reserve banks using words in t h e i r endorsements on both checks and non-cash items to l i m i t t h e i r
l i a b i l i t y when guaranteeing p r i o r endorsements.
IV.
SPECIAL TOPICS.

The f o u r t h p o r t i o n of the program will ne devoted to tne discussion of
special topics suggested by various Counsel.

A large number of such topics

have been suggested, but those l i s t e d below are believed to be the most
important.

Other topics vvhich have been suggested will be considered if

time permits, under Division V of this program.




-5-

X-4195

D e s i r a b i l i t y of uniform provision in check c o l l e c t i o n c i r c u l a r s
covering Government checks.

The courts have been very l i b e r a l

in allowing the Government to assert claims f o r f o r g e r i e s - in
one case a f t e r a period of more than two years had elapsed.
(This topic suggested by Mr. Mason, Counsel to Federal Reserve
Bank of New York).
How should a Federal reserve bank handle items on non-par points
where previous notice has not been given to member banks of the
f a c t t h a t such points are non-par p o i n t s .

(Suggested by Mr.

Powell).
.Right of Federal reserve banks to preference on claims growing out
of t h e i r sending items d i r e c t to national bank on which drawn, or
at which payable f o r c o l l e c t i o n and remittance when such bank f a i l s
before i t s remittance d r a f t can be c o l l e c t e d .

(Suggested by Mr.

IVfoConkey, Federal Reserve Bank of St. Louis).
Refusal of member bank to permit Federal reserve bank to charge
to i t s reserve account the amount of checks sent to i t f o r payment
and remittance as provided in Section V l l - l - ( c ) of Kansas City
Check Collection Circular,

(Letter from Governor B a i l e y ) .

Contention made by numerous bankers t h a t while Federal reserve
banks have legal r i g h t to exempt themselves from l i a b i l i t y in coll e c t i o n s f o r anything except t h e i r own negligence, y e t as a. pract i c a l matter they ought not to do so.
Collecting checks drawn on banks known by the Federal reserve oank
to be in an extended or weakened condition:
(a)




Whether or not under the p r e s e n t regulation and the

* i
-6-

x-4195

774

uniform collection c i r c u l a r s , a Federal reserve bank i s
l i a b l e for r e s u l t i n g loss if i t sends checks d i r e c t to the
drawee bank and accepts remittances in the form of exchange
d r a f t s a f t e r knowing or having reason to know t h a t the
drawee bank i s in a weakened condition, and such drawee
bank closes i t s doors before the remittance d r a f t i s collected.

(Suggested by Mr, Wallace and Messrs. Randolph and

Parker).
(b) E f f e c t of State s t a t u t e s expressly permitting in general
terms the sending of checks d i r e c t to the drawee banks.
(Suggested by Messrs. Randolph and Parker).
(c)

What precautions should a Federal reserve bank adopt in

such cases in order to avoid r e s p o n s i b i l i t y f o r sending
checks d i r e c t tc the drawee bank.

(Suggested by Mr. Wallace

and Randolph and Parker.)
7.

Advisability of requiring indemnity of member banks when Federal
reserve banks are held l i a b l e for losses r e s u l t i n g from sending
checks d i r e c t to drawee banks or accepting exchange d r a f t s in
remittance.
V.
NON-CASH ITEMS AND OTHER MISCELLANEOUS TOPICS.

Several problems a r i s i n g in the collection of non-cash items by
Federal reserve banks and other matters not d i r e c t l y connected with check
c o l l e c t i o n s have been suggested f o r discussion, and if time i s available
consideration w i l l next be given to these questions.

Explanation of these

topics will be ma.de by Counsel f o r the p a r t i c u l a r Federal reserve banks




-7-

•

X--.15J

7 7 5

where the problems have arisen and such explanation will be followed by a
general discussion by a l l attending the conference.

The following are the

topics of t h i s character which have been suggested:
1.

Incorporation into non-cash collection c i r c u l a r s of warranty by
member and nonmember clearing banks sending items to Federal reserve
banks f o r deposit or c o l l e c t i o n that by such action they authorize
the Federal reserve banks to handle checks subject to the terms and
conditions of Regulation J; warrant that they have authority to
give Federal reserve banks such a u t h o r i t y ; and they agree to indemnify the Federal reserve banks f o r any loss r e s u l t i n g from the
f a i l u r e of the sending bank to have such authority.

(Suggested by

Mr. Mason).
2.

To what extent, if a t a l l , should Federal reserve banks f i l e and
prosecute claims against receivers of f a i l e d banks f o r the b e n e f i t
of member banks where, having received items f o r c o l l e c t i o n on the
f a i l e d bank while i t was a going concern i t has sent those items
to the f a i l e d bank and received the remittance d r a f t of the f a i l e d
bank, which d r a f t was not paid because of the f a i l u r e of such bank.
(Suggested by Mr. Powell).

3.

Right of Federal reserve bank to r e t a i n rediscounted paper and excess c o l l a t e r a l a f t e r proving claim against insolvent member bank
for f u l l amount due Federal reserve bank.

(Suggested by Mr.

McConkey).
4.

Practice of some country banks of not remitting d i r e c t to Federal
reserve bank but requesting t h e i r correspondents to remit f o r them




-s-

x-4195

and n o t i f y i n g Federal reserve batu. that they ha.V3 dene so.
Does t h i s make the correspondent bank the agent of the Federal reserve bank so that the f a i l u r e of the correspondent
r e s u l t s in loss to the Federal reserve bank rather than the
country bank on which the original checks were drawn?
gested by Mr. McConkey).




(Sug-

777
FEDERAL

% 1 5 E E VE

B 0 AE D

STATEMENT FOE THE PRESS

>-41S'6

For Release in Morning Papers,
Friday, November 28, 1924.
The following i s a summary of general business
find, f i n a n c i a l conditions throughout the several
Federal Reserve District*» based upon s t a t i s t i c s
for the months of October and November, as contained in the forthcoming, issue of the Federal
Reserve Bulletin,
Production of basic commodities and factory employment showed f u r t h e r
increases in October, and distribution of merchandise was in large volume.
The general level of wholesale prices advanced, r e f l e c t i n g largely a r i s e
in the prices of a g r i c u l t u r a l products.
PRODUCTTOH:
The Federal Reserve Board's index of production in basic i n d u s t r i e s ,
adjusted to allow f o r seasonal variations, increased 6 per cent in October,
and was l6 per cent above the low point of midsummer, though s t i l l considerably below the level of the early months of t h i s year.

Output of

iron and s t e e l , cotton and woolen t e x t i l e s , lumber, and bituminous coal
was subtantially l a r g e r than the month before.

Factory employment in-

creased 2 per cent in October, r e f l e c t i n g larger working forces in most of
the manufacturing industries.

Building contract awards increased and were

14 per cent above a year age.
Crop estimates by the Department of Agriculture in November showed
increases in the expected yields of com, cotton, tobacco, and potatoes.
The movement of crop* to market in October reached the largest volume in
f i v e years and exports of grain and cotton were in greater volume than in
the corresponding month of any recent year.




-2-

X-4196

7'7g

TBADE:
Railroad f r e i g h t shipments were larger in October than in any previous
month, owing to exceptionally heavy loadings of miscellaneous merchandise
and grain.

Wholesale trade increased s l i g h t l y , but was 3 per cent l e s s

than in October, 1923-

Sales of dry goods, shoes and hardware were con-

siderably smaller than a. year ago, while sales of groceries and drugs were
larger.

Department store sales showed a seasonal increase but were 4 per

cent less than l a s t year, and so.les of mail order houses and chain stores
also increased and were in g r e a t e r volume than in 1$23«

In preparation f o r

Christmas trade merchandise stocks a t department stores increased subs t a n t i a l l y and were 2 per cent l a r g e r than a, year ago.
PRICES:
The wnolesale p r i c e index of the Bureau of Labor S t a t i s t i c s rose 2 per
cent in October as a r e s u l t of considerable advances in the p r i c e s of farm
products and foods, end s l i g h t increases in the p r i c e s of c l o t h i n g and
chemicals.

Fuel and mstal p r i c e s declined and p r i c e s of building materials .

and house f u r n i s h i n g s were p r a c t i c a l l y unchanged.

During the f i r s t half

of November quotations on a l l g r a i n s , cotton, s i l k , copper, and rubber advanced, while p r i c e s of raw sugar and bituminous coal declined.

t

BANK CREDIT:
Loans f o r commercial purposes at member banks in leading c i t i e s , which
had increased r a p i d l y from the beginning of September to the middle of
October, advanced only s l i g h t l y in the following four weeks.

The growth

cf loans secured by stocks and bonds was also r e l a t i v e l y small, notwithstanding great a c t i v i t y in the s e c u r i t i e s market.




Holdings of investments

779
-3-

>:-42$6

by these banks continued the incr9A.se which began in the e a r l y months of
the year.

A l a r g e p a r t cf the incres.se in dcuar.j deposits during the fcur

weeks ending November 12, when they were higher than at any previous time,
was in bankers' balances i n d i c a t i n g a continued movement of funds to the
large centers.
At the reserve banks

increase in earning a s s e t s was the r e s u l t of

l a r g e r o f f e r i n g s of acceptances, r e f l e c t i n g f i r m e r money c o n d i t i o n s .

Vhile

discounts and holdings cf United S t a t e s s e c u r i t i e s remained p r a c t i c a l l y unchanged during the four weeks ending November 19, the increase in acceptances c a r r i e d t o t a l earning a s s e t s
p a r t of the y e a r .

to the h i g h e s t point since the early

Money in c i r c u l a t i o n increased in October f o r the t h i r d

successive month and the t o t a l on November 1 was $215,000,000 l a r g e r than
in August.
Money r a t e s continued to show a. firmer tendency and by November 23
were generally from 1/4 to 1/2 of one per cent higher than in October.




7 8 0

FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS
For Immediate Release.

X-4l98
November 29, 1924.

CONDITION OF ACCEPTANCE MARKET
October 16 to November 12, 1924.
Money r a t e s , though s t i l l low, showed a. firmer tendency in the four
weeks' period ending November 12.

The supply of new b i l l s which came into

the market was well sustained though i t was somewhat smaller than in the
preceding period.

Demand for b i l l s at banks in some of the f i n a n c i a l centers

was smaller than during the preceding four weeks, but purchases by int e r i o r banks were considerably l a r g e r .

During the l a s t week of the period
a
money r a t e s were s l i g h t l y firmer and there was/suostantial increase in the
volume of b i l l s o f f e r e d to the market due in p a r t to b i l l s which banks had
bean carrying in t h e i r p o r t f o l i o s .

There was not a corresponding increase

in the demand and dealers* aggregate p o r t f o l i o s were larger a t the end of
the period than a month e a r l i e r .

Sales to the Federal reserve banks in-

creased almost continuously and reached the highest point in the middle of
November.

The p r i n c i p a l commodities against which b i l l s were drawn were

c o t t o n , grains, sugar, tobacco, s i l k , and p r o v i s i o n s .
Rates in the New York market at the close of the period were 2 1/4 per
cent bid and 2 to 2 1/8 per cent offered f o r 30 day b i l l s , 2 3/8 per cent
bid and 2 1/8 to 2 1/2 per cent o f f e r e d f o r 60 day b i l l s , and 2 1/2 per
cent bid and 2 1/4 to 2 3/8 per cent offered f o r 90 and 120 day b i l l s .

All

r a t e s were approximately 1/8 of one per cent higher than a t the end of the
preceding period.




*781
( COPY )

X-4195

IN THE UNITED STATES CIRCUIT COURT OF APPEALS
FIFTH CIRCUIT

No. 4424.

CITY OF DOUGLAS,
P l a i n t i f f in E r r o r .
Versus
FEDERAL RESERVE BANK OF DALLAS,
Defendant in E r r o r .

Error from the D i s t r i c t Court of the United States f o r the Western
D i s t r i c t of Texas.

Harry E. P i c k e t t , Clean T. Knapp, James P. Boyle, Ed. M. Whitaker,
and W. P e t i c o l a s , f o r P l a i n t i f f in Error.
E. B. Stroud, J r . , and A. H. Culwell, (E.B. Stroud, J r . , Turney,
Bruges, Culwell, Holliday & Pollard, on the B r i e f ) , f o r Defendant in Error.

Before W L E AND BRYAN, Circuit Judges, and DAWE2NS, D i s t r i c t Judge.
AKR
DAWKINS, D i s t r i c t Judge:
For a valuable consideration the County of
Cochise, State of Arizona, delivered to the p l a i n t i f f , City of Douglas,
8aid S t a t e , 1 a check drawn upon the Central Bank of Wilcox, Arizona, f o r the
sum of $5,000 dated December 22, 1920, which the payee c i t y deposited in




-2-

X—419^

the F i r s t National Bank of Douglas on December 24th.

On the same date

782
the

l a t t e r bank forwarded the check to the Federal Reserve Bank, El Paso Branch,
the proceeds upon c o l l e c t i o n to be remitted f o r the c r e d i t of the City of
Douglas.

The 25th being a holiday (Christmas) and the 26th a Sunday, the

caeck was in the hands of the Bank at El Paso on December 27th, and on
that date i t was by s a i d bank forwarded d i r e c t to the payee bank a t Wilcox
f o r payment.
thereof

The bank a t Wilcox stamped i t paid and transmitted in l i e u

t i t s ovvn c a s h i e r ' s check f o r $6426.17 ( e v i d e n t l y covering, in ad-

d i t i o n , other items) drawn upon t h e Central Bank of Phoenix, Phoenix, Arizona, payable to the Federal Reserve Bank of El Paso.

The Reserve Bank f o r -

warded t h i s l a s t mentioned check to t h e branch of t h a t i n s t i t u t i o n a t Los
Angeles, C a l i f o r n i a , and i t in t u r n s e n t the c a s h i e r ' s check d i r e c t to the
Central Bank of Phoenix f o r payment, where i t was p r o t e s t e d f o r non-payment.
The p r a c t i c e of sending the checks d i r e c t seems to have been authorized by
s p e c i a l ruling of the Federal Reserve Board.

The Central Bank of Wilcox

f a i l e d on January 8th and the Central Bank of Phoenix, likewise closed i t s
doors on January 19th, 1921.
Thereupon, the City of Douglas sued the Federal Reserve Bank of Dallas
of which t h e one a.t El Paso i s a br&nch, s e t t i n g up these f a c t s and
charging the defendant with negligence, in t h a t , i f , instead of sending
the o r i g i n a l check d i r e c t to the payee bank, i t had been sent to some other
agency in the Town of Wilcox, the money would have been paid because t h e
drawer at the time had s u f f i c i e n t funds on deposit with the Wilcox Bank
with which to meet t h e check; t h a t the defendant knew the Central Banks of
Wilcox and Phoenix were insolvent, but n e v e r t h e l e s s , thus n e g l i g e n t l y




-3-

x-4193 783

handled the matter in violation of the usual and customary r a l e s of
banking, and thereby rendered i t s e l f l i a b l e f o r the l o s s ,

p l a i n t i f f ac-

cordingly prayed f o r judgment for the face of the check as the amount of
i t s dajnages suffered through t h e alleged f a u l t of the defendant.
One of the defenses specially pleaded below was that the p e t i t i o n
disclosed no cause of action, in that there was no p r i v i t y of contract between p l a i n t i f f and defendant and t h a t the former's remedy was to sue the
i n i t i a l bank of deposit, the F i r s t National Bank of Douglas, Arizona.
This contention having been sustained by the t r i a l court a f t e r a hearing
on the merits, p l a i n t i f f prosecutes t h i s writ of e r r o r .
The question presented i s as to whether t h i s court shall follow what
i s known as the "Hew York" as distinguished from the "Massachusetts Bule".
Under the New York Rule the depositor of a dishonored check the payment of
which has f a i l e d through the f a u l t of a t r a n s f e r e e of the i n i t i a l dep o s i t a r y mast proceed against the said i n i t i a l oank, upon the theory that
t h e r e i s no p r i v i t y between him and the subsequent holders; while in
Massachusetts, he may sue d i r e c t l y t h e bank through whose f a u l t the loss
occurred.

Exchange National Bank v, Third National Bank, 112 U.S. 276;

Federal Reserve Bank of Richmond v. Malloy, £64 U . s . , l 6 0 ; Advance Sheet
number 10, March 15, 1924#
In the l a t t e r case the Supreme Court uses t h i s langaage:
"The State decisions in respect of the l i a b i l i t y of a
correspondent bank to the owner of a check
for c o l l e c t i o n by the i n i t i a l bank of deposit are in
c o n f l i c t beyond the p o s s i b i l i t y of r e c o n c i l i a t i o n .
A number of S t a t e s , following the 'New York Rule,'
so-called, have held t h a t there i s no such d i r e c t
l i a b i l i t y ; but that the i n i t i a l bank alone i s r e sponsible to the owner. On the other hand, an equal,
i f not a g r e a t e r , number of States following the




•
-4-

784

X-Uigs

1

Mas sachase11s Rule', have held exactly the contrary;
v i z . , that the i n i t i a l bank, by the mere f a c t of dep o s i t f o r c o l l e c t i o n , i s authorized to employ subagents, who thereupon become the agents of the owner,
and d i r e c t l y responsible to him for t h e i r d e f a u l t s .
This Court, in Exchange National Bank vs. Third National Bank, 112 U.S. 2?6, 26 L. Ed. 722, 5 Sup. Ct.
Rep. lUl, a f t e r reviewing the two l i n e s of decisions,
approved the 'New York Rule 1 . But the r u l e may, of
course be varied by c o n t r a c t , express or implied. Id.
26$. Here the r e l a t i o n s of the payee to the i n i t i a l
bank of deposit are controlled oy the Florida s t a t u t e
with respect to which i t mast be presumed they dealt
with each o t h e r . The s t a t u t e hs.d the e f f e c t of importing the 'Massachusetts Rule' into the contract,with
the r e s u l t that the i n i t i a l bank had implied authority
to i n t r u s t the collection of the check to a sub-agent,
and that sub-agent, in turn, to another; and the r i s k
of any d e f a u l t cr neglect on their p a r t rested upon
the owners. 112 U.S. 251. I t follows that the action
was properly brought against the Richmond bank."
I t appears to be conceded that the Federal Courts have followed the
It
New York Rale, o u t / i s contended the f a c t s of the present case take i t
without the rule f o r the reason that there was a special undertaking such
a.s i s r e f e r r e d to in the case l a s t cited and in which the court declared:
"But the rule may, of course, be varied by c o n t r a c t , express or implied,"
but in applying the doctrine of the Massachusetts Rule in that case, i t
said: "Here the r e l a t i o n s of the payee to the i n i t i a l bank of deposit are
c o n t r o l l e d by the F l o r i d a s t a t u t e with respect to which i t m a t be presumed
they dealt with each other.

The s t a t u t e had the e f f e c t of importing the

'Massachusetts Rule* into the; c o n t r a c t , with the r e s u l t that the i n i t i a l
bank had implied a u t h o r i t y to i n t r u s t the c o l l e c t i o n of the check to a
sub-agent, and that sub-agent, in turn, to another; and the r i s k of any
default or neglect on t h e i r part r e s t e d upon the owners."
Prior to this decision, the Supreme Court of Florida had adopted the
New York Rule and evidently the s t a t u t e which was l a t e r passed and




-5-

X-41S)

785

recognized in the Mailoy case was intended to change the law in that
regard.
In addition to the charge of negligence, the appellant contends that
because the bank book in wnich the deposit was ma.de with the F i r s t National
Bank of Douglas contained the provision:

"All out of town items credited

subject to f i n a l payment," the case i s taken out of the New York Rule and
governed by a special s t i p u l a t i o n making the Massachusetts doctrine applicable.

I t f u r t h e r a s s e r t s that the Supreme Court of the United States

has never held that t h e r e was not p r i v i t y between the depositor and the
c o l l e c t i n g bank such as to render i t l i a b l e to the owner of a check sued
as in t h i s case.

a
we shall discuss f i r s t , the contention that there was/special contract.

The language quoted unquestionably gives to the receiving bank the r i g h t to
charge back against the account of the depositor checks f o r which c r e d i t
i s entered, if dishonored; but can t h i s be construed as a l i m i t a t i o n upon
i t s l i a b i l i t y f o r the f a u l t s of i t s agents so as to take the case out of the
doctrine of the United States Courts?

We think n o t .

Hflhat the Bank of

Douglas had in mind, and what the words in t h e i r ordinary usage mean, i s
that i f t h e check i s not f i n a l l y paid by the drawee, i t w i l l be charged
back.

Nothing whatever i s said about the f a u l t s of anyone or of exemption

from l i a b i l i t y t h e r e f o r .

In the present case the check was paid by the

drawee and the e f f e c t was to discharge the drawer.

Bank v. South Weymouth

Bank, 184 Mass. 49; 67 N.E. 67OJ Milling Company v. Bank, 120 Tenn. 225,
111 S.W. 2US, 18 L«B.A. (new s e r i e s ) 4Ul; Malloy v. Federal Reserve Bank,
281 Fed. 1005.

I t , ( t h e check) has t h e r e f o r e never to t h i s day been r e -

turned t o the F i r s t National Bank of Douglas i n order that i t might be




charged against the p l a i n t i f f .

Actually, n e i t h e r the p l a i n t i f f nor the

F i r s t National Bank were p a r t i e s to the check which was protested f o r nonpayment and hence were not e n t i t l e d to notice t h e r e o f .

The c a s h i e r ' s

check wnich was issued in favor of the branch of the Federal Bank a t El
Paso was drawn upon t h e Central Bank of Phoenix in favor of the El Paso
Bank and was the consideration given in payment of the o r i g i n a l check.

Of

course, having accepted i t instead of the money in payment of the f i r s t
check, the El Paso Bank assumed an obligation of i t s own, independent of
the o r i g i n a l r e l a t i o n , to see that the c a s h i e r ' s check was paid, and the
money transmitted back to the F i r s t National Bank of Douglas.

So that

the s i t u a t i o n as we see i t i s u n a f f e c t e d by t h i s language in the pass book.
I t did not extend or enlarge the i n i t i a l bank's powers in the employment of
i t » agents f o r c o l l e c t i o n so as to make them sub-agents of the City of
Douglas.
Returning now to the e f f e c t of the New York Rule.

While i t i s true

the case of Exchange National Bank v. Third National Bank, supra, was one
in which l i a b i l i t y was sought to be fixed against the i n i t i a l bank r a t h e r
than the c o l l e c t i n g bank, yet the language of that decision, in our opinion,
can be construed in no other l i g h t than as pronouncing the doctrine that
there was no p r i v i t y between the l a t t e r and the depositor of the check.
We quote therefrom as follows:
"There i s no s t a t u t e or usage or special contract in
t h i s case, to q u a l i f y or vary the obligation r e s u l t i n g from
the deposit of the d r a f t s with the New York bank f o r c o l l e c t i o n .
On i t s receipt of the d r a f t s , under these circumstances, an imp l i e d undertaking by i t arose, to take a l l necessary measures
to make the demands of acceptance necessary to p r o t e c t the
r i g h t s of the holder against previous p a r t i e s t o the paper.
* * * * The general p r o f i t s of the receiving bank from the
business between the p a r t i e s , and the accommodation to the




f

»
-7-

X-4ljy

customer, mast a l l be considered together, and form
a c o n s i d e r a t i o n , in the absence of any c o n t r o l l i n g
f a c t s to the c o n t r a r y , so t h a t the c o l l e c t i o n of the
paper cannot be regarded as a g r a t u i t o u s f a v o r . Smed.es
v . Bank of TJtica 20 Johns 372, and 3 Cowan, 662; McKinster v . Bank of Utica, ^ Wend. 46; a f f i r m e d in Bank
of Utica v. McKinster, 11 Wend. 4J3« The c o n t r a c t , then,
becomes one to perform c e r t a i n d u t i e s necessary f o r the
c o l l e c t i o n of the paper and the p r o t e c t i o n of the h o l d e r .
The bank i s n o t merely appointed an a t t o r n e y , authorized
to s e l e c t other agents to c o l l e c t the paper. I t s undertaking i s to do the thing, and not merely to procure i t
. tc be done. In such Case, the bank i s held to agree to
answer f o r any d e f a u l t in the performance of i t s c o n t r a c t ;
and, whether the paper i s to be c o l l e c t e d in the place
where the bank i s s i t u a t e d , or a t a d i s t a n c e , t h e c o n t r a c t
i s to use the proper means tc c o l l e c t the p a p e r , and the
bank, by enploying sub-agents to perform a p a r t of what i t
has contracted to do, becomes responsible to i t s customer.
This general p r i n c i p l e a p p l i e s to a l l who c o n t r a c t to p e r form a s e r v i c e . I t i s i l l u s t r a t e d by the decision of the
Court of King's Bench, in E l l i s v . Turner, S T.E. 531,
where the owners of a v e s s e l c a r r i e d goods to be delivered
a t a c e r t a i n p l a c e , but the vessel passed i t by without
d e l i v e r i n g the goods, and the v e s s e l was stink and the
goods were l o s t . In a s u i t a g a i n s t the owners f o r the
value of the goods, based on the c o n t r a c t , i t was contended
f o r the defendants that they were not l i a b l e f o r the misconduct of the master of the v e s s e l in c a r r y i n g the goods
beyond the p l a c e . But the p l a i n t i f f had judgment, Lord
Kenyon saying t h a t the defendants were answerable on t h e i r
c o n t r a c t , although the misconduct was t h a t of t h e i r servant,
and adding: 'The defendants a r e responsible f o r the a c t s of
t h e i r servant i n those things t h a t respect h i s duty under
them, though they are not answerable f o r h i s misconduct
in those t h i n g s t h a t do not r e s p e c t h i s duty t o them.'
The d i s t i n c t i o n between the l i a b i l i t y of one who cont r a c t s to do a t h i n g and t h a t of one who merely receives
a delegation of a u t h o r i t y to act f o r another i s a fvtndamental one, a p p l i c a b l e to the p r e s e n t c a s e . I f the agency
i s an undertaking to do the business, the o r i g i n a l p r i n c i p a l may look to the immediate c o n t r a c t o r with h i m s e l f ,
and i s not obliged to look to i n f e r i o r or d i s t a n t underc o n t r a c t o r a o r sub-agents, when d e f a u l t s occur i n j u r i o u s
to h i s i n t e r e s t . "
When t h e Supreme Court says:

"The bank i s not merely appointed an

a t t o r n e y , authorized to s e l e c t other agents to c o l l e c t the paper, i t s
undertaking i s to do the thing and not merely to procure i t to be done.




