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1
x-1530
FEDERAL EFSSP.VE SCAHD JLO'QUNCEMENT
1SK
<U LY 3, l-S-25.
CHANGES B
SJkTK 3«TF. j/SMSISSHIP:
Admitted to M^rrfbarshd-n:
Capital
Surplus
Total resources
Date
DISTRICT NO. "5.
Glensi&6 Bpnk & Trust Co.,
Glenside, Penna.
$125,000
$30,000
$870,596
6-^9-25
Columbia State Savings Bank,
Chicago, 111.
200,000
25,000
2,313,OUl
7- 2-25
DISTRICT NO. 7.
Converted into National Bank:
Citizens State Bank, Commerce,.Tex&s
7~ 1-25
Taken over by Nonmember B-ink:
First State Bank of Ladonia, 7®?.crla, Texas
Gnarauty Bank & Trv-sCo., Or? ••.••• io.xas
First St&t? Bank, Saoinal, Tax&c
6-18-25
6-20-25
6-18-25
PERMISSION GRANTED TO EXERCISE TRUST V0WS.S:
Orac.gely.irg National Bank, Orarvrsc-irg, S. C.
First National
LaFayetto> £&«
.
City iN&ticnel Rv;ik, Auburn, Ind.
,
Mount S a m on National Bank & Iruet Co., Mt. Vernon, Ind.
f~
77~
7-
2-25
2-25
2-25
1-25
2
x-1350
FEDERAL RESERVE BOARD ANNOUNCEMENT
WEEK ENDED JULY IP, I925.
CHANGES IN STATE BANK MEMBERSHIP
Admitted, to Membership
Capital
Surplus
DISTRICT NO. 3.
North York State Bank,
North York, Pa.
$1+0,000
DISTRICT NO. 8
Federal Bank & Trust Company
Little Rock, Ark.
200,000
Total Resources
Date
$4,000
$253MS
7-3-25
20,000
240,000
7- 9-25
Converted into National Bank
The Celine State Bank, C e l i m , Texas
7- 7-25
Voluntary Withdrawal
Bank of Fountain, Fountain, Mich.
7- 8-25
Change of Location and Title
Hudson Trust Company, West Hohoken, N. J.
to
Hudson Trust Company of Union City, N. J.
(The Town of Union and West Hohoksn, New Jersey)
(consolidated under the name of Union City, N.J)
7~ 3-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS.
Merchants National Bank of Manchester, N.H. (Supplemental)
First National Bank of Lewiston, Maine
Farmers National Bank of Reading, Pennsylvania,
7- 9-25
j- 7-25
j~ 7-25
X~1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDING JULY 17, 1925.
ADMITTED TO THE FEDERAL RESERVE SYSTEM
DISTRICT NO. 6
Capital
Surplus
Total
Resources
Date
Bank of Wefcumpka,
Watumpka, Alabama
$25 >000
$15>000
$192,726
J—I3—25,
VOLUNTARY WITHDRAWALS
The Falls Banking Company,
Kanyon State Bank,
Security State Bank of Wanamingo,
La Crosse County Bank,
Peoples State Bank,
Cuyahoga Falls, Ohio
Kenyon, Minnesota
W&namingo, Minnesota
West Salem, Wisconsin
Whitehall, Wisconein
7-16-25
7-13-25
7--13-25
7-13-25
7-13-25
CHANGE OF NAME
First Guaranty State Bank,
First State Bank
Denton, Texas
to the
Denton, Texas
ASBORBED BY NON-MEMBER BANK
Commercial Guaranty State Bank,
San Augustine, Texas
PERMISSION GRANTED TO EXERCISE TRUST POTHERS
The First National Bank,
Milton, Pennsylvania
The First National Bank,
Lake City, Florida
7-11-25
4
FEDERAL RESERVE BOARD JU^OTKCEMENT
FOE THE WEEK EMDED JULY 24, 1$25
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership:
Capital
Surplus
Total
resources
Date
$35,000
$40,000
$454,909
7-20-25
The Reliance Trust Co., Cleveland, Ohio, and the Commonwealth
Banking & Trust Co., Cleveland, Ohio, have consolidated
under the title of Ohio Trust Company.
6-30-25
DISTRICT HO. g.
Citizens Bank, Festua, Mo.
Consolidation of State Members:
Voluntary Withdrawals:
State Bank of Jeffers,
Security State Bank,
Bank of Alamo,
Jeffers, Minn.
Noonan, N. Dak.
Alamo, Tenn.
7-22-25
7-21-25
7-20-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First National Bank,
National Rockland Bank,
Laconia National Bank,
Manayunk National Bank,
Lynchburg National Bank,
Alexander National Bank,
Consolidated National Bank,
Farmers National Bank,
Morgan County National Bank,
Ontario National Bank,
Bath, Maine
Boston, Mass.
Laconia, N. H.
Philadelphia, Penna.
Lynchburg, Va.
St. Petersburg, Fla.
Dubuque, Iowa
Clay, Ky.
Fort Morgan, Colo.
Ontario, Calif.
7-22-25
7-22-25
7-22-25
7-22-25
7-22-25
7-22-25
7-22-25
7-22-25
7-22-25
7-22-25
5
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED JULY 31, 1925
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to the System:
Surplus
Total
resources
$50,000
$10,000
$244,795
7-29-25
60,000
12,000
220,015
7-29-25
Capital
Date
DISTRICT NO. 7.
Stunner State Bank,
Stockland, 111.
DISTRICT NO. 11.
league State Bank,
Teagae, Texas
Absorbed "by Nonmembar:
Security Bank & Trust Co.,
Helena, Ark.
7-25-25
Voluntary Withdrawals:
Farmers & Merchants Bank,
Picaho State Bank,
Athens, Ala.
Picabo, Idaho
7-27-25
7-27-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Second National Bank,
Guardian National Bank.
First National Bank,
Lodi National Bank,
Hamilton, Ohio
Chicago, 111.
Riverside, 111.
Lodi, Calif.
7-29-25
7-29-25
7-29-25
7-31-55
x-1530
FEDERAL BESERVE BOARD MT?roiBTOE?IF36E
FOR TIIS iESE 1 3 3 AU3uS2 14,1325
CHANGES IN STATE PAZK jyTOERSHXP:
Date
Admitted to Liemusrcbi-p:
None.
Voluntary Withdrawal:
Polk County Bank,
Balsam Lake, Wis.
S-lU-25
Absorbed by Nonmamber:
Merchants & Planters State Bank, Winnsboro, Tex.
8- 4—25
Absorption of Nonmember:
The Farmers Stats Bank, Jamestown, Kans., a nonmember, has
been absorbed by TI1-3 Jamestown State Bank, James torn, Kans., a
member.
7—20—25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Citizens National Bark,
Jenkintown, Perma.
PaintsviHe National Bank,Paintaville, Ky.
Harriman National Bank,
Harriman, Tenn.
S-lU-25
g-12-25
8—12—25
8
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED AUGUST 21,1925
CHAISES IN STATE BANK MEMBERSHIP:
No changes *
PERMISSION GRANTED TO EXERCISE TRUST POWERS: •
None.
9
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FCR THE WEEK ENDED AUGUST 28, 1925
CHANGES IN STATE B A M MEMBERSHIP:
Admitted to Membership:
Capital
Surplus
$25,000
>,250
Total
resources
'Date
DISTRICT NO. 8.
The North Side Bank,
St. Louis County, Mo.
$31,250
8-26-25
Closed:
Orrville Bank & Trust Co.,
Orrville, Ala.
8-27-25
Change of Title:
The Guaranty State Bank, Tahoka, Texas, has changed its title
to The Security State Bank.
6-17-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Hurlbut National Bank,
Winsted, Conn.
Peoples National Bank,
Stamford, Conn.
Northumberland National Bank, Northumberland, Pa.
Union National Bank,
Lewisburg, Pa.
Market Street National Bank, Shamokin, Pa.
Jefferson County National Bank, Brookville, Pa.
First National Bank,
Covington, Ky.
Union National Bank,
Richmond, Ind.
American National Bank,
Aurora, 111.
Rockport, Ind.
First National Bank,
8-26-25
8-25-25
8-25-25
8-25-25
8-25-25
8-26-25
8-25-25
8-26-25
8-26-25
8-25-25
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE "WEEK ENDED SEPTEMBER -2X, 1925.
• CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership:
None •
Voluntary Withdrawal:
Bank of Safford,
Safford, Arizona
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First National Bank,
First National Bank,
Skoiehegan, Maine
Chattanooga, Tenn.
±2
x-1530
FEDERAL HESEEVE BOARD ANNOUNCEMENT
FOE THE WEEK ENDED SEPTEMBER 18, 192$.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership:
Capital
Surplus
Total
resources
$200,000
$3,319,002
Date
DISTBICT NO. 2.
Clinton Trust Company,
Newark, N. J.
#+00,000
9-18-25
Absorption of Nonmember and Change of Title:
The Commercial State Bank, Constantine, Mich., a member, has
taken over the First State Bank of Constantine, Mich,, a nonmember, and has changed its title to First Commercial Savings
Bank.
$- 5-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First National Bank, Tuckahoe, New York
9-17-25
13
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE WEEK ENDED SEPTEMBER 25, 1^2$.
CHANGES IN STATE BANK MEMBERSHIP:
Date
Admitted to Membership:
None.
Closed:
Peoples Trust & Savings Bank, Perry, Iowa
$-21-25
Taken over by Norraember Bank:
9-19-25
Bank of St. Helena, St. Helena, Calif.
(Taken over by Liberty Bank, San Francisco, Cal.)
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Hillside National Bank,
Cataract National Bank,
National State Bank,
First National Bank,
First National Bank,
First National Bank,
First National Bank in
Hillside, N. J.
Niagara Falls, N. Y.
Troy, N. Y.
Onoonto, Ala.
Wetumpka, Ala.
Cloverdale, Ind.
Columbus, Miss.
9-22-25
9-23-25
9-22-25
9-23-25
9-23-25
9-23-25
$-18-25
14
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED OCTOBER 2, 1925.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership:
Capital
Surplus
Total
resources
$150,000
$38*000
$4,928,055
9—^9—25
25,000
24,000
673,309
9-29-25
Date
DISTRICT NO. 1.
Quinoy Trust Co.,
Quincy, Mass.
DISTRICT NO. 7.
Utica State Savings Bank,
Utica, Mich.
15
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED OCTOBER 9, I925.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership:
Date
None.
Voluntary Liquidation:
Ladd & Tilt on Bank,
Portland, Oregon.
9- 2-25
Voluntary Withdrawal:
The Manistique Bank,
Manistique, Michigan.
10- 8-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Rumford National Bank,
Rumford, Maine.
Union National Bank,
Lowell, Mass.
Caledonia National Bank, Danville, Vt.
Baxter National Bank,
Rut land, Vt.
Oyatermen's National Bank,Sayville, N. Y.
Peoples National Bank,
Farmville, Va.
Brady National Bank,
" Brady,
Texas.
City National Bank,
Galveston,Texas.
10- 5-25
10- 5-25
10- 5-25
10- 9-25
10- 8-25
10- 5-25
10- 5-25
10-5-25
16
X-1530
FEDERAL RESERVE BOAED .AMOUNCEMENT
FOE TEE WEEK ENDED OCTOBER 16, 1925.
CHMTC-E3 IK STATE BANK MEMBERSHIP:
Admitted to Membership:
Capital
Total
resources
Surplus
Date
DISTRICT NO.
Liberty Trust Company,
A1lentown, Pa.
$300,000
$175,000
$1,615,795
10-1]-25
Reopened:
Orrville Bank & Trust Co.-, Orrville, Ala.
10-10-25
Merger:
The National Union Bank of Boston, Mass., has merged
with the State Street Trust Company, Boston, Mass., a member.
Closed:
Bank of Bowyrsville, Bowersvilla, Ga.
Farmers & Merchants State Bank, Eureka, Mont.
10- 9-25
10-15-25
Voluntary Withdrawal:
Farmers & Merchants State Bank, Hocla, S. Dak.
10-13-25
Absorbed by Hcnmsmber:
The Security State Bank, Buhl, Idaho, has been absorbed by the Buhl State Bank, Buhl, Idaho, a nonmember.
10- 5-25
x-153'o
FEDERAL RESERVE BOARD ANKOUNCiSMEN1]
FOR THE WEEK ENDED OCTOBER 23,
CHANGES IN STATE BKHK MEMBERSHIP:
Date
Admitted to Membership:
None.
Closed:
Big Stone City State Bank, Big Stone City, S. Dak.
10-2}-2^
Voluntary Withdrawals:
Farmers Bank & Trust Co., Georgetown, Ky.
Continental Trust Co.,
Washington, D. C.
10-17-25
10-17-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
First National Bank,
Ramsey, N. J.
First National Bank,
Media, Pa.
Aurora National Bank, Aurora, 111.
First National Bank,
Van Bur en, Ark.
First National Bank,
Fordyce, Ark. (Supplemental)
Bellinghazn National Bank, Ballingham, Wash. "
10-23-25
10-23-25
10-23-25
10-2J-25
IO-23-25
IO-23—25
X-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED OCTOBER 30, 1925.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership*
N o n e *
Voluntary Withdrawals:
Bank of Morehead City, Morehead City, N. C*,
The Corydon State Bank, Corydon, Indiana,
10-23-25
10-24-25
Absorbed by Member Bank.
The Commercial Bank of Athens, Athens* Georgia, has
been obsorbed by The Citizens and Southern Bank of
Savannah, Savannah, Georgia.
10-27^25.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
N o n e .
19
X-1530
FEDERAL EESEHVE BOARD AMOUNCEMENT
FOR THE WEEK ENDED NOVEMBER 6, I925.
CHANGES IN STATE BAKE MEMBERSHIP:
Date
Admitted to Membershiip:
None.
Absorption of National Bank:
The Harvard Trust Co., Cambridge .> Mass.; has absorbed
the Manufacturers National Bank, Cambridge, Mass.
$-28—2$
Voluntary Withdrawal:
Long Branch Banking Co., Long Branch, N. J.
'
11- 4-25
Absorbed by Nonrnember:
Farmers State Bank, Huntsville, Ala. , a member, has
been absorbed by Tennessee Valley Bank, Decatur, Ala.,
a nonmember.
11- 2-25
Converted into National Bank:
Bank of Commerce, Tampa, Florida.
11- 2-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
National White River Bank, Bethel, Vt.
11- 4-25
20
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK EMBED NOVEMBER 13, 1$25.
CHANGES IN STATE BANK MEMBERSHIP:
Pat;
None.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
Perth
First
First
First
Amboy National Bank, Perth Amboy, N. J.
National Bank,
Tenafly, N. J.
National Bank,
Connersvilie, Ind.
National Bank,
Marion, Ind.
11-10-25
11-10-25
11-10-25
11-10-25
21
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED NOVEMBER 20, 1525.
CHANGES IN STATE BANK MEMBERSHIP:
Dist. No.
Date
Admitted, to Member ship:
None.
Converted into National Bank:
11
Liberty State Bank, Liberty, Texas.
11-16-25
Consolidated with State Member:
11
Farmers & Merchants State Bank, Maypearl, Texas,
has consolidated with Citizens State Bank,
Maypearl, Texas, a member.
11-16-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
7
2
2
Springvale National Bank,
Toy National Bank,
Liberty National Bank,
First National Bank,
Springvale, Maine.
Sioux City, Iowa.
New York, N. Y. (Sup.)
Ossining, N. Y.
11-20-25
11-20-25
11-17-25
11-17-25
X-1530
FEDERAL EESLBVS BOARD ANNOUNCEMENT
FOR THE WaEK ENDED NOVEMBER 27- 1925
CHANGES IN STATE M
MEMBERSHIP!
Dist, No.
Date
Admitted, to Membership:
None.
Voluntary Withdrawal:
Volusia County Bank & Trust Co. , Deland, .Fla,.
11- 21 25
Closed:
Sac County State Bank, Sac City, Iowa
II-2.I-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
4
7
New Hampshire National Bank, Portsmouth, N. H.
Old National-City Bank,
Lima, Ohio
Citizens National Bank, Stevens Point, Wis.
11-24-25
11-17-25
11-24-25
23
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOR THE WEEK ENDED DECEMBER 4, 1925.
CHANGES IN STATE BANK MEMBERSHIP:
Pist.
No.
Date
Admitted, to Membership:
3
Montgomery Trust Co.,
Norristown, Pa.
Capital
Surplus
Total
resources
$500,000
$250,000
$6,613,687
11-30-25
Voluntary Withdrawal:
7
Paw Paw Savings Bank,
P a w P a w , Mich.
11-28-25
Consolidated with State Member:
12
Iron Commercial & Savings Bank, Cedar City, Utah
(Consolidated with Bank of Southern Utah, Cedar City,
Utah, a member)
11-23-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
7
National Bank of Ionia,
Ionia, Mich.
11-30-25
24
x-1530
FEDERAL RESERVE BOARD AltfNOUNCEMENT
FOR THE WEEK tiHDED DECEMBER 11, I925.
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
No.
Date
Admitted to Membership:
Total
resources
2
Capital
Surplus
Manufacturers & Traders
Bank, Buffalo, N. Y. $2,000,000 $1,500,000 $61,935 A 8 9
(Succeeded Manufactuarers & Traders National Bank)
11-27-25
Closed:
7
Commercial State Bank,
Britt, Iowa
12- 7-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
6
7
12
National Bank of Stamford,
First National B^nk,
First National Bunk,
American National Bank,
Stamford, N. Y.
Clo,rksvi lie, Tenn.
Quincy, Mich.
Sun Bernardino, Cu,lif.
12- 8-25
12- 8-25
12- 8-23
12- 8-25
#
25
x-1530
FEDERAL RESERVE BOARD ANNOUNCEMENT
FOB THE WEEK ENDED DECEMBER 18, 192$.
CHANGES- IN STATE BAKTK MEMBERSHIP:
Dist. No.
Date
Admitted, to Membership:
Capital
7
Surplus
La Grange Trust & Savings Bank, La Grange,111. $100,000 $25,000
Total
resources
$1,985,682
12-16-25
Merger:
2
The Fidelity Trust Co., Buffalo, N. Y., and the Manufacturers
and Traders Bank,.Buffalo, N. Y., both members, have merged
under the title of Manufacturers and Traders Trust Co.
12-15-25
Insolvent:
11
First State Bank, Mt. Calm, Texas
(Assets sold to a nonmember bank)
11-18-25
PERMISSION GRANTED TO EXERCISE TRUST POWERS;
3
7
7
National Bank of West Grove, West Grove, Penna.
Irving Park National Bank, Chicago, 111.
Security National Bank-, Eockford, 111.
12-17-25
12-17-25
12-17-25
26
X-153C
FEDERAL RESERVE BOARD AMOUKCEMENT
FOR THE iSEBK E^DuD DECEMBER 23, 1^25.
Dist. No.
Data
Admitted to Membership:.
Alone.
Converted to National Bu,nk:
1
Massachusetts Trust Company, Boston, Mass.
12-1^-25
Withdra'vn:
11
The Farmers Sta.e Bank, Garvin, Okla.
12-21-25
Change of Title:.
11
The Fanners Guaranty State Bank; North Zulch,
Texas, has changed its titla to Guaranty Bond
State Bank.
Absorption of Nonine-urn,-,! .
The Wood & Huston Bank, Marshall, Ho., a member
bank, has absorbed the BanA. of Mt. Leonard, Mt.
Leonard, Mo., a nonmembar.
11-27-25
PERMISSION GRAINED TO EliERCISE TRUST FOYERS:
Massachusetts National BanK, Boston, Md,ss.
lcf-1^-25
x-1530
FEDERAL RESERVE BOARD AMOIINCEMENT
FOR THE WEEK ENDED DECEMBER
1925 •
CHANGES IN STATE BANK MEMBERSHIP: •
No.
.
2 American Trust Co..,
New Yorkj N. Y,
Admitted to Membership:
'
Total
§jjj2P^P-.s
$4,000,000 $2,250,000 $53,055,044
4
Peoples-Coxritnsrcial Bank,
Belief or. taine, 0 .
7
First Trust & Savings Bank,
Hammond., Ind.
125,000
25,000
125,000
90,000
1,379,728
3,780,320
EatjS
12-31-25
12-28-25
12-31-25
Closed:
9 Valley County Bank, Hinsdale, Mont.
9 fatate Bank of Nashua, Nashua, Mont.
12-28-25
12—28—25
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2 Railway National Bank,
Railway, N. J.
2 De J aware National Bank, Delhi, N, Y.
7 Illinois National Bank, Springfield, 111.
7 First National Bank,
Monroe, Mich.
12 First National Bank in Berkeley, Cal.
12-29-25
12—29—25
12-36-25
12-29-25
12—3O-25
28
FEDERAL RESERVE BOARD
WASHINGTON
4373
A D D R E S S OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE B O A R D
July 2, 1925.
C
SUBJECT: Eligibility of Officer of Insurance Company for Election
as Class 3 Director.
Dear Sir:
The Federal Reserve Board has recently been requested to rule
on the question whether a person whose sole occupation is that of an officer of a life insurance company is eligible for election as a Class
B director of a Federal reserve bank.
After a careful consideration of
this question* the Board reached the conclusion that such a person is
not eligible for election as a Class B director; because (a) he is not
actively engaged in
11
commerce, agriculture, or some other industrial
pursuit" within the meaning of that language as used in the Federal
Reserve Act and (b) it is contrary to the policy of Congress for a person so closely identified with the financial interests to be permitted
to serve as a Class B director of a Federal reserve bank.
The decided cases show clearly that the business of insurance
companies is not regarded as "commerce" by the courts (Hooper v, California, 155 U. S . 648)* and obviously it is not "agriculture",
A person
whose sole occupation is that of being an officer of an insurance company,
therefore, is not engaged in such a business as will render him eligible
for election as a Class B director unless it can be said that the insurance business comes within the general term; "some other industrial
pursuit".
Pago 2.
X-4373
It appears from the dictionary definitions that the terms"industry" and "industrial" are susceptible of two meanings:
(1) a broad
meaning which includes substantially all forms of business enterprises,
and (<5) a more restricted meaning which applies only to manufacturing,
mining and similar enterprises which have for their object the production of material tangible values.
The insurance business probably would
come within the term "other industrial pursuit" if that term is to be
construed in its broadest possible sense; but it would not come within
the meaning of that term if the word "industrial" is to be given its
more limited meaning.
It is necessary, therefore, to go beyond the bare language
of the Act and endeavor to ascertain from every possible source the
real intention of Congress.
It is a fundamental rale of statutory
construction that, where the language of a statute is susceptible of
more than one interpretation, the intended meaning must be sought by
the aid of all pertinent and admissible considerations*
Section 4 of the Federal Reserve Act provides that a Class B
director shall be actively engaged in "commerce, agriculture, or some
other industrial pursuit" and also provides that no Class B director
"shall be an officer, director or employee of any bank".
It is clear,
therefore, that Congress intended that Class B directors should be business men, and should not be bankers or closely identified with the banking business.
It may be said that the three classes of directors of Federal
reserve banks are representative of:
29
Pago 3.
X-4373
30
(A) The "banks (or the principal lendirg class of the public);
(B) Business (or the principal borrowing class of the
public); and.
(C) The Government or the general public.
Is the insurance business one of the classes of business which
Congress had in mind when it used the language "commerce, agriculture or
some other industrial pursuit"?
by asking another question:
This question may be clarified somewhat
What is the fundamental distinction, from the
standpoint of the Federal Reserve Act, between business men who are represented on the boards of directors of Federal reserve banks by Class B directors and bankers who are represented by Class A directors?
The answer
would seem to be that bankers are lenders whereas business men are borrowers .
Considering the insurance business in this light, it seems clear
that it must fall on the same side of the line as banking, becau.se insurance companies (as distinguished from insurance agents and brokers) do not
as a rule borrow money but have large funds for investment purposes and
constitute an important factor on the lending side of the money market.
This phase of their business is very closely analogous to that of investment banking.
The Board feels, therefore, that it is contrary to the general policy of Congress for officers of insurance companies to serve as
Class B directors, not only because they are not borrowers and, therefore,
not the class of business men which Congress presumably had in mind, but
also because they are lenders and are closely analogous to bankers who
are expressly forbidden to be Class B directors.
Page 4.
X-4373
31
The language of the Act also indicates that it was the intention
of Congress that Class B directors should represent not only the borrowing public hut that particular class of the borrowing public whose borrowings give rise to paper which is eligible to rediscount.
They are ex-
pressly required to be actively engaged in "commerce, agriculture, or
some other industrial pursuit," and this language is very similar to
that used in the principal definition of eligible paper;
"Notes, drafts, and bills of exchange issued
or drawn for agricultural, industrial, or commercial purposes, or the proceeds of which have been used, or are to
be used for such purposes," (Section 13)
It is probable that this close similarity in the two sections
was not accidental, but on the contrary was the result of intention and
design.
Congress probably intended that the board of directors of a Fed-
eral reserve bank should include in its membership men v;ho are familiar
with the kinds of business from which paper eligible for rediscount with
Federal reserve banks would arise.
The policy of such an intention is
obvious.
Under the established construction of the law regarding the
eligibility of notes, drafts and bills for rediscount, it is hardly
possible that the business of insurance companies (as distinguished
from that of insurance agents or brokers) could give rise to paper eligible for rediscount at Federal reserve banks.
It seems reasonable
to conclude, therefore, that Congress did not have that business in
mind when it used the phrase "some other industrial pursuit" in Section 4, but intended to use that language in the more restricted
•32
X-4373
Page 5.
sense which, includes only manufacturing, mining and similar enterprises which have for their object the production of material tangible
values.
For those reasons, the Board reached the conclusion that a
person whose sole occupation is that of officer of an insurance company is not eligible for election as a Class B director of a Federal
reserve bank.
This does not mean that all officers of insurance com-
panies are ineligible for election as directors of Federal reserve
banks; because many of them are bank directors and, therefore, are
eligible for election as Class A directors, which would seem to be
the class to which they properly belong.
Very truly yours,
D. B. Crissinger,
Governor.
TO ALL FEDERAL RESERVE AGENTS EXCEPT BOSTON.
33
X-4375
C O P Y
June 12, 1925.
Federal Reserve Bank,
Atlanta, Georgia.
Dear Sirs:
The Comptroller of the Currency upon my request has given me his
position in regard to the respective rights, title and authority of the
Comptroller of the Currency and of the Federal Reserve Bank of Atlanta,
concerning the Bills Payable which the Georgia National Bank of Athens,
rediscounted with the Federal Reserve Bank, and the Bills Payable which
it hypothecated with the Federal Reserve Bank, and the disposition of
the collateral that was pledged to secure both the bills receivable upon
these two accounts.
The Comptroller of the Currency holds that the Georgia National
Bank has a contingent interest in both classes of Bills Payable which
the Receiver must protect, and that the collateral pledged to secure the
Bills Receivable upon both accounts cannot be disposed of without the
consent of the Comptroller of the Currency and an order of the United
States District Judge for this district.
The Comptroller is further of the opinion that none of the rediscounted notes, or those hypothecated to the Federal Reserve Bank can be
compounded without the consent of the Comptroller and the Court as above
stated.
Thus, that in no case of sale of collateral pledged to secure
notes rediscounted to you or hypothecated to you, can the collateral be
disposed of without the consent of the Comptroller and the Court.
The opinion of the Comptroller of the Currency in this matter
was brought about by my assenting to the sale by you of the 75 bales of
cotton held to secure notes of the Georgia Farms, and the 43 bales of
cotton held to secure the notes of Mr. S. C. Branch, which had been transferred to you by the Georgia National Bank of Athens.
I understood from Mr. Tutwiler of the Federal Reserve Bank, that
your position was that the rediscounted notes belonged to you absolutely,
and you could do as you pleased with them without consulting the
Comptroller, and that you also had a right to collect the notes hypothecated to secure the indebtedness of the Georgia National Bank to you, and
for this purpose you had the right to sell the collateral pledged to both
these lines of notes.
There seems to be a conflict of opinion as to the rights of the
Comptroller and of the rights of the Federal Reserve Bank in this matter
which may produce delays and confusion in the future.
X4375
34
—2-
I would like to know whether you concur with the Comptroller of
the Currency, and if you do not, I suggest that it will "be test for the
controversy to be settled one way or the other to prevent any embarrassment in the collection of the debts and the disposition of the collateral.
I will of course insist upon the views of the Comptroller of the
Currency in regard to these matters until I am instructed otherwise.
Respectfully,
(Sgd)
JKS;W
jno. K: Shields,
Receiver.
X-4375a
35
C O P Y
June 29, 1925,
To The Honorable
The Comptroller of the Currency of the United States,
Washington, D. C.
Dear Sir:
The Receiver of the Georgia National Bank of Athens, Georgia,
recently transmitted to the Federal Reserve Bank of Atlanta (of which
we are general counsel) the opinion of your office with respect to the
right of the Federal Heserve Bank of Atlanta to deal with (a) collaterals securing payment of bills and notes rediscounted by the National
Bank with the Reserve Bank, and (b) collaterals securing the payment of
bills and notes hypothecated with the Reserve Bank to secure both the
direct obligations and the rediscounts of the National Bank.
As we understand the letter of the Receiver, the position taken
by your office is that the Reserve Bank cannot take any action with
respcct to any such collateral (except to collect the same) unless thereunto authorized both by the Comptroller of the Currency and the United
States Court for this District.
If the purport of the ruling of your office be as stated, the
Federal Reserve Bank of Atlanta respectfully dissents therefrom.
In
order that the situation may be cleared up. if possible, we are talcing the
liberty of transmitting, at the request and on behalf of the Federal
Reserve Bank of Atlanta, our opinion, as its counsel, as to the law on
these questions with particular reference to the dealings between the
Reserve Bank and the Georgia National Bank,
It is our information that the National Bank was indebted to the
Reserve Bank at the time of its suspension on both rediscounts and direct
notes.
To secure both classes of paper there had been deposited collateral; the usual form of collateral "note having been used in connection
with the deposit of collateral to secure the direct obligations, and a
specific contract covering the pledge of additional collateral having
been employed in connection with the deposit of collaterals to secure the
payment of rediscounts. Some of the rediscounted items were also secured
by collateral, and some of the notes pledged as collateral for both
classes of obligations of the National Bank were also secured by collateral.
It is with respect to the collaterals securing the discounts and
the hypothecated notes and bills that the instant questions have arisen.
We understand that the opinion which was transmitted to the Reserve
Bank by the Receiver as above stated was given as the result of the
sale by the Reserve Bank, with the assent of the Receiver, of certain
cotton which had been pledged as security for the payment of a note which
had been rediscounted with the Reserve Bank by the National Bank.
X-4-375a
36
-2-
Wo recognize that it is true generally that collateral securities in which the Georgia National Dank has an interest, legal or
equitable, should not he compounded or compromised without the approval
of your office.
This is true for the reason that the trust of the
Receiver has an interest in all such collaterals. We respectfully
submit, however, that it does not follow that the Reserve Bank, as the
complete legal owner of the rediscounts and as the holder of the
pledged notes, could not exercise rights arising respectively thereunder, including the orderly sale of the securities made pursuant to
law or under the torrr.s and provisions of particular notes. In other
words, if, for example, the Reserve Bank should hold a note secured
by cotton, either as a rediscount or as collateral, it could, in our
opinion, as the owner or holder of such note, sell the cotton just as
readily as could the Georgia National Dank, its innediate endorser.
This right, we think, would certainly obtain with respect to the rediscounts, and we see no reason why it should not apply with respect to
notes pledged or hypothecated with the He serve Sank.
The sale of such
commodities by the Reserve Bank as the owner or holder of the secured
note, would be different from the compounding, compromise or settlement
of the note at less than face value.
With regard to rediscounts, whether secured or unsecured, we arc
of the opinion that ordinarily the Reserve 23ank could compound, compromise or settle the same as between itself and the respective makers
of the notes, without first obtaining the approval of your office. Any
such compromise or settlement would, however, release the endorsing
bank from any liability on its endorsement, and it follows that the
Reserve Bank could not make a settlement with the maker of a rediscount
and thereafter hold the National Bank for any deficit, or satisfy any
such deficit out of the "additional collateral."
To sum up our opinion: In the case of rediscounts the Reserve
Bank would seem to be the absolute owner of the paper, with the right
to sell the collateral and to enforce the liability of any party liable
on the paper. Even an accounting for any excess in collateral securing
the rediscounted item would properly be between the Reserve Bank, the
owner of the note, and the maker of the sane. Of course a settlement
or compounding of the rtidiscounted item would absolve the endorsing bank
and its assets from any further liability arising from its endorsement.
With respect to secured notes which are hypothecated (as contradistinguished from discounted) we think that the Reserve Bank, as the holder
thereof, would have the right to sell collaterals securing the sane by
virtue of its rights as holder thereof, but that it could not compromise
or compound any of such hypothecated notes without the approval of the
Comptroller of the Currency and an authorization by order of Court.
Inasmuch as cases involving questions similar to those arising
in connection with the specific matter mentioned above will doubtless
occur in the future, we are asked by the Federal Reserve Bank to transmit to you its position in the premises, so that if possible an understanding may be had as to the respective rights of the Receiver and
the Reserve Bank in such cases.
*
X-4375a
-3-
Mr. J. L. Canp'bell, Deputy Governor of the Federal Reserve
Bank, and the writer, will be in Washington July 13th, and for
several days thereafter, and would appreciate the opportunity of
discussing the questions herein presented.
Very respectfully yours,
ESP-G
Mr. J. L. Canp'bell, Deputy Governor,
Federal Reserve Bank cf Atlanta,
Atlanta, Georgia.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4377
July 10, 1925.
SUBJECT:
Employment of Expert Services by Federal
Reserve Banks.
Dear Sir:
At a meeting of the Board, yesterday, the matter of
Federal reserve banks employing the services of experts
in the conduct of litigation, special studies, etc.,
was considered, and the Board voted that all reserve
banks, before making or authorizing such engagements,
shall first secure the approval of the Federal Heserve
Board thereto.
Very truly yours,
Edmund Piatt,
Vice Governor.
TO ALL CHAIRMEN
39
FEDERAL RESERVE BOARD
X-4378.
WASHINGTON
address official correspondence to
the federal reserve board
July 11, 1925.
SUBJECT:
Payment Counsel Foe in connection with Catlettsburg
Par Clearance Cases,
Dear Sir:
There is enclosed, herewith a copy of a statement
rendered to the Federal Reserve Board by Honorable Newton D.
Baker in the sum of $1,000 covering his professional services
in connection with the Catlettsburg par clearance cases. The
Board has considered and approved this statement, and has requested the Federal Reserve Bank of Cleveland to remit the
amount to Mr, Baker direct.
Inasmuch as this case heretofore has "been considered
a System matter, the Board has directed that this feo be prorated among all Federal Reserve Banks, It is requested, therefore, that you remit direct to the Federal Reserve Bank of Cleveland the sum of $83,33 as your proportionate share of the total
fee.
Very
truly yours,
(Enclosure)
J. C. Boell,
Assistant Secretary.
LETTER TO BE SBIT TO A M . CHAIRMEN EXCEPT CLEVELAND,
X-4378(a)
CO?
Y
Federal Reserve Boar d
to Uewton D. Baker, Dr.
July 3, 1925,
To Professional Services.
Retainer and services in connection with
Catlottsburg cases in equity and at law;
examination of pleadings, decisions, conferences with Mr. Howell, Mr. Boyle and
Mr. iyatt at various times; conferences
with witnesses and examination of affidavits
and evidence; preparation for trial and consultation in regard to final settlement.
$1,000,
41
FEDERAL RESERVE BOARD
WASHINGTON
X-4380
address official correspondence to
the federal reserve board
July 14, 1925.
SUBJECT:
Amendment to Manual of the Federal Beserve
System leased Wire Service.
DtivO.* Sir:
The Manual of the Federal Reserve System
Leased Wire Service, issued ty the Board in 1922,
provides under the heading "Instructions to Telegraph Operators" that "Telegrams containing code
words will bear a check or count indicating the
total number of code words in the message".
On occasions this requirement has had the
effect of delaying the dispatch of messages partly
in code, -owing to the inability of the operators
to readily determine just which words were code
words, and the Board has adopted a suggestion made
by the Leased Tire Committee that the requirement
be withdrawn and the Manual bo amended in this
respect to read as follows:
"Telegrams containing code words will
bear a check or count indicating the total
numbe.r of words in the message. Form telegrams such as gold settlements, Tend, Druid,
Drummer, and others of like character should
not bear a check."
please instruct your telegraph operators
accordingly.
Very truly yours,
J. C. Ho$ll,
Assistant Secretary.
To Governors of all F.H.Banks.
FEDERAL RESERVE BOARD
WASHINGTON
X-^+JSl
address official correspondence to
the federal reserve board
July 16, 1925
SUBJECT:
Expense Main Line, Leased. Wire System,
June, 1925.
Dear Sir:
Enclosed herewith you will find two mimeograph
statements, X-43SI-a and X-UjSl-b, covering in detail
operations of the main line, Leased Wire System, during
the month of June, 1925»
Please credit the amount payable by your bank
in the general account, Treasurer, U.S., on your book&,
and issue C/D Form 1, National Banks, for account of
"Salaries and Expenses, Federal Be serve Board, Special
Fund", Leased Wire System, sending duplicate C/D to Federal Reserve Board.
Yours very truly,
Fiscal Agent,
Enclosures:
To Governors of all banks except Chicago.
43
X-4381-a
REPORT SHOWING CLASSIFICATION AMD NUI.ffiER OF WORDS
TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE
LEASED FIRE SYSTEM FOR THE MONTH OF JUNE, 1925.
Fed. Res.
Bank Business
From
Boston
25,680
New York
157,431
Philadelphia
34,031
Cleveland
67,428
Richmond
42,898
Atlanta
51,904
Chicago
98,306
St. Louis
66,347
Minneapolis
32,107
Kansas City
69,737
Dallas
53,147
San Francisco 103,723
TOTAL
802,739
Percent of
Total Bsnk
Business(*)
Treasury
Dept.
Business
3.,30
19. bl
4,24
8.40
5.34
6.47
12.25
8.26
4.00
8.69
6.62
12.92
6,162
9,808
6,178
8,131
6,531
5,048
9,750
9,551
4,901
7,534
4,996
16,523
100.00
98,113
War
Finance Corp,
Business
-
-
-
-
Total
31,842
167,239
40,209
75,559
49,429
59,952
108,056
75,898
37,008
77,271
58,143
120,246
900,852
Board
269,228
54,652
426
324,306
Total
1,071,967
152,765
426
1,225,158
Percent of Total 87*50#
12.47#
.03#
Bank
Business 1,071,967 words or 67.53$
Treasury Dept.152.765
" "
12.47#
Total
1,224,732
100.00#
(*)These percentages used in calculating
the pro rata share of leased wire expenses as shown on the accompanying
statement (X-4381-b)
4
REPORT OF EXPENSE
MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, JUNE, 1925.
Name of Bank
Operators'
Salaries
Boston
$ 250.00
New York
1,005.32
Philadelphia
216.66
Cleveland
260.33
Richmond
170.00
Atlanta
255.OO
Chicago
(#) 3,605.55
St. Louis
274.00
Minneapolis
241.35
Kansas City
275*64
Dallas
251.OO
San Francisco
36O.OO
Federal-Reserve Board
TOTAL
(&)
(#)
(*)
(a)
(b)
$7,404.65
Operators * '
Overtime
$
Wire
Rental
—
-
-
-
-
-
-
-
-
•—
-
-
-
.75
-
-
—
15,326.83
$
.75
Pro Rata
Share of
Total
Expenses
Total
Expenses
$
$
-
250.00
1,005.32
216.66
260.33
170.00
255-00
3,805.55
274.00
241.35
275-64
251.75
380.00
15,326.83
$15,326,83 $22,732.43
(a) 2,845-24
$19,887.19
$
636.39
3,699-85
643.22
1,670.52
1,061.98
1,256.70
2,436.18
1,642.68
795.49
1,728.20
1,316.53
2,569.42
$19,557.19
Includes $204.67 for branch line business transmitted over ma,in line circuit
Includes salaries of Washington operators.
Credit
Received $10. 73 from War Finance Corporation and $2,834.51 from Treasury Department
covering business for the month of June, 1925.
Amount reimbursable to Chicago.
X-^Sl-b
Credits
$
250.00
1,005.32
216.66
250.33
170.00
255.00
Payable t<
Federal
Reserve
Board
356.39
2,594.56
626.56
1,390.19
(&)1,096.65
1,031.70
3,805.55 (*)1,309.37
? 7-4.00
1,368.68
554.14
241.35
1,452.56
275.64
1,064.78
251.75
2,189.42
380.00
$7,405.60
$
$14,055.63
(b)l,369.37
$12,686.26
45
X-4383
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
July 16, 1925.
SUBJECT:
Code 'Words to be used by the Federal
Reserve Bank of ITew York in advising
other Federal Reserve Banks of changes
in the Participated Foreign Accounts.
Dear Sir:
In order to reduce the phraseology in telegrams
between the Federal Reserve Bank of Few York and other
Federal reserve banks in cormoction with advices covering
changes in the participated foreign accounts, it has been
suggested for such purpose that additional code words be
supplied from the Federal Reserve Telegraphic Code.
The Board has approved this suggestion and,
effective July 24, 1925, the following code words will
be used between the Federal Reserve Bank of Hew York
and other Federal reserve banks covering the transactions referred to:
JURISTS: Your participation foreign accounts
Free balance
Bills
Please
make necessary changes your books to conform and
credit us ___
to adjust free balance.
JURY30X: Your participation foreign accounts
Free balance
Bills
Please
make necessary changes your books to conform and we
credit you
__ to adjust free balance.
JURYMAN: Your participation foreign accounts
Free balance __________ Credit us __________ to
adjust.
JUSTICE: Your participation foreign accounts
Free oalance ____________ We crodit you.
to adjust.
JUSTIFY: Your participation foreign accounts
Bills .
Please make necessary changes
your books to conform.
-
2
-
X-4383
The code words indicated should be inserted in
the Federal Reserve Telegraphic Code at the bottom of
page 130 following the code word "JUNKETED".
Yours very truly,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F.R.BANKS.
X-4384
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
T H E
July 17, 1925.
federal reserve board
SUBJECT: Holiday, Denver Branch,
August 1, 1325.
Dear Sir:
The Denver Branch of the Federal Reserve
Bank of Kansas City will be closed on Saturday,
August 1st, on account of observance of Colorado
Day. That office, therefore, will not participate in either the regular Gold Fund Clearing
or the Federal Reserve Note Clearing of that
date.
Please include your credits of August
1st for the Denver Branch, with those of the
following business day, in the Gold Fund Clearing.
Very truly yours,
J. C. IToell,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
X-4S85
R
E
C
O
R
D
-of the-
JOIMT CONFERENCE OF COUNSEL OF THE FEDERAL RESERVE B A M S
-and-
REPRESENTATIVES OF THE COMPTROLLER OF THE CURRENCY
IN CONNECTION WITH CLAIMS AGAINST INSOLVENT
NATIONAL BANKS, HELD IN WASHINGTON, D.C.
July 13, 1925.
49
X-43S5
RECORD OF THE JOINT CONFERENCE OF COUNSEL OF THE FEDERAL
RESERVE B A M S AND REPRESENTATIVES OF THE COMPTROLLER OF
THE CURRENCY IN CONNECTION WITH CLAIMS AGAINST I2TSOLVENT
NATIONAL BANKS, HELD IN WASHINGTON, D.C. JULY 13, 1925.
The conference convened, on the morning of July 13 at 10
o'clock in the Board room of the Federal Reserve Board, Treasury .
Department, Washington, D.C. Those present were:
L. R. Mason,
Federal Reserve Bank of New York,
Philadelphia,
J. S. Sinclair,
Cleveland,
Sterling B. Newell,
Richmond,
M. G. Wallace,
Atlanta,
R. S. Parker,
Chicago,
C. L. Powell
St. Louis,
Jas. G. McConkey,
Minneapolis,
A. Ueland,
Kansas City,
H. G. Leedy,
Dallas,
E. B. Stroud, Jr.,
San Francisco.
A. C. Agnew,
Mr. Walter Wyatt and Mr. George B. Vest from the Federal
Reserve Board.
In addition to the Counsel to the Federal reserve "banks
and the Federal Reserve Board, listed above, there were present
from the Federal Reserve Bank of Atlanta, Mr. J. L. Campbell, from
the Federal Reserve Bank of Kansas City, Mr. G. E. Barley, and from
the Federal Reserve Bank of Dallas, Mr. R. B. Coleman. On the
first day of the conference no representative from the office of
the Comptroller was present.
Mr. Piatt, Vice Governor of the Federal Reserve Board,
made a short address of welcome to the Conference. Mr. Wyatt
was elected Chairman of the Conference and Mr. Vest was elected
Secretary.
As a preliminary to any formal action by the Conference,
the following resolution prepared by Mr. Parker and offered by
Mr. Mason, was adopted with Mr. Powell voting "no":
50
-2-
X-4385
RESOLUTION NO. 1
RESOLVED that any resolutions passed or opinions voiced "by this confercnce shall "be taken
as expressing merely the opinions of Counsel
on the respective questions involved.
The conference first took up the question discussed in
Mr. Wallace's letter of Kay 26, 1925, addressed to Governor Seay
of the Federal Reserve Bank of Richmond.
On the subject of the necessity for filing separateclaims for each rediscounted item, after discussion, Mr. Agnew
offered a resolution, which with an addition thereto by Mr. Powell,
was adopted as follows:
RESOLUTION IIP. 2.
RESOLVED that it is the sense of this conference
that the Federal reserve banks accede to the principle of the suggestion of the Comptroller that
separate claims against insolvent national banks
be predicated upon each note rediscounted by the
Federal reserve bank and in its hands at the time
of insolvency; and be it further
RESOLVED that it be thu sense of this meeting that
it is the right of the Federal reserve banks in
filing claims against failed national banks on
rediscounted paper to file one claim on all discounted paper, setting out all proper particulars,
and this conference recorcnends the adoption by the
Comptroller of the Currency of procedure consistent
with this method.
Mr. Sinclair not voting.
Statement of Mr. Sinclair.
Mr. Sinclair requested to oe recorded as not voting
on the foregoing resolution after having made the
statement that Mr. Willians was agreeable generally
and in the ordinary case to conform to the consensus
of opinion of the conference with respect to the matters therein contained, but that he did not wish to
feel obligated to conform to such expression of opinion
in a case where it should become material to the rights
of the Federal Reserve Bank of Philadelphia to file
one proof of claim for dividend purposes, based upon
-3-
X-4385
the aggregate of all items rediscounted by
the insolvent national bank. Die qualification contained in this statement shall apply
to subsequent resolutions in as far as proof
of rediscount
items as separate claims is
concerned.
The conference next discussed the set off of reserve balances against claims due from insolvent national banks and adopted
the following resolution, offered by Mr. Mason, without dissenting
vote:
RESOLUTION NO. 3.
RESOLVED that this conference agree to the
proposal of the Comptroller that reserve
balances be treated as a set off to claims
against failed national banks.
The right to treat Federal reserve bank stock as collateral rather than as set off was next taken up and the following
resolution, offered by Mr. Mason, was adopted without dissenting
vote:
RESOLUTION NO. 4.
RESOLVED that it is the sense of this conference that it is the lawful right of reserve
banks to treat amounts realized on account of
surrender of stock of failed national banks
in the Federal reserve banks as collateral and
not as an offset to claims against such banks.
The conference then discussed the manner of applying and
crediting payments made on collateral, and the following resolution,
offered by Mr. Wallace, was adopted without dissenting vote:
RESOLUTION NO. 5.
BE IT RESOLVED that it is the sense of this conference that collateral pledged for a specific note
made or endorsed by a member bank should be credited
in a separate account, until the net amount realized
from such collateral and dividends paid upon such
note is sufficient to pay the said note, adding
interest on the note from the date of insolvency to
the date of final payment, and giving credit allowance for interest on the amounts collected on collateral from the date of collection to the date of
final payment. If the note or other agreement with
the member bank provides that such collateral shall
likewise be held for other debts, after such note
52
-4-
X-4385
is paid collateral then remaining should "be held
as general collateral.
Collection made on general collateral should be
credited in a collateral account until the time
for final settlement. In no event should collections made from or on account of collateral affect the basis of dividends, until such net collections and dividends equal the amount due on the
obligations for which the collateral was pledged.
Next discussed was the subject of interest on rediscounted
items and the following resolution offered by Mr. Lecdy was adopted
without dissenting vote:
RESOLUTION NO. 6.
RESOLVED that it is the sense of the Conference
that there is no legal liability on the part of
the Federal reserve banks to account to the
receivers of insolvent national banks for interest
accrued on rediscounted notes after the failure
of the bank re discounting the same, and that the
Federal reserve banks are entitled to such accrued interest according to the terms of such
rediscounts, or if not provided for by their
terms, then, at the legal rate.
The conference then proceeded to a consideration of the
topics suggested for discussion in Mr, Stroud's memorandum, which
accompanied his letter of June 6, 1925, addressed to the Federal
Reserve Board. Some of these topics, it was found, had already
been covered by resolution and upon others no action m s taken.
The remaining topics were disposed of by agreeing to the recommendations contained in the memorandum, except for the following
changes:
The statement contained in Mr* Stroud's memorandum under
Topic I B (2) was amended so as to read as follows:
It is our view that we are entitled to dividends
upon the full amount of the claim as originally
filed and allowed until such time as the dividends,
plus collections on collateral and offsets, equal
one hundred per cent of the indebtedness, together
with interest thereon, and also until we have been
fully reimbursed for the expense reasonably necessary in preserving, selling and collecting collateral to which w e have been incident in the
collection of the paper.
-5X-4385
In considering Topic II B(l), Mr. Parker's letter of
Juno 29 was endorsed "by the Conference as an addition to the
statement suggested in Mr. Stroud's memorandum.
The statement contained in Mr. Stroud's memo random
under Topic II C(2) was amended so as to read as follows:
We are of the opinion that we are entitled to dividends upon each of the rediscounted notes for the
full amount of claim as originally filed and allowed
until such time as the dividends, plus collections
made from parties liable upon the rediscounted note,
equal one hundred per cent thereof with interest
and expense reasonably necessary in preserving,
selling and collecting collateral.
The statement contained in Mr. Stroud's memorandum under
Topic II D(l) was amended so as to read as follows:
It is our view that "before any compromise or setlement is made upon a rediscounted note that the
consent and acquiescence of the receiver should he
obtained, if it is desired to continue the liability
of the receivership and not desired to preserve
the right of recourse as provided in the next paragraph.
In "uho event the receiver refuses to give his consent
or acquiescense to the settlement, then he should be
given an opportunity to tnke the rediscounted note
up for the amount offered in settlement, permitting
the claim to stand and continuing to pay dividends
on the amount as originally filed and allowed until
such time as it is fully paid.
If the receiver does not care to take the note
up and the Federal reserve bank is still of the
opinion that the settlement is a good one, we
think it has the right to make such settlement
with the parties prior to the insolvent bank,
provided that when doing so recourse is expressly
reserved on said note against the receiver of
the insolvent bank.
The statement contained in Mr, Stroud's memorandum under
Topic III A was amended so as to read as follows:
It is our view that a Federal reserve bank has no
right to settle or compromise notes held as collateral in the absence of contract to the contrary.
However, they would be liable only for the value
of such collateral notes, and if a settlement or
compromise should be effected whereby the Federal
54
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X-4385
reserve "bank obtained, the full market value
of the note, there would be no liability upon
its part. Hence, we think that when such settlements are made without reserving right of
recourse against party secondary liable, consent of receiver should be obtained.
Topic
Topic
Topic
Mo.5.
IV B,
The statement contained in Mr. Stroud's memorandum under
I A(2) had already been disposed, of by Resolution Mo. 6;
I A by Resolution No.4; Topic II A by Resolution Ho.3;
II B(2) by Resolution Mo.6; and Topic III C by Resolution
Upon the following topics, no action was taken: II B(3),
IV D, IV E, V A, V B, V C, and V E.
Inasmuch as the views of the conference were agreed, to
in most cases by the representatives of the Comptroller on the
second day of the conference, and are set out hereafter in the
form agreed to by the joint conference, it is deemed unnecessary
to set out in"detail at this point the action of the conference
on each topic considered.
After disposing of the topics suggested in Mr. Stroud's
memorandum, there was placed before the conference for discussion
the suggestion made in a letter dated June 26, 1925, from the
Federal Reserve Agent of the Federal Reserve Bank of Dallas to the
Governor of the Federal Reserve Board, that special counsel of
national reputation and outstanding ability be employed on a special
retainer to assist in par clearance cases and similar cases in
wnich Federal reserve banks may bo involved and to act as a sort
of clearing house for legal departments of all Federal reserve banks.
After a considerable discussion on this subject, the following
resolution offered by Mr. Powell, with an addition by Mr. Mason,
wp.f adopted, Mr. Mewell and Mr. Stroud voting "no":
RESOLUTIOM MO. .7.
RESOLVED that it is the sense of this conference
that it is not essential to the proper administration of the Federal reserve banks to employ
advisory counsel for general supervision of legal
matters affecting the System.
BE IT FURTHER RESOLVED, however, that it is the
sense of this meeting that the banks continue
as heretofore to employ special counsel to assist
in litigation of system wide interest when in the
judgment of counsel concerned the occasion requires it and the banks are agreeable.
X-4385
-7-
The conference then adjourned and met the next morning,
July 14th, at 10 o'clock.
On the convening of the conference on the morning of
July 14, on motion of Mr. Powell, Mr. Stroud was elected spokesman for the Counsel of the Federal Reserve Banks in the forthcoming joint conforcnce with the representatives of the Comptroller
of th-a Currency with the privilege reserved to other Counsel to
make such suggestions or comments as they deemed appropriate.
The following representatives of the Comptroller of the
Currency then entered the conference:
Deputy Comptroller Stearns,
Deputy Comptroller Collins,
Mr. Garrett,
Mr. Poage,
Mr. Touts,
Mr. Slack.
The matters which had been discussed on the day previous
by the Counsel for the Federal reserve banks were then taken up
topic by topic, as indicated in Mr. Stroud's memorandum, with the
representatives of the Comptroller. All matters taken up were
finally agreed upon. There is recorded below the action of the
joint conference on the various topics considered;
I.
