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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 Withdrawn: Pembersille Savings Bank Co. , Pemberville, Ohio.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 ' ^ 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 ' I 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)