787

-S-

X-4199

In such ca.se, the bank i s held to agree to answer f o r any default in the
performance of i t s contract; and whether the paper i s to be c o l l e c t e d in
the place where the bank i s s i t u a t e d , or a t a distance, the contract i s
to use the proper means to c o l l e c t the paper, and the bank, by employing
sub-agents to perform a part of what i t has contracted to do, becomes
responsible to i t s customer, n i t would seem clear t h a t the conclusion
was that those employed by the i n i t i a l bank were not the SUD-agents of
the depositor, but agents of the depositary.

Undoubtedly, if the subse-

quent t r a n s f e r e e , or c o l l e c t i n g bank, could be said to be the agent of
the owner in these circumstances, i t mast necessarily a r i s e from the aut h o r i t y , express or irtplied, from the owner to the i n i t i a l Dank to make
such employment.

As i s stated a t other places in t h e opinion quoted from,

the owner of a check, when depositing i t for c o l l e c t i o n , does not know the
channels through which the bank may send i t and c e r t a i n l y there i s no
d i r e c t legal t i e between him and anyone else to whom i t may be transmitted.
The contract i s between the f i r s t bank and the one to whom i t i s sent f o r
c o l l e c t i o n and f o r the violation of which, through negligence or otherwise , the t r a n s f e r e e i s l i a b l e to the t r a n s f e r r o r .

In those cases where

i t i s held t h a t the owner of the check may pursue d i r e c t l y the c o l l e c t i n g
bank, i t i s upon the theory of implied authority in the i n i t i a l bank to
make the employment f o r the b e n e f i t of the owner and as to which t h e coll e c t o r i s held to a s s e n t .

Under t h i s rule the i n i t i a l bank i s only ac-

countable f o r negligence in s e l e c t i n g a responsible and f a i t h f u l agent
f o r the owner and cannot be held l i a b l e for the subsequent f a u l t s of the
c o l l e c t i n g agent in which i t had no p a r t or reasonable ground co a n t i c i p a t e
would, be committed.




In other words, there i s apparent inconsistency in

-3-

x-4i^

789

tne idea that ooth the i n i t i a l and c o l l e c t i n g oanks, or e ithe r of them,
at the cncice of the owner, can be held l i a b l e in these circu&stances.
None of the elements necessary to a s o l i t a r y obligation e x i s t s .

The matter,

therefore, mist be governed by the e f f e c t of the contract and when i t i s
determined, as the Federal Courts have decided, that the i n i t i a l

bank

undertakes, in the absence of express or implied understanding otherwise,
to c o l l e c t the check and to be, i t s e l f , responsible t c the owner f o r the
f a u l t of i t s own agents, there a r i s e s no r e l a t i o n between the owner and
the c o l l e c t i n g bank out of which a- r i g h t of action f o r f a i l u r e to perform
can be maintained.
Our conclusion i s that the r u l i n g of the lower court upon the special
defense i s sustained by the law applicable t h e r e t o .
In i t s brief appellant urges upon us the contention that the El Paso
Bank having accepted the check of the Wilcox Bank upon the Phoenix Bank,
instead of money, and the original check having thereby been paid, the
defendant became l i a b l e to i t as a debtor f o r funds Had and received.
However, t h i s suit r e s t s e n t i r e l y upon a demand f o r damages f o r v i o l a t i o n
of a c o n t r a c t , and a c a r e f u l reading of the p e t i t i o n w i l l not d i s c l o s e
the s l i g h t e s t suggestion of a r i g h t based upon assumpsit.

Of course, the

two causes of action are entirely d i s t i n c t , and we are not permitted to
t r e a t the p e t i t i o n as one in assumpsit even though a r i g h t of action might
e x i s t upon that score, as to which we express no opinion.
For the reasons assigned, the judgment of the lower court i s
AFFIRMED.




(ORIGINAL FILED-N0VEM8EF, 25, 1924.)

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD




December ) , 1924.
X-42CC
SUBJECT: Revised Principles Governing Research,
S t a t i s t i c a l snd Publication A c t i v i t i e s .
Dear S i r :
The Federal Reserve Board has adopted
the enclosed revised p r i n c i p l e s governing r e search, s t a t i s t i c a l and publication a c t i v i t i e s of
the Federal reserve banks and the Federal Reserve
Board. These p r i n c i p l e s supersede those transmitted with the Board's l e t t e r of October j l ,
1924 (X-4161) and become e f f e c t i v e January 1,192$.
Very t r u l y yours,

Walter L. Eddy,
Secretary.
(Enclosure)

TO ALL F. R, AGENTS

791
X-4230-a
PRINCIPLES GOVERNING RESEARCH, STATISTICAL AND PUBLICATION
ACTIVITIES 0? THE FEDERAL RESERVE BAN3S AND THE FEDERAL

EFSEIiVE BOARD,

Scope and Purpose* - The purpose of the work of the research and
statistical divisions of the Federal reserve banks and the Board is to collect
and digest information bearing on the problems with which the Federal Reserve
System is concerned, either as a matter of current operation or as the basis
of Federal reserve policies.
All such Work is to be under the general supervision of the Federal Reserve Board acting through its Division of Research and Statistics.
While research studies and scientific investigations may be undertaken on
the initiative of the Federal reserve banks or of the Federal Reserve Board,
the Federal reserve banks, ^before any expense is incurred for their prosecution, are to secure the approval of the Federal Reserve Board. It is not intended, however, that approval be awaited before studies of small scope are
undertaken which involve no considerable expense. In conducting such studies,
the Director of the Board's Division of Research and Statistics may make assignments to one or more of the Federal reserve banks of such portions as
may seem desirable.
Publications. - Beginning with January, 1^25, the monthly publications
of the Federal reserve banks are not to exceed eight pages, as a standard,
but during 1925* which may be considered a year of readjustment, the number
of pages is not to exceed twelve.
Free distribution Of such publications as a matter of course shall be
made only to member banks, to other Federal reserve banks, to the Federal Reserve Board, and to firms reporting, statistical information, nonmember par
list banks, and to such others as may be determined through the Board 1 s Division of Research and Statistics in contact with a committee of the agents
to be entitled to it. The Federal reserve banks by April 1, 1925, are to arrange to make a. charge sufficient to cover costs for copies delivered in
*
bulk for distribution. The question of imposing a charge for single copies
shall be deferred for further consideration.
The monthly reyiews, published by the Federal Reserve Agents, are to be
under the general editorial supervision of the Director of Research and
Statistics of the Federal Reserve Board, who is responsible to the Board for
the proper conduct of the research, statistical, and publication activities
undertaken by the Board and authorized for the several banks.




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD

X-%202

December 10, I92U
SUBJECT:

Holidays, Christmas and New Year's Day.

Dear S i r :
In accordance with the Board 1 s l e t t e r X-4128 of
August 1, 1924, there w i l l be no Gold Settlement Mind
or Federal Reserve Note Clearing on Thursday, December
25, I92U, and Thursday, January 1, 1925, on account of
Christmas and New Year's Day, resr>ecti*Sly, and the
Board's books w i l l be closed.
Please advise Branches.
Yours very t r u l y ,

J . C. Noell,
Assistant Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS*




X-4303

EE COED OF THE
CONFEEETTCE OF COUNSEL OF FFDEBAL EESEBVE BAMS
HELD AT w^tthTOTON.D.C. ,ON DECEMBER 5 and 6,1934.

The Confarsncs of Counsel 6f a l l Fad^i'al r s s s r v s "banks convened on ths morning of December 5,1924, a t 10 o 1 clock in the
Board Boom of the Federal Rsaorvs Board, Treasury Department,
Washington, D.C. Those present wars:
From
From
From
From
From
From
From
From
From
From
From

the
ths
the
the
the
the
the
the
the
the
the

Federal
Federal
Fedaral
Federal
Foderal
Federal
Federal
Federal
Federal
Federal
Federal

Eeserve
Bassrve
Easervo
Eeserve
Eeserve
Reserve
Eeserve
Eeserve
Eeserve
Eesorve
Easerve

Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank

of
of
of
of
of
of
of
of
of
of
of

Boston
r Mr. Arthur H.Weed
New York
- Mr- L. Eandolph Mason
P h i l a d e l p h i a - Mr. Parker S. Williams
Cleveland
- Mr. S t e r l i n g B. Newell
Eichnond
- Mr. M. G. Wallace
Atlanta
- Mr. B. S. Parker
Chicago
- Mr. Charles L. Pave 11
St.Louis
- Mr. James G.McConkey
Minneapolis - Mr. A. Ueland
Kansas City - Mr. H. G. Leedy
Dallas
- Mr. Paschal Dreibelbis a r r i v e d a f t e r the lunch hour
on December 5 and Mr. E. B.
Stroud,Jr. arrived a f t e r ths
lunch hour on December 6.
From the Federal Eeserve Bank of San Francisco-Mr. Albert C. Agnew
From the Federal Hasarvo Board
-Mr. Walter Wyatt, Mr. Edgar
1
v . Fraeman, Mr. George B.
Vest and Mr. B. M. w i n g f i e l d .
In a d d i t i o n to the Counsel f o r the Federal reaorve banks
and the Federal Eeserve Board, above l i s t e d , Honorable Newton D.
Baker, S p e c i a l Counsel to the Federal Eeserve Bank of A t l a n t a in the
case of Pascagoula National Bank v. Federal Eeserve Bank of Atlanta e t a l .
Mr. K. K. C a r r i c k , S e c r e t a r y to the Federal Beserve Bank of Boston, Mr.
George L. Harrison, Deputy Governor of the Federal Eeserve Bank of New
York and S e c r e t a r y to the Governors 1 Conference, Mr. H. F. S t r a t e r ,
A s s i s t a n t Cashier of the Federal Eeserve Bank of Cleveland and Chairman
of the Standing Committee on C o l l e c t i o n s , were present upon s p e c i a l
invitation.
Mr. Hamlin, Member of the Federal Eeserve Board, made a short
address of welcome to the Conference of Counsel a t i t s opening on the
morning of December 5. Mr. Wyatt was then e l e c t e d Chairman of the
Conference and he appointed Mr. Vest as S e c r e t a r y ,




794
Page 2.
The Conference then proceeded to the consideration of the
topics l i s t e d on t h e program which had been prepared and sent out
in advance of the meeting by Counsel to the Federal Reserve Board,
All matters on the program were discussed informally bat formal
action was taken in only a few instances. With regard to the topics
which had been r e f e r r e d to the Conference of Counsel by the Governors'
Conference, however, formal action was taken in each case.
The f i r s t question r e f e r r e d t o the Conference by the
Governors' Conference was
"Whether or not a Federal reserve bank in
forwarding checks or non-cash collection items to a
bank f o r c o l l e c t i o n , and in accepting t h e r e f o r a r e mittance consisting of a bank d r a f t drawn by the r e mitting bank upon another bank, has the r i g h t to accept s t i l l another bank d r a f t in remittance f o r the
f i r s t bank d r a f t . "
In answer to t h i s question two resolutions were proposed and
adopted. The f i r s t was submitted by Mr. Agnew as follows:
"RESOLVED t h a t i t i s the opinion of t h i s
conference t h a t the Federal Reserve banks are uot p r o tected l e g a l l y "under the terms of the Board's regulations or the uniform c i r c u l a r s in accepting an exchange
d r a f t or d r a f t s in purported settlement of a f i r s t exchange d r a f t given for t r a n s i t or non-cash items".
This resolution was adopted by the Conference without
d i s s e n t i n g vote.
The second r e s o l u t i o n in answer to t h i s question was one o f f e r e d by
Mr. Weed. This resolution was as follows:
"WHEREAS, Mr.Harrison, Secretary of t h e
Governors' Conference,has stated that in h i s opinion
the Governors' Conference would welcome an expression
of opinion from this Conference as to the a d v i s a b i l i t y
of amending Regulation J or taking other steps in such
manner as to p r o t e c t Federal reserve banks from l i a b i l i t y in accepting another bank d r a f t in remittance
f o r the f i r s t bank d r a f t ;
"BE IT RESOLVED, that i t i s the opinion of
t h i s conference t h a t Federal reserve banks should not
seek to be protected against l i a b i l i t y which might r e s u l t from the acceptance of a second or subsequent
bank d r a f t . 1 1




V95
Page 3.
This resolution was ad op ted-"by the Conference with one d i s s e n t i n g vote Judge Ueland voting "no."
The second question submitted "by the Governors' Conference to
the Conference of Counsel was as follows:
"Whether or not i t would be advisable as a matter of
law to have the Federal reserve banks issue a uniform
c i r c u l a r containing a form of contract between banks and
t h e i r depositors, requesting member and clearing-member
banks to amend their c o n t r a c t s (contained on deposit
s l i p s and signature cards) in accordance with the form
proposed in the c i r c u l a r . "
In reply to t h i s question^a resolution was submitted to the conference by Mr.Powell with an amendment by Mr. Baker, in the ^following
form:
"That i t be the sense of t h i s conference that i t
would not be advisable to have the Federal reserve banks
issue a uniform c i r c u l a r containing a form of contract
between banks and t h e i r depositors requesting member and
non-member clearing banks t* amend t h e i r contracts in
accordance with the form proposed in the c i r c u l a r .
BE IT FURTHER RESOLVED that t h i s conference expresses i t s sympathy with any p u b l i c i t y through the
Federal Reserve Board or t h e Federal reserve banks
which w i l l inform member banks, non-member clearing banks and
the public as to the legal e f f e c t of Regulation J . "
This resolution was unanimously adopted by the Conference.
The t h i r d topic suggested by the Governors 1 Conference was as

follows:

"Whether or not i t would be advisable f o r the Federal
reserve banks to amend t h e i r check c o l l e c t i o n c i r c u l a r s so
as to provide t h a t the act of submitting checks to Federal
reserve banks f o r c o l l e c t i o n w i l l be construed, as a warranty
that the depositor has lodged with the depositing bank the
required, agreements."
A f t e r discussion of this question, a resolution was offered to t h e Conference by Mr. Newell as follows:




796
Page 4.

*1* i s the sense of thif conference'that i t i s not
advisableifor the Federal rsterve banks to amend their
collection circulars so as tQ provide that the act of
submitting checks to Federal reserve banks for collection
will be construed as a warranty that the depositor has
lodged with the depositing brinks appropriate agreements. *
This resolution was thereupon unanimously adopted.
2Sae fourth and f i f t h questions submitted tp the Conference of
Counsel by the Governors'* Conference were thai considered together.
These questions were as follows;
"Necessity of Federal reserve banks' guaranteeing prior
endorsements on non-cash collection items."
".Advisability of Federal reserve banks using words in
their endorsement# on both checks and non-cash items to limit
their l i a b i l i t y when guaranteeing prior endorsements. *
After a short discussion these topics were referred to a comnittee consisting of Messrs. Wallace, Agnew and Mason, with the understanding that the
committee would confer with Mr. St rater and Mr. Harrison. The comnittee
met and drafted a report and submitted the same to the Conference. The
report was as follows:
"The undersigned members of the committee appointed te
consider and report upon Questions 4 and 5 submitted by the Governors' Conference, wish to report as follows:
"In many states the courts have held that a forwarding bank
endorsing a non-cash item 'for collection 1 or in similar terms
thereby warrants to i t s correspondent the genuineness of prior
endorsements. In other states the courts have held that in such
cases the forwarding bank does not warrant the genuineness ef
prior endorsements unless express words to that effect are added
to the endorsement. There is alas conflict in the authorities
as to whether or not the ordinary endorsement 'Pay
the order
of any bank or banket* i s to be considered as equivalent to a
qualified endorsement or a general endorsement.
*
"If the Federal reserve banks receive non-cash item# without requiring a warranty of prior endorsements stated in express ,
terms, and transmit or c'ollect such items either with or without
a warranty of prior endorsements, there i s danger that the payer
or some person mA sequent to the Federal reserve bank may be able




797
Page 5

to recover from the Federal reserve bank i f any endorsement p r i o r
to that of such "bank "be found, a f t e r payment to to a forgery, and
the Federal reserve tank may Ids tillable t o recover from the tank
which transmitted the non-cash item to the Federal reserve tank.
Thus the loss w i l l f a l l on the Fedoral reserve bank, t y reason
of the f a c t that the legal e f f e c t of an endorsement containing
no express words of warranty may te diffar-snt in the State in
which the Federal roserva tank collected the non-cash i t am and
the S t a t e in which i t would te compelled to a s s e r t i t s remedy
against the tank which had transmitted the item to i t , and t y
reason of other possible complications a r i s i n g under c o n f l i c t
of laws.
"We t e l i e v e the Federal reserve tanks should determine
whether or not they desire to warrant the genuineness of prior
endorsements upon non-cash items handled t y them. The determina t i o n of t h i s question is a matter of tanking p o l i c y and must
t e decided t y considering what her or not the business put l i e
can t e s t te. served t y a rule under which the Federal reserve
tank assumes r e s p o n s i t i l i t y to the p a r t y from which i t c o l l e c t s
or to which i t remits a non-cash item and requires indemnity from
the party from which i t receives non-cash items. Your committ e e , ho-vev^r, believes t h a t the policy of requiring a guaranty and
guaranteeing prior endorsements i s economically sound, and
should t e adopted as a uniform practice throughout the Federal
fiaserve System.
"If the Federal reserve tanks desire to assume the r e s p o n s i t i l i t y for the genuineness of prior endorsements, they
should incorporate an express guaranty to that e f f e c t in t h e i r
endorsement stamp and should require the tanks from which such
items a r e received to make a a i m i l a r guaranty f o r the protection
of the Federal reserve tanks.
"If the Federal reserve tanks do not desire to assume
r e s p o n s i t i l i t y for the genuineness of p r i o r endorssments .they
should protect themselves t y adding to t h e i r c o l l e c t i o n endorsement express words negativing t h e i r r e s p o n s i t i l i t y for
prior endorsements.
"We t e l i e v e that Questions 4 and 5 are so c l o s e l y a s s o c i ated t h a t i t i s e a s i e r to answer both of them a t the same time
and, t h e r e f o r e , in the atove report we have endeavored to answer
both questions a t once.
(Signed) M. G. Wallace
L. E. Mason
A. C. Agnew
Committee"




791
Page 6,

X-4303

This report of the committee was accepted "by the Conference, and a f t e r
discussion the report was on motion unaniimusly adopted as the report
of the Conference.
On the morning of December 6, Mr« Awa.lt representing the Treasury
Department appeared "before the Conference to discuss the matter of charging tack War Savings Stanps found to be c o u n t e r f e i t a f t e r they had been
credited by the Treasury Department to the Federal Bes3rve banks from
which they had been received and by which thay had been cashed as f i s c a l
agents of the Government. The questions considered were whether or not
the Treasury Department had a r i g h t to charge back such c o u n t e r f e i t War
Savings Stamps against the Federal reserve banks from which they were r e ceived, and whether and to what extent the Federal reserve banks should
a s s i s t the Treasury Department in recovering the losses represented by
cashing such c o u n t e r f e i t War Savings Stamps. These questions were discussed
in some d e t a i l w i t h Mr. Await and a f t e r he had r e t i r e d , the following r e s olution was submitted to the Conference by Mr. Newell:
"RESOLVED That i t i s the opinion of t h i s conference :
"1. That the several Federal reserve banks are under no
legal obligation to reimburse the Treasurer wf the United
States for the amount of c o u n t e r f e i t War Savings Stamps now
or h e r e a f t e r paid by them as f i s c a l agents of the United
States unless said Federal reserve banks have f a i l e d to use
due care a t the time said stamps were paid by them.
"2. That the several Federal resarve banks should not
comply with the request of the Treasurer of the United
States to c r e d i t him with the amount of such stamps now d i s covered to be c o u n t e r f e i t .
"3. That the several Federal reserve banks which have
now or nay h e r e a f t e r pay such c o u n t e r f e i t stamps should cooperate with the Treasurer of the United States in recovering from the persons or banks by whom such stamps were presented to said banks for payment of the amounts t h e r e o f , but
that such cooperation should not extend to charging to the
account of any. member or nonmember clearing bank with any
Federal reserve bank the amount of any such stamp and no suit
should be i n s t i t u t e d by any Federal reserve bank (as F i s c a l
Agent of the United States) to recover back the amount paid
on any such stamps.
"4. That as to the amounts for which the several
Federal reserve banks have reimbursed postmasters for payments made by them on such c o u n t e r f e i t stamps the several
Federal reserve banks, as f i s c a l agents of the United S t a t e s




7 9 9
Page 7
should make counter-entries in t h e i r accounts with the
Treasurer of the United S t a t e s , a s requested by him."
This resolution was unanimously adopted.
Topic 1 of the f i f t h main division of the program was d i s cussed informally in some d e t a i l , a n d i t was decided to make a formal
, recommendation to the Standing' Committee on Collections with regard to
' t h i s matter. This topic reads as follows:
"Incorporation into non-cash c o l l e c t i o n c i r c u l a r s
of warranty by member and non-member c l e a r i n g banks sending
items to Federal reserve banks f o r deposit or c o l l e c t i o n
that by such action they authorize the Federal reserve banks
to handle checks subject to the terms and conditions of Regulation J ; warrant that they have a u t h o r i t y to give Federal
reserve banks such authority;and they a g r e e . t o indemnify the
Federal reserve banks f o r any loss r e s u l t i n g from the f a i l u r e
of the sending banks to have such a u t h o r i t y . "
Mr. Lfesan made t h e following motion:
"MOVED that we recommend that the Standing Committee
on Collections include in i t s proposed form of non-cash
collection c i r c u l a r a provision that es.ch menber and nonmember c l e a r i n g bank which sends non-cash items to any Federal
reserve bank for collection shall by such a c t i o n be deemed
to have warranted to the Federal reserve bank that i t has
authority to empower the reserve bank to handle the items
in the manner herein provided and to have agreed to indemnify
any Federal reserve bank for any loss r e s u l t i n g from the
f a i l u r e of such sending bank to have such a u t h o r i t y . "
This motion was duly seconded and unanimously adopted by the Conference.
Although a l l the matters on the program were considered and
discussed by the Conference, formal action was taken only in the i n stances above noted.
The Conference adjourned on December 6th a t 4:30 P.M.




(Signed) George B. Vest
Secretary#

800
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




X-4204
December 10, 1924
SUBJECT: Expense Main Line, Leased. Wire System,
November, 1924
Dear Sir:
Enclosed, herewith you will find, two mimeograph
statements, X-4204-a and X4204-b, covering in detail
operations of the main line, Leased Wire System, during
the month of November, 1924.
Please credit the amount payable by your bank
in the general account, Treasurer, U. S«, on your books,
and issue c/D Fonn 1, National Banks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund," Leased Wire System, sending duplicate o/D to Federal Reserve Board.
Yours very truly,

Fiscal Agent.
(Enclosure)

TO GOVERNORS OF ALL BANKS

CHICAGO,

x-4204-a
REPORT SHOWING CLASSIFICATION A D NUMBER OF W R S
N
OD
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE M N H OF NOVEMBER,
OT
1924.