CLAIMS EVIDENCED BY MEMBER B A M PROMISSORY BOTES.
A.
Amount of Claim.
(1) Time of determining
amount „
Representatives of the Comptroller and Counsel of the
Federal Reserve Banks agreed as follows:
It is our view that this question has been finally
decided by the Supreme Court of the United States
and that the claim should be filed for the amount
of the indebtedness on the date of insolvency.
(2) Interest.
On the question how interest should be computed in determining the amount of claims it was agreed that:
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X-4385
In determining the amount of the claim
against an insolvent hank, unaccrued interest should he rebated at the discount
rate at the time of discount, and past
due interest should he included at the
contractual rate specified in the note,
and if no contractual rate is specified,
then according to the legal rate in effect
in the state in which the claim arises.
Claims filed on member hanks' promissorynotes should bear interest at the contractual rate specified in the note, and
if no contractual rate is specified in the
note, then according to the legal rate in
effect in the state in which the claim arises.
With reference to the interest to be charged an insolvent
bank upon claim in final settlement, it was agreed that when the
member bank note contains an express rate of interest to be paid
after maturity, the rate of interest so expressed shall govern;
and the question whether a failed bank should have the benefit
of the rate of rediscount is a question of policy for determination by the officers of the Federal reserve banks.
(3) Attorney's fees.
Representatives of the Comptroller and the Counsel of
the Federal Reserve 2ariks agreed as follows:
Whore a member bank's promissory note provides
for payment of attorney's fees if placed in the
hands of an attorney for collection, we are of
the opinion that this item should be remitted
except when it is necessary to actually institute suit in order to effect collection of the
note.
(4) Offsets.
(a) Is the refund of capital stock and accrued
dividends an item of offset?
Representatives of the Comptroller of the Currency and
the Counsel of the Federal Reserve Banks agreed to the view expressed in Resolution No. 4, as follows:
RESOLVED that it is the sense of this conference
that it is the lawful right of reserve banks to
treat amounts realized on account of surrender of
stock of failed national banks in the Federal reserve banks as collateral and not as an offset
to claims against such banks.
5 7
—9—
X-4385
(b) Ledger balances.
Representatives of the Comptroller and the Counsel
of the Federal Reserve Banks agreed as follows:
We are of the opinion that ledger balance
is an item of offset.
B.
Dividends.
(1) Anount upon which dividend should bo paid.
Representatives of the Comptroller and the Counsel of
the Federal Reserve Banks agreed as follows;
It is our view that every dividend paid
by the receiver should bo based upon the
amount of the claim as originally filed and
allowed, and that no deductions should be
made for collection received upon collateral,
or otherwise, between the payment of any
two dividends.
(2) When Federal reserve bank no longer entitled to dividends.
Representatives of the Comptroller and tho Counsel of
the Federal Reserve Banks agreed as follows:
It is our view that Federal Reserve lanks are
entitled to dividends upon the full amount of
the claim as originally filed and allowed
until such time as the dividends, plus collection on collateral and offsets, equal one hundred per cent of the indebtedness, together
with interest thereon, and also until they
have been fully reimbursed for the expense
reasonably necessary in preserving, selling
and collecting collateral to wldch they have
been incident in the collection of the paper.
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X-4385
II.
CLAIMS EVIDENCED BY REDISCOUNTED NOTES.
A.
Whether proven collectively or singly.
The first paragraph of Resolution No. 2 adopted by
Counsel for the Federal reserve banks was agreed upon; "but the Federal Reserve 3ank Counsel on motion of Mr. Stroud receded from their
position as set forth in the 2nd paragraph of the said resolution,
Mr. Ueland and Mr. Lcedy voting "no",
That part of Resolution No* 2 which was agreed to is
as follows:
RESOLVED that it is the sense of this conference that the Federal reserve hanks accede to
the principle of the suggestion of the Comptroller that separate claims against insolvent national hanks be predicated upon each note re discounted
by the Federal reserve bank and in its hands at
the time of insolvency.
It was agreed, however, that the
rency might require a separate, claim to be
counted by a Federal reserve bank and that
predicated upon more than one rediscounted
B.
Comptroller of the Curfiled on each note redisno such claim should be
note.
Amount of Claim.
(1) Time of Determining Amount.
It was agreed that the amount of tfce claim should be determined as of the date of insolvency, for dividend purposes.
(2) Interest.
Representatives of the Comptroller's office and Counsel
for the Federal Reserve Banks agreed to the view expressed in Resolution No. 6, which reads as follows:
RESOLVED that it is the sense of this conference
that there is no legal liability on the part of
the Federal Reserve banks to account to the receivers of insolvent national banks for interest
accrued on rediscounted notes after the failure
of the bank rediscounting the same, and that the
Federal reserve banks are entitled to such accrued
interest according to the terms of such rediscounts, or if not provided for by their terms,
then, at the legal rate.
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X-4385
(3) Attorney's fees.
Not discussed.
(4) Offsets.
a. How applied.
The representatives of the Comptrollers-office and
Counsel to the Federal Reserve Banks agreed as follows:
It is our view that Federal reserve hanks
have the right to apply offsets as they
deem advisable.
b. Capital stock and accrued dividends thereon.
This point had been discussed and decided by previous
action.
c. Ledger balance.
This point had been discussed and decided by previous
action.
C.
Dividends.
(1) Amount upon which dividends should be paid.
This point had been discussed and decided by previous
action.
(2) When no longer entitled to dividends.
The representatives of the Comptroller's office and
Counsel to the Federal Reserve Banks agreed as follows:
Ti'c arc of the opinion that Federal reserve banks
arc entitled to dividends upon each of the rediscountcd notes for the full amount of claim as
originally filed and allowed until such time as
the dividends, plus collections made from parties
liable upor. the re discounted note, equal one hundred per cent thereof with interest and expense
reasonably necessary in preserving, selling and
collecting collateral.
60
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X-4385
a. Do payments made subsequent to the maturity of the
note or date of insolvency affect the amount of
dividends?
The representatives of the Comptroller^ office and
Counsel to the Federal Reserve Banks agreed as follows:
It is our view that a claim once having been
filed and allowed subsequent payments made by
parties liable on the note should not be deducted from the amount of the claim when dividends arc paid. In other words, -the claim once
having boon filed and established , we think
Federal Reserve Bapks are entitled to dividends
on the full amount of the claim until such time
as those dividends plus payments equal to one
hundred per cent of the note.
D.
Compromises and Settlements.
(1) Right to make.
The representatives of the Comptroller's office and
Counsel to the Federal Reserve Banks agreed as follows:
It is our view that before any compromise
or settlement is made upon a rediscounted
note that the consent and acquiescence of
the receiver should be obtained, if it is
desired to continue the liability of the
receivership and not desired to preserve
the right of recourse as provided in the
next paragraph. In the event the receiver
refuses to give his consent or acquiescence
to the settlement, then he should be given
an opportunity to take the rediscounted
note up for the amount offered in settlement,
permitting the claim to stand and continuing
to pay dividends on the amount as originally
filed and allowed until such time as it is
fully paid.
If the receiver does not care to take the
note up and the Federal Reserve Bank.is
still of the opinion that the settlement is
a good one, we think it has the right to
make such settlement with the parties prior
to the insolvent bank, provided that when
doing so recourse is expressly reserved on
said note against the receiver of the insolvent bank.
(3) In cases of compromises and settlements of rodiscountcd notes, what authority needed by the receiver?
/
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X-4385
The representatives of the Comptroller's office and
Counsel to the Federal Reserve Banks agreed as follows:
It is our view that whenever a receiver consents
to the settlement of a rediscounted note, he should
obtain an order of a court of competent jurisdiction
permitting
same,
E.
Expense's of Preservation and Collection of Rediscounted Notes.
The f.epresentativos of the Comptroller's office and
Counsel to the Federal Reserve Banks agreed as follows j
It is our view that proper contractual
agreement with member banks will make
such expenses indebtednesses of the bank
and, therefore, collectible from collateral which might be held.
III.
COLLATERAL.
A.
Right of Compromise and Settlement.
The representatives of the Comptroller's office and
Counsel to the Federal Reserve Banks agreed as follows:
It is our view that a Federal Reserve
Bank has no right to settle or compromise
notes held as collateral, in the absence
of contract to the contrary. However,
they would be liable only for the value
of each collateral note, and if a settlement or compromise should be effected
whereby the Federal Reserve Bank obtained
the full market value of the note, there
would be no liability upon its part. Hence,
we think that when such settlements are
made without reserving the right of recourse against party secondary liable,
consent of receiver should be obtained.
B.
Authority needed by Receiver to Compromise a Settlement
of Collateral Note.
No action was taken on this subject.
C.
How and When Applied.
(1) Collateral to member bank's promissory note.
Representatives of the Comptroller's office and Counsel
Reserve Banks agreed upon the view expressed in
to the Federal
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JC-4385
Resolution No. 5, with an addition thereto, drafted by Mr. Agnew
and adopted by the Counsel of the Federal Reserve Banks, so that
the entire resolution reads as follows:
BE IT RESOLVED that it is the sense of this
Conference that collateral pledged for a specific note made or endorsed or a member bank
should be credited in a separate account,
until the net amount realized from such collators! and dividends paid upon such note is
sufficient to pay the said note, adding interest
on the note from the date of insolvency to the
date of final payment, and giving credit allowance
for interest on the amounts collected on collateral
from the date of collection to the date of final
payment. If the note or other agreement with
the member bank provides that such collateral
shall likewise be held for other debts, after
such note is paid collateral then remaining
should be held as general collateral.
Collection made on general collateral should be
credited in a collateral account until the time
for final settlement. In no event should collections made from or on account of collateral
affect the basis of dividends, until such net
collections and dividends equal the amount due
on the obligations for which the collateral was
pledged.
Sums realized from collateral to a specific
obligation shall be applied to the liquidation
of such obligation until the amount so realized
and dividends paid on such obligation are sufficient to retire it.
(<;) Collateral to Rediscounts.
Representatives of the Comptroller's office and Counsel
to the Federal Reserve Banks agreed as follows:
We are of the opinion that collections on
collateral to rediscounts should not be
applied until final settlement with the
receiver.
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X-4385
(3) Where insolvent tank's indebtedness consists
of both rediscounts and collateral.
This question had already been agreed upon as in Resolution No. 5 set out tinder III C(l) above.
(4) Expense of preservation and collection.
Representatives of the Comptroller's office and Counsel
to the Federal Reserve Banks agreed as follows:
We are of the opinion that the legitimate
expense incurred by Federal Reserve Banks
in the preservation and collection of
collateral notes is a recoverable expense
and can best be handled upon final settlement rather than as each note is collected.
(5) Special advances necessary for collection of
collateral notes.
This subject was not discussed.
IV.
CLAIMS OH ACCOUNT OF UNPAID CASH OR COLLECTION LETTERS,
A.
Amount of Claims.
This subject not discussed.
B.
Proof Required.
This subject not discussed.
C.
Duplicate Claims.
This subject not discussed.
D.
Offsets.
This subject not discussed.
E.
Application of Collateral.
This subject not discussed.
F.
Whether General or Preferred Claims.
This subject not discussed.
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X-4385
64
V.
MISCELLANEOUS CLAIMS.
A.
Claims on account of. Itediscounted or Collateral Notes Sent for
Collection and Remittance which are Collected but not Remitted.
For.
This subject not discussed.
B.
Claims on Behalf of Makers of Notes who Pay Amount Thereof
to Insolvent Bank not Knowing the note has "been Rcdiscounted
or Pledged as Collateral.
This subject not discussed.
C.
Claims on Behalf of the United States.
This subject not discussed.
D.
Renewal notes in Hands of Receiver Evidencing same Indebtedness as Notes held by Federal Reserve Bank under rediscount
or as Collateral.
Representatives of the Comptroller1s office and Counsel
to the Federal Reserve Banks agreed as follows:
It not infrequently happens that a bank,
before its failure, takes a renewal note
covering a certain indebtedness, telling
the maker that his old note will be
mailed him later. The bank fails before
the old note has been obtained from the
Federal reserve bank. In such cases,
the receiver not infrequently takes the
position that his note is a valid note
and as a result much trouble is experienced. We think in such cases as these
the receiver should be instructed that
after he has satisfied himself that the
note in his possession really evidences
the same indebtedness as the note in the
possession of the Federal reserve bank
he should turn over to the Federal reserve
bank the renewal note.
E.
Claim for Forgeries.
This subject not discussed.
X-4385
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VI.
FINAL SETjiTISI-IEHTS WITH BECEIVEB5 .
This subject not discussed.
After agreement with the representatives of the
Comptroller's office on the various topics as noted above, the
conference adjourned at 2 p.m.
(Signed) George B. Vest,
S e c r e t a r y .
*1 *
X-4457
MEMORAEDUM BY PROF. SPRAGUE
regarding
LEGISLATIVE PROPOSALS ACCEPTED BY THE
ADVISORY COMMITTEE.
ITovember 21, 1925.
X-4457
The Advisory Committee has approved without change all of
the numerous provisions of the first McF&dden bill designed to liberalize
the national "banking law, suggesting changes only in Section 5200 covering loan limitations and in the new investment banking section#
ITo
action was taken on the branch banking proposals contained in the bill,
the Committee being of opinion that it would be unwise for the reserve
The
system to take any position on this highly controversial matter.
Committee also agreed upon a limited number of additional amendments,
confining itself to those which presumably would not arouse serious opposition. The text of the various proposals of the Committee is herewitJi submitted together -rri th summary indications of their scope and
purpose.
SECTION 5300. REVISED STATUTES.
(Suggested changes are enclosed, in brackets)
Section 5200.
The total liabilities(other than those incurred
under Section 13 of the Federal Reserve Act)to any (national banking) association of anv person, firm, company, or corporation for money borrowed,
including in the liabilities of a company or firm the liabilities of the
several members thereof, shall at no tine exceed 10 per centum of the
capital stock of such association actually paid in and unimpaired, and 10
per centum of its unimpaired surplus fund.
This limitation as to such
liabilities to such association shall be subject to the following exceptions:
No change in the present statute other than
the specific exclusion of bank acceptances*
(l)
Liabilities arising out of the discount (or purchase) of
tiie following described paper shall be subject to no limitations based
upon the amount of such capital and surplus:
The phraseology of the Senate draft of the
McFadden bill is followed here with the addition
of definite provision to cover purchased paper.
X-4457
With its numerous exceptions, "both limited and.
unlimited, this section of the national bank act
is unavoidably long and complicated, -riving rise
to many difficulties of interpretation in practice.
Much might be said in favor of the policy embodied
in the recent legislation of a number of States,
notably New York and Missouri, limiting the amount
which may be lent to any one interest regardless
of the form or nature of the obligation, loans secured by U. S. Bonds or by bonds of the State or
its local governing units being the sole unlimited
exception. In Mew York, for example, there is a
blanket limitation of 15 per cent for city banks
and 25 per cent for country banks covering all paper
as to which more than the customary 10 per cent is
allowed. Owing to the wide diversity of conditions
in different sections of the country, this does not
seem to be a feasible policy in the ease of the
national banks.
(a)
Bills of exchange drawn in good faith against actually
existing values; (b)
Commercial or business paper actually owned by the
person, firm, company or corporation negotiating the same; (c)
Drafts and
bills of exchange secured by shipping documents conveying or securing title
to goods shipped — ( b u t provided that no such drafts, bills of exchange, or
commercial or business paper included under (a), (b), and (c) of this subtitle, shall be included within the meaning of this exception when both
drawer and drawee, or both maker and payee are corporations and one such
corporation is affiliated with or a subsidiary of the other, i.e., if a
majority of the stock of one such corporation is owned by the other or by
the stockholders thereof.)
The purpose of the additional clause is to exclude at least some portion of those bills of exchange
and notes that are in substance nothing more than the
obligations of a single interest,
(d)
Demand obligations when secured by documents covering
commodities in actual process of shipment (when such obligations are or have
X-4457
"been discounted or purchased for the account of the drawer or endorser.)
The additional proviso here is designed to
exclude the holding of accepted demand obligations
for an indefinite period of time by a "bank, a
practice which involves making an unsecured loan
to the borrower.
(e)
Bankers* acceptances of the kinds described in Section
13 of the Federal Reserve Act.
(f)
(Obligations secured by not less than a like face amount
of bonds, notes, or certificates of indebtedness of the United States.)
A bank may purchase an unlimited amount of
these securities. Loans thus secured would appear
to be a no loss satisfactory investment* It is,
therefore, proposed that the present limitation to
an additional 15 per cent of capital and surplus
be removed.
(2)
Liabilities arising out of the discount (or purchase) of the
following described paper shall be subject to the following limitations
based upon the amount of such capital and surplus, (but provided that the
exceptions permitted under this sub-title shall not be cumulative,):
(a)
Liabilities as surety, drawer, endorser,'/or guarantor,
other than of bills of exchange, (notes) and commercial and business paper
excepted under (l) hereof and excluding accommodation paper, having a ma~
endorser,
turity of not more than six months, where the surety, drawer,/or guarantor
obtains a loan from or discounts paper with or sells paper to any national
banking association, shall at no time exceed 15 per centum of such capital
and surplus in addition to such 10 per centum of such capital and surplus
(but provided further that such obligations as surety, drawer, endorser, or
guarantor of any corporation a majority of the stock of which is owned by
_4~
X-4457
any borrower shall be included, as a part of the aggregate obligations of
such borrower.)
This paragraph does not appear in any form
in existing law, which imposes no limitation upon
indirect liabilities, although under a ruling of
the Comptroller of the Currency endorsements of accommodation paper are included within the 10 per
cent limitation. To the McFadden bill draft amendments definitely excluding accommodation paper and
eliminating the guarantees of interrelated corporations are suggested.
(b)
^otes secured by shipping documents, warehouse receipts,
or other such documents conveying or securing title covering readily marketable non-perishable staples when such property is fully covered by insurance,
provided that the market value of such staples is at no time less than 115
per centum of such obligations, shall be subject to a limitation of 15 per
centum of such capital and surplus in addition to such 10 per centum of such
capital and surplus, (but this exception shall not apply to obligations of
any borrower arising from the same transactions and secured upon the identical staples for more than six months in any consecutive twelve months); and
provided further that obligations of this character shall be subject to a
further increase of limitation of 15 per centum of such capital and surplus
in addition to such 25 per centum of such capital and surplus for a period of
not more than three months in any consecutive twelve months.
The McFadden bill, as it passed the House, had
extended the period from six to ten months on loans
secured by non-perishable staples, but the Senate
Committee did not approve the change. The House bill,
also, contained a provision, for loans on staples up
to 50 per cent of capital and surplus, requiring additional margins in a succession of steps until for
the final 5 per cent a 40 per cent margin was necessary. This extension of the loan limit was stricken
-5-
X-4457
out in the Senate draft. There is reason to
"believe that it will "be "brought forward again
and with strong backing. As an alternative, a
more liberal provision than is contained in the
present law is suggested, "but for the relatively
short period of three months. Under the proposed arrangement it is believed that all financing requirements for marketing staples can be
supplied by the banks.
(c)
Notes secured "by documents conveying or securing title
covering livestock when the actual market value of such livestock is not
less than 115 per centum of the face amount of the notes secured by such
documents, (when such livestock are being prepared for market during the
period of the loan and provided no part of the total accommodation granted
the "borrower is unsecured,) shall "be subject to a limitation of 15 per
centum of such capital and surplus in addition to such 10 per centum of
such capital and surplus, but
this exception shall not apply to the ob-
ligations of any one borrower for more than six months in any consecutive
twelve months.
The present law includes livestock in the
paragraph in which an additional 15 per cent loan
is allowed for six months secured by insured
staples. Insurance dn livestock is generally impracticable, and this requirement was eliminated
in both the House and the Senate bills, which contain separate livestock paragraphs. The House
bill further does not retain the six months limitation which reappears in the Senate draft. The substitute favored by the Committee does not require
the maintenance at all times of the 15 per cent
margin, but introduces a provision designed to exclude dairy and breeder loans. On the ground that
livestock loans arc less liquid and involve more
hazards than loans secured by staples, a further
provision is added requiring the entire loan to be
on a secured basis.
(d)
(Obligations of any borrower in the form of bonds,
X-44S7
notes, debentures, and tho like, purchased for investment or resale, under
such restrictions as to the.character and volume of such securities as may
"be made by the Comptroller of the Currency, shall at no time exceed 15 per
centum of such capital and surplus in addition to such 10 per centum of such
capital and surplus, but this limitation as to amount shall not apply to
obligations ®f the United States, or general obligations of any State or
of any political subdivision thereof, or obligations issued under authority
of the Federal Farm Loan Act.)
The McFaaden bill, as an additional paragraph
to Section 24 of the Federal Reserve Act, contains
provisions relating to investment security dealings
by national banks. Business in which the bonks have
long been engaged is thus recognized and placed under
the supervision of the Comptroller and is also restricted as to amount in the cass of any one obligor.
The Advisory Committee favors transferring this matter
to Section 5200 of the Revised Statutes, and also the
elimination of the provision in the McFadden bill subjecting this business to the Blue Sky laws of the
several States.
-7-
X-4457
AM3ITOICI-ITS TO THE NATIONAL B A m i : % LAW DESIGNED TO FtTRftlSH M05E ADEQUATE
M T A HEGABDIII& THE CONDITIONS 0? THE B A M S THROUGH EXAMINATIONS.
I.
All obligations of every nature both direct ahd indirect arising out of the
sale, pledge, or hypothecation of any of its assets "by a national banking association shall be definitely recorded upon its books at the time such assets are sold,
pledged, or hypothecated.
For each failure to comply with this requirement a
national banking association shall be subject to a fine of Five Hundred Dollars,
to be imposed by the Comptroller of the Currency.
This proposal is designed to cover the rather common
practice of the assumption of obligations by banks in an
informal fashion, often in correspondence between bank$.
officials. These obligations frequently escape the notice
of bank examiners because they are not definitely recorded
on the books of the banks.
II.
Where an officer or director of a national banking association is an officer or director of any other bank, banking association, trust company, securities
company or investment company, and where in the judgment of the Comptroller of
the Currency the national banking association is related in management and operation in such close degree with such other bank, banking association, trust
company, sednarities company or investment company, that the examination of the
national bank fails to disclose its true condition in the absence of detailed
information regarding such other related institutions, then such other bank,
banking association, trust company, securities company or investment company
shall furnish the Comptroller of the Currency with a copy of an examination
simultaneously made by the State authorities or through such arrangements as
may be deemed satisfactory by the Comptroller of the Currency furnish detailed
information regarding its condition and operations; and upon failure so to do
the officer or director may be disqualified by the Comptroller of the Currency
from further acting in such capacity, and in such cases the Comptroller of the
-8-
X-4457
Currency, upon request, is authorized to furnish the State Supervisor of Banking, or other similar officers, copies of such examination of the affiliated
national bank.
This proposal is designed to secure adequate information regarding national hanks which are closely affiliated
with other financial institutions, in particular the situation in the case of chains of banks — a type of branch banking which readily lends itself to grave abuse. During the
last few years, a number of such chains have collapsed, and
investigation shows that when a national bank was in such a
chain, the examination of the bank failed to indicate its
true position on account of the shifting of assets back and
forth between the various institutions in the group.
III.
That Scction 5146 of the Revised Statutes of the United States, as amended,
be amended by adding at the end thereof a new paragraph as follows:
It shall be unlawful for any national banking association to make a loan
or loans of more than Five Hundred Dollars in the aggregate unless secured by
readily marketable collateral, to any salaried officer of such association or
to any corporation in which such officer or any director of such banking association owns or controls a majority of the stock or is an officer or director,
except upon submission to and approval by the board of directors of such
association, as a condition precedent, of a financial statement from such officer or from such corporation as the case may be.
A violation of this provision
shall disqualify any such officer or director and vacate his place.
It would seem not unreasonable to require financial
statements from all directors borrowing on an unsecured
basis, but as such a proposal would probably arouse wide-;
spread opposition this recommendation is limited to salaried
officers and to corporations in which they or the directors
are interested.
MISCELLANEOUS AMBgmHEHTS •
Sec. 5205. Shorten the period allowed for payment of assessments in cases
of impaired capital from three months to two months with a further provision
4
*
-g-
X-4457
authorizing the Comptroller of the Currency to extend the period when in his
judgment it may "be deemed advisable.
Sec. 5146.
Last Sentence.
Any director who ceases to "be the owner of the
required number of shares of the stock (or who pledges or hypothecates the
same), or who becomes in any other manner iisTualifled, shall be declared by
the Comptroller of the Currency to have vacated his place.
This is a minor change designed to meet an apparent
oversight in the Banking Act which fails to disqualify a
director who pledges his stock.
7 3
X-4390
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For Release in Morning Papers,
Monday, July 27, 1925.
The following is a summary of general business
and. financial conditions throughout the several
Federal 113serve Districts, based upon statistics
for t:.xe months of June and July, as contained
in the forthcoming issue of the Federal Reserve
Bulletin.
Production of "basic commodities and factory employment declined further
in June, while railway freight shipments and the volume of wholesale trade increased*
Wholesale prices, after declining for two months, advanced in June.
Production.- Production in basic industries, as indicated by the Federal
Reserve Board 1 s index, declined about one per cent in June to the lowest level
since the autumn of 1924, but was 17 per cent above the low point of last summer.
Output of pig iron, steel ingots, lumber, newsprint, and petroleum, and mill
consumption of cotton declined in June, while production of bituminous coal,
sole leather, and wheat flour increased*
during June was slightly less than in May,
The number of automobiles manufactured
Factory employment declined one
per cent and factory pay rolls over 2 per cent between May 15 and June 15, reflecting substantial declines in the automobile, boot and shoe, textile, and
iron and steel industries.
Building contracts awarded during June were larger
in value than during May and almost equaled the peak figure for April,
In
square feet of floor space the June awards were a little smaller than those for
May.
Residential contracts in June were the smallest for any month since Feb-
ruary, but greatly exceeded those of a year ago*
The Department of Agriculture estimate of the condition of all crops
combined on July 1 showed some improvement from the month before.
The corn
crop forecast places it at approximately 550,000,000 bushels above last year.
2.
X-4390
74
The July 15 cotton crop estimate was 13,588,000 bales, compared with a forecast of 14,339,000 hales on June 25.
Trade.- Freight car loadings were larger during June than during May, as is
usual at that season, and also considerably oxccoded the figures for June, 1924,
the low point of last year.
Sales at department stores during June were season-
ally smaller than in May, hut totaled 5 per cent more than last year.
It should
be borne in mind, however, that in June of this year there were 4 Sundays as
compared with 5 in the preceding month as well as in June, 1924.
Mail order
sales were 6 per dent larger than in Kay and exceeded the amount for June, 1924.
Sales of wholesale firms were 5 per cent greater than in May and larger than in
any June in the last five years.
Department store stocks were reduced further
in June, but were slightly larger than a year ago.
Wholesale stocks of gro-
ceries, shoes, and hardware were smaller at the end of June than a month earlier,
but those of dry goods and drugs were larger.
Compared with a year ago stocks
of groceries, and drugs were larger in value while stocks of dry goods, shoes,
and hardware were smaller.
P r i c e s W h o l e s a l e commodity prices advanced 1.4 per cent in June, according
to the index of the Bureau qf Labor Statistics, following declines in April
and May.
The largest increase for any commodity group was for the miscellaneous
group which includes crude rubber;
prices of farm products, foods, and fuel
and lighting also advanced, while prices of building materials declined considerably.
In the first half of July quotations on flour, beef, hogs, wool,
copper, petroleum, hides, and rubber increased, while prices of. sugar,
bituminous coal, and hardwood lumber declined.
Bank Credit.-
At member banks in leading cities the volume of loans on
securities continued to increase after the middle of June and during the first
half of July was at a higher level than at any previous time.
Demand for bank
75
X-4700
3,
credit for commercial purposes was relatively inactive and the volume of commercial loans at reporting member banks remained near the low level for this
year, although considerably above the amount for the corresponding period in
1924.
At the reserve banks the seasonal demand for credit and currency was reflected in increased borrowing by member banks which carried discounts at the
beginning of July to the highest level in more than a year, and notwithstanding the subsequent decline the total on July 22 was still at a relatively high
level.
Total earning assets on that date showed little change as compared with
the figures for four weeks earlier.
Firmness in the money market at the close of the fiscal year was followed
by an easing of money after the first week of July.
In the latter part of
the month there was again evidence of firmer money conditions.
These changes
were reflected chiefly in the movement of rates for call money, quoted rates
on prime
commercial paper and on bankers' acceptances remaining throughout
the period at 3 3/4 - 4 per cent and 3 l/4 per cent.
76
F E D E R A L
R E S E R V E
B O A R D
X-4391
STATEMENT FOR THE PRESS
For immediate release
July 27, 1925.
CONDITION OF ACCEPTANCE MARKET
June 18, 1925 to July 15, 1925.
Acceptances.
The acceptance market was relatively quiet during the four weeks ending
July 15, with the smallest volume of transactions reported for many months.
Rates on all maturities were unchanged throughout the period.
During the last
half of June the demand for "bills of the longer maturities, based partly on
foreign orders, exceeded the supply at prevailing rates in New York, Boston,
and Chicago, and New York reporting dealers' portfolios were reduced to a new
low point for the year.
Over the first of July, however, slightly firmer
money conditions were accompanied "by a moderate increase in the supply of "bills
and a slackening in demand.
Later the volume of offerings again fell off and
exceptionally quiet conditions were reported from all the important markets.
Dealers' portfolios on July 15 were of moderate size and consisted chiefly of
"bills of the shorter .maturities.
Rates in the New York market on July 15
were 3-1/8 bid and 3 per cent offered en 30-day bills, 3-1/4 bid and 3-1/8
offered on 60-day bills, 3-3/8 bid and 3-1/4 per cent offered on 90-day bills,
with 3-5/8 to 3-3/4 bid and 3-1/2 to 3-5/8 per cent offered on the longest
maturities.
77
FEDERAL RESERVE BOARD
WASHINGTON
X-4393
address official correspondence to
the federal reserve board
August 4,;192^
SUBJECT:
Code Words for use between Federal Reserve
Banks in connection with Telegraphic Tracings
and Advices coverirg Non-Cash Collection Items.
Bear Sir:
It has "been suggested to the Board by one of the
Federal reserve banks that, in order to reduce the .phraseology in telegrams between Federal reserve banks covering
telegraphic tracings or advices in connection with non-cash
collection items, where such messages arc sent over the
leased wires for the benefit of Federal reserve banks, and
consequently at their expense,additional code words for such
purpose be supplied from the Federal Reserve Telegraphic Code*
The Board has approved this suggestion and, effective August 15th, the following code words will be used
covering the transactions referred to:
BUCKISH: We credit your account today with
representing proceeds of collection
number
.
sent direct to us by
.
BUCKLE; Referring to our collection number
payable at
for $
sent
if outstanding obtain immediate telegraphic report. Advise us status by wire.
OLYMPIAN: Telegraph reply over private leased
wire.
In instances where messages of this nature incidental
to member bank transfers are transmitted over the commercial
wires it may be desirable to also use the above code words in
such messages in order to reduce the additional expense to the
member banks concerned*
78
- 2 -
X-4393
The code words "BUCKISH" and "BUCKLE" and the
code word "OLYKPIAU" should be inserted in the Federal
Reserve Telegraphic Code at the "bottom of pages 35 and
168 following the code words "BUCKHOEtt" and "OLIVINE",
respectively.
Yours very truly,
J. C. Nocll,
Assistant Secretary.
TO GOVERNORS OF ALL F.R.BAHKS.
( C O P Y )
WILLIAMS and SIUKLER
Attorneys at Law
601 Commercial Trust Building
X—'4394
PHILADELPHIA.
August 3, 1925.
Walter Wyatt, Esq., General Counsel
Federal Reserve Board
Washington, D.C.
Dear Mr* Wyatt:
I am writing to "bring to your attention a case recently
decided "by the Superior Court of the State of Pennsylvania, The
case is reported at page 52 of Volume 85 of the Pennsylvania Superior Court Reports, and was decided on February 27th, 1925. It has
recently come to my attention in the advance sheet form, and inasmuch
as there arc no extra copies on hand I am unable to -send you a complete
report of the case. It may be that you have already seen a copy of it.
The case is interesting inasmuch as it seems to apply the
Malloy case doctrine. The effect of the decision is to hold that
a bank of deposit receiving an item for collection from its depositor
must first prove knowledge on the part of the depositor of a regulation providing that a collecting bank will be liable only for actual
funds coming into its possession, before it will be permitted to recover from the depositor an overdraft resulting from the failure to
collect the item deposited for collection. In that case the bank of
deposit had forwarded the items, which were two certificates of deposit, through ordinary channels for collection. In due course the
items come into the hands of the Federal Reserve Bank of Cleveland,
and it forwarded the items directly to the bank of issue for collection, The Federal Reserve Bank accepted the bank draft of the bank
of issue in payment of the two certificates. Prior to payment of the
bank draft, the bank of issue made an assignment for the benefit of
creditors and the drawee bank dishonored the draft. The items were
charged back in the usual manner and the bank of deposit, by reason
of having permitted overdrafts, was forced to bring suit against the
depositor for the amount of the two certificates.
The lower court made absolute a rule in favor of the plaintiff bank for judgment against the depositor for want of a sufficient
affidavit of defense on two counts, namely:
"(1) the plaintiff by accepting the deposit certificates
did not become the owner and that the bank whose negligence caused the loss to the defendant was the agent of
the depositor and not the agent of the bank; and
(2) that the affidavit of defense did not contain a
sufficient allegation of facts to justify a conclusion that the certificates were received by the bank
80
- 2 -
X-4394
Walter Wyatt, Esq., General Counsel
8/3/25
as cash, or that it became the owner thereof."
The defendant appealed from the judgment of the lower court,
and the Superior Court upheld the first contention stating clearly
that the law, of Pennsylvania had long "been settled on the basis of
the Massachusetts rule, namely that the liability of the bank of deposit in the absence of instructions or an agreement to the contrary,
extends merely to the selection of a suitable and competent agent,
with proper instructions, and does not involve responsibility for
default and misconduct of the correspondent bank. The Court further
upheld the second ground for the decision of the lower court, namely
that the allegations of the affidavit of defense were not sufficient
to show that the certificates were not received by the plaintiff for
collection but were received as cash, and that the plaintiff bank
became the owner thereof.
The Superior Court, however, reversed the judgment of the
lower court and remitted the record for further proceedings, on the
ground that the plaintiff had not averred in its statement of claim
that the plaintiff had knowledge or was charged with knowledge of
Regulation J of the Federal Reserve Board whereby the Federal Reserve
Bank of Cleveland was authorized to limit its liability to cases in
which the proceeds of collection items in actual funds came into its
hands. The Court in its opinion said:
"The depositor is not bound by the knowledge of its agent
of the regulation which provides for variation of the settled law. On what principle of law may such a regulation
bind a depositor? Clearly, only if the depositor has knowledge of the regulation when he makes his deposit. The
plaintiff avers no such knowledge on the part of the defendant and the defendant denies that he had such knowledge."
Yours very truly
MLS
(Signed) Parker S.Williams.
1
I
X-4395
F E D E R A L
R E S E R V E
B O A R D
81
STATEMENT FOR THE PRESS
Released for publication Monday
morning, August 10, 1925.
COMMODITY CLASSIFICATION OF ACCEPTANCES
Of the bankers1 acceptances purchased outright by the Federal Reserve banks
in March and April of this year, 40 per cent, in dollar value, were drawn to
finance the marketing of cotton and grain, according to a statement by the Federal Reserve Board, based on a study which appears in the Federal Reserve Bulletin
for August issued today.
Another 10 per cent of the acceptances were drawn to
finance the storage or movement cf other American agricultural commodities, bringing the proportion of farm products among the commodities underlying purchased
acceptances to 50 per cent of the total.
During the two months included in this study the reserve banks purchased
$24?,000,000 of bankers* acceptances, exclusive of acceptances bought under repurchase agreements.
Of this amount $87,000,000 was drawn to finance imports,
$77,000,000 to finance exports, $59,000,000 to finance domestic transactions, of
which a large proportion covered the storage of agricultural staples in elevators
and warehouses awaiting export, and $24,000,000 to finance the storage and shipment of feoods between foreign countries.
Before the Feaer&l reserve system was established, this convenient and
economical way of financing the marketing of crops by the use of American bankers'
acceptances was not available,and a large part c r our foreign trade was financed
through the use of acceptances drawn on foreign banks, which involved the
'
"
82
X-4-395
-2->
payment of commissions and. discounts-in foreign markets#
The
^
Federal Reserve Act made it possible for "banks in this country to accept drafts
and the Federal reserve "banks, "by standing ready to purchase acceptances, have
fostered an acceptance market in this country, the extent of which is indicated by the fact that there are now outstanding at different times of the year
between $600,000t000 and $800,000,000 of bankers' acceptances.
Through the acceptance market, facilities have been also provided for
financing the storage and shipment of American farm products by exporters and
cooperative marketing associations at lower rates and more conveniently than
was possible before.
The analysis made by the Federal Reserve Board shows that acceptances purchased by the reserve banks cover a wide range of different commodities# During
March and April import acceptances covered about 600 commodities, and export
acceptances covered over 250 commodities#
The principal commodities under-
lying the $247,000,000 of acceptances purchased by the reserve banks in March
and April, combining acceptances in foreign trade and in domestic transactions,
were as follows:
Cotton
Grain
Sugar
Coffee
Silk
Wool
Hides and skins
Copper
Lard and meat
Flour
Tobacco
Rubber
Cotton manufactures
Woodpulp
Lumber
Pars
Farm Implements
$74,836,000
27,180,000
19,782,000
17,752,000
15,082,000
11,431,000
7,300,000
6,679,000
5*323,000
5,266,000
4,195,000
3,046,000
2,337,000
1,915,000
1,886,000
1,689,000
1,235,000
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
y—4
a
°
August 5, 1925.
Dear Sir;
Will you kindly furnish the Board at
your early convenience with a list of non-member
"banks maintaining clearing accounts with your
bank on July 1, 1925, together with the amount
of the balances standing to the credit of each
such bank on the above date*
Very truly yours,
Walter L. Eddy,
Secretary.
DRAFT OF LETTER fO GOVERNOR AT EACH FEDERAL RESERVE B A M .
i
84
•*
FEDERAL RESERVE BOARD
x-4397
WASHINGTON
address official correspondence to
August 5, 1925.
°
the federal reserve board
SUBJECT:
Estimating population of Towns and Cities in which
Banks applying for Membership are located.
Dear Sir:
Attention is directed to the Board's circular letter of December 20, 1919, X-1769, in which it is stated that
the Board will accept estimates of the population of towns
or cities in which hanks applying for membership in the Federal Reserve System are located as shown by the last official
census unless there is good reason to believe that these figures are incorrect, in which event an estimate of the population will be required through means of local data supported
by affidavits.
This letter, however, applies only to cases in
which there has been an official enumeration of the population of the place in which the applying bank is located.
In a number of cases in recent years the Board has been
called upon to determine the eligibility for membership
of banks situated in communities of which no official
enumeration of the population had been made, either because the communities were unincorporated or for some
other exceptional reason. In cases of this kind the Board
has required that evidence as to the population of such
communities be furnished through affidavits obtained from
public officials or prominent business men.
Hereafter in cases in which there is doubt as to
the population of the place in which a bank applying for
membership in the System is located, either because there
is good reason to believe that the last official census is
incorrect or because there has been no official census of
the place in question* the Board will require estimates of
the population of the place by public officials, such as
the postmaster, the school superintendent, members of the
school board, county supervisors, city or county treasurers,
tax collectors, judges or clerks of local courts, or from
prominent residents or business men in the community. An
affidavit should accompany each estimate stating th*\t it
has been made according to the best of the affiant*s
knowledge and belief, In some cases it may be desirable
to have an examiner make an investigation of the popula-
—
2
X-4397
-
tion of the place and report his conclusions on the question.
Where the community in which the hank is located is unincorporated the Board desires estimates of the population of the
physically well defined area having the characteristics of
a town which lies about the place where the bank is located.
Very truly yours.
D. R. Crissinger,
Governor.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4398
August 5, 1925.
SUBJECT:
Corrections in Inter-District Time
Schedule.
Dear Sir;
By agreement between the Federal Heserve Bank of Dallas and the Federal Reserve
Bank of St. Louis the following changes should
"be made in the inter-district time schedule:
Dallas to Little Rock - 1 dayLittle Rock to Dallas - 1 day.
Yours very truly,
J. C. Noell,
Assistant Secretary,
TO GOVERNORS OF ALL F.R.BASKS.
87
FEDERAL RESERVE BOARD
WASHINGTON
X-4400
address official correspondence to
the federal reserve board
August 6, 1925
SUBJECT:
Employment of Hon. Newton D. Baker in
Brookings Par Clearance Case.
Dear Sir:
Referring to the Board's telegram of June 25th
(Trans. 570), you are advised that all Federal reserve
hanks have signified their willingness to bear a pro
rata share of the expense of retaining Honorable Newton
D. Baker in connection with the appeal from the decision
of the United States District Court in the suit of the
Brookings State Bank, Brookings, Oregon, vs. Federal
Reserve Bank of San Francisco.
Upon completion of his services, Mr, Baker will
render his bill to the Board for approval, after which it
will be paid by the San Francisco Bank, and the other reserve banks will be advised by the Board of the amounts
which they are to remit to San Francisco.
By direction of tho Board.
Very truly yours,
Walter L. Eddy,
Secretary.
To Governors of all F.H.Banks (Except San Francisco)
88
Federal Reserve Board,
B'j:rr:, No, Z<i402,
August, 1925.
NOTIFICATION 0? T B B H S T 1 0 N 0? INSOLVENCY OB SUSPENSION...
FEDERAL E3SEHVE i^GBNT AT
Name of bank
Date of insolvency or
suspension
DATE
Location
Date of termination of
insolvency or suspension
.
Indicate manner of termination of insolvency or suspension by a check mark on the
blank line opposite the appropriate item.
1.
2.
3.
Bank declared insolvent:
a. Eoopencd after reorganization (assessment $
b. Reopened after assistance from the directors
c. Succeeded by newly organized bank..
Nemo of bunk
d. Absorbed by or merged with another bank.....
Nome of bank
g. Otherwise liquidated (spqeify)*
Bank found solvent:
a. Beopened.
I), Succeeded by newly organized bank.
Name of bank
c. Absorbed by or merged with another bank
Name of bank
d. Liquidated voluntarily
Losses wore sustained by:
a. Federal reserve bank ($
b. Depositors
e. Stockholders
) ___
__
)
Remarks:
*
Should include banks in process of liquidation.
Report on this form should bo submitted at the earliest practicable date covering each bank previously closed or suspended whose insolvency or suspension has beer,
terminated or which is in the process of liquidation.
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE DISTRICT OF OREGON.
BROOKINGS STATE BANK, an
Oregon Banking Corporation,
Plaintiff,
-vs-
NO. Ii» 9041
FEDERAL RESERVE B A H OF SAN
FRANCISCO, a Federal Reserve
Banking C o r p o r a t i o n ,
Defendant.
MEMORANDUM OF AUTHORITIES
ON MOTIOU TO DISMISS.
R. ff. Wilbur,
Joseph N. Teal,
Rogers Mao Veagh,
Portland, Oregon,
Albert C, Agnew,
San Francisco, California,
Attorneys for Defendant.
\
-2-
X-4403
90
IN THE DISTRICT COURT OF THE UNITED STATES
FOE THE DISTRICT OF OREGON.
BROOKINGS STATE BANK, an
Oregon Banking Corporation,
Plaintiff,
-vs-
NO. L. 9041
FEDERAL RESERVE BANK OF SAN
FRANCISCO, a Federal Reserve
Banking Corporation,
Defendant.
itoiORAflbDM OF AUTHORITIES
ON. MOTION TO DISMISS.
The position of the defendant in relation to this motion may "be
briefly summarized as follows:
1.
The complaint in this action, from the allegations of which
the theory upon which the jurisdiction of the United States District Court
is predicated must "be ascertained,, thvabod jurisdiction upon the sole ground
of the Federal incorporation of the defendant.
2.
The Act of the Congress of February 13, 1925# (c.229, 43 Stat,
Sec. 12), effective May 13, 1925, deprives this Court of jurisdiction founded
upon the Federal incorporation of the defendant.
3.
This Act affects cases pending when it takes effect, as well
as cases thereafter arising and deprives this Court of power to proceed with
the trial of this case in any particular.
4.
This action is not one "arising under the laws of the United
States" except in so fax as it is such by reason of the Federal incorporation of the defendant.
X—4403
5«
This action is not ono "between citizens of different
states" nor ""between citizens of a state and foreign states, citizens or
subjects-,"
6.
There being only one ground upon which the jurisdiction of
t h i s Court could tic predicated, the Federal incorporation of the defendant,
and t h a t ground having been removed by the recently enacted statute, t h i s
C o u r t s h o u l d f o r t h w i t h dismiss the action.
These contentions will be considered more fully in the order stated.
I.
THE COMPLAINT DOES HOT STATE A CAUSE OF ACTION FOUNDED
UPON A FEDERAL QUESTION NOR UPON DIVERSITY OF CliTlZENSHIP. THE SOLE GROUND OF JURISDICTION STATED IS THE
FEDERAL CHARACTER OF DEFENDANT.
The only allegations in the complaint which in any way refer to
the character of the defendant or the laws under which it exists are those
contained in paragraph II, which is as follows:
"That the defendant, Federal Reserve Bank of San Francisco,
is a corporation organized, created and existing under and by
virtue of the laws of the United States, and being the Federal
reserve system of the United States, the principal office of which
is in the city of Son Francisco.,: California; that said bank is
doing business within the State of Oregon and has duly organized
a branch bank in pursuance of the Federal Reserve Act, which said
branch bank is located in Portland, Multnomah County, Oregon,
and that said defendant is carrying on the business of a reserve
bank and is doing business within the State of Oregon."
The statement that the defendant is organized under the laws of
the United States and that it has a branch at Portland, Oregon, established
in pursuance of the Federal Reserve Act, does nothing more than identify
the defendant as a Federal corporation.
Neither in this paragraph nor else-
where in the complaint does the plaintiff claim any right founded upon the
Reserve Act nor does it attack the constitutionality of said act nor allege
92
-4-
X-4403
any infringement or violation of th6 provisions thereof "by defendant.
The
entire action eeunde la common law tort and, in so far as the allegations of
the complaint are concerned, every issue involved could be decided independently of the defendant's character as a Federal corporation and without
reference to any law of the United States.
Defendant is charged with wilful
and malicious interference with plaintiff's business and with certain alleged
libels, the commission of which might, with equal force, be charged against
any corporation, however organized*
If, then, as we will hereafter show, the mere Federal character of
defendant no longer serves to -Vest this Court with jurisdiction, upon what
possible theory can Jurisdiction be longer retained?
Existence of Federal question most be plainly stated in the
complaint.
tf there is any rule firmly established in the Federal decisions,
it is that in order to predicate jurisdiction upon the ground that the action
is one arising under the laws of the United States, the action must be one
actually and not potentially involving a Federal question and that such is
the fact must be plainly and unequivocally shown by the initial pleading, unaided by subsequent pleadings or proof.
On this point the case of
Roman Catholic Church v. Pa. Ry. Co.. 237 U.S.575;
3 5 S U P . Ct. 7 2 9
is pertinent.
This was a suit for injunctive relief and an award of damages
against the railway company for an alleged nuisance occasioned by the operation
of trains along a certain highway*
The court, passing upon the matter of
whether a Federal question is involved, say:
"The only passage in the bill which in any degree whatever
gives basis for the assumption that jurisdiction was invoked because
of a reliance on rights claimed under the Constitution and laws of
-5—
X-4403
*
" t h e "United S t a t e s , i s p a r . Xx, w h i c h i s a s f o l l o w s :
'That the said acts of the defendant have taken from your orator
property consisting of casements of light and air to which your
orator is legally entitled, and deprives it of the same without due
process of law and without just compensation, .... and that such acts
of the defendant have been and no® are a violation of the provisions
of thb Constitution of the United States.1 As from any point of view
it is impossible, "because of the vagueness of these averments, to escape, to say the least, doubt as to whether the bill asserted rights
under the Constitution and laws of the United States which would be
adequate to sustain the jurisdiction of the Circuit Court...,i it follows that they arc insufficient to sustain the claim of jurisdiction,
since the rule is that averments to accomplish that result must be explicit and clearly made. ... But even if this impossible assumption
were yielded to, there will yet be no ground upon which to rest jurisdiction, since the bill contains allegations which would exclude the
possibility of implying from the facts alleged that there was an intention to base jurisdiction on rights asserted under the laws of the
United States. We say this because paragraph XII of the bill unmistakably charges that the acts complained of were the result of the
negligence of the carrier in operating its trains, thus excluding the
possibility of affixing to them the character of state action so as to
bring them within the 14th Amendment."
Again the rule is clearly stated in
Hull v. Burr. 234 U. S.. 272: 34 SUP. Ct. 892.
wherein it is said:
"The g e n e r a l r u l e i s f i i r m l y e s t a b l i s h e d t h a t a s u i t d o e s n o t
so a r i s e u n d e r t h e iatfs of t h e U n i t e d S t a t e s u n l e s s i t r e a l l y and
s u b s t a n t i a l l y involves a d i s p u t e or controversy r e s p e c t i n g the v a l i d i t y , c o n s t r u c t i o n , of e f f e c t o f some law of t h e U n i t e d S t a t e s ,
upon the determination of which the result depends* And this must
appear not by mere inference* but by distinct averments according to
the rulos of good pleading; not that matters of law must be pleaded
as such* "but that the essential facts averred must show, not as a
matter of mero inference or argument, but clearly and distinctly,
t h a t s u i t a r i s e s u n d e r some f e d e r a l l a w . "
Where the jurisdiction of the District Court is originally invoked,
or the case is brought there by removal, on the ground that the case is one
arising •under the Constitution, laws or treaties of the United States, that
it does so arise must appear from plaintiff's own statement of his claim,
that is, "a statement of facts in legal and logical form such as is required
in good pleading," showing the plaintiffTs cause of action without regard to
94
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what may "be the contentions or claims of the defendants.
Carson v. Dunbam, 121 U. S. 421; 7 Sup. Gt. 1030,
Metcalf v. Watertown, 128 U. S. 586; 9 Sup. Ct. 173,
Colorado M i n i n g Co. v. Torek, 150 U. S. 138; 14 Sup, ct. 35,
Tennessee v. Union Bank, 152 U. S. 454; 14 Sup. Ct. 654,
Boston Copper Co* v. Montana Ore Co., 188 U. S. 632; 23 Sup. Ct. 434.
'•Whether or not a case arises under the laws of the United
States is a question which must be decided, not "because of questions
which might arise in the subsequent progress of the cause, but upon
the grounds of jurisdiction asserted in the plaintiff's pleading."
Love11 v. Newman, 227 U. S. 412; 33 Sup. Ct. 375.
"When the complaint shows a case which arises out of a contract
or a common-law right of property, and only indirectly and remotely
depends on federal law, such a case not only does not, but cannot
properly turn upon a construction of such law, But when the complaint
asserts a right created by federal law, it presents a suit which may
properly turn upon a construction of that law."
McGoon v. N o r t h e r n Pacific Ry. Co., 204 Fed. 998.
"The averments of the complaint cannot be helped out by resort
to the other pleading or to judicial knowledge*"
Mountain View Mining Co. v. McFadden, 180 U. S. 533;
21 Sup. Ct. 488.
"It has become firmly settled that whether a case is one arising
under the Constitution or a law or treaty of the United States, in
the sense of the jurisdictional statute, must be determined from what
necessarily appears in the plaintiff's statement of his own claim in
the bill or declaration, unaided by anything alleged in anticipation
or avoidance of defenses which it is thought the defendant may interpose,"
Taylor v. Anderson, 234 U.S. 74; 34 Sup. Ct. 724,
See, also, Joy v. St. L ouis, 122 Fed. 524,
affirmed in - 201 U. S. 332; 26 Sup. Ct. 478,
Third Street By. Co. v. Lewis, 173 U. S. 457;
19 Sup. Ct. 451,
Poabody v. Gold H m Mining Co. (C.C.A. 9th Cir.)
Ill Fed. 817.
"The suggestion in a complaint in an action at law that the defendant may or will set up a defense based on a statute repugnant to
the Constitution, does not make the suit one arising under the Const! tution."
95
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X—4403
Fergus Falls v. Fergus Falls Water Co., (C.C.A.8th Cir.)
72 Fed. 873.
"Where, however, the original jurisdiction of a circuit (now
district) court of the United States is invoked upon the ground that
the determination of the suit depends upon some question of a federal
nature, it must appear at the outset, from the dtidlaratioir or the bill
of the party suing, that the suit is of that charactcr; in other words,
it must appear in that class of cases, that the suit was one of which
the circuit (now district) court at the time its jurisdiction is invoked, could properly take cognizance of. If it does not so appear,
then the court, upon demurrer, or motion, or upon its own inspection
of the pleadings, must dismiss the suit; just as it would remand to
the state court a suit which the record at the time of removal, failed
to show was within the jurisdiction of the circuit court.
"It cannot retain it in order to see whether the defendant may
not raise some question of a federal nature upon which the right to recover will finally depend; and if so retained, the want of jurisdiction
is not cured "by an answer o^.plea which may suggest a question of that
kind,"
Metealf v. Watertown, 128 U. S. 586; 9 Sup. Ct. 173.
"In other words, as was said, in substance, in Osborn v. U. S. Bank,
9 Wheat. 739; the right of the plaintiff to sue does not depend upon
the defense which the defendant may choose to sot up, because the right
to sue exists, if at all, before any defense is made, and must be
judged exclusively as of the date of the filing of the complaint, on
the state of facts therein disclosed."
St. Paul Ry. Go* v* St# Paul, etc. 68 led. 2.
Decree affirmed 18 Sup* Ct. 946.
In San. Francisco v * United Railroads. (C.C.A. 9th Cir.) 190 Fed.