Fed. Res.
Bank Business

Froqa
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

Percent of
Total Bank
Business (*)

Treasury
Dept.
Business

22,369
150,849
32,32S
59,150
40,929
52,690
84,122
60,765
38,316
59,509
53,420
94,866

3,327
5,669
4,869
4,537
3,004
3,397
5,723
4,733
1,955
4,284
2,556
9,993

749,613

Total

2.98
20.12
4.31
7.39
5,46
7«04
11.22
8.11
5.11
7-98
7.13
12.65
100.00

War
Finance Corp.
Business

Total

-

25,696
156,550
37,197
63,687
43,933
56,087
89,845
65,498
40,271
64,093
55,976
104,859

54,047

32

803,692

-

32
—
-

-

-

-

-

Board

254,499

41,169

340

296,008

Total

1,004,112

95,216

372

1,099,700

Percent of Total

8.66$

91*31$

.03$

Bank Business 1,004,112 words or 91*33$
11
Treasury Dept.
95.216
" 8.67$
Total

1,099,328

FEDERAL RESERVE BOARD
Washington, D. C.
December 10, 1924




"100.00$
(*) These percentages used in c a l c u l a t i n g
the pro r a t a share of leased wire
expenses as shown on the accompanying
statement (X-4204-b)

REPORT OF EXPENSE
MAIN LIFE
FEDERAL RESERVE LEASED WIRE SYSTEM, NOVEMBER, 1924

Name of Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
J5t. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Fed, Res, Board
TOTAL

(#)
(*)
(&)
(a)

Operators'
Salaries

Operators 1
Overtime

$

$

250.00
920,82
200,00
272,00
165-00
255.00
(*>3,815,44
226,00
135,59
265.64
251,00
380.00
$7,186,49

7.00
-

-

33.00
-

-

$40.00

Total
Expenses
$

Wire
Rental

Pro Rata
Share of
Total
Expenses
$

. Ctedits

Payable to
Federal
Reserve
Board

250.00
927.82
200.00
272,00
I65.OO
255,00
3,848.44
—
226«00
185*59
265.64
251.00
38Ov00
$15,343. Ib..$i5,343.16

621.66
4,197.22
899.10
1,645.93
(#)1,343.68
1,468.61
2,340.59
1,691.82
1,065.99
1,664.70
1,487.38
2,639.91

$

250.00
927.82
200.00
272.00
I65.OO
255.OO
3,848.44
226.00
' 185-59
265.64
251.OO
38O.OO

371.66
3,269.40
699.IO
1,373-93
1,178.68
1,213.61
(*)i,507.85
1,465.82
880.40
1,399.06
1,236.38
2,258.91

$15,343.16 $22,569.65
(a)1,708.73
$20,860.92

(#)$21,065.59

$7,226.49

$15,346,95
(b)l,507.85
$13,839.10

Includes $204,67 f o r branch l i n e business transmitted over main l i n e c i r c u i t .
Includes s a l a r i e s of Washington o p e r a t o r s .
Credit
Received $8.73 from War Finance Corp. and $1,700.00 from the
Treasury Dept. covering business f o r the month of November, 1924.
(b) Amount reimbursable to Chicago.




X-4204-b

$

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

X-4306

December 11, 1934.

SUBJECT: Adjustments in Capital Stock Holdings of
Member Banks.
Bear S i r :
The Federal Beserve Board has approved the
recommendation of the recent conference of Federal
Reserve Agents that adjustments of c a p i t a l stock holdings of iremher "banks "be rrade ser.i-annuaily instead of
q u a r t e r l y , except in cases where a considerable amount
i s involved. Voluntary applications to increase or
reduce stock w i l l be handled as a t present, but the
Fedsral reserve ba.nks o r d i n a r i l y w i l l only request adjustments of c a p i t a l stock twice instead of four times
a year.
Very t r u l y yours,
J . 0. -Noall,
Assistant Secretary*

TO ALL FEDERAL RESERVE AGENTS.




803

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

x - 4 2 0 7

Deceriber 12, I92U

SUBJECT: Necessity of new Clayton Act Application where
1/1 rector has resigned from and again i s elected
to serve the same i n s t i t u t i o n .
Dear S i r :
The question has recently been r a i s e d whether an o f f i c e r or d i r e c t o r of a bank who has received permission from
the Federal Reserve Board under the Kern Amendment to the Clayton Act to serve such bank and l a t e r resigns h i s p o s i t i o n as
o f f i c e r or d i r e c t o r , mast apply again f o r the permission Of the
Board i f he subsequently desires to serve the same i n s t i t u t i o n .
This i s a question upon which t h e Board'has never h e r e t o f o r e
been called to r u l e .
I t i s believed thkt the mOst reasonable i n t e r p r e t a t i o n of the law is t h a t a resignation from a bank which a d i r e c t o r
has been permitted to serve by permission of the Board i s ipso
facto a termination of the permission in so f a r as service upon
that p a r t i c u l a r bank i s concerned. Such a resignation i s i n r e a l i t y an abandonment by the d i r e c t o r of h i s r i g h t to serve the part i c u l a r bank. I t i s a voluntary relinquishment of a p r i v i l e g e
granted to him,
There are also c e r t a i n p r a c t i c a l considerations which
would make t h e requirement f o r a new permit in such cases d e s i r able. Conditions may change materially between the date of the
permit and t h e time when the director wishes to renew h i s connection with the uank from which he has resigned. The Board,
moreover, would r a r e l y receive information as to changes of t h i s
character, i f a new a p p l i c a t i o n were not required.
You are advised, therefore, that i n cases of t h i s kind
the Board w i l l require t h a t the director in question make a new
application to the Board f o r permission to serve the bank or
banks from which he has resigned, together with the other banks
which he i s serving a t the time.
By order of the Federal Reserve Board.
Very t r u l y yours,

Walter L. Eddy,
Secretary
TO ALL FEDERAL RESERVE AGENTS



805
X-4208

TREASURY DEPARTMENT
• f f i c e of the Secretary
WASHINGTON

December 0, 1924.
The Governor
Federal Reserve Board.
Sir:
You are hereby advised t h a t the Department has r e f e r r e d to the Disbursing
Clerk, Treasury Department, f o r payment, the account of tha Bureau of Engraving
and P r i n t i n g f o r preparing Federal reserve notes during the period November 1,
1924, to November 29, 1924, amounting to $36,960.00, a s f o l l o w s , Federal Reserve Notes, 1914
ii
|10
$20
New York
245,000
—
—
Cleveland . . . . . . . . . . . . . . . .
*72,000
*
—
—
—
Chicago
218*000
—
—
Kansas City
. . . . 129,000
—
—
Dallas
100,000
50,000
50,000
San Francisco
fo.OOO
—

860,000

50,000

50,000

960,000 sheets At $38.50 p j r M . ,

Total
245,000
72,000
218,000
129,000
200,000
96,000

960,000

$36,960.00

The charges against the several Federal Reserve Banks are as f o l l o w s , CompenPlate
Sheets
sation
Printing
Materials
#&tal
New York
Cleveland
Chicago
Kansas City
Dallas . . .
San Francisco

,

245,000
72,000
218,000
129,000
200,000
96.000
960,000

$4,348.75
1,2)8.00
3,869.50
2,289.75
3,550.00
1,704.00
$17,040.00

$2,004,10
588.96
1,783.24
1,055.22
1,636.00
785.28
$7,852.80

$3,079.65
905.04
2,7^0.26
1,621.53
2,514.00
1,206.72
$12,067.20

$ 9,432.50
2,772.00
8,393-00
4,966.50
7,700.00
1,696.00
$36,960.00

The Bureau appropriations w i l l be reimbursed i n the above amount from the
i n d e f i n i t e a p p r o p r i a t i o n "Preparation and Issue of Federal Reserve Notes, Reimbursable" , and i t i s requested that your board cacuse such i n d e f i n i t e approp r i a t i o n to be reimbursed in like amount.




Respectfully,
(Signed) S. R. Jacobs,
Deputy Commissioner.

FEDERAL RESERVE BOARD
WASHINGTON

X-4209

address official correspondence to
the federal reserve board

December 13, I92U
(

SUBJECT: E f f e c t of Consolidation of S t i t e Banks on
Clayton Act Permits.
Dear S i r :
The opinion of the Federal Reserve Board has been requested as
to whether a person who has received t h e permission of the Board to serve
at the same time as d i r e c t o r of c e r t a i n banks, one of which i s a State i n s t i t u t i o n which subsequently consolidated with another S t a t e bank under
State law, w i l l be required to make a new a p p l i c a t i o n to the Board a f t e r
such consolidation in order to continue to serve the consolidated i n s t i t u t i o n together with the other banks which he has been s e r v i n g .
With r e f e r e n c e to the consolidation of n a t i o n a l banks the Board
ruled on November 6, 1923, (X-388O) as f o l l o w s :
"The Board accordingly r u l e s t h a t where a permit i s
granted to a person to serve as d i r e c t o r of a n a t i o n a l bank
and some other bank, and the n a t i o n a l bank subsequently cons o l i d a t e s with another n a t i o n a l bank, under the Act of November 7. 1918, the permit w i l l continue to be e f f e c t i v e
and w i l l authorize the d i r e c t o r in question to serve the
consolidated n a t i o n a l bank and the other bank i r r e s p e c t i v e
of which n a t i o n a l bank c h a r t e r was selected as the b a s i s of
the c o n s o l i d a t i o n . "
In reaching the conclusion j u s t s t a t e d , the Board s a i d :
"While a permit issued under the Kern Amendment i s
p r i m a r i l y a personal l i c e n s e to the applying d i r e c t o r ,
giving him the r i g h t to serve in c e r t a i n c a p a c i t i e s , i t a l s o
.. confers upon the bank involved a d e f i n i t e , though i n c i d e n t a l ,
i n t e r e s t in the d i r e c t o r ' s services and the Board b e l i e v e s
t h a t t h i s i n t e r e s t of the bank should be construed as i n cluded in the r i g h t s , f r a n c h i s e s or i n t e r e s t s of a c o n s o l i d a t ing n a t i o n a l bank within the meaning of the Act of November 7,
1918."
Under the reasoning of t h i s r u l i n g the Board holds t h a t i n any
case where two or more banks consolidate under a s t a t u t e , e i t h e r Federal
or S t a t e , which v e s t s i n t h e consolidated i n s t i t u t i o n a l l the r i g h t s ,
f r a n c h i s e s or i n t e r e s t s of the consolidating banks, the consolidated i n -




Page 2

X-4209

s t i t u t i o n would, as a matter of law, have the right to the service of
any d i r e c t o r of any of the consolidating banks; in other words that
a d i r e c t o r who i s serving a bank by the permission of the Federal Reserve Board may, a f t e r h i s bank consolidates with another, continue
to serve the consolidated i n s t i t u t i o n if the s t a t u t e under which the
merger was e f f e c t e d gives to t h i s i n s t i t u t i o n a l l the r i g h t s , f r a n c h i s e s
and i n t e r e s t s of the constituent banks. The Board r u l e s , t h e r e f o r e ,
that in such cases i t w i l l not require the d i r e c t o r e f f e c t e d to cake
ap pl i c a t i o n to the Board f o r a new permit, but the d i r e c t o r w i l l be permitted, without any formality, to continue to serve the consolidated ins t i t u t i o n together with the other banks which he was serving before the
consolidation took p l a c e .
In every case of t h i s kind, however, the Board w i l l request
the Federal Reserve Agent to consider and report with recommendation
whether or not the s i t u a t i o n existing as a r e s u l t of the consolidation
of the banks involved has so e f f e c t e d the question of competition between the banks upon which the d i r e c t o r i s serving as to make advisable
the revocation of the permit formerly issued. In reporting on these
matters the Federal Reserve Agent should consider e s p e c i a l l y the question
of competition between the branches of the consolidated i n s t i t u t i o n , if
any, and the other banks which the director i s serving.
Very t r u l y yours,

Walter L. Eddy,
Secretary
TO ALL FEDERAL RESERVE AGENTS




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

Subject:

December 11, 1924.
X-4210

Reconcilement of Provisions of Telegraphic
Transfer Circulars

Dear Sir:
The Federal Reserve Board approves the action of
the recent Governors' Conference in voting that the matter of
reconciling the provisions of t h e telegraphic t r a n s f e r c i r c u l a r s of the Federal reserve banks with the regulations embodied in the Board's l e t t e r of June 21, 1924 (X-4099)>
r e f e r r e d to the Leased Wire Committee, in collaboration with
the Standing Committee on Collections, with the request t h a t
the Committees make a study of the question and such recommendations to the Board as may be necessary in order to reconcile
the p r a c t i c e of some reserve banks with e x i s t i n g regulations
governing the use of Federal reserve leased wires, or else
make appropriate amendments to the Board's r e g u l a t i o n s .
Very t r u l y yours,

Walter L. Eddy,
Secretary

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.




FEDERAL RESERVE BOARD

809

WASHINGTON
address official correspondence to
the federal reserve board

X-4211
December 13, 1924

SUBJECT: Expenditures of Federal Reserve Bpnk Funds f o r
Welfare and Educational Work.
Dear S i r :
The r e s o l u t i o n adopted by the recent Governors'
Conference following the conference discussion of the subj e c t of expenditures of Federal reserve bank funds for welf a r e and educational work among the employees of the Fede r a l reserve banks has bsen considered by the Federal Reserve Board, and the Board has concluded that "FEDERAL
RESERVE BAMS HAVE THE RIGHT TO M K APPROPRIATIONS FROM
AE
THEIR FUNDS FOR THE PURPOSE OF WELFARE MD EDUCATIONAL
W R A O G THE EMPLOYEES OF THEIR RESPECTIVE BANKS."
OK MN
The Board i s of the opinion "THAT PAYMENTS BY
FEDERAL RESERVE BANKS FOR THE PURPOSE OF WELFARE A D EDUN
CATIONAL W R A O G THEIR EMPLOYEES M Y BE CONTINUED", and
OK MN
A
has ruled t h a t "THE EXPENDITURES FOR WELFARE A D EDUCATIONN
AL WOR-' SHALL BE BUDGETED IN DETAIL AND BE M D SUBJECT TO
AE
THE APPROVAL OF THE FEDERAL RESERVE BOARD".
A copy of the budget should accompany the request
f o r the Board's approval of the appropriation.
Very t r u l y youre,

Walter L. Eddy,
Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS




810
Federal Reserve
Board
OFFICE

X-U212

CORRESPONDENCE

TO

Governor Crissinger

FROM

Mr. Goldenweiser

December 8, 1924.
SUBJECT: A r t i c l e in the Commercial
and Financial Chronicle
f o r November 22, 1924.

Eight pages of the Chronicle for Novenfcer 22 were devoted to an
a r t i c l e e n t i t l e d "Imperfect working of Federal Reserve System - over-satu r a t i n g c r e d i t and currency".

In view of the wide c i r c u l a t i o n of the

Chronicle among persons i n t e r e s t e d in f i n a n c i a l problems, i t i s worth while
to consider some of the p o i n t s in t h i s e d i t o r i a l .
Resolution of Bankers' Association.
The a r t i c l e begins with a quotation from the r e s o l u t i o n of the
American Bankers' Association l a s t October in Ciicago to the e f f e c t t h a t the
Operations of the Federal reserve banks "may tend to accentuate the swings of
the f i n a n c i a l pendulum r a t h e r than to keep the swings from going too f a r in
ei t h e r d i r e c t i o n , " and that i t should be c a r e f u l l y considered whether i t
would not be"wise to l i m i t the Federal reserve banks to t h e i r primary function
as banks of issue and r e d i s c o u n t . "

The w r i t e r believes t h a t the Bankers 1 Asso-

c i a t i o n r e s o l u t i o n "has come not a moment too soon."

He thinks t h a t "in view

of the recent glutted condition of the money markets of the country no one
can t r u t h f u l l y a s s e r t that the Federal reserve banks have functioned properly"and that "the volume of the c i r c u l a t i n g medium of the country i s being kept
at a level enormously above what i t should be. "




Page 2.

a-4212

Causes of excessive ease in the money market.
The w r i t e r discusses the reasons usually assigned f o r the over abundance of funds, namely, the trade recession and the gold inflow, but i s
convinced t h a t in addition to these causes the a c t i v i t i e s of the Federal r e serve banks have contributed to the excessive supply of c r e d i t .

He i s of the

opinion t h a t , while the irember banks have gone back to normal conditions a f t e r
the war, "the reserve banks have been unable or unwilling to get back and have
stopped a t the half way p o i n t . " On t h i s point the writer i s c l e a r l y mistaken,
since the t o t a l volume of member bank c r e d i t a t the present time i s about
$2,300,000,000 larger than a t the post-war peak in the autumn of 1920, while
t o t a l earning a s s e t s of the reserve banks are about $2,300,000,000 l e s s than
they were a t t h a t time.
As proof of the statement that the reserve banks have increased the
amount of c r e d i t in the market the writer p o i n t s out that while what he c a l l s
"mercantile paper" (discounts) a t the reserve banks i s now only about
$23^,000,000, the reserve banks have bought during the year over $500,000,000
of Government s e c u r i t i e s and l a t e l y have purchased large volumes of acceptances.
In t h i s statement the w r i t e r overlooks, f i r s t , that while the reserve banks
have purchased Government s e c u r i t i e s to t h e extent of $500,000,000 there has
been an equivalent decline of discounts, and, secondly, that purchases of
acceptances have been l a r g e l y on the i n i t i a t i v e of acceptance dealers who
have o f f e r e d t h e i r b i l l holdings to the reserve banks because the firmer cond i t i o n s in the money market have caused the member banks to c a l l some of
their loans to these d e a l e r s .




A comparison of conditions now and a year ago

8123
PAGE 3 -

X-4212

and an examination of the gold inports during the period i n d i c a t e

that f o r

the year as a wiiole the increase of member tank c r e d i t approximately c o r r e s ponds to the amount for which the gold imported from abroad furnished a b a s i s .
Total loans and investments of a l l member banks increased by about
$2,000,000,000 between September 13, 19^3

an(

^ October 10, 1924, and n e t gold

inports for the period were about $375,000,000, indicating t h a t the gold inflow
?,lone, when aaded to the reserves of member banks, has been much more than suff i c i e n t to serve as a b a s i s f o r the increased lending power of member banks.
Ea-rning a s s e t s of the reserve banks, on the other hand, are ne higher now than
they were a year ago.
Functions of the reserve banks.
The w r i t e r ' s views on the scope and functions of the Federal reserve
system are that "the reserve banks exist only to provide surplus or excess
c r e d i t " and t h a t "in a period of pronounced ease in the money market . . . not
a dollar of t h e i r deposits ought to be put out in the shape of reserve n o t e s . »
The question whether the reserve banks are to be merely emergency i n s t i t u t i o n s
operating a t times of seasonal or c y c l i c a l demand for excess c r e d i t or whether
they shall be continuously in the market, i s a question on which there has been
much d i f f e r e n c e of opinion.

The Federal Reserve Board however, has from the

beginning taken the p o s i t i o n that i t i s important f o r the reserve banks a t a l l
times to remain in touch with the market and that f o r t h i s reason i t i s necessar
for these banks always to have in t h e i r possession discounts, acceptances, or
s e c u r i t i e s in order not to be cut off e n t i r e l y from contact with the c r e d i t
situation.




Pa-ge 4.

X-4212

The w r i t e r ' s views on currency.
On the subject of Federal reserve notes the writer has strong convictions baseo l a r g e l y on a misunderstanding of the nature of the Federal reserve
note. He says that when money rates are down to 3 and 3 l / 2 per cent and there
i s no

mercantile demand f o r reserve bank c r e d i t , t h i s i s conclusive evidence

that there should be no Federal reserve n o t e s outstanding, and that gold rather
than notes should be in c i r c u l a t i o n . This view overlooks the f a c t that Federal
reserve notes are not issued by the reserve banks, except in response to a currency demand, and that i t makes no d i f f e r e n c e in the e x i s t i n g c r e d i t and money
market s i t u a t i o n

whether the reserve banks issue Federal reserve notes or gold

in response to t h i s demand. I t i s true that by paying out gold the reserve
banks decrease their p o t e n t i a l lending power more than by issuing Federal r e serve notes, but in view of the f a c t that t h i s p o t e n t i a l lending power i s now
f a r in excess of any probable demand f o r reserve bank c r e d i t , t h i s e f f e c t of
paying out gold i s of only academic i n t e r e s t .
The saturation p o i n t .
The w r i t e r says that the only way the reserve banks can acquire gold i s
either by i s s u i n g Federal reserve notes br by accepting gold on deposit.

From

t h i s he argues that i f the note issues and the deposit l i a b i l i t i e s of the r e serve banks exceed t h e i r gold reserves, t h i s i s evidence t h a t the reserve
banks have put into use more c r e d i t than they have received from the p u b l i c .
This statement i s fundamentally correct. I t i s true t h a t to the extent that the
deposits and notes exceed the reserves of the reserve banks there i s more bank
c r e d i t in use, as a r e s u l t of the operation of the reserve banks, than there




Page 5

X-4212

would have been i f the deposits had been held by tha member banks and the geld
had been in c i r c u l a t i o n . The conclusion, however, that t h i s excess, which
amounts to about $1,000,000,000 represents "saturation" ?f c r e d i t by the reserve
banks does not follow. While the excess measures the extent to which the existence of the reserve b&nks has added to the volume of c r e d i t in existence, i t
i s not clear what i s meant by s a t u r a t i o n . The f a c t i s that the larger volume
of currency in c i r c u l a t i o n a t the present time compared with l $ l 4 , p r i o r to
the establishment of the Federal Reserve System, i s due t# the higher level of
p r i c e s . The l e v e l of wholesale p r i c e s i s about $0 per cent above what i t was
in 1913 and. the volume of money in c i r c u l a t i o n i s about 40 per cent above i t s
level at that time.

I t may be argued that i t i s because of the increase in
I
currency that p r i c e s have increased, but whatever t r u t h there may be in t h i s
argument i t s proper application i s to %e war period and not to recent activ*>
i t i e s of the reserve banks. P r i c e s increased during the war in the United
S t a t e s and throughout the world, and in order to meet the requirements of b u s i ness at the e x i s t i n g p r i c e level more currency i s required than was needed in
1914.
The complete adjustment between the demand f o r currency and the volume
of i t outstanding "under the p r e s e n t plan i s one of the d e f i n i t e gains r e s u l t i n g
from the establishment of the Federal Reserve System, and t h i s adjustment i s in
no way a f f e c t e d by the policy of thd reserve banks to pay out one or another
kind of currency, a point which the writer f a i l s to understand. He i s e n t i r e l y
mistaken when he says that i f the gold coming from abroad had merely displaced




Page 6

X-U212

Federal reserve notes in c i r c u l a t i o n there v/ould lse-,no. such redundancy of
currency and no such plethora, of funds as now p r e v a i l s . " The f a c t i s that the
Federal reserve banks have paid out $700,00C,GGC of gold i n t o c i r c u l a t i o n in
the l a s t two y e a r s , an amount somewhat in excess of gold imports f o r the p e r i o d ,
and Federal r e s e r v e rote c i r c u l a t i o n has declined by approximately the same
amount. The Federal reserve banks have paid out more gold i n t o c i r c u l a t i o n
since the middle of 1922 than they have received from abroad, so that the tot&l
cash reserves are now smaller than they were two years ago, but t h i s policy has
had no e f f e c t on c r e d i t and currency conditions, beyond merely changing the form
of money in c i r c u l a t i o n .
Expenses of the reserve banks.
The author also discusses the n e c e s s i t y f o r the reserve banks to earn
t h e i r expenses, and expresses h i s conviction t h a t t h i s was the one reason why
the managers of the system permitted the issuance of a large excess of reserve
bank c r e d i t w h a t e v e r ingenious arguments they may have put f o r t h to explain
t h e i r actions. In t h i s connection he quotes B. M. Anderson tc the e f f e c t t h a t
g r a t u i t o u s s e r v i c e s by the r e s e r v e banks should be discontinued, and W i l l i s t o
the e f f e c t t h a t earning a s s e t s of about $1,000,000,000 a year w i l l be required
to meet the expenses of the reserve banks and t h a t , t h e r e f o r e , t h e banks should
enter the market more a c t i v e l y . He does not argue with W i l l i s , who b e l i e v e s
t h a t the reserve banks should a t a l l times be a large f a c t o r in thenarket, but
draws from W i l l i s 1 view the opinion that the f r e e services are a great menace
because they make i t necessary f o r the reserve banks to keep $1,000,000,000
of c r e d i t constantly in u s e .




Page 7.

X-4212

>

The discount r a t e .
The w r i t e r quotes Anderson to the e f f e c t that the discount r a t e should
be regularly kept higher than the markst r a t e , "but goes f a r t h e r than' Anderson by
saying that the rediscount r a t e should never be l e s s than $ or 6 per cent. This
i s in keeping with h i s general theory t h a t the Federal reserve banks should
function only in emergencies. Reserve bank c r e d i t , according to h i s view, should
be used only when i t i s badly needed and when a d i f f e r e n c e of a few per cent
would hardly be noticed.
To the w r i t e r "there i s something preposterous about the attempt to
t h r u s t excess c r e d i t , the only c r e d i t at the command of the Federal reserve
banks, upon the member banks when they have no need f o r I t * " He thinks t h a t the
e f f e c t of t h i s i s to force banks into speculation. He says t h a t in view of the
f a c t that the banks can borrow from the reserve banks a.t 3 a nd 3 1/2 per cent
and can buy good investments a t 4 and 5 per cent, their r e f r a i n i n g from doing
t h i s i s a sign that they have b e t t e r vision than the reserve banks. The f a c t
that member banks have at a l l times lent or invested funds up to the l i m i t of
t h e i r available reserves and t h a t they have now a volume of c r e d i t f a r in excess
of the 1920 peak i s not taken .into consideration in t h i s statement. He also sees
a danger in the f a c t t h a t , the lower the discount r a t e the more the reserve banks
w i l l have to have invested in order to earn t h e i r expenses, and that t h i s v i cious c i r c l e would lead to progressive i n f l a t i o n .
The w r i t e r ' s remedies.
As a f i n a l conclusion from t h i s discussion the w r i t e r proposes the r e p e a l of the 1917 amendments which required that a l l the reserves of the member




Page 8

X-U212

banks bo kept with the reserve banks snd permittod the reserve banks to iusua
notes d i r e c t l y against gold. If the w r i t e r ' s views on the s i t u a t i o n were c o r r e c t
h i s remedies would not be adequate. With the present volume of reserves the r e serve banks could t r a n s f e r to the member banks that proportion of the reserves
held by these banks p r i o r to 1917 and s t i l l have enough funds l e f t for any amount
of c r e d i t expansion that may reasonably be anticipated; P r o h i b i t i n g the reserve
banks from issuing notes against gold would under the present circumstances
have no e f f e c t whatever, as i s indicated by the f a c t , already mentioned, t h a t
the reserve banks have a c t u a l l y paid out gold r a t h e r than notes to the .extent
of $700,000,000 without any e f f e c t on the c r e d i t s i t u a t i o n .
To sum up, the author, displeased with the f a c t that the i n t e r e s t r a t e
i s what he considers abnormally low and believing that the reserve banks are a t
l e a s t in p a r t responsible, has based h i s arguments on a misunderstanding of our
system of currency issues and of the scope and l i m i t s of the power possessed by
the Federal r e s e r v e banks. There may be too much bank c r e d i t in use, but the
w r i t e r o f f e r s no f r e s h evidence on t h i s point and proposes no remedies t h a t
would accomplish h i s purpose.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




X-4213

December l6, 1924»

SUBJECT:

Oaths of O f f i c e .

Dear S i r :
I am sending you herewith a supply of
the various forms Of oaths of o f f i c e which i t
w i l l be necessary for you to have executed by
newly elected or appointed d i r e c t o r s of your
Bank and i t s branches and by those o f f i c e r s
designated by the Federal Reserve Board f o r
terms beginning January 1, 192$.
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

TO ALL FEDERAL RESERVE AGENTS.

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

X-4214
December 17, 1924

SUBJECT:

Stocks of Unissued. F. R. Notes

Dear S i r :
You are requested to prepare and submit to the
Federal Reserve Board, before January 10, 1925> a*1
estimate of the amount of each denomination of the
Federal Reserve notes of your bank you may be c a l l e d
upon to issue during the calendar year 192|). This
information i s desired for the purpose of r e g u l a t i n g
the production of Federal Reserve notes during the
coming year.
For your guidance, I would s t a t e that the Board
i s of the opinion that i t s stock of unissued Federal
Reserve notes should at a l l times include approximately a twelve months' supply-of each denomination
Of the notes of each bank, and that not more than a
s i x months' supply of each denomination of unissued
notes should be in the custody of the Federal Reserve
Agents.
By direction of the Federal Reserve Board,
Yours very truly,

Walter L. Eddy
Secretary
TO ALL FEDERAL RESERVE AGENTS




820
FEDERAL RESERVE BOARD
WASHINGTON

X-4215

A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO
T H E FEDERAL RESERVE B O A R D

SUBJECT:

December 18, 1924

Annual Reports of Federal Reserve Agents

Dear S i r :
The Federal Reserve Board has approved the recommendation made by
the Federal Reserve Agents a t t h e i r recent conference, that t h e i r annual r e p o r t s be confined to a t e x t u a l discussion with such i n c i d e n t a l data and t a bles as appear proper, but t h a t detailed s t a t i s t i c a l tables be not used,
and. that r e f e r e n c e be made in each annual report to the s t a t i s t i c a l data
published by the Federal Reserve Board in i t s annual r e p o r t .
In preparing i t s own annual r e p o r t , t h e Board will follow the same
general arrangement of the s t a t i s t i c a l t a b l e s , i n both p a r t s I and I I , as
was adopted in the report f o r the year 1$2^, and accordingly t h e r e w i l l be
shown in p a r t I I ten schedules p e r t a i n i n g to each Federal r e s e r v e d i s t r i c t .
Copies of the schedules w i l l be forwarded t o you as socm as a v a i l a b l e for
comparison with any similar data that may have been prepared by your bank.
In case you f e e l tha.t the tables shorn in p a r t I I of the Board's report f o r
1923, considered in the l i g h t of the s t a t i s t i c a l data given in p a r t I , are
not s u f f i c i e n t l y complete, we s h a l l be glad to have you advise the Board at
your early convenience of any additions t h a t you think should be made.
At the beginning of p a r t I I of the report charts both f o r the
System and f o r each d i s t r i c t w i l l be grouped together instead of having the
chart for each bank shown on pages opposite the f i g u r e s f o r such bank.
I t i s understood that you will forward the text of your e n t i r e
report to the Board as in the p a s t , and that i t w i l l not be released for
publication u n t i l a f t e r i t has been passed upon by the Board.
Very t r u l y yours*

Walter L. Eddy,
Secretary.
TO AIL FEDERAL RESERVE AGENTS




X-4217

Proposed. Hall Amendments t o Section 9» H. R. 9387 (McFadden B i l l )

Page 11, l i n e 13, a f t e r the word "located" i n s e r t the following:
"and i t s h a l l be unlawful f o r any such a-pplying bank in any s t a t e
which does not by law or regulation, at the time of the approval
of t h i s Act, permit s t a t e banks or t r u s t companies c r e a t e d by or
existing under the laws of such s t a t e , to have branches within the
l i m i t s of municipalities in such s t a t e , to become such a stockholder of such Federal Reserve Bank except upon condition that such
applying bank relinquish a.iy branches which i t may have established
subsequent to the approval of t h i s Act".

Page 11, l i n e 23, a f t e r the word "thousand" i n s e r t the following:
"and PROVIDED f u r t h e r t h a t i t shall be unlawful for any such member
bank to e s t a b l i s h a branch within the l i m i t s of the municipality
where such bank i s located, in any s t a t e which does not by law or
regulation, at the time of the approval of t h i s Act, permit s t a t e
banks or t r u s t companies created by or existing under the laws of
such s t a t e to have branches within the l i m i t s of such municipali t i e s in such s t a t e . "




39C

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

X-4218
December 19, 1924

SUBJECT:

Bank and Public Relations Work.

Bear S i r :
The Federal Reserve Board has considered the
Committee r e p o r t submitted a t the recent Conference
of Federal Reserve Agents on the subject of 'tBaak and
Public Relations Work". The Board i s of the opinion
that Federal Reserve Banks should not undertake any
organized, concerted e f f o r t "to bring b e f o r e the
business men of the country the advantages they axe
receiving ** from the Federal Reserve System", but
should cooperate with organizations disposed t o be
h e l p f u l - such as the National Association of Credit
Men, the American Bankers Association, Chambers of
Commerce, and Agricultural and Civic Associations by f u r n i s h i n g them with such information about the
work of the System as they may properly u s e .
Very truly, yours,

Walter L. Eddy,
Secretary
TO ALL FEDERAL RESERVE AGENTS.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

X-U219
December 19, 1924.

SUBJECT:

I o t a Case - Federal Reserve Bank of Atlanta.

Dear S i r :
This i s to advise you t h a t the Federal
Reserve Board has approved the reconmendation of
the recent Conference cf Governors that i t would
be inadvisable to employ Special Counsel r e p r e s e n t a t i v e of a l l Federal Reserve banks to take
p a r t i n the case of Pousson v. Federal Reserve Bank
of Atlanta, brought in the 18th J u d i c i a l D i s t r i c t
Court, State of Louisiana., and since removed to
the proper United States D i s t r i c t Court (the soc a l l e d Bank of I o t a case).
Very t r u l y yours,

Walter L. Eddy,
Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

X-U220
December 19, 1924

SUBJECT:

Discontinuance of Member Bank Basic Line
Reports.

Dear S i r :
At the present time, the Federal Reserve Board i s
receiving semi-monthly reports from the Federal reserve
banks showing borrowings of member banks whose average
d a i l y borrowings equal three times t h e i r basic l i n e s , and
in addition, i s receiving monthly reports showing average
borrowings of those banks which were borrowing continuously
in excess of t h e i r c a p i t a l and surplus during the report
month.
The Board believes the basic l i n e r e p o r t s to be
the l e s s valuable of the two reports above r e f e r r e d to,
azid the Federal reserve banks are requested to discontinue
t h i s report to the Board as of January 1, 1925*
Very t r u l y yours,

Walter L. Eddy,
Secretary.

TO THE GOVERNORS OF ALL FEDERAL RESERVE BANKS
Copies to Federal Reserve Agents




82
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

X-4221

December i g , 1924.

SUBJECT:

Determination of Outlying D i s t r i c t f o r Purpose of
Reserve Reduction.

Dear S i r :
You a r e hereby advised that the Federal Reserve Board
has approved the following recommendation of the recent conference
of Federal Reserve Agents:
"That the Federal Reserve Board in determining
whether a member bank located in an outlying d i s t r i c t of a reserve or c e n t r a l reserve c i t y should
be permitted to carry reduced reserves as provided in Section 19, Federal Reserve Act, should be
guided in each instance by the r e s u l t s of an analy s i s of the character of the business of the app l i c a n t member bank or of a l l the bajiks of the
neighborhood group showing a proportion of (1) Balances due other banks
(2) Balances of corporations
(3) Public deposits
(4) Cash in v a u l t s . "
You a r e f u r t h e r advised that the Federal Reserve Board
has ruled that a bank applying f o r a reduction in reserves under
the provisions of Section 19 must have been a member of the Fede r a l Reserve System and i n operation as such f o r a period of a t
l e a s t one year p r i o r to the date of such application*
Very t r u l y yours,

Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS




826
FEDERAL RESERVE BOARD
WASHINGTON

X-U222

address official correspondence to
the federal reserve board

SUBJECT:

d e c s h & e r

1 9 ,

1 $ 2 4

Budget Committee.

Dear S i r :
The Committee on S a l a r i e s , Expenditures a i d E f f i c i e n c y of the Fede r a l Reserve Board h#,s given c a r e f u l considerate©n to the recommendations
made by the Governors a t the recent conference with respect to the adoption
of a "budget c o n t r o l of expenses and to other economies i n operation, and
has recommended t o the Federal Reserve Board and the Board has approved of
the appointment of a committee t o consult with such Federal reserve banks as
may request information -vith r e s p e c t to a budget system. The Board has appointed as members of the committee
Mr. L, R. Rounds, Chairman
Mr. M, J . Fleming
Mr. E. L. Smead
The Board hopes that a l l Federal r e s e r v e banks w i l l give consideration to the establishment of a budget system f o r the c o n t r o l of expenses
and requests t h a t any bank i n t e r e s t e d correspond d i r e c t l y with the chairman
of the above budget committee.
With respect to the recommendation of the conference "that the
Economy and E f f i c i e n c y Committee of the Federal Reserve Board be requested
to advise each Federal reserve bank whether t h a t committee, iti view of a l l
the information a t i t s disposal, has any s p e c i f i c suggestions td make to
the directors or o f f i c e r s of the several Federal reserve banks as to how
f u r t h e r economies# other than the adoption of a budget, might be e f f e c t e d
by the respective Federal reserve banks" the c o m m i t t e e recognizes the d i f f i c u l t y of making s p e c i f i c suggestions f o r economies without being possessed
of a d e f i n i t e knowledge of the d e t a i l e d operations of the banks and for t h i s
reason i t does not seem d e s i r a b l e to make any s p e c i f i c suggestions a t t h i s
time. I t w i l l , however, continue as i n the p a s t , to bring general suggestions t o the a t t e n t i o n of the Federal reserve banks from time to time and exp e c t s to correspond with the banks with reference to the cost of c e r t a i n
functions.
Very t r u l y yours,

Walter Ii. Eddy,
Secretary.
TO THE GOVERNORS OF ALL FEDERAL RESERVE BANKS




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board

X-4223
December 19, 192^

SUBJECT:

Circulation of Standard. Silver Dollars.

Dear S i r :
The Board understands t h a t as a r e s u l t of a c t i o n at the
recent Governors' Conference, the Governor of each Federal reserve bank w i l l recommend to h i s Board of Directors that the
bank undertake for a limited time and f o r a limited amount,
purely f o r the purpose of experiment, to pay the charges on
outgoing shipments of standard s i l v e r d o l l a r s , but not on incoming shipments, s u b j e c t to the understanding, however, that
the p r a c t i c e w i l l be discontinued if and as soon as i t i s shown
t h a t there i s no r e a l demand for standard s i l v e r d o l l a r s , and
that consequently i t i s more expensive on account of the cost
of t r a n s p o r t a t i o n and other f a c t o r s than using $1 b i l l s .
You are advised t h a t the Federal Reserve Board favftrfe
the Federal reserve banks undertaking f o r a limited time and
f o r a l i m i t e d amount, merely f o r the purpose of experiment, to
pay the charges on outgoing shipments of standard s i l v e r doll a r s , but not on incoming shipments. The Board r e a l i z e s , of
course, that i t may be impossible to avoid the payment of t r a n s p o r t a t i o n charges on incoming shipments of standard s i l v e r doll a r s in cases where the shipping member banks include such doll a r s with other coin shipped to a reserve bank.
Very t r u l y yours,

Walter L. Eddy,
Secretary
TO ALL GOVERNORS




FEDERAL

RESERVE

BOARD

STATEMENT FOE THE PRESS
For Release in Morning Papers
Tuesday, December 23, 1924.

December 22, 1924
X-422U

Members of the American Bankers Association Committee
on Collection of Non-Cash Items by Federal Reserve Banks
have appeared before the Federal Reserve Board and urged
the Board to amend i t s regulation so as to p r o h i b i t the
handling of non-cash c o l l e c t i o n items by Federal reserve
banks.

The Committee has f i l e d a brief in support of i t s

arguments f o r the discontinuance of t h i s f r e e service p e r formed by Federal reserve banks for their member banks.
The question'of the r e v i s i o n of i t s regulation i s now
under consideration by the Federal Reserve Board.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




x ~ 4 2 2 | }

December 22, 1924.

SUBJECT:

McFadden-Pepper B i l l s .

Dear S i r :
There are enclosed herewith copies of
the so-called McFadden and Pepper B i l l s , the committee reports thereon and the proposed Hall amendments to the McFadden b i l l , which amendments, however , have not yet been introduced.
The Board requests t h a t you consider
the various provisions of the b i l l s and submit t o
i t a t an early date a written report of your views
and comments thereon.
Very t r u l y yours,

(Enclosures)

Walter L. Eddy,
Secretary,

TO ALL FEDERAL RESERVE AGENTS AND GOVERNORS EXCEPT
GOVERN'OR STRONG.

830

FEDERAL

RESERVE

BOARD

STATEMENT FOR THE PRESS

X-4226

For Release in Morning Papers,
Saturday, December 27, 1924.
The following i s . a summary of general "business
and f i n a n c i a l conditions throughout the several
Federal Reserve D i s t r i c t s , based upon s t a t i s t i c s
f o r the aoiithsof November and December, as contained in the forthcoming issue of the Federal
Reserve B u l l e t i n .
Production i n "basic i n d u s t r i e s and factory employment continued at
about the same level in November as in October. There was a f u r t h e r s l i g h t
r i s e in the general level of p r i c e s r e f l e c t i n g advances in nearly a l l
groups of commodities.
Production.
Production of basic commodities was at about the same r a t e in November
as in.October, but owing to the smaller number of working days not allowed
f o r in the adjustment f o r usual seasonal v a r i a t i o n s , the Federal Reserve
Board's index of production declined by about 2 per cent. Increased a c t i v i ty was shown in the iron and s t e e l industry and in cotton and woolen text i l e s , while production of food, coal, lumber, paper, and automobiles
declined. There was l i t t l e change in the volume of f a c t o r y employment
in November. Building contracts awarded declined somewhat in November,
but the t o t a l was considerably larger than f o r the corresponding month
of any recent y e a r .




X-4226
Final estimates by the Department of Agriculture of crop y i e l d s i n
1924 showed a greater aggregate production than in 1923 and an increase
of about 9 per cent in the t o t a l value of a l l crops.

Yields of ivheat, oats,

cotton, potatoes, and hay were larger than in 1923, out the production of
corn and tobacco was smaller. Marketing continued in large volume in November and exports of a g r i c u l t u r a l products were the l a r g e s t f o r many months
in recent years.
Prices.
The l e v e l of wholesale p r i c e s , as measured by the index of the Bureau
of Labor S t a t i s t i c s , advanced s l i g h t l y in November, p r i c e increases in
most of the commodity groups being nearly o f f s e t by a considerable decline
in the p r i c e s of animal products. During the f i r s t half of December there
were f u r t h e r advances in the p r i c e s of grains, f l o u r , sheep, metals and
lumber, while the p r i c e s of beef, hides, s i l k , and brick declined.
Trade.
Railroad f r e i g h t shipments, though smaller in November than in October
owing to seasonal influences, were in about the same volume as in 1923.
Wholesale trade showed the

usual decline in November and was about as ac-

t i v e as a year ago. Sales of f u r n i t u r e and meat were l a r g e r than l a s t year,
while the volume of business in nearly a l l other l i n e s was smaller. Retail
trade was somewhat more active in November; and sales of mail order houses
and chain s t o r e s were l a r g e r than l a s t year. Merchandise stocks a t depart-




1

-3"

832

X-4226

iaent stores were s l i g h t l y reduced ana were 2 per cent l e s s than a year ago.
Bank c r e d i t .
Total loans and investments of member banks in leading c i t i e s continued
to "increase during the four weeks ending December 10 and on that date were in
l a r g e r volume than a t any previous time. The increase during the period was
c h i e f l y in loans secured "by stocks and bonds and accompanied continued
a c t i v i t y in the security markets - Commercial loans showed a seasonal decline
from the high point of the year reached in the middle of November, but continued above the level of a year ago. Security holdings, a f t e r increasing
rapidly since the spring of the year, reached a peak on November 19 and a f t e r
that time showed a s l i g h t decline.
At the reserve banks t o t a l earning a s s e t s increased considerably during
the four weeks ending December 17, r e f l e c t i n g the seasonal demand f o r currency and the export of gold. The volume of discounts of the reserve banks
increased between the middle of November and the middle of December, t h e i r
holdings of acceptances also showed a net increase, while United States sec u r i t y holdings declined somewhat.
Firmer conditions in the money market during the l a s t half of November
and the f i r s t half of December were indicated by higher r a t e s on bankers'
acceptances and a r i s e of one-half per cent in the r a t e on commercial
paper.




.

X-U22S
(COPY)
Federal Reserve Board,
Washington, D. C.
Gentlemen:
Brief of American Bankers Association Committee
on Collection of Non-Cash Items by Federal Reserve Banks.
Complying with request made by the Federal Reserve Board at the
time of the recent hearing before you on the question of the handling of
Non-Cash Items f o r c o l l e c t i o n by Federal Reserve Banks, I hereby submit on
behalf of the American Bankers Association Committee a summary of the Comm i t t e e ' s observations and analysis on t h i s s u b j e c t , with i t s recommendations.
1.

ORIGIN A D ACTIVITIES OF COMMITTEE
N

(a) P r i o r to the spring meeting of the Council of the American
Bankers Association a t Rye, New York, in April, 1923« bankers i n c e r t a i n sect i o n s of the United States had indicated t h e i r disapproval of the Federal Reserve Banks being in the c o l l e c t i o n business, and the Clearing House Associat i o n of Minneapolis, Minn., had adopted a r e s o l u t i o n (copy of which wa,s f o r warded to the Federal Reserve Board) urging t h a t the Federal Reserve Banks
discontinue the service,
(b) Acting upon t h i s question which arose in the manner ai'Creaaid,
the American Bankers Association Council in session at Rye, New York, appointed a Conmittee, designated as a Committee on Non-Cash Items, to make an inv e s t i g a t i o n of t h i s a c t i v i t y on the p a r t of Federal Reserve Banks and report
a t a l a t e r meeting with recommendations,
(c) At the meeting of the Council i n Atlantic City in September,
1923, the Committee reported that they had not completed t h e i r analysis; that
the Federal Reserve Board had appointed a Committee of Governors on the same
matter, who had not a t that time completed t h e i r i n v e s t i g a t i o n . Therefore,
the Committee requested that i t be continued as an Investigating Committee,
which was granted.
(d) The Committee next reported a t the Spring meeting of the Counc i l at Augusta, Georgia, in A p r i l , 1924. (Copy of which report i s hereto a t tached, marked Exhibit "A")- A f t e r some discussion of the Committee's report
from the f l o o r and the exchange of several questions and answers on t h e subj e c t , the report was unanimously approved, and a special committee of three
appointed to confer with the Federal Reserve Board, with a u t h o r i t y to urge
t h a t the c o l l e c t i o n of Non-Cash Items by Federal Reserve Baraks be discontinued.
(e) At the General Convention of t h e American Bankers Association
held in Chicago, September l a s t , the action of the Council a t i t s Spring meeting in Augusta, Georgia, in the appointment of the Special Committee with aut h o r i t y to urge t h a t the c o l l e c t i o n of Non-Cash Items by Federal Reserve Banks




- 2 -

X-422S

0 3 4

be discontinued, was reported to the Convention in session, and 9-pprcved.
without any objection.
( f ) P r i o r to the hearing before the Board accorded our Committee
on December 5» 1924, we endeavored to get a recent cross section of opinion
from bankers on t h i s question, and accordingly sent out a. questionaire (copy
of which i s hereto attached, marked Exhibit "B"). This l e t t e r was sent to
e i g h t y - f i v e bankers in a,ll p a r t s of the United S t a t e s , who were selected without regard to whether t h e i r bank was located in a. c i t y in which there was a
Federal Reserve Bank or Branch. F i f t y - f o u r replies'were received up to the
date of the hearing, of which f o r t y - f o u r expressed t h e i r opinion that the
c o l l e c t i o n of Non-Cash Items by Federal Reserve Banks should be discontinued.
Ten r e p l i e s indicated t h a t they were in favor of continuing the present service (These l e t t e r s are attached hereto f o r your perusal and consideration).
COMMITTEE'S OBSERVATION AND FINDINGS
(a) Our Cornr.ittee would like i t c l e a r l y understood t h a t our a c t i v i t i e s have been confined s t r i c t l y to the handling by Federal Reserve Banks of
Non-Cash Items, and has no r e l a t i o n to the present service by Federal Reserve
Bajiks in the par clearance of checks and d r a f t s drawn on member or non-member
banks. Our contention i s that any sight or time d r a f t i t h or without documents attached drawn against an individual f i r m or corporation which comes
in the possession of the Federal Reserve Bank without the Federal Reserve Bank
having rediscounted the same f o r a rtiember bank i s a Non-Cash Item; therefore,
a collection in t h e i r possession. Likewise any maturing note which the Federa l Reserve Bank may be requested to handle for collection without the Federal
Reserve Bank having f i r s t rediscounted the same i s also a Non-Cash Item. Fart h e r , that a l l dunning d r a f t s , e t c , in which, of course, n e i t h e r the member
bank or the Federal Reserve Bank in p a r t i c u l a r can have any invested funds are
Non-Cash Items. In b r i e f , any item coming into the possession of a. Federal
Reserve Bank not drawn on or payable by a. bank or t r u s t company and for which
Reserve Bank has n o t given c r e d i t in reserve account to i t s endorser i s a
Non-Cash Item.
(b) That the present service of handling Non-Cash Items as hereinb e f o r e described i s materially unbalanced in i t s b e n e f i t s tc the member banks
of the system.
(c) That the Federal Reserve Banking System cannot a f f o r d the overhead expense incident to the performance of t h i s service.
(d) That i t i s inconsistent for any business organization to carry
on an a c t i v i t y which incurs l i a b i l i t y without remuneration, and t h e Federal
Reserve Banks cannot be in the collection business without incurring l i a b i l i t i e s , Loss of items or s e c u r i t i e s or documents attached, f a i l u r e to p r o t e s t
or other accompanying i n s t r u c t i o n s may r e s u l t in loss to Federal Reserve Banks
handling same.
(e) That there i s no saving of time in the handling of collection
items by Federal Reserve Banks. In f a c t , there may be a. loss of time in r o u t ing collection items through Federal Reserve Banks instead of member banks
routing them d i r e c t .