507. the plaintiff alleged that section 499 of the California Civil Code
entered into and became a part of its contract with the defendant city and
that ordinances adopted by the city with a view to the construction of a
municipal railroad and its acts in carrying out those ordinances would result
in an impairment of plaintiff's contract as expressed in its franchise.
Holding that no federal question was presented, the Court said;
"If, as alleged in the bill., the impairment of the appellee's
contract consists in the fact that the city is proceeding to disregard its covenant, and to construct a road in violation of the provisions of Sec. 499, which was made a part of the contract, we are
confronted with the fact that the city is proceeding to violate a law
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:.;:-4403
of the state* If its action is illegal and unwarranct ,15 it is
primarily so "because it violates that lav;. If its action had the
effect to impair the obligation of the contract, it also has the
effect to violate the express and paramount law of the state, and
it is therefore void, and is not state legislation. .... In Barney
v. Hew York, 193 U. S. 430; 24 Sup. Ct. 502, jurisdiction was invoked on the ground of the deprivation of property without due
process of law in violation of the fourteenth amendment. It appeared on the face of the plaintiff's bill that the acts of the
city officers therein complained of were not only unauthorized,
but were forbidden by state legislation. It was held that no federal question was involved. The Court said! 1 In the present case
defendants were proceeding, not only in violation of the provisions
of the law, but in opposition to plain prohibition.1"
In Parson v. Chicago, 138 Fed. 184, the Court said:
"Turning, now, to the question as to whether the suit is one
arising under the Constitution, two elements mast concur to give
the court jurisdiction; The suit must be one actually and not
potentially arising under the Constitution, as said by Mr, Chief
Justice Fuller, speaking for the court in Hew Orleans v. Benjamin,
153 U. S. 411, 424, and it must appear at the outset that the alleged deprivation was by the act of the State. Barney v. H. Y.,
193 IT. S. 430« ... The court mast look to the substance of the bill
to determine whether there is in fact a federal question presented,
or whether the said federal question, if there be one, is but incidental to the controversy. ,.. The federal courts should be slow
to assume jurisdiction, unless it appears that a federal question
is necessarily involved in the case,"
The following cases are to the same effect:
Oregon Short Line v. Skottowe, 162 U, S. 490;
16 Sup. Ct. 869,
Brown v. Keone-, 8 Pet. 112; 8 U. S. (L. Ed.) 885,
Sheldon v. Sill, 8 How. 441; 12 U. S. (L. Ed.) 1147,
Robertson v. Cesse, 97 U. S. 646,
Hanford v. Davies, 163 U. S. 273; 16 Sup. Ct, 1051,
State of Tennessee v. Union Bank, 152 U. S. 454;
14 Sup. Ct. 654,
Defiance Water Co. v. City of Defiance, 191 U. S,
143; 24 Sup. Ct. 53,
Little York Co. v. Keyes, 96 U. S.199; %4 L. Ed. 656,
Blackburn v. Portland Mng, Co, 175 U. S. 571;
20 Sup, Ct. 222,
Shreveport v. Cole, 129 U. S. 36; 9 Sup. Ct. 210,
Hew Orleans v. Benjamin, 153 U, S. 411; 14 Sup, Ct.
905, 909,
Arbuckle v, Blackburn, 191 U. S. 405; 24 Sup. Ct. 148,
Spencer v. Duplan Silk Co. 191 U. S. 526;
24 Sup. Ct. 174.
Peabody & old %bg. Co. v. Gold Hill Co. (C.C.A. 9ch Cir.)
Ill Fed. 817.
That the court, separately from ths trial on the merits, should
hear and determine questions relating to its jurisdiction in any action before it, whether those questions be raised by objections to the complaint, or
by a plea in abatement, or whether taken advantage of pending the trial, is
unquestioned.
American Sheet Co. v. Wenzler, 227 Fed. 321.
This uniform rule is so well stated in Shulthis v. McDougal.
225 U. S. 561. 32 Sup. Ct. 704 that further authority seems unnecessary.
In this case, involving the question of the title to certain oil
lands, the jurisdiction of the Supreme Court was challenged on a motion to
dismiss the appeal.
In opposing the motion, the appellants contended that
the case was one arising under certain laws of the United States and was not
one, therefore, dependent upon diversity of citizenship.
In considering this
contention, the Court said:
"The consideration of the contention will be simplified if,
before taking up the specific grounds on which it is advanced,
the rales by which it must be tested are stated. They are:
"1. Whether the jurisdiction depended upon diverse citizenship alone, or on other grounds as well, must be determined
from the complainant's statement of his own cause of action, as
set forth in the bill, regardless of questions that may have been
brought into the suit by the answers or in the course of subsequent pleadings. ...
"2. It is not enough that grounds of jurisdiction other than
diverse citizenship may be inferred argumentatively from the
statements in the bill, for jurisdiction oezuot rest on any
ground that is not affirmatively ar„d distinctly set forth. ...
"3. A suit to enforce a right which takes its origin in
the laws of the United, utaccs is not necessarily, or for that
reason alone, one arising uider those laws, for a suit does not
so arise unless it really and substantially involves a dispute or
controversy respecting the validity, construction or effect of
such a law, upon the determination of which the result depends.
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This is especially so of a suit involving rights to lands acquired.
under a la# of the United States. If it were not, every suit to
establish title to land in the central and western states would so
arise, as all titles in those states are traceablo back to those
laws....
"To sustain the contention that the suit was one arising under
the la\7S of the United States, counsel for the appellants point out
the statutes... But the bill makes no mention of those statutes or
of any controversy respecting their validity, construction or effect. Neither does it by necessary implication point to such a controversy. "
Emerson v. Baker 3 Fed. (3d) 831. (Jan. 30. 1925)
Judged by the matter alleged in the complaint, which, as has been
seen, is the only source from which a foundation for jurisdiction can be derived, it certainly cannot bo said that the cause of action therein stated,
substantially or at all "involves a dispute or controversy respecting the
validity, construction or effect of any Federal law, upon the determination
of which tho result depends."
The action can be decided solely by reference
to the common law liability for tort.
Mo portion of the Reserve Act is
pleaded; ho interpretation of the Reserve Act is asked; no claim is made
that any tight accorded by the Act has been infringed or that any constitutional right is, by tho Act, denied.
Federal jurisdiction was invoked and
is now maintained solely upon the ground that the defendant exists and conducts its operations under Federal law.
This being so, may this Court re-
tain jurisdiction to complete the trial of this case?
II
THE ACT OF CONGRESS OF FEBRUARY 13. 1925. EFFECTIVE
MIT 13. 1925. (c. 229; 43 Stat. Sec. 12) DEPRIVES
THIS COURT OF JURISDICTION FOUNDED UPON THE FEDERAL
INCORPORATION OF THE DEFENDANT.
The sixty-eighth Congress passed an act (Public-No. 415 H.R. 8206)
entitled, "An Act to amend the Judicial Code, and to further define the
jurisdiction of the Circuit Courts of Appeal and of the Supreme Court, and
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for othefr purposes*" (cu229, 43 Stat.) Section 12 of this Act reads as
follows:
"That no district court shall have jurisdiction of any action
or suit by or against any corporation upon the ground that it was
incorporated "by or under an Act of Congress; Provided, that this
section shall not apply to any suit, action, or proceeding "brought
"by or against a corporation incorporated by or under an Act of
Congress wherein the Government of the-United States is the owner
of more than one-half of its capital stock."
Section 13 of the Act repeals certain sections of the Judicial
ii
Code and certain existing Acts of Congress, among them section 5 of An Act
to amend an Act entitled 'An Act to codify, revise, and amend the laws relating to the judiciary' approved March 3, 1911," approved January 28, 1915,
to Which repeal reference is hereinafter made.
Section 14 provides:
"That this Act shall take effect three months after its
approval; but it shall not affect cases then -pending in the
Supreme Court, nor shall it affect the right to a review, or
the mode or time for exercising the same, as respects any
.judgment or decree entered prior to the date when it takes effect. (Underscoring ours.)
The Act was approved February 13, 1925, and goes into effect May
13, 1925.
Congress could not have used more positive language than that used
in section 12.
Where jurisdiction is based upon the Federal origin of one
of the parties, as in this case, the jurisdiction of the United States District Court ends on.May 13, 1925.
This intent is made additionally plain by
reason of the fact that section 12 of the new Act takes the place of section 5 of the Act of January 28, 1915, (38 Stat. L, 803, ch. 22, sec. 5)
repealed.
"No court of the United States shall have jurisdiction of
any action or suit by or against any railroad company upon the
ground that said railroad company was incorporated under an Act
of Congress."
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X-4403
By the recently enacted law this provision is repealed and
the same rale is applied to all corporations incorporated by or under an
Act of Congress.
The defendant is such a corporation.
III.
THE ACT OF FEBRUARY 13, 1925. AFFECTS CASES
PENDING WnM THE ACT TAKES EFFECT. AS WELL
AS CASES THEREAFTER ARISING. IT DEPBIVI.S
THIS COURT OF POWER TO PROCEED AT ALL WITH
THE TRIAL OF THIS CASE.
The above conclusion would seen to be inevitable from the very
wording of the Act*
Section 14 thereof declares that the Act shall take
effect three months after its approval, May 13, 1925; but that it shall
not affect cases then pending in the Supreme Court.
The omission of any
exception as to cases then pending in the District Courts which, by the
provisions of section 12 are divested of jurisdiction in certain cases,
clearly evinces an intention not to except cases pending in such District
Courts.
Further, section 14 expressly provides that the Act shall not af-
fect the right to a review or the node or tine for exercising the same, as
respects any judgment or decree entered "prior to the date when it takes
effect."
Thus, the Act does operate in respect to all judgments and de-
crees not entered prior to the date when it takes effect.
But we are not confined to a construction of the wording of the
Act to support the contention that the Act in question divests this court
of power to proceed in all cases pending upon its effective date, when
jurisdiction is predicated upon the Federal origin of one of the parties.
The rule that jurisdiction over pending cases is ousted by the repeal or
amendment of the statute upon which jurisdiction depends, was early laid
down and has been uniformly followed by the Supreme Court of the United
-12-
States.
• j£~4iX
1 0 1
The only oxcoption to this rale is representod by those ct:seti
whore the repealing or amending act contains a clause saving ponding cases
from its operation.
Norris v« Crocker. IS Row. 439; 14 I. Ed. 210
In this case an Act of Congress imposing a penalty for aiding in
the escape of fugitive slaves was repealed while an action brought for the
purpose of collecting the penalty fixed by the Act was in progress; the
Supreme Court holding that since the action for the recovery of the penalty
was pending at the time of the repeal of the Act, such repeal was a bar to
the action, the Court saying!
"Che suit was ponding below when the Act of September 18,
1850 was passed, and was for the penalty of $500 secured by the
fourth section of the Act. As the plaintiff's right to recover
depended entirely on the statute, its repeal deprived the court
of jurisdiction over the subject matter. And in the next place,
as the plaintiff had no vested right in the penalty, the Legislature might discharge the defendant by repealing the law. Wo
therefore answer, to the second question certified, that the repeal of the fourth section of the Act of 1793 does bar this action,
although pending at the time of the repeal."
In the case of
McNulty v. E'.atty. 10 Howard. 646; 13 L. Ed. 353. the Court said:
"In the case of U, S. v. Boisdere's Heirs, 8th How. 121, it
is said, that aa this court can exercise no appellate power ovor
cases unless conferred on it by Congress. If the act conferring
the jurisdiction has expired, the jurisdiction ceases, although
the appeal or writ of error be actually pending in the court at
the tine of the expiration of the Act. The cases on this point
are referred to in the brief in that case and afford full authority
for the principle, if any were needed. The writ of error, therefore, fell with the abrogation of the statute upon which it was
founded."
Ex parte MeCardle, 7 Wall. 506; 19 L. Ed. 264.
This case came before the Supreme Court on appeal from the Circuit Court for the Southern District of Missouri.
petition for a writ of habeas corpus•
The matter arose on a
A motion to dismiss the appeal
102
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was made, argued and denied.
X-4405
Subsequently the Supreme Court permitted
reargument and while the matter was pending awaiting reargument, an Act
of Congress was passed affecting the jurisdiction of the Supreme Court in
such cases.
The attention of the court was called to tne Act of Congress
restricting its jurisdiction and, holding that even while the matter was
pending before it, its jurisdiction could be and had "been foreclosed, the
Court said:
"On the other hand, the general rule, supported by the
best elementary writers, is that when an Act of the Legislature
is repealed, it must be considered, except as to transactions
past and closed, as if it had never existed. And the effect of
repealing Acts upon suits under Acts repealed has been determined by the adjudications of this court. The subject was
fully considered in Morris v. Crocker, 13 How. 429, and more
recently in Insurance Co. v. Ritchie, 5 Wall. 541; 18 1* Ed. 540.
In both of these cases it was held that no judgment could be
rendered in a suit after the repeal of the Act under which it
was brought and prosecuted.
"It is quite clear, therefore, that this court cannot proceed to pronounce judgment in this case* for it has no longed
jurisdiction of the appeal; and judicial duty is no less fitly
performed by declining ungranted jurisdiction than in exercising
firmly that which the Constitution and the laws confer. ... The
iqjpeal of the petitioner in this case must be dismissed for want
of jurisdiction."
Baltimore and Potomac Ry. Co# v. Grant, 8th Otto 398;
25 L. Ed. 231;
In this case an appeal from the Supreme Court of the District
of Columbia to the Supreme Court of the United States involving less than
$2500 was pending at the time that an Act of Congress was passed limiting
appeals in such cases to those in which the amount in dispute, exclusive,
of the costs, exceeded the sum of $2500.
The question presented was
whether, the jurisdictional amount having been changed while the case was
in process of appeal, the jurisdiction of the Supreme Court had been taken
away.
The Court say:
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11
t is equally well settled, that if a law conferring
jurisdiction is repealed without any reservation as to pending
cases, all such cases fall with the law. ... It is claimed,
however, that taking the Act together, the intention of Congress
not to interfere with our jurisdiction in pending cases is manifest. There is certainly nothing in the Act which, in express
terms, indicates any such intention. Usually where a limited repeal only is intended, it is so expressly declared. ... Indeed,
so common it is, when a limited repeal only is intended, to insert some clause to that express effect in the repealing act, that
if nothing of the kind is found, the presumption is always strong against
continuing the old law in force for any purpose. ... There is nothing
in the statute which indicatos any intention to make a difference
between suits "begun and those not begun .... If it had been the
intention to confine the operation of what w&s done to judgments
thereafter rendered or td cases not pending, it would have been
so easy to have said so; we must presume that Congtesti meant the
language employed should have its usual and ordinary signification,
and that the old law should be unconditionally repealed.
" W i t h o u t more we c o n c l u d e t h a t o u r j u r i s d i c t i o n i n t h e c l a s s
of c a s e s o f w h i c h t h i s i s one h a s b e e n t a k e n away, a n d t h e w r i t
is accordingly dismissed."
In the case of
Gates v. O s b o r n e . 9 Wall. 567; 19 L. Ed. 748.
a jurisdictional question was raised and ^r. Justice Clifford, speaking for
the Court,said:
"Jurisdiction was conferred by an act of Congress, and when
that act of Congress was repealed, the power to exercise such
jurisdiction was withdrawn, and inasmuch as the repealing act
contained no saving clause, all pending actions fell."
To the same effect see!
Yeaton v. U. S., 5 Cfanch 281; 3 L. Ed. 101,
Hamilton Bank v. Dudley, 2 Pet. 492; 7 L. Ed. 496,
B. & 0. Railway Co. v. Grant, 98 U.S., 398;
25 L. Ed. 231
Hendrix v. U.S. 219 U. S. 79; 31 Sup. Ct. 193,
Hallowell v. Commons, 239 U. S. 506; 36 Sup. Ct. 202.
This rule is not confined to the Supreme Court of the United
States but has been uniformly followed by the other Federal courts, as well
as the state courts.
15 Corpus Juris. 825.
Thus, in the case of Hpyle v.
New Orleans Railway. 23 La. Ann. 502. it was decided that even though
104
X-4403
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judgment had boon rendered, a divestiture of jurisdiction "before tho
judgment is signed deprives the court of authority to sign it.
U# S. v. Kelley, (C.C.A. 9th Cir.) 97 Fed. 460;
followed in Parr, v. Colfax - C.C.A. 9th Cir.,
197 Fed. 302)
A former judgment of -the lower court was reversed on the writ
of error from the Circuit Court of Appeals and the cause was remanded for
new trial.
After the mandate had issued, it was discovered that before
the Circuit Court of Appeals had rendered its decision, Congress had passed
an act abridging the jurisdiction of the Circuit Court and District courts
in cases such as the one then under consideration.
A notion was made by-
defendant in error for an order recalling the mandate, upon the ground that
the court had been deprived of jurisdiction.
The Circuit Court of Appeals, deciding that tho lower court had
been deprived of jurisdiction while the case was pending, and its mandate
should therefore be recalled, since the lower court had no jurisdiction to
further try the case, said!
"The question arises whether the act deprives the courts of
the United States of jurisdiction of causes which were pending
at the tine of its enactment. The plaintiff in error invokes the
well-settled rule that a prospective operation of a statute is
presumed to be intended unless/!e§islative intent to the contrary is declared, or necessarily implied, either from the contents
of the statute or from the circumstances which attended its enactment.
In the Circuit Court of Appeals for the Fifth Circuit, in U. S. v.
McOrcry, 91 Fed. 295, it was held that the effect of the statute
was to deprive the courts of the ^nited States of jurisdiction to
entertain pending cases. The same view of the statute was taken
by Kirkpatri-ck, District Judge, in Fairchild v. U. S. (91 Fed* 297)
.... The Supreme Court in a series of decisions has recognized the
doctrine tint, when jurisdiction of a cause depends upon a statute,
the repeal of the statute, without a reservation as to pending cases
deprives the court of all jurisdiction which the act conferred. ...
"We are unable to discover how a law which amends the act whereby jurisdiction was conferred differs from a repealing act such as
the acts considered in the decisions above referred to. Such an
105
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:>
4
amendment is, in effect, a repeal. It repeals pro ta-rco tho
grant of jurisdiction. It revokes a portion of the jj.rLcdiction which was conferred. There is nothing in the language
of the act in question to indicate a purpose to except from its
operations cases which were then pending. In the absence of
such a reservation, the intention of Congress is clear. ... As
amended, the statute expresses the measure of the court's power
over pending cases. ... This court has no power to review the
judgment of the circuit court in a matter of which the latter
had been divested of its jurisdiction. This court can act upon
the circuit court only through its mandate. It will not issue
its mandate to a court which has no power to enforce it. ...
"The argument that the construction which we place upon the
act will in some cases lead to harsh results is one that would
have persuasive force if the language of the act left its meaning
doubtful. In view of the settled construction which has been
placed upon similar legislation, it must be presumed that, in
omitting a saving clause as to pending suits, Congress intended
all the results of its act, and that it. had in view the possible
exerci?o of its own power to grant relief in cases in which the
dismissal of pending causes and the intervention of the Statute
of limitations might result in hardship. The motion for an
order recalling the mandate will be allowed, the judgment of
this court set aside, and the writ of error dismissed."
It is interesting to note that Judge Gilbert, who wrote the
opinion in this case, was urged to his conclusion by Jos. 1ST. Teal, Esq.,
there counsel for defendant in error, and here one of counsel for the defendant , Federal Reserve Bank.
The language of the court is particularly apt, for section 14 of
the Act of Congress of February 13, 1925, not only does not evince any intention to save pending cases from the operation of the statute, but does
plainly evince an intention to allow the statute to operate on pending cases.
The Act says:
"This Act shall take effect three months
but it shall not affect cases then pending in
nor shall it affect the right to a review, or
exercising the same, as respects any judgment
prior to the date when it takes effect."
after its approval;
the Supreme Court,
the mode or time for
or decree entered
Patently, the act is intended to affect cases pending in the District courts
on the date when it takes effect, as well as the right to a review and the
106
-18-
X-4403
mode and time for exercising same, as respects all judgments and decrees
not entered prior to the date when it takes effect#
The conclusion is in-
escapable that the act serves to divest the District courts of all jurisdiction in cases pending on the effective d a t e
of the Act, May 13, 1925*
Bond v# United States, 181 Fed. 63 3 (Clrci?.t Heart District
of Oregon* 1910),
This was a suit brought by an Indian to declare heirship in certain
allotted lands#
The Government defended the suit on the merits.
The report
of the case does not show in what manner the question of jurisdiction was
raised.and, so far as the decision shows, that question was investigated by
the court upon its own motion.
After issue had been joined but before the trial of the case,
Congress passed an act (June 25, 1910; 36 Stat. 855), declaring that in
matters such as the one involved in this suit, the Secretary of the Interior should decide the question of heirship and "his decision thereon
shall be final and conclusive#**
There was no statute expressly repealing
an existing act which conferred upon the United States District Court jurisdiction to entertain cases of the kind in question#
Judge Sean, in passing upon the question of jurisdiction, said;
"If the jurisdiction thus conferred upon the Secretary of
the nterior is exclusive, the court should proceed no further
in this suit but should dismiss it..# Unless the court has jurisdiction to ascertain and determine disputes arising over the
question of heirship of deceased allottees by virtue of some act
of Congress* and especially if Congress has conferred exclusive
jurisdiction over that question upon another department of the
Government, the court is without authority to proceed in the matter#*
After quoting the statute upon which jurisdiction had depended
prior to the enactment of the latter statute giving the Secretary of tiie
Interior jurisdiction, the Court continued:
-19-
X-4403
"If Congress intended by the act of 1901 to confer upon
the courts jurisdiction to determine questions of heirship and
descent as it may affect allotted lands during the trust period,
it was a Jurisdiction, which it could take away at any time.
This, it did "by making the Secretary of the Interior a special
tribunal to determine such questions and declaring that his decision shall ho final and conclusive, thus making the jurisdiction conferred upon him exclusive and to that extent operated
as a repeal, by implication, of the act of 1901, conferring
jurisdiction upon the courts, ... and as there is no saving
clause, the authority of the court immediately ceased over pending
cases. In qy judgment, therefore, the court has no jurisdiction
of this suit, but the qaestion sought to be litigated mast be determined by the Secretary of the Interior." (Underscoring ours.)
This case was followed by Pel-Ata-Yakot v. United States, decided by the District Court for the District of Idaho, and reported in
188 Fed. 387.
In this case, Judge Dietrich, quoting the Act of Congress conferring upon the Secretary of the Interior power to render final decisions
in Indian allotment cases, said:
"The provision is comprehensive, and clearly evinces the
intention of Congress to confer exclusive jurisdiction to decide such controversies upon the Secretary of the Interior. This
being true, it oust bo held that by implication the existing act
conferring jurisdiction upon the courts, was repealed. ... The
repeal thus effected being without any reservation as to pending
cases, the present case, although commenced prior to the
of the repealing act, must fall with the act upon which it rested,"
(Underscoring ours.)
Neither of these cases were taken to the Circuit Court of Appeals but in the case of Parr v. Colfax. 197 Fed, 302. tiae Circuit Court
of Appeals for the Ninth Circuit decided the same question in identically
the same way, saying:
"What is the effect of that statute upon the appeal in
this case? The contention is made that it has no application
to a case which was begun before the date of the statute, but
we do not think so. There is in the statute no clause reserving
jurisdiction as to pending cases, and the meaning of the statute
is clear that exclusive jurisdiction is given to the Secretary
of the Interior of all cases where an Indian, to whom allotment
of land had been made or might thereafter be made, dies or had
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X-4407
died, intestate before the expiration of the trust period and
before the issuance of the fee simple patent. That construction
"being given, the statute deprived the Circuit Court of jurisdiction to entertain an action such as is here under consideration and thereby, as a necessary incident, it took away the jurisdiction of this court to entertain an appeal from the decree of
the Circuit Court sued out after the statute went into effect,
and this for the reason that the act deprives this court of the
power to enforce any judgment it may render on appeal. The appeal
is dismissed."
It will be noted that in these cases the court held that the
jurisdictional statute previously existing was repealed by implication,
by virtue oi the fact that final authority was vested in another department of the Governments
In the present case there is no repeal of tho
statute conferring general jurisdiction upon the District Courts but there
has been enacted a special statute eliminating from that jurisdiction suits
brought against corporations organized under acts of Congress where jurisdiction rests upon that ground.
That the District Courts have been di-
vested of jurisdiction in cases such as the one at bar does not, therefore,
rest for its support upon inference or implication, but upon a positive
Congressional enactment.
IV.
THIS ACTION IS NOT 0MB "ARISING- UNDER QHE
LAWS OF THE UNITED STATES" EXCEPT AS THE
DEFENDANT IS A FEDERAL CORPORATION.
We have seen that the plaintiff in its complaint does not attempt to state a Federal question except by alleging that the defendant is
a Federal corporation and operates under Femoral law.
%e have also seen
that by the recent Act of Congress, jurisdiction predicated upon this
ground has been taken av7o.y.
But, i t may be r.aid, every act of the d e f e n d a n t i s g o v e r n e d b y
F e d e r a l law a n d grows out of such laxr; t h e r e f o r e a n y a c t i o n a g a i n s t s u c h
a c o r p o r a t i o n must n e c e s s a r i l y be one a r i s i n g u n d e r a l a w of t h e U n i t e d
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X-4403
States, irrespective of the allegations of the complaint.
JLV
'
Any such con-
tention is, of course, at once confronted with the uniform rule discussed
in Subdivision I ante, that jurisdiction cannot he presumed or left to
conjecture hut must be predicated solely upon what the plaintiff sets up
in its complaint as a ground for jurisdiction.
Moreover, the gradual re-
striction by Congress of the jurisdiction of the United States Courts and
the decisions interpreting the Congressional enactments so Restricting jurisdiction show plainly that no such contention is tenable.
Since the case of Osborn v. jBaaki 9 Wheat;738; 6 Ut S> (L.Ed) 204.
it has been uniformly held by the Supreme Court that a mere averment that
the plaintiff or defendant is a corporation organized under an act of
Congress makes the case one "arising under the laws of the United States."
Bankers Trust Co. v. T. & P.Ry. 241 U. S. 295,
Pacific Removal Cases, 115 U. S. 1; 5 Sup. Ct. 1113,
American Bank v. Fed. Reserve Bank, 256 U. S. 350;
41 Sup. Ct. 499.
In the case last cited, the Supreme Court, referring to a Federal
Reserve Bank say:
"The principal defendant was incorporated under the laws
of the United States and that has been established as a ground
of jurisdiction since Osborn v. Bank."
The only theory upon which jurisdiction was sustained in the
Osborn case, the Pacific Removal cases and the ones which follow them, was
the Federal character of one of the parties.
A^& now, Congress has said
that "no district court shall have jurisdiction of any action or suit by
or against any corporation upon the ground that it was incorporated by or
under an Act of Congress."
The intent to destroy the basis upon which juris-
diction was predicated in these early cases could not be made plainer.
This curtailing of jurisdiction in action by and against federal
110
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X-4403
corporations has been a matter of gradual growth.
Xfp to 1882 the right of national banks to sue and be sued in
Federal courts was based upon their Federal origin.
The passage of the
Act of July 12, 1862 (Comp.. Stats. 9665; 22 Stat. L» 172) left the jurisdiction as to these banks, with certain specified exceptions, dependent on
diversity of citizenship, or the existence of a federal question.
Up to 1915 railroad companies incorporated under acts of Congress
were subject to suit and could sue in the Federal courts by reason of their
Federal incorporation.,
T. and P. Ry. Co. v. .Cody. 166 U. S. 608: 41 L. Ed. 1134.
Congress, by the Act of January 28, 1915, (ch, 22, sec. 5, 35 Stat,
at L. 803), provided that no Federal jurisdiction should attach in the case
of suits by or against any railroad company upon the ground that said railroad company was incorporated under an Act of Congress.
The Congress has
now seen fit to still further restrict the jurisdiction of the Federal court
by saying that no district court shall have jurisdiction of suits or actions
by or against any corporation upon the ground that it was incorporated under
an Act of Congress, at the sane time repealing the Special statute in regard
to jurisdiction against Federal railroad companies.
Thus the gradual re-
striction of Federal jurisdiction is plainly seen, applying first to national
banks, next to federally incorporated railroads, and, by the recently enacted statute, to all Federal corporations.
That Congress has this power cannot be questioned, for the Constitution left to Congress the sole power to declare the extent and distribute the jurisdiction among the Federal courts.
These courts possess no
powers except such as the Constitution and the laws of Congress concur in
Ill
—23™
Jv -440o
conferring and the pr§sropiotion is always against jurisdiction unless it
affirmatively appears.
Hashville v. Cooper, 6 Wall. 252; 18 L. Ed. 852,
U. S. v. S. P. Ry. Co. 49 Fed. 297,
Hanford v. Davies, 163 U. S. 273; 41 L. Ed. 157.
As has "been already shown, a case presents a federal question
only where, by the allegations of the complaint, it is apparent that it
will "become necessary to construe the Constitution, laws or treaties of
the United States in order to reach a correct decision of the material
issues or to decide as to the existence of some right asserted under the
Federal Constitution or laws.
The Constitution or laws of the United States
mast "be directly involved and the existence of such question must be set
forth in the complaint.
The issue mast be one of law, and not of fact.
Simpkins Fed. Practice. Rev. Ed. 395. 396. 409.
A mere reference to the Federal statute or even a claim that it
will become necessary to construe a Federal statutet does not set up a
federal question.
It mast appear from the complaint that the recovery
sought is based upon the construction given and that it is the substantial
issue.
Simpkins. Fed. Practice. Rev. Ed. 416. 418.
Where, as in this case, the answer raises no Federal question,
the case should be dismissed at once.
Robinson v. Anderson, 121 U. S. 522, 524; 30 L. Ed. 1021,
Hooker v. Los Angeles, 188 U. S. 318; 47 L. Ed. 491,
Devine v. Los Angeles, 202 U. S. 338; 50 L, Ed. 1055,
Boston Min. Co. v. Montana Ore Co., 188 U. S. 634;
47 L. 3d. 633.
The case of
Bankers Trr.et Co. v. Tt & P< Ry* Co* 241 U* S.«
395; 36 Sup* Ct* 569«
—24:*-
112
X—440o
is directly in point on this phase of our contention,
foreclose a mortgage given by the railway company.
This was a suit to
It was "brought in the
United States District Court for the Northern District of Texas and was dismissed for want of jurisdiction. A direct appeal was taken to the Supreme
al
Court on the Jurisdiction/question.
The bill alleged that the defendant corporation was one created
and existing under the laws of the United States with its principal place
of business and its general offices in the Northern District of Texas,
The
Act of Congress under which the railway coiripany was created provided, in
part| that such company " shall be able to sue and be sued, plead and be impleaded, defend and be defended in all courts of law and equity within the
United States."
By motion to dismiss the railway company challenged the
jurisdiction of the District "curt upon the ground of the special statute
passed by Congress, heretofore referred to, which read as follows;
M
Ho court of the United States shall have jurisdiction of
any action or suit by or against any railroad company upon the
ground that said railroad company was incorporated under an Act
of Congress." (Act of Jan. 28, 1915, ch. 22, sec. 5; 38 Stat, at
L. 803.)
*
The plaintiff insisted that, in refusing to entertain the suit,
the District Court erred because the bill showed that the suit was one
arising under the laws of the United ^tates in that it arose under an Act
of Congress and upon the further ground that the bill showed the suit to
be one between citizens of different states*
Deciding both of these con-
tentions in the negative, the Supreme Court said:
"Upon reading Sec. 1 of the Act of 1871, it is plain that
the words 'shall be able to sue and bo sued, plead and be impleaded, defend and,be defended in all courts of law and equity
within the United States' were not intended in themselves to
confer jurisdiction upon any court. As the context shows, Congress
was not then concerned with the jurisdiction of courts, but with
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113
the faculties and powers of the corporation which it was creating;
and evidently all that was intended was to render thin corporation
capable of suing and being sued by its corporate name til any court
of law or equity - federal, state or territorial - whose jurisdiction as otherwise competently defined was adequate to the occasion, Had there been a purpose to take suits by and against the
corporation out of the usual jurisdictional restrictions relating
to the nature of the suit, the amount in controversy, and the venue,
it seems reasonable to believe that Congress would have expressed
that purpose in altogether different words* ...
As long ago as Osborn v. Bank of United States, it was settled
that a suit by or against a corporation chartered by an Act of Congress
is one arising under the laws of the United States. ... ^ffcer the
Act of March 3, 1875 extended the jurisdiction of the circuit courts
to cases arising under the laws of the United States, the ruling just
quoted was uniformly followed and applied in suits by and against
federal corporations...... save where the particular suit was withdrawn or excluded from that jurisdiction by some specific enactment,
like that of July 12, 1882 (22 Stat, at L. 162) placing most of the
suits by and against nati'onal banks in the same category with suits
by and against banks not organized under the laws of the United
States...
u
^t results that if the general jurisdictional provision now
embodied in Sec. 24 of the Judicial Code, respecting suits arising
under the laws of the United States, were alone to be considered, it
would have to be held that the District Court had jurisdiction of
the present suit as one falling within that class by reason of the
incorporation of the Texas and Pacific Railway Company under a law
of the United States. But Sec. 5 of the Act of Jan. 28, 1915 mast
also be considered. It is a later enactment, is shown by the title
to be amendatory of the Judicial Code, and, as has been seen, declares
that 'no court of the United States shall have jurisdiction of any
action or suit by or against any railroad company upon the ground
that said railroad company was incorporated under an Act of Congress.1
These are direct and comprehensive words, and when read in the light
of the settled course of decision just mentioned, must be taken as
requiring that a suit by or against a railroad company incorporated
under an Act of Goiyrress, be not regarded, for jurisdictional purposesf
as arising under the laws of the United States, unless there be some
adequate ground for so regarding it other than that the company was
thus incorporated* Primarily, there was a purpose to effect a real
change in the jurisdiction of such s u i t s * . A n d so, when due regard
is had for the terms of the amendatory section of 1915 and for the
real basis of the jurisdiction affected, the conclusion is unavoidable
that what is intended is to make the fact that a railroad company is
incorporated under an Act of Congress - that is to say, derives its
existence, faculties, and powers from such an act - an entirely negligible factor in determining whether a suit by or against the company
is one arising under the laws of the United States.
"Upon examining the bill in the present suit, it is certain that
it does not arise under those laws apart from the incorporation of
the Texas and Pacific Company under Acts of Congress ... Portions
thereof are copied into the bill as showing that the mortgage sought
to be enforced was given under a power conferred by Congress, but
this does not help the jurisdiction. As under the amendatory section,
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114
X-4403
the fact that the company derives its existence and. all of its
faculties and powers from a Federal charter, cannot avail to
give jurisdiction, it is obvious that to dwell upon the fact
that any particular power comes from the common source must "be
equally unavailable."
The language of the Supreme Court in this case, applied to paragraph two of the complaint in the Brookings case, will convince at once
that there are no allegations in that paragraph sufficient to sustain juris-\
diction on any ground other than the federal incorporation of the defendant.
The fact that the defendant Was organized, created, and exists under the
laws of the United States is immaterial.
The jurisdiction is not aided by
the additional allegations that the defendant has duly organized a branch
bank in pursuance of the Federal Reserve Act, because as ^r. Justice Van
Deventer says, in the Bankers Trust Company case, under the recent statute
the fact that the defendant derives its existence, its franchise and its
powers from a Federal charter cannot avail to give jurisdiction*
Therefore*
to dwell upon the fact that any particular power comes from Federal source
or that any act has been done under Federal authority, must be equally
unavailing to confer jurisdiction.
Western Union Telegraph Company v. «*kni Arbor
Railroad. 178 U. S. 239: 30 Sup, Ct. 867.
This was a bill filed in the state court of Michigan against the
railroad company to restrain the defendant from interfering with the right
of the telegraph company in certain telegraph lines along the defendant * s
railroad.
% e bill stated that the telegraph company was doing business in
many parts of the United States and that it had filed with the Post Master
General its acceptance of the provisions of a certain Act of Congress relating to telegraph companies.
It further alleged that the telegraph com-
pany had the right to maintain its telegraph line under the provisions of
115
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X-4403
the statutes of the United States*. The action was removed by the defendant to the Circuit Court of the United States, upon a petition alleging
th a t the action was one arising under the laws of the United States, citing
the specific Acts of Congress to which the bill of complaint referred.
The
defendant filed an answer and cross-bill and the cause was submitted to the
Circuit Court.
That court dismissed the bill and from the decree of dis-
missal an appeal was taken to the Circuit Court of Appeals which affirmed
the docree.
Mr. Chief Justice Fuller, speaking for the Supreme Court, said:
"Defendant's application to remove was based on the averment
that the suit arose under the Constitution and laws of the United
States. Whether it did so arise depended on complainant * s statement of its own case. The sixth and seventh paragraphs of the
bill contained all the defendant could have relied on as bringing
the case within that category. Those paragraphs were to the effect that conplainant had accepted the provisions of the Act of
Congress and that, independent of the contract, it had a right to
maintain its telegraph line under the provisions of the Statutes of
the United States. .....
"When a suit does not really and substantially involve a dispute or controversy as to the effect or construction of the Constitution or laws of the United States, upon the determination of
which the result depends, it is not a suit arising under the Constitution or laws. And it must appear on the record, by a statement in legal and logical form, such as is required in good pleading,
that the suit is one which does really and substantially involve a
dispute or controversy as to a right which depends on the construction of tho Constitution or some law or treaty of the United
States, before jurisdiction can be maintained on this ground.
We are unable to perceive that paragraphs 6th and 7th mot this requit oment and it does not appear to us that they were intended to
do so by the pleader* ... It is entirely clear that there were no
averments in the bill in respect to this contention, which would
bring the case within tho category of cases arising under the Constitution or laws of the tfnited States so that jurisdiction could
be held to have rested on that ground.0
The rule announced in tho foregoing cases might bo multiplied by
the citation of an endless number of other decisions of the Supremo Court.
A few, however, will suffice to show the uniformity of the principle involved.
iOo
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116
Cohens v. Virginia, 6 Wheat. 264; 5 L„ 3d, 257,
leather Mfg. Co..v. Cooper, 120 U. S. 778;
7 Sup. Ct. 777,
Whittemore v. Amoskeag National Bank, 134 U. S. 527;
10 Sup. Ct, 592,
Continental Bank v. Buford, 191 U. S. 119;
24 Sup. Ct. 54,
Spencer v. Duplan Silk Co., 191 U. S. 526;
24 Sup. Ct. 174,
In the case of Leather Mfg. Co. v. Cooper, cited above, referring
to the statute localizing national "banks, the court said:
"This was evidently intended to put national "banks on the same
footing as the "banks of the state where they were located for all
the purposes of the Jurisdiction of the courts of the United States.
... The removal of this class of cases from a state court to a circuit court was first provided for by the Act of March 3, 1875, in
that clause of Sec. 2 which relates to suits'arising under the Constitution or laws of the United States'as construed in the Pacific
Railroad Removal cases. Then the Federal and state courts had concurrent jurisdiction for suits "brought "by or against national "banks
and a suit of that character begun in a state court could be removed..,
because, as a national bank is a Federal corporation, a suit by or
against it is necessarily a suit arising under the laws of the United
States. But the Act of 1882 provided in clear and unmistakable terms,
that the courts of the United States should not have jurisdiction of
such suits thereafter brought. ... Consequently, so long as the Act
of 1882 was in fotco, nothing in the way of jurisdiction could be
claimed by a national bank because of the source of its incorporation.
A national bank was by that statute placed before the law in this respect the same as a bank not organized under the laws of the United
States."
V,
THIS ACTION IS NOT ONE "BETWEEN CITIZENS OF
DIFFERENT STATES" NOR "BETWEEN CITIZENS OF A
STATE AND FOREIGN STATES^ CITIZENS OR SUBJECTS.
Section 24 of the Judicial Code, defining the jurisdiction of
district courts, provides, so far as applicable to this case, as follows:
"The district courts shall have original jurisdiction
as follows:
"First. Of all suits of a civil nature, at common law or
in equity...where the matter in controversy exceeds, exclusive
of interest and costs, the sum or value of Three Thousand Dollars,
and (a) arises under the Constitution or laws of the United
States, or treaties made, or which shall be made, under their
*29*
X—4:4.0*3
117
authority, or (b) is between citizens of different states,
or (c) is between citizens of a state and foreign states,
citizens or subjects .
It may be contended that, granting this is not an action arising
under the laws of the United States and conceding that the Federal character
of the defendant does not serve to confer jurisdiction, this is an action
between a citizen of the State of Oregon and a citizen of another state and,
t^sa^' ^hofefoi^,''' jurisdiction attaches by reason of diversity of citizenship*
Any such contention is entirely untenable.
This same question, in another phase, was at issue in the case of
Bacon v. Federal Reserve Bank of San Francisco. 289 Fed. 513.
That case involved the question of whether or not the Federal Reserve Bank
of San Francisco was an inhabitant of the State of Washington by virtue of
the fact that it maintained an office in that state, and therefore subject
to suit against its objection, in the United States District Court for the
Eastern District of Washington,
Judge Heterer decided this question in the
negative, holding that the Reserve Bank was an inhabitant of the Northern
District of the State of California within the meaning of section 51 of the
Judicial Code but that it was not a citizen of either the State of Washington or the State of California.
In this case, if it had been determined
that the Reserve Bank had any state citizenship, the United States District
Court would have had jurisdiction, either upon the ground of diversity of
citizenship or upon the ground that the defendant was a citizen of the State
of Washington and therefore amenable to process served in that state.
the Bacon case the court said, in part:
"The defendant, Federal Reserve Bank, is not a citizen
of California, it being incorporated under an Act of Congress;
its activities are not confined to a single state or locality,
but are carried on in different states. ... The defendant Federal
In
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X-4403
Reserve Bank "bears the same relation to the United States,
or at least to the Federal Reserve District, as a corporation
does to the state of its creation. It is a creature of the
Congress. It is a citizen, if it may be so termed, of the
United States. It is transacting business under and by virtue
of national authority."
In Fletcher's Enc. of Corporations, Vol. 1, p. 866, it is said*
"A national corporation - that is, a corporation created
by Congress in the exercise of its powers as the Legislature of
the United States - is not regarded as a foreign corporation, but
as a domestic corporation, in any state or territory in which it
may do business, or in which it may have an office* ... A railroad
company, incorporated under Acts of Congress, whose activities
and operations were not intended to be, gad are not in fact, confined to a single state, but are carried on in different states,
is not a citizen of any state for the purpose of Federal jurisdiction on the ground of diversity of citizenship."
This same question was decided by the Supreme Court in the case
of
Bankers Trust Co. v. T. & P. Ry» Co. 4 241 U.S. 295;
3 6 S U P . Ct. 5 6 9
heretofore cited on another point.
In that case the Court said:
"Whether ^his is a suit between citizens of different states
tui'ns upon whether the Texas and Pacific Company id a citizen of
Tex&Si It is doubtful that the pleader intended to state a case
of diveffce citizdnGhip; but* be this as it may. we are of the
opinion that the bdmpany is not a citizcn ff niiy state. It was
incorporated under acts of Congress, not under state laws; and its
activities and operations were not to be confined to a single state;
but to be carried on, as in fact they were, in different states.
Sf bourse, it is a citizen of the UnitedStates in the sense that
a corporation organized under the laws of one of the states is a
citizen of that state, but it i# not within the clause of the
Fourteenth Amendment which declares that native born and naturalized citizens of the United States shall be citizens of the state
wherein they reside. Nor has Congress said that it shall be regarded as possessing state citizenship for jurisdictional purposes,
as isdone in respect of national banks by Sec. 24, par. 16, of the
Judicial Code. In short, there is no ground upon which the company
can be deemed a citizen of Texas, and this being so, the suit is
not one between citizens of different states."
State of Texas v. Interstate Commerce Commission.
2 5 8 U. S . 1 5 8 : 4 2 SUP. Ct. 2 6 1 .
In this case the Supreme Court decided that the Interstate
X-4403
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119
Commerce Commission and the Railroad Labor Board, when sued by a state
as corporate entities created by the United States for governmental purposes, are not citizens of any state within the provisions fixing the jurisdiction of the Federal courts,
A bill was brought in equity in the Suprmo Court by the State of
Texas against the Interstate Commerce Commission and the Railroad Labor
Board.
The state sought a declaration that the transportation act was un-
constitutional; that all action taken thereunder should be declared void;
and that the defendants should be restrained from proceeding under the Act.
The defendants were referred to as citizens of states other than Texas, for
the purpose of vesting jurisdiction.
The Court said:
"Both defendants are sued as corporate entities created
by the United States for governmental purposes; and, if this
be their status, they a,re not citizens of any state, but have
the same relation to one state as to another. So, to enter-*
tain the suit, we should have to find some ground of jurisdiction
other than the one suggested. ... It is only where rights, in
themselves appropriate subjects of judicial cognisance, are
being; or about to "be affected prejudicially by the application
or enforcement of a statute that its validity may be called in
question by a suitor 6nd determined by an exercise of the judicial power. .. .What has been said suffices to show that we
are not at liberty to entertain the bill in the exercise of our
limited original jurisdiction.11
Petri v. Commercial National Bank. 142 U.S. 644; 12 Sup.—Ct.325.
This case involved the question of whether the fourth section
of the Act of Congress of March 3, 1887 (24 Stat# 552), declaring national
banks, for the purposes of actions by or against them to be citizens of the
states in which they are located, prevented national banks from bringing
actions in the Federal courts on the ground of diversity of citizenship.
Mr. Chief Justice Fuller, resolving this question in the mgative,
reviewed the legislation in relation to national banks and concluded by
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X-4403
120
quoting the provisions of the fourth section of tho Act of July 12, 1882,
which is as follows:
"Jurisdiction for suits hereafter brought "by or against
any association established under any law providing for national
hanking associations,
shall be the same as, and not other
than, the jurisdiction for suits by or against banks not organized under any law of the United States, which do or might do
banking business where slich national banking associations might
be doing business when suits may be begun,"
Commenting upon this statute, the Court say:
"Hence the jurisdiction of the circuit courts over suits
by or against national banks could no longer be asserted on the
ground of their Federal origin, as they were placed in the same
category with banks not organized under the laws of the United
States... So far as the mere source of its incorporation rendered
suits to which a national bank might be a party cognizable by the
circuit courts, that was taken away, bat the jurisdiction which
those courts might exercise in such suits when arising between
citizens of different states or under the Constitution or laws
of the United States, except in that respect, remained unchanged."
So, in the case at bar, it must be apparent that the enactment
by Congress of the recent statute creates a situatioh where jurisdiction
by the District Courts over suits by of against Federal reserve banks can
no longer be asserted on the ground of their Federal origin*
This statute
places the Reserve banks in the same category with banks not organized
under the laws of the United States, in so far as jurisdiction of the
Federal courts is concerned.
Of course it is true that jurisdiction of the
Federal courts remains in so far as diversity of citizenship is concerned
and in so far as actions arising under the laws of the United States are
concerned, but, as has been seen, the case at bar involves neither of these
questions.
VI.
CONCLUSION
Summarizing, we submit the following:
First.
The jurisdiction of this court is predicated in the complaint upon
-33-
X--4403
121
the sole ground that the defendant is a creature of the Federal law and
therefore subject'to suit in this court.
Second,
The complaint is the only source from which the "basis of juris-
diction can he ascertained.
If not adequately pleaded there* jurisdiction
cannot he aided by judicial knowledge, the allegations of the subsequent
pleadings nor the testimony developed at trial.
Third,
Congress has, by the Act of February 13, 1925, divested this court
of jurisdiction upon the only ground stated in the complaint.
Fourth.
Jurisdiction cannot be predicated upon the ground of diversity of
citizenship because this is not the theory of the complaint, because there
is no diversity of citizenship, the defendant not being a citizen of any
state, and because this Court is now without power to grant leave to amend
the complaint in an attempt to state even a specious diversity of citizenship.
Fifth.
The terms of the Act of February 13, 1925, and the construction
placed upon analogous statutes by the Federal courts lead inevitably to the
conclusion that this Court is divested of jurisdiction over this action for
all purposes upon and after the effective date of the Act of May 13, 1925.
Mayor v. Cooper. 6 Well. 247; 18 L. Ed. 851
Sixth.
We respectfully submit that this honorable Court should eo instanti
strike this case from its files and dismiss the same without an award of
costs or other relief to either party.
Respectfully submitted,
Portland, ^regon,
May 13, 1925
Attorneys for Defendant
122
,
TREASURY DEPARTMENT
Office of the Secretary
WASHINGTON
x—44 05
August 11, 1925.
The Governor
Federal Reserve Board.
Sir:
You are hereby advised that the Department has referred to the Disbursing
Clerk, Treasury Department, for payment, the account of the Bureau of Engraving
and Printing for preparing Federal reserve notes during the period July 1 to
July 31, 1925, amounting to $115,500.00, as follows
Federal Reserve Notes, 191*4-
&
Boston . . . .
New York . . .
Philadelphia .
Cleveland. . .
Chicago . . .
Minneapolis
Kansas City .
San Francisco.
. . 500,000
. . 500,000
. . 420,000
»
•
.
200,000
|20
150
50,000
.—
» •
• —
—
200,000
— —
. . 600,000
•
$10
— —
100,000
—
5,000
— —
5,000
"
•
400,000
— —
— —
111
—•—
— —
. . 100,000
. . 250,000
2,370,000
i 11
15,000
— —
50,000
200,000
15,000
Total
$100
5,OGO
15,000
750,000
500,000
435,000
305,000
600,000
5,000
100,000
305,000
3,000,000
3,000,000 sheets at $38.50 per M . . . . $115,500.00
The charges against the several Federal Reserve Banks are as follows,—
Sheets
Boston
750,000
New York
500,000
Philadelphia . . . .
435,000
Cleveland
305,000
Chicago . . . . . .
600,000
Minneapolis
5,000
Kansas City
100,000
San Francisco. . . . 305,000
3,000,000
Corn-pensation
$13,312.50
8,875.00
7,721.25
5,413.75
10,650.00
88.75
1,775.00
5,413.75
$53,250.00
Plate
Printing
$6,135.00
4,090.00
3,558.30
2,494.90
4,908.00
40.90
818.00
2,494.90
$24,540.00
Materials
Total
$ 9,427.50 $ 23,875.00
6,285.00
19,250.00
5^7-95
16,7^7-50
3,833-85
11,742.50
7,542.00
23,100.00
62.85
192.50
1,257.00
3,850.00
3,833.85
11,742.50
$37,710.00 $115,500.00
The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", and it is requested that your board cause such indefinite appropriation to be reimbursed in like amount.
Respectfully,
(signed) S. R. Jacobs,
Deputy Commissioner of the Public Debt.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X—-1406
August 15, 1925
SUBJECT:
Expense Main Lino, Leased. Wire System, July 1925.
Dear Sir:
Enclosed herewith yon will find two mimeograph
statements, X-4406-a and X-4406-"b, covering in detail
operations of the main line, Leased Wire System, during
the month of July, 1925.
Please credit the amount payable by your hank in
the general account, Treasurer, U.S., on your hooks, and
issue c/d Form 1, National Banks, for account of "Salaries
and Expenses, Federal Reserve Board, Special Fund", Leased
Wire System, sending duplicate C/D to Federal Reserve Board.
Tours very truly,
Fiscal Agent.
Enclosures:
TO GOVERNORS OF ALL B A M S EXCEPT CHICAGO.
124
X-4406-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WOEDS
TRANSMITTED OVER MA IB LIKE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF JULY, 1925.
Fed. Res.
Bank Business
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Percent of
Total Bank
Business(*)
Treasury
Dept.
Business
Total
26,270
158,595
33,083
67,647
42,100
56,501
97,159
68,663
35,562
68,328
53,647
99,114
3.26
19.66
4.10
8.39
5.22
7.00
12.04
8.51
4.41
8.47
6.65
12.29
3,156
5,123
2,802
2,833
2,167
2,632
4,751
3,434
1,443
3,025
1,869
5,750
38
20
29,426
163,718
35,885
70,480
44,267
59,133
101,910
72,097
37,005
71,353
55,554
104,884
806,669
100.00#
38,985
58
845,712
Board
273,478
25,704
Total
1,080,147
65,689
Per cent of Total
Bank Business
Treas.Dept.
Total
War
Finance Corp.
Business
94.26#
5.73#
-
~
~
-
300,182
58
1,145,894
.01#
1,080,147 Words or 94.27#
65.689
"
"
5.73#
"
" 100.00#
1,145,836
(*) These percentages used in calculating
the pro rata share of leased wire expenses as shown on the accompanying
statement (X-4406-h)
\o
04
•H
Name of Bank
Operators1
Salaries
(b)
8
(a)
$
Total
$7,258.52
Operators'
Overtime
1
-ee-
Boston
New York
1,377.32
216.66
Philadelphia
Cleveland
280.33
Richmond
175*00
Atlanta
255-00
Chicago
(*>3,698.85
200•00
St.Louis
Minneapolis
198.72
Kansas City
275*64
Dallas
251.OO
San Francisco
38O.OO
Federal Reserve Board
(#)
(*)
(&)
x-44o6-b
REPORT OF EXPENSE'
MAIN LINE
FEDERAL RESERVE ISASED WIRE SYSTEM, JULY, 1925
—
-
-
-
-
—
Total
Expenses
lire
Rental
$
-
-
15,329.30
$15,329.30
Pro Rata
Share of
Total
Expenses
$
25O.OO
1,077.32
216.66
280.33
175.00
255.OO
3,698,85
200.00
198.72
275.64
251.00
380.00
15,329.30
$22,587.82
(a)l,296.49
$21,291.33
$
694.10
4,185.88
872.94
1,786.34
1,111.41
1,490.39
2,563.48
1,811.89
938.95
1,803.38
1,415.87
2,616.70
$21,291.33
Includes $204.67 for branch line business transmitted over main line circuit.
Includes salaries of Wshington operators.
Credit.
Received $ 1 . 6 3 from War Finance Corporation and $1,294.86 from the Treasury
Department covering business for the month of July, 1925.
Amount reimbursable to Chica.go.
Credits
$
25O.OO
1,077.32
216.66
280.33
175.00
255.00
3,698.85
200.00
198.72
275-64
251.OO
380.00
$7,258.52
Payable to
Federal
Reserve
Board
444.10
3,102.56
656.28
1,506.01
11,141,08
1,235.39
1,135.37
1,611.89
740.23
1,527.74
1,164.87
2,236.70
(b)3L,iy?.37
$14,237*48
126
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4407
August 18, 1925.