X-4228

33,1

( f ) That member banks could absorb the service now performed
by Federal Reserve Banks in the collection of Non-Cash Items without any
appreciable increase in t h e i r cost of operation, in that every c o l l e c t i o n
item that i s now handled by Federal Reserve Banks originates in a member
bank, and that only in the t h i r t y - f i v e c i t i e s in which there i s established
a. Federal Reserve Bank or Branch i s the same item presented to the party
upon whom i t i s drawn without i t having to be sent to a bank by the Federal
Reserve Bank in the c i t y in which i t is payable for p r e s e n t a t i o n . Thus,
a l l the c o l l e c t i o n s handled by Federal Reserve Banks, excepting those payable in c i t i e s a f o r e s a i d , are handled at a duplication of service c o s t s . x
(g) That member banks maintain a. c o l l e c t i o n department for the
handling of outgoing and incoming c o l l e c t i o n s , and a large percentage of
member banks incur costs of advertising of t h i s f a c t in an e f f o r t to put
t h e i r collection departments on a maintenance or p r o f i t a b l e b a s i s .
(h) That the p r e s e n t a t i o n of c o l l e c t i o n items by Federal Reserve Banks i s g e n e r a l l y unpopular with the p u b l i c , because of the inconvenience to the payer of items presented by Federal Reserve Banks in that
in the exercise of action the Federal Reserve Bank's general p r a c t i c e
i s to require t h a t the payer naist pay in cash or by a d r a f t of a member
bank drawn against i t s Federal Reserve balance. Therefore, when a runner
f o r a Federal Reserve Bank takes a c o l l e c t i o n across torn some f i f t e e n or
twenty blocks and presents i t for payment, the payer i s confronted with
t h i s condition of payment by the runner, and accordingly hs.s to pay in
cash, which he seldom has on hand, or go to h i s bank rmd arrange f o r a
d r a f t in favor of the Federal Reserve Bank in payment of the item. This
i s an inconvenience and annoyance to him and does not c r e a t e f o r the Fede r a l Reserve Bank a f r i e n d l y f e e l i n g on the p a r t of the p u b l i c , which
they are at a l l times hopeful of acquiring.
( i ) We a r e convinced from our analysis of this service tha,t
Governors of c e r t a i n Federal Reserve Banks contending f o r the continuance
of t h i s service are influenced by their immediate environments because of
the b e n e f i t s that accrue to c e r t a i n i n s t i t u t i o n s in large i n d u s t r i a l and
commercial centers in which c e r t a i n Federal Reserve Banks are located and
do not represent the a t t i t u d e on t h i s subject of t h e i r constituency as a
whole.
( j ) We a r e firmly of the opinion that i t was not intended that
a Federal Reserve Bank should function in any capacity that would bring
i t into direct competition with any of i t s member banks, or to deal in any
way d i r e c t l y with the public, as i s necessary in handling of the collection business.
. (k) That the service of handling c o l l e c t i o n items by Federal
Reserve Banks i s not needed as a. measure of saving expense or time to member banks, and the b e n e f i t s that accrue by v i r t u e of t h i s service are being c a p i t a l i z e d by c e r t a i n member banks f o r p r o f i t to them f o r charges
which they can make to t h e i r customers for handling collection items that
the Federal Reserve Bank handles f o r them without charge or i t accrues dir e c t l y to the individual firm or corporation who furnished no p a r t of the
c a p i t a l upon which the Federal Reserve Bank i s operated, and, t h e r e f o r e ,
e n t i t l e d to no p a r t of i t s b e n e f i t s d i r e c t l y .



-4-

036

( l ) That i t i s u n f a i r to impose a discretionary duty upon Hoserve Bank management by i t having to daily choose which member s h a l l have
the c o l l e c t i o n items en a point where there are more than one member bank,
a s i t u a t i o n which alone leads to dissension and d i s s a t i s f a c t i o n , r e s u l t i n g
in the basis f o r a charge of favoritism*
(m) That many member banks receiving c o l l e c t i o n items from Fede r a l Reserve Banks now remit without charge because they are under the impression that any item handled f o r a Federal Reserve Bank cannot be charged
upon. Thus through t h i s f e e l i n g of service to and cooperation with the Fede r a l Reserve Banks they are omitting charging f o r a service f o r which they
are j u s t l y e n t i t l e d t o remuneration.
( n ) Quoting from l e t t e r s recently received from bankers, which
are hereto attached, as aforesaid, I desire to c a l l your a t t e n t i o n to a
l e t t e r from the F i r s t National Bank of Detroit, Michigan, as follows:
"As a commercial bank i n t e r e s t e d in giving d i r e c t and prompt
service, we axe opposed to the Federal Reserve Banks handling
Non-Cash Items f o r the following reasons:
1st*
2nd.
3rd.
4th.
5th.

Loss of time in routing items d i r e c t l y .
Slow and incomplete advices of payment.
Additional time and ^rouble taken to r e c a l l or reduce items.
D i f f i c u l t y in obtaining adjustment caused by t h e i r erroxs.
More opportunity f o r special i n s t r u c t i o n s to be overlooked
or improperly passed on*"

The Fort Worth National Bank, Fort Worth, Texas, write in p a r t
as follows:
"The i n s t i t u t i o n with which I am connected in one month handled
more than $4cQ,000 of cotton d r a f t s through the c o l l e c t i o n
department of Federal Reserve Banks, and based on an average
c o l l e c t i o n charge of one-tenth of one per cent there resulted
a saving f o r t h i s bank of more than $400.00. While t h i s i s a
p r o f i t f o r t h i s p a r t i c u l a r bank, i t was made a t the expense of
several banks located in Federal Reserve C i t i e s , and a p r o f i t
to which they were j u s t l y e n t i t l e d , and which should have been
paid by the drawer of the d r a f t s or the depositor."
lO) That the f u t u r e s t a b i l i t y and p o p u l a r i t y of the Federal Reserve System must be guarded against any tendency to increase i t s cost of
operation by dealing d i r e c t l y with the public in pny jpanner or coming in
competition with i t s members. Free services have b u i l t up overhead t h a t
has to be met by open market a c t i v i t i e s detrimental to'-its f u t u r e .
(p) We believe t h a t i t is universally recognized t h a t there i s a
necessity a t the present time of reducing the overhead, cost of the System,
&iid are therefore, firmly of the opinion that i t would be recognized by a
large majority of the membership of the System as prudent in the i n t e r e s t of
economy to eliminate from the System the handling of c o l l e c t i o n s , thereby saving the System in excess of one million d o l l a r s per annum, and we are
convinced that such action on the p a r t of the Reserve Board would meet with




X-U22S

- 5 -

the approval of the m j o r i t y of i t s nen'ibers and c e r t a i n l y could "be done
without any serious embarrassment to any member.
REG OE-tENDAT I QT .
T
Therefore, in compliance with t h e foregoing f a c t s and the aut h o r i t y invested in t h i s Committee by the American Bankers Association,
we most earnestly urge t h a t the Federal Reserve Board's regulations be
so amended as to p r o h i b i t the handling of Non-Cash Col-lecticn Items by
Federal Reserve Banks.
Respectfully submitted,
(Signed)

John

Barton,

Chairman, Committee on Non-Cash Items,
American Bankers Association
Members of Committee
attending hearing
December
1924:
J . W. Barton, Minneapolis, Minnesota,
C. L. Brolcaw, Kansas City, Kansas,
William C. White, Peoria, I l l i n o i s .




037

X-4228-a

(COPY)
Exhibit "A"
2EPORT OF COLXITTEE 021 HOH-CASH IT2LS TO
3XSCUTITE COUNCIL, A.B.A.
AUGUSTA, GEORGIA,
APRIL 50,1934.

President Head: Ehe next order of business w i l l be the report of
the Committee ,en Uon-Cash Items. Mr. Barton.
Mr. Barton: Mr. Chairman and Gentlemen of the Council: Many of
you no doubt w i l l r e c a l l that a t the Spring Meeting of the Council in
Sew York some discussion on t h i s subject was had, which r e s u l t e d in the
appointment of a special committee to make investigation and report with
recommendations.
Your Committee on Collection of Eon-Cash Items by the Federal Reserve
Banks reports as follows:
We are convinced that the service of handling c o l l e c t i o n items by
Federal Reserve Banks i s exceedingly unbalanced in i t s b e n e f i t s to member
banks. We believe the Federal Reserve Act did not intend to put the Fede r a l Reserve banks in competition with commercial banks or that they should
do business d i r e c t l y with the p u b l i c .
We f i n d based on information received from a Federal Reserve bank that
only one out of twelve member banks use t h i s service a t the present time,
and that t h i s 8$ of t h e i r membership i s comprised almost e n t i r e l y of the
large c i t y banks, thus taking away from 92$ of t h e i r member banks a banking
function which they f e e l they have a r i g h t to perform. For the Federal Reserve banks to continue to c o l l e c t non-cash items would t h e r e f o r e tend to
aggravate f u r t h e r many member banks in the country and keep others out of
the Federal Reserve System, .and continue,to add to the already widespread
f e e l i n g that there i s a tendency within the System to increase r a t h e r than
diminish t h e i r commercial a c t i v i t i e s .
We f i n d that i t costs Federal reserve banks t h i r t y times as much to
c o l l e c t non-cash items as i t does tq c o l l e c t cash items, f o r example:
During the quarter ending
handled 176,096,223 cash items
per item of .0064. During the
clusive of Government coupons)
cost per item of .1957.




June
at a
same
were

30, 1923, the Federal reserve banks
t o t a l cost of $1,132,438, or a eost
period 1, 253,281 non-cash items (exhandled a t a cost of $245,291, or a

X-4228-a

-2-

LJV

total
Further t h a t , the/cost of c o l l e c t i n g non~cash items i s rapidly increasing. In 1923 the cost to Federal Reserve hanks was in excess of
$1,000,000 and if not discontinued w i l l soon he many times that amount.
¥e f e e l that the expenditure of more than a million d o l l a r s by Federal
Reserve hanks to c o l l e c t non-cash items f o r l e s s than 10$ of the members i s
u n j u s t to the other 90$,besides taking away from a large number of member
banks the c o l l e c t i o n p r i v i l e g e to which they f e e l they are j u s t l y entitled,.
We f i n d that tne Federal Reserve banks in performing t h i s service are
thus made dunning agencies f o r the c o l l e c t i o n of large and small accounts
of varied character and descriptions a t heavy cost to them and to the detriment of the System as a whole in the minds of the p u b l i c . For i l l u s t r a t i o n ; In one Federal Reserve bank there was outstanding March 31, 1924,
items f o r c o l l e c t i o n as follows:
Size
Under
$1.00
2.00
3.00
4i00
5.00
6.00
10.00
20.00
30.00
40.00
50.00
100.00
500.00
1000.00
2500.00
5000.00

$1.00
to i.SS
to 2.99
to 3.99
to 4.99
to 5.99
to 5.99
to 19.99
to 29.99
to 39.99
to 49.99
to 99.99
to 499.99
to 999.99
to 2499.99
to 4999.99
and over

Bomber
30
48
27
29
24
25
59
138
110
78
47
218
421
125
149
31
14
1574

Amount
$

16.31
66.65
64.98
99.77
104.76
139.24
445.52
1,936.01
2,710.48
2,677.04
2,056.85
15,280.66
89,695.31
89,016.72
230,715.11
101,4-51.14
"89,290.83
$625,967.78

of which 834 items or over half of the number of items aggregated s l i g h t l y
over $25,000.
Your Committee caused inquiry t o be made of the Clearing House
Associations in c i t i e s that have a Federal Reserve bank or a branch to determine t h e i r a t t i t u d e on the question, and desires to report that out of




-3-

X-4228-a

040

the 24 reporting, 17 were in favor of requesting that Federal Reserve "banks
discontinue the c o l l e c t i o n of non-cash items, and 7 f o r continuing the
service, that of the 17 f o r discontinuing 11 adopted resolutions which were
forwarded to the Federal Reserve Board.
Therefore, in v i e r of the foregoing f a c t s and a f t e r c a r e f u l conside r a t i o n of the subject matter &nd with a sincere regard f o r the f u l l
worth of the Federal Reserve System and f u l l y appreciating the great importance of maintaining the Federal Reserve "banks as "banks of reserve,
rediscount and issue, f o r which they were o r i g i n a l l y intended, we most
earnestly recommend that the c o l l e c t i o n of non-cash items "by Federal Reserve
"banks "be discontinued, and f u r t h e r recommend that a Committee of three "bankers "be appointed to confer with the Federal Reserve Board with a u t h o r i t y
to urge t h a t the Federal Reserve "banks discontinue the c o l l e c t i o n of noncash items.




J . W. Barton, Chairman
C. L. Brokaw
D. U. Finnegan
Robert F. Maddox
James Ringold
William C. White.

* • »

(COPY)

X-4228-b

041

Exhibit "3"
Minneapolis, Minn.

November 19,1924.

In 1923 a committee was appointed with i n s t r u c t i o n s to make an
i n v e s t i g a t i o n of the p r a c t i c e in vogu.e "by Federal Reserve Banks in the
handling of non-cash items f o r c o l l e c t i o n .
At the l a s t spring mooting of the Council of the American Bankers
Association t h i s committee on non-cash items reported with recommendations
that the Federal Reserve Board be urged to make a r u l i n g requiring Federal
Reserve Banks to discontinue handling c o l l e c t i o n items, such as b i l l of lading d r a f t s , e t c . , w i t h the r e s u l t that the committee's recommendations were
approved and a sub^comcittce was selected and i n s t r u c t e d to confer with the
Federal Reserve Board in an e f f o r t to have the committee recommendations
c a r r i e d into e f f e c t .
This matter has been discussed from time to time with c e r t a i n members of the Federal Reserve Board who have shown a keen i n t e r e s t in the subj e c t . The sub-committee on non-cash items w i l l have a hearing before the
Federal Reserve Board on Friday, December 5th, at which time t h i s service
being conducted a t a considerable expense to the Federal Reserve System,
which unquestionably i s unbalanced in i t s b e n e f i t s to the members of the
System, w i l l be discussed.
On behalf of the committee I am writing f o r an expression of
your opinion on t h i s s u b j e c t . We would l i k e to have you s t a t e as to whether you are f o r or against the Federal Reserve Banks continuing in the coll e c t i o n business and we w i l l appreciate your reasons f o r the p o s i t i o n you
take on t h i s question. Similar l e t t e r s are being sent to c e r t a i n other
bankers and i t i s a n t i c i p a t e d that the r e p l i e s w i l l be h e l p f u l to the Committee in the discussion of t h i s matter b e f o r e ' t h e Federal Reserve Board.
Yours very t r u l y ,

Members of Sub-Committee:
Mr. Robt.F.Maddox, Atlanta, Ga.
Mr. C. 1. Brokaw, Kansas City, Kansas.
Mr. Wm. C. White, Peoria, 111.




Chairman,
Committee on Non-Cash Items.

FEDERAL RESERVE BOARD
WASHINGTON

X--4229

address official correspondence to
the federal reserve board

SUBJECT:

ASSESSMENT FOB GENERAL• EXPENSES "OF THE FEDERAL RESERVE
BOARD, JANUARY 1 TO JUNE 3O, 192$.

Dear S i r :
Confirming t e l e g r a p h i c advice there i s enclosed h e r e with copy of a r e s o l u t i o n adopted by the Federal Reserve Board,
levying an assessment upon the several Federal reserve "banks of
an amount equal to one hundred f a r t s e n thousandths of one per
cent (.00114) of the t o t a l paid in Capital stocJc and surplus of
such banks to d e f r a y the estimated general expenses of the Board
from January 1 to June 30, 1525•
There i s also enclosed a statement showing the b a s i s
upon -which the assessment i s l e v i e d .
Kindly deposit one-half of the amount of your a s s e s s ment in the General Account, Treasurer, U. S . , on your books
January 1, 192$, and on --half March 1, I925 in each instance
issuing a C/D f o r c r e d i t of " S a l a r i e s and Expens3s, Federal Reserve Bo-.ard, Special Fund", assessment f o r general expenses,
and sending duplicate C/D to the Federal Reserve Board.
Also
please f u r n i s h a statement of your c a p i t a l and surplus used as
a b a s i s f o r the assessment.
Very t r u l y yours,

Enclosures.

F i s c a l Agent,

(S.-nt to Chairman of each Federal Reserve Bank)
X X.




X

X-U-229
RESOLUTION LEVYING ASSESSMENT

Whereas, under Section 10 of the act approved
December 23> 1913> end known as the Federal Reserve Act,
the Federal Reserve Board i s empowered to levy semiannually upon the Federal reserve hanks i n proportion to
t h e i r c a p i t a l stock and surplus an assessment s u f f i c i e n t
to pay i t s estimated expenses, including the s a l a r i e s of
i t s members, a s s i s t a n t s , a t t o r n e y s , experts and employees
f o r the h a l f - y e a r succeeding - the levying of such a s s e s s ment, together with any d e f i c i t c a r r i e d forward from the
preceding h a l f - y e a r ; and
Whereas, i t appears from estimates submitted and
considered that i t i s necessary that a fund equal to one
hundred fourteen thousandths of one per cent of the t o t a l
p a i d - i n c a p i t a l stock and surplus of the Federal reserve
hanks he created f o r the purpose hereinbefore described,
exclusive of the cost of engraving and p r i n t i n g of Federal
reserve notes; Now, t h e r e f o r e ,
Be i t resolved, That pursuant to the authority
vested i n i t by law, the Federal Reserve Board hereby
levies an assessment upon the several Federal reserve banks
of an amount equal to one hundred fourteen thousandths of
one par cent of the t o t a l paid—in c a p i t a l and surplus of
such banks as of December $1, 1924, and the F i s c a l Agent of
the Board i s hereby authorized to c o l l e c t from said hanks
such assessment and execute, in the name of the Board,
r e c e i p t s f o r payments made.
Such assessments w i l l be c o l lected i n two installments of one-half each; the f i r s t
installment to be paid on January 1, 1925, end the second
half on March 1, 1925.




\

X-U229 -»
ESTIMATE FOR .TAMIABY 1Q25 ASSESSMENT
Average monthly encumbrance f o r period
July 1, 1924, to December J>1, 19.24;
Personal services, . . . . .
Non-personal services, . » » »

$45>559'1&
; 181*5%

$59,740.73

Encumbrance f o r December, 1924:
Personal services,
Non-personal services, .

$45,55&'25
23 ,112.96

68,889.21

Estimated monthly requirements*
January to June, 1925:
Personal services,
Non-personal services, . . . . . . . .

$48,000.00
_14,000.00

Estimated average monthly increase, . . . .

^
2,259.87

Total estimated requirements,
January 1 to June 30 > 19^5:
To cover above estimate,
To provide a contingent fund,

. . . .

372*000.00
, 20,000.00

Estimated unencumbered balance, Dec. 31, 1924,
Amount to be raised by assessment,
Estimated p a i d - i n c a p i t a l and surplus of Federal
Reserve Banks as of December 3 1 , 1924, . . .

^
. 20,000.00
372,000.00

328,000,000.00

An assessment of one hundred fourteen thousandths of one per cent
(.00114) w i l l produce,
373,920.00




X-423C —
REPORT OF CONDITION TO
FEDERAL RESERVE BOARD

The following information i s desired in connection with the report of
condition to be ms.de as at the close of business

HEAD OFFICE MP DOMESTIC BRANCHES COMBINED
1.

Detailed balance sheet showing a l l a s s e t s and l i a b i l i t i e s , including, contingent l i a b i l i t i e s . I t i s requested that the items f o r
which d e t a i l e d schedules are requested below be shown as separate
accounts on the balance sheet.

2-

Amount of loans, discounts, overdrafts and other advances c l a s s i f i e d as follows:
(a.)
(b)

Time

(c)

3.

Demand - Secured - Unsecured.

Maturities of time loans and advances.
Past due
Dae within six months.
Due within one year.
Due a f t e r one year.

Detailed l i s t of investments (including stock of a f f i l i a t e d i n s t i tutions showing):
(a)
(b)
(c)
(d)
(e)
(f)

4.

Issuing Government or corporation.
Interest rate.
Maturity.
Par value.
Book value.
Approximate market value.

Ownership of stock of a f f i l i a t e d i n s t i t u t i o n s :
(a)
(b)
(c)

5.

- Secured - Unsecured.

Per cent owned by yourselves.
Per cent owned by foreign Governments.
Per cent owned by individuals and corporations.

Balances due from banks which are considered as reserves according
to Federal Reserve Board regulation, balances due from branches,
agencies and a f f i l i a t e d i n s t i t u t i o n s and exchange p o s i t i o n .




X-4230-A
-

2

-

(a.)

(b)

List of foreign branches, agencies and a f f i l i a t e d i n s t i t u t i o n s and balances due from and due to each.

(c)

Exchange position, a l i s t of uncovered, oversold or overbought,
p o s i t i o n s in a l l f o r e i g n currencies including foreign currency
s e c u r i t y on which exchange values are not protected.

(d)

6.

L i s t of banks and balances due fron; each which are considered
as reserves in accordance with regulation of Federal Reserve
Board.

List separate balances due to foreign or domestic banks or
customers which are not incidental to your acceptance business
or held f o r purpose cf carrying out transactions i n foreign
countries.

B i l l s payable -(Primary obligations of reporting corporation representing money borrowed.)
(a)
(b)
(c)

7.

Payable t o .
Amount.
Interest rate.

Rediscounts (Other than acceptances sold with endorsement)
(a)
(b)
(c)
(d)
(e)

D r a f t s or notes drawn in d o l l a r s .
D r a f t s or notes drawn in foreign currencies.
Total amount of rediscounts by banks.
Rate of discounts.
Spread of m a t u r i t i e s .

S.

Total l i a b i l i t y f o r acceptances sold with endorsement.

9.

Deposits in the United S t a t e s :
(a)
(b)
(c)

Net demand deposits ( a f t e r deducting uncollected demand items
payable within United States - exchanges)
$
.
Reserve Required $_
_ _
Time deposits""^
Reserve Required $
Total Reserve required against deposit l i a b i l i t y $

Reserve Held
(d) Cash on -hand $
( e ) Bank b a 1 anc e s $
( f ) Total cash reserve held $
. (g) Excess or d e f i c i t of cash reserve held over reserve
required
$




Z-423G -A
-

3

-

Acceptances.
(a)

Acceptances outstanding:
Maturing in 30 days or less
Maturing a f t e r 30 da.ys
Total outstanding acceptances

$_
$_
$_

(b)

Subscribed c a p i t a l and surplus
Excess (a) over (b)

$_
$

Acceptances secured according to
regulation of the Federal Reserve
Board.
Acceptances otherwise secured
Acceptances unsecured-

$_
b

Amount required to be secured
under agreement with Federal
Reserve Board
(Give l i s t of security held as
required above giving description
and approximate amount)
(c)

L i s t of drawers of d r a f t s accepted, with t o t a l aggregate
l i a b i l i t y in excess of 10 per cent of subscribed c a p i t a l
and surplus showing:

Name Address
(d)

$_

Busines

Aggregate L i a b i l i t y

Security * or Guaranty

Reserve against outstanding acceptances:




Required

15$ against a l l acceptances outstanding which
mature in ]>0 days or l e s s .
$
3$ against a l l acceptances outstanding which
mature in more than 30 days.
$
Total reserve required a g a i n s t acceptance
liability.
$

Held

Cash and bank balances
Bankers acceptances
s e c u r i t i e s approved .by Federal
Reserve Board (List in d e t a i l )

$_

Total reserve held

•_
£

in-

X-423CU

- U(e)

Detail l i s t of renewed acceptances and number of renewals
of each.

(f)

Schedule showing d i s t r i b u t i o n of commodities financed by
acceptance t r a n s a c t i o n s ,

•(g)

C l a s s i f i c a t i o n of acceptances as follows:
Amount of acceptances covering importation to the United
States.
Amount of acceptances covering asportations fron; the
United S t a t e s .
Amount of acceptances covering movements of merchandise
between foreign c o u n t r i e s .
Amount of acceptances dra.wn f o r the purpose of f u r n i s h ing doll&r exchange.

11.

General l i m i t a t i o n s :
Per cent deposits and acceptances outstanding to subscribed c a p i t a l and surplus.

12.

List of o f f i c e r s and d i r e c t o r s .

13.

List of stockholders showing number of shares owned by each.
(record of changes since l a s t report)

14.

List of branches, sub-branches, agencies, o f f i c e s and a f f i l i a t e d
i n s t i t u t i o n s - date of opening of each and the location,
(record of changes since l a s t report)

15.

Date of l a s t examination or audit - by whom made.
(*)

If s e c u r i t y , s t a t e nature of s e c u r i t y , giving quantity and
approximate value, i f a bank guaranty, give name and location of bank.

(**) Excess amount as shown in (10-g) not required f o r reserve
against deposit l i a b i l i t y .




X-1-230-A
- 5 B.

FOREIGN BHALTCH5S, AGEWI7S

M-D SUBSIDIARY BMTKS MP CORPORATIONS

1.

Balance sheet to bs furnished by each, showing in d e t a i l a l l
assets and l i a b i l i t i e s , including contingent l i a b i l i t i e s . I t
i s requested that the items for which d e t a i l e d schedules are
requested below be sho.\n as separate accounts on the balance
sheet.

2.

Amount of loans, discounts, overdrafts and other advances
c l a s s i f i e d as follows:
(a) Demand - Secured - Unsecured.
(b) Time - Secured - Unsecured.
(c) Maturities of time loans and advances.
Past due
Due within six months
Due within one year
Due a f t e r one year

3«

Detailed l i s t of investments, showing:
(a) Issuing Government or corporation
(b) I n t e r e s t r a t e
(c) Maturity
(d) Par value
(e) Book value
( f ) Approximate 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 O f f i c e
(d) Other branches, agencies and a f f i l i a t e d i n s t i tutions

5»

L i s t of banks having balances due from your branch with amount
f o r each bank separately:
(a) Banks and bankers
(b) Head Office
(c) Other branches, agencies and a f f i l i a t e d i n s t i tutions

6.

B i l l s payable: (Primary obligations of reporting corporation
representing borrowed money)
(a) Payable to
(b) Amount
(c) I n t e r e s t r a t e
(d) Maturity
(e) Collateral (give detailed l i s t )




X-1239-A
1

1350

- 6 -

Rediscounts,:
(a) Amount
(b) Maturity
(c) With whom
(d) Hate
(e) Secured or unsecured - i f secured, give d e t a i l e d data
Deposits.

(a)

(b)

Government deposits ( i f secured give
l i s t of c o l l a t e r a l )
1. Demand
2. Time
Other deposits
3» Demand
4. Time
Total
Deposits - how payable
1. Local Currency
2. Dollar
Sterling
Otherwise
Total

I:

Special Reserve Statement - average fot




(a)

Net deposits:
1. payable
2. Payable
Ji. Payable
4. Payable

month of_

i n l o c a l currency
in d o l l a r s
in sterling
Otherwise _________
Total

Dollar
Equiva^lent

X»4230-*F 8 5 1 .
-

(b)

,

,

Reserve:
1.
2.
(a)
(b)
(c)
(d)
(e)

?

.

Amount, i f any, and composition r e quired by l o c a l laws.
Amount held:
Amount Per cent t o
n e t deposits
Gold and S i l v e r . . . $
~~~ $
Local Currency....
Other cash
Balance in Ideal
Govt. b a n k . . . . . . .
Other reserve funds
.
Total
..

Date of l a s t examination or audit - by whom made.
NOTE:




1.

Where a schedule does not r e f e r to your corporation, please i n d i c a t e t h i s by i n s e r t i n g the word
"None".

2.

Reports f o r foreign branches, agencies, etc* ,
should be in terms of United S t a t e s d o l l a r s , s t a t ing the r a t e of exchange a t which they were con. Verted.

FEDERAL

RESERVE

1 CARD

STATEMENT FOR THE PRESS
For Immediate Release
December 30, 1924.

X-4231

A hearing to show cause why a branch of the
\

Federal Reserve Bank of Richmond should be established
i n the south-western p o r t i o n of the F i f t h Federal Reserve D i s t r i c t w i l l be given to the d i r e c t o r s of the
Federal Reserve Bank of Richmond by the Federal Reserve
Board on Friday, February 13, 1925.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board

?

July 9 , 1924,
St. 4134

SUBJECT: Reports of Condition of State
Banks and Trust Companies,
Dear S i r :
Your courtesy will be g r e a t l y appreciated i f you
w i l l f u r n i s h the Federal Deserve Board, as soon as a v a i l a b l e , ,
with twp copies of the a b s t r a c t of reports of condition of
State banks and Trust companies i n your State on June 30,
19?U, or other recent date i n case you did not i s age- a c4&
f o r r e p o r t s of condition as of June )0.
If convenient to your o f f i c e , we would l i k e to have
separate f i g u r e s f o r mutual savings banks and f o r p r i v a t e
banks, providing there are any such banks operating in your
s t a t e . I n case the number of each c l a s s of banks reporting
i s not shown in the a b s t r a c t , will yoii also ^e good enough to
incorporate t h i s information i n your l e t t e r of t r a n s m i t t a l .
Following -fCur usgal custom i t w i l l be appreciated i f you w i l l
kindly segregate t h e data according to Federal reserve dist r i c t s , as the v§l%@ of these data t o the Board and f o r purbe g r e a t l y enhanced i f they can be
poses of p u b l i c a t i o n
tabulated tiy Federal reserve d i s t r i c t s .
The July number of the Federal Reserve Bulletin (copy
of *%ich w i l l be forwarded to you as soon as received from the
p r i n t e r ) contains a sxmmary statement of the a b s t r a c t s of r e p o r t s of condition on or about March 31, 1924, of a l l banks and
t r u s t companies (other than mutual savings banks) under staite
supervision i n t h e 48 s t a t e s and t h e r e s t r i c t of Colmbia, t o
which your a t t e n t i o n i s i n v i t e d .
A franked and s#lf?addressed envelope, requiring no
postage i s enclosed f o r use i n transmitting t h e d a t a requested.
Very t r u l y yours.

J . C. W e l l ,
Assistant Secretary.

Enclosure.
,»


http://fraser.stlouisfed.org/
To State
Federal Reserve Bank of St. Louis

Banking Departments.

53

054
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

July 9, 1924.
St. 36
SUBJECT: Reports of Condition of State
Banks and Trust Companies.

Gentlemen.
Your courtesy will be greatly appreciated i f
you vti.ll f u r n i s h the Federal Reserve Board, as soon as
available, with two copies of the abstract of reports of
condition of S t a t e banks and Trust companies In your
State on June 50s 1924, or other recent date i n case you
did not issue a c a l l for reports of condition as of June
30.
If convenient to your o f f i c e , we would l i k e to
have separate f i g u r e s f o r mutual savings banks and for
private hanks, providing there are any such banks operating i n your s t a t e . In case the number of each c l a s s of
banks reporting i s not shown i n the a b s t r a c t , will you
also be good enough t o incorporate t h i s information i n
your l e t t e r of transmittal.
The July number of the Federal Reserve Bulletin
(copy of which will be forwarded to you as soon as re*
ceived frcxn the p r i n t e r ) contains a summary statanent of
the a b s t r a c t s of reports of condition on or about March
31, 1924, of a l l banks and t r u s t companies (other than
mutual savings banks) under state supervision i n the 4g
s t a t e s and the D i s t r i c t of Columbia, to which your
a t t e n t i o n i s invited.
A franked and self-addressed envelope, requiring
no postage i s enclosed f o r use i n transmitting the data
requested.
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

Enclosure.



ODD

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




J u l y 29, 1924.
St. 4i6?.

SUBJECT: Expense Budget.

Dear S i r :
I n connection with the study of the comparat i v e {functional expense e x h i b i t s f o r a l l Federal reserve
banks and branches, the question of e s t a b l i s h i n g a
budget system f o r the control of expenses has a r i s e n .
In order t h a t t h i s Committee mgy be informed aS t o what,
i f any, steps have been taken ty t h e banks with r e f e r ence to t h e establishment of a budget f o r any or a l l of
t h e i r expenses, i t w i l l be appreciated i f you w i l l adv i s e promptly whether or not your bank has in operation
any form of budget c o n t r o l .

I f you have any such system,

kindly d e s c r i b e i t s operation, s t a t i n g how long t h e
system has been in e f f e c t and what r e s u l t s you have obtained from i t s operation.
Yours very t r u l y ,

Geo* E. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and E f f i c i e n c y .

LETTER TO GOVERNORS OF ALL FEDERAL RESERVE BAMS.

FEDERAL RESERVE BOARD
WASHINGTON

July 29, 1924.
St. 4170.

address official correspondence t o
the federal reserve board

SUBJECT: Committee on Salaries,
Expenditures and E f f i c i e n c y .

Dear S i r :
This l e t t e r i s t o advise you of a change i n the organization
of the Board's committees whereby the Committee cn Econcny and Efficiency
and the Committee cn S a l a r i e s and Expenditures have been consolidated
i n t o one committee to be known as the Ccnmittee on S a l a r i e s , Expenditures and E f f i c i e n c y . This committee w i l l h e r e a f t e r deal with a l l
matters formerly handled by the two committees. The new,committee i s
composed of two members, Mr. Geo. R. James, and Mr. E. H. Cunningham.
Mr. E. 1 . Smead of the Board ' s s t a f f has been designated, as secretary
of the committee.
In f u r t h e r i n g i t s work the committee w i l l in general be
guided Ty t h e following:
1 - The individual boards of d i r e c t o r s of the several banks
are responsible f o r the proper, economical, e f f i c i e n t and s a f e
operation of t h e i r respective banks. I t i s not the purpose of the
Board or i t s committee t o in any sense d i r e c t the operation of any
bank, hit r a t h e r t o look d i r e c t l y to the d i r e c t o r s of the banks f o r
s a t i s f a c t o r y r e s u l t s and you are, t h e r e f o r e , requested t o read t h i s
ccmmunicaticn, and a l l others that may be subsequently forwarded cn
the same subject, t o the d i r e c t o r s of your bank.
2 - I t i s t h e purpose of t h e Board, working through i t s committee, t o keep i t s e l f informed so f a r as possible as t o the comp a r a t i v e e f f i c i e n c y of operation of t h e banks and to make available
t o the banks such information as i t has which w i l l be h e l p f u l t o
them in t h i s regard. While i t i s appreciated t h a t the quarterly
exhibits- of operating expenses do not i n many cases a f f o r d a t r u e
basis of comparison between the banks and t h a t , t h e r e f o r e , the d i f ferences in the cost f i g u r e s as indicated ly these e x h i b i t s do not
necessarily indicate t h e comparative e f f i c i e n c y of operations, the
Board nevertheless believes that f u r t h e r e f f o r t should be made to
reconcile these f i g u r e s .




357
S t . 4170.
2
3 - The Board i s intending to ask the next Governors' Conference' t o give serious consideration t o the matter of operating
expenses and t o i*eq,uest t h a t the governors adopt at t h a t conference some plan f o r d e f i n i t e l y dealing with the subject of expenses
with a view to securing the g r e a t e s t possible e f f i c i e n c y in the
operation of a l l banks. Any such plan should, of course, make i t
possible f o r the banks t o benefit from the experience of each other,
and f o r t h i s reason i t might well include the carrying can of some
portion of t h i s work through a committee of operating o f f i c e r s t o
be nameet by the governors.
4 - While in the opinion of the Board the economical operation of the banks i s e s s e n t i a l l y an individual bank problem, the
Board i s nevertheless charged by law with c e r t a i n d u t i e s of supervision and regulation, and i t believes i t t o be i t s duty t o see
t h a t every bank is run in the most economical manner possible and
t h a t the operations of the several banks are reasonably comparable.
This l e t t e r is sent you at t h i s time in order t h a t you may,
between now and the next Governors 1 Conference, be giving the matter
consideration so that the conference may be able to formulate d e f i n i t e
plans f o r a constructive program of g r e a t e r e con any and e f f i c i e n c y in
the operation of the banks.
Yours very t r u l y ,

Geo, R. Jarrjes, Chairman,
Committee on S a l a r i e s ,
Expend i t u r e s and E f f i c i e n c y .

LETTER TO GOVERNOR OF EACH FEDERAL RESERVE BANK.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board

August l 4 , 1924.
St. 4177.
SUBJECT:

Rincticmal Expenses
Sec ond Quart e r 1924.

Dear S i r :
There i s enclosed herewith one copy of the
Functional Expense Exhibit f o r the Second Quarter of
1924, showing f o r each Federal Be serve bank and
branch the cost of operating each functionuand expense u n i t , together with the number of o f f i c e r s and
of employees, the t o t a l number of u n i t s handled,
u n i t s handled per employee per day, and u n i t c o s t s .
Copies of the exhibit are a l s o being
mailed to the Governor of each Federal reserve bark.
Very truly yours,

E.Iu Smead, Secretary,
Committee on Salaries,
Expenditures and. E f f i c i e n c y .

Enclosure.
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE B N AK



FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




August 1£, 1924.
s t . U193,

SUBJECT:

Statement showing Operations
of Federal Reserve Clearing
System.

Dear S i r :
There is enclosed herewith a copy of a
statement (St* 4 l 9 l ) showing the operations of the
Federal reserve clearing system during June 1924;
The publication of t h i s statement in the Federal
Deserve B u l l e t i n has been discontinued, aod instead i t w i l l h e r e a f t e r be mimeographed and d i s t r i b u t e d to the Federal reserve banks as per the
attached form.
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

Enclosure.

LETTER TO THE GOVERNOR OF EACH FEDERAL RESERVE BARK

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




August 20, 1924,
St. 4ig4.

SUBJECT:

Condition of Member Banks
as of June 30, 1924.

Dear S i r :
For your information there i s enclosed,
herewith a preliminary statement regarding the
condition of a l l member banks, combined as of
June 30, 1924.

The Board's abstract (No. 25)

showing the detailed f i g u r e s f o r State bank and
Trust company members and the combined figures
f o r a l l member banks i s now in the hands of the
p r i n t e r and w i l l be ready f o r d i s t r i b u t i o n in
the near f u t u r e .
Very t r u l y yours,

J . C. Noell,
Assistant Secretary.

LETTER TO EACH FEDERAL RESERVE AGENT

1

881

CONDITION OF M M E BANKS AS OF JUNE }0, 1924.
E BR
Condition r e p o r t s as of June 30, 1924, which, have now become a v a i l a b l e , i n d i cate t h a t t o t a l loans and investments of a l l member banks on t h a t d a t e were
$27*262*000,000, marking a f u r t h e r increase of $4)0,000,000 over the record amount
shown f o r March 31, 1924.

The increase f o r the period was c h i e f l y i n the banks'

investments which advanced by $342,000,000, while loans increased by $88,000,000.
Of the growth in investments, $38,000,000 represented a d d i t i o n a l purchases of U. S.
s e c u r i t i e s , and $304,000,000 - additions t o the banks' holdings of corporate obligations.

A r a p i d growth of demand d e p o s i t s , Including c e r t i f i e d and c a s h i e r s ' checks,

carried t h e i r t o t a l t o $16,293*000,000, the l a r g e s t amount on record, and time dep o s i t s increased to $9*203,000,000, a l s o a l a r g e r t o t a l than at any previous time.
The attached t a b l e p r e s e n t s f i g u r e s showing t h e condition of s t a t e bank and
t r u s t company members and of a l l member banks on June 30, 1924.

The following

statement shows changes in the p r i n c i p a l resources and l i a b i l i t i e s of a l l member
banks on the l a s t c a l l date compared with three months and w i t h a year ago:
Increase (+) or decrease ( - )
on June 30, 1924, since
March 11. 1924
Loans and discounts (including o v e r d r a f t s )
United States s e c u r i t i e s
Other bonds, stocks and s e c u r i t i e s
Total loans and investments
Demand d e p o s i t s (including c e r t i f i e d
and c a s h i e r s ' checks)
Time d e p o s i t s
B i l l s payable and rediscounts
Acceptances outstanding




June 30. 1923

+ $ 88,000,000
+
35,000,000
+ 304,000,000

-

+

465,000,000

+ 430,000,000

+

587,000,000

+
+

+ 1,132,000,000
+ 825, OX, 000
570,000,000
60,000,000

-

707,000,000
313,000,000
242,000,000
108,000,000

+ $ 384,000,000

262,000,000

'

062

** 2 *
*
*
EESOUBCES AND LIABILITIES OF STATE BANK AND TRUST COMPANY
MEMBERS AND OF ALL M M E BANKS ON JUNE 30, 1924,
E BR

All member
banks

S t a t e bank and
t r u s t company members

Loans and discounts (including
overdrafts)
U. S. s e c u r i t i e s
Other bonds, stocks and s e c u r i t i e s

$19,264,019,000
3,607.797, ooo
4,389tft3»,QQQ-

$ 7,278,802,000

Total loans and investments

27,261,559,000

10,138,621,000

503,555,000
1,965,453,000

159,072,000
766,783,000

582,475,000
1,940,197,000

185,135,000
496,675,000

1,741,073,000
1,782,9#,000

739,795,000
735,902,000

35,777,256,000

13,221,983,000

15,306,999,000
9,203,545,000
178,946,000
983,979,000

5,720,242,000
3,944,831, oco
57,375,000
433,766,000

25,675,460,000

10,156,214,000

3,854,101,000
502,907,000
304,668,000
2,030,336,000
1,669,592,000
1,740,172,000

1,033,984,000

Cash i n v a u l t
Reserve with F. R. Banks
Items with Federal Reserve Banks in
process of c o l l e c t i o n
Due f r a n banks and bankers
Exchanges f o r c l e a r i n g house, and checks
on other banks i n same place
All other rescurce s
Total resources
Demand d e p o s i t s
Time d e p o s i t s
U. S. d e p o s i t s
C e r t i f i e d aid c a s h i e r s ' checks
Total d e p o s i t s (other t h a n bank)
Due to banks and bankers
B i l l s payable and r e d i s c o u n t s
Acceptances
Capital stock paid i n
Surplus
All other l i a b i l i t i e s




1,129,358,000

1.750.461.000

162,282,000
155,896,000

697,075,000
589,669,000
426,863,000
( S t . 4194)

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




September 20, 1924.
St. 4212.
SUBJECT:

Condition r e p o r t s of State bank
md Trust company members, form 105-

Dear Sir.:
There are beizg forwarded to you today under
separate cover
copies of form 105 revised as of
May 15, 1924. Please mail three copies of the form
t o each State Bank and Trust company member in your
d i s t r i c t with i n s t r u c t i o n s to hold the blank forms
pending r e c e i p t of a c a l l f o r condition r e p o r t s .
Upon r e c e i p t of notice from t h e Board of the
b a l l f o r condition r e p o r t s , kindly n o t i f y the banks
thereof by mail i f they are located within two days%
time from the Federal reserve bank, or by telegram
i f not within two days 1 time by mail, and request
them t o f i l l out the reports and mail them t o you
promptly - In no case l a t e r than 10 days a f t e r r e ceipt of the c a l l .
In order t h a t the compilation of the
Board's a b s t r a c t showing the condition of a l l s t a t e
bank and t r u s t company members combined as of the
date of the next c a l l may not be undtily delayed, i t
i s requested that the Reports be forwarded to the
Board as soda as practicable a f t e r they are r e ceived by the Federal reserve bank* I f i t i s necessary t o communicate with a bank regardirg apparent
e r r o r s i n i t s report, a note t o that e f f e c t should
be made cn the report i t s e l f before i t i s mailed to
the Board, and the Board should be advised of the
necessary corrections when the desired information
$e received from the member bankKindly acknowledge r e c e i p t .
Yours very t r u l y ,

Walter L. Eddy,
Secretary.
LETTER TO EACH FEDERAL RESERVE AGENT.

363

k

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




September 3i 1924.
S t . 4215*
SUBJECT: Abstract of Condition Reports of
State Bank and Trust Company
Members and Of a l l Member banks
as of June )0, 19<^•
Dear S i r :
We ate forwarding to you under separate
covet

copies of the Board 1 * Abstract No. 25

showing t h e conditicn of State Bank and Trust Company members and of a l l member banks as at close
of business on June 30, 1924.

Consolidated

f i g u r e s f o r a l l member banks, both National and
State, a f e shown on pages 1 and 12.
Please forward one copy of the a b s t r a c t
t o each State Bank and Trust Coup any member in
your d i s t r i c t that has expressed a desire t o r e ceive copies of a b s t r a c t s as issued.
Very tr uly yours,

E.L.Smead, Chief,
Division of Bank Operations.

TETTER TO ALL FEDERAL RESERVE AGENTS.

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board




September l6, 1924.
St. 4226,

Dear S i r :
One of the reserve banks recently asked
the committee f o r a r u l i n g with respect t o the
a l l o c a t i o n of express charges paid on daily shipments of checks t o banks where shipment was made
by express rather than by mail. Farther inquiry
has e l i c i t e d the information t h a t in at l e a s t
three cases reserve banks are forwarding checks t o
certain banks by express where the volume i s such
as to make i t possible to e f f e c t a saving by t h i s
method. Your a t t e n t i o n i s called t o t h i s f a c t with
the suggestion t h a t you make an i n v e s t i g a t i o n to
see whether i t would be possible f o r your bank to
e f f e c t a similar saving, unless such investigation
has already been made. In t h i s connection i t i s ,
of course, necessary to consider the matter of
service, i . e . , whether items sent by express would
be received in t i n s to insure t h e i r c o l l e c t i o n as
promptly as i f sent by mail.
In case you are making of should h e r e a f t e r
make any shipments of checks by express, the exp r e s s dharges thus incurred should be charged on
expense report form $6 against item "Expressage",
and in the f u n c t i o n a l expense report to the "Postage" function against a new item "Expressage on
outgoing checks" t o be w r i t t e n in a f t e r "Bent of
postage meter machine."
Very t r u l y yours,

E. L» Smead, Secretary,
Committee on Salaries,
Expenditures and E f f i c i e n c y .

LETTER TO EACH PROCEDURE COMMITTEE
'*3.

CT~AIEIAT

FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
e
the federal reserve board

September 17, 1924

Dear S i r :
The Board's Committee on S a l a r i e s , Expenditures and
E f f i c i e n c y has r e c e n t l y corresponded with the Federal Reserve
Agents concerning t h e a l l o c a t i o n of expenses t o t h e "Administrat i o n " and "Federal Reserve Note Issues" u n i t s of the Federal
Reserve Agents Function. From t h i s correspondence i t appears t h a t
a majority of the banks in a l l o c a t i n g expenses have considered
the "Administration" unit as intended t o cover general administ r a t i v e expenses connected with work under the supervision of the
Federal Reserve Agent and, in some c a s e s at l e a s t , have included
expenses i n t h i s u n i t which c l e a r l y r e l a t e t o other f u n c t i o n s ,
such as Bank Examinations and S t a t i s t i c a l & A n a l y t i c a l . I t a l s o
appears t h a t the expenses charged t o Federal Reserve Note Issues
u n i t include in rnary cases the cost of a number of operations
which are in no respect r e l a t e d t o the note issue work.
I t has been decided t o eliminate i n f u t u r e r e p o r t s the Administration u n i t of the Federal Reserve Agent's
Function on page 2b of Form "E", as i t appears from the i n f o r mation furnished , t o the Committee t h a t t h e a d m i n i s t r a t i v e expense r e l a t i n g t o the note issue work is, in most cases,
scarcely s u f f i c i e n t in amount t o be measured.
The expenses h e r e t o f o r e charged to the Administ r a t i o n u n i t of the Federal Reserve Agent's Junction should
accordingly, beginning with July 1, 1924, be charged t o other
u n i t s as nearly as may be in accordance with the service r e n dered. Some of the d u t i e s , the cost of which has h e r e t o f o r e
been charged i n c e r t a i n cases t o e i t h e r the Ncte I s s u e s u n i t
or t o the Administration u n i t , a r e stated below together with
the unit t o which the expense is properly chargeable.
Handling a p p l i c a t i o n s of NaticnAlBanks f o r fiduciary powers.
Handling a p p l i c a t i o n s under Clayton Act.
"
"
f o r acceptance powers.
Analyzing r e p o r t s of condition - National and
S t a t e Banks.
F i l i n g earning and dividend r e p o r t s .
Applications f o r membership.
Applications to e s t a b l i s h branches, e t c .
The above should oe charged t o Bank Examinations Function.




I
- 2 -

867

S t . 4229-

Capital stock applications - Issue and surrender.
Maintaining c a p i t a l stock r e g i s t e r , issuing c e r t i f i cates, e t c .
The above should be charged t o General Books u n i t , Accounting
Func t i on.
Handling weekly condition reports of selected member
banks.
Weekly report of bank d e b i t s .
Tabulation of Clearing House statements*
Compilation of annual r e p o r t .
The above should be charged t o S t a t i s t i c a l u n i t , S t a t i s t i c a l
& Analytical Function.
Election of d i r e c t o r s .
Cost of p r i n t i n g annual r e p o r t .
The above should be charged t o the General Overhead Controllable Rinct ion.
'
Charges to be made t o the Federal Reserve Note
Issues u n i t should represent only such expenses as are incident
to the issue of Federal Reserve Notes in accordance with the mamal.
In any case where an Assistant Federal Reserve Agent
or another person on the s t a f f of the Federal Reserve Agent performs d u t i e s wnich are of b e n e f i t t o another f u n c t i o n of the bank
and which are not s p e c i f i c a l l y provided for in' any function under
the control of the Agent, a portion of the salaty bf such person
should be allocated t o the u n i t benefited by t h e service rendered;
and i t i s suggested in any such case that the question of a l l o c a t i o n of salary be taken up by the Agent and the Governor with a
view t d making a f a i r d i s t r i b u t i o n of the expense.
I t i s oelieved that i f the above instructions are
c a r e f u l l y followed in the preparation of future expense r e p o r t s
Form "E", the reports submitted by the several banks w i l l be more
comparable and that the actual cost of conducting the a c t i v i t i e s
coming under t h e control of the Federal Reserve Agent w i l l be more
accurately s t a t e d . Will you, t h e r e f o r e , be governed by the above
in the preparation of f u t u r e r e p o r t s .
Very t r u l y yours,

Geo. R. James, Chairman,
C omrni tt.ee on Salar ie s,
Expenditures and E f f i c i e n c y .
LETTER TO EACH FEDERAL RESERVE AGENT



868
FEDERAL RESERVE BOARD
September IS,
St.4235,

WASHINGTON
address official correspondence t o
the federal reserve board

1924.

SUBJECT: Expense Budget*
Dsar Sir?
Replies received from the Federal reserve "banks t o
the Board's l e t t e r St. U167 of July 29, 1924, inquiring as to
whether the banks have i n operation any form of budget control
of t h e i r expenses, i n d i c a t e that t h e New York, Cleveland and
Chicago banks are now operating under a budget , t h a t the Kansas
City bank has an expense control system which embodies some of
the f e a t u r e s of the budget system, and that the Richmond and
Minneapolis banks intend t o i n s t a l l a budget system i n the near
future* Those banks which have been operating under a budget
f o r some time s t a t e t h a t i t has been a material f a c t o r i n r e ducing expenses.
The subject of budget control i s having the serious
consideration of the Board and the topic w i l l be placed on
the program f o r discussion a t the j o i n t conference of Federal
Reserve Agents and Governors of the Federal reserve banks to
be held i n Washington beginning November 10. - I t w i l l be
appreciated, t h e r e f o r e , i f you w i l l give t h i s subject c a r e f u l
consideration so that the conference may be able to formulate
d e f i n i t e recommendations regarding t h e adoption and operation
of the budget system f o r t h e control of the operating expenses of the banks.
In order t h a t you may have a general idea of the
s i t u a t i o n a t each of the banks i n regard to t h i s question,