SUBJECT:
Holidays, September, 1925.
Dear Sir:
,
•v
On Monday, September 7th, Labor Bay,
there will be no Gold Settlement Fund or Federal Reserve "oto Clearing, and the books of
the Board will be closed.
On Saturday, September 12th, the
Baltimore Branch of the Federal Beserve Bank
of Richmond will be closed on account of
observance of Defenders' Day. Please include
your credits of September 12th for the Baltimore Branch in the Gold Fund Clearing of the
following business day.
Kindly notify branches,
Very truly yours,
V
J. C« IToell,
Assistant Secretary.
TO GOV3B1IOHS OF ALL F.R.3AHS.
±27
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4409
SUBJECT:
August 25, 1925.
B a n k Suspensions and Insolvencies*
Dear Sir:
In view of
bank suspensions and
t h e i m p o r t a n c e a t t a c h i n g to s t a t i s t i c s r e l a t i n g to
i n s o l v e n c i e s , t h e B o a r d is d e s i r o u s o f o b t a i n i n g
more uniform and more detailed reports
o n the s u b j e c t .
^ o u a r e r e q u e s t e d , t h e r e f o r e , n o t o n l y to a d v i s e t h e B o a r d
as h e r e t o f o r e b y t e l e g r a m of a l l b a n k s , w h e t h e r i n c o r p o r a t e d or u n i n c o r porated, which are declared
insolvent,
order of s u p e r v i s o r y a u t h o r i t i e s
rectors on account
d i s p o s i t i o n o f the
or a r e
or b y
closed
to the p u b l i c b y
the v o l u n t a r y a c t i o n o f
the d i -
of f i n a n c i a l d i f f i c u l t i e s ( r e g a r d l e s s o f t h e u l t i m a t e
i n s t i t u t i o n ) b u t a l s o to f u r n i s h a s s o o n a s p o s s i b l e
d e t a i l e d i n f o r m a t i o n concerning e a c h s u s p e n s i o n or i n s o l v e n c y on f o r m
No-* X 4 4 0 1 o f w h i c h a s u p p l y is b e i n g f o r w a r d e d u n d e r s e p a r a t e c o v e r .
K i n d l y c o n t i n u e to a d v i s e the B o a r d b y t e l e g r a m o f a l l b a n k s f o r m e r l y
r e p o r t e d a s s u s p e n d e d or i n s o l v e n t t h a t h a v e r e s u m e d o p e r a t i o n s * a n d a s
s o o n a s p o s s i b l e r e p o r t o n f o r m H o . X 4 4 0 2 ( w h i c h is a l s o b e i n g f u r n i s h e d
y o u ) t h e t e r m i n a t i o n of e a c h s u s p e n s i o n o r i n s o l v e n c y .
A report on form
Ho» X 4 4 0 2 s h o u l d b e s u b m i t t e d f o r e a c h c l o s e d b a n k w i t h i n t w o m o n t h s o f
t h e d a t e o f c l o s i n g , a n d i n c a s e f i n a l i n f o r m a t i o n is n o t t h e n a v a i l able^ the report s h o u l d be m a r k e d " p r e l i m i n a r y " a n d a n o t h e r be
at a later d a t e .
There
is e n c l o s e d a list
record of reports
Will you please
for
of suspended b a n k s m a d e u p
the y e a r 1 9 2 4 a n d
correct
the f i r s t
or c o n f i r m t h i s l i s t a n d
submitted
from our
7 m o n t h s of 1 9 2 5 .
complete the indicated
i n f o r m a t i o n at a n early date.
It
is r e a l i z e d
that
there m a y b e d i f f i c u l t y in obtaining
com-
p l e t e d a t a f o r no;irae'auer b a n k s , but the B o a r d w i l l a p p r e c i a t e y o u r r e n d e r i n g a s f u l l a r e p o r t as p o s s i b l e .
I n o r d e r to do t h i s it w i l l b e
n e c e s s a r y to o b t a i n i n f o r m a t i o n f r o m s t a t e a u t h o r i t i e s , w h o ,
lieved, w i l l b e willing
to c o o p e r a t e
in a constructive
it i s b e -
study of bank
-2- .
X-4409
failures. In cases whore all the desired information cannot be
obtained from state officials, please give such information as is
available to you from other sources, indicating that it is unofficial.
Very truly yours,
Walter L t Eddy,
Secretary.
(Enclosure)
TO ALL F. R. AG-EIiTS.
X-4411
F E D E R A L
R E S E R V E
129
B O A R D
STATBiviEMT FOR THE PRESS
For Release in Morning Papers,
Thursday, August 27, 1925.
The following is a summary of general "business
and. financial conditions throughout the several
Federal Reserve Districts, based upon statistics
for tha months of July and August, as contained
in the forthcoming issue of the Federal Reserve
Bulletin.
Production in basic industries turned upward in July after a continuous decline
since January.
Wholesale prices advanced further and the distribution of commodi-
ties continued in large volume*
Production.-
The Federal Reserve Board's index of production in basic industries,
which makes allowance for usual Seasonal variations, advanced by about 2 per cent in
July to a point ne&rly 20 per cent above the low level of a year ago.
Increased
output was shown for lumber, coal, and cement, cotton consumption declined less than
usual at this season, while the output of the iron and steel industry and the
activity in the wool industry continued to decrease.
activity was greater than in July of last year.
In nearly all the industries
Among industries not represented
in the index the production of automobiles, rubber tires and silk continued to be
large.
Volume of factory employment and earnings of industrial workers declined
further in July, seasonal increases in the clothing, shoe, and meat packing industries being more than offset by decreases in the other industries.
Building con-
tracts awarded in July were in only slightly smaller volume than the exceptionally
large total reached in June and the total for the first seven months of this year
exceeded that for any previous corresponding period.
Estimates by the-Department of Agriculture indicated a less favorable condition
of all -crops combined on August 1 than a month earlier.
Expected yields of corn,
_2_
X-4411
180
wheat, rye, tobacco, and hay were soner/hat smaller than in July, while the indicated production of oats, "barley, and ^hite potatoes was larger.
According to
present indications the yields of all principal crops, except corn and "barley,
nill "be smaller than last year.
The mid-August cotton crop estimate was 13,990,000
hales as compared with a forecast of 13,565,000 "bales on August 1.
Trade.-
Freight car loadings during July were larger than in June and exceeded
those of any previous July, and weekly figures for August indicated a continued
large volume of loadings.
Sales at department stores showed loss than the usual
seasonal decline in July and wore 3 per cent larger than a year ago, and mail order
sales were considerably above those of July, 1924;
Wholesale trade continued at the
June level and was 6 jier cent above the corresponding period a year ago,,
Prices.•»
Wholesale prices advanced further by nearly 2 per cent in July, accord-
ing to the index of the Bureau of Labor Statistics*
Prices of farm products and
of miscellaneous commodities rose over 4 per cent, reflecting chiefly increases in
livestock and rubber, while in the other c o m m o d i t y groups price changes were
relatively small.
The general level of prices in July was 9 per cent higher than
a year ago, the rise being chiefly in agricultural commodities.
In August raw
sugar, potatoes, silk, metals, and fuels advanced, while grains, leather, hogs,
and rubber declined.
Bank credit.-
Demand for commercial credit at member banks in leading cities
increased in August and the volume of commercial loans on August 12 was larger than
at any time since the middle of May, but still considerably below the level at the
beginning of the year.
Loans on securities increased between the middle of July
and the middle of August, while the banks' investments showed little change for
the period.
Discounts for member banks increased at all the reserve banks in recent weeks
131
X-4411
-3and the total on August 19 was the largest in more than a year and a half.
The
reserve "banks' holdings of securities and "bills bought in the open market continued
to decline, "but total earning assets in the middle of August vzere near the high
point for the year.
During the latter part of July and the first half of August conditions in
the money market were soaevrhat firmer.
The prevailing rate on prime commercial
paper, r;hich had remained at 3 3/4 to 4 per cent since early in May, advanced in
August to 4 l/4 per cent.
132
X-4413
F E D E R A L
R E S E R V E
B O A R D
STATELET FOR THE PRESS
For Immediate Release
August 27, 1925
CQITDITIOff Op ACCEPTANCE MARKET
July 16, 1925 to August 19,1925*
Acceptances.
The acceptance market continued seasonally quiet during most of the
five weeks ending August 19.
Hew York dealers reported the smallest average
volume of weekly transactions since the four week period ending September
10 last year.
The small supply of bills offered in all markets was just
about covered by the demand, silk bills being in largest volume.
Dealers'
portfolios showed but slight changes until the last few days of the oeriod,
when some improvement in demand, chiefly for ninety day maturities for the
investment of foreign money, reduced them substantially.
Rates were unchanged
throughout the period and on August 19 were quoted in the Hew York market as
3 1/8 bid and 3 per cent offered on 30-day bills, 3 1/4 bid and 3 1/8 per cent
offered on 50-day bills,
3 3/8 bid and 3 1/4 per cent offered on 90-day
bills, with 3 3/4 bid and 3 5/8 per cent offered on the longest maturities.
133
FEDERAL RESERVE BOARD
X-4414
WASHINGTON
V
address official correspondence to
the federal reserve board
September
Dear Sir;
Under date of August 17 Mr. Wyatt wrote you that he
had been advised by lir. McConkey that the Court of Appeals at
Springfield, Missouri, had confirmed the preference obtained
by the Federal reserve bank in the Circuit Court in the B&rik
of Oran case. This office has now received from Mr. McConkey
a copy of the opinion in this case, together with a copy of
the opinion in the case of the Bank of Poplar Bluff v. Frank
C, Liillspaugh, which latter case was decided by the Court of
Appeals at Springfield, Missouri, at the same time that the
Bank of Oran case was decided. The facts in the Bank of Popular Bluff case were essentially the sane as those in the Oran
case and the Court decided the Poplar Bluff case and then
based its decision in th.3 Oran case upon it. Therefore, the
reasoning of the Court upon which the decision in the Oran
Case rests is contained largely in the Bank of Poplar Bluff
opinion. In Lr. Wyatt's absence I an enclosing a copy of
each of these opinions for your information.
As stated in Mr, Wyatt's letter of August 17th, in
view of the fact that the ruling of the Springfield Court of ,
Appeals is in apparent conflict with that of the Court of ApV
peals at St. Louis in the case of American Bank v. Peoples B&hk,
255 S.W. 943, the Springfield Court certified the Oran case to
the - Supreme Court of Missouri in order that that court might
pass upon the question as to which of the two courts of appeal
is correct, Mr, McConkey is hopeful of obtaining a favorable
decision from the Supreme Court of Missouri, thus establishing
in the State of Missouri the same doctrine as was established
in the JState of Virginia by the Peters case.
Enclosures:
Very truly yours,
George B. Vest,
Assistant Counsel.
134
IN THE SPBIIimSLD COURT OF APPEALS
X-4414—a
. KARCH T3RI.:, 1925.
Federal Reserve Bank'of St. Louis, Respondent
So.3826
vs
Frank C. Lillspaugh, Commissioner of Finance
for the State of Missouri, in charge of th.6
Liquidation of the Bank of Oran,
a-to el lan t.
APPEAL FRO:. THE CIRCUIT COURT OF SCOTT COUBTY.
Hon. Frank Kelly, Judge.
Bailey & 3ailey, of Sikeston, for appellant
and Montgomery <?; Ruclcer, and Frank V.", Hays,
all of Sedalia, as Alaici Curiae, filed "brief
in support of Appellant#
James G-. LcConkey, of St. Louis, for Respondent,
AFFIRLSi) and Certified to Supreme Court.
.3RADI£Ti J. - Plaintiff filed its petition in the circuit court
seeking to have allowed as a preferred claim a demand against the Bank
of Oran which was in the hands of the Commissioner of Finance for Liquidation. The court "below allowed the claim as a preferred one, and
defendant appealed.
The cause was tried upon an agreed statement of facts in substance
as follows: "That the Federal Reserve Bank , is and was at all times
herein mentioned, engaged in the business of banking as defined in a
certain Act known as the Federal Reserve Act; that the Bank of Oran, Oran,
Missouri, is and was at all the times herein mentioned a state banking
corporation engaged in the business of banking at Oran, Missouri; that
135
-
2
-
Z-4414~a
the Federal Reserve Bank of Ste Louis maintained 110 deposits with nor
kept any "balance accounts with the Bank of Or an, and the Bank of Or an
maintained m
deposits with nor kept any "balance accounts with the
Federal Reserve Bank; 'that ®ie Federal Reserve Bank, under the Federal
Reserve Act and the rulings of the Federal Reserve Board, is required to
receive for collection and remittance all items collectable at oar and
payaole in the district of the Federal Reserve Bank when such items are
received from a member bank or another Federal Reserve Bank; that all
memoer banks are required to clear at par items drawn on or payable at
their bank when the collection is made through the Federal Reserve Bank*
Shat any non-member bank is permitted, under an agreement acceptable to the Federal Reserve Bank, to have forwarded to it for collection and
remittance all items drawn on or payable at such non-member bank; that
at all the times herein mentioned there was in existence such an agreement
between the Federal Reserve Bank and the Bank of Orrui, by which the
Federal Reserve Bank agreed to forward through the United States mail
direct to the Bank of Oran all items coming through it for collection;
and the Bank of Oran agreed that on the same day the item was received
it
ould either collect and remit the proceeds or return the item, duly
protested, the Bank of Oran to have the option of remitting by exchange
acceptable to the Federal Reserve Bank or by the shipment of currency
insured at the expense of the Federal Reserve Bank; that acting under
this agreement, the Federal Reserve Bank did on January 9th and 10th,
1924, respectively, forward by mail to the Bank of Oran its cash letters
containing items drawn on or payable at the Bank of Oran, aggregating
$2,522*59 endorsed for collection and remittance.
136
«• 3 —
X*~'±414--a
That on January 10th and 11th, 1924, when these respective cash
letters were received by the Bank of Oran, it collected the items by
charging them to the respective drawer1s accounts in the said Bank of
Oran, and, immediately, and on the same days drew its drafts on its
correspondent, The First national Bank of St. Louis for $1,733.^3 and
659.15, respectively, and forwarded such drafts to the Federal Reserve
Bank; that the Federal Reserve Bank duly presented the drafts for p a r e n t
and p a — e n t was refused "because, in the meantime, the Bank of Oran had
clc£vJ- for Vusiness,. and was in charge of the Commissioner of
the purpose of liquidation.
icr
The drafts were duly protested and remain
uiToaid; that at the time the Bank of Oran collected the respective items,
"by charging the several amounts against the respective drawer * s Balance
in the Bank of Oran, each of the respective drawers had more than sufficient funds to his credit in the bank than was necessary to sustain
the qhargc; that at the tine the items were collected, the Bank of Oran
had in its vaults cash amounting to $4,475.31, and, with its correspondent,
the First rational Bank in St. Louis, on whom the drafts wore drawn, and
subject to check, the sun of $14,906.00; that at the time the Bank of Oran
was closed and taken over by the Banking Department it had in its vaults,
in cash,$3,326.66, and on deposit with the First national Bank in St.
Louis subject to check, the sum of $18,239.16.
That of the items listed in Exhibit (A) and on which claim was
filed the item of $50.75, drawn by the 5ast St. Louis Cotton Oil Company,
in favor of Joe G-crst, and the item of $163,80 drawn by the East St. Louis
Cotton Oil Company in favor of B.3, Barber have been satisfactorily
adjusted between the drawer and payee, and are to be eliminated iron the
137
- 4-
$2^.51X1»0S .clained- as preferred, leaving a balance of $2,095.53 on which
a preference is claimed."
In the Bank of Poplar Bluff v. Killspaugh
S.W.
ooinion in which is handed down herewith we ruled upon every proposition
involved in the cause now in hand.
That case involved the right of a
claia against the Bank of Puxico to preference.
Therein we discussed
the law applicable to the facts at bar. Following the reasoning in that
case the judgment in the cause now in hand should be affirmed, and it is
so ordered.
As in the case of Bank of Poplar Bluff v. Liillspaugh, supra, we
deea our rulings and conclusions here in conflict with the holding by the
St. Louis Court of Appeals in American Bank v< People's Bank, 255 S.W*
943, and this cause is, therefore, ordered certified.to the Suprene Court
for final disposition.
Cox, P.J. and Bailey, J. concur*
JOHN H. BBADI3Y,
Judge.
X-4414-b
IH THE SPRHG-FIELD COURT OF APPEALS
MARCH TERM, 1925
Bank of POPLAR BLUFF, Appellant
)
vs.
)
FRAJJJK C» MILLSPAUGH, Commissioner
of Finance, and in Charge of the
Liquidation of the BA2TK OF PUXICO,
MISSOURI,
Respondent.
)
)
)
)
)
HO. 3842
APPEAL FROM THE CIRCUIT COURT OF STODDARD COUNTY
Hon. W. Si C. Walker, Judge*
Oliver & Oliver, of Cape Girardeau, for Appellant.
John A. Gloried, of Poplar Bluff, for Respondent.
REVERSED AND REMANDED WITH DIRECTIONS, AND CERTIFIED TO SUPREME COURT:
BRADLEY, J.- This is an action to have allowed as a preferred
claim a demand against the Bank of Puxico which failed and was placed in
the hands of the Commissioner of Financo for liquidation.
On trial "below
the claim was allowed as a general claim, "but was denied preference.
From
the judgment plaintiff appealed.
The cause was tried upon an agreed statement of facts which agreed
statement in substancc is as follows;
December 11, 1923, Ethel Roichcrt
had on deposit in the Bank of Puxico $5000. and on that dato she drew a
draft upon said Bank of Puxico payable to plaintiff bank.
This draft was
delivered to plaintiff with direction to collect said $5000. from the Bank
of Puxico and place it to her credit in plaintiff bank.
.December 12th
plaintiff bank presented said draft to the Bank of Puxico and demanded
139
-2-
X-4414 -Tj
immediate payment and said draft was accepted by said Bank of Puxico.
The
Bank of Puxico failed and refused to pay said draft or any part thereof
throughout the 12th, 13th, 14th and 15th of December, although during that
time it paid chocks, drafts and claims drawn upon it by others.
On December
15th the Bank of Puxico drew and mailed to plaintiff its draft dated December 14th for $5000. on the Citizens Trust Company of G-orin, Mo., payable
to the order of plaintiff.
Said trust company draft was received by plaintiff
December 16th, and was forwarded in the usual way and presented to the
drawee, the Citizens Trust Company of Gorin on December 19th, but payment
was refused.
The draft on the trust company was protested, and on December
19th plaintiff was advised by telegram of non-payment.
On same day, De-
comber 19th, plaintiff again demanded of the Bank of Puxico payment of the
Eoichert draft drawn on December 11th, and said Bank of Puxico promised to
pay it, but did not do so*
Again on December 20th and 21st plaintiff de-
manded payment and each time the Bank of Puxico promised, but failed to pay.
From December 12th when the Rei chert draft was first presented and
accepted to December 22nd the Bank of Puxico continued to receive deposits,
and pay numerous demands amounting in the aggregate to many times $5000.
There was in the till of the Bank of Puxico and to its credit in other
solvent banks more than $5000. on December 12th when the Beichert draft was
first presented and accepted, and that condition continued to exist up to
and including December 20th.
The books of the Bank of Puxico showed at all
times mentioned herein that it had on deposit with the Citizens Trust Company
of Gorin more than $5000., but the books of the trust company showed only
$640.46, and it is agreed that $640.46 is correct.
December 22nd the Bank of Puxico ceased to do business, but on
140
X—4414wTD
-3-
December 26th the Conrnissio:.ior of finance, or tha deputy in charge, charged
the account of Ethel Roichert with the $5000. draft drawn by her on December 11th.
The act of the plaintiff bank, under the existing facts, in
sending to the Bank of Puxico the Roichert draft was equivalent to designating the Bank of Puxico as the agent of plaintiff to present the draft to
itself, collect it, and send the money to plaintiff.
In other rzords the act
of the plaintiff bank in sending the Reichert draft to the Bank of Puxico
for collection and remittance created between the plaintiff bank and the
bank of Puxico the relation of principal and agent.
v.
Midland National Bank
Brightwoll, 148 Mo. 358, 49 S.W. 994, 71 A.m. St. Rep. 608; Capital
National Bank v. Coldwatcr National Bank, 69 M.Wi (Nobr.) 115, 59 Am. St.
Rep. 572; State v. Bank of Commerce, 85 N.W. (Ncbr.) 43, 52 L.R.A. 858; State
National Bank v. First National Bank, 124 Ark. 531, 187 S.W. 673; Goodyear
Tiro & Rubber Co. v, Hanover State Bank, 204 Pac. (Kan.) 992; 21 A.L.R. 677;
Federal Reserve Bank of Richmond v. Bohannan, 127 S.E, (Va.) 161; Federal
Reserve Bank of Richmond v* Peters, 123 S.E, (Va.) 379f- Board of Supervisors
v. Prince Edward-Lunenburg County Bank, 121 S.E. (Va.) 903; Nyssa-Arcadia
Drainage Dist. v. First Nat'l Bank, 3 Fed. (2nd) 648.
Midland National Bank v. Brightwoll, supra, the court said:
"When a note or draft is sent by one individual or bank to another bank for
collection and to remit the proceeds to the sender the relation of principal
and agent is created, and not that of creditor and debtor."
When the agent, the collecting bank, has collected the item sent
to it for collection and remittance, it holds the proceeds, according to the
great weight of authority, prior to remittance, as trustee for the sender,
141
-4-
X-4414-b
unless the too "banks, the sender and the collecting bank, are transacting
business with each other on what is known as the reciprocal accounts method,
about which we shall have more to say, infra.
If the money is sent in re-
mittance all the authorities agree that the transaction is final, and the
forwarding bank's title to the money after it leaves the hands of the collecting bank is superior to all claims against the collecting bank.
Reserve Bank of Richmond v. Peters, supra, I.e. 382.
Federal
The divergence of
opinion, when the reciprocal accounts method does not exist, is upon the
legal effect of the collecting bank remitting by draft instead of sending
the money.
Some authorities hold that the act*af remitting by draft changes
the theretofore relation of principal and agent to that of debtor and
creditor.
Akin v. Jones, 27 S.ff. (Tenn.) 669, 25 L.R.A. 523, 42 Am. St. Rep,
921; Sayles v, Cox, 32 S.W. (Tenn.) 626, 32 L.R.A. 715, 42 Am. St. Rep. 940.
Also some authorities hold that where an item for collection is sent by one
bank to another in the usual course of business and without instructions that
only the relation of debtor and creditor is created.
United States National
Bank v. Grlauton, 92 S.2. (Oa*) 625$ L.R.A. 1917 F. 600; Union National Bank
v. Citizens Bank, 54 N.E. (Ind*) 97; Peters Shoe Co* v* Murray, 71 S.W. (Tex.)
977.
Also some cases have been ruled because of a reciprocal accounts
arrangement between the forwarding bank and the collecting bank.
serve Bank of Richmond v, Peters, 123 S.3. (Va.) l*c. 382.
Federal Re-
The reciprocal
accounts method and the remittance method arc described in Federal Reserve
Bank of Richmond v. Peters, supra, as follows: "In order to make collections
of checks handled by them banks usually adopt one of two methods, reciprocal
accounts, or remittance.
Under the reciprocal accounts method, the col-
lecting bank, upon receipt of payment of the checks, gives credit upon its
142
*5-
X-4414-b
books to the for.7ard.ing bank, and the forwarding "bank charges the collecting
bank upon its books*
They settle from tine to tine according as the bal-
ance accumulates, with the one or the other.
Under this nethod, as soon as
the collection is nade the relation of the banks is that of creditor and
debtor;
Under the remittance nethod the forwarding bank sends the checks to
the collecting bank with instructions to collect then and remit immediately*
The collecting bank is not authorized to retain the proceeds in its hands,
and therefore acts only as an agent for the forwarding bank."
To hold that the principal and agent, when the reciprocal accounts
course of business does not exist, is changed to that of debtor and creditor
by collecting an iton sent for collection and remittance, does not appeal to
us as sound reason*
Heither is it sound, in our opinion, to hold that the
relation of principal and agent is changed to that of debtor and creditor by
the mere act of remitting by draft instead of sending the cash.
Either holding
compels the sender of the item to bocome a depositor, a creditor, in the true
sense of the tern, of the collecting bank whether such is desired or not..
If an item is sent to an individual for collection and remittance, and he collects, but fails to remit or remits by check or draft and the check or draft,
for any reason, is not paid, the individual remains the agent of the sender#
We can see no reason why the same rule should not apply to a bank.
We think that the correct and only reasonable and jus t rule is laid
down in 3 E.C.I, p. 635, See. 261 where, in discussing the question of title
to the proceeds of collections made by banks, this language is used; "These
principles must always be borne in mind in considering the question as to the
title to the proceeds of collections by banks, as it necessarily follows that,
if the title to the paper to bo collected passed to the bank, the proceeds of
143
-6-
X~* 4414—*b
the colloction will "belong to it, and the bank will bo merely a general
debtor of the customer; whereas, if the paper was deposited for collection
merely, as title thereto remains in the customer, title to the proceeds will
not necessarily pass to the bank#
When it is finally determined that a de-
posit of a check or draft was for collection only and vested no title
thereto in the bank, the question still remains as to the title to the proceeds of such check or draft.
The question may be said to be simply one of
the intention of the parties.
If they intended that the proceeds should be
remitted immediately upon receipt thereof, or if in any other way it can be
shown that the parties intended that the proceeds of the check as well as
the check itself should remain the property of the owner, such intention will
control and the bank will not take title to the proceeds."
In support of the rule of intention as stated in the text quoted
these cases are cited;
Capital National Bank v. Coldwater National Bank,
supra; State v. Bank of Commerce, supra} Plane Mfg* Co* v* Auld, 86 N.W,
(S.D.) 21; Continental National Bank v. We ems, 6 S*W* (Tex.) 802; McLeod v.
Evans, 28 N«W. (Wis*) 173; North v» International Sugar Feed Company, 90 S.E.
(N*C.) 295.
If the notion that a remittance by draft changes the relation from
that of principal and agent to that of debtor and creditor is to be the
law in this state, then a forwarding bank sending an item for collection
under the remittance method will, in order to protect itself or its customer,
be compelled to require remittance in cash.
When the Beichert check was presented by plaintiff to the Bank of
Puxico these two facts existed; (l) Ethel Reichert, the drawer of the draft,
had on deposit in said Bank of Puxico the sum of $5000; (2) the Bank of
±44
-7-
"
X-4414-b
Puxico then had. in its till and. in other solvent "banks sufficient cash to
pay this draft*
This "being true it was the duty of the Bank of Puxico to
pay this draft*
This cause is in equity,. and equity will consider that as
done which ought to have "been done*
Peters, supra.
Federal Reserve Bank of Richmond v.
Hence we proceed on the theory that the draft was in con-
templation of law paid when presented*
That is, the Bank of Puxico as agent
for plaintiff presented said draft to itself and collected the sane,* and
thereafter hold the proceeds as the agent of plaintiff, and in trust for
plaintiff#
In Federal Reserve Bank v* Peters, supra, wo find this language:
"It appears from the rocord that as soon as tho draft was sent to the Federal
Reserve Bank of Richmond the cashier of the Prince-Edward lament)erg County
"bank deducted the amount thereof from the apparent "balance due from the Bank
of Commerce & Trust upon which the draft was drawn, just as if this amount
had already "been withdrawn from the latter bank and transferred to the Federal Reserve Bank of Richmond*
By this act the cashier intended to set
apart such a portion of the "balance in the Bank of Commerce & Trusts as was
necessary to meet the draft sent to the Federal Reserve Bank of Richmond,
as he was obligated to do under his contract.
which ought to have been done.
Equity regards that as done
Under such circumstances the draft on tho
Bank of Commerce & Trusts was an equitable assignment of the funds to tho
Federal Reserve Bank of Richmond and wo will so adjudge."
'<fo rule that plaintiff's right to a preference should bo determined
by the sane rules of law as would govern, had the Bank of Puxico issued its
draft for $5000. at tho time tho Reichert draft was presented, upon a
solvent bank where it then had on deposit a sum sufficient to pay a draft for
$5000. and that tho only reason why said draft was not paid was tho failure
-8-
145
X-4414-t
of the Bank of Puxico prior to the presentation of its draft.
Such are the
facts in Federal Reserve Bank v, Millspaugh. ...........S.W
which we hand down concurrently with the cause now in hand.
On principle
we think plaintiff in the cause at bar should and does occupy the same status
as does the plaintiff in Federal Reserve Bank of St. Louis v. Millsp&ugh,
supra.
To hold otherwise would place premium upon the arbitrary conduct of
a banker, and permit him, when his bank is limping to its grave, to make
fish of one depositor and fowl of another.
hold that the Bank of Puxico held the $5000* which it should have
paid to plaintiff; impressed with the trust imposed by virtue of the relation existing between the plaintiff and the Bank of Puxico, and that this
$5000. passed into the hands of the Commissioner of Finance still impressed
with the trust*
Relief has boon denied in some caSoid on the theory that the transaction in judgment did not result in augmenting the assets that pass&d to
the receiver or official acting as the receiver of a failed bank.
argument in support of such theory runs about like this;
The
If Ethel Reichert
had not drawn her draft on her deposit in the Bank of Puxico, and said bank
had failed as it did, it would have failed owing Ethel Reichort $5000,
But
instead of owing Ethel Reichort $5000. when it failed the Bank of Puxico
owed plaintiff bank $5000. evidenced by the draft that it gave plaintiff on
the Citizens Trust Company of G-orin. . Therefore, there was in effect no difference in the amount of the estate or assets that passed to the Commissioner
of Financc; that the assets that passed to the Commissioner of Finance wore
neither increased nor diminished by the whole transaction. - But this argument
is not sound.
It proceeds upon the theory that the Bank of Puxico simply
146
-9-
X-4414r-t>
owed plaintiff $5000; that only the delation of debtor and creditor existed.
Such, however, under the authorities we prefer to follow was not the true relation between plaintiff and the Bank of Puxico.
The VBank of Puxico owed
plaintiff $5000 "because it held $5000 of plaintiff's money as much so as if
plaintiff had merely left $5000 with the Bank of Puxico for safe keeping
sealed and labeled and not intended for deposit*
From the time the Heichert
draft was presented and accepted the Bank of Puxico held plaintiff 1 s $5000,
and this $5000* passed to the Commissioner of Finance and thereby increased
the funds in his hands $5000 above the actual assets of the Bank of Puxico.
Federal Reserve Bank of Richmond v. Peters, supra; Goodyear Tire & Rubber Co.,
v# Hanover State Bank, supra,
The fact that this $5000 remained commingled
and unseparated from the funds of the Bank of Puxico and passed along with
the assets to the Commissioner of Finance does not place it beyond the reach
of the arm of equity«
Harrison v. Smith, 83 Mo. 210; Midland National Bank
v, Brightwell, 148 Mo,, 35®, supra; Nyssa-Arcadia Drainage Dist. v* First
Nat. Bank, supra.
It is our conclusion that plaintiff is entitled to have its claim
of $5000 allowed as a preferred claim. 4 s we construe we do not consider our
conclusion in conflict with the Midland National Bank Case,
The facts in
that ease as appear in the reported opinion arc as follows:
"On December 12,
1894,
the Midland National Bank sent collection items to the Slater Savings
Bank of Slater, Missouri, with instructions to remit in Kansas City exchange.
These items aggregated $6,726.44, a large part of which consisted of drafts
drawn on the Citizens Stock Bank of Slater, Mo.
All of these items were
collected by the Slater Savings Bank, either by charging the accounts of depositors against whom the drafts were drawn, after being authorized to do so
-10-
X-4414-b
by such depositors, and crediting the account of the Midland National Bank
(Italics ours) or "by a cloaring of the day's business with the Citizens
Stock Bank.
In settlement of the balance for the day against it, the Citi-
zens Stock Bank gave the Slater Savings Bank its draft on St. Louis for
$4,134.31.
The Slater Savings Bank indorsed this draft and forwarded it,
together with its own draft on St. Louis for $2,650, to the Midland National
Bank on Account of the collection items above mentioned.
Neither of these
drafts were paid, and both the Slater Savings Bank and the Citizens Stock
Bank of Slater failed December 17th, 1894, and their assets arc in the hands
of their respective assignees.
The Midland National Bank has not received
payment for any portion of the collection items above mentioned, represented
by these drafts for $4,134.31 and $2,650,
At the tine tf the failure of tho
bank, the assignee found in the vault the sum of $449 in cash*
%hd it is also
admitted that said draft of $2,650 was forwarded to plaintiff on December
14th, 1894, when payment was refused and said draft was protested for nonpayment, and also that the said defendant as assignee had in his hands at
the date of the trial sufficient assets to pay the draft of $2,650 and interest thereon in full."
As appears from the facts in the Midland National Bank Case it is
distinguishable from the cause at bar in two controlling features; (l) It
would seem from the portion of the statement of facts which we have italicized and certain language on pago 367 of the opinion as reported in the 148th
Missouri, that the reciprocal accounts nethod existed between the Midland
National Bank and the Slater Savings Bank; and (2) when the Slater Savings
Bank drew its draft, and endorsed the one drawn by the Citizens Stock Bank,
it did not have sufficient money in its vaults or elsewhere to pay its own
-11draft or the one it endorsed.
X-44TA~>
Hot having any funds with which to pay, there
was no payment in fact or law made, and therefore nothing existed upon rhich
a trust could "be impressed or claim of an o qui table assignment founded.
It
scons to us that the lack of funds was also one of the decisive features in
the Midland National Bank Case.
In Ancrican Bank v. Peoples Bank, 2 5 5 S . W, (Mo.App) 943 the
facts as appear from the agreed statement are as follows;
That plaintiff
is and was at all times mentioned in the petition a corporation engaged in
and doing a general "banking "business at DoSoto, Jefferson County, Mo.
That
on the 30th day of December, 1920, and for a long time prior thereto, defendant was doing a general banking business in the same city.
That on tho
3rd day of January, 1921 (said bank having boon closed for business on tho
evening of December 30, 1920), the bank commissioner of the state of Missouri
took charge of the business and affairs of tho defendant bank, after which
Frank Dietfich was appointed to assist in liquidating tho business and afffairs of said bank and is still in charge thereof.
That it had been tho
custom for years between the plaintiff and defendant bank to clear or exchange bills and checks which each had received on the other and settle the
difference.
Thfet on the 30th day of December, 1920 (on which day said
People's bank was closed and has not singe resumed business,) plaintiff, in
the due course of business and for a valuable consideration, had, come into
possession of and had for collection and settlement a great number of checks
drawn by the solvent customers of the Peoples Bank on their accounts in said
tank; all of which customers had to the credit of their accounts amounts sufficient to pay said checks, except $878.92, to which amount said checks were
overdrafts, and which amount of overdrafts have since been maxie good and paid
149
-12-
staid bank ox cop t $229,20.
X-4414-'"b
That upon the clearing or exchanging chocks on
that day the balance duo from tho defendant hank to the plaintiff hank was
$5,414,72.
That tho plaintiff hank turned oypr, to the defendant "bank, in
.v
clearing, tho chocks whi ch it had received against defendant and received
fron defendant the checks which it had against plaintiff, and tho difference
nado the balance as above stated, for which balance defendant bank delivered
to plaintiff a draft on the Central National Bank of St, Louis, which draft
was not paid but protested* and tho protest fees arc $2.65*
That the chocks
so roceivod by defendant fron plaintiff wore charged out of the accounts of
the various depositors who had drawn then.
had boon a depositor in tho defendant bank.
That plaintiff was not and never
That on said date and on the
day the bank closod there was between six and seven thousand dollars in cash
in the defendant bank*
That there is now duo on account of said balance and protest fees,
from defendant to plaintiff, tho sum of $5,417,37.
That claim for said
amount was properly presented in duo time to the said deputy bank commissioner for allowance which claim was by him allowed."
On this state of facts tho St. Louis Court of Appeals denied a
preference.
Counsel for plaintiff bank in the cause at bar it would appear
arc inclined to concede that their contention is in conflict with and contrary to the law as written in American Bank v. People's Bank, supra.
Counsel for plaintiff in Federal Reserve Bank of St. Louis v. Millspaugh,
supra, says that the case of American Bank v. People's Bank was decided on
the theory that tho two banks there proceeded under tho reciprocal accounts
method.
If such was tho fact then we arc not in conflict, but wo cannot say
from the statement of facts and tho opinion in American Bank v» Peoples
150
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X—4414—h
Bank that the W o banks in that caso wore doing business with oach other
under the reciprocal accounts method.-
It seens that the conclusion wo have
reached,, and the law as we have endeavored to state it, arc in conflict with
the caso mentioned*
We have given the cause at bar serious and prolonged
consideration and are of the opinion that sound reason* substantial justice
and the weight of authority support our conclusion.
The judgment should be reversed and cause remanded with directions
to allow plaintiff1s claim as a preferred claim as asked in its petition,
and it is so ordered.. Dooming our statement of the law and our conclusion
in conflict with the case of American Bank vi Peoples Bank, supra, by the
S U Louis Court of Appeals, this cause is ordered certified to the Supreme
Court for final disposition.
Cpx, P. J.
and
Bailey, J.
concur.
JOHN H. BBADLEY,
Judge.
151
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-4416
September 8, 1925.
SUBJECT:
Bank Examination and. Credit Work.
Dear Sir:
In tne Board's letter of Juno 4, 1925,
you were advised that as soon as all replies had
"been received to the Sub-Committee1s report on
bank examinations and credit work you would he
furnished with a summary thereof.
Replies have now been received and copies
of summaries of the Governors' replies relating to
the credit function and of the Agents' replies relating to the hank examination function are enclosed
herewith.
The Board hopes that the Governors, at
their forthcoming conference, will be prepared to
submit a statement to tho Board outlining the view
of the Conference with reference to the report on
the credit function.
Yours very truly,
Walter L. Eddy,
Secretary.
(Enclosure)
TO GOVERNORS OF ALL P. R. BASKS.
152
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-4417
September 8, 1925.
SUBJECT:
Bank Examination and Credit Work.
Dear Sir:
in the Board*s letter of June 4, 1325, you were
advised that after all replies had "been received from the
Federal Reserve Agents with reference to the bank examination portion of the report recently submitted on bank examination and credit functions by three Deputy Governors,
a summary Would be furnished to oach agent and the report
placed on the program for discussion at one of the forthcoming conferences*
The replies have now been received and there is
enclosed herewith a copy of a summary of these replies as
we3! as a copy of a summary of the replies made by the
Governors on the credit portion of the report.
Under date of June 29, 1925, the Board advised
M
r. Perrin that it would like to have the Federal Reserve
Agerts make a careful study of the Sub-Comnittec1 s report
on the bank examination function and come to the conference
prepared to recommend a definite set of rules outlining the
scope of a credit investigation and of a bank examination
in such clear and distinct terms that if adopted by the
Board there will result a substantially uniform policy in
this regard, including the assessment of costs of examinations against banks examined*
The Board hopes that the Agents will be prepared
to submit their report at the forthcoming conference.
I
Yours very truly,
(Enclosure)
Walter L # Eddy,
Secretary.
TO F* B. AGENTS OF ALL F. E. B A M S .
153
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4418
September 9, 1925.
f
SUBJECT:
Cafeteria Expense.
Dear Sir:
In reviewing the cafeteria expenses of the Federal reserve
banks for the past year it is found that the total expense of operation as reported in the functional expense reports amounted to
$441,913 and receipts to $344,387, leaving a net expense of $97,536,
which was assumed by the banks. The expenses enumerated, of course,
do not.include anything for rent, light, heat and power, refrigeration, repairs and alterations, and furniture and equipment. The detailed expenses for all banks combined during the year ending June 30,
1925, were as follows:
Cost of food
$241,324
Salaries:
Cooks, waiters, etc.
127,411
34,321
Assigned staff
All other
4,423
Service supplies
7,267
Office and other supplies
3,570
Printing and stationery
1,244
Glass, china and furnishings 6,361
Gas - fuel
8,199
Uniforms
665
Mis cellaneous
7.128
Total expense of unit
$441,913
Receipts
344.387
Het expense
$ 97,526
According to information available at the Board's office at
least one of the banks absorbs no cafeteria expenses except for refrigeration, heat, rent, etc., which under the functional expense mamml
are not required to be charged to the cafeteria expense unit, at six
others the expenses for food and salaries only are reimbursable from
receipts, while some others charge for the cost of food only.
The
Board feels that in the interest of economy and good administration
154
~3—
X—44:18
there should "be greater uniformity in the operation of the cr-fOtcrias
of the Federal reserve banks and will, therefore, place the subject
on the program for consideration at the forthcoming Governors1 conference. It is requested that careful consideration be given to
this subject in advance in order that if practicable some agreement
may be reached as to what expenses, if any, now being charged to
the cafeteria in the functional expense reports, should be absorbed
by the Federal reserve banks.
By direction of the Federal Reserve Board,
Very truly yours,
D. R. Cribsinger,
Governor.
TO ALL GOVERNORS OF F. R. BANKS.
155
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-4419
September 9, 1925.
SUBJECT:
Code word, to covor new issue of Certificates
of Indebtedness, Series TJ2-1926, in telegraphic transactions.
Dear Sir!
In connection with telegraphic transactions
in Government securities between Federal Reserve Banks,
the code word "Begetteth" has been designated to cover
the new issue of Certificates of Indebtedness dated
September 15, 1925, Series TJ2-1926.
This word should bo inserted in the Federal
Reserve Telegraphic Code Book, following the supplemental code word "Beget" at the bottom of page 24,
Yours very truly,
J. C. Hoell,
Assistant Secretary.
TO C-OVEBHORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-4421
September 14, 1925.
SUBJECT:- Expense Main Lihe, Leased Wire System,
August, 1925.
Dear Sir:
•Enclosed hererrith you will find two mimeograph,
statements, 1-4421-a and %-4421-t, covering in detail
operations of the main line, leased Wire System, during
the month of August, 1925.
Please credit the amount payable by your bank
in the general account, Treasurer, U. S., on your books,
and issue C/D Form 1, National Banks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate C/D to Federal Heserve Board.
Tours very truly,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.
157
X-4421-a
REPORT SHOWING CLASSIFICATION AND E H B E R OF WORDS
TRANSMITTED OVER MAI2T LIKE OF THE FEDERAL RESERVE
LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1925.
Fed. Res.
Bank Business
From
Boston
Mew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dailati
San Francisco
23,002
125,619
31,710
67,692
39,693
56,567
89,997
67,896
30,603
67,287
50,832
99,737
TOTAL
750,635
Percent of
Total Bank
Business(*)
3„0S
16.73
4.22
9.02
. 5.29
7.54
11.99
9.05
4.08
8.96
6.77
13.29
100.00$
Treasury
Dept.
Business
2,401
3,692
2,512
2,475
1,703
2,864
4,048
3,166
1,202
2,418
1,450
4,707
32,638
Board
362 ,951
24,176
Total
1,013,586
56,814
Percent of Total
Bank Business
Treas.Dept.
Total
94.65$
1,013,586 words or 94.69$
"
5,31$
55.814
"
1,070,400
"
" 100.00$
!
War
Finance Corp.
Business
-
—
-
-
106
-
106
420
526
Total
25,403
129,311
34,222
70,167
41,396
59 f 431
94,045
71,062
31,805
69,811
52,282
104,444
783,379
287,547
'1,070,926
5.30$
(*) These percentages used in calculating the pro rata share of
leased wire expenses as shown on the
accompanying statement (X-4421-h)
X-442l-b
REPORT OF EXPENSE *
MAIN LIKE
FEDERAL RESERVE LEASED WIRE SYSTE&, AUGUST, 1925-
Name of Bank
Operators'
Salaries
Operators'
Overt ime
Boston
$ 250.00
$
New York
1,113.32
Philadelphia
216.66
s
Cleveland
280.33 Richmond
175.00
Atlanta
225.00
Chicago
(*>3,907-22
St. Louis
200.00
Minneapolis
183-34
Kansas City
275.64,
Dallas
251.00 x
San Francisco
380.00
Federal Reserve B oard
Total
$7,457.51
Wire
Rental
$
-
Pro Rata
Share of
Total
Expenses
Total
Expenses
$
250.00
1,113.32
2l6.c6
280.33
175.00
225.00
3,907.22
200.00
183.34
275.64
251.00
380.00
15,349.64 15,349.64
$15,349-64 $22,807.15
(a)l,220.87
$21,586.28
$
660.54
3,611.3s
910.94
1,947.0s
1,141.91
1,627.61
2,588.20
1,953.56
880.72
1,934.13
1,461.39
2,868.82
$21,556.28
Credits
$
250.00
1,113.32
216.fa6
250.33
175.00
225.00
3,907.22
200.00
183-34
275.64
251.00
38O.OO
$7,457*51
Payable to
Federal
Reserve
Board
$
410.54
2,498.06
694.28
1,666.75
(#)1,171.
1,402.61
(&) 1 , 3 1 9 . 0 2
1,753.56
697.38
1,658.49
1,210.39
2,488.82
$15,652.46
(b)l,319.02
$14,333.44
(#)
,(*)
(&)
(a)
Includes $204.67 for branch line business transmitted over main line circuit.
Includes salaries of Washington operators.
Credit
Received $10.32 from 7/ar Finance Corp. and $1209.95 from Treasury
Department covering business for the month of August, 1925.
(b) Amount reimbursable to Chicago.
HCJi
(3D
159
FEDERAL RESERVE BOARD
x-4422
WASHINGTON
address official correspondence to
the federal reserve board
SUBJECT;
b g p t ggldgl"
1 5 ,
1 9 2 5 «
Code Words for use between Federal Reserve Banks in connection with Telegraphic Tracings and Advices covering Non-Cash
Collection Items,
Dear Sir:
Referring to the Board's circular telegram of August 11th,
Trans.No•583, advising that the Board desired to submit to the Leased
Wire Committee for recommendation the use of code words indicated in its
circular letter X-4393, of August 4,1925, before such code words became
e±factive, you are advised that a report from the Leased Wire Committee
n a s b e e n received in which it is stated that there will be no objection
o n t n e p a r t of the Committee to the use of code words in t elegraphic tracings o f n o n - c a s h collections, where such messages are sent over the leased
ior the oenefit of the Federal reserve banks,
The Federal Reserve Board has designated, effective October 1,
1925, the following code words to be used over the leased wires:
BUCKLE: Referring to our collection number
payable at
.
for $
,
if outstanding obtain immediate
telegraphic peport. Advise us status by wire.
OLYMPIAN: Telegraph reply over private leased wire.
The use of the following code word, in connection with direct
$endings, is to De limited to telegrams sent over the commercial wires:
BUCKISH: We credit your account today with
$
representing proceeds of collection
number
sent direct to us by
.
It should be understood that the above code words have been
supplied o n l y for the purpose of reducing the phraseology in telegrams and
are n o t intended to supersede or amend the present Leased Wire Regulations,
The code Words "BUCKISH" and "BUCKLE" and the code word "OLYMPIAN"
should be inserted in the Federal Reserve Telegraphic Code at the bottom of
pages 35 and 168, following the code words "BUCKHORN" and "OLIVINE", respectively.
Yours very truly
J, C. Sboll
Assistant Secretary,
TO ALL GOVERNORS.
160
X-4423
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
WASHINGTON
September 10, 1925.
The Governor
Federal Reserve Board.
Sir :
You are hereby advised that the Department has referred to the Disbursing
Clerk, Treasury Department, for payment, the account of the Bureau of Engraving and Printing for preparing Federal reserve notes during the period August
1 to August 31, 1925, amounting to $110,168.00, as follows:Federal Reserve Notes, 1914
$5
Boston
New York
Philadelphia
Cleveland
Chicago
Kansas City
San Francisco
200,000
800,000
200,000
80,000
420,000
300,000
300,000
2,300,000
$10
$20
$50
-
-
-
-
-
-
160,000
100,000
80,000
160,000
-
-
-
40,000
-
300,000
2,930,000 sheets
5,000
5,000
@
-
-
80,000
320,000
-
10,000
$37.60 per M
Total
200,000
800,000
445,000
345,000
420,000
340,000
380,000
2,930,000
$ 110,168.00
The charges against the several Federal Reserve Banks are as follows:
Sheets
Boston
New York
Philadelphia
Cleveland
Chicago
Kansas City
San Francisco
200,000
800,000
445,000
345,000
420,000
340,000
380,000
2,930,000
Compensation
Plate Printing
Materials
$ 3,540.00
14,160.00
7,876.50
$ 1,640.00
6,550.00
3,649.00
2,829.00
3,444.00
2,788.00
$2,340.00 & 7,520.00
9,360.00
30,080.00
5,206.50
16,732.00
4,036.50
12,972.00
4,914.00
15,792.00
3,978.00
12,784.00
4,446.00
14,288.00
34,281.00 $110,168.00
6,106.50
7,434.00
6,013.00
6,726.00
$51,861.00
3,116.00
$24,026.00
Total
The Bureau appropriations will be reimbursed in the above amount from the
indefinite appropriation "Preparation and Issue of Federal Reserve Notes,
Reimbursable", and it is requested that your board cause such indefinite appropriation to be reimbursed in like amount•
Respectfully,
S. R. Jacobs,
Deputy Commissioner of the Public Debt.
161
( COPY )
C 0 IF I B 1 N T I A L
To
Federal Reserve Board
From
Mr, Wyatt, General Counsel.
X-4425
Date
Sept.16, 1925
Subject: Proposed Deduction of
Items in Process of Collection from
Gross Demand Deposits.
I am advised that the Board desires an opinion on the question
whether, without any amendment to the law, it could, by a mere
amendment to its regulations, adopt the following recommendation
contained in the Report of the Federal Reserve Agents' Committee on
Member Bank Reserves, dated May 12, 1925:
"The deduction of exchanges for clearing house,
checks on other banks in the same place and other
checks in process of collection from demand deposits
instead of from 'due to banks' is proposed in order
to correct the unequal bearing of the present requirement on different banks."
In my opinion, the Board cannot, under the terms of the present
law, amend its regulations in such a way as to permit member banks to .
deduct these items from theit gross dematid deposits for the purpose of
coiirputihg their Reserves, although such deductions may be made from
the specific item "balances due to other banks." The reasons for my
opihion are as follows:
Prior to the passage of the Federal Reserve Act, national banks
were required to maintain certain specified reserves against their deposit liabilities and no deductions whatever were permitted by statute.
In order, however, to afford some relief from the high percentages of
reserve then required to be maintained, the Comptroller of the Currency
by regulation permitted national banks to deduct from their deposit
liabilities the amount of balances due from other banks, including in
such "due from" bank balances: (l) checks on out-of-town banks in process of collection; (2) checks on banks in the same place as the national bank and (3) exchanges for clearing houses. These items were
permitted to be included among balances due from banks on the theory
that in the ordinary course of business they could shortly become
balances due from banks. This practice of the .Comptroller's Office
was in effect for some time prior to the passage of the Federal Reserve Act,
Section 19 of the Federal Reserve Act as originally enacted
provided in part:
*
"In estimating the reserves required by this
Act, the net balance of amounts due to and from
other banks shall be taken as the basis for ascertaining the deposits against which reserves
shall be determined."
162
-2-
1-4425
This provision was amended "by the J),ct of June 21, 1917, so as to
road as follows; which is its present form:
"In estimating the balances required by this Act,
the net difference of amounts due to and from
other banks shall be taken as the basis for ascertaining the deposits against which required
balances with Federal reserve banks shall be determined. "
Thus, the Federal Reserve Act in effect ratified the regulation of
the Comptroller of the Currency which had permitted national banks
to deduct balances due from banks in computing their reserve requirements, and it specifically authorizes member banks to offset "due to"
and "due from" bank balances. It is significant, however, that it
permits no deduction from gross deposit liabilities, but only a deduction from deposit liabilities to other banks, and, except for the
permitted deduction of balances due from banks from balances due to
banks, Section 19 requires member banks to maintain specified reserves
against the aggregate amount of their d e m n d deposits and their time
deposits. That is to say, member banks m s t carry reserves against
the aggregate of (l) all individual demand deposits; (2) all time deposits, and (3) the excess of "due to" bank balances over "due from"
bank balances.
Certain provisions in the various Liberty Bond Acts exempt
Government deposits, other than postal savings deposits, from reserve
requirements, but I do not know of any other provision of law which
authorizes any deduction fromtiie amounts against which member banks
must carry reserves and it seems clear that since Congress has specifically defined deposits against which reserves must be carried and
has specifically authorized certain deductions to be made, no other
deductions can properly be implied and no discretion is vested either
in the Federal Reserve Board or the Comptroller of the Currency to
permit such deductions. In short, Congress has permitted balances due
from banks to be deducted from balances due to banks, so that the
only items which may be deducted are items which can be classed as
balances due from banks, and these items can be deducted only from
the item balances due to banks.
This question is discussed in detail in an opinion of Judge
Elliott, in his capacity as Joint Counsel for the Federal Reserve
Board and the Comptroller of the Currency, published in the Federal
Reserve Bulletin for September 1917, at page 692. The conclusion
was therein reached that member banks are permitted to deduct "due
from" bank balances from "due to" bank balances and may include in
the item "due from" bank balances, checks in process of collection,
checks on "Lanks in the sane place, and exchanges for clearing houses,
163
-3-
X-4425
rut that this deduction is the only deduction permitted "by law and
that accordingly member "banks may not deduct checks on other "banks,
exchanges for clearing houses, or cash in vault fron gross demand,
deposits.. Judge Elliott concludes:
"The argument advanced in favor of the allowance of
these deductions should, in the opinion of this office, have "been addressed to Congress rather than to
the Federal Reserve Board or the Comptroller of the
Currency. As above stated, neither the Federal Reserve Board nor the Comptroller are vested with any
discretion to permit deductions not specifically authorized "by the Act and could not, in the opinion of
this office, justify a ruling that "banks might deduct
cash or other items from their gross demand deposits
in computing their reserves."
This opinion was adopted by the Board and has "been followed
consistently. I concur fully in the opinion and I "believe, therefore, that the Board cannot "by ruling or regulation permit member
banks to deduct the items suggested by the Reserve Committee of Federal Reserve Agents from their gross demand liabilities in computing
their reserve requirements. As Judge Elliott stated, the arguments in
favor of permitting such deductions should be addressed to Congress. If
it is desired, I shall be glad to draft a bill to amend Section 19 so
as to permit member banks to make these deductions.
MR. SMEAD'S SUGGESTION.
Mr, Smead has suggested that, while these items may not technically be deducted from gross demand deposits, they may properly be
omitted in computing the amount of a member bank1 s demand deposits;
provided such member bank has a clear and binding contract with all
its depositors to the effect that checks on other banks are received
on deposit for collection and credit only, and that such deposits shall
not be withdrawn until the checks actually have been collected.
Theoretically, there is a technical justification for this
suggestion; but if the suggestion were adopted it would be extremely
difficult to apply in practice and at the same time keep the practice
within proper legal bounds. Furthermore, it is very doubtful that many
banks would be willing to comply with the requirements necessary to entitle them to the advantages of this suggestion.
Where a check technically is received for collection and credit
the transaction does not give rise immediately to a general deposit
liability on the part of the bank - i.e., the relation of debtor and
creditor between the bank and its depositor. On the contrary,
164
X-4425
the "bank handles the chock as the depositor1 s agent for collection until
it has collected the check a n d received the proceeds of the collection,
whereupon it credits the amount to the depositor1s account and becomes
the depositor*s debtor for the amount. Not until this has been done,
•.loos the transaction give rise to a general deposit liability on the
part of the bank. Up to this time the transaction has been a special
deposit, and the Board has held heretofore that member banks need not
carry reserves against special deposits. (July 1921 Bulletin, page 815.)
But see addendum on page 9 of this opinion.
If the transaction clearly is a deposit for collection and credit,
therefore, and this relation is faithfully maintained, the bank technically should not be required to carry reserves against such deposit until
the check actually has been collected and the proceeds credited to the
depositor's general deposit account.
In practice, however, it often is extremely difficult to tell
whether a given transaction is legally a special deposit for collection
and credit or a general deposit. This results largely from the fact that,
instead of deferring credit for checks until they actually have been collected, commercial banks usually give immediate credit in thq depositor*s
general deposit account from which withdrawals are being made constantly.
It is true that commercial banks frequently refuse to honor checks drawn
against "uncollected funds"; but they also frequently honor checks drawn
against deposits of checks on other banks which have not been collected*
Section 16 of the Federal Reserve Act requires Federal reserve
banks to maintain reserves in gold or lawful money of not less than
35$ against their deposits and does not permit any deductions whatever to be made from their deposits in computing their reserves. In a
circular letter to the Chairmen of all Federal Reserve Banks, dated
March 16, 1921 (X-3071), however, the Board ruled that while Federal
reserve banks must carry reserves against all deposits immediately available, including foreign Government credits, and no deductions would
be permitted, yet no reserve need be carried against "transit items or
other deferred availability credits which represent deposits not immediately available
It may be argued that similarly member banks need not carry
reserves against deposits of uncollected checks which are not subject
to immediate
withdrawal but are received only for collection and credit.
This undoubtedly would be true if member banks conducted their business
in the same way as Federal reserve banks; but as a rule they conduct
their business in a different manner.
Federal reserve banks carry two accounts on their books for
each member bank- a deferred credit account and a reserve account. When
checks on out-of-town banks are deposited with a Federal reserve bank
the amount is not credited to the reserve account but is credited to
165
-5-
Z-4425
the deferred credit account until the expiration of the time stated in
the time schedule when it is presumed that such checks will have been
collected and the proceeds received "by the Federal reserve bank. At the
expiration of the time stated in the time schedule the credit for such
checks is transferred from the deferred credit account to the reserve
account and thus becomes available for withdrawal or to be counted as
reserves. No withdrawals whatever are permitted from the deferred credit
account and such account is not considered legal reserves of the member
bank. In legal effect, the Federal reserve bank receives such checks
for collection and credit and scrupulously maintains the relation of
principal and agent with its member banks until the expiration of
the time stated in the time schedule, when presumably such checks will
have been collected and the proceeds received by the Federal reserve bank.
Member banks on the contrary usually carry only one account with
their depositors to which all deposits, including deposits of outof-town chocks are credited immediately upon receipt and withdrawals
are permitted to be made from such account continuously. There is no
segregation of credits for uncollected items from credits for collected
items and, even if the bank contracts with its depositor that withdrawals
will not be permitted from uncollected funds, it is difficult to ascertain what part of the total deposit balance represents collected funds
and what represents uncollected Binds. It is only when the total balance
becomes so low that the amount of checks drawn against it by the customer exceeds the amount of his balance representing credits for actually collected funds that the bank can say that checks drawn by the customer are drawn against uncollected funds and can attempt to enforce
its rule forbidding customers to draw against uncollected funds. Even
in a case of this kind many banks are reluctant to enforce the rule if
the customer happens to be a good one.
I asked Mr. Smead how he would compute the amount of a bank's
deposits against which it should carry reserves if his suggestion
were adopted, and he replied that he would simply subtract from
the bank*a total demand deposits the total amount of "exchanges for
clearing house, checks on other banks in the same place and other checks
in process of collection." His theory was that the amount of such
items would represent the amount of deferred availability credits
which are not subject to withdrawal, if the bank has a contract with
all of its customers forbidding them to check against uncollected ftinds.
This would not be at all accurate, however, because the total of the
abo.VB items would include, not only the amount of deposits against
which the bank's customers would have no right to check, but, also
items owned by the bank itself which give rise to no deposit liability
(e.g., checks received in payment of notes due the bank or for the purchase
price of securities sold by the bank.)
Mr. Smead admitted that this
would be true and that, therefore, the banks would be allowed greater
deductions than they would be legally entitled to if his suggestions
were adopted. He suggested that in order to obviate this difficulty
member banks might be required to segregate their uncollected funds ac-
X-4425
counts in such a way as to show what portion thereof represented checks
owned by them and what portion represented checks deposited by their customers and still in the process of collection.
This woUld not be sufficient, however, because such items would include checks deposited
as time deposits as well as checks deposited as demand deposits; and
iz would be necessary to make another subdivision of the uncollected
funds account in order to tell which of the uncollected items should be
omitted in computing its time deposits and which should be omitted in computing its demand deposits.
It is very doubtful that member banks would be willing to
make such radical changes in their accounting systems for the sake of obtaining small reductions in their reserves; and, even if they did, it
would be extremely difficult for an examiner to check up their accounts in
such a w a y as to ascertain the correctness of the subdivision of the bank's
uncollected funds account.
If Mr. Smead's suggestion were to be adopted, the only safe and
practical way in which it could be applied would seem to be to require the
banks to adopt the same practice as the Federal reserve banks and carry two
accounts with each customer (a checking account and a deferred availability
account) and forbid their customers to make withdrawals from their deferred
availability accounts. It is very doubtful that the member banks would be
willing to make such a radical change in their established methods of business, especially in view of the fact that such a change would be extremely
unpopular with their customers who are accustomed to receive immediate credit
in their checking accounts for all checks deposited, no matter on what banks
they are drawn.
RELATION OF THIS QUESTION TO
PASCAQOUIA CASE.
I fear that if Mr. Smeadfs suggestion were adopted at this time,
it would seriously jeopardize our chances of winning the Pascagoula case,
because a very similar question is involved in that case in connection
with the demand of the Pascagoula bank for immediate credit, which in substance is a demand that the Federal reserve banks absorb all the float
for all member banks. Inasmuch as this would result in the absorption
by the Federal reserve banks of something like $500,000,000 of float and
would lead to tremendous expansion in bank credits, this is by far the most
serious question in the Pascagoula case and nothing should be done to embarrass Mr. Baker in the conduct of that case.
In the Pascagoula case our opponents argue as follows:
Section 16 requires Federal reserve banks to receive all checks drawn
on member banks" on deposit at par.11 They say this means that all
Federal reserve banks must give immediate credit for such checks in a
general deposit account immediately available for withdrawal or
-7-
X-4425
to be Q^unted as reserves; and that the present practice of Federal reserve
banks/giving deferred credit for checks deposited with them by their
member banks is not a compliance with the requirement of Section 16.
One of our principal answers to this argument is that such
checks are received on deposit for collection and credit and that such
a transaction is a "deposit" within the meaning of Section 16.
How the only way in which Mr. Smead1 s suggestion could be
adopted would be to say that where a check is received by a member bank
on deposit for collection and credit such a transaction is not a deposit
within the meaning of Section 19 and, therefore, member banks-need not"*carry
any reserves against such deposits; and I fear that it would be extremely
difficult to convince the Supreme Count that such a deposit is a deposit
within the meaning of Section 16 if the Board should admit publicly that
it is not a deposit within the meaning of Section 19. I fear,., therefore,
that any such admission by the Board in an official ruling would seriously
jeopardize our chances of winning the most important point in the Pascagoula
case.
For this reason, I feel that the Board should not issue any
such ruling, at least until after the Pascagoula case has been decided by
the Supreme Court. If the Board has any doubt about the matter, I think it
is only fair to Mr. Baker that he should be consulted before any such ruling is issued.
OTHER PRACTICAL OBJECTIONS.
In^view of the importance and delicacy of this question I
feel that I should point out one or two other practical objections to the
adoption of Mr. Smead1 s suggestion, without an amendment to the law.
In the first place, the adoption of Mr. Smead1 s suggestion at
this time would effect a radical change in the method of computing reserves which has been in practice over * ten years. Although the member
banks which have no balances "due to" banks would gain by such a ruling a
slight diminution of their reserves, it is quite likely that, instead of
being grateful for this concession by the Board, they would feel that for
the last ten years they had been cheated of something to which they were
rightfully entitled; and it is possible that some of them might even go
into court and attempt to recover from the Federal reserve banks interest
on excess reserves which they have been required to maintain as well as
a portion of the penalties which they have sbeen required to pay for deficiencies in reserves.
168
-8-
X-4425
If such a modification of the reserve requirements were
accomplished through an amendment to the law on the recommendation
of the Board, however, the "banks would feel that they had gained
something to which they had not been entitled heretofore and would
be grateful to the Board for its recommendation. Furthermore,
anyjamendmer-t to the law might be worded in such a way as materially
to simplify the difficult practical and accounting problems mentioned
above.
In view of the fact that Hr. McFadden has a bill pending
in .Congress which he has announced his intention of pressing for enactment at the next session, and in view of the fact that one of the
principal features of this bill is a provision to permit member banks
to carry less reserves with the Federal reserve banks, any attempt by the
Board at this time to meet the demands of the smaller banks by a ruling
which would change the established method of computing reserves might
appear to be an attempt to forestall Congress by an administrative ruling and might adversely affect the Board's relations with Congress. On
the other hand, if this modification of the reserve requirements were held
in abeyance, it would constitute good trading material when the Board
comes to deal with the Banking and Currency Committee with reference to
Mr. McFadden's bill. The Board could tell the Committee that it believes
Mr. McFadden's bill to be unsound but that it believes certain modifications should be made in the reserve requirements and that it will
recommend amendments to the law covering this and other modifications
recommended by the Committee on.Reserves. This would give the Board a
tactical advantage which might be of considerable value in defeating or
modifying the second McFadden bill.
C O N C L U S I O N .
I agree with the Committee on Reserves that the present
provisions of the law permitting deductions to be made only from balances "due to" banks works an injustice to country banks because they
have no such balances from which deductions can be made, and that some
modification of the reserve requirements ought to be made to remove this
inequality. For the various reasons pointed out above, however, I respectfully submit that it would be much better in every way for these
modifications of the reserve requirements to be accomplished through
amendments to the law rather than through administrative rulings of
doubtful legality and difficult of application in practice.
Respectfully,
(signed)
Walter Wyatt
General Counsel.
-9-
X-4425
ADDENDUM
On ps-go 4 of the attached opinion I cited a ruling of
the Board holding that member "banks need not carry reservesagainst
special deposits (1921.Bulletin, page 815.) Since writing the
attached opinion, however, I have discovered a later ruling published
on page 572 of the May 1922 Bulletin, wherein the Board laid down
the broad general rule
ii*** that all funds received by a bank in the
course of its commercial or fiduciary business
must be treated either as deposits against which
reserves must be carried, or as trust funds subject
to the ordinary restrictions and safeguards imposed
upon the custody and use of trust funds, and that
whether a certain deposit falls in one category or
the other must depend in each case upon the particular terms and conditions under which it was made."
See also two rulings published on page 1435 of the 1921 Bulletin.
170
-10-.
X-4425
Date
To
Federal Reserve Board
From
Mr. Wyatt, General Counsel.
Sept. 17, 1925
Subject: Proposed Deduction of
Items in Process of Collection from
Gross Demand Deposits.
Since writing my opinion of September 16th on the above question, I have discovered in the files a letter addressed to Mr. Edwin
S. Schenck, President of tho Citizens National Bank of Hew York, under
date of October 20, 1919, which considers a suggestion the same as that
made by Mr. Smead.
This letter was written by Mr. George L. Harrison,
then General Counsel to the Board, and was signed by Governor Harding*
The letter holds that if a bank wishes to avoid the maintenance of a
reserve against uncollected checks during the period in which such
checks are being collected, it should take sudi checks for collection
only and not for immediate credit,
A copy of the letter is respect-
fully submitted herewith for the Board 1 s information.
Respectfully,
(signed) Walter Wyatt
Walter Wyatt
General Counsel.
Letter attached.
X-4425
—11—
October 20, 1919.
Mr. Edwin S. Schenck,
President, The Citizens National Bank of New York,
Hew York City.
Sir:
Your letter of October 15 relating to the construction
of Section 19 of the Federal Reserve Act, has been received.
I am enclosing herewith a copy of an opinion (X-305)
July 19, 1919, filed by Counsel of the Federal Heserve Board
in July 1917, which discusses the points which you have presented for consideration. Both the Federal Reserve Board, and
the Comptroller of the Currency have approved this opinion
and have been guided by it in all of their rulings relating
to the maintenance of reserve balances by member banks. It
is not believed that either the letter or the spirit of the
law would justify an extension of the purpose or character
of the deductions defined in this opinion.
With particular reference to your statement relating
to reserves to be carried against a deposit created by the
credit to a customer's account of the uncollected checks
;vhich are not payable until the deposited checks actually have
been collected, I wish to state that any account which is
credited 7/ith the amount of an item before collection is, as
a matter of law, subject to check unless there is an express
binding agreement to the contrary, and if it is intended
that the customer shall have no authority to draw on an account
credited in this manner, the bank should take the item for
collection only and not for immediate credit. Even assuming,
however, that the item is credited ioaediately subject to an
agreement that it will not be drawn upon until the check is
actually collected,
deposit cannot properly be termed a
time deposit because of the fact that it is not one "payable
after thirty days" as defined in the Regulations of the
Federal Reserve Board. Being payable "within thirty days" it
must necessarily be termed a demand deposit and as such is
subject to the reserves required to be carried against demand
deposits^. If the bank wishes to avoid the maintenance of a
reserve against deposits of this character during the period
in which checks they represent are being collected, the bank,
as previously stated, should take such checks for collection
only and not for immediate crc&it.
Very truly yours,
(W.P.G. Harding)
Enc.
Governor
171
172
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-4426
September 18, 1925,
SUBJECT:
Holidays during October, 1925.
Dear Sir:
There will be no Gold Settlement Fund or Federal
Reserve Note Clearing on Monday, October 12th, 1925, on account of observance of Columbus Day, and the Bogxd's books
will be closed. For your information, the offices of the
Board and the following Banks and Branches will remain open
for business as usual:
Richmond
Atlanta
Birmingham
Nashville
Jacksonville
Detroit
St. Louis
little Rock
Memphis
Minneapolis
Kansas City
Denver
Oklahoma City
In addition to the holiday mentioned above, the fol*lowing Branch Banks will be closed on the d?ytes specified:
Tuesday, October 6th, Detroit
Friday,
"
9th, Jacksonville
Tuesday,
"
13th, Birmingham
(Election Day)
(Farmers1 Day)
(Fraternal Day)
The Detroit Branch, therefore, will not participate in the
Cold Fund clearing of October 6th. Please include your credits
of October 6th for Detroit Branch with those for October 7th
in the Gold Fund Clearing. .
Kindly notify Branches.
Very truly yours,
J# C. N©ell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-4428
F E D E R A L
R E S E R V E
1 7 3
B O A R D
STATEMENT FOR THE PRESS
For Immediate Release
Sept. <35, 1925
CONDITION OF ACCEPTANCE MARKET
August 20,1925, to September 16,1925.
Acceptances.
The acceptance market showed somewhat greater activity during the first
half of September than in August, following an increase in rates at the end of
the month.
Dealers advanced their rates on all maturities by l/4 of one per
cent on August 28 so that 30 day bills were quoted at 3 3/8 bid and 3 1/4
per cent offered, 60 day bills at 3 l/2 bid and 3 3/8 offered, 90 dn£ 120
day bills at 3 5/8 bid and 3 l/2 offered, and the longest maturities at 3 7/8
bid and 3 3/4 per cent offered.
The New York Federal Reserve Bank raised its
official buying rates on August 31 to 3 l/8 per cent on 30 day bills, 3 l/4
per cent on 31-44 days, 3 3/8 per cent on 45-90 day bills, 3 1/2 per cent on
4 months and 3 3/4 per cent on 6 months bills.
Increased demand, chiefly by
local banks, was reported as a result of the higher market rates in New York,
Boston, and Philadelphia, with a smaller increase in supply, which was expected
to be augmented by the appearance of more cotton bills a little later in the
season.
On September 16 New York dealers' portfolios had been reduced to the
lowest figure reported since the spring of 1923.
The Chicago market was very.
dull throughout the period from August 20 to September 16 with a decline both
in the demand for and supply of bills as compared with the preceding period.
X-4429
174
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For Release in Morning Papers,
Monday, September 28, 1925.
The following is a summary of general business
and financial conditions throughout the several
Federal Reserve Districts, based upon statistics
for the months of August and September, as contained
in thv forthcoming issue of the Federal Reserve Bulla tin.
Production of basic commodities declined in August to the lowest level of
the year but was considerably higher than during the summer of 1924.
Distri-
bution of goods at wholesale and retail continued in greater volume than a year
ago.
Seasonal growth in the demand for credit, arising partly from financing
of the crop movement, was reflected in an increase in the volume of commercial
borrowing.
Production:- The Federal Reserve Board's index of production in basic industries,
which is adjusted for seasonal variations, declined 4 per cent in August, but
was 15 per cent higher than a year ago.
Output of steel and of bituminous and
anthracite coal and activity in the woolen industry increased in August, while
mill consumption of cotton and the production of flour and lumber decreased.
Employment and earnings of factory workers were larger in August than in July,
but continued smaller than in June.
Building contracts awarded during August,
owing chiefly to large awards in New York, exceeded all previous records.
Crop reports of the Department of Agriculture at the beginning of September, ad
compared with forecasts a month earlier, indicated somewhat larger yields of
spring wheat, oats, barley, hay, and tobacco, and smaller yields of corn and
potatoes.
The mid-September cotton crop estimate was 13,931,000 bales compared
with a forecast of 13,740,000 bales on September 1.
Trade:-
Wholesale trade was 5 per cent larger in August than in July owing to
- 2 -
X-4429
175
seasonal increases in the sales of dry goods and shoes, and sales of all lines
except groceries were greater than those in August, 1924.
Sales at department
stores and at mail order houses showed less than the usual increases in August
hut continued in greater volume than last year.
Stocks of merchandise at depart-
ment stores increased in August and for the first time this year were considerably
larger than in the corresponding nonth a year ago.
Wholesale firms in all leading
lines except drugs and hardware reported smaller stocks on August 31 than a month
earlier.
Total freight car loadings were larger during August than in any month since
last October.
Coal shipments, preceding the anthracite strike, were especially
heavy, ' less -than-carload-lot shipments continued to increase, and the movements
of livestock and grains were seasonally greater than in July, although smaller
than in August, 1924.
Prices:-
Wholesale prices showed a further slight advance in August and were
near the high level reached in the spring of this year.
Prices of agricultural
commodities, which in recent months have been above the average for all commodities, increased further, while prices of other commodities declined slightly.
Between the end of August and the latter part of September prices of bituminous
coal, pig iron, rubber and cotton advanced, and prices of spring wheat, corn,
raw sugar and wool declined.
Bank Credit:-
At member banks in leading cities loans chiefly for commercial and
agricultural purposes showed further seasonal increases during the first half of
September and at the middle of the month were about $275,000,000 higher than at
the end of July.
Investment holdings remained in about the same volume as dur-
ing previous months, but loans on securities increased and on September 16 were
near the highest level of the year.
X-4429
1
7
6
A further growth in the total of reserve bank credit in use occurred during the five week period ending September 23.
Member tank borrowings increased
in the early part of September, and after a temporary decline during the
period of Treasury financing, increased to a larger total than at any tire
since the beginning of 1524.
The seasonal growth in the demand for currency
during August was reflected in an increase of $65,00C,0C0 in total money in
circulation.
Money rates showed a firmer tendency during the last week of August
ana the first, throe weeks of September.
The prevailing rate on prime commer-
cial paper remained at 4 1/4 per cent but there was an increased proportion of
sales at 4 \j2 per cent.
177
FEDERAL RESERVE BOARD
WASHINGTON
. A D D R E S S OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE B O A R D
X-4430
September 25, 1925.
SUBJECT:
Code Words to be used by the Federal Reserve Bank of
New York in advising other Federal reserve banks of
changes in the Bank Polski credit.
Dear Sir:
In order to reduce the phraseology in telegrams between
the Federal Reserve Bank of New York and other Federal reserve
banks in connection with advices covering changes in the Bank
Polski credit, it has been suggested for such purpose that additional code words be supplied from the Federal Reserve Telegraphic
Code.
The Board has approved this suggestion and, effective
October 5, 1925, the following code words will be used between the.
Federal Reserve Bank of New York and other Federal reserve banks
covering the transactions referred to:
JUSTLY: Have made further gold loan $
Bank Polski. Your participation now being $
please credit us $
to adjust.
You should
now accrue daily $
. interest.
JUSTNESS: Bank Polski loans reduced to
Your participation now being
we credit you
to adjust. You should now accrue daily
$
$
interest.
The code words indicated should be inserted in the Federal
Reserve Telegraphic Code at the bottom of page 130 following the supplemental code word "JUSTIFY".
Yours very truly,
J• C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
178
( COPY )
Dr. Miller
Mr. Wyatt
X-4431
July 8, 1924.
Administrative duty.of Board
re expenditures of Federal
Reserve tanks.
You have requested an expression of my views on the following questions:
1.
What is the general administrative duty of the Federal Reserve
Board with reference to expenditures of Federal Reserve hanks?
2.
What is the administrative duty of the Federal Reserve Board in
passing upon the specific question referred to the Board by the last Governors'
conference with reference to the propriety of the Federal reserve "banks paying
the Comptroller of the Currency $10 for each copy of a report of an examination
of a national "bank furnished to the Federal reserve "banks ,instead of $4.50 as
at present?
1.
G-EEERAL ADMINISTRATIVE DUTY.
'
In order to discuss this question intelligently, it is necessary, first,
to review certain provisions of the Federal Reserve Act.
(a)
General Powers of Directors of Federal reserve "banks.
Section 4 of the ^-ct provides that each Federal reserve bank shall have
power:
"Fifth.. To appoint "by its "board of directors such
officers and employees as are not otherwise provided for in
this Act, to define their duties, require bonds of them and
fix the penalty thereof, and to dismiss at pleasure such
officers or employees.
"Sixth. {Do prescribe by its board of directors.
by-laws not inconsistent with law, regulating the manner in
which its general business may be conducted, and the privileges
granted to it by law may be exercised and enjoyed.
"Seventh. To exercise by its board of directors.
or duly authorized officers or agents, all powers specifically
granted by the provisions of this Act and such incidental powers
as shall be necessary to carry on the business of banking within
the limitations prescribed by this Act." .
-2-
X-4431
± 7 9
Section 4 also contains the following provisions with reference to the
boards of directors of Federal reserve tanks:
"Every Federal reserve "bank shall be conducted
]mder the supervision and control of a board of directors.
"The Board of directors shall perform the duties
usually appertaining to the office of directors of banking
associations and all such duties as are prescribed by law.
"Said board shall administer the affairs of said
bank fairly and impartially and without discrimination in
favor of or bgainst any member bank or banks and shall, subject to the provisions of law and the orders of the Federal
Reserve Board, extend to each member bank such discounts, advancements and accommodations as may be safely and reasonably
made with due regard for the claims and demands of such other
member banks."
These provisions clearly indicate that the power and responsibility of
managing each Federal Reserve bank and administering its affairs is vested
primarily in its board of directors, which is charged with all of the duties
usually appertaining to boards of directors of banking institutions including
the duty of exercising supervision and control over the affairs of the bank.
The powers of the Federal reserve banks and their boards of directors, however, are qualified in various ways by the powers of the Federal Reserve Board.
(b)
General Powers of Federal Reserve Board.
The Federal Reserve Board is authorized to order or direct the Federal
recurve banks to do certain things, and certain Specific powers of the Federal
reserve banks are expressly made subject to review, regulation or approval by
the Federal Reserve Board.
I shall not attempt to discuss all such pro-
visions of the Act but shall merely quote some of them by way of illustration.
It will be noted that the provision last quoted above is to the effect
that the board of directors of a Federal reserve bank shall extend to each
member bank such discounts, advancement and accommodations as may be safely
and reasonably made with due regard for the claims and demands of other member
180
-3banks,
11
X-4431
subject to the provisions of law and the orders of the Federal Reserve
Board."
Section 3 authorizes the Federal Reserve Board to permit or require
5 M e r a l reserve banks to establish branch, tanks.
Section 11(b) authorizes the Federal Reserve Board:
"To permit, or, on the affirmative vote of at least
five members of the Federal Reserve Board to require Federal reserve banks to rediscount the discounted paper of
other Federal reserve banks at rates of interest to be
fixed by the Federal Reserve Board."
Section 14 (e) authorizes the Federal reserve banks:
"To establish accounts with other Federal reserve banks
for exchange purposes and, with the consent or upon the
order and direction of the Federal Reserve Board * * *
to open and maintain accounts in foreign countries, appoint
correspondents, and establish agencies in such countries
It will be noted that these provisions give the Board power to order
or direct the doing of certain things by the Federal reserve banks and this
constitutes the greatest possible measure of control over these particular
actions.
In respect to these particular matters, the Board is authorized to
substitute its judgment for the judgment of the Board of directors of the
Federal reserve banks and in a measure to direct the activities of the Fed~
eral reserve banks#
It should ibe noted, however, that this power of the Board
is restricted to certain specific acts and does not relate to the conduct of
the general business of the bank*
Certain other powers of the Federal reserve banks are made subject to
approval or review by the Federal Reserve Board.
Thus, Section 14 (e) provides also that, "Whenever any such account
has
been opened or agency or correspondent has been appointed by a Federal reserve bank * * *, any other Federal reserve bank may, with the consent and
-4
™
x
"4451
181
approval of the Federal Reserve Board, be permitted to carry on or conduct,
through the Federal reserve bank opening such account or appointing such agency
or correspondent, any transaction authorized by this section * *
Section 14(d) authorizes each Federal reserve banki
"To establish from time to time, subject to review and determination of the Federal Reserve Board* rates of discount to be
charged by the Federal reserve bank for each class of paper, which
shall be fixed with a view of accommodating commerce and business."
Section 13 authorizes each Federal reserve bank!
"To make advances to its member banks on their promissory
notes for a period not exceeding fifteen days at rates to be
established by such Federal reserve banks, subject to the review and determination of the Federal Reserve Board.M
The salaries paid by Federal reserve banks are expressly made subject
to approval by the Federal Reserve Board.
Section 4 contains the following provision!
"* * * Any compensation that may be provided by boards of
directors of Federal reserve banks for directors, officers or
employees shall be subject to the approval of the Federal
Reserve Board."
Section 12 authorizes the directors of the Federal reserve banks to
fix the compensation of members of the Federal Advisory Council, "subject to
approval of the Federal Reserve Board."
Two important facts should be noted with reference to those provisions
of the Act making certain specific actions by the Federal reserve banks
subject to approval or review and determination by the Federal Reserve Board:
(a) They apply only to the specific acts mentioned and, therefore, are
limited in their scope; but (2) they have the effect of making such action
by the Federal reserve banks contingent upon approval by the Federal Reserve
Board and, therefore, such actions are not valid until approved by the Board.
Another form of control vested in the Federal Reserve Board is the
power to prescribe regulations, limitations and restrictions with reference
-5-
X-4431
4-8.2
to the exercise of various powers "by the Federal reserve banks.
Thus, t h e s e c o n d paragraph of S e c t i o n 1 3 gives t h e B o a r d t h e r i g h t to
determine or define the character of notes, drafts and bills of exchange which
are eligible for rediscount within the meaning of the Act; the third paragraph
makes the power of Federal reserve banks to discount or purchase sight drafts
"subject to regulations and limitations to be prescribed by the Federal Res e r v e Board;" and the ninth paragraph provides that!
•
"The discount and rediscount and the purchase and sale by
any Federal reserve bank of any bills receivable and of domestic
foreign bills of exchange, and of acceptances authorized by this
Act, shall be subject to such restrictions, limitations, and
regulations as may be imposed by the Federal Reserve Board.11
Likewise, Section 13(a) authorizes Federal reserve banks to discount
agricultural paper "subject to regulations and limitations to be prescribed
by the Federal Reserve Board"; and Section 14 authorizes Federal reserve
banks to purchase and sell in the open market cable transfers, bankers' acceptances and bills of exchange "under rules and regulations prescribed by
the Federal Reserve Board."
These are but a few of the many provisions of tho Act giving the Board
power to prescribe regulations, limitations and restrictions, but they serve
to illustrate the nature of such power.
It may be stated generally that such
powers of the Board, like the power to approve certain actions by the Federal
reserve banks, are limited in scope and apply only to certain specific powers
of the Federal reserve banks; but when the Federal Reserve Board has prescribed valid regulations, limitations and restrictions on these subjects
they have the force and effect of law and the banks must comply with them.
The Act also gives the Board y§?y bPQEvd supervisory powers over the
Federal reserve banks.
discussed aboyg, t&ey
While these powers are broader in scope than the powers
quite different in nature in that they give the
-6—
X-4431
JL83
Board loss control over the actions of the "banks.
Section 11(j) authorizes the Board in the "broadest possible terms "to
exercise general supervision over said Federal reserve "banks."
This "broad
provision would seem to apply to all activities of the Federal reserve "banks
and every phase of their "business; but, as will "be shovm below, "general supervision" does not mean administering the affairs of the bank, nor does it contemplate the substitution of the judgment of the Federal Reserve Board for
that of the board of directors in conducting the every day business of the
bank.
In order to provide further for this general supervision over Federal reserve banks, Section 11(a) authorizes the Board:
"To examine at its discretion the accounts, books,
and affairs of each Federal reserve bank * * * and to
require such statements and reports as it may deem
necessary."
Section 21 requires the Board to order at least one examination of each Federal reserve bank each year.
Section ll(i) also gives the Board general authority to make all rules
and regulations necessary to enable it effectively to "perform the duties,
functions and services specified in this Act."
This is similar to the general
power given to any organization to prescribe rules or by-laws for the conduct of its business.
Thd various powers of the Federal Reserve Board over the federal reserve banks may be divided roughly into four different classes;
1.
The power to direct or require the Federal reserve banks to do
certain things, which for convenience may be called the power of direction.
This gives the Board the greatest measure of control over the Federal reserve banks but is limited to certain specific acts.
184
-72.
X-4431
Tho power to review, approve or disapprove certain actions of the
Federal reserve "banks, which power is limited in its scope to certain specific
actions "but gives the Board the next greatest measure of control over these
actions by making them invalid or ineffective until approved by the Board.
This may be called the veto power.
3.
The power to prescribe regulations, limitations, and restrictions
governing the exercise of certain specific powers of the banks.
This is
limited in scope to certain specific powers but gives the Board a great measure
of control over the exercise of those powers»
For convenience this may be
called the regulatory power.
4.
The power to exercise general supervision over, and examine into all
the affairs of* the Federal reserve banks.
This power is broadest in its
scope but gives the Board the least measure of control over the Federal reserve banks.
-"-t might be called the supervisory or visitorial power.
The expenditures of the Federal reserve banks for supplies or information are not specifically made subject to the direction, veto or regulatory
powers of the Federal Reserve Board.
They are, therefore, subject only to
the Board's general supervisory power.
This makes it important to consider
more carefully the purpose, nature and extent of this general supervisory power.
-8(c)
X-4431
1
General Supervisory Power ;
It is customary in American law to vest in some board, commission, or
officer, the power to exercise general supervision over certain types of
corporations such as common Carriers, insurance companies, and. banks, which
are affected with a public interest.
Farthermore, under American law all
corporations are chartered by the Government and have only such powers as are
expressly granted in their charters or in the laws under which they are incorporated and such incidental powers as are necessary to the exercise of the
powers expressly granted.
It is well settled that by implication they are
forbidden to exercise any other powers.
The State, therefore, is interested
in any attempt by a corporation to exceed its corporate powers and it is well
settled that the State is the one to complain of any ultra vires acts of a
corporation and is the only one which can institute quo warranto proceedings
to compel a corporation to cease performing iiltra vires acts.
The duties of
boards, commissions or officers charged with general supervision over corporations affected with a public interest, therefore, are primarily to see that
such corporations dp not exceed their lawful powers and that they carry out
the purposes of their organization in such a way as to benefit rather than
injure the public, and to prevent or check any abuses of any character.
This power, in its general nature and purpose is quite similar to, if not
the same as, the common law power of visitation.
A discussion of the au-
thorities on the subject of visitatorial powers, therefore, may throw some
light on the extent of the Board's duties and powers in the premises.
The visitors of eleemosynary and ecclesiastical corporations at common
law, however, frequently perforrad.all the functions and possessed all the
powers which are now divided between the directors of banks and the governmental authorities having supervision over them; and it is important to keep
-9-
X44.il
3.86
this in mind while reading the authorities quoted below:
Bouvier 1 s Law Dictionary. (p. 3404) discusses this subject as follows:
"Visitation.
corporation.
The act of examining into the affairs of a
"The power of visitation is applicable only to ecclesiastical
and eleemosynary corporations. 1 Bla. Com. 480. The visitation of civil
corporations is by the government itself, through the medium of the courts
of justice. See 2 Kent, 240. In the United States, the legislature is
the visitor of all corporations founded by it for public purposes; Dartmouth
College v. Woodward, 4 Wheat. (U.S.) 518 4 L. Ed. 629.
* * * * * * * * * * * * *
"All eleemosynary corporations who are to receive the charity
of the founder have visitors if they are ecclesiastical corporations; and
if a particular visitor is not provided "by the founder, then the Ordinary
of the place is the visitor; if they are lay corporations, the founder and
his heirs are perpetual visitors; 5 Mod. 404e It is a necessary incident
of an eleemosynary corporation; 1 Mod. 82; "a power to correct abuses and
to enforce due observance of the statutes of the charity« "but not a power
to revoke the gifts, to change uses or divest rights;" Allen v, McLean
1 Sumn. 276, Fed. Cas. No. 229, per Story, J.
"A visitor has the right of inspecting the affairs of the corporation and superintending all officers who have charge of them according to
the statutes of the founder, without any control or revision of any other
person or body* except the judicial tribunalst by whose authority and jurisdiction he may be restrained and kept within the limits of the granted ppwers,
and made to regard the general laws of the land; in re Murdock, 24 Mass.303,
Mo. appeal lay from a visitor unless he visits quo Ordinary, when an appeal
lay to the Crown in Chancery. It was said by Lord Camden that visitation is
despotism uncontrolled and without appeal; Grant. Corp. 534, See, generally
Tudor, Charitable Trusts; Stephens, Statutes Relating to Ecclesiastical, etc.
Institutions; Report of Oxford Commission (1852); 7 Com. Dig. 545; 21 Viner,
Abr. 587• See 34 L. Mag, and Rev. 40, as to Oxford and Cambridge Universities.
"In Massachusetts it is held that the visitation of eleemosynary
corporations according to the common law is in force except as altered by
statute; In re Murdock, 24 Mass. 303; such statutes may vest visitatorial
power in the courts, in the absence of a personal visitor, or even where there
is one; In re Taylor Orphan Asylum, 36 Wis. 534; but where visitatorial power
is conferred on certain public officers, the courts may not interfere unless
such visitors should act contrary to law; Nelson v. Cashing, 2 Cush. (56
Mass.) 519.
"Even where a testator, in founding a hospital, directed that the
trustees should annually report their acts to the court and give bonds, it
was held that the court had no visitatorial power or other supervision;
-10-
X-4431
1 8 7
Jenkins v. Berry, 119 Ky. 350, 83 S. if, 594.
"The visitatorial power of a court over a cemetery association
does not authorize it to substitute its own business judgment for that of
the association; Roanoke Cemetery Co. v. Goodwin, 101 Va. 605, 44 S. E. 769.
"Under the visitatorial powers of a state over corporations doing
"business within its borders, it is competent for it to compel such corporations to produce their books and papers for investigation and to require the
testimony of their officers and employees to ascertain whether its laws have
been complied with, and this power extends to the production of books and
papers kept outside of the state, and a statute requiring such production
does not amount to an unreasonable search or seizure or a denial of due process
of law;. Consolidated R. Co. v. Vermont, 207 U. S. 541; 28 Sup. Ct. 178, 52
L. Ed. 327, 12 Ann. Cas, 658; Hammond P. Co. v. Arkansas, 212 U. S. 322, 29
Sup. Ct. 370, 53 L. Ed. 530, 15 Ann. Cas. 645. A corporation being the
creature of the state, has not the constitutional right to refuse to submit
its books and papers for an examination at the suit of the state, and an officer of a corporation charged with criminal violation of a statute cannot
pload the criminality of the corporation as a refusal to produce its books;
Halu v. Henkel, 201 U. S. 43, 26 Sup. Ct. 370, 50 L. Ed. 652. A corporation
is bound to furnish information when called for by the state, so far as
reasonably possible, and state the facts which excuse them from answering
more fully; State v. Express Co., 81 Minn. 87, 83 N. W. 465, 50 L. R. A. 667,
83 Am. St. Rep. Austin, 67 Kan. 208, 72 Pac. 850.
"It may be considered that, to a certain extent, railroad commissions are the machinery created by law for the exercise of visitatorial
-power.
"This power does not include the common law right of the shareholder to inspect the books of the coloration; Guthrie v. Harkness, 199
U. S. 148, 26 Sup. Ct. 450 L. Ed. 130, 4 Ann. Cas. 433."
In the famous Dartmouth College Case, 17 U. S. (4 Wheat) 517 , 672,
Mr. Justice Story discusses the subject of visitors of eleemosynary corporations as follows:
"To all eleemosynary corporations, a visitatorial power
attaches, as a necessary incident; for these corporations being
composed of individuals, subject to infirmities, are liable, as
well as private persons, to deviate from the end of their institution. The law, therefore, has provided, that there shall
somewhere exist a power to visit, inquire into and correct all
irregularities and abuses in such corporations. and to compel
the original -purposes of the charity to be faithfully fulfilled.
1 Bl. Com. 480. The nature and extent of this visitatorial power
has been expounded with admirable fulness and accuracy by Lord
Holt in one of his most celebrated judgments. Phillips v. Bury, 1
Ld. Raym. 5; s.c. 2 T.R» 346. And of common right, by the dotation, the founder and his heirs are the legal visitors, unless
the founder has appointed and assigned another person to be
visitor. • For the founder may, if he please, at the time of the
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.
x
-4431
± 8 8
endowment, part with his visitatorial power, and the person
to whom it is assigned will, in that case, possess it in exclusion of the founderfs heirs, 1 Bl. Com. 482 * * * * But where
trustees or governors are incorporated to manage the charity,
the visitatorial power is deemed to "belong to them, in their
corporate character» Philips v. Bury, 1 Ld. Raym. 5, s.c. 2 T.R,
346; Green v. Rutherforth, 1 Ves. 472; Attorney-General v. Middleton, 2 Ibid. 327; Case of Sutton Hospital, 10 Co. 23, 31."
That the power to supervise and examine banks is a visitorial power
is indicated "by the following passage in Morse on Banks and Banking (5 Ed,)
Vol, 1 p. 44:
"A state may invest the supervision of banks in a bank commissioner or other examiner, and grant to him visitorial -powers
over banks and impose upon him the duty of examination of banks,
the investigation of their solvency* and the winding up of
their affairs if the protection of the depositors demands such
action, % may examine the records of the bank, change the personnel of the board of directors, and establish rules for the
proper discharge of his duty. His power should not be unduly
narrowed by construction, nor can he be removed by the governor,"
In Guthrie v, Harkness, 195 U, S. 148, a stockholder in a national bank
applied for leave to inspect the books, accounts and loans of the -bank for
the purpose of ascertaining the value of his stock.
Upon refusal to allow
such inspection, he instituted proceedings to compel the officers of the
bank to permit him to examine the books.
One of the defenses made on be-
half of the officers was that the common law right of the stockholder to inspect the books of a corporation is cat off as to stockholders of national
banks by Section 5241 of the Revised Statutes, which provides that "No
association shall be subject to any visitorial powers other than such as
are authorized by this title or are vested in the courts of justice,"
The
court held that the stockholder was entitled to examine the books of the bank
and that the officers thereof most permit him to do so.
-4r, Justice Day said:
-
"But, it is; said, the right of the shareholder to inspect
the books is cut off by section 5241, providing "no association
shall be subject to any visitorial powers other than such as are
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authorized by this Title, or are vested in the courts of
justice. 'We are unable to find any definition of 1visitorial
powers1 which can be held to include the common law right of
the shareholder to inspect the books of the corporation. * * * *
* * * * * * *
"The meaning of this section was before Judge Baxter
in the case of First Nat. Bank of Youngs town v, Hughes, 6 Fed.
Rep. 737, and of the meaning of the term * visitorial powers 1 ,
as used in section 5241, that learned judge said:
1
Visitation, in law, is the act of a superior or
superintending officer, who visits a corporation to examine into its manner of conducting business, and enforce
an observance of its laws and regulations. Burrill defines the word to mean "inspection; superintendence; direction; regulation."1
"At common law the right of visitation was exercised by
the King as to civil corporations and as to eleemosynary ones by
the founder or donor. 1 Cooley1s Blackstone, 481. 1 In the United
States the legislature is the visitor of all corporations created
by it, where there is no individual founder or donor, and may direct judicial proceedings against such corporations for such
abuses or neglects as would at common law cause forfeiture of
their charters.1 1 Cooley*s Blacks tone, 482, note.
"In the case before us the Supreme Court of Utah quotes
from Merrill on Mandamus as follows:
1
Visitors of corporations have -power to keep them within
the legitimate sphere of their operations, and to correct all
abuses of authority, and to nullify all irregular proceedings«
In America there are very few corporations which have private
visitors, and in the absence of such, the State is the visitor
of all corporations.1
"In no case or authority that we have been able to find
has there been a definition of this right, which would include the
private right of the shareholder to have an examination of the business in which he interested, and the right of discovery of the
methods and means by which the agents of the corporation are conducting its affairs. The right of visitation being a public right.
existing in the State for the purpose of examining into the conduct
of the corporation with a view to keeping within its legal powers,
Congress had in mind in passing this section that in other sections
of the law it had made full and complete provision for investigation
by the Comptroller of the Currency and examiners appointed by hin,
and, authorizing the appointment of a receiver, to take possession
of the business with a view to winding tip the affairs of the bank.
It was the intention that this statute should contain a full code of
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190
provisions upon the subj'ect, and. that no state law or enactment
should undertake to exercise the right of visitation over a
national corporation* Sxce-ot in so far as such corporation was
liable to control in the courts of .justice, this act was to be
the full measure of visitorial power."
The Board's power to exercise general supervision over Federal reserve
banks and examine into their affairs is quite similar to the corresponding
power of the Comptroller of the Currency over national banks, and it would
seem that the nature and purpose of the Board's power mast be practically
the same as that of the Comptroller's.
In the case of State v. Morehead. (Nebr.) 155 H.W. 879, the court in
discussing the right of the State Banking Board to refuse to issue a charter
to a savings bank said:
"When the general rule of a statutory construction is
applied and section 16 is considered in connection with the
other provisions, it must be held that the board is vested
with authority not only to correct evils that may creep into
the management of an existing bank, but to guard against dangers, that may threaten institutions about to be formed.
"'The power to compel, beforehand, co-operation,
and thus, it is believed, to make p. failure unlikely and
a general panic almost impossible, must bo recognized, if
government is to do its proper work, unless wo can say
that the means have no reasonable relation to the end.1
State Bank v. Haskell, 219 U.S. 104, 112, 31 Sup. Ct. 186,
188 (55 L. Ed. 112, 32 L.R.A.N.S. 1062, Am. Cas. 19121,487)'
ii * * * We think the intention of the Legislature was to
vest the banking board with general control and with authority
to do all things reasonably necessary for the -protection of depositors throughout the state. The Board also stands in the
nature of a trustee for this guarantee fund, and it is its duty
to take such precautions as may be necessary to protect its in. tegrity. The terms 'general supervision and control' vest the
banking board with duties of a very high order, and they are not
to be -perfunctorily discharged, but to be administered with the
highest degree of intelligence and discretion.•
"It is customary for Legislatures to grant to administrative
bodies of this character the power to adopt rules, by-laws, and
regulations reasonably necessary to carry out the purpose for
which they are created, and this grant is not an improper delegation
-14-
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191
of authority. Blue v. Beach, 155 Ind. 121, 56 N.E. 89,
50 L.E.A. -64, 80 Am. St. Rep. 195 and cases cited. This
is held generally to be the rule in matters coming within
the police power of the state. That the banking business
comes within that power is no longer an open question.
"'The police power extends to all the groat public naeds
(Camfield v. United States, 157, U. S. 518, (17 Sup. Ct. 864,
42 L. Ed. 250))and includes the enforcement of commercial
conditions such as the protection of bank deposits and checks
drawn against them by compelling cooperation so as to prevent
failure and panic.' (Eoble State Bank v. Haskell, 219 U. S. 134)
"The business of banking coming within the police power
of the state, the same rule of construction may be applied to
banking acts as to rales and regulations established by banking
boards as applies to acts creating other administrative bodies
coming within the police poorer. The Supreme Court of Judicature
of Indiana, in discussing this phase of the question, in Blue v.
Beach, supra, says:
•While it is true that the character or nature of
such boards is administrative ohly, still the powers conferred upon them by the legislature, in view of the great
public interests confided to them, have always received
from the courts a liberal construction, and the right of
the legislature to confer upon them the power to make...
reasonable rules, by-laws, and regulations, is generally
recognized by the authorities*111
The case of Great Northern Railway Company v. Snohomish County. 48 Wash
478, 93 Pac. 924, involved, the construction of a State statute requiring
the State Board of Tax Commissioners to exercise "general supervision" over
assessors and county boards of equalization and the assessment of taxable
property in order to secure equality in taxation.
% e case turned upon the
proper meaning of the term "general supervision"- whether it authorized the
Commissioners to act merely in an advisory capacity or whether it authorized
them to classify inter-county railroads and fix the value thereof for the
purpose of taxation.
The court held that the statute authorized the Com-
missioners to classify inter-county railroads and fix the value thereof for
purposes of taxation; that the words "general supervision" imply something
192
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X-4431
more than a merepower to advise and suggest; that they confer authority
to oversee and review the acts and correct errors of those over whom the
right of supervision is granted.
In the course of the opinion the court said:
"While these several provisions hear more or less directly
on the question under consideration, the case turns principally
on the meaning of the term 1 general supervision* in the act defining the powers and duties of the state "board of tax commissioners, * * * The state hoard of tax commissioners is given/§SpIfvision over assessors and county hoards of equalization to the end
that all taxable property shall he placed on the assessment rolls
and equalized as between the different counties and municipalities,
so that equality of taxation shall "be secured according to the
provisions of law# What is meant by 1 general supervison1? Counsel
for respondents contend that it means to confer with, to advise,
and that the board acts in an advisory capacity only, ^e cannot
believe that the Legislature went through the .idle formality of
creating a board thus impotent. Defining the term *general supervision1 in Vantongeren, v. Hefferman, 5 Dak. 180, 38 H.W. 52, the
court said: 1 The Secretary of the Interior, and under his direction,
the Commissioner of the General Land Office, has a general "supervision over all public business relating to public lands." What
is meant by "supervision"? Webster says supervision means "to oversee ior direction; to superintend, to inspect; as to supervise the
press for correction." And, used in its general and accepted meaning,
the Secretary has the power to oversee all the acts of the local officers for their direction, or, as. illustrated by Mr. Webster, he
has the power to supervise their acts for the purpose of correcting
the same; and the same power is exercised by the Commissioner under
the Secretary of the Interior. It is clear, then, that a fair construction of the statute gives the Secretary of the Interior, and
under his direction, the Commissioner of the General Land Office,
the power to review all the acts of the local officers, and to correct, or direct a correction of, any errors committed by them. Any
less power than this would make the "supervision" an idle act - a
mere overlooking without power of correction or suggestion.1 Defining
the like term in State v. F.R. & M. V, E.E. Co., 22 Nebr. 313, 35
N,W. 118, the court said; 1Webster defines the word "supervision"
to be "the act of overseeing; inspection, superintending." The
board therefore is clothed- with the power of overseeing, inspecting,
and superintending the railways within the state, for the purpose
of carrying into effect the provisions of this act, and they are
clothed with the power to prevent un.iust. discrimination against
either persons or places. It seems to us that the term 1 general
supervision* is correctly defined in these cases. Certainly a person
or officer who can only advise or suggest to another has no general
supervision over him, his acts or his conduct."
Similarly, it would seem that the Board-s power to exercise "general
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193
supervision" over the Federal reserve banks would include the power to
require the Federal reserve tanks to carry out the purposes of the Act and
to correct any errors which they nay have committed by deviating from the
terms of the law.
On the other hand, there are some cases indicating the limitations on
this power of general supervision.
One of such cases is that of State v. Bronson, (Mo.) 21 S. W. 1125. '
The constitution of Missouri provides that "The supervision of instruction
in the public schools shall be vested in a board of education whose powers
and duties shall be prescribed by law".
The legislature passed a law
creating a commission to purchase the books necessary for use in the schools.
This law was objected to by the directors of a school district as being unconstitutional on the ground that it was in violation of the powers vested
in the board of education by the constitution.
The court held that the selection and purchase of the school books does
not come within the fair meaning of the words "the supervision of instruction"
and the law does not violate the constitutional provision.
In so holding
the court said:
"With such a general system of public schools it mast
be evident that when,the constitution says the supervision of instruction shall be vested in the state board of education, it
docs not mean that this board shall enter into the details of
giving instruction or carrying on the schools. All this is and
inay b e left to subordinate officers. It means no more than a
general oversight over the matter of instruction."
In the case of Roanoke Oemetary Co. v, Goodwin, 101 7a. 605, 44 S.E.
769, the lower court had reviewed the reasonableness of regulations prescribed by the cemetary association for the conduct of its business and the
fees charged for opening graves arid had issued a decree whereby the court
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1-94
undertook to proscribe its own rules and regulations for the management
of the affairs of the company, even going to the extent of determining the
fund out of which the salary of the superintendent should be paid.
The
Supreme Court of Appeals in Virginia held that the decree exceeded the power
of the court and said:
"*t is not permissible for a court to thus substitute its
ovm- business discretion and judgment for that of the company;
its visitorial powers have no such scope. 1 Clark & Marshall, p. 547."
Similarly, it .xdght be said that the authority to exercise general
supervision over the Federal Reserve banks does not carry with it the duty
to enter into the details of operating the banks nor the authority for the
Federal Reserve Board to substitute its own business judgment and discretion
for that of the directors.
In my opinion, the Board's power to exercise general supervision over,
and to exaaine into the affairs of, Federal reserve banks includes the power
and carries with it the duty to see that Federal reserve banks do not exceed
their corporate powers; that they do not discriminate in favor of or against
any class of the public or any member banks; that they preserve and protect
the banking reserves of the country with which they are entrusted; that they
do not do anything which may endanger their solvency or the soundness of
their currency; that they carry out faithfully the purposes of the Federal
Reserve Act; and that they comply in all respects with both the letter and
spirit of the law.
I am further of the opinion that this power carries with
it the power to require the Federal reserve banks to cease doing anything
;-7hich is ultra vires, and to correct irregularities abuses or dangerous
practices of any kind in which they may engage.
supra,
11
As stated in State, v. Moreland,
The terms 'general supervision and control1 vest the banking board
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195
with duties of a very high order, and they ore not to "be perfunctorily
discharged, but to he administered with the highest degree of intelligence
and discretion."
On the other hand, I sun of the opinion"that this power does
net carry with it either the duty or the power to interfere in the details of
the operation of the Federal reserve "banks or to substitute the Board's own
business judgment and discretion for that of the Directors of the Federal reserve banks.
The above is not intended ap a precise definition of this power but
merely a general expression of my views on the subject.
(d)
Provisions Regarding Expenditures>
The only provisions of the Act which specifically give the Board control over the expenditures of Federal reserve banks are those quoted above
which make the salaries paid by them subject to approval by the Federal Reserve Board.
The most important provision,regarding the expenditures of Federal reserve banks is contained in Section 7 which reads, in part, as follows:
"After all necessary expenses of a Federal reserve bank
have been paid or provided for, the stockholders shall be entitled to receive an annual dividend of six per centum on the
paid-in capital stock, which dividend shall be cumulative.
After the aforesaid dividend claims have been fully met, the
not earnings shall be paid to the United States as a franchise
tax except that the whole of such net earnings, including those
for the year ending December thirty-first, nineteen hundred and
eighteen, shall be paid into a surplus ftind until it shall
amount to one hundred per centum of the subscribed capital stock
of such bank, and that thereafter ten per centum of such net
earnings shall be paid into the surplus.
"The net earnings derived by the United States from Federal
reserve banks shall, in the discretion of the Secretary bo used
to supplement the gold reserve held against outstanding United
States notes, or shall bo applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secretary of the Treasury.