there i s enclosed herewith a mimeographed statement, St. 423§ ,
summarizing t h e r e p l i e s received from the Governors to the
Board1,s l e t t e r of July 29.
Very t r u l y yours,

Geo. R. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and Efficiency.

Enclosure.



LETTER TO GOVERNOR OF EACH FEDERAL RESERVE BANK

St.4236*

Sumriary of r e p l i e s received i n answer to the Board's l e t t e r S t , 4 l 6 j of
July 29, 1924, subject "Expense Budget, M
GENERAL S M A Y
U MR
I Banks having some form of Budget Control:
In e f f e c t
1. New York
2. Cleveland
3. Chicago
4. Kansas C i t y ( p a r t i a l )

Results

Big f a c t o r i n reducing
expenses.
Too e a r l y to r e p o r t .
Since July 1, 1924
(Operating Depts.: Jan, 1,1924 Has been a material
(Agent's Dept.: For .1} years, f a c t o r i n reducing expenses.
During l a s t 2 years
S a t i s f a c t o r y f o r some
departments.
Since Jan. 1, 1921

I I Banks planning to i n s t a l l Budget System:
1. Richmond
2. Minneapolis

Date
January 1, 1925
As soon a s p o s s i b l e

I I I Banks not operating under any form of Budget Control and which have made no plans
f o r i n s t a l l i n g such a system:
1. Boston
2, Philadelphia

3. Atlanta
4. St. Louis

5. Dallas
6. San Francisco

DETAILED SUMMARY

BOSTON
1, Has never undertaken to i n s t a l l a budget system,
2. Budget might be established and lived up to i n a few departments,
3- Certain expenses cannot be a n t i c i p a t e d : Example - Note issuance and F i s c a l
Agency.
4. Operations i n such departments aa Discounts, Transit and Currency are more
a c t i v e at c e r t a i n times of the month and at c e r t a i n seasons of the year
than at o t h e r s and f o r c e must be maintained to handle peak loads.
5.

Trend df' expenses has been downward during p a s t two y e a r s : Expenses covering
f i r s t half of 1924 are $80,000 l e s s than f o r corresponding period i n 1923.

N W YORK
E
1. Has operated under expense budget since January 1, 1921.
2. Has been one of the biggest f a c t o r s i n reducing the operating expenses.
3. Plan i s as f o l l o w s :
a. Detailed f i g u r e s covering the p r i n c i p a l items of expenditure during the
p a s t two years are submitted to department heads to a s s i s t them i n making
e s t i m a t e s . Committee of t h r e e o f f i c e r s reviews these estimates and makes
report to O f f i c e r ' s Council and the budget i s then submitted to d i r e c t o r s
f o r f i n a l approval.



-

St. 423^.

2 ~

37i

b« A monthly departmental expense report with comparative f i g u r e s shows
whether ejqpenses a r e running within "budget and a l s o wBether they have
increased or decreased over t h e same period of the year before.
4, 3upplamenting t h e budget i s the following system of making purchases;
a,. Every r e q u i s i t i o n must be signed by o f f i c e r s i n charge of department
and i f i n excess of $100 must be approved by senior o f f i c e r as well.
b. Requisition then goes to Planning Division, which passes on i t s n e c e s s i t y
and whether or not the a r t i c l e i s standard both f o r manufacturer and f o r
bank.
e. Deputy Governor then v i s e s a l l purchase r e q u i s i t i o n s a f t e r which they are
made upon a s t r i c t l y competitive b a s i s .
.£«!£I!ElfHI A
1, Has not put any departments on a budget.
2, In a few i n s t a n c e s r e s t r i c t e d appropriations have been made.
3, Cost of food i n c a f e t e r i a i s limited to approximate r e c e i p t s .
1.
2*
3,
4,

Has j u s t established a budget f o r the l a s t s i x months of 1924.
Budgeted the expense u n i t s a s now reported i n the f u n c t i o n a l Expense Reports.
Too e a r l y to r e p o r t r e s u l t s .
Plan i s as f o l l o w s :
a. Furnished each o f f i c e r with a form showing cost f o r the f i r s t half of
1.92ft-of the expense u n i t s under Ms supervision and requested a report on
the probable expenses f o r t h e l a s t half of year. Budget Committee r e viewed estimates and approved f i g u r e s were reported back to o f f i c e r s with
statement that the amounts approved were the maximum amounts t h a t could be
expended and even these should be f u r t h e r reduced i f p o s s i b l e .

BICSMOHD

1. Has not yet i n operation a budget control but expects to i n s t a l l one by
January 1, 1925.
2, Present system of expense control i s a t a l l times under the c a r e f u l superv i s i o n of the executive o f f i c e r s and i s designad to maintain a rigid superv i s i o n over s a l a r i e s of employees, promotions and t r a n s f e r s , terminations and
replacements, as well as a l l purchases of supplies and equipment and the d i s t r i b u t i o n of supplies from stock.

ATLANTA
1, Has never established a budget system.
2, Purchases are made on a competitive bid b a s i s and approved by Managing
Committee.
3, Board of Directors reviews s a l a r i e s of employees every 30 days.
-

•

-

•

.

•

• ..

;

GmC&GO
1. Operating departments now working under budget plan f o r f i r s t year, although
Agent's department has used budget f o r three years.
2. Substantial reduction has been e f f e c t e d i n operating f o r c e and general ex*
penges of bank and the establishment of the budget i s considered a m a t e r i a l
factor,
3. Plan i s as f o l l o w s :




-

3

-

St.4236.

a. O f f i c e r s were furnished with forms showing detailed expenses f o r
1922 and 1923 and asked f o r estimates f o r 1924-. Procedure Conuiittee
reviewed estimates and made necessary revisions, Relationship between actual expense and budget i s shown i n monthly expense r e p o r t s .
ST. LOUIS
1. No budget system in e f f e c t as local procedure committee has been unable to
see wherein a b e n e f i t would be derived from i t s adoption.
2, If budget system i s established, i t should i n no way i n t e r f e r e with the
present p o l i c y of the bank regarding economy and e f f i c i e n c y , which has
been very successful.
MINNEAPOLIS
1. Has never established a budget system f o r the c o n t r o l of expenses.
2. Suggestion, however, appeals to Governor and such a system will be put
in operation as soon as p o s s i b l e .
3. Points out that there are some departments, f o r example, "Failed Banks"
where the budget system would not be applicable.
KANSAS CITY
1. No regular budget system although such a system p a r t i a l l y i n operation during l a s t two years.
2, Estimates of expenses made a t various periods and i f a c t u a l expenses exceed estimates, an i n v e s t i g a t i o n i s made.
3- At present operating costs are being compared with expenses f o r corresponding period of 1923 and any increase w i l l be immediately investigated.
4. Believe i n budget system as a whole but could not {maintain e f f i c i e n t
service i f kept within a cost of operation that was estimated during a
previous period when conditions may have been quite d i f f e r e n t .
DALLAS
1„ Budget has not been established because i t was thought that on account of the
size of the organization and t h e character of work performed, the expenses
could be controlled i n other ways.
2. If the Board concludes, a f t e r a f u r t h e r study, that the plan would work to
the advantage of a bank of t h i s size and performing the character of operations
performed by us we would be glad to give f u r t h e r consideration to the matter.
SW FRANCISCO
1. Has not adopted a budget system as a means of controlling expenditures.
2. Functional expense reports have been an admirable means of detecting any
material v a r i a t i o n in the cost of conducting the d i f f e r e n t operating functions
of the bank. These r e p o r t s do not, however, provide the e s s e n t i a l f a c t s f o r
an -intsry i s t r i c t ' -c arparis cn. +of expenses.
3- Greatest help we could receive would be a v i s i t from an operating representa t i v e ; of Board's Committee to determine whether or not the bank i s
economically and e f f i c i e n t l y conducting i t s various operations.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to

September 18,

the federal reserve board

g t ,

4 gj) 7 •

SUBJECT: Budget Expense.

Dear S i r :
I am enclosing herewith f o r your information a
copy of a l e t t e r (St. 4235 dated September 18, 1924) sent
to the Governors of the Federal reserve banks advising
them that the subject of budget control i s having the
serious consideration of the Board and that the topic
will be placed on the program f o r discussion at the
joint conference of the Federal reserve agents and
Governors of the Federal reserve banks to be held in
Washington beginning November 10.
I t r u s t you w i l l give t h i s matter c a r e f u l
consideration and be prepared t o discuss i t f u l l y at
the forthcoming conference*

As you w i l l note, the

l e t t e r to the Governors c a r r i e s an.enclosure summar i z i n g the r e p l i e s received from the Governors t o the
Board's l e t t e r St. Ulfay of July 29 on the subject of
Budget Expense.


LETTER


Very t r u l y yours,

Geo. R. James, Chairman,
Ccmmittee on Salarie s,
Expenditures and E f f i c i e n c y .

TO EACH FEDERAL RESERVE AGENT"

!

07.3

FEDERAL RESERVE BOARD
WASHINGTON

September 18, 1924.
St.4235.

address official correspondence to
the federal reserve board

SUBJECT: Expense Budget.
Dear S i r :
R e p l i e s received from the Federal reserve banks to
the Board 1 s l e t t e r St. 4l6? of July 29, 1924, inquiring as to
whether the banks have i n operation any form of budget control
of t h e i r expenses, i n d i c a t e that the New York, Cleveland and
Chicago banks are now operating under a budget, that the Kansas
City bank has an expense control system which embodies some of
the f e a t u r e s of the budget system, and that the Richmond and
Minneapolis banks intend to i n s t a l l a budget system i n the near
f u t u r e . Those banks which have been operating under a budget
f o r some time s t a t e t h a t i t has been a material f a c t o r i n r e ducing ejpenses.

The subject of budget control i s having the serious
consideration of the Board and the topic w i l l be placed on
the program f o r discussion a t the j o i n t conference of Federal
Reserve Agents and Governors of the Federal reserve banks to
be held i n Washington beginning November 10. I t w i l l be
appreciated, t h e r e f o r e , i f you w i l l give t h i s subject c a r e f u l
consideration so that the conference may be able to formulate
d e f i n i t e recommendations regarding the adoption and operation
of the budget system f o r the control of the operating expenses of the banks.
In order t h a t you may have a general idea of the
s i t u a t i o n at each of the banks i n regard to t h i s question,
there i s enclosed herewith a mimeographed statement r St.4236 ,
summarizing the r e p l i e s received from the Governors to the
Board 1 s l e t t e r of July 29.
Very t r u l y yours,

Geo. R. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and Efficiency,

Enclosure.



LETTER TO GOVERNOR OF EACH FEDERAL RESERVE B N
AK

st. i*23G. 8 7 4

Summary of r e p l i e s received i n answer to the Board*s l e t t e r St.Ul67 of
July 29, 1924, subject "Expense Budget, w
GENERAL S M A Y
U MR
I Banks having some form of Budget Control:
In e f f e c t
1. New York
2. Cleveland
3. Chicago
4. Kansas C i t y ( p a r t i a l )

Results

Big f a c t o r i n reducing
expenses.
Since July 1, 1924
Too e a r l y to r e p o r t .
(Operating Depts.:Jan. 1,1924 Has been a material
(Agent*s Dept.: Foi .13 years, f a c t o r i n reducing expenses.
During l a s t 2 years
S a t i s f a c t o r y f o r some
departments.
Sinc-e Jan. 1, 1921

I I Banks planning to i n s t a l l Budget System:
1. Richmond
2. Minneapolis

January 1, 1925
As soon as possible

I I I Banks not operating under any form of Budget Control and which have made no plans
f o r i n s t a l l i n g such a system;
1. Boston
2. Philadelphia

3, Atlanta
4. St. Louis

5. Dallas
6, San Francisco

DETAILED S M A Y
U MR
BOSTON
1. Has never undertaken to i n s t a l l a budget system.
2. Budget might be established and lived up to i n a few departments,
3. Certain expenses cannot be a n t i c i p a t e d : Example - Note issuance and Fiscal
Agency.
4. Operations i n such departments aa Discounts, Transit and Currency are more
.,
a c t i v e at c e r t a i n times of the month and at c e r t a i n seasons of the year
than at others and f o r c e must be maintained to handle peak loads.
5.

Trend i f ' expenses haa been downward during past two years: Expenses covering
f i r s t half of 1924 are $80,000 l e s s than f o r corresponding period i n 1923.

N W YORK
E
1. Has operated under ejgpense budget since January 1, 1921.
2. Has been one of the biggest f a c t o r s i n reducing the operating expenses.
3. Plan i s as follows:
a. Detailed f i g u r e s covering the p r i n c i p a l items of expenditure during the
past two years are submitted to department heads to a s s i s t them i n making
estimates. Committee of three o f f i c e r s reviews these estimates and makes
report to O f f i c e r 1 s Council and the budget i s then submitted to directors
f o r f i n a l approval.




-

2 -

St. 4 6 3 6 ^ 3 7 5

b. A monthly, departmental expense report with c-croparative f i g u r e s shows
whether expenses a r e running within "budget and a l s o whether they have
increased or decreased over t h e same period of the year b e f o r e .
4. Supplementing t h e budget i s the following system of making purchases:
a. Every r e q u i s i t i o n must be signed by o f f i c e r s i n charge of department
and i f i n excess of $100 must be approved by s e n i o r o f f i c e r as well,
b. Requisition then goes to Planning Division, which passes on i t s n e c e s s i t y
and whether or not the a r t i c l e i s standard both f o r manufacturer and f o r
bank.
c. Deputy Governor then v i s e s a l l purchase r e q u i s i t i o n s a f t e r which they a r e
made upon a s t r i c t l y competitive b a s i s ,
PHTLADEIPHIA
1 . Has not put any departments on a budget*
2. In a few i n s t a n c e s r e s t r i c t e d appropriations have been made.
3. Cost of food i n c a f e t e r i a i s limited to approximate r e c e i p t s .
CLEVELAND
1. Has j u s t e s t a b l i s h e d a budget f o r the l a s t s i x months of 1924,
2. Budgeted the expense u n i t s a s now reported i n the Functional Expense Reports.
• 3* Too e a r l y to r e p o r t r e s u l t s .
Plan i s as f o l l o w s :
a. Furnished each o f f i c e r w i t h a form showing cost f o r t h e f i r s t half of
192k of the expense utoits under h i s supervision and requested a report on
the probable expenses f o r t h e l a s t half of year. Budget Commit tee r e viewed e s t i m a t e s and approved f i g u r e s were reported back to o f f i c e r s with
statement t h a t the amounts approved were the maximum amounts t h a t could be
expended and even these should be f u r t h e r reduced i f p o s s i b l e ,
BI OSMOND
1. Has not yet i n operation a budget control but expects to i n s t a l l one by
January 1, 1925.
2, Present system of expense control i s a t a l l times under the c a r e f u l superv i s i o n of the executive o f f i c e r s and i s designed t o maintain a r i g i d superv i s i o n over s a l a r i e s of employees, promotions and t r a n s f e r s , terminations and
replacements, a s well as a l l purchases of supplies and equipment and the d i s t r i b u t i o n of s u p p l i e s from s t o c k .
m a m
1, Has never e s t a b l i s h e d a budget system.
2; Purchases a r e made on a competitive bid b a s i s and approved by Managing
Committee.
3. Board of Directors reviews s a l a r i e s of employees every 30 days.
4, .
CHICAGO
1. Operating departments now working under budget plan f o r f i r s t y e a r , although
Agent's department has used budget f o r three y e a r s .
2. S u b s t a n t i a l reduction has been e f f e c t e d i n operating f o r c e and general ex-, 4*>
penses of bank and the establishment of the budget i s considered a m a t e r i a l
factor,
3# Plan i s as f o l l o w s :




°76
,

3 -

St.4236.

a. O f f i c e r s were furnished with forms showing detailed expenses f o r
' 1922 and 1923 and asked f o r estimates f o r 1924-. Procedure Comnittee
reviewed estimates and made necessary r e v i s i o n s . Relationship between actual expense and budget i s shown i n monthly expense r e p o r t s .
ST. LOCJIS
1, Ho budget system in e f f e c t as local procedure camiittee has been unable to
r see wherein a b e n e f i t would be derived from i t s adoption.
2, If budget system i s established, i t should i n no way i n t e r f e r e with the
present p o l i c y of the bank regarding economy and e f f i c i e n c y , which has
been very succ.es sful*
MINNEAPOLIS
1. Has never established a budget system f o r the c o n t r o l of expenses,
2. Suggestion, however, appeals to Governor and such a system w i l l be put
in operation as soon as p o s s i b l e .
3. Points out t h a t there are some departments, f o r example, "Failed Banks"
where the budget system would not be applicable,

K N A CITY
ASS

1. Ho regular budget system although such a system p a r t i a l l y i n operation during l a s t two years,
2. Estimates of expenses made a t various periods and i f a c t u a l expenses exceed estimates, an i n v e s t i g a t i o n i s made.
3. At present operating costs are being compared with expenses f o r corresponding period of 1923 said any increase w i l l be immediately investigated.
b. Believe i n budget system as a Whole but could not toaintain e f f i c i e n t
service i f kept within a cost of operation that was estimated during a
previous period when conditions may have been quite d i f f e r e n t .

m m

1. Budget has not been established because i t was thought that on account of the
size of the organization end t h e character of work performed, the expenses
could be controlled i n other ways.
2. If the Board concludes, a f t e r a f u r t h e r study, that the plan would work to
the advantage of a bank of t h i s size and perf orming the character of operations
performed by us we would be glad to give f u r t h e r consideration to the matter.

SAN FRANCISCO
'
1. Has not adopted a budget system as a means of controlling expenditures.
2. Functional expense reports have been an admirable means of detecting any
material v a r i a t i o n i n the cost of conducting the d i f f e r e n t operating functions
of the bank. These r e p o r t s do n o t , however, provide the e s s e n t i a l f a c t s f o r
an • i n t srj9 i s t r i c t - xt oqiaris en. t>fexpenses.
3. Greatest help we could receive would be a v i s i t from an operating representa t i v e ; of Board's Committee to determine whether or not the bank i s
economically and e f f i c i e n t l y conducting i t s various operations.




FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board




October 7, 1924.
s t . U263.

SUBJECT:

Cost of Bank Examination
and Credit work.

Dear S i r :
The wide v a r i a t i o n s in the cost of bank
examination and c r e d i t work as shown by the q u a r t e r l y
f u n c t i o n a l expense r e p o r t s , Form E, indicate t h a t '
the policy with respect t o such work i s f a r from
uniform among the several Federal reserve banks.
,In o r d e r / t h e r e f o r e that the Committee may {
have f u l l information regarding the scope of the
examination and c r e d i t work carried on by your bank
and of the theory upon which your p o l i c y with
r e f e r e n c e t o sach work is based, i t w i l l be apprec i a t e d if you. w i l l kindly f u r n i s h i t with the i n formation called f o r in the attached questionnaires
at your early convenience.
Very t r u l y yours,

Geo. R. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and E f f i c i e n c y .

Enclosure.
LETTER TO CHAIRMAN AT EACH FEDERAL RESERVE BANK
COPY TO GOVERNOR

077

BANK EXAMINATION FUNCTION.

\

8*78

State Bank Members
National
In cooperation
Banks
with s t a t e bank Independent
authorities
1. How many examinations were made of member
banks during the period January t o June 1923
July t o December 1923
January t o June 1924
July t o September 1924
2. How many c r e d i t investigations were made of
member banks during the period January 10 June 1923
July t o December 1923
January to June 1924
July t o September 1924
3. Show separately number of examinations and of c r e d i t i n v e s t i g a t i o n s made in
each s t a t e in your d i s t r i c t since July 1, 1923.
4. Has the cost of a l l examinaticns made since July 1, 1923, been charged to the
banks examined? I f not, give l i s t of banks not charged and the reasons t h e r e f o r .
5* Has the cost of a l l c r e d i t investigations made since July 1, 1923, been absorbed
by the reserve bank? I f not, give names of banks charged and reasons t h e r e f o r .
6. Describe general determining f a c t o r s that prompt you t o i n s t i t u t e credit investigations.
7. Are c r e d i t investigations conducted regularly of a l l member s t a t e banks,
whether or not they are substantial borrowers?
(a)

In a l l s t a t e s in your d i s t r i c t .

(b)

In s t a t e s where examinations made by s t a t e a u t h o r i t i e s are not
acceptable t o reserve bank d i r e c t o r s .

8. Describe b r i e f l y the character and extent of the c r e d i t i n v e s t i g a t i o n s made by
your examiners.
9. a.
b.
c.

How many examiners do you now have?
1. Capable of making independent c r e d i t investigations?
2. Who are not placed in charge of c r e d i t investigations?
Give name an* salary of each examiner and a s s i s t a n t examiner.
What l i m i t is placed on the amount allowed examiners f o r t r a v e l i n g expenses?




(St. 4263a)

-

10. ab.

2

-

Gi re name and s a l a r y of each employee ( o t h e r than examiners) r e c e i v i n g
$2,500 or more p e r anum.
Gize number and average s a l a r y of employees r e c e i v i n g l e s s than $2,500
pe r anum

11. Do you r e c e i v e copies of r e p o r t s of examinations of State bank members from
each S t a t s bank Superintendent i n your d i s t r i c t ?
12. Describe the extent of the a n a l y s i s made of r e p o r t s of examination of (a)

State member banks.

(b)

National banks.

13. Describe b r i e f l y each separate set of records kept in the examination d e p a r t ment and enclose copies of a l l forms used i n the department.
14. Are t h e r e any employees assigned t o the examination f u n c t i o n mho are devoting
a s u b s t a n t i a l p o r t i o n of t h e i r time t o the <*crk of some other function without
a l l o c a t i o n of the expense?
If so give d e t a i l s .




( S t . 42bja)

MAINTAINING- CREDIT INFORMATION EXPENSE UNIT
LOANS, REDISCOUNTS A D ACCEPTANCES FUNCTION
N

State the number of c r e d i t f i l e s carried by you on corporations, firms,
ships and i n d i v i d u a l s .

partner-

(a) Domiciled in your oxm d i s t r i c t .
(b) Domiciled outside your d i s t r i c t .
How many of the c r e d i t r e p o r t s carried by you on concerns domiciled outside
your d i s t r i c t s were, obtained. ~
(a) Direct from such concerns.
(b) Through the f \ R, Bank of the d i s t r i c t in which the concern i s
domiciled.
(c) Through reporting c r e d i t agencies,
Ho# many c r e d i t f i l e s have been s t a r t e d since January 1, 1924?
a. I s a l l c r e d i t information furnished by the borrowing member banks?
b* If not, what percentage i s obtained frcm other sources?
c. List p r i n c i p a l sources from which such inforrnaticn i s obtained.
a- Do you require borrowing banks to f u r n i s h c r e d i t statements covering a l l
notes rediscounted?
b. If not, what exceptions are permitted?
Do you f u r n i s h blank forms t o member banks on mhich c r e d i t statements of
borrowers are t o be submitted? If so, please enclose sample of each such form.
a* Ho* many subscriptions do you make t o c r e d i t r e p o r t i n g agencies?
b. State name and cost of each service*
c, Eov do you value such service as compared with c r e d i t r e p o r t s received through
borrowing member banks?
a* Do you obtain s p e c i a l r e p o r t s from credit agencies?
b. If so, how many such r e p o r t s have you received since January 1, 1924?
c. What agencies mere they received from and what' was the t o t a l cost of the rer e p o r t s received from each agency?




(St. 4263b)

Do you conduct any special investigation of any c r e d i t information received?
If so, describe b r i e f l y and s t a t e number of employees so engaged.
Do yon consider i t necessary to obtain credit information other than that
shorn in the regular reports issued "by c r e d i t agencies, covering corporations,
partnerships, i n d i v i d u a l s , e t c . , whose paper i s not under rediscount with
your bank?

a.
b.
c.

How many employees do you have i n your c r e d i t department ?
Give name, t i t l e and annual salary of each employee receiving $2,500
or more per anum,
Give number and average salary of employees receiving l e s s than $2,500
per anum.

Describe b r i e f l y each record kept i n your c r e d i t department and f u r n i s h
copies of a l l forms used,




(St. 4263b)

FEDERAL RESERVE BOARD

~

WASHINGTON

October S, 1924.
St. 4264.

address official correspondence to
the federal reserve board

SUBJECT: Auditing Departments of
Federal Reserve Banks.

Dear S i r :
An examination of the outlines covering the work p e r formed by the Auditing Departments of the Federal reserve banks
recently received by t h i s Committee, indicates t h a t a considerable v a r i a t i o n e x i s t s in the auditing procedure of the Federal
Reserve banks.

I t would seem, however, in view of the simi-

l a r i t y of work performed by the reserve banks, that the essent i a l functions of an auditing department in one Federal r e serve bank should not be materially d i f f e r e n t from those in
another, and f o r t h i s reason i t has been decided t o appoint
a committee of bank o f f i c e r s t o make a complete study of t h i s