Should a Federal reserve bank be dissolved or go into liquidation,
any surplus remaining, after the payment of all debts, dividend
requirements as hereinbefore provided, and the par value of the
stock, shall "be paid to and become the property of the Unitod
States and shall be similarly applied,li
The first paragraph says in substance, that after paying or providing
for "all necessary expenses", paying their dividends and transferring certain
portions of their net earnings to their surplus funds, the Federal reserve
banks' shall pay the remainder of their net earnings to the United States as
a franchise tax.
This gives the United States a contingent interest in the
earnings of the Federal reserve banks and makes it important that their expenditures and their accounts shall be scrutinized by some representative of
the Government, in order that the Government may not be unlawfully deprived
of any part of its franchise tax.
There is no specific provision in the
however, providing special machinery for the performance of this function
and it would seem that this duty must devolve upon the Federal Reserve Board
as part of its duty to exercise general supervision over the Federal reserve
banks.
In my opinion this makes it the duty of the Federal Reserve Board
to examine into and to supervise in a general way the expenditures of the
Federal reserve banks and to make sure that such expenditures are within
the corporate powers of the Federal reserve banks, are reasonably necessary
for the conduct of their legitimate business, and are never made for the
purpose of unlawfully depriving t$e United States Government of its franchise tax or for any other unlawful purpose.
It may be remarked in passing that the Federal Reserve Board apparently
performs this duty through its examining force, which calls attention in its
reports of examinations to any expenditures by the Federal reserve banks
which appear to be unwarranted or questionable in any way.
There are certain other considerations which might be pointed out In
connection with this duty of the Board:
-20(1)
X-44?l
1 9 7
The purpose of the provision, that the excess earnings of
the Federal reserve hanks shall he paid to the Government as a franchise
tax was not so much to provide a source of revenue for the Government as
it was to take away from the Federal reserve banks the temptation to conduct their operations with a view of making large earnings, in order that
they night regulate credit and conserve the hanking reserves of the country
without being influenced by the desire to earn money.
(2)
Section 7 also provides that the funds derived by the United States
from the franchise tax shall be used only for two specific purposes;
(a)
To supplement the gold reserves held against
outstanding United States notes, or
(b)
To reduce the outstanding Ainded indebtedness
of the United States.
This is important in this connection because it negatives any argument
to the effect that the purpose of the law is not frustrated if the earnings
of the federal Reserve Banks are used to defray the expenses of any department of the Government,
Any unwarranted payment by a Federal reserve bank
to any bureau of the Government may serve indirectly to divert money from
the two purposes specified abbve &nd apply it to a purpose different from
that contemplated by Congress,
(e)
Conclusions as to Board's General Administrative Duty.
A consideration of the above provisions of the Act and principles of law
leads me to the following general conclusions:
1,
That the primary duty of administering the Federal reserve banks
is vested in the board of directors of each federal reserve bank and, therefore, they have the primary responsibility of seeing that all expenditures
are proper both from a business and a legal standpoint.
-212.
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198
It is the duty of the Board to examine into and supervise in a
general way the expenditures of the Federal reserve tanks, to the end that
they shall be kept within the corporate powers of the Federal reserve tanks,
shall "be confined to such as are reasonably necessary to the legitimate
operations of the banks, shall not improperly reduce the franchise tax paid
to the United States and shall not be made for any unlawful purpose.
3.
This does not impose upon the Board the duty of passing upon the
reasonableness of every minor expenditure of the Federal reserve banks,but
it does impose upon the Board the duty of being constantly on guard to check
any unlawful, improper, unwarranted or unreasonable expenditures.
4.
The -^oard is not required to approve expressly any expenditures ex-
cept those for salaries.
5.
Inasmuch as the franchise tax is to be paid into the Treasury and
to be used for specific purposes, it is equally as improper for the Federal
reserve banks to make unwarranted payments to any department or bureau of
the Government as it is to make such payments to private individuals.
6.
On the other hand, the Federal reserve banks have a right to
pay any bureau of the Government any bona fide, reasonable amount for -apy
service which that bureau may" render to them and which they may actually
need in the conduct of their business.
7.
In determining what is a reasonable amount, both the" Federal re-
serve banks and the Federal Reserve Board, in my opinion, are primarily
concerned with the value of the services to the Federal reserve banks and
what it would cost to obtain such services from some other source.
8.
In my opinion, the Board should see that any payments by the Fed-
eral reserve banks to any bureau or department of the Government, as well as
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1
9
any payments made to any private individual or corporation, should bo
r.iadc solely with the view of obtaining necessary services at a reasonable
cost and without any purpose of subsidizing each bureau, department, or
person.
II.
DUTY OF THE BOARD II THIS SPECIFIC CASE.
If this question had not been referred to the Board by the Federal reserve banks I doubt that it would be necessary for the Board to inquire especially into it or pass especially upon the reasonableness of this expenditure by the Federal reserve banks, because Federal reserve banks obviously
are justified in obtaining this information in some w/Exy and the expense
clearly is less than the value of the information to them.
The fact is,
however, that the Governors of the Federal reserve banks at their recent
conference referred this question to the Board with the understanding that
the Board would confer with the Comptroller of the Currency and arrive at an
understanding as to what charge should be made by the Comptroller for furnishing the Federal reserve banks with copies of reports of examinations of
national banks; and these circumstances would seem to impose upon the Board
the duty of passing upon the reasonableness of the amount to be paid by the
Federal reserve bank for this service, which is primarily a question of
policy or judgment rather than a question of law.
In my opinion, the ^Board should consider this question from the standpoint of the Federal reserve banks» and the primary considerations are:
1.
Whether the amount proposed to be charged is reasonably commensurate
with the value of the service to the Federal reserve banks under all the circumstances; and
2,
Whether such charge is in excess of what it would cost the Federal
9
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200
reserve banks to obtain such information from socio other source without
causing undue embarrassment to then or unnecessary burden to their member banks.
I think, however, the Board may properly consider the broad question
whether or not the payment of such charges by the Federal reserve banks would
in effect constitute a subsidy to the Comptroller's office, an unwarranted assumption by the Federal reserve bonks of part of the expenses of examining
national banks, or any other violation of the purpose of the law.
If the
Board should decide to inquire into this question I think the Board should
bear in mind the following considerations:
(a) The fact that the Federal reserve banks are authorized by law
to obtain this information without any expense to themselves, by making
special examinations of their member banks and assessing the costs thereof
against the banks examined.
(b) The question whether or not making their own examinations of
member banks would cause the Federal reserve banks any unnecessary embarrassment or would result in an unnecessary duplication of work or an unnecessary burden on the member banks,
(c) The fact that such information has in the past customarily
been obtained from the Comptroller of the Currency, first, free of cost, and
later upon the payment of a fee of $4.50 per copy.
(d) The fact that the Comptroller is not required by law to furnish
this information to the Federal reserve banks, and the banks can obtain it
from him only on such terms as he sees fit to prescribe.
(o) The fact that the Comptroller has stated his intention of
raising the charge to $10 per report, which carries with it the implication
that he will not Airnish it for less,
301
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X-4431
My own personal opinion is that a fair consideration of all these
elements would justify the Board in reaching the conclusion that the purchase
of this information "by the Federal reserve "banks from theComptroller of the
Currency and the payment of the price or charge fixed "by the Comptroller is
not an unwarranted or improper expenditure "by the Federal reserve "banks.
I do not consider it to "be the duty of the Board to inquire into the
method adopted "by the Comptroller in arriving at the amount to "be charged
for his service nor the disposition which he intends to make of the proceeds,
these "being matters pertaining solely to the internal administration of his
office.
If, however, the Board decides to go into thdse questions, I think
the following additional considerations should "be "borne in mind:
1.
The Comptroller has recognized the fact that the law requires him
to assess the total cost of examining national "banks against the "banks
examined, and that he has no right to require the Federal reserve "banks to
hear any portion of such expense.
2.
On the other hand, he has argued, and I think correctly, that he
has no right under the law to assess against the national "banks anything
more than the actual costs of making their examinations, and, therefore, he
would "be doing the national banks an injustice if he should add to the
costs of such examinations the cost of furnishing information to the Federal
reserve "banks.
In other words, as I understand his position, it is that
he must assess the total costs of examining the national banks against the
national banks, but no more; and that if he furnishes any information to the
Federal reserve banks he most require reimbursement from them for all additional expenses to which his office is put in furnishing such information.
3..
He also states that this expense includes more than the bare cost
of nn.iring additional carbon copies of the reports of examination, and that
203
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X-4431
it is extremely difficult to arrive at the precise amount it costs his
office to furnish such additional information to the Federal reserve banks.
4.
The Comptroller's administrative problem is to determine what pro-
portion of the total costs of (a) examining national banks, and (b) furnishing
Federal reserve banks with copies of reports of such examinations, together
with such other information as they desire, should properly be assessed
against the national banks as expenses of making examinations, and what proportion of such total sun should be paid by the Federal reserve banks for the
information furnished to them.
If the Board decides to go into the last question and it is found to
be impossible or impracticable to determine precisely the proper apportionment of these expenses, I an of the opinion that the Board would be justified in approving the payment by the Federal reserve banks of any flat
charge which in its opinion is a fair estimate of their proper share of the
total expense of obtaining this information and f u r n i s h ! i t to then; and
I do not think that the Board could be criticized justly for failing to insist upon a precise mathematical formula for determining this amount.
Respectfully,
Walter Wyatt,
General Counsel.
203
FEDERAL RESERVE BOARD
WASHINGTON
A D D R E S S OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE B O A R D
X-4432
September 29, 1925.
SUBJECT:
Election of Class "A" and "B" Directors.
Dear Sir:
This will confirm my telegram to you
of this date advising that the Board has designated November 17, 1925, as the date for opening the
polls for the election of Class "A" and "B"
directors and that no change will he made in the
group classifications which have governed in these
elections for the past several years.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO CHAIEMAH OF AIL F.R.BANKS.
204
X-4435
TRJ:~p
SUPY :rJLi::l}_f.CI.!l?;J·'J'
Office of
t~e
Secretary
W.ASHING~·ON
October 6, 1925.
The Govnrnor,
Fed.c:re..l Reserve Board.
Sir:
You a:ce horeby advised that th8 Dcpartrn.:mt has raferr8cL to the Disbursing
Cle::-k, 'l'rsa.su..:'.'y Depe.rtme:nt, for paym:mt: the account of the Bu::es.u of Engraving
11Jjd Printing for y;rs:;?a.dng Federal reserv0 nctes during the ;p.a:dod Sdpternber 1
co Septelliber 30, 1925, amounting to $112,300.00 as follows:
Naw Yo:".:"k
?hiladul:?hia
400,000
680,000
61..0,000
10:000
6ou,o0o
200,000
100 ,,:-·~(.,
100,000
_j_OCl, DOG
lvO,vGO
10,000
410,000
- - -380,000 - - '
--------·
2 J 100,000 .
,uv,OGG
20,000
j,OOO,OOO
400,000
200,000
300,000
600,000
200,C0G·
C1eveland
Chlcago
K.stnsas City
I'allas
Sa..'1 Francisco
400,000
100,000
80,000
200,000
.
3,C.{J0,000 sheets at $37 .~0 per M ••..•......... $112,800.00
The charges against tha several Fed.eral Reserve Banks are as follows:
sation
Plate
--·--Printing
$ 7)080 •
$ 3,280
C~ilj?CrlShe5~ts
.... . . . . . . . . . .
... .
New York
4oo,ooo
680,000
610.)000
600,000
200,000
100,000
410,000
3,000,000
Philad.el:phia
. . .. ..
Cleveland
Chicago
Kansas City ...........
Dallas
San Francisco
I
I
I
I
o
I
I
I
I
I
to
•
I
1
o
o
1
o
o
o
o
o
o
o
o
o
I
•
•
•
•
0
•
•
••••••••••
•
0
•••••••
12,036.
10)797.
10,620.
3 ,5i+O.
l, 770 •
5)576.
5 ,002.
4, 920.
1, 6~-0.
53,100.
2 ,bOO.
820.
_L0_]_.-~_0,32.
:Ma:t erie.ls
$ 4,630.
7) 956.
7) 1_3 7 .
7;020.
2 ,3l+O.
1,170.
L;.,
7Cj7.
.. ..LI--
35,100.
2-'ot.:~l
$15 ,o4o. oo
25,563.00
22,9.36. 00
22,560.00
7)520.00
3,760P00
15,ln6.oo
112,300.00
The Bureau appropriations will be reimbursed in the above amount from the
indefinite ap:propriat.on "Preparation and Issue of li,ederaJ. Eose~·re Notes, Reimbursable", and it is requested. that your board cause such indefinite appropriation to be reimbursed in like amount.
Respectfully,
R. Vl. Barr,
J..cting Deputy Com'TdsslonGr.
205
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4437
October 15,
SUBJECT:
Expense Main Line, Leased Wire System, September,
1925.
1925.
Dea,r Sir:
Enclosed herewith you will find two mimeograph statements, X-4437-a and X-4437-b, covering in detail operations of
the main line, Leased Wire System, during the month of September, 1925.
Please credit the amount payable by your bank in the
general account, Treasurer, U. S., on your books, and issue
C/D Form l, National Danks, for account of "Salaries and Expenses, Federal Reserve Iloard, Special Fund", Leased Wire System,
sending duplicate C/D to Federal Reserve Board.
Yours very truly,
Fiscal Agent.
(Enclosures)
TO GOVERNORS OF ALL :DANKS EXCEPT CHICAGO
206
X-4437-a
REPOFT SHOWING CLASSIFICATION .AiJD NUI\:-·ER OF WORDS
TILA.NSMITTED OVER MAIN LINE OF THE FB:CEF.AL RESERVE
LEASED WIRE SYSTBIV: J!uR T:TJ£ MO}~J:I O:f.i' SEPTEMBEil., 1925.
Fed. Res.
Jank Business
From
Per cant of
Tctal Bank
:Sus in es s ( *)
Trea.sury
Dept.
llu.s ire e s s
W<J.r
Finance Corp.
business
Total
------------------------------------------------------------------------------------j0,..2.63
4::n4
Boston
N·::w York
Philadelphia
Cleveland
Richmond
At1~mta
ChiC"l.gO
St. Louis
Minnaapolis
K<msas City
Da.llas
SBn Francisco
'rota1
26·;:149
15 7, 7.26
33 1 065
66' 731
4o ,399
58,629
92,422
3·27
19.70
4.13
(). 34
32,616
69,468
56,194
9'j,l79
4.07
7.02
12.39
suc,462
1J).uO%
67,861
5·05
7·32
l~·a~
.
()
G.63
r
8,,1.&94
4,366
5,485
4,336
6,687
8,289
5,464
3,258
5,186
2,914
9,lt30
25
., ....
.
~,
166,620
37,454
72,216
44,735
65,316
100,736
73,325
35,574
74,6 5lr
59,108
108,609
.Gs, 423
25
868,910
324,571
Ilo.'l.rd
272,i:)92
51,466
213
To tB.1
1,073,354
119,089
233
1,1~3 ,4sr::•·
..... ~q·
Percent of Total
89.93%
10 .c5·%
.02%
( "') Th0t>e i;ercentat;es used in cal-
cu1atir.g the pro rEta sl1n.N of
leAsed wire expenses as shown on the
accompanying statement (X-4-LI-3 7-b)
X-4437-b
REPORT OF EXPENSE
MAIN LINE
Fl:DERAL RESERVE LEASED WIRE SYSTEM,
S.EPTE!vTBEI~,
1925.
----------------------------------------------------------------------------------------------------------------------Payable tc
Federal
?ro Ea.ta
ShA.re of
Opers.tvrs'
Sala.ri es
N2me of L8Ilk
Operators'
Overt irr,e
Wire
Ben tal
Total
Expenses
Total
Expen.::;es
Reserve
Board
Credits
-------------------------------------------------------------------------------------------------------r---------------
s 250.00
::_<est en
lT C"N Yc:rk
't
1,071. 32
216.66
2GO. 33
212.50
Phi la.dulJhio.
CltlVelrmci
r~ i '~r: xc.n ~1.
Atlsr. ta
ChjcPgl')
St. Lcu::.s
y"
$
250.00
1,071.32
216.66
2GJ.33
212.50
.-,.-.:--
225.;::c
c:.c:.)•'-'v
(*) 3,637-<:12
3,037.92
2-'-"C. CC
22::· .JC
lS). 34
:\1inn.:;apvli s
K<'''D sns C:i.ty
Dctlln. s
San Fr::mcisco
::.1 d :3 ! .. ~-1.:~ ~i.e s c:r~te I'0'3.rd
]
$
1&3.34
•275.64
275.64
2)1. ((,
251. ·JG
1G0.c~,.,
l3C.~O
15,337·31
1
$
656.34
3,954.08
05
Q r")r7
0~0.""'
1,673·96
l,Olj,61
1 J ),(.9
'"'3
''"• c.
2,)15.29
1, 7G2.0b
Gl6.91
1,742.20
1,409.02
2,4s6.s6
A
tt)
250.00
l ,071. 32
216.66
2<30.33
212.50
225-00
3,637·32
200.00
, "'3 31127).64
..1.. (,...)
•
-
251. (jC
1GO.OO
-}
'I'
4:6.34
2,8b2. 76
61:2.2'9
l,3J3.G3
(# )l , \)0 5 · 7G
1,2L~4. 23
~-\··
'""' '6
&j.i.,)J.'j.v
1,502.06
633 ·57
1,466.56
1,158.(,2
2,306.56
15,337·31
--------------------------------------------------------------------------·--------------------------------------------To tal
$14,6::.2.D
$ -
({/:)
(*)
$2v ,C7l.4G
IliClu.':Gs t2C4.67 for brsnch !line bets:ineJs transmitted. ever r:E.i..'1 line circuit.
Incl-;_F>s S'1.laries of iN.3.shingt:on opera.tors.
(&)
Crcd:~
(a)
Received $7.32 from War Finance C0rporation and $2,242.22 from tLe Treasury
Dspart'Tient ccvering business for the month of Septeniber, 1:125·
J.rnom1t rein.bur::;a.ble to Chicago
(b)
t
$t,9l3.71
(b)1,3lj.o6
$13 '292.4-4
208
FEDERAL RESERVE BOARD
WASHINGTON
X-4438
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 19, 1925.
Su"bjcct:
IIolid..."Lys duri:.-,[; Novcn'bcr, 1925.
Dear Sir:
On Tuescl.ay, Novcnbor 3rct, tho f~llordnc Federal
Reserve :Janks D.J."'lc1 :DrJ.nchos \7ill "Jo closed account
Election Day in their respc:ctivo Stntcs: !Jew York,
::Uff'J.lc, Philadelphia, ?it tsburgh, :Llicrnond and Detroit.
Please include credits of Noven'ber 3rd for New
York, Fhiladol:phin., Ric:hnond. :::md Detroit in your Gold
Fu:1d Cloari!lC of the follovrinc: d::ty and r..oke no shipeeuts of Federal Rcsorv..; notes, fit or ur..fit, on that
dn.tc, for account of tho Hoe:.d Offices 1:1cntioncd.
On Wedl1esck"ly, Novcriber 11th, .Arnisticc D:ly, there
will be :10 Gol,:l Fund or },odcr."ll 3.cserve Note Clearing
c::nc:. tho boo3::s of tho :Jon.rd will be closec"!.. For your
infoiT.lD.tion, t:1o offices of t:1o Joarcl a:1d the follovline
:J[uil:::s and. ::rr·nc:-,es \7ill be ope::1 f::r business as usual:
!oston, Ncr: Yorl:, :uffalo, CleveLm:::l, Cincinnati, .Atlc..:1ta
anrl Dctroi t.
On Thu:csday, Uovcnbor 2Sth, Thanl::sr;iving Day, there
will be no Gold Fund. or Fodoral Reserve ~;otc Clearing,
ccnd the books of the :oard rrill bo closed.
Vory truly yours,
J. c. Noell.
Assistant Secretary.
TO GO'IJ'E:RlJORS OF
~\.LL
F. Il. :D.UTI".S •
20~3
X-4440
FEDERAL
RESEP..7E
BOARD
for Release in l'orning Papers,
ITednesGay, Octo1er 28, 1925.
The
follo,~line;
is a SU'TILa.ry of r.;eneral business
throu;hcut the several
Fericra:. Rus;;;rve Distrlcts, basccl. upon statistics
for t 11,:; c:Ln th2 of Se:ptC>r;;·oer .<>.nd October, as conta:bed in tl-10 forthcoming issue of the :F'ederal
Reserve 3nlJ.etin.
~~rd fir.ar~cia::. cond~.ti:ms
Production in basic industries nnd factory employ:nent increased in Septe01.ber.
[lt
Distribution of cow.oodities, bot!J. e.t ·~·holesale and./retail, continued
in l.al'C0 volume, and the level of prices rer.:airled practically unchanged.
The Federal Rcs::rvc
}?)t:l-rd.l
s ir:dex of }·Jrolluction advanced 2 per cent in
September, not·.-ri t:hstanding the suspension of anthracite mining.
Tho vo lu.,.'Tie of
out:;;m.t increased ccnsidorab:.y in tho iron and steel, bituminous coal, and textile industries, while tno d.ccreasos v;!-1ich occr.. rrco. in some other industries
WOl'e relatively small.
AutomobiJ.e production was
l;~rsor
than in August, but
continued to reflect the effects of curte.ilr:ent incioeTtc:.l to changes in models.
Eun.ber of e::1pbyees on factory p:1.yrolls in Ee})temter was larger than in Aut:,'Ust
in nearly all :ceporting indl'_st::·ies.
:Euildir•g contracts awarded during September
did not oqu,<>,l the record level of August, but continued large as compared with
\.:arlL:r
:~1o:r..:hs.
Total contracts awnrdcd d.uring the first nine months of this
year were ncGrl:" as l[:'·.rgc as for the entire year 1924.
Crop condi tiorls, as reported by the Dopartm..;nt of Agriculture, showed consid.crablc i;-Jprovc;nor.t in Soptember, and tho indicated yields of cotton, corn, oats,
barley, and hny were larger thon a raonfh earlier, while forccat:ts of wheat and
tooacco :?reduction were
slightl~r
sr:::caller.
Marketing of crops increased further
in Septe..:ber, but '"as scaller than last year.
21.0
- 2-
Trado.
sales in c.ll li..!CS cxct."-pt dry
.roro
G"Ois
O.e-,urtme:.1t stcro a..ld ue.il orC.er
h~ltsco
il:.croo.so in September and wore ll\rser
l't dcpnrtnont
stor~s
a.lso
i:1cr~rs~d.
la.rg.:~-r
sl!cwod
t~
tbrul a
c::1oid~rnbly
a yct'r
li~os
except groceries
So.los of ·
&:Oro tr.a.:t t'!le usual.
St-1ck.s of mercnt'..ndise
t'$<).
i:J. September nora thl..n usur.J. a.:1d o.t tho end
of the mouth were 4 per cent greater tha.'"l a yev..r c.go.
leading
:~eo.r O.f!.O.
r~Jorted
'i'lholesale firms in all
umsller stoCks on September 30
th~
a
uonth t-arlier.
:!:l<.'l
Tot':.'~/ :10rc;anuise :!rcit:nt car locdit:gs in Septea..:bor wore lar£'8l' thon
~in.g
tho sc::&o r.o:t:th of any prev!.ot:.s y\lar.
in Au,;u.st, cn:i!lf; to t'!lc
pro~~cts we~o
~t!ll'a.ci to
Coal shipments were smollor then
striko, t'.nd sh:pmonto of coal and of grain
amnller than in September of last yver.
Pr1££!.
Th..) lovol of l'rholesc.lo prices, ne
:.:c~su.rud
by the indox of the Burea.u of
labor Statistics, declined slic;htly in September. .Aniong .groups of commodities
grains, woolen
b()Oc!s,
ant:. f'C.l'lli turo Ghowod price decl i:1os, mile p ricos of
con.l nnd bu'lld-t.ng Detorio.ls e.dvrulccd.
Ir. tho i'irr;t hal! of Octobor pricoo of
grains, vool, a.z:d rubber i.J.cr\W.sed, r.hll& )rict.s of shOe]), hogs, sugar, rod
cotton doclinod.
At oe:nbor ba:llts in leadi:1g cities tho volume of loans, both for cocnorcinl
purposes a:J.d on socuritics, incret.sod. futhor
be~wea::t
Scptombor 16 and October
14, a.'"ld n.t tho mid<ile of October tct:ll loa.ns of those bcnke were !lOo.rly
$650,000,000 lo.r.g\lr thc.:1 at t~o end ::-f
Jul:r. Du.:oine
t~e
samo period demnd do-
p?si ts of these bn:Jcs i:lCroc..seC:. b;- 1-jout $360,000,000, lnlt wore below the level
of tho bcgi:oi:-.g of the yeo.r, while the voltm10 of their b:>rrowings o.t the rosorve ba.Jks increased b7
ab~ut
$200,000,000 to the big::test
p~int
of tho yer.r.
..
.
- 3-
!otnl voll.'"::lO ot rocor:o i:o.nl: crod! t eut:tta..cll.'&
then at e::r:1 oth.:r t".n.o \lUring 19£.5,
-:;n.s lar~r
re:.:l~.:ti.:c,- i:-ct~c.•a.ocs
i:1 OCtober
e.uring tho two pro-
cudi-t? ;.o:'ltbs bt>th in di s.:::m.J.ts fc..r t:.lDb.3r bnr.ks a:ld i::. nccoptm:cos 'bollbht in
,po::. r:-.rkot.
Thif.' ;;r:nrth l:as boon cno pri.mo.::'ilr to the socsonel incroo.so dnr-
ing tho poriod of about $1U>,OOO,OOO in
nls., bo\)r c.
3
c.>~a:&.oorl:'.blo
curr\}~C7
i:1 circul.:..tion tmd
t~oro hns
.i.=-croM<' .1!\ 411Cmbor 'bank rcls..,n-lll Lcla.nct~s, ncco::&p~nt;
&rowth in their deposits.
In October tho mtw on prbe cot::10rcie.l p39cr r.ero fimer c.nd tho r"nor.nl
r ....t? O!l coJ.l lcanP n.veraged hi&}ler tba:l in Sopta:btn-.
212
X-4441
FEDERAL
RES~RVE
BOARD
STATEMENT FOR 1HE PRtSS
For Immediate Release.
October 28, 1925.
_90lWITimJ
S~te::1ber
OF ACCEPTAL'l"CE lviA.c't:KJJ.;T
15, 1925 to October 21, 1925 •
.Accen ta:1.ces.
The acceptance market during the five week period ending October 21
was characterized by an increasing supply of bills wi til a moderate demand
which resulted in a growth of dealers' portfolios.
~his
was particularly
true of the New York market, for a more active dcma:1.d was reported from
Boston and Philadelphia, while t."lc Chicago market continued dull on both
tho supply and demand sides.
The increase in the total
vollli~O
of bills in
the market was attributed in part to seasonal drawings against cotton and
in part to firmer money conditions.
The only
cha~ges
in bill rates in
New York were an increase of 1/8 of one per cent in dealers 1 rates on 120
day and lo:1gcr maturities, and an increase in the New York Federal Resorve
Ba:1...1{: 1 s minimum buying rate on bills of 45 days or shorter rnaturi ties from
3 1/8 to 3 1/4 per cont.
On October 22, rates were quoted in the Now York
market as 3 3/8 per cent bid and 3 1/4 cffered for 30 day bills, 3 1/2 bid
and 3 3/8 offered for 60 day bills, 3 5/8 bid and 3 1/2 offered for 90
day bills, 3 3/4 bid a~1d 3 5/8 offered for 120 day bills a~1d 4 bid and
3 7/8 per cent offered for 5 and 6 months bills.
21.a
FOfu'"'EITtJrl: Oi' CHARTER OF NAT!Ol!AL Il.A:TI{ FOR VIOLATION OF LAW.
The Comptroller of the Curro~cy early in 1921 requested the
Department of Justice to i~stitutc suit to forfeit the charter of the
First Nntiono.l :Bank of Hagerstown, Hagerstown, Maryland.
This nctio:1
was trucon pursuant to the provisiQ~s of Section 5239 of the Revised
Statutes and Sectir,n 2 of the Federal ~eserve Act, because of continued
violations of law by the r.ational barJ.::, among them being failure to
maintain the reserves rcquirud by law.
In order to comply with tho
requirements of Section 2 of tho Federal Reserve Act that such proceedings be instituted upon direction of tho Federal Reserve 3oard, the
DoQrd upon request of representatives of the Department of Justice
passed a resclution authorizinG and directing the Comptroller of the
Currency to institute suit in his name to forfeit tho charter of the
First National Daru~ of Hagerstown for violation of stat~te.
Tho United
States District Attorney at Dal tir:1ore thereupon filed suit in the United
States District Court age.inst the First National JJank of Hagerstown
alleging a number of violations of tho liational :Sank Act and tho Fedoral Reserve Act by this bank and its officers and praying tho Court
to appoint a receiver to protect tho depositors of the bailie.
The
Court granted the prayer and a receiver v;as appointed.
A fer1 days
after the proceedings were instituted tho bank was reorganized and
new officers placed i~ charbe and, with tho consent of the Comptroller
of the Currency, the receiver was discharged and the bank reopened.
JL~ appeal was truccn by the bank, however, to the United States Circuit
Court of Appeals from the action of tho District Court in appqinting
a receiver.
This Court dismissed the appeal without exprossly passing
upon the question whether the receiver was lawfully ap?ointod, but
inQicated in no uncertain tcrrr.s that it co~sidercd the course which
had been followed entirely proper under the circumstances.
A copy
of thu opinion of the Circuit Court of Ap::_Jeals is attached hereto.
214
X-4...:43
]'!Ii.ST
~T.AT.
B.A.lTK C:?
H.AG:::::lSTO"ff~T
et o.l. v. ChiSSilTG&,, Comptroller
of Currency,
( CirC'lit Court of .Appvtls 1 F>ur'Gl'. Cu~'Uit.
Appeal fl'Or.l the District
of llfu.rylo.nd, 'J.t Bal. tir:tora;
Co~.u·t
Murch 1, 1922.)
of tho Unitod Sto.tos for the District
J,)lm C. RosG, Judgo.
Suit l)y Daniel R. Crissinger, as Co.r;ptroller of the Currency of the
United
Stat.~s,
against tho
Fi~~:;t
1Iational :Bo.nk of Hagorstown, o. national
oaru{ing corporation, and others.
Froo
.::u.~
order o.;r,>poin ting o. rccci vcr
for the h"l.nk, dcfend&'1 ts ap:pce.l.
E.
F~
Ho.gor~ltovm,
Winc;ert a.nd Miller WL1.gort, both of
Md., for
appelb.nts.
Robert R. Ccroo.n, U.
s.
Atty., of Ba.lti:noro, Md., for ap:polloo.
Before IGWP and WADDILL, Circuit Judges, c.nd McDOWELL, Dictrict
Judge.
W.A!>DILL, Circu.i t
Jud:~_;o.
On the 28th of Sopter:1bor, 1921, the
appellee 1 De.niol E. Cri ssint;·Jr, Co::t;?trollor of tho Currency of tho United
Stat()f.' of
~boricn.,
acting on l1is mm initiative, o.nd o.t the insto.ncc of
t:1e F0dorc.l z;,·:servo :So2rd of tho United
State~·,
filed the oill in ::::guity
in this cause against ·tho :Fi:i.·st Hationa.l :Ba11l;;: of Hagerstown, Md., its
officers and. directors.
Tho puryone of the bill wa.s to bring nb0u.t
the forfeiture of tho ba.nk 1 s ch!lrtor, 1.rr.der soctionB 9786 and 9831 of
tho .bu.:J.k of certain provisions of tl'.e Fedor,ll
.
b:;~.nking
la·;'1s of tho United StF.. . tos •
:r-o~e:rvo
n.'1Ll the
:~ti0r~al
215
-2-
In the bill of complaint the officers an<l directors of the bank,
and the bank itself, are charged with failure to establish and maintain
the reserve required by law;
making now loans without uaintaining the
resEr vc required by 1...-.w;
:po.yi:1g cash di vidonds when the reserve
below legul requiromon t;
m:..:.ki.:.1g oxcessi ve loa:::.s, including loa..."1.S to tho
cashier, officers, ru1d directors of said
firms, anQ corporations;
mcki"~
bar~,
\73.S
as well as other persons,
excessive loans to corporations in
which officers of the bank ':'icre financially interested;
m..'"lldng excess-
ivo loans to the relatives of the officers and directors of the
b~"lk;
entering into an agreement with another bruiking institution with the purpos~
of covering up violations by it of tho banking laws of the United
States;
lending money, taking as security therefor tho bank's own stock;
purchasing for investment, sha::"cs of tho CLI.pi tal stock of private corporations;
e~loying
and. koe:;>ing in the
crr~;loy
of the brull:, a cashier
known to the directors to be engaged in cxtonsive speculative trons"'!
actions in stocks
~"ld
bands.
Sections 9786 a':ld 9831 of the Com...nlcd Stntutcs, referred to, are
as follows:
"Should an~r national banking association in th3 U:n.i ted States no·:•
organized fnil uithin one year after the nassage of this act to become
a member bank or fail to comply with ~1y- of the provisions of this act
applicable thereto, all of the rights, privileges, and franchises of
suCh associ~tion granted to it Ul1Qer the National Bank Act or under the
provisions·of this act shall be thereby forfeited.
~\ny noncompliw1cc
with or violation of this act shall, however, be determined and adjudged by ~"1.Y court of the United States of co~ctent jurisdiction in
a suit brought for that purpose in the district or territory in which
such bank is located, ~"1.dcr direction of tho Federal Reserve Board, by
tho Comptroller of the Currency in his own n~ before the association
shall be declared c.issolvcd. * * *"
Colll!?• Stat .• S.ec.9876, subscc. 6.
"If the directors of any national ~~'l!:ing association shall knowingly violate, or l:no~ingly ~orrr.it 011y of the officers, agents, or
servants b! tlie association to violate any of the provisions of this
216
X-4443
"':"3-
title all t:1e rig~1ts, :pri vi11)ges and fra:1chises of the association
shall oe thoro-by forfeited. Such violation shall, however, be determilwd nnd adjudged by a proper circu.i t, district, or territorial
court of the United States, in a suit brought for that purpose by
the Comptroller of tho Curr<.:ncy, in J.1is own name, before the association shall be declo.red dissolved.. And in cc>sos of such violation,
every director who participated in or asse:1ted to the same shall be
held liable in his personal and individual capacity for all damages
which the association, its shareholders, or any other person, shall
have sustained in consequence of such violation.n Comp. Stat. Sec.
9831 (liational :Banking Lm:).
Section 9826 of the U~1ited States Compiled Statutes (Act Ju..Yle 30,
1876, c. 156, 19 Stat. 63) provides that upon the ascertainment by the
court that tho facts warrant the forfeit"L:.re of tl.1e ·oank 1 s charter,the
Comptroller may appoint a receiver to close and wind up tho affairs of
the bank.
The complainant in this cause does not allege insolvency of the
ballk as a reason for the forfeiture of the bank's charter, but relies
solely upo:::t the irregu.lari ties charged and set forth in tho bi 11 as the
necessity for so doing, and complainw1t particularly
c~Utrged
that, upon
the filing of the bill, it would be necessary and imperative that a receiver should be appointed to hold
~~d
preserve the assets of the bank,
pending the hearing of the cause on lts merits, as otherwise the mere
institution of such a proceeding would result in large numbers of the
bank 1 s depositors, and especially those conveniently at hand, or early
hearing of the actioj1, wit}J.drawing or dema..."'lding immediate payment of
their en tiro deposits, which would operate to the serious diso,dvantage
of tho remaining creditors of the bank, as well as the owners thereof, .
and in the end render the institution unable to pay its remaining obligations.
ceiver.
Prayer was
accordir~ly
made for the appointment of a re-
217
X-4443
-4-
Tho bill rms duly vc:ri:fi(JG.. by :J.ffidavi t, [G1d upon the filing of
the same, the court. on the 28th day of September, 1921, certified U1at
in its j1.l.dgment it was necessary o.nd irrrporativo·;.:
and for the best in,.
torest of all l;arties concerned, th:1t a temporary recci ver slwuld ·oe
choso11, to hold and preserve the assets of tl1e bank Ulltil su.ch time as
tl1o hearing could be· had upon the bill of com1)laint and a:1S\70r thereto,
and appointed Robert D. Garrott as sucl1 recoi vor, who il:C1.'YleG.iately u:;;1on
executing tho bond, in the penalty of $50,000, roqu.irod of l1.im, possessed
himself of all the assets, effects,
llild
o state of tlw ba.'1k.
On tho 6th of October, 1921, t':J.O con;plo.ine::1t filed a petition in
tho cause, reciting as follows:
"First. Tr.nt since the filing of tho ·oill o'Z ccm],ilaint in this
case and tho a:ppointnon t of a receiver for the dofenc.apt bank by this
honorable court the defendants Henry F. Wingert and Miller Wingert, together with their brothers, Willia.r.:J. WL1gert and Lewis P. Win{~ert, and
their sisters, M.~rtha A. Wingert o. nd Julia :E. Reamer, and the cashier
of said bank, J. Edgar Young (hereinaftor called tho vendors), have
entered into a CO:::l.tract "i'Ti t:1 Messrs. AloxaJ.dor Armstrong, W~ Bladea
Lownclos, Emory L. Coblen, Cyrus Floc:::, <Jnd Har:.blocio:l & Company (hereinafter called the :mrchc.sors), whJrcby the scid vo::-:.dors bave legally
bound tnomsol ves to tr~lsfer to the said purchasers' for a co:lsideration,
all of the crq_Jital stock of tno dofc'1da...!t bnri!.: 0'\7ned by tho said voadors,
a;nou:1ti:1g L1 all to fifty-five hu::drod (5,500) s~mros, tho sru,1C con..
ztit·:tti:.;l~~ c. 1.:1ajori ty of tho authol'izod and outstanding ca1Ji tal stock
tJ:1."1'00f • II
The petitioner further <.::.verred that,
b~:
the agroemont sot forth in
the above-quoted rocital, tbc :::)resent officers of the bank, the dofoadant
directors a:1d the cc.s11ior, would forthvri th
take off oct
the
tcr~:1s
iv.:;::~odin tel;y,
n..1d
furt~1.er
te~1der
t:wir
rosig:v:~.tio:.1s
alleged t:1a t he was familiar with
of said al;roew.on't referred to in ··aragraJ7h 1 of the petition
as aforesaid, and arproved the
sa.:~c;
tmt it \las his belief and opinion
that the :::·mrchasers of tho stocl::: of t:t:e
ban~:
w"der the
:10w
agreeoent were
OXlJerionccd rod capable be.r..:::ing r::ten, rrho would in all respects cor:rply
to
21.8 '
X-4443
-5-
with the lo.'l7s of the United St:1teu rcgul:1ting the ma.nageme!'lt o.nd
control of nationo.l banks, nr:..d. he a3kt:d and prayed tl-.at the said receivership proceeding bo disc<LtL.uo::'., t?-.c o.ssets of the bank returned
to it, and. the suit disr.J.issed, upon the com:tnr; in of the receiver's
report showing his tr&""lsactions in tho nrer.1ises.
On the day of the filing of this petition, to wit, on the 6th of
October, 1921, B..L""l order was c:1tered recitin1:; that it was expedient so
to do, m1d that the discontinuance of tho receivership would not work
injury or dav.age to t!:,e bank or its
creditor~,
the receiver was withdrawn,
and f0rthwi th ordered to release and restore to the 11ank the assets in
his posso:rJsion.
The '-'ilP';lla:lts herein, at this time, upon the entering of the order
disco:J.ti:ru.ing tho
roceivers~lip,
made known to the court their intention
to tal::e an appeal from the docroe of the 28th of September, 1921,
an·'-
:pointi::1g the receiver; but they took no steps at the tir:1o to that end,
or to stay fu.r thor pr1J ce odi:1gs ::;:end.ing the appeal, until the 14th day of
October, 1921, whe:1 they presented their petition and assign.tnent
errors,
<:J.:~d
secured a.r.1. a.p!)ea.l,
wit~:co"'J.t
suspension or supersedeas.
of
In
the r::.oan time, a..'1d thereafter, the court :proceeded in tl:o ~ause;as conte~lated by section 129 of the Judicial Code (Comp. St. Sec. 1121), and
later on, on the 28th of November, 1921, on r:1otion of the complainant,
and with the consent and c.pj1roval of tl:J.B bank as then constituted, a.p:proved the action and doine:;s of tho receiver, and directed the bill dis::1issed.
T~1e
cause is now 1:lefore the court solely upon the aflpeal froo the
order appointing t.he receiver; the single assignment of error being t..l1a.t
2:.1.9
X-4443
-6-
such .::x)pointncnt should not hnvc been rJL:tdo in tho absonco of an avornont that the bank i7as insolvent..
The cor:rplainant and the defendant
ba:1k each nove to disniss the ap::;eal, because the
a noot question,
a~d
sa;:~e
:presents only
that the appellants have no further interest in
tho subjcct-natter of the litigation.
(1)
Tho disposition of tho case upon the notion to disuiss nakes
it unnecessary to pass upon the nerits of tho original appointnent.
Without noaning so to do, we r.ny say, in passing, that it appears to
the court that the action taken in the
cir~umstances
of this case was
not only in the discretion of the chancellor, but that the exercise
thereof was wise and prudent.
Sees. 1537, 1541, 1542.
F~moroy 1 s
Eq. Jur. (2d Ed., 1919), vo1.4,
No loss wo.s sustai:1ed by the appointr:1ent of
tho receiver, and it certainly resulted in averting serious consequences.
The contrary course wic;ht r...:we ;:roven nost disastrous, from a financial
viewpoint, to the bo.Zlk and all parties i:1 interest.
(2)
The Dation to disr:1iss the appeal r.1a.J.ifestly should be granted.
There is no longer any justiciable ,controversy betueen the parties; the
receiver has been appointed, has acted, ond been discharged.
He re-
turned and SQrrendered to the bank all of the prop8rty and estate
co~
ing into his possession and subject to his control, and his action hns
been fully m1d finally approved by the court appointing hiD.
pl~inant
The con-
no longer seeks the intervention of the court for any purpose,
but, on the contrary, approves what has been done; and the defendants
in in teres~, the ban];c, its directors, ond officers, as now constituted,
have no cause of co:oplaint, and concur in the action taken..
2 ()0
f.,..
X-4443
-7(3)
Tho o.ppol1.·1nts socking to prosecute tho uppeal have no nannor
of intorost in tho sa"bjoct-;:mt;ter of tho H tic;ation.
Having sold and
part:;d -:;ith thoir l:olC.incs in the ba:ikl~ondonte lito('± Coil?• J-;rr. 575,
and cason· ci tod), thoy crumot a.."ld should not be heard to dictate and
control l i tieo.tion in whic:i1 others alone o.ro in to res ted.
The
[~peal
Dis::1issed •
.
will be
dis~isced
at tho cost of tho
O.]pell~"lts.
2 ':J1
l.:c~./ •.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
X-4445
November 7, 1925.
SUBJECT:
Revision of Oath of Office of
Class B Director.
Dear Sir:
The Federal Reserve Board has revised
the form of tha oath of office to be executed by
Class B Directors of Federal reserve banks so
tr~t it will set forth the occupation in which
the director was 11 actively11 engaged at the time
of his election.
A supply of these forms is enclosed
herewith.
Very truly yours,
Walter L. Eddy,
Secretary.
(Enclosures)
TO .ALL CHAIRMEN OF F. R. BANKS •
222
X-4446
F:EDER.lL RESERVE
:JOJ.ED
ST.Ar:':"~~GNT FO:i TEE P:aESS
For immediate release
The Federal Reserve ]oard announces
4.00 o'clock p.m.,
November 9, 1S25
t~~t
the
Federal Reserve :Bank of J3oston hn::> established a rediscount rate of 4 per cent on all clanl;es of paper of all
maturities, effective November 10, 1925.
x-4447
TR~ SUEY
DEP..t'IRTI'ffil\JT
OFFivE OF THE S~CRETARY
WASHING':!.:· ON
November
6,
1925.
The Governor
Federal Reserve Board.
~r:
You a.re hereby advised that the Department has referred to t!:J.e Disb-r:.rsi rg
Clerk, Treasury Department, for :pa;yment, the account of the Bureau of En.gr3. ving
and Printing for proparing Foderal res-.;rVv not3C during tbe perio:.l October 1 to
October 31, 1925, amounting to $126,524.00, as follows:
Boston
New York
Phi1a.d.elphia
Cleveland
Richmond
Atlanta
Chicago
lv1i nne apo 1 i s
Dallas
Sdli
-Fr¥.~.cisco
Fed0ral Renerve NotesJ Series 1914
$20
ll~
~52
i2
1co_.coo
3GOJOOO
4oo,oco
100,000
300,000
100,000
100,000
100,000
5,000
200,CCJ
6co,coo
200, CCC;
30C,CC:J
5,000
_0c~cc.:.,
2:J(} J ··~~:__.
2,350,CCJ
700,__;oc
10<J_, oz;c
jvU ,Ot)C
s,oco
15,0GO
The charges ag:1inst the sevaral Federal Reserve Banks a.re
CampenPl~te
s,;,tion
Printing
M~toriaJ.s
Total
Boston
$1,770.00
$ 320.00
$l,lJO.CO
$3,760.00
Hew York
5,310.V:,
2,460.00
3,5JJ.OO
11,230"00
PhiladeJ.phia.
lCv,GO:J
1,770.00
820.00
1,170.00
3,760.00
Cleveland
805,000
14,248.50
6,6Cl.CO
9,418.50
30,268.00
Richmo:1d.
200,000
3,540.00
1,640.00
2,340.00
7,520.00
AtLmta
200,000
3,540.00
1,640.00
2,)40.00
7,520.00
Chicago
600,000
10,620.00
4,92C.GO
7,020.00
22,560.00
iv1i nne apo 1 i s
205,000
3,625.50
l,o8l.OO
2,353.50
7,7J8.00
Dallas
300,000
5,310.0v
2,4EG.OC
3,510.00
11,280.00
San Fr-a.nci sco
'5S:h_OO:J
9,8£3,50_'___ 4,j:..:~- C0___ 6,:_,.~2_:__5C1
20,368.00
Total
3,365,000
$59,560.50
$27,553.00
4339,)7<).50 $126,524.00
3,365,000 sheets ~t $37.60 perM ....... $126,524.00
The Bureau app:.:-01•riations will be reimbur sod in the <::.by;·e d!IlOu.nt from the
iYJ.definite aprJropri<:J.tion HJ?reJJarution and Issue of Fede:::-.J.l Resarve Notes,
Reioburea.ble 11 , a::::.d. it is reqTl.Osted th9.t your bo1rd cc.u;e such indefinite
appropriation to be reimburs0d in like ~~o~~t.
K.::s:pectf-ally,
(signed) s. R. Jacobs
Deputy Commissioner.
Sheets
lCG,i...iJO
3C0,Cvu
•
Tots,l
---100,0()0
3005()1)0
100,000
305,000
200,000
200,000
6C':)' 000
205,000
3G0,GOO
. 555,000
3,365) 000
as follows:
- ..
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
Novenber 13, 1925.
SU::JECT: Expense Main Line, Leased Wire Systor.1. October, 1925.
Delli' Sir:
Enclosed herewith you will find two oioeograph statenonts, X-~9-a and X-~1~9-b, covori~g in detail operations of
the rm.in lino, Leased Wire Systcc, during the nonth of October,
1925.
Please credit the acount payablo by your qpnk i~ the
account, Treanurcr, U. S., o~ youi' bocks, and is suo
C/D Foro 1, Natioru:tl J.:mks, for o.ccount of "Salaries a'Vld Expenses, Federal Reserve ~oard, Spo~iul Fundtt, Leased Wire Syst~.
sending duplicate C/D to Federal Resprvo Joard.
ge~eral
Yours very truly,
Fiscal Agent.
(Enclosures)
TO GOVEmJORS OF .ALL !31V"J::S EXCEPT CHICAGO.
- ..
x-~9-o.
REPORT SHOWING CLASSIFICATION A11D lTOl!JER OF WORDS
TRA?JSlHTTED OV.h!d l~nr LINE OF THE FEDERAL RESERVE
W..3ED WIE:: SYST::M FOR THE MONTH OF OCTOJER~ 1925
Fron
Joston
Nm• York
Philadelphia
Cleve1a...."ld
:l.iclm.ond
Atlanta
Chicago
St. Louis
Mine1eapolis
Kansas City
Dallas
San Francisco
Fed. Res.
'Junl-: Jus inos s
Treasury
Dept.
Jusinoss
3!46
18.75
4.55
8.38
7.57
11.82
2,400
4,036
2,8G4
2,560
2,139
3,094
4,630
3,145
1,377
2,828
1,271
5,023
100.00%
35,487
70
891,894
------- - - - - -
- - - -
29,625
160,573
35,168
73,134
43,344
66,096
98,792
72,819
38,974
71,790
64,793
101,221
War
Fi:tc.'Ulco Corp.
Business
Per cent of
Totnl ~nk
:3usinoss(*)
4~11
8.54
5.06
7.72
11.54
8~50
38
32
Total
- - - 32.025
164,609
38,052
75,794
45,483
69,190
103,422
75,964
40,389
74, 62"5
66,096
106,244
Total
856,337
:Board
274,663
26,601
114
301,378
Total
1,131,000
62,088
184
1,193,272
--~
r
Percent of Total
94.78~
5.2~
.02%
100.00~
(*) These percentages used in calculating the pro rata share of
leased wire expenses as shown
on the accompanying statement
(X-4449-b)
~4449-b.
REPORT OF EXPENSE MAIN LINE
- - --
FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER,
1925
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Pro- Rata.
- --------- - - - -- --Operatora 1
Salariee-
Name of Bank
Operators'
OTertime
Wire
Rental
Total
Expenses
Share of
Total
Expeneea
Payable to
Federal
Reserve
Board
t•
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -$250.00
- - - - - ------- ------- -----$250.00
$489.15
$739.15
Boston
New York
Philadelphia.
Cleveland
Richmond
Atlanta
Chicago
St. Louis
h.iilmeapolis
Kansas City
Dc~la.s
San FraHcisco
Federal Reserve Board
Total
Credi
$250.00
(f)
933·32
216.66
280.33
175.00
225.00
3,817.93
ro:.;.oo
6.uo
a;>G.JC
183·34
275.64
251.00
380.00
$7,188.22
933·32
216.66
280o 33
175.00
225.00
3,823.93
$15,345.69
183-34
275.64
251.00
380.00
15,345,69
4,005-52
878.01
1,824~38
1.080.96
1,649~;;!)
2,465"26
1,~a5.s4
972~01
l, 790" 20
1,617.16
2,525,08
$6.00
3,072.20
933·32
216.66
661.35
1,544.05
280-33
175.00 (&) 1,110.63
1,424.20
225.00
3,823.93 {•) 1,358.67
zoc.oo
1,615.84
788.67
183·34
1,514.56
275"64
1.366.16
251.00
2,145.08
380.00
$7,194.22
(b)
{&)
(#)
(*)
(a)
(b)
Includes $204.67 for branch line business trensmi tted over main line circuit.
Includes salaries o:f Washington operators.
Cradit.
R3ceiv0d $4.35 from War Fin~ce Corp. and $1,172·79 from Treasury Department,
covering business for the manth of October, 1925·
Amo~~t reimbursable to Chicago.
$15,731.89
1,358.61
$14,373·22
2 ')1-1
1"<..-1(
X-4450
FEDER.lL
RESERVE
ST.AT.cil~ill'"T FOR T:a:El
BOARD
P~SS
For :i.mmediate release
4. 00 or clock p.m ••
1Jovember 16, 1925
The Federal Reserve Board annou:r..ces that the
Federal Reserve Bank of Cleveland has established a rcdiscount rate of 4 per cent on all clc.sscs of :paper of
all maturities, effective November 17, 1925.
Released for publication in
the morning papers of
W'::JdnPqd.·J.y, N0vHr.ob•~r 18th~ 1926.
S:peal:ing before the Cor:lillercial Club of Boston Tuesday
evening, Uovember 17th, on the operation of the Fr;deral Reserve
System, Mr • .A. C. !Ailler, member of t:ne Fedoral Reserve Board,
took occasion to point out how the scope, influence 8.J'.d im;_Jortanco
of the Federal Reserve System under present credit
a~d
business
coned tions bad increas ;d since the establishr:r.e"1t of the System
eleven years ago.
"Originally- concoivod
issues and reserve
creditt~
a~;
a syf.lton of o:astic ta:'lk :1otc
to ovc<rCO'!lO the cJ.isabi li ties from which
our banking system fo:·mcrly suffered because of the rigid nrovisions
governing reserves anJ. rostri cting note issues, the Fedoral Reserve
Banks, by forc0 of tho unp:rccedc"1 ted conditions growing out of the
World War that have shaped their devol opme:1t along broader lines
almost from tho day of their establisl'..:nm:ot, have :Jad to form a
larger conception of their fu.nction in the country 1 s crcd.i t and
economic system - one best to be defined to bG to stead;>r credit
conditions, to give at all times a firm basis of r.trensth a::"d he:1lth
to the country's credit organization so far as it lies in tho :power
of tho Federal Reserve, and through the wise and intelligent exercise
of this
fu~ctior"
to give steadiness, sto.Cilit;)r and. stre:::gth to
underlying business conditions.
than
e~er
It is mere widely recognized now
before what a vital and shaping influence credit is through-
X-H51
- 2 -
out the whole economic system.
The good fl.IDctioning of trade,
agriculture and industry, experience has demonstrated,
ca~
be
greatly aided. by good functioning of the Federal Reserve S;;rstem.
Tho good fu.i:J.ctioning of the Federal Rescrvo Syr?tem moans that
the curre:Dt rroductivo inc1.u.stry of the country shall be at all
•
times su:p:plied with all th'3 crodi t it :1oods from tho Federal P.eservo
Ba'lks to meet its le,:;i tirnate operating roqu.iromcmts on the lowest
terms consistent with econoeic safety.
extended. are:--,umcnt.
But the k.1erican
This statement needs no
p~.iblic
does not yet fully under-
stand that at times whe11 bd:u.str;;r and trade through excessive optinis:n
or spec'J.lative enthusiasr;; are getting i::::to a sta·iie of feverish activity
they must not cet the credit facilities of tho Fed .~ral Reserve Banks
; ....
J..
on too easy terms - cna.,
•
lS,
on terms so low as to encourage needless
barrowing :md invite i:1.flationE:ry developments.
vr.n.ile crodi t wisely
extendecl ca.n do ;nuch in a. heal tb.ful way to stimulate, the dangers of
ovcrstimulatior:. cun novor safely be lost sight o.f. 11
i
1
This, briefly stated, ncontinuedMr, Miller,
11
is tho
prlilosophy of variable discount rates . 11
11
There is a prejudice of long ste.nJ.ing in t:1e United States"
said Nir. lLiller "against variable disco1:!.llt rates.
This prejudice con-
stitutes one of the difficulties in tho administration of the Federal
Reserve Banks.
The discoullt rates of
Centr~l
banks arc made to be moved.
':rhis is well <L'1derstood in Engl.<,.md, where the :Banl-: of England for
decaues hn.s employed t!1c changeable disco·un t rate wi t'-1 marvellous effect
X-44S'j_
in giving st<:J.bility to the British bar.Jdng r>nd. credit s:rstem.
banking 3Ild business public tl1erc, before tho World
'.~;ar,
The
UYJ.derstood
very accurately tho basis of the :Ba.."'lk of E·1gland 1 s diBcOu."'lt policy
a;:1d tho meanin,c; of changes of the :B3r1k 1 s official rates.
There re-
sul ted from this a cooporatio:1 between tr.o Iiank and. the busi:J.:JSs public.
Tho success of the Briti::h 'ban1dnc a"1d cro.:li t systcn was la.rgely du.o to
this intellit_.;ent coo-poraUo::,. 11
11 'We
:nay expect Ln.t i:r,_ time o. similar si tUD.tion ;7i 11 exist L:1
the United States.
Ar:. the Federal Resel'Ve Syste:n itself more fully
\'/CH'
cl
o-..1t its guiding cn6. operating principles and as these come to be unclerstocd
and. accepted by the business public, we ma:J expect to see the prejudice
agai!l.st changes of discount rate O.!l.d
ot~er
methods of credit control over-
come and the good functioni:r1g of tho Federal Reserve System promoted by
intelligent cooperation betwecm the Federal. Reserve Banks and the general
busL1ess public. 11
Mr. Miller expressed the L:ar, however, LJet
11 u~1til
this result is attained we are likely to su:ff'er from he:::.i tc:.::.t or tardy
action in the matter of Federal Reserve dif:;co::nt
11
n-.a.tter;~,~
Time is of the essence of success in
currency regulation by Central or Roserve oa:.1ks.
upward trend of industry when tho
L1terve~1tion
pJlic~.r.
11
of credit and
ThE::re arc ti:Jes on an
of the Federal Roserve
System by sui table discou.nt policy cc::u."l stimulate a forward movement in
industr;f by maintaining a lo11 rate; a.:1d later on by an
a.dv~mce
of rate
restrain the s:peculati•re exter.sion of ircdustry and thus serve to maintn:i::-1
a. good con.dit:i.on of adtivity and prosperit;'/•
The function of rate :,_.:;Hey
23~
X-4451
-4-
is thus at times to accelerate the flow of reserve credit by a rato that
invites borrowing and at other times to retard it by a rate that discourages
undue resort to the facilities of· the Federal Reserve Banks.
On a downward
trend of industry when the thing most to be feared is hasty lj.quidation
under the pressure of
fe~r
of monetary stringency,
through their rate policy can do much to
~ake
Fe~eral
Reserve Banks
the inevitable liquidation
gradual and orderly by lowering the terms upon which their credit is made
available.
"Action by the Federal Reserve Banks on the all important
matters of
disco~~t
policy and open market operations to be competent
must, of course, be basad
~pan
insight into the economic factors govern-
ing the state and trend of industry, trade and credit.
Without such
knowledge there can be no real conviction and, CJnsequently, no real
policy.
But more than conviction is necessary to make Federal Reserye
action effective.
and be prompt.
Such action when tal:en must be rightly timed
Hesitation and delay are tho deadly causes of
miscarriage and failure in the matter of central banking administration.
They have beset central banking administration in all countries.
To ·Overcome them must be a primary concern in the development
our Federal Reserve System.
As yet our System lacks
high degree of initiative
essential
This is in part due to the
co~lex
organization and
the
to its
c11aractcr
resulting wide
most
of
of
tr~t
effective operation.
our
distribution
Federal Reserve
of
authority
X-44.5ll
-5-
·.
n."ld responsibility fer its rtn.rdlg&ment.
to the fact that th0 l<xger economic
~d
:But it is also due
credit problems with
which tLe Federal Reserve Syste1:1 is called on to d.eal are lEl.cking in the definiteness of character which makes for definiteness
of action.
Tha processes of inflation -:vith which o"J.r Federal
Hcserve Syster;;, like other cuntrD.l ba.!1ki:1g systcrr:s, is collod
upo::1 at times to copEJ are i::1sidicu.s in their cbaracte:c.
tion does not an::-:,ounce its comi:1g in
full-fledged.
~dva..."1ce.
It begins as expansion.
In::::la-
It is not born
It beco::-es inflation when
expansion bas gone beyond the lir:.i t of eccnor;;i c safet;,-, that is
when furt.her additions to tne c:mntry's
s~.:.p'•ly
of credit cn:n not
be digested by tile bod;{ economic in alimx"ting nrocluctivo industry.
The excess goes to fcJd the appeti to for speculation, and
that appetite, more them ::1ost a:ppeti tes, grows by wLat it feeds
on.
Thus inflation makes
ra~idly
for more inflution Llllless its
incipient stage is clearly perceived by those responsible for
the maintenance of
.1.
hoaghy creciit an.d business situation and
sv..bjected to appropriate restraining inf1uence.
11
Turnine to the present situation in the United States
Mr. Miller pointed out tho various evide::1ces of the high state
of activity of the cou:1try's productive industry and trade.
"We are in the midst of a vcr·J considerable industrial expansion
with ma!y of the factors that
momentum.
m~e
for prosperity
gP~ning
Productiont trade, employ;;:ent a.:1d pa;;-roll
in
..
X-·:1451
- 6 ~·ear
disburseuents n.ro all in materially greater vol-;]1018 tbm a
aDO·
T.:1ero ctu"L bo no do-s:bting thn.t we o.ro alren.rl;:r in rm era of pros:peri tJ.
~he
into
yen.r 19::;5 has brought o. e:;re!:lt ma.ny new co: . . structi VG factors
pla~·
L:.
o1rr OCCilOr::ic
sit111:-1.tion.
very great importance also is the
Ecrro:pe in the
~)ast
two
~·en.:·s.
Of tl;cse, the
mS~.:~kell
economic
LOst
L":portant
reco·;er~r
of
Tl1.e leading industries of Western
Europe aid fair before long to be on a normal basis of productivity.
Our export trade will benefit. Tho atmo:;;phore of the world at large,
:no:reover, h<-::.s become more conducive to economic adventure by reason of
the settle::-tGnt of r.J.a:ny of the pm:ploxing econor.1ic end ?Oli tical
yroblems left n.t the end. of tho vrar.
.Ar:J.One; tl1.ose, of particular
interest to the ULited States aro the Da•:;os
Pl~;.:1.
of rC})arr:.tior. 1)ay-
ments 2nd the progress made in arra:ngi;:tc f;.mding terms of
owed to the United States.
since the close of the war.
ic to bn
s~cort-li ved
r3.~lllts
The outlooi<: has never bee:1 so trlc;ht
Vl"hether t::1e prosr1e1·ity vi:1ic':1 oocko:1G
or of long duration will depend.
lar~Scly
upon
the wisd.om and skill with which we ha..'1dle ourselves h1 the United
States.
The business community of the Unl ted st·.atos learnEd. sev-
eral groat lessons :ror::t tho :iisr;.strous criGes <:4'1Cl d.c:prossion of
1~20-1922.
It has d.evolch)Cd in roccLt ;/C[.;.rs :.'. Cccp:wi t;r :for oco-
nordc self-government, tho.t :.ohouLl go far tow<::.rd i:"1suring preservation of business s.:.u1i ty c.nd tho avoida.ncc of the extravagances and
X-4451
-7-
execs sen tln t incvi ta.bly cub1inn.te in prosperity l::ooms.
The
Federal Reserve also has a very groat responsibility for the
:rm,intenance of sou..-·1d conditions to the exton t at least that this
c::m be helped or uccom;:>lishcd by r..aintaining the credit situation
henlthy.
HThe floati:J.s supply of credit in the United States
h'".S
~.ever -~ec:1
so l':lrgo as at tr.Lo present tL1c Dnd never so much
in excess of curron t a:1d prospective roquirenonts of com::J.crce,
a.gricul turo a"'ld industry.
The principal factors that ha70
contribu.ted to this result o.rc (1) t:r.;.e hrr;e L1fhL"'C of gold in
recent years;
(2) econony in the u~~e of croC.it reS'J.lting fron
the sr:mller voluno of credit rcq1::.irod for cnrryir•; i!WCntorios bec.:msc of in:proved. trar;.spcrto.tion conditions ar.d the prc::rptness
with which plant facilities in all leading lines of industry
are able to respond to increased
(3)
der~nds
for th0ir products;
the thawi:ag out, largel;r as a result of i;:rproved ae:,--ri~l
tural conditioLs in this
~~d
the last crop season, of credits
tln t becam.e fro zen after tl:o crisis of 1920;
rnpic seasonal liquidation this autur.w.
and, finally, to
These factors ac-
cou:1t for tho corapo.ratively slight growth i:n tho volur..1o of credit
taken for ccc1'ncrcial uses from1 the ba.."'lks of the country in the
course of the last year •
The great grcwth in the loan account
X-4451
- 8-
of the banks of the col.llltry has not been in the commercial loan
acc.)unt but in the collt1.tcral loan account.
.A..."1d the great growth
in tilis branch of banking operations hl d"U..e mainly to the huge volume
of credit absorbed by the call market in the country's great speculative center since the opening of the year.
This condition, along
with the considerable volume of credit absorbed by land speculation in
some parts of the country and speculative build:.ng operations constitute
the danger spots in our present situation.
There is evidence that a
section of tbo public· is los in,:; its bearings and being d:rawn in to the
arena of thoughtless speculation.
Cheaper and more abundant credit
than the country has ever known on so extensive a scale are giving them
aid and encoura:::;ement.
It is time for a halt lest a speculative fra.'1le
of mind s:h.ould be engendered w111ch mit;;h t in time invade the field of
legitimate trade and industry.
11
It is not the du:ty of the Federal Reserve System to under-
tako to ret,"Ulate stock or other speculation or to interfere unnecessarily
in the affairs of their member banks.
But it is well to
reca~l
that the
Federal Reserve System was not established to provide a life preserver
for the speculator.
commerce.
It was set up as an aid to industry, agriculture and
It is a system of liquid productive credits.
Federal Reserve credit for speculative or
inw~ stment
by specific provisions of tho Federal Reserve ..\ct.
The use of
purposes is precluded
It is clear, there-
fore, that no bank has a proper status as ru1 applicant for Reserve Bank
acco~'1lodation,
which is
S~??lying
credit for speculative uses.
It is the
duty of the Federal Reserve Banks to hold true to: the course plotted for
them in the fund&'1lontal provisions of the Federal Reserve ActJ 1
.)•.
-X-4452
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Noveobor 17, 1925.
SUBJECT: Bank Salaries.
Dear Sir:
In accordance with previous practice and
in view of Section 4 of the Federal Reserve Act,
which provides that any compensation that may be
provided by boards of directors of Federal ~eserve
bariks for directors, officers or employees shall be
subject to the approval of the Federal Reserve Eoard,
it is requested that you prepare and forward to the
Eoard on or before December 10 schedules, in accordance
with the sample forms attached hereto, containing the
names and salaries of all officers and employees of
your bank.
It will be noted that the schedules are to
show the present and proposed annual salaries of all
officers and of employees receiving in excess of $2~500
per annum, and the salaries at the beginning of 1925
and those proposed for January 1, 1926, of employees
receiving $2,500 or lese. Separate schedules should
be submitted for the Head Office and each Eranch.
Will you also kindly accompany your salary
recommendations with a statement showing salaries paid
to officers and to employees during 1925 (December
est~ted), and the estimated salary requirements for
officers and employees during 1926, classified by
functions in accordance with the enclosed for.m.
Very truly yours.
Walter L. Eddy.
Secretary.
Enclosure.
TO CHAIRMEN OF ALL F. R. EANKS
N'.AMES .A1:D SAI.d\.RI:ES OF O:F:B':CERS 01! :D:E;C:m;J3:SR 1, 1925.
(Includes only the positions list'3ll in Fch~erel Reserve
J3oard 1 s letter X-3532 of Oct. 5, lS22)
Federal Reserve
:Bar~
- Branch
-------------------Functions
Name
Title
~~~------------
su~ervisod
P!l:osent
ann'lk"ll
salary
Proposed
salary
Jan. 1,1926
..
Total, ____officers
X-4452-b
NUMBER .AliD SALARIES OF EMPlOYEES RECEIVING MORE TF.AN $2,500 PER Jc\NNOM.
(Em.ployccs recommended for salaries in excess of $2,500 should
also be included in this report)
Federal Reserve :Sank - :Branch._ _ _ _ _ _ _ _ , Dec. 1, 1925.
N~_an_.e_·_____________ ~T~i~tl~e~-----------
Total,
Functions to
Present
which assigned annual
·salary
er:rployees
Proposed salary
Jan. 1, 1926.
2a~3
X-4452-c
N'O'MilER AATil SALARIES OF EMPI01"'EES RECE!VING $2,500 OR LESS PER A.h'NUM.
(Er:1ployoos recor..nended for salaries in excess of $2,500
should not bo included in this report).
Foclcro.l Reserve
_______
Nnmo; _ _
:Bank -
:Branch ----------------• Dec. 1, 1925.
Title
Proposed salriry
Salary on
Jan. 1, 1926
Jan. 1, 1925*
------------------ function
Totn.l, ____ onployoes
Enployees should be grouped according to the functions given in the functional expense report, forn E, and totals shown for all functions. An onployee assigned to norc than one function should be listed in the function to which he devotes the greater part of his tine, with a note indicating in what other functions
he is enployed. ~ne report should not include extra help or tenporary anployees,
but it should include all regular eL~loyees whose salaries are reiobursable to the
bank either in whole or in part. In the case of enployees who are on a per dian
or hourly basis, the esti.oa.tedtotal annual compensation should al~o be shown.
lmTE:
*If hired during 1925, please show the initial salary.
2~:10
X-4452-d
SALAli.I:SS* PAID D'J"'RilJG .1925 AJ.JD ESTIN!ATED PAYlEEHTS Du.dilrJ: 1926
Federal Reserve Bank (including br:mches)
---·----...-,----------·
]'unctions
·--~(Form E classification)
Paid Juring 1925
Estimated payments
(Dec8mber estim_a_t_e_d~)--~~~_d_1lrin~l~9~2~6~--
fficors j ErnpJoyces : Officers l Er;tployees
Goneral Ovorheo.d
Provision of Space
Provision of Personnel
General Service
Failed :Ba:nJ:s
Loans, Rediscounts and Acceptances
Securities
Currency and coin
Check collections
Non-cash colloctions
.Accounting
Fiscal ..\.goncy
Legal
Auditing
Bank Relations
Federal Reserve Note Issues
Bank Examination
Statistical and Analytical
Total
----==-================
*Includes extra help, overtime and supper mo!1ey.
24:1
FEDERAL RESERVE BOARD
WASHINGTON
X-4453
ADDRESS OFFICIAl. CORRESPONDENCE TO
THE FEDERAl. RESERVE BOARD
November 17, 1925.
SUBJECT:
Closing of Books on December 31, 1925.
Dear Sir;
In considering resolutions for the payment of
dividends by the Federal reserve banks at the end of this
year, and requests for authority to charge earnings with
depreciation allowances, reserves to take care of probable
losses, otG., the Federal Reserve Board will follow the
procedure &~d rule~ adopted last yoar, as outlined in the
Board's letter St.4333 of November 26, 1924, a copy of
which is enclosed. It is therefore requested that the
di-ridend resolution of ycur bank be accompanie(l with
statements similar to those requested in that letter,
and that the resolution and accompanying dc:;.t:-1 be mailed
in time to reach the Board not latar then recember 10,
1925, in order that i t may have rurrplc time to pass upon
all charges to current net earnings which ;your bank
proposes to make when closing its books at the end of
the year.
Very truly yours,
Walter L. Eddy,
Secretary.
TO .ALL CHAIRMEN
Enclosure:
242
FEDERAL RESERVE BOARD
WASHINGTON
November 26, 1924.
St. 4333 •.
stffiJEC'r:
Closing of Books on December 31, 1924..
Dear Sir:
In order tha~ t~ Board may bave anple time to pass upon all
cha.tSf:ls which your b~ propo sea to me.ke aga.inst ourren~ earnings when
tho booJts are closed on recen.ber 31, 1924, for depreciation allowances,
for reserves to take care of probable losses, and for otller extraordinary
purposes; it is requested that t.be dividend resolution of your :Board of
Directors be mailed in time to reach the Board' a offices not later than
Deoember 10, 1924.
b
diVidend resolution should be accompanied w1 th statements
, showing the folloWing inforruation:
1. Estimated gross earnings, current eJCpenses, proposed charges
to current net earnings, zd net earnings available for surplus and framhisa tax, for the calendar year 1924.
2. Unpaid indebtedness of failed or suspended 'oanlts to Federal
reserve liank, giving tbe na:r.es of the banks, indebtedness
of each on November 30, character of aecuri ty, if any, and
estimated losses.
-=:-
3. Indebtedness to Federal reserve
bank of 1bember banks 71hiob
are considered to be in an unsafe concli tion, giVing the
names of the banks, indebtedness of ea.on on November }0,
charaotler o1' seouri ty, if any, and probable losses.
4. A statement in the form outlined l'elow, shoWing separa•ly
for each property acquired for Banking Bouse purposes,
(a) the cest, al0012ltS charged off, net book value, mel
eetims.ted market value of land owned;
(b) the coat to NoV9mbsr JO, amounts.cbarged off, reserves
carried, net book va.lue, s.nd estil!.ated replacement cost of
buildings, exclusive of fixed a.aohinery and equipment,
either con.pleted or in course of construott.on;
(c) the cost to Noven.ber 30, aroounts charged off, l'Qserves
carried, a.nd net book. va.lue of fixed maohinery and e.quipment.
.
'--
243
- 2-
LAND
- C o s t to lJovon.b\lr 30
.Amount c~r~d off
Book value {nat)
Esti:r.a.ted market v~ue
BUI LmNG INCUJDING VAULT
Cost to llovetr.ber 30
Amount charged off
Reserves now carried
Book value (nat)
Esti:natao replacement cost
t------
FIXEr .M!CHINEP.Y .&"'D E9UIP!4ENT
Cost to Novamoer 30
Amount charged off
Raaerves now carried
Book value (net)
In the case of land on wnich a new building .nas been or 1 s to be
constructe(! ths cost of the lancl (tui!ding site) should agree with the amount
reported agg.inst item 6 of q1:artarl;r ba.W: pretr.i ses rc,port (Federal Reserve
Board Fonn St. 2810). In case of buildings purchased and occupied as bank
quarters, the reported cost of land should represent its fair market value
at time of purc:.se.
The Ja.lanca of t~ purchase price should be considered
as the cost of the building.
The following rules have be!n approved by the Federal Reserve Board
for the gllidanoe of the Federal reserve ba:lK-s in subnd. tting requests for permission to make special charges against current net eamings, and for closing
of books on Decembar 31.
1. 'Banlt Premises. (a) Land. No charges against current net earnings
Will be authoriiecJ by the Fed!ral Reserve Board to cover depreciation on land
Where the estimated market value of the land is equal to or in excess of its
net book value.
(b) Buildings. In passir.g upon requests to set
up depreciation reserves on bank buildings, the. Board Will in general penni t
a c·:-.arge against current nat eamir.gs of not emeedir..g 2 per cent of estimated
replacement cost, including vaults but excluding fixed n.achinary and equipnent.
In case the net book· value of a. building is in excess of its estimated replacement cost., the Board will consider requests frorr. Fe~era.l reserve banks for permission to write off a depreciation ~barge not exceadi.:1g the an:ount of such
e.xoess.
(c) F!xed n.a.ol:inery and equipment. A reserve
should be set auide each year to cover depreciation en fimc:l machinery and
equipment, such as boilers, engi.-les, dynanos, motors, power pllll!ps, elevators,
heating, plunbing, lighting and ventilating systems, pneunatic tubes, refrigeration plants, automatic fi t'e sprinkler equipn.ant, and vacuum cleaners.
JDnual adc:li tiona to this reserve should b9 based on the estimated life of the
.
-
244
.... J ...
·-.....~~nt, but itt nc caa-' s!':.ou.ld tha a.nr.ual cha.rge emeed 10
per cent-o1' cost. Replacan..ents of Fi:mt.l Machinery and Equipment sltould ae
charged to this reserve.
(d) Estimates of the market value ofland and of
the replacement cost of buildings ei t:':.er cOllq)lated or in course of construction sho~d be obtained from the best available authorities. A copy of the
estimates thus obtained should be enclosed with your request for autbority
to charge current net earnings With depreciation on bank premises un:i.ess
similar estimates have \een previously oubmi.tted to the l!ederal Beserve l'oa.rd.
For the purpose of tbi s report the· estimated replaoer.ent cost of buildings
including vSul.ts, but excluding fi19d machinery anc1 aquipnont, may be arrived
at by deter.nining tte mean of two amounts, namely; (1) the total actual cost
of constl"U.Ction, and (2) the estimated cost of construction based on the
lowest prices that have eXisted during the fifteen 39ars preceeing t:he com-pletion of construotion.
(e) Whara properties ha.'l/e been purchased With the
intention of razing existing buildings and of erecting new banking quarters
tao Board Will consider requests for permission to deduct from current nat
ea...-nings an amount equal to the diffarence between the cost of the property
ano the market value of the building site exclusive of improvemants.
2. Furniture and a guip:r!!?nt. Requa s ts w charge off the ~a.laroe
in the Furniture and Equipment account on Decomber 31 should be
accoq>a.nied w1 th an i te:ui zed 11 sv of all Furniture and Equip:nent carried on
the books as of the date your reqt"~est is submittad a.nd also With a list of
addi tionaJ. furniture, if any, that it is proposed to puroh9.88 during the
remainder of the year.
r~ning
3. Depreciation on United States sacurities. A reserve amounting
to 3 per cent of tbe par value of u. S. conversion bonds :.f 1946-47 n.a.y be
set aside to cover depreciation on such bonds. In case tlie present reserve
for depreciation is in excess o1' actual depreciation as a.Dove determined
such excess should )e cradi ted to Profit and Loss.
4. Surplus and franchise t~s. After all current e~en'les,
dividends, depreciation allowa.roes and other extraordinary charge-offs
authorized by the Federal Reserve Board have l·een provided 1'or, any remaining net earnings shall be distributed as 1'ollows:
(a) Transfer to surplus account all available net ea.ritings
prov-iding tne total surplus will not as a result exceed
the bank's &bscribed capital, in which case only such
amount shall be transferred as is"' necessnry to inorease
the surplus account to an amount equu to the bank's
sub scri beci capital.
(b) Of the balance of mt earnings, if any, 10 per o.ant shall
be trans1'erred to surplus a)COunt, and 90 per cent peid
to the United States Govennent as a franchise tax.
.
245
- 4 ...
Instrt10tions 13.6 to th"' tin.a and rna t.hocl of pa.~nt of tbe franchise tax will as usual be issu3d at a later date by tbe Treasury Department.
Walter L. Edclv •
Secretary.
TO OH.AIBMEN OF ALL PEDERAL RES.&llVE B~'«S.
.,
246
FEDERAL RESERVE BOARD
WASHINGTON
X-4454
ADDRESS OFFICIAl. CORRESPONDENCE TO
THE FEDERAl. RESERVE BOARD
Uovember 18, 1925.
SUBJECT:
Termination of .Membership
by Withdrawing Uember Bank .
Dear Sir:
The Federal Reserve Board }...a.s been requested to rule upon
the question whether a State member bank which has given si.x: r:wnths 1
notice of its intention to withdraw from the System, but fails to
withdraw immediately at the end of the si.x: months' period is onti tled
to interest at tho rate of one-half of 1% per month from tho date of
tho last dividend to the date upon which its Federal reserve bank
stock is actually surrendered or 1nercly up to the date on Which the
six months• period CA~ired.
As the Board has stated in connection with other rulings
on similar questions, notice of intention to withdraw is a prerequisite
of withdrawal from the System but is not any part of the actual withdrawal itself. At the tetmination of the six months 1 period following
notice of withdrawal a State member ba.nk does not automtitically cease
to be a member of the Federal ReserV'e System. A bank which has given
such notice but has not acted pursuant thereto, continues to be a member of the Federal Reserve System for all purposes and is entitled to
the privileges and is subject to the obligations of membership in the
System. A state member bank, therefore, which has given notice of its
intention to withdraw but does not consummate the withdrawal at the
termination of the six months' period by surrendering its Federal reserve
bank stock must continue to maintain the reserves regularly raq_uired by
the Federal Reserve Act, and when it does withdraw fror:1 the System by
surrendering its Federal reserve bank stock it is entitled to interest
at the rate of one-half of 1% per month from the date of the last dividend, if earned, to the date on which the stock is surrendered and membership is terminated.
In order to be entirely accurate it should also be stated
that the amount refunded is in no event to exceed the book value of
the stock at tho time, but ·this requirement is of little practical
importance under present conditions •
. As explained in tho Board's letter of September 20, 1923,
X-3841, a notice of withdrawal does not rer!lain effective indefinitely
but only for a reasonable time after the e:>..'})iro.tion of the six months 1
X-4454
-2-
24:7
period. In all cases of this kind arising hereafter the Board will
consider two r..onths as a reasonable time for the consummation of withdrawal after the six months' period has expired; so that if the stock
is not surrendered within eight months from the date upon which notice
of intention to withdraw is received, the notice becomes void and a
new notice will be required before a voluntary wi thd.rawal will be permitted. If the circumst~~ces are unusual and seem to require a longer
period for tho withdrawal, the :Soard will consider a~ extension of time
provided that application for such extension is received by the :Soard
within the two months' limit. You are requested to bring this matter
to the attention of all bnnks which have notices of withdrawal now pending and in the futuro to advise any ba:nk from which a notice of withdrawal is received of the Board's ruling as to the time permitted for
withdrawal.
By order of the Federal Reserve :Soard.
Very truly yours,
Walter L. Eddy,
Secretary.
LETTER TO ALL FEDERAL RESERVE AGENTS.
248
F ED E R·A·L R E S E·R V E B 0 A R D
STATEIV'J.ENT FOR THE PT?.E."SS
4.00 o'clocj.<: p.m.,
For immediate reles.se
J'~ovsr:,ber
The FeC.eral Reserve Board armounces that the
Federal Reserve Bank of Phila.delphi"~. hM es t~.bl:ishcd
redisc.oun t rate of
4 p8r
cent- ·on all cl.a.sses ·of pa.per
of all rr,D.turi ties, effec t:i.. ve November 20·,
1925.
tJ.
19, :1.925
X-4458
FEDER.AL
RESERVE
:BO.ARD
STATEMENT FOR TIEE PRESS
For imoodiate release
3:00 o'clock p.m.,
November 21, 1925
The Federal Reserve :Board announces that the Federal
Reserve :Bank of San Francisco has estaolishcd a rediscount
rate of 4 per cent on all classes of paper of all maturities,
effective November 23, 1925.
250
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4459
Nov~mbcr
SUBJECT:
Christmas Holiday.
Dear Sir:
On Christmas Day, the offices.
of the Federal Reserve Board and all Fedoral Reserve Banks and Branches will be
closed.
This is tho only holiday which
will be observed during tho month of De-
camber.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F •. R! BANKS
24, 1925.
251.
X-44:60
F E DE R A L R
E S : R VE B 0 A R D
STATE1.3NT FOR THE PRESS
:Tor RolcaDe in Horning Papers,
Saturd.a.y; Nover.:.ber 28, 1925.
Tbe following is a sunliTlai';'y' of general business
and financial conditions tbrour;hout tbe several
Yederc;._l Ressrve Districts, based upon statistics
for the months of October and November, as contained. in the forthcominG issJ.c of the }i'edcral
Reser7e :Bulletin.
Industrial activity and tha volurne of 1Nholesale and retail trade increased
in October.
Wholesale prices declined sowewha t to the lev·el prevailing at mid-
year.
Production.
The Federal Reserve 3oarcl' c:; index of production in basic industries,
which m3.kes allowance for seasonal changes, rose by about
4 per cent in Octo:. ,;T,
reflecting increases in tho output of most of the 22 commocli ties included in
the index.
Particularly largo increases in activity wore sho\711 for tho iron
and stool and textile industries, and the output of bituminous coal and of lumbor was in large volume.
on record.
Production of 8.utomociles in Octooer 1;·o.s the largest
Pe_yrolls at factories, including industries not covered o;y tho pro-
duction in1ex, increased in @Jctober to the highest level since ca.rly Ln 1924:.
Tho V8.lue of b11ilding contracts awarded declined further in October, contrary to
soasJn'J.l
the usual/tonduncy in builcling activity botvveen September and October, but tho
total Has considerably
1r~.rgor
than in the corresponding month of n::1y othor year.
Estimates by the Dopart:ncr:t of Agriculture i'!.1 I;ovcmber indicate a corn crop
of 3,013,000,000 bushels and a c'Jtton crop of l5,2S8,or;o buleo, compared with
2,437,000,000 bushds and 13,628,8(;0 bales in
19~;4.
llarkoting of crops vvas scaso'!.1-
ally larger in October than in Sopt•3mber but averaged nearly 10 per cent loss
a year ago.
t~,an
X-4460
-2-
252
Trade.
Wholesale trade, according to the :Fcdoral Reserve J3onrd' s combil'wd inc ox
of sales in six loadL1g lines, roached a seasonnl peal::: ic1 October and i7as in
larger volume tha:1 for e:.ny month of the past five years.
Sales at dcpnrtmcnt
stores and mnil order houses, owing partly to favorable weather co;:;.di tbc:.:.,,
showed co;:;.sidorablY.' more than the usual increase in October and were the
largest on record for that m:mth.
at wholoso.lc firms r:ere
SiUc" 1.lcr
Stocks of dr;)'goods
I
shoes, and hardware
at the end of October than on September 30,
but stocks of groceries were larger.
Merchandise stocks at
dc~partmont
stores shoYied slightly more than the usunl increase in October, and wore sor::e';;hat ln.r&:;or than at the end of October a year aco.
Freight cG.r loadi.:igs roo.ched a seasonal peak in october and totaled
nore them in o,ny previous month, notwithstanding reduced shipments of a::1thraci to and of crains and e:;r<.:in products.
Prices.
T..11c Bureau of Labor Statistics index of 1:.-rwlcst:tlc ;:>rices, after remain-
ing relatively constant for throe months, declh:eli from 160 in September to
158 in October, reflecting declines in the prices of agricultural products,
particularly grains, livestock, meats, cotton, and sugar.
prices of grain::;,, wool, s?-gar
I
Since November l
pig iron, and rubber have increased.
Bmlk credit.
J3ctvicon the niddle of October and the mid.dlo of
cornr::lcrcial
c~1d
}Jove1~ber,
loans f6r
\ .... ·t
industrial purposes at mer;1ber barJcs in leading ci tics con-
tinued in a volune about $450,000,000 larger than at r:lid-sur::u::er.
Loans on
securities increased further and total loans on November 11 wore about
$1,000,000,000 larger than at the opening of the year.
Dor.k:nd deposits in-
creased. further during October and early Novm:1ber to a level near tho hit;h
-3-
poin.t of last Jn'::uo.r;r.
At the reserve banks total bills and securities in Novaober
~ere
in tho
largest volun.c for the year and about $200,000,000 larger than a year ago.
!
Mcr::bcr ba:1k borroYiings declined sopcvthat fro:o the high point reached early. in
October, while acceptance holdings continued to increase and on Nove.nber 18
were larger than at
bank credit since
ar~
previous tine for the year.
~id-sunrner
The growth in reserve
was chiefly in response to the
seaso~l
increase
of nonoy in circulation, which on Novenbcr 1 was about $180,000,000 lc.rf:or
than on August 1.
Duri!lf; the latter part of October and early pc.rt of Nover.lbcr open narket
rates for cor::r:ercial paper and ba:"U:ers acceptances
rer.:o.i~1cd
uncha.nsed at the levels ree.ched during the enrly autur.n.
tho Federal reserve banks of Boston,
Clcvela~d,
substantially
Discount rates at
Philadelphia,
a~d
Francisco r1ore advanced fron 3 1/2 to 4 per cent during Novcnbcr.
San
X-4461
254
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
November 25, 1925
For Immediate Release.
CONDITION OF ACCEPTANCE MARKET
October 22, 1925 to November 18, 1925 •
.A.cccptances.
An increased supply of bills was reported from the New York and Boston
acceptance markets duxing tl-}e last week of October with a light demand which
resulted in an increase in dealers' portfolios.
Later the demand in !Jew
York increased and at the close of tho reporting period, on November 18, the
market was quiet with demand
ings to tho reserve bank.
a~d
~10
supply about equal and only moderate offeraverage weekly turnover of bills by reporting
dealers in that city was about the ssne during tho four weeks ending
Novc~hor
18 as during tho five v:eoks ending October 22, and their aggregate portfolios
were nearly equal on these two dates.
In Boston the market was characterized
as fairly active in November with a moderato supply end licht demand for bills,
so that offerings to the reserve bank were
was very quiet during the whole
~iod,
subGt~~tial.
The Chicag9 market
the average volurne of business re-
ported by dealers being considerably smaller than during tho proYious five
weeks.
Rates remained unchanged in all
~~kets.
On November 18 they were
quoted in New York as 3 3/8 per cent bid a'1d 3 1/4 offered for
30-dc::~.y
bills,
3 1/2 bid .:md 3 3/8 offered for 60-day bills, 3 5/8 bid and 3 1/2 offered for
90-day bills, 3 3/4 bid and 3 5/8 offered for 120-day bills, and 4 per cent
bid and 3 7/8 offered for l~l and 180-duy bills.
255
X-4463
WEY SEC'l'IOlJ 9 SHOULil
1~.
L. T. McFadden, Chairman of the
of the House of
Representatives~
~E
STRICKl'N 00::£...
Com~ittee
on Banking and Currency
in his contribution to the November issue
of the American Bankers .Association Journal, entitled 11 Why Section 9 is
Necessary to the National :Bank :Bill" declares that the only opposition to
this section comes from "a small but influential group of state member banks 11
in one state, California, and from "one or two Cleveland state member banks,
which desire to continue to establish branchcl!l in the suburbs of Cleveland. 11
It may be that the only organized opposition to this section comes from
the groups mentioned, but it is nevertheless true that the section affects
banks in no less than twenty-four states.
It sets up a now standard of
eligibility for membership in the Federal Reserve System, a standard not
related to safety of management or sound banking policy, but solely to the
question whether banks have branches or offices (the bill d$fines all additional offices as branches) outside of "the corporate limits of the municipall ty in which tr.e parent bank is located. 11
'!ihore were in June 1924
(Federal Reserve Bulletin December, 1924, page 933) 245 such non-member banks
located in twenty-three different states as follows:
A.r izona . . . . . . . . . . . . . • . 4
.A.la."ba.r:13. ............... , 4 .
.Arlr..ansas • . . . • • • . . • . . . • 2
California •......••••• 5a
Delaware ••. -. • • • • • . • . • • 4
Florida. , . .• . • • • . . . . . . . . 1
Georgia •.............• 10
Indiana • . . • • • . . • • • • . . • 1
Louisiana. •..•••••..••• 21
Maryland ••.••••.•••.•• 15
-2-
1vfni~1C
X-4·463
25()
...... ~ ~ ~ ••••••• 20
Mich:i..cc.1~.1 • ~ ~ ~. ~ ••. ~. 3
M.n.ssacln::::etts •....• 6
Missit:.tiiiJpi ..•.•••• 8
rTor~'IJ. CJ.rolina ••.• < 34
Now Jersey ••...••.• 4
0:1i 0 • • . • • • • • • . • . . . • 8
Pcmns;yl vnnia • ~ ••.• , 9
South Carolina ••... 4
Rhode Isla~d ····~·· 2
Tennessee •••..•••.• 14
Virginia •.••.••..• ~ 18
Washington~·······~
Total •...• Z45
This :..ist of states should have included New Hampshire from which state
a bank with two branches outside "the corporate limits of the municipality
in which the :;_Jarent ba."lk is located" ( Ccnwc.y) htJ.s since been admitted to the
Federal Reserve System!
Of state banks maintaining such outside branches 245
are non-members and only 55 are r.1embers of the Federal Reserve System.
This
cont:east of figures nlone sh.)uld convince any unprejudiced student of the
subject that Section 9
of it.
ca~not
possibly accomplish what its proponents expect
Instead of strengthening the Federal Reserve System it will weaken
it, in my opinion, by excluding from membership many well managed ins ti tuti ons,
and by preventing any further additions of branches under any circumstances
by member banks.
As to the unwisdom of such an iron-clad prohibition of all further extension of branches by membe.r state banks I have only to cite the
~ecent
establishment of a branch of the Citizens and Southern Bank of Savannah,
Georgia, in Athens, Georgia,.
This branch was established with permission of
the Federal Reserve Board in August at the earnest request of the directors
of the Federal Reserve Bank of .Atlanta and at the request of the citizens of
Athens.
One of the leading citizens of Athens has recently written me that
the establishment of this branch 11 has been of incalculable valu.e in creating
257
X-4463
-3-
confidence nnd stabilizing co::.:ditions gmcrally in the city and commu."lity ..:"
Now what good reason is thoro for prohibiting by law the rendering of
such a service to a stricken
co~~ity?
If National banks can't be permitted
to render service of this kind because of prejudice against branches
w~
should we say to a state that its State banks cannot render such service and
remain in the Federal Reserve System?
The Athens case does not stand alone.
There have been several others during the past year, and more during the two
or three preceding years.
Sect Lm 9 will do nothing of consequence to strengthen the Na. tional
Banking system, and if branch banking is as alluring as its opponents appear
to think it is it will do nothing of consequence to prevent its spread.
Section 8 purports to give city National :Ba.."lks the right to establish branches
within municipal limits, where state banks have that privilege, a right which
the National Banks are already exorcising with the concurrence of the
troller of the Currency.
Co~
Section 9 denies to country banks the right to es-
tablish even neighborhood bronchos.
It should be remembered that of the 310
banks ope:tating br·anches outside mw.1icipal limits 239 are located in
towns or cities with a population les·s tmn 25.ooo,· and 129 of them in
municipalities of less than 2,500.-
Some of these bariks ha.ve operated branches
successfully for upwards of thirty years.-
Is it likely that Section 9 will
cause them to give up their branches or will ci:ilerce the States in which they
are located into a change in their
law~
relating to the subject?
If Section 9 does n0thing of consequence to strengthen the National
Banking system another section of the McFadden bill will do much to weaken
it.
I ·.refer to Section 7 which repeals an Act which bas been a part of the
National Banking Law since 1866.
This repeal will prevent ba.nks with branches
258
X-4463
-4-
beyond rm.uiicipal limits from becoming national banks and retaining their
branches.
Section 7 is doubtless resarcJed as an essential accompaniment
of Section 9 and stands or falls v;ith it.
b:..•tea.d of prohibiting these banks
from becoming National "banl:s the National Bankjng system would be greatly
strengthened i f such banks as the Grenada Ba::.1k of Grenada, Mississippi, the
Tennessee Valley
B~~k
of
Deca~r, Alabama~
of Savannah, Georgia, the Wachovia Bank and
the Citizens and Southern Bank
~rust
Ccrnpany of Winston-Salem,
North Carolina, the Industrial Trust Company of Providence, Rhode Island,
tho Merrill Trust Company of Bangor, Maine, and many others that I could
mention could be induced to t:ili:o out n3.tional charters.
the
bra~ch
barking institutions of
C~liforr.ia
I have not mentioned
because they are so well known,
and because my purpose is to show that California and Cleveland are really
only a sl.I'.a.ll part of tho picture.
(SIGNED)
EDMUND PIATT
259
c0
p
X-4464
y
ET T'.dE UlTITED STATES CIRCUIT COURT OF .APPEALS
For the Ninth Circuit.
. FE::::JERU. RESERVE :BMW. OF S.AN
FRA1TCISCO, e corporation,
Plai~tiff
)
)
)
)
in Error
)
vs.
)
)
)
)
)
)
IDAHO GRIL1.~ ALFALFA SEED GR01'iERS
ASSOCIATION, a corporation,
Defendant in Error.
ITo. 4560
Upon Writ of Error to the United States District Court for the
District of Idaho, Eastern Division.
Before GILBERT, HUNT, and BUDKIN, Circuit Judges.
RUDKIN, Circuit Judge:
During the period herein mentioned, the
Idaho Grimm Alfalfa Seed Growers Association was a farm marketing association organized under the laws- of that State and was engaged in the business of cleaning and marketing alfalfa seed produced by its members.
alfalfa seed was sold, a draft was drawn on the buyer for the
price with a bill of lading attached.
When
purcha~e
Up to about a year prior to November
28, 1923, all drafts thus drawn were deposited with D. W. Standrod and
Company Bankers, for collection only, and the Association was not permitted
to draw against the amount of the drafts until payment was actually made to
the Standrod Bank.
But in the fall of 1922, this arrangement was changed
through an agreement between the Association and the Standrod Bank, and
thereafter the Association was given immediate credit for the amount of the
260
X-4464
-2-
drafts when doposi ted, and wc.s pcrmi t.tcd to draw against them to the full
amount, if it so dcsi rod.
If n draft was not paid '7hon presented, tho amount
was charged back to the account of tl1e Association, and if paid, the Association was charged with interest on the
was \actually paid.
amou_~ts
checked out before the draft
0~1 Nove;nber 23, 1923, the Association drew a sight draft
in the sum of $10,848.80 on Teweles and Company for the purchase :price of a
carload of alfalfa seed shipped to that company.
The draft was made payable
to the Standrod Eruik, had attached thereto a bill of lading for the shipment,
and was accoinpanicd by a letter of instructions, stating trot payment might
be deferred Ulltil the arrival of tho car.
The draft was then forwarded by
the Standrod Bank to the Federal Reserve Bank at Salt Lake for discount and
was there discounted and the amount placed to the credit of the Standrod
Ban£~.
Two sLmilar drafts were drawn by the Association on November 26, 1923, for
substantially similar amounts and these drafts took the same course.
be said in this
co~~ection,
It might
however, that tho general manager of tho Asso-
ciation neglected to sign one of the last mentioned drafts nnd the defect was
not discovered until the draft roached the Federal Reserve Bank at Salt
La~e.
The Standrod Bank was then notified of the defect over tho telephone and another draft was substituted in its place.
Tho
Sta~drod
Bank was open for the transaction of business for the
last time on November 28, 1923, and on November 30, 1923, its affairs were
taken over by the Banking Officers of the State.
St~~drod
On the latter date the
Bank had an overdraft with the Federal Reserve
Earu~
in the sum of
$47.96, and the Association had a balance to its cheCking account, on the
books of the Standrod Bank, in the sum of $32,295.20.
On December 1, 1923,
the Association notified the Banking Officers of the State that the Standrod
26~
X-4464
Bank was insolvent at the time of the receipt of the drafts and that its
officers and agents know ur had cause to believe that it was so insolvent, and
the Association made claim to the drafts or, if collected, to the proceeds
thereof.
A copy of this notice was mailed to the Federal Reserve Bank on
the same day.
The present action was then instituted by the Association against
the Federal Reserve Bajk, the Standrod Bank, and the Banking Officers of the
States to recover the amount of the three drafts or their value.
The com-
plaint contains six causes of action in all, or two causes of action based
on each of the three drafts.
The causes of action on each of the three
drafts were identical in form however, so that for persent purposes reference
need only be made to the first and second causes of action based on the draft
of November 23, 1923.
Speaking generally, it was alleged in the first cause
of action that for upwards of a year prior to the date of the receipt of
the qraft in question the Standrod Eank was insolvent; that its directors
and managing officers, and the managing officers of the Federal Reserve Bank
were at all times fully aware of its insolvent condition; that the draft was
forwarded to the Federal Reserve Bank for collection; that the amount thereof was collected by the Federal Reserve Bank after the close of the Standrod
Bank, and that the Federal Reserve Bank refused to account for the proceeds
thereof.
In the second cause of action it was alleged that the draft was
deposited with the Standrod Bank under an agreement between the Association
and the Bank that the draft and the proceeds thereof should be and remain the
property of the Association, and that the title thereto, or to the proceeds
thereof, should not become tho property of the Standrod Bank.
At the com-
mencement of the trial tho Federal Reserve Bank moved the court to require
262
X-4464
tho nlnL1tiff to elect uho thor it vrould proceed or:. the first 1 third and fifth
causes of ac ti o:1, '\71lich it claimed were of oqui table cognizance, or on tho
second, fourth and sixth causes of action 7rhich it clo..irnud
lo:;r.
This motion wo..s denied.
testimony on the
nonsuit
',"TaS
pc~rt
~wro
cognizable at
The motio:1 was rO:i.10Wed at the close of the
of the plaintiff but wns again denied.
A motion for a
then grc:nted to the second, fourth ond sixth causes of action,
but denied as to the rern..'1.ining causes of o.ction.
The Federo.l Reserve :Sank
then moved the court to discharge the jury o.nd transfer the co.use to the cqui ty
side of the court.
Tho court took this motion under advisement ond directed
the trial to proceed in tho rneantLne.
The cause was thereafter submi ttcd to
the jury under instructions to vrhich no exccptionswere tnkon, and the jury
returned a verdict in favor of the plaintiff in the sum of $32,692.12.
Some-
time after the verdict was returned the court filed a memorandum on the
motion to discharge the jury and transfer the cause to tho equity side of tl1e
court in which i t said:
"While the point is not o:ltiroly free from doubt,
upon consideration I lk~ve concluded that the complaint
was properly entertained upon tho law side of the court.
"The further question of iThother or not, if tho
verdict be taken as advisory only, it should be apiJrOvod
and adopted, I answer in the affirmative."
The court then added:
"Counsel for the plaintiff \7ill prepare a judgment
in the ordinary form of a judgment upon the verdict, incorporating therein, at tho proper place, the additional
clause, in substance, 'which finding of the jury is approved and adopted. '"
Judgment was thereafter en tored upon t be verdict, as directed by
the court, after making certain deductions for moneys checked out by the
plaintiff before the close of tho Standrod Bank.
has been brought here for review by '\7ri t of error.
The judgment thus entered
263
X-4464
-5-
Tne first assignment of error is based on the refusal of the court
to require the defendant in error to elect whether it would proceed on the
even or odd numbered causes of action.
In answer to this assignment we need
only say that the granting of the nonsuit as to the even numbered causes of
action necessarily compelled the defendant in error to proceed on the remaining causes of action and, conceding for the p11rposes of this case only,
that it was error not to require an election at an earlier stage of the trial,
the error was plainly and manifestly without prejudice.
Tho next assignment of error is based on the refusal of tho court
to
discl~rge
the jury and transfer the cause to
t~e
equity side of the court
after the nonsuit had been granted as to tho even numbered causes of action.
Again, if we concede that the action or actions were of equitable cognizance,
no error can be predicated upon the action of the court in submitting the issues to a jury in an advisory capacity because that practice is always permissible and its adoption is a matter of discretion with the court.
And
when the court treated tho verdict as advisory only and Dpproved the findings
of tne jury it asserted all the powers and assuned all the responsibilities of
a
Ch~cellor.
This was the utmost consideration to which the plaintiff in
error was entitled and it is in no position to complain of mere matters of
procedure resting in the sound discretion of the court.
We might say in this
connection, however, that it does not appear to us that the defendant in
error was seeking to enforce a trust or to follow trust funds.
It proceeded
upon the theory that the diversion of the proceeds of tho drafts by the Federal Reserve :Sank, with knowledgE:l that the Standrod Bank uas i:::J.solvent, and
with knowledge that the drafts uere not the property of the Standrod Bank,
was a tort or wrong for
~hicl1
complete and adequate remedy.
a court of law has always afforded a full,
264
X-4464
-6-
Nurr.orous errors hc..ve been assigned on the adnission of testimony
over ob.jcction.
Tho defondo..'1t i::l. error offorod in evidence a compilatioa ln...'l.de
by ono of tho \7i tnosses from tho books of tho Ba'1k, showing i:1 dota.i 1 the resources and lio.bi l i tics of the :Bank O:\t the clJso of business on November 28,
1923.
Tl1is compilo.ti on or su.rnrnnry was tclce:.1 from books o.lroady in evidence;
its corroctaess ilao o.t no time questioned and is
V!as
no error in this ruli:r..{s•
~1ot
questioned :1ow.
Thoro
San Pedro Lumber Co. v. Reynolds, 53 Pac. 410;
Jordan v. Warner's Estate, 83 N.W. 946; State v. Brady, 69 N.W. 290.
The liquidating officer of the State, who
1~
charge of the affairs
of the Standrod Bank since its close, was permitted to give the amount collected or realized from the assets in his charge during tho preceding ten
months, and to state whether, in his opinion, any equity re:rnained in tho
pledged bills receivable of tho Bank after payment of tho loans secured by
the pledges.
As already stated, tho witness had been in charge of the affairs
of the Bank for about ten months; it was his duty to collect ond distribute
the assets in his cmrge and he had devoted his entire ti:ne a."1.d attention to
that object.
He had consulted with the collecting agent of tho Federal Re-
serve :Ba..'lk a...'ld. was more familiar w'i th the assets of the :Bonk o....'1d their probable
value than any other person, except perhaps the managing officers of the Bank.
He
~as co~~etent
therefore to express an opinion on the question submitted,
a"1d the fact tho.t his opinion was based on the value of the sccuri ties some
time after the close of the Ba.:'lk \Vould go to the t1cight of his tcstimo:n.;;r, not
to its competency.
State v. Cadwell, 44 N.W. 700; Campbell v.
P~rk,
101
N.W. 861.
The plaintiff in error moved to strike the testimony of one of the
witnesses, based on a.
compil~tion
prepared from tllc books of the Standrod
Bank in evidence, showing tho number of overdue notes hold by tho Sta.'1drod
265
-7-
Eaa}: .:.1nd ho-;; lone; ovcrd·J.o, rmd t:w du:i:'ici.oncy ur excess of reserve o:.1
·cri t:1 tho Federal Reserve llo.:1k o:• difforont d.atos.
There ;.ms
:;10
dG"~losi t
orr or in this
rulin,.-; for :tonsons olready stated.
Undor date of November 10, 1923, or eigh.toon clnys before the close
of tho Bank, tho vicc..'-:rrosidont a:'ld. il'D.nagor of tho Standrod.
:Ba:~
addressed a
lettt'lr to the rrnnag;int,:; officer of tho ]'odcral Rosorvo Bank stating tl:.at :he had
found it ne c.essary to t::U':o o.c:vantage of the offer of thG latter
~o
handle a
note of $10,000; that he was enclosing the note therewith, :payable ten days
from l!ove:nbor 13, oodin€;.;:
11 This
will tide us ovor. 11
The manager of the Feder::J.l
Reserve Bank answered this letter under date of Novcmoer 14, 1923, stating
that the discount
co~~ittco
of the Federal Reserve Bank
:U~d
declined to accent
the note for discount, and further thnt the directors of tho Federal Reserve
Bank r1ere of opinion that tho Federal Reserve branch had advanced o. sufficient
sum to provide for tno ordinary needs of the Standrod
Ba~~,
and that con-
sidering all tho fea.tures entering in to tho security pledged as col1.:1 teral to
its obligation now owing to the Federal Reserve
:s~:uk,
it rrcs only proper that
the directors c.:.1d stockholders of the Standrod Banl-: should ;;rovido fu!lds out
of their perso:1al resources of a suff:l.cicnt amount to prG]?Crly rc:lo.bili tato
tho Ba..'1k n.'ld fu.rnish it with a large enough ro•.-munt of worki!lg CD;?i tal to have
the baak function in a proper manner.
Error is assigned
these two letters, but. tho assignment is without merit.
i~1
tho a<'lr!lission of
Tho letters clearly
tended to show the desperate condition of the Standrod Baril-e on that date and
knowledge of that condition on the part of the Federal Reserve Ba:c1k.
Under date of September 9, 1922, the assistant manager of the Federal Reserve Ba.nlc addressed a le ttor to the prosiden t of tho Standrod Bank
stating that the harvest season was on; that he desired to impress upon the
officers of the bank the necessity of sb£1ping their affairs so that after the
X-4464
-8-
roriod of liquidation
\7C\.S
'
ov,.;.r tho bnnk ·.-:auld sho\1 a decided illlJ?rovomont in
its conditio!1; that at thc.'l.t time tho lo:c.ns of tho institution npproximated
$1,700,000, while tho deposits were less than one half that nmount, or in the
neighborhood of $785,000; that these figures spoke for the;nselves a::ld. called
for :q.o comme:::1t; th:lt i f the StD.ndrod Bank expected to continue to receive assistanco from tho Federal Reserve
Ba~~,
a determined effort must be put forth
by its officers to the end that a proj_)er ratio between loa:1s nnd. deposits
might be shown; and the president of the Standrod Bank was directed to bring
the letter to the attention of the board of directors and furnish the Federal
Reserve Bank with a letter over the signature of each, outlining what tho
Federal Reserve Bank might expect in that regard.
by t4e president of the Standrod
Baril~
This letter was
a1~wered
under date of September 11, 1922.