subject and submit a report there cn.

The committee named

is as follows:
Mr» I>, R. Rounds, Chairman,
General Auditor, Federal Reserve Bank of New York
Mt, F* H. Holman,
Auditor, Federal Reserve Bank of San Francisco
Mr. J . S. Walden, J r . ,
Controller, Federal Reserve Bank of Richmond,
The work of auditing i s of very great importance to
the reserve banks and should at a l l times be carried on with a
view to providing adequate protection with a minimum of expense.




-

2

-

Bach reserve bank i s e n t i t l e d to, and should have, t h e oenef i t of the experience of every other r e s e r v e bank, and the
committee believes t h a t t h i s r e s u l t can best be accomplished
by having a committee of e x p e r t s , who are thoroughly f a m i l i a r with a l l operations of Reserve banking, formulate a
standard of a u d i t i n g procedure which may be used by each
bank in i t s a u d i t i n g work.

I t i s believed that i f the

above-named committee submits a complete plan f o r a u d i t i n g
which can be accepted by a l l reserve banks as the standard
f o r t h e i r a u d i t i n g procedure, the r e s u l t w i l l not only be
a s u b s t a n t i a l saving of expense but an improvement in
a u d i t i n g methods as w e l l .
Very t r u l y yours,

Greo. R* James, Chairman,
Committee on S a l a r i e s ,
Expenditures and E f f i c i e n c y .

LETTER TO CKAIRMM AT EACH FEDERAL RESERVE 3ANK
COPY TO GOVERNOR




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

O c t o b e r

9*

19*24,

St.4268.
SUBJECT: BtiLly Balance Sheets,
Forms 34 and F.R.A. - 5.

Dear S i r :
I t i s expected that the manuscripts f o r the 1925
e d i t i o n s of f01m 3^» d a i l y balance sheet of Federal reserve
bank, and form F, B. A. - 5» daily statement of Federal r e serve agent, w i l l be sent to the p r i n t e r in the near f u t u r e .
I t w i l l t h e r e f o r e be appreciated i f you w i l l kindly advise
the Board promptly the number of copies of each of these
forms that w i l l be required f o r your bank (and f o r each of
i t s branches, i f any) f o r use during 1925.

Kindly s t a t e

also any special punching that may be desired.
In the event that your bank has any changes to
suggest i n e i t h e r form, i t w i l l be appreciated i f you w i l l
advise us of them when replying to t h i s l e t t e r .
Very t r u l y yours,

E. X. Efeiead, Chief,
Division of Bank Operations.

LETTER TO EACH FEDERAL RESERVE AGENT.



J@5
FEDERAL RESERVE BOARD
WASHINGTON

October l 6 , 1924.
St.4273

address official correspondence to
the federal reserve board

SUBJECT: Reports of Condition of State
Banks and Trust Companies
Dear S i r :
Your courtesy w i l l be g r e a t l y appreciated i f you w i l l
f u r n i s h the Federal Reserve Board, as soon as a v a i l a b l e , with
two copies of the abstract of reports of condition of State banks
and Trust companies i n your State on October 10, 1924, or other
recent date i n case you did not issue a c a l l f o r r e p o r t s of cond i t i o n as of October 10.
If convenient to your o f f i c e , we would l i k e to have separate f i g u r e s f o r mutual savings banks and f o r p r i v a t e banks,
providing there are any such banks operating i n your s t a t e . In
case the number of each c l a s s of banks reporting i s not shown i n
the a b s t r a c t , w i l l you also be good enough to incorporate t h i s i n formation i n your l e t t e r of t r a n s m i t t a l . Following your usual
custom i t w i l l be appreciated if you w i l l kindly segregate the
data according to Federal reserve d i s t r i c t s , as the value of these
data to the Board and f o r purposes of publication w i l l be g r e a t l y
enhanced, i f they can be tabulated by Federal reserve d i s t r i c t s .
The October number of the Federal Reserve B u l l e t i n (copy
of which has been forwarded to you) contains a summary statement
of the a b s t r a c t s of r e p o r t s of condition on or about June 30, 1924,
of a l l banks and t r u s t companies under state supervision i n the
4g s t a t e s and the D i s t r i c t of Columbia, to which your a t t e n t i o n i s
invited.
:

A franked and self-addressed envelope, requiring no
postage, i s enclosed f o r use i n transmitting the data requested.
Very t r u l y yours,

fc*

I'
I
!
I
1
r

Walter L. Eddy,
Secretary,

Enclosure.
To State



Banking Departments.

FEDERAL RESERVE BOARD
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO
T H E FEDERAL RESERVE B O A R D

October 16, 192U.
St. 42?4,
SUBJECT:

Reports of Condition of State
Bank and Trust companies.

Gentlemen:
Your courtesy w i l l be greatly appreciated i f
you w i l l f u r n i s h the Federal Be serve Board, as soon as
a v a i l a b l e , with two copies of the abstract of reports of
condition of State banks and Trust companies i n your State
on October 10, 1924, or other recent date i n case you did
not i s s u e a c a l l f o r reports of condition as of October 10.
If convenient to your o f f i c e , we would l i k e to
have separate f i g u r e s f o r mutual savings banks and for
p r i v a t e banks, providing there are any such banks operating
i n your s t a t e . In case the number of each class of banks
reporting i s not shown i n the a b s t r a c t , will you also be
good enough to incorporate t h i s information i n your l e t t e r
of t r a n s m i t t a l .
The October number of the Federal Reserve B u l l e t i n
(copy of which has been forwarded to you) contains a summary
statement of the a b s t r a c t s of reports of condition on or
about June 30, 1924, of a l l banks and t r u s t companies under
s t a t e supervision i n the 4g s t a t e s and the D i s t r i c t of Columbia, to which your a t t e n t i o n i s i n v i t e d .
A franked and self-addressed envelope, requiring
no postage, i s enclosed f o r use i n transmitting the data
requested.
Very t r u l y yours,

Walter L. Eddy,
Secre t a r y .

Enclosure.



FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

November 1, 1924.
s t . U301
SUBJECT: Report on Economy and E f f i c i e n c y .

Dear S i r :
There are enclosed herewith two copies
of the report j u s t made to the Federal Reserve
Board by the Committee on S a l a r i e s , Expenditures
and E f f i c i e n c y , in which there i s presented a
review.of the Committee's a c t i v i t i e s during the
p a s t year, an outline of i t s present program, and
recommendations regarding the f u t u r e conduct of
the economy and e f f i c i e n c y work. This report i s
sent you at t h i s time i n order that you may be
f a m i l i a r with the present a c t i v i t i e s of the
Committee i n advance of the forthcoming conference.
Very t r u l y yours,

Geo. R. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and E f f i c i e n c y .

*

>




Enclosures.
LETTER TO GOVERNORS AND CHAIRMEN OF ALL F. R. BANKS.

St. 4328
•
Federal Reserve Board,
November 21, 1924.

STATEMENT

FOB

THE

PRESS

Thursday November 27 being a holiday, the Board's
weekly statements of condition of Federal Reserve Banks and of
r e p o r t i n g member banks will be issued on Friday, November 28,
and released for p u b l i c a t i o n on Saturday, November 29.




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

November 22, 1924.
st„ 4329.
SUBJECT:

Condition of Member Banks
as of October 10, 1924.

Dear S i r :
For your information there i s enclosed
•r

'




herewith a preliminary statement regarding the
c o n d i t i o n of a l l member "banks combined as of
October 10, 1924.

The Board's a b s t r a c t (No. 26)

showing the detailed f i g u r e s f o r State bank and
Trust company members and the combined f i g u r e s
f o r a l l member banks i s now i n the hands of the
p r i n t e r and w i l l be ready f o r d i s t r i b u t i o n i n the
near f u t u r e .
Very t r u l y yours,

Walter L. Eddy,
Secretary.

Enclosure
\

LETTER TO ALL FEDERAL RESERVE AGENTS

J89

CONDITION OF M M E BANKS AS 0? OCTOBER 10, 1924
E BR

St.-Ujpg

Loans and investments of a l l member "banks increased $1,129,000,000 between
June 30 and October 10, 1924 and aggregated $28,4 51,000,000 on the l a t t e r date.
This t o t a l i s the l a r g e s t ever reported and i s $5>032,000,000 above the t o t a l reported on March 10, 1922, the low point of the post-war period.

Although increas-

es as compared with June 30 are reported f o r a l l Federal reserve d i s t r i c t s , the
increase i n the Minneapolis d i s t r i c t was especially marked, while those for the
Richmond, Atlanta, St. Louis, Kansas City and San Francisco d i s t r i c t s were r e l a t i v e
ly small.

The t o t a l increase i n loans and discounts amounted to $556,000 } 000,

while investments went up $6331000,000.
to $30,772,000,000.

Total deposits increased $1,242,000,000

Over half of t h i s increase was i n amounts due to banks.

De-

mand deposits increased $421,000,000, time deposits - $39^,000,000, and U. S. dep o s i t s - $123,000,000, while c e r t i f i e d and c a s h i e r s ' checks outstanding show a
decline of $330,000,000.

The attached table presents f i g u r e s r e f l e c t i n g the con-

d i t i o n of s t a t e bank and t r u s t company members and of a l l member banks on October
10, 1924.
The following statement shows changes i n the p r i n c i p a l resources and l i a b i l i t i e s of a l l member banks on the l a s t c a l l date as compared with f i g u r e s for
June 30, 1924, and f o r September 14, 1923.
Increase (+) or decrease(-)
On October 10, 1924, since
June 30, 1924
Loans and discounts (including overdrafts)
United States s e c u r i t i e s
Other bonds, stocks and s e c u r i t i e s
\
Total loans and investments
Demand deposits (including c e r t i f i e d and
c a s h i e r s ' checks)
Time deposits
B i l l s payable and rediscounts
Acceptances outstanding




Sept. 14. 1923

+$556,000,000
+ 287,000,000
+ 346,000,000
+ 1,139,000,000

+$963,000,000
+ 172,000,000
+ 818,000,000
+1,953,000,000

+ 90,000,000
+ 394,000,000
- 70,000,000
+ 52,000,000

+1,282,000,000
+1,131,000,000
- 688,000,000
+
39,000,000

— 2

—

RESOURCES AND LIABILITIES OF STATE BAM AND TRUST C M A Y
O PN
MEMBERS AND OF ALL MEMBER BANKS ON OCTOBER 10, 1924.

All member
banks
Loans and discounts (including
ove rdraf t g)
U, S. s e c u r i t i e s
Other bonds, stocks and s e c u r i t i e s
Total loans and investments
Cash i n v a u l t
Reserve with F. R. Banks
Items with Federal Reserve Banks i n
process of c o l l e c t i o n
Due from "banks and bankers
Exchanges f o r c l e a r i n g house, and checks
on other banks i n same place
All other re sources
Total resources
Demand d e p o s i t s
Time deposits
U. S. deposits
C e r t i f i e d and c a s h i e r s ' checks
Total deposits (other than bank)
Due to banks and bankers
B i l l s payable and rediscounts
Acceptances
Capital stock paid i n
Surplus
All other l i a b i l i t i e s




$19,819,898,000

State bank and
t r u s t company members

3,894,620,000

4,736,126,000

$7,601,161,000
1,318,766,000
1,340,310,000

23,450,644,000

10,760,237,000

527,859,000
2,121,428,000

168,507,000
317,757,000

613,494,000
2,430,462,000

125,600,000
580,318,000

1,091,300,000
1,865,653,000

462,155,000
817,470,000

37,103,870,000

13,792,084,000

15,729,597,000
9,597,395,000
301,803,000
653,342,000

5,938,330,000
4,138,099,000
116,391,000
288 ,839,000

26,282,137,000

10,481,659,000

4,489,920,000
432,747,000
357,055,000
2,034,943,000
1,682,646,000
1,824,419,000

1,190,786,000
138,717,000
198,049,000
703,166,000
609,033,000
470,674,000

s t . U329.

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

November 26, 1924.
s t . 4333.

SUBJECT:

Closing of Books on December 31, 1924,

Dear S i r :
In order t h a t the Board may have ample time to pass upon a l l
charges which your "bank proposes to make against current earnings when
the books are closed on December 31» 1924, f o r depreciation allowances,
f o r reserves to take care of probable l o s s e s , and f o r other extraordinary
purposes, i t i s requested t h a t the dividend r e s o l u t i o n of your Board ef
Directors be mailed i n time to reach the Board's o f f i c e s not l a t e r than
December 10, 1924,
The dividend resolution should be accompanied with statements
showing the following information:
1. Estimated gross earnings, current expenses, proposed charges
to c u r r e n t n e t earnings, and net earnings available f o r surplus and franchise t a x , f o r the calendar year 1924.
2. Unpaid indebtedness of f a i l e d or suspended tanks to Federal
reserve bank, giving the names of the banks, indebtedness
of each on November 30, character of s e c u r i t y , if any, and
estimated losses.
3. Indebtedness 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 on November 30«
character of s e c u r i t y , i f any, and probable losses.
4. A statement in the form outlined below, showing separately
for each property acquired for Banking House purposes,
(a) the c y s t , amounts charged o f f t net book value, and
estimated market value of land owned;
(b) the c o s t to November 30, amounts charged o f f , reserves
c a r r i e d , net book value, and estimated replacement cost of
buildings, exclusive of fixed machinery and equipment,
e i t h e r completed or i n course of construction;
(c) the c o s t to November 30, amounts charged o f f , reserves
c a r r i e d , and net book value of fixed machinery and equipment.




LAND

Cost to November 30
Amount charge d off
Book value (net)
Estimated market value

BUILDING INCLUDING VAULT
Cost to November 30
Amount charged off
Reserves now carried
Book value (net)
Estimated replacement cost
FIXED MACHINERY AND EQUIPMENT
Cost to November 30
Amount charged off
Reserves now carried
Book value (net)

$.

$

$

In the case of land on which a new building has been or i s to be
constructed the cost of the land (building s i t e ) should agree with the amount
reported against item 6 of quarterly bank premises report (Federal Reserve
Board Form St. 2810). In case of buildings purchased and occupied as bank
quarters, the reported cost of land should represent i t s f a i r market value
at time of purchase.
The balance of the purchase p r i c e should be considered
as the cost of the building.
The following r u l e s have been approved by the Federal Reserve Board
for the guidance of the Federal reserve banks i n submitting requests f o r p e r mission to make special charges against current net earnings, and f o r closing
of books on December J l .
1. Bank Premises, (a) Land. No charges against current net earnings
w i l l be authorised by the Federal Reserve Board to cover depreciation on land
where the estimated market value of the land i s equal to or i n excess of i t s
net book value.
(b) Buildings. In passing upon requests to set
•up depreciation reserves on bank buildings, the Board w i l l in general permit
a charge against current net earnings of not exceeding 2 per cent of estimated
replacement c o s t , including vaults but excluding fixed machinery and equipment.
In case the net book value of a building i s i n excess of i t s estimated replacement c o s t , the Board w i l l consider requests from Federal reserve banks f o r p e r mission to write off a depreciation charge not exceeding the amount of such
excess.
(c) Fixed machinery and equipment. A reserve
should be set aside each year to cover depreciation on fixed machinery and
equipment, such as b o i l e r s , engines, dynamos, motors , power pumps, elevators,
heating, plumbing, l i g h t i n g and v e n t i l a t i n g systems, pneumatic tubes, r e f r i g e r a t i o n p l a n t s , automatic f i r e sprinkler equipment, and vacuum cleaners.
Annual additions to t h i s reserve should be based on the estimated l i f e of the




machinery and equipment, but i n no case should the annual charge exceed 10
per cent of c o s t . Replacements of Fixed Machinery and Equipment should Toe
charged to t h i s reserve.
(d) Estimates of the market value of land and of
the replacement c o s t of buildings e i t h e r completed or i n course of construction should be obtained from the b e s t available a u t h o r i t i e s . A copy of the
estimates thus obtained should be enclosed with your request f o r authority
to charge current net 'earnings with depreciation on bank premises unless
similar estimates have been previously submitted to the Federal Reserve Board.
For the purpose of t h i s report the estimated replacement cost of buildings
including v a u l t s , but excluding fixed machinery and equipment, may be arrived
at by determining the mean of two amounts, namely; ( l ) the t o t a l actual cost
of construction, and (2) the estimated cost of construction based on the
lowest p r i c e s t h a t have existed during the f i f t e e n years preceding the comp l e t i o n of construction.
(e) Where p r o p e r t i e s have been purchased with the
i n t e n t i o n of razing e x i s t i n g buildings and of e r e c t i n g new banking quarters
the Board w i l l consider requests f o r permission to deduct from current net
earnings an amount equal to the difference between the cost of the property
and the market value of the building s i t e exclusive of improvements.
2. Furniture and equipment. Requests to charge off the balance
remaining i n the Furniture and Equipment account on December 31 should be
accompanied with an itemized l i s t of a l l Furniture and Equipment carried on
the books as of the date your request i s submitted and also with a l i s t of
additional f u r n i t u r e , i f any, t h a t i t i s proposed to purchase during the
remainder of the year.
3- Depreciation on United States s e c u r i t i e s . A reserve amounting
to 3 per cent of the par value of U. S. conversion bonds of I9U6-U7 may be
set aside to cover depreciation on such bonds. In case the present reserve
f o r depreciation i s in excess of a c t u a l depreciation as above determined
such excess should be c r e d i t e d ' t o P r o f i t and Loss.
4. Surplus and franchise taxes. After a l l current expenses,
dividends, depreciation allowances and other extraordinary c h a r g e - o f f s
authorized by the Federal Reserve Board have been provided f o r , any remaining net earnings s h a l l be d i s t r i b u t e d as follows:




(a) Transfer to surplus account a l l available net earnings
providing the t o t a l surplus w i l l not as a r e s u l t exceed
the bank's subscribed c a p i t a l , in which case only such
amount shall be transferred as i s necessary to increase
the surplus account.to an amount equal to the bank's
subscribed c a p i t a l .
(b) Of the balance of net earnings, if any, 10 per cent shall
be transferred to surplus account, and 90 per cent paid
to the United States Government as a f r a n c h i s e tax.

-

4 -

I n s t r u c t i o n s as to the time and method of payment of the f r a n chise t a x w i l l as usual "be issued a t a l a t e r date by the Treasury Department.
Very t r u l y yours,

Walter L. Eddy,
Secretary.

TO CHAIRMEN OF ALL FEDERAL RESERVE BANKS.




/

FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

December 15, 192*+.
St. UlRS..
SUBJECT: Reports of Earnings, Expenses,
Dividends, and Franchise Tax
Payments f o r 192U.
Dear Sir:
In order t h a t the Poard may have information regarding
the f i n a n c i a l r e s u l t s of operations 0/ Federal reserve banks during the present calendar year as soon AS p r a c t i c a b l e a f t e r January 1, i t i s requested that a statement be telegraphed the Board
on Friday morning, January 2, 1925» showing the following informa
tion:
(Code)
EACH - Gross earnings n
« . . . .$
EADS - Current expenses . . . . . . . . . . . . . . .
EARN Current net earnings
ELBA - Additions to Current net earnings*
ENID - Deductions from Current Net Earnings
Net additions to or deductions
from current net earnings

.
*

EAST - Net earnings available f o r dividends,
franchise t a x , and surplus
EYRE - Dividends paid
EMET - Paid tg Government as f r a n c h i s e tax
EVEN - Transferred 10 surplus account

.

Total (to agree with item EAST)
CAPP - Subscribed c a p i t a l January 1, 1925
CEDE - Surplus January 1, 1925




_________

#
I

•3

I t i s also requested that the .regular monthly r e p o r t s
of earnings and expenses on forms 95> 9^, 97 sW
"be accompanied with an itemized statement showing in d e t a i l a l l additions
to and deductions from current net earnings ( P r o f i t and Loss
account) during the year, and that i n addition to the regular
balance sheet form 3^ f o r the l a s t day of the year representing the
condition of the bank a f t e r f i n a l closing of the books, a form 3^
be submitted showing the condition of the bank at close of business
but p r i o r to the making of any p r o f i t and loss account e n t r i e s .
Very t r u l y yours,

E. L. Sine ad, Chief,
Division of Bank Operations.
•i
>

N
LETTER T BE SENT T THE GOVERNOR
O
O
AT EACH FEDERAL RESERVE BANK.




1

S t . 4364
Federal Reserve Board
December 19, 1924,

STATEMENT

FOR

THE

PRESS

Thursday, December 25> being a holiday, the
Board's weekly statements of condition of Federal reserve
banks and of reporting member banks will be issued on
Friday, December 26, and released f o r p u b l i c a t i o n on
' Saturday, December 27 •

The following week, t h e weekly

statements w i l l be issued on Friday, January 2» and r e leased f o r p u b l i c a t i o n on Saturday, January 3. .




898

" f''p

FEDERAL RESERVE BOARD
WASHINGTON

December 24, 1924,
4370.

ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

*

SUBJECT:
a

i

Auditing Departments of
Federal Reserve Banks.

Bear S i r :
The committee of bank o f f i c e r s appointed t o make a comp l e t e study of the a u d i t i n g f u n c t i o n and t o submit a report thereon,
of which you were advised i n ny l e t t e r St. 4264 of October g, 1924,
met in Washington on December g, 9 and 10, 1924, and have now submitted a r e p o r t , the p r i n c i p a l object of which i s t o secure
F i r s t , a s a f e audit designed- t o provide every reasonable
check and safeguard, on t h e operations of the banks, and.
Second, an e f f i c i e n t audit with a view t o g e t t i n g maximum s a f e t y at minimum c o s t .
s
m

^

1
w

Two copies of the report are enclosed herewith, one f o r
yourself and- one f o r t h e Auditor of the bank. One copy of the r e port i s a l s o being sent under separate cover t o the Governor. I t
i s suggested t h a t the report be c a r e f u l l y studied and, a f t e r your
Auditor has had an opportunity to thoroughly f a m i l i a r i z e himself
with i t , that a copy of the report together with h i s comments be
submitted, to your Board of Directors f o r such action as i t may des i r e to t a k e .
In t h i s connection I d e s i r e t o say t h a t i t i s not the
purpose of the Board or of t h i s committee to d i c t a t e i n any way
the manner i n which your a udi t s should be performed, but the
Committee i s desirous of being of as much a s s i s t a n c e to the banks
as p o s s i b l e from the standpoint of both economy and e f f i c i e n c y .
This committee believes t h a t the report attached hereto o u t l i n e s
the fundamental p r i n c i p l e s that should govern Federal reserve
auditing, and t h a t i t w i l l be of material help t o your Board- and
your Auditor i n planning and carrying out the a u d i t work of your
bank.
Very t r u l y yours,
George E. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and E f f i c i e n c y .
TO CHAIEMEN Of ALL F. B. BANKS




FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL. RESERVP BOARD

D$C8mbGT

2 4 ,

1 9 2 4 .

St. 4370a
V

K
1

SUBJECT: Auditing Departments of
Federal Reserve Banks.

Dear S i r :
For your information there i s enclosed
herewith copy of a l e t t e r that is being sent today

m

to the Chairmen of the Federal reserve banks, | p .
gether with a copy of the report submitted by the

^

committee appointed by the Board on October 8,

4'

1924, to m%e a study of the auditing f u n c t i o n .
Yours very truly,

George B. James, Chairman,
Committee on S a l a r i e s ,
Expenditures and Efficiency

LETTER TO GOVERNORS OF ALL F. R. BANKS

).




1
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD

December 31, 1924.
s t . 4333.

SUBJECT: Schedule of Federal Beserve Bank
Personnel f o r 1924 Annual Report.
Dear S i r :
For use i n the forthcoming annual report of the
Federal Reserve Board covering operations during the c a l endar year 1924, i t i s requested t h a t as soon a f t e r January 1, 1925, as p r a c t i c a b l e , you f u r n i s h the Board with
a statement r e l a t i n g to the personnel of your bank ( i n cluding branches, i f any) as at close of business on
December 31* 1923 and 1924, made out i n accordance with
the form attached hereto* The statement should not take
account of changes i n e i t h e r the number or s a l a r i e s of
o f f i c e r s or employees that are to be made on January 1,
1925. In determining whether or not a given individual
should be l i s t e d as an o f f i c e r or an an employee the
Board's l e t t e r X-3532 of October 5, 1922 should be used
as a guide. After the statement has been completed i t
should be compared with data published on pages 249-252
of the Board's 1923 annual r e p o r t , so that any d i f f e r ences may be reconciled before the report i s transmitted
to the Board.
Very t r u l y yours#-

Waiter I». Eddy,
Secretary.

%
TO ALL CHAIRMEN OF FEDERAL RESERVEBftMS



St.

4333a

FEDERAL RESERVE B N OF __
AK
(including Branches)

O f f i c e r s and Employees
Annual S a l a r i e s
Number
1923
1924
1924
1923
Officers:
Chairman and Federal Reserve Agent
Governor
Other o f f i c e r s
Employees by departments:
Banking department
Federal Reserve Agent's department
Auditing Department
Fiscal Agency Department
Total
Fiscal Agency department employees
whose s a l a r i e s are reimbursed, by
the Treasury lepartment
Other employees whose s a l a r i e s are
reimbursed to bank, including building
employees i n space rented to tenants
Grand t o t a l
Temporary employees (not included above)