In
this letter he stated that they expected to reduce their loans to $1,200,000
that season; that with this reduction there would no doubt be a corresponding
increase in
would
ta~e
d~posits;
tr~t
the officers of the Stru1drod Baruc realized that it
another year to put everything in shape, where there would be no
borrowed money; that in a great many cases they lmd loaned money to farmers
and stockmen and it was absolutely necessary to make further advru1ces in order
to secure liquidation on their present indebtedness.
under date of
Se~tember
This letter uas a:1swered
12, by the assistant manager of the Federal Reserve
Bank, by n second letter, stating that the letter of the president of the
Standrod Bank was unsatisfactory for two
ro~sons:
First, because a comnruu1i-
cation over the signature of each of the directors setting forth what might
thenceforth be expected from the bank ¥vas not furnished as requested, and
second, while tho Federal Reserve Bank was not in a position to know how
great a reduction in loons should be made, it believed that the policy of the
Standrod Bank should be to bring about the greatest possible liquidation, to
the end that it might again resume a position more "1early bordering on the
2 6r-l
~-
'
X-4464
-9-
sound and norm:::tl.
IJ?hese letters 71nrc objected to for tho like reasons as
tho letters already
the same reasons.
Y-~o~lodgo
co~sidercd,
but, in our opinion, they
~ere
competent for
They· tended. to shorr the condition of the Standrod Bonk and
of that condition on tr£ part of
tl~
Federal Reserve Bru1k.
True,
tho letters were wri tton a little more than a year before tho ban..< closed,
but other testimony in the case shows t1Ja t
uas
t~~"ero
~1o
substantial
in
cho..~go
the condition of the bank from tlmt date ur.til the time it cloaed, except
-;JG:t-
haps for the worse, as the disparity between loans c.nd deposits was even
greater when the bank closed than when these letters were wri tton.
It
o~ly
remains to
co~sidor
the question of the insolvency of the
Standrod Bank; knowledge of that insolvency on the part of its officers m1d
the officers of tho Federal Reserve Bank, and the effect of such insolvency
and kno·.1ledgo, if proven.
.A bnnk is said to be solvent when it has enough
assets to pay, uithin a reasonable time,all of its liabilities through its
own agencies, and is insolvent when unable to meet its liabilities as they become due in the ordinary course of business, or, in shorter terms, when it
cannot pay its deposits on demand in accordunce
~ith
its promise.
7 C.J. 727.
Measured by this rule we think the court and jury were amply justified in
finding that the bank was insolvent, if indeed it was not wholly and hopelessly so.
When the Eank closed, its deposits were approximately $500,000,
its loans and discounts approximately $1,300,000.
plaintiff in error tho sum of
a1~roxi~~tcly
m1d
It had borrowed from the
$700,000; from the United States
National :Bank of Portland approximately $85,000; a.nd from the National :Bank
at P;ocatello, Idaho, $20,000.
It had pledged with tho plaintiff in error,
security for its loan, bills rccoivanl.o of tho face value of approximately
$900,000; with tho United States National Ilanlt of Portland bills rccei vable
~s
268
-10of the fa.ce
va~~e
X-4464
oi a.pproximately $175,000; and
wit~
the bank of Pocatello
bills receiva.blo of tll.e face value of c.:pproximately $30,000.
And
v7G
tl1ink
it fairly appears from tho testimony that thoro was no equity in tho bills
rec0ivable thus pledged, after the payment of the loans which they were
pledged to secure.
Thoro was left wi tl1 tho banlc to meet its ordinary demands
from day to day m1d to pay its depositors, bills receivable of the face value
of approximately $275,000 C4'1d a small amount in stocks; bonds, warrants and
overdrafts.
During tho ton months which had elapsed since the bank closed
its doors, tho liquidating officer of the State had been able to realize but
$40,000 or $50,000 from tho
In the
sum~or
assets and resources t~~t crune into his hands.
of 1923, the board of directors considered the proposition of
forming a holding company to tc.ke over three, four, or five hundred thousand
dollars in face va.lue of the uncollectible
p~er
of the bank, but the vice-
president a.;.1d manager did not think that this would suffice.
During July and August, 1923, tho Pacific Joint Stock Land :Bank
forwarded two checks to the Standrod :Bank aggregating the
s~~
of $11,000,
with instructions to obtain releases of liens against pro:;!ort;;,· a::J.d turn the
proceeds over to borrowers fron the Joint Stock Land :BXJ.lc:.
were not
retur~ed
Tl·~e
releases
and several letters passed without satisfaction.
sentative of the Joint Stock Land Bank was then sent to tho
to inquire into tho matter.
St~'1drod
A repreBank
He there discovered tba. t the money had been
misapplied and was inforr:1od by the vi co-:presidont and roo.nager thr.1. t the demands upon the bonk were ratter large and. unus'-l.D.l, and that omng to low reserves he was not in a po£itio:1 to repay the money.
tim~, but this ~s refused.
He asked for further
Several r.:.1oetin,ss of the board of clircctors fol-
lowed and finally, about two days later, the representative of the Land :Bank
rec~i ved
a draft on the Wal:Jr...er Brothers Bank at Salt W.ke City for the amount.
269
X-4464
-11-
We- have already referred to the refusal of tl1o loan of $10,000 a few days
before the close of
tl~
bank to tide it overo
As against this the only testi-
mony offered by the plaintiff in error was some testi::10ny tending to show
that the officers of the Standrod Bark had no knowledge of its insolvent condition.
j~'y,
While the testimony had that tendency, if creQitcd by the court and
it likewise had a strong tendency to show
solvent.
tr~t
the bank was in fact in-
It 3ppeared from the testimony of one of the directors that M;c.Tly
a.ll the loans had been outstanding since the close of the war; that th:!".e
was no money in the country; that the bank wn.s unable to IlUlke collections;
that its deposits had decreased from a million and a half to about half a
million dollars; trat the directors of tho bank had pledged their personal
cradit to raise money for the bank, in short, that the condition of the bank
was all but desperate.
Under these
circumst~~ces
it is idle to claim that
the finding of the court and jury on the question of insolvency was not
justified by the testimony.
The claim that the directors ond managing officers of the Standrod
Bank had no notice or knowledge of the existing condition is equally unfounded.
The directors, called as witnesses,
the condition of the bank, in most part,
,fro~
derived their knowledge of
reports
to them by other
~~o
officers of the bank, and it is a significant fact that such other officers
were not called as witnesses.
True, they might have been called by the de-
fendant in error, but officers who receive deposits in an insolvent bank
are guilty of a fraud, if not a crime, and a third party who
prove the fact of insolvency cannot be expected to call the
the fraud as witnesses.
u.~erttikes
perpetrator~
Furthermore, the insolvent condition of
to
of
the bank
had so long continued and was manifested in so many different ways, that a
finding of knowledge of insolvency on 1he part of the managing officers of
270
X-44G4
-12both banks
'\7CLS
fully
jut1 ~ificdn
If this to trno, ell tho nuthc..ri ties agree
t:rn t tho receipt of a d.epc..si t "J·.i c.n insolvo:1t bo.11::.-: is a fraud on tho de-
posit0r; that title to t:1o deposit docs not pass, end trk'"'..t the deposit
be followed so long as it can bo identified.
~.ny
A fraud was thus perpetrated
on the defendant in error by tho officers of t:L1e Sto.ndrod. :Bar.Jr:, o.nd, >.ittingly or unwittingly, tho Federal Reserve Bc.nk became o. rJarty to the fro.ud..
It is lastly
co:1.tc~1ilcd
tln t t:1e plo.intiff in error is a bo:no. fide
purchaser before :r.nturi ty nnl that its ti tlc cannot be assailed.
Federal Reserve
Balli~
:C1.·. t. tr"o
had notice that the drafts were not the property of the
Standrod :Bank, in too vm.ys:
First, because it uas apparent thD.t the Stanclrod
Bonk bad no funds with which to purclnse the trafts; and second, beco.use tho
applications for discount stated on their face that the drafts were the
property of a depositor.
With this knoulodgo, a finding of
mala fides on
the part of the plaintiff in error was justified, and the plea of bonn fide
Durchaser caru1ot prevail.
The judgment is affir::J.od.
(ENDORSED:) Opinion. Filed Nov. 9, 19?.5
F. D. Monckton, Clerk, by Paul P. O'Erion, Deputy Clerk.
271.
( c0
FEDE3..AL
p
y
RESERVE
X-4464-a
B.ANK
Of San Francisco
John Perrin,
Uovember 18, 1925.
Chairman of the Board
and Federal Reserve .Agent.
Federal Reserve Board
Washington,
D. C.
Sirs:
During 1924 the Idaho Grimnl .Alfalfa Seed Growers .Association,
an organization of far~ors engaged in tho production and sale of alfalfa
seed, brought an action against the Federal Reserve Bank in the state
courts of Idaho for the recovery of $32,692, loss alleged to have been
s-;.1-s tained through the failure of D. W. St:;.ndr od & Co. , Bankers , Blackfoot,
Idaho. This case was removed by the Federal Reserve Bank from the State
Court to the United States District Court sitting in Idaho. Plaintiff 1 s
claim was predicated upon the following facts:
The Seed Growers Association, for some time prior to the
failure of the Standrod Bruik on November 30, 1923, had been a depositor
in that bank. Tlwy had entered into a special arrangement with the
Standrod Bank vrh0reby they were privileged to deliver to the Standrod
Bank sight drafts drc~n to the order of the ba~~. with order bill of lading
attached, representing tr~ purchase price of seed sold by them to eastern
customers, and for these drafts the St~~drod Bank gave the Association
full and immediate credit. The Association was then allowed to treat the
proceeds as part of their general checking account and to usc the funds
represented by tho drafts without restriction, even· before the drafts could
possibly have been collected. For some time prior to November, 1923, the
Standrod Bank had been in an extended condition and this fact was known to
the Federal Reserve Balli~ and to the officers of the Standrod Ba~~. Duri:1g
the early part of November, 1923, tho condition of tho Standrod B~1k was
such that the Federal Reserve Bank of San Francisco felt that it was not
warranted in making any further advances to the Standrod Bank and so
notified that bank. During the last week that the bank was open for
business, th<': Seed Growers Association deposited with the Standrod :Bank
three sight drafts with bills of lading attached, aggregating over $30,000,
receiving immediate credit therefor, and against the credit thus created
the Seed Growers .Association immediately commenced to dra.'ii.
These drafts
were negotiable in form and bore no evidence of any attempt on the part
of the Association to restrict their negotiation. Im..rnediately upon their
receipt by the Standrod Bwik, that bank transmitted them to the Salt Lake
City Branch of this ·,;o.nk, accompanied by the usual form of a:p:plication
for discouu~t. Credit of the Association being good, and the paper being
eligible and entirely acceptable, the drafts vrere immediately discounted
272
-2-
X-4464-a
by this bank and tho proceeds thereof passed to the reserve account of
the Stnndrod Dank. That bank immediately proceeded to avail itself of
the reserve credit thus established ~~d between the date of the credit
and the date on which the bank closed its doors used all of its reserve
f~nds and failed with an overdraft of a. small amotL~t.
Upon the delivery
of the drafts to tho Federal Reserve Bank they were immediately forwarded
to the eastern points at which they were payable for collection. Proceeds
from the collections had not come into the possession of the Federal Reserve Bnnk when the Standrod Bank closed its doors. As soon as the Association received notice that the Standrod Bank had placed its affairs
in the hands of the State Commissioner of Finance, the Association notified the Standrod Bank and the Commissioner of Finance that the drafts had
been deposited for collection only, that title thereto had not passed to
the Standrod Bank and that the Association would claim as its own any funds
representing the collection of said drafts. Tho Association also claimed
at this time that a fraud had been committed upon it through the receipt
of the drafts by the Standrod Bank at a time when it was insolvent and when
such insolvency.was known to the officers of the Standrod Bank. A cppy of
this notice was served upon the Federal Reserve Bank after the Standrod
Bank had closed. Subsequently, long after collection of the drafts had
:h.eeli ·m:aaa·; ·f11e Aesaociation demanded that the Reserve bank reimburse it for
'the amount :'o<f'"'-i ts deposit in the Standrod Bank at the time of failure, aggregating over $30,000. This demand was refused and the action above referred
to was commenced.
Tho case was tried in the United States District Court at
Pocatello before a jury consisting of eleven farmers and one ex-policeman.
The complaint consisted of six causes of action, two on each of the drafts
involved. The first cause of action as to each draft was predicated upon
the theory that the Standrod Bank was insolvent when the drafts were received, tl~t this insolvency was known to its officers and to the Federal
aeserve Bank and tlat the failed bank, as well as the Federal Reserve Bank.
was liable to the Association for the unused portion of the deposit repre~euting the face value of the drafts.
Tho second cause of action in each
instance was predicated upon the theory t~~t the drafts had been deposited
for collection only and that, title having been retained by the Seed Growers
Association, no purchaser of the drafts could acquire title good as against
the Association. Upon the trial this bank contended that there was no
evidence to ~pport the theory that the drafts had been deposited for collection only and that inasmuch as the Federal Reserve Bank did not know and
t~d no means of knowing the status of accounts as between the Association
and the Standrod Bank, it patently could not be charged as a party to the
alleged fraud resulting from the receipt of deposits. The Court granted
a motion for nonsuit on the three causes of action, predicated upon the
theory that the drafts had boon deposited for collection only, but allowed
the case to proceed on the i:1solvency theory. The case was voluntarily
dismissed as against the Comr.1issioner of Finance, the Standrod Bank and
the liquidating agent, leaving this bank as the sole defendant. A verdict
was rendered for the full amount of the drafts, without any allowance for
the amount thereof actually used by tho Association. The Court ~bso
quently required a deduction of tho amount cheCked out by th~ Association
-3-
and entered
X-4464~a
judgment for the balance.
The case was appealed by us to the Circuit Court of Appeals for
the Ninth Circuit and was recently argued before that court. The judgment
of the lower court was affirmed and it is the present intention of ~~is
bank to ask for a rehearing before the Circuit Court of Appeals and if
this is denied to take the matter to the Supreme Court of the United States.
There are many facts in connection with the case, favorable to
our Dosition, wnich it is difficult to set forth in this letter. It may
be said, however, that there is absolutely no evidence in the record whiCh
even remotely tends to show tba.t the Federal Reserve :Sank had any knowledge
whatever that the Seed GrQWers Association had not received a full, adequate
and present consideration from the Standrod :Sank for the drafts. No att~mpt was made to prove that the Reserve :Sank knew that the proceeds of the
drafts had been left on deposit with the Standrod :Sank. It was sh0wn that
the Association might have withdrawn the fttll amount of the drafts in cash
0ver the counter of the bank, might have accepted exchange on the Standrod
:Sank's correspondents for the amount thereof, or might have used the proceeds te pay a preexisting indebtedness to the Standrod :Sank and tl1at no
lo1owledge of which of these three courses had been f0llowed was brought home
to the Federal Reserve Bank. It was ~~~her shown that the Association itself was so well acquainted with the condition of the Standrod :Sank that
about a month prior to the date when it closed the manager of the Association demanded from the Standrod :S&~k a prerequisite to further deposits
that the bank should give the Asseciation a bond to protect its account
similar to bonds furnished tQ indemnify public deposits. The manager of the
Association also admitted that he had ln1own the Standrod :Sank was in an extended condition for two years prior to its failure. The Directors of the
Standrod Bank all testified that they had no knowledge whatever that the
bank was insolvent UL~til it was taken in clnrge by the Cocmissioner of
Finance. Practically the only evidence of insolvency introduced was that
gained from an examination of tho books of the batik after it had closed
and from an appraisal of the value of its assets by the Deputy Commissioner
of Finance who took ch~rge of the bank in November, 1923. The existence
of a condition of insolvency is predicated solely upon inference and not
upon positive testimony.
Yesterday the Executive Committee of this bank, feeling that
this case involves a question of such vital import~~ce net only to this
bank but to all other Federal reserve banks and banks generally, authorized the employment of Hon. Newton D. :Saker to assist in handling the case
before the Suprece Court of the United States, provided Mr. :Saker was
available. From the brief sumoary of the facts whiCh I have given it can
be plainly seen that if tho judgment of the lower court, sustained by the
Circuit Court of Appeals, is to stand, neither this bank nor any bank can
safely disco~t for another institution, which it knows or has reason to
believe is in an extended condition. :Sanks do nQt usually discount their
customers' paper unless they are in need of :f'u.nd.s and the Court has said
in effect that if the bank is in that condition, the discounting agency is
p~aced on notice that there may be equities enforceable against innocent
third partie's purchasing paper for value. The decision of tho Circuit Court
of Appeals was evidently hastily prepared and is not supported by any
citation of authorities. A copy of the opinion prepared by Judge Rudkin
X-4464-a
-4is attached hereto, o.s well as a copy of our clos':ing brief.
I have taken the liberty of calling this case to your attention,
not only for the purpose of acquainting you with the situation in relation
thereto, but also for the purpose of suggesting that the case and its importance be brought to the attention of the other Federal reserve banks and,
if &tgreoable to them, tha. t Mr. Baker's fco be prorated cmong all of tbo
banks, as has been done in the past in relation to several other cases no
more important and of no more universal interest than this.
I am informed tbat counsel for the Federal Reserve Board has been
advised as to progress in tlus case and has been s~plied with copies of
the briefs. A copy of the Opinion of the Circuit Court of Appeals is being forwarded to Mr. Wyatt.
Very truly yours,
( sigi:ed)
JOHN PERRIN
Chairman of the Board.
Enclosures.
275
FEDERAL RESERVE BOARD
X-4466
· ...,·
WASHINGTON
ADDRESS OFFICIAl. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
December 5, 1925.
Dear Sir:
For your information, there is quoted below the entry
made in the official journal of the Supreme Court of the United
States for November 30th (p.99) with reference to the Pascagoula
National Bank case:
11 No.242.
The Pascagoula National Bank of Moss
Point and Pascagoulo., Mississippi, appellant, v. The
Federal Reserve Bank of Atlanta et al• Appeal from
the District Court of the United States for Northern
District of Georgia. Per curiam: Transferred to the
United States Circuit Court of Appeals for the Fifth
Citcuit, upon the authority of the act of September 6,
1916, c. 449• sec.3, 39 Stat. 727, and section 238 of
the Judicial Code as amended by section 238 (a), act
of September 14, 1922, c. 305, 42 Stat. 837; act of
February 13, 1925; soc.l4; Heitler v. The United
States, 260 u.s~ 438."
As you probably remember, tho pl~intiff appealed this case
direct from the United States District Court to the Supreme Court
on the ground that it involved a constitutional question. After
hearing the argument of Counsel on behalf of the appellant, the
Chief Justice stated that the Court did not wish to hear from
Counsel for the Federal Reserve Bank of Atlanta and on the following Monday, November 30, the Court issued the above quoted order.
This means, of course, that the Court felt that the constitutional question raised by the plaintiff was not of sufficient
substance to give the Court jurisdiction on a direct appeal and
that, therefore, the case should have been appealed to the Circuit
Court of Appeals in the first instance. This is tantamount to a
decision that the provision of the first paragraph of Section 13
of the Federal Reserve Act, which forbids Federal reserve banks
to pay excr...ange charges. and thus impliedly forbids member banks
to charge exchange on checks presented to them by Federal reserve banks, does not deprive national banks of property without
X-4466
due rrocesu of law within the moaning of the fifth amendment
to the Constitution and, therefore, is not unconstitutional,
as contended by the appellant.
The Court's action was a disappointment to us, because
it will result in a postponement of a final decision on the
other points involved in the case. Counsel for both sides have
agreed, however, that it is desirable to obtain a hearing in the
Circuit Court of Appeals as soon as possible. The Circuit
Court of Appeals will not sit in Atlanta again before next October and, therefore, Counsel for both sides have agreed to enter into a stipulation permitting the case to be heard in New
Orleans or some other place in the Fifth Circuit. We hope to
get the case assigned specially for argw~ent in the Circuit
Court of Appeals at New Orleans sometime in January or February.
It is expected that the side which loses the case
in the Circuit Court of Appeals will appeal it to the Supreme
Court so that even·~ually a final decision will be obtained
from the Supreme. Court.
Very truly yours,
Walter Wyatt,
General Counsel.
276
277
FEDERAL RESERVE BOARD
WASHINGTON
X-4467
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 9, 1925.
StiBJECT:
Complimentary Copies of Federal
Reserve Bulletin for State Bank
Examiners.
Dear Sir:
Referring to the Board's letter
X-417q of October 25, 1924, on the above
subject, you are advised the Board has approved a similar arrangement for the year
1926. It is requested, therefor-e, that you
send to the Board, not later than Decemoer
24th, a list of names of State bank examiners
in your district to whom a complimentary copy
of the Federal Reserve Bulletin should be
forwarded during the year 1926.
Yours vety truly,
J. C. Noell,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
278
FEDERAL RESERVE BOARD
WASHINGTON
X-4468
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 9,1925.
Su~JECT:
Assistant Federal Reserve Agents, 1926.
Dear Sir:
On or before December 20th, the Federal Resorve
Board will give consideration to the matter of the appointment of the Federal Reserve Agents and Assistant Federal Reserve Agents to serve during the year 1926. You
are requested to send to the Board in time to reach it
by the date mentioned the names of those vrhorr. you desire
to be appointed a.s Assistant Federal Reserve .A.gents at
the head office and the branches, if ~y. of your Bank.
Recorr.mend<ttions as to the salaries of .A.ssistant
Federal Reserve Agents should be submi ttcd at the sa....-ne
time as the salary recommendations for bank employees.
Very truly yours,
J. C. lToell,
Assistant Secretary.
279
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENC,E TO
THE FEDERAL RESERVE BOARD
X-4469
December 9, 1925.
SUBJECT:
Code word to cover new issue of
Certificates of Indebtedness,
Series TD-1926, in telegraphic
tra.J.sac tions.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal Reserve
:Banks, the code word 11 Belongeth11 has been designated to cover the new issue of Treasury Certificates of Indebtedness dated December 15, 1925,
Series TD-1926.
This word should be inserted in the Federal
Reserve Telegraphic Code :Book, following the supplemental code word ":Belong", at the bottom of
page 25.
Very truly yours,
J. C. l1oell,
Assistant Secretary.
TO GOVERNORS OF ALL F .R.B.IUTICS.
280
X-4471
TRE.i'i.S URY :!JEP"'\.FtT:.lRJ.'JT
Office of the Secretary
WA5I.IINGTO.tJ
December 7,1925.
':'he Governor,
Federal Reserve Board.
Sir:
You are hereby advised that the Department has referred to the Disbursing
Clerk, Treasury Department, for payment, the account of the Bureau of Engraving
and Printing for preparing Federal reserve notes during the period November 1
to November 30, 1925, ~nounting to $112,800.00, as follows:
Federal Reserve Notes, Seri~~l91~
~j_
$10
$20
$50
Boston
New York
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Kansas City
Dallas
San Francisco
100,000
200,000
300,000
100,000
300,000
500,000
200,000
100,000
200,000
200,000
2,200,000
100,000
100,000
100,000
100,000
50,000
250,000
)50,000
2vv,UOO
_5 C LQ-,{;_(J_ __
3,0GG,OG0 sheets at $37.60
~er
M
Total
100,000
200,000
450,000
50,000
300,000
450,000
500,000
200,000
100,000
200,000
_ _ __,5_00' 000
50,000
3,000,000
$112,300.00
The ct.argeli a.gu.inst the severc.l Fedaral Reserve Banks are as follows:
Compens~=
Boston
New York
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Ko.nsas City
Dallas
San Francisco
Total
Sheets
100,000
200,000
4)0,000
300,000
450,000
500,000
200,000
100,000
200,000
5uv,OOO
3 , O<>v, 000
tion
$1, no. uo
3,540.00
7 .. 965. 00
5,310.00
7,965.00
3, 350.00 .
3,540.00
l, 770.00
3 ,540. 00 .
8,35_0.00
53,100.00
Plate
Printing
$320.00
1,640.00
3,690.0:)
2,460. (;(;
3,690.00
4,100.00
1,640.00
320.00
1, 640.00
4,100.00
24,600.00
Ma. tori a.ls
'rota1
$1,170.00
$3,760.00
2,340.00
7,520.00
16,920.00
5,265.00
11,280.00
3,510.00
16,920.00
5,265.00
5, 3)0. 00
18,300.00
2,340,(;0
7,520.00
1,170.00
3,760.00
2,)40.00
7,520.00
_22_§5Q_:_Q.Q__l3 ~00 ._gg
.35) 100.00 . 112,800.00
The Bureau apr)ropria.tions will be reimbursed in the ubova amount from the
indefinite appropriation "Prepar.::..tion and Issue of Fed.erJJ. Reserve Notes, R'3imbursable11, and it is ruq_uested thc.t your board ca.us0 sMh ir.defini ta appropriC~.tion to be reimbursed in like ::1Illou:nt.
Re sp3c tfully,
S. R. J;;:.cobs_,
Dapu t y CorLwi s s ion3r .
28_1
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
X-·±472
December 15, 1925 •
• SUBJECT:
Expense Main Line, Leased Wire System,
November, 1925.
Dear Sir:
Enclosed herewith you will find two mimeograph statements, X-4•:172-a and X-~1,472-b, covering in
detail operations of the main line, Leased Wire System,
during the month of November, 1925.
Please credit the amount payable by your
bank in tho general account, Treasurer, U.s., on your
books, and issue C/D Form 1, National Banks, for account of 11 Salaries and Expenses, Federal Reserve
Board, Special Fun~} 1 , Leased Wire System, sending
duplicate CJD to Federal Reserve :Board.
Yours very truly,
Fiscal .Agent.
(Enclosures)
TO
GOVEfu~ORS
OF .ALL BANKS EXC:EPT CHICAGO.
282
X-4472-n
REPORT SHOWING CLASSIFIC.t~TIO:tT .~-\ND NUUBER OF WORDS
TRJJTSMITTED OVER UAr:; LINE OF 1'HE FEDERAL RESERVE
LEASED WIRE SYSTEH FOR THE MONTH OF NOVZMEER, 1925.
From
-
---- ---
Boston
Nc-.v York
Philadelphia
C1eve1o.i'1d
Richmond
Fed. Res.
Ba:'lk Business
Per cent of
Total Bank
Business(*)
3.49
17.98
•1.12
8.62
5.21
7.20
11.91
Total
755, 79•1
100.00%
Board
Total
248,663
1, 004,"157
Chicngo
St. Louis
Minneapolis
Ka::1sas City
Dallas
Sc.n Francisco
Percent of Total
War
Finenco Corp.
Business
Total
~.- ~.~
26,390
135,870
31,122
65,134
39,364
54, <160
90,029
63,771
33,991
62' 557
53,997
99,109
i~tla.nta
1"rcasury
De-pt.
Business
94.2376
8.4~1
~.50
8.28
7.H:
13.11
2,508
3,964
2,520
2.220
1,902
2,253
·1,572
2,670
1,037
2,693
1,086
4,411
-.
15
103
31,836
118
r~
787,748
278,279
1,066,027
29d?8
61,ll•:i:
._..
28,892
139,834
33. 64~;
67,354
41,26:3
56,713
9<1:, 61G
66.4•11
35,028
65,353
55,083
103,520
7rzd/.,
"-"''/"'
100%
( *) 'l'hoso }}erce:1tagos used in
ca1C'.::.la tir"~ the pro rata share
of loD.sed ·:riro o:x:pe:.:.scs as shown
o~1 the occompo.nyi:1{; s ta temen t
(X-4472-b)
REPORT OF EXPENSE IviAIN LINE
FEDERAL RESERVE LEASED WIRE SYST.E:l._.
NOVEMBER,
Name of Ba.nk
Boston
Hew York
Philadelphia.
Cleveland
Ricllmond
Atlanta.
Chicago
st. Louis
Minnea.polia
K!:'..ol1S.':l.S City
Dallas
San Francisco
Federal Reserve Board
Operator•'
Salariea
$ 250.00
933·32
216.-66
280.33
212.50
225.0J
(#)3,742.17
20;) .. 00
183·34
275.64
251.00
380.00
Operator•'
Overtime
$
------ - - - - - -----Tctal
$7,149-96
Wire
Rental
1925·- ·..
Total
Expenael
250.00
933·32
216.66
280.33
212.50
225.00
3,742.17
200.00
183-34
275.64
251.00
380.00
15,362.58
$
Pro Rata.
Share of
To1&1
EJPenae•
$
740.26
3,813.73
873.89
1,828.38
1,105.09
1,527.19
2,526 ·23
1,790.20
954.49
1, 756.27
1;514.46
2, 780.76
$
Credita
Payable to
Federal
Reeerve
Board
i 250.00' $
490.26
933.32 2,880.·41
216.66
657.23
280.33 1,548.05
212.50(&)1,097-26
225.00 1,302.19
3,742.17(*)1,215·94
200.08 1,590·20
133-34
771.15
275.64 1,480.63
251.00 l ,263~46
38C.CO 2,4o0.76
$7,149.96 $15,481.60
(b)l,215.94
$14,265.66
(&) Includes $204.67 for branch lino busL~aaa tra~smitted over main line circuit.
(#) Includes salaries of Washington operators.
(*)
(a)
(b)
Credit
Received $D.97 from War Finance Corp. and $1,290.62 from Treasury Dept. covering business for the
month of November, 1925.
..\mount reimbursable to Chicago.
284
/
X-4475
STAT:Elrv::ENT FOR THE PR:;!';SS .
For
I~~ediate
Release
The Board today appointed George
as a Class
11
Federal Reserve :So2rd
.December 19, 1925.
DeCamp, of Pittsburgh,
0 11 Director of the Federal Reserve Bank of Cleveland for
the unexpired term of D. C. Wills, deceased, and designated Mr. DeC~
Federal Ros8rve Agent and Chairman of the Board of Directors
of t:1c Cleveland :Bank for the year 1926 •
._.. ,....
Since 1918 Mr. DeCamp has been Manager of the Pittsburgh
Branch of the Federal Reserve Bank of Cleveland.
285
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 21, 1525.
SUBJECT:
.A.SSESSMElfr FOR GE.I\f'Ji;RAL EXPENSES OF THE FEDEEAL RES;'RV:tG
EOAHD, JMfUARY 1 TO J~E 30, 1926.
Dear Sir:
Confirming tel~fgraphic advice there is enclosed herewith copy of a resolution adopted. by the Federal ResGrve Board
levying an assesBment upon the sovzral FGderal reserve banks of
an ar.nount cqu::t.l to one,}lundrod two thous.:mdths of one per cent
(.00102) of the tot~l paid in capital stock and surplus of such
banks to defray th.J estimated gonGrd.l expensos of the Bo:J.rd from
J~uary l to June 30, 1926.
Kindly daposi t one-half of the c>..rnount of your o.ssessInl:mt in the G:mera.l Account, Treasurer, U. S., on your books
J ..nud.ry l, 1926, and ona-half M:...,rch 1, 1926, in each instance
issuing a C jl) for credit of 11 83-L.,ries and Ex.:ponses, F3der;;1l Re~;c;rve Board, Speci:J.l Fund", ::ii.Ssessment for gun8ra.l expenses, and
sending duplicc1ta C/D to the Fed.:;r.s.l Rcs.Jrve J30,Md,
Also please
furnish ~ statem0nt of your c~pitcl1 and surplus used as a b~sis
for the assessment.
Very truly yours;
Enclosul·e.
(Sent to Chairman of ec1ch Fedor:..l RGS·3rve J3J.J.J..k). ,
286
X-l.!476-b
RESOLUTION LEVYING ASSESS1mNT
~ereas, und~r Section 10 of tho ~ct ~pprovod
December 23; 1913) and known ~s the FedGr~l Resarvc Act,
the Fodor.:-.1 ReaGrva Bol:l.rd is empowered. to lsvy semia.nnu;J.lly upon the FedGr""1 resorve banks in :proportion to
thair c.l:pit.J.1 stock <md surplus an <J.ssessment sufficient
to p:;;,y its ostilil.J.ted ox:pensos, incluling the sa.la.rias of
its memburs, assist,.iJlts, attorneys, expurts ai"J.d employees
for tho ha.lf-yea.r succ.).~d.ing thJ l-:Jvying of such c:.~.ssessmont,
togathar with any ~eficit carried forw~rd from the prec.Jdine; h .... lf-ye:ill' i ~d
Viherea.s, it a.:p1~01J.rs from estimates submitted a.nd.
considered th,:~.t it is il.3C3ss~ry t~t :.~. fund. equ(J,l to one
hund.rod two thous.:;llld.ths of one :pr cent of the tot;i:i.l lJ.:lid.in capital stock Jl'l\1. sur:plus of the F13ior.:.~.l res•;;rv.J banks
be cra;itod for th;; J..lur:poso hoNinbafore described, exclusive
of the cost of 0n~,r J.Ving <And printing of Foder.:ll reserve
'
notes; Now, thcreforo,
Be it rosolved, That pursuant to the authority
vested in it by law, the Fod.Qr~l Rosarvc Board hereby
levies .m a.ssesament U}On the saver ..l.l Federal reserve b.gnks
of cim amount eq,~l to one hundred two thousmdtha of one
per cent of the totul p;.~oi.;l-in Ci!.~i t,.• l ,;.ni surr~lus of such
b..mka s.s of Dl;)cember 31, 1925, ·cilld thJ Fiscal Agemt of the
Bo~rd is hereby authorized to collect from said b~ such
.J.sse ssment and. execute, in the name of the ]o.l.rd., recai}:)ts
for ~~ents ma.ia.
Such aasessmonts will be collectod in
two instal1ments of on~-~1! each; the first installment
to be lJ·...id on J-:.1nu-J.ry l, 1926, :md the s~cund ha.lf on
Ma.rch l, 1926 •
.
287
X-4478
FZDERAL
RESERVJ;
:BOARD
J<~or Release in Morning Papers,
Monclay, Dece!nl~r 28, 1925.
T:1e following is a su.t..:nary of general
bu!: iness and financial conditions thro,Jghout tr~ several Federal Reserve Districts.
based upon statistics for the months of
Nove~ber·n~d December, as contained in the
forthcoming issue of the Federal Reserve
:Bulletin.
Production of basic
co~~oditics
in November continued in about the
same volume as the month before* and the general level of prices rerr..ained
unchanged.
Activity of wholesale and retail trade was below the record
level of October, but larger than in November of last year.
}.='reduction.
Output of l:o.sic industries included in tl:e Federal Reserve :Board 1 s index of production was at aeout the sarre rate in No7ember as in October, but
owing to a
cent.
sm~llGr
number of
worki~g
days tlm index declined by about 1 per
Increases occurred in average daily p':'oduction of pig iron, steel
ingots, copper, and bitmrinous coal, a...'ld in t;he consumption of cotton, while
the :production of flour, sugar, and meat products declined.
Automobile
production in Uovcmber was seasonally less than in Octeber, but continued
large for this time of the year.
Employment and payrolls in manufacturing
industries showed s:na.ll increases in November as compared with October.
Employment ond worknon 1 s earnings increased in the rr..achinory indus tries,
while in food products and tobacco and in the clothing industry there were
...
seasonal declines.
B1.lilding contracts awarded were smaller in November
than in October, but were large when compared with the volu1ne for November
of previous years.
288
-2-
...
Final estimateG by the Deparktent of Agriculture in 1925 indicate ttJ.8.t
the acree.ge of all crops harvested y;as slightly larger tban in 1924, but tlJat
the aggregate production of crops was in about the same volu.r:1e.
Yields of
cotton, corn and tobacco wore considerably larger tha~ last year, while the
J?roduction of wheat, oats, potatoes, and hay was smaller.
Trade.
Sales in leading lines of wholesale trr.:.de shov:ed the usual decline in
Novenber from tho seasonally high levels in October, but continued larger
thou in the corresponding r:tonth of uny of tho past five years,
Total volu.'!le
of trade at department stores and ma.i 1 crdor houses was sr.Ja.ller than in
October, ov1ing largely to the sr.1aller nm:1ber of business days in November.
Co0f>ared with earlier years, however, departnent store sales were the
largest on record for lTovenbcr and sales at nail order housos wore tho
•
largest for tl1at month in the past six years.
Merchandise stocks at de-
partment stores showed considerably more than the usual increase in November and were 4 per cent larger than in November of last year.
Distri-
bution of comrnodi ties by railroads during November reached new high levels
for the month.
Movements of merchandise and miscellaneous commodities,
coal, and coke were larger, while those of livestock, grain, and forest
products were somewhat smaller thru1 in November of the two preceding years.
Prices.
Wholesale prices, according to the index of tho Bureau of Labor
Statistics, remained the some in November as in October.
Prices of live-
stock, meats, and. cotton goods declined, but thorJe decreases were offaet
in the general averages by advances in the price of grains, fuel, lumber,
. ...
X-4478
-3-
a.nJ. r<lllber.
In the first th:ree weeks of
Dece:n-~~er
289
prices of wheat, flour,
and hardwood lunber '<7ure slit"c1tly hi 1_:sl1.er t:1n.n :Ln Hovernber, while quotations
on cattlo, cotton, coke, canpGr,
1.r~d
hides i7ero lorrer.
liank Credit.
-1
At mer:1ber banks in leading cities the volume of credit outstanding G>n
De0efuber 9 was near tho high level roached early in 1Tovornbcr.
Loans for
cornr.:ercial ar.rl Ggricultu:;:al pu::po::;es declined so::1errhat during the period,
and
t~ero
was also a decrease in t~~ banks 1 security holdings; continued
growth of loons on securities, however, was sufficient to offset those reductions and trJ.O total of
lo~:ms
and. invos trJon ts rcmt;.,ined practically un-
changed •
.At tho reserve bunks the seasonal dor.:JD.nd for ccin·ency and credit re-
.
sulted in a.n increase of total bills and soc\lr:i. tiE.:s in De comber to the
highest level in nearly :i'our yenrs.
This increase in reserve bank credit
in usa has been in tho fori:'\ of eli sconnts for :::lEJi.lbor banks, as the volume
of purchased bills held chru:tell but H ttlo between tho niddle of Noveo.ber
and the ;:1idJ.lo of Docer:.oor, and holdings of United States securities also
rern.a.inod conctant, except for a tcnporary increase connected with' Treasury
financing on December 15.
Mone~r in circulation increased by
$?1, 00'), 000
between Uover.J.ber 1 and Decm~ber 1 and the con tiuu.ed dernLmd for currency in
December was reflected. at the reserve banks both in increased Federal re-
...
serve note circulation and in a decline in cash reserves.
Duri::.g tho latter P'Jit of November and the early part of December openmnrket rntes on corn.rr1.ercial pepor and acceptances remained substantially
•
unchanged.
Later in Docm:1ber increased dcmend for credit and currency,
lar{;el;;,r seasonal in character, was reflected in firmer money conditions.
290
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENC!t TO
THE FEDERAL REliERVE BOARD
X-4480
December 24, 1925.
SUBJECT:
Holidays during January, 1926.
Dear Sir:
On Friday, January :. 1926, New Year's Day, there
will be no Gold Settlement Fund nor Federal Reserve Note
Clearing, and the offices of the Federal Reserve Board will
be closed •
..
The Federal Reserve Banks and Branches indicated
below will also be closed in observance of holidays during
Janu.c'1.ry:
Friday, January
8
New Orleans
•
Tuesday,January 19 Richmond·
Atlanta
Birmingham·
Nashville
Jacksonville
Memphis
..
Anniversary of
Battle of Ne\v
Orleans
.Anniversary of
birthday of
General Robert
E. Lee
Please include yo~r credits of January 8th for New
Orleans, and January 19th for Richmond, Atlanta and Memphis,
in the Gold Fund Clearings of the following business days, and
make no shipment of Riclli~ond or Atlanta Federal Reserve notes,
to Head Office or to Washington, on January 19th.
Very truly yours,
J. C. Noell,
Secretary.
Ass~stant
TO GOVERNORS OF ALL F. R. BANKS
X-4481
FOREIGN BR.\NCHES OF Al\GRI CAN
BANKING INSTI'I'UTIONS.
Bankera Trust Compa!_!;L__Ne\V York.~J.
Ilranches: France: Paris
England: London
Equitable Trust Company, New York, N. Y.
Branches: England: I,ondon
:France: Paris
~iexico :
Me:)!i co City
ClJaBe National Bank, New Yor:.:, l'I_~.
l3ranches: eu·ba:
Habana
Panama: Paru:ma City
Canal Zone: Cristobal
Farmers Loan and Trust Compa~y, New York, N. Y.
Farmers Loan and Trust Coa:rpany, Ltd. , London, England (two offices)
a British Company; all stock owned by Farmers Loan and
Trust Company, New York, N. Y.
Representatives: Paris, France.
First National Bank, Boston, Mass.:
Br&nches: Argentina: Buenos Aires
CubaF
Habana.
...
Guaranty Trust Cenrpa.ny, New York, N. Y.
Branches: England: London (three offices)
England: Liverpool
Belgium: Antwerp
Belgium: Brussels
France: Paris
France: Havre
National City Bank of New York, New York, N. Y.
Branches: ~gentina: Buenos Aires
Rosario
...
Belgium:
Antwerp
Brussels
Brazil:
Pernambuco
Rio de Janiero
Santos (Agency)
Sao Paulo
Bayamo
Caibarien
Camaguey
2~J1
-2-
X-4481
l'Tati,nc:J.. City Ba~12.-c of Ue':.r ·r_QfS.L..::N;.c;e;.;.~':......:Y:...::o:.::r..::j:::.J,~l!:....:.c...-.:Y:....:.__,(....,c:.:::o;..:;n::..;t:....:i:;..:cn::.::u;:..:e:....:d"-'-)
}.!ranches: Cuba:
Ca:.:·d.cuas
Ciego de .Avila
Cie:1fuegos
Florida
Guan tanamo
Manz~nillo
Matanzas
Santa Clara
Habana (sub-brro1ches)
Belascoain
Galiano
C'J.::;, tro Caminos
La Lonja
Moron
Nuevitas
Pinar del Rio
Remedios
Se.gua la Graade
Sa.ncti S:9iri tus
So.;.1. tiago
Vertiel1tes
Yaguajay
)
Chile:
Sa.::..tia.go
Val~;araiso
Dominican Republic:
Barahona
La Vega
Puc;rto Plata
S::u1 :C':caacisco de Macoris
San Pedro de Macoris
Santiago de Los Caballeros
Santo Domingo City
E:J.gland:
Lo:1don
City Branch
'\Vest-end branch
Fro.uce:
Paris
National City Bru1k (Frru1ce) S.A.
(Subsidio.ry of National City Bru1k
of New York)
Italy:
Genoa
Milan
Peru:
Lima
Porto Rico:So.n
JU&~
2B2
-3-
X-4481
1Tationa1 City :Ba:ak of New _Yort..,_New York, lL Y. CCo:1tL1ued)
Branches: Uruguay:
Montevideo
Venezuela: Caracas
B]UUJCHES OF FOREIGN BANKING CORPORATIONS OPERATING
UNDER AGREEMENT WITH THE FEDERAL RES:SRVB :BOARD.
Equitable Eastern Banking Corporation (subsidiary of
Equitable Trust Company, New York, N. Y.):
Branc:1es: China:
Shanghai
Hongkong
International Banking Corporation, New York, N. Y.:
Branches: China:
Canton
Dairen
Hankow
F..arbin
Hongkong
Peking
Shanghai
Tientsin
England:
London
India:
Bomba7
Calcutta
Rangoon (Burma)
Java:
Batavia
Spain:
Barcelona
Madrid
Republic of Panar;a;
Colon
Panama
Japa"ll:
Kobe
Tokyo
Yokohama
Osaka
Philippine Islru1ds:
Cebu
Manila
•
Straits Settlements:
Singapore
National City Bank (France) S. A. (subsidiary, in Paris, of
Natio:1al City Bank of New York).
Federal Reserve Board,
Ja..J.uary 1, 1926.
293
2B4
STATE!·,!:8NT
FOR
TH::!i
PRESS
FEDER.U. I'..ES:SRV3 BOAP..D
For Immediate release.
X-4482
December 30, 1925.
The Federal Reserve Board will hold
a hearing on January 15, 1926, at which those
interes~ed in the establishment of a branch of
the Federal Reserve Bank of Rir.h~ond to serve
the territory located in the southwestern portion
of the Fifth Federal Reserve District will bo
afforded an O?portunity to present orally and
in writing their views as to the necessity for
the establishment of such a bra..'lch, and at what
city in said. terri tory such a branch should be
established.
295
FEDERAL RESERVE BOARD
WASHINGTON
X-4483
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 30, 1925.
SUBJEC'I':
.
Practical In ter::pretation of terr.:1 11 1Ton-Perishable
Readily Marketable Staple Agricultural Product'.
Dear Sir:
In its l':3tter X-~~94-8, dated ._Tanuarzr 21, 1.924, the :federal
Reserve Boar:l di~C'lSS3cl. the pro:Jer intenwetc:tion of the term
11 non-:9erishable readily m:.:trlzeta1)le s ta.ple a:;ricul tural :9roduct 11 ,
as useu in Section 1~5 of the :Fed.eral 2esr:rvo Act.
I::1 that lettt.:r the Bo.o~rd ex-;resse'l the )pir.ion t}lat FEderal ::.·eserve banks
should not refuse to di.scount sight o:~.· dDma:iCi b:.n Oi~ lading
cl.rafts merely be ca.'.1se tho 2{;rj cultural :produ.ct covered thereby is
l10 longer in a tec}micall;/ l'.'lW state, cut ha:: ]:J.!:':SS8d through the
initial ste.gos of rofinc;nont or processin~; subsequent to the actual harvosting.
It wr.s stated, however, that ·che Board was not
then :prepared to formulate a co;-:~prehensi ve definition of this
broad term, but dee;,jeti it Et'J.visable to rule upon specific cases
as the;,r should be preser, te::L
.,
The Boer<l has now been requested to rule U':)On the question of whet!l8r canned corn should properly be considered a
non-perishable readily marketable staple agricultursl product in
accordance with the Board's letter X-3948. }3efore passing upon
this question the :Board 7rishes to i1ave information as to the practic(J.l in t0)rpretiltii)n which ha::-, been given by tho Federal reserve
ban~cs to the term 11 non-perisr1ablo readily m~rkotable staple agricultural :product 11 •
You are reque:-;ted t0 a,-fvise the Board what
products y::mr bank }:as heretofore considere:l as agricultural and
what pro duets it has declined to consid.er as agricultural in passing upon applications for the disc;:nmt of Sif:,:ht and demand drafts.
':'he Board particularly desires to lmow whether sight or demand
J.rafts sec1Jred b;r canned products have been offered. to you for
redisC)"lm t, and, if so, wh13.t action you have ta.kcn vvi th regard
thereto.
Very truly yours,
'Nal ter 1. E:idy,
Secretary.
TO GOVERl.\ORS OF ALL FEDERAL. RESt.::R.VE J3.A.NKS.
FEDERAL RESERVE BOARD
296
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
..
X-4484
December 30, 1925.
SL~JECT:
Eligibility for RediscolL~t of Notes of Corporation
Representing Borrowings of Funds to be Advanced to
Subsidiaries.
Dear Sir:
..
The Federal Reserve Board has recently had occasion to rule
upon the eligibility for rediscount at a Federal reserve bank of notes
of a parent corporation representing borrowings by the parent corporation of funds to be advanced to its own subsidiaries.
In the narticular case ~resented to the Board for a ruling
it appeared t:::w.t formerly mo:nber banks took the notes of the subsidiaries
with the endorsement of the parent corporation and that such notes were
considered eligible for rediscou.~t at Federal reserve banks; but that
recently the :Parent corporation had decided tba.t it would be better and
simpler financing for it to borrow all funds to be used by it or its
subsidiaries on its own notes and to make advances from such borrowings
to its subsidiaries. Two of the Federal reserve banks, however, took
tho :?osition that, i.L."l.dor tho regulatio:i.s of tho Federal Reserve Board,
notes of the parent corporation given for funds borrowed for the purpose
of IT..akiag advances to its o><n subsidiaries must be classed as 11 finance
paper 11 which is ineligible for rediscount at Federal reserve ba'i.ks; a."'ld
a member bank requested the Board to reco~sider the question with a view
of ascertaining ;:hether a more liberal interpretation could be placed
upon tl~t provision of its regulations which pertains to fina"'l.cc paper.
The -position taken by the Federal reserve bar.Jcs in this matter
is in accordance ~ith a strict technical interpretation of that provision
of the Board's reGulations which ~rovides trat in order for paper to
be eligible for rediscount the proceeds of such paper must have been
used 11 in the first instance" for an eligible purpose and that paper 11 the
proceeds of whicn have been or are to be advanced or loaned to some other
borrowerM is not eligible for rediscount. Upon further consideration of
this question, however, the Board reached the conclusion that this is
an unnecessarily strict interpretation of its regulations in cases of
thi.s kind, and the :Soard Tilled that where a parent corporation owns a.t
least 75 per cent of tho stock·of each of a number of subsidiary
corporations the nO'"til:>S of ouch parent corporation the proceeds of which
297
X-4484
-2-
have been adv~~ced or loaned to its subsidiary corporations will not be
considered finan·co paper vvithin the moa.~irlg of tho Board 1 s regulations;
provided that (1) tho parent corporation makes no adva~ces except to its
own subsidiaries, (2) the subsidiaries borrow no money except from the
parent corporation, and (3) the yrocceds of such advances have boon or
are to be used by the subsidiary corporation for ru1 industrial, commercial, or agricultural purpose, within the meaning of the Federal Reserve Act and the Bo[~d 1 s regulations. It is understood, of course, that
in order to be eligible for rediscount such paper must also comply in all
other respects with the requirements of the law and the Board's regulations.
The Board has heretofore published several rulings to the effect
that paper representing borrowings by one person, firm, or corporation of
funds to be advanced to an independent person, firm, or corporation, is
11 finance paper 11 a~J.d is therefore ineligible for rediscount; and this ruling
is not intended as a reversal or qualification of those rulings. There is
a clear distinction, however, between cases such as those covered in tho
rulings above mentioned and the case here urcsontod; because, whore tho
borrower is a parent corporation ond makes~ advances only to subsidiary
corporations owned by it, the parent corporation a~d tho subsidiaries arc
in practical effect one single organization a~d may with propriety be
viewed as a single borrower.
Very truly yours,
D. R. CRISSINGER,
Governor.
TO GOVERJ:.TORS AND FEDERAL RESERVE AGENTS OF ALL F. R. BANKS
'
2B8
FEDERAL RESERVE BOARD
WASHINGTON
X-4485
ADD~ESS OFFICIAL CORRESPONDENCE TO
'THE FEDERAL RESERVE BOARD·
SU:SJECT:
December 30, 1925.
Ratios of Capital Assets to
~~rrent
Liatilities.
Deru· Sir:
At its meeting on December l, 1925, t~e Fe1eral
Advisory Council at the Boardfs request gave consideration to the cause and probable effoct of the present
trend towards lower ratios of capital assets to current
liabilities in the ba..YJ.king ins t:i tutions of the country.
Tho Council 1 s recommendation to the Board on this topic
is as follows:
' 1 From the rne!:lora.ndum and chart furnished by the
Federal Ro serve Board it is evident that tl-:ere has b oen
a downward tendency in the proportion of capital funds
of national banks to liabilities, and the chart would indicate that the ratio has reached its lowest point siilCe
1865. It would seem, therefore. proper for the Federal
Reserve Board to draw attention of the Federal reserve
banks to this trend 1 and through them, the attention of
the clearing houses and member banks with a view to en-·
couraging a close study of the question on their :Qart . 11
..
Accordingly, we are sending you h•Jrowi th a copy of
the chart showing the trend of the ratio of capitAl to deposits since 1865 and a table giving the same inforination
for two more recent dates by Federal reserve districts.
This material is sent to you for your information and such
diJtrihution as you may see fit to make among memoer banks
or 0 ther banks.
Yours very truly,
Enclosure
Wal tc;r L. Eddy,
Secretary •
..
'1'0 .ALL FEDERAL RESERVE AGE1rl£S.
(COPY )
X-4486
2B9
SOUTHERN PACIFIC COMPANY
•
65 Market Street
Son Francisco
•
Wm. Sproule,
President.
Decemoer 24, 1925.
Honoraole C. S. Hamlin,
Federal Reserve Board,
United States Treasury Bldg.,
Washington, D. C.
~
Dear Mr. Hamlin:
I have yours of 11th instant and have not forgotten your desire for
a memorandum of the bank organization that would seem to be more effective
...
..
than the present •
My views are given with some reluctance lest they be deemed a presumption or mischievous.
Fact is the suggestions offered are of value only as they are con-
•
structive toward putting the Federal Reserve Board in such control of the batiks
as will cause them to function in their daily work upon policies suggested by
...
the. Federal Reserve Board, with local renresentation in carrying out the
policies effectively, which will give recognition to the Government's interest in the not returns from each bank, requiring adoquato supervision of
the bank's operations.
..
In this I do not refer to one bruik but to any Federal
Reserve Bank •
I think it better to put tho momoro.ndum in detached form, rmrkod 11
Controlling Influences in Federal Reserve
Ba-~ks. 11
Yours truly,
•
•
Encl
..
P.S.--I have been qQito free in expressing myself in tho memorandum as I
understand it to be so desired, ffi1d confidential •
(signed) Wm. Sproule
w.s.
300
-2-
X-4486
Controlling L1flu.::::"ces in Fed.eral Reserve :Ba"lks
•
A co:1trollbg i:1flue:1ce in a Federal Reserve :Ban.k: is either in
Washington or is local.
The IJa::.lap:cr of tho Bo.nk is aut to be selected by the local majority
...
in the directory of the :Bank, whose feelinG is apt to be that the local interests in the area served by the Bank are best protected by strengthening the
Ma:i.1ager, who is elected by will of tho local r.aajori ty oven ':7hcn tho election
is unanimous.
A Manager not agreeable to the local majority in its directory
could not be elected •
•
The r;fanager should be the Manager of the Bank in the conduct of its
•
daily transactions and general routL1e; but this is not the way it works.
He starts with the title of Governor, which is a misnomer.
Governor; nei thor is he a Managing Director.
not be.
He is not a Director a"ld should
His business should be to run the Bailk as an organization, under
the direction of the Board of Governors.
.
He is not a
The :Board of Governors are merely
given, for convenience, the more general title of :Board of Directors.
Board of Governors should give its instructions to the Manager.
The
The Manager
should be given these instructions through the Chairman of the Board of
..
1
Governors (i.e. Directors.)
Chai~~
of the Board and Federal Reserve Agent is the only of-
ficial of the Bank named in the statute.
are joint &1d continuous.
•
As such, his official fUnctions
He should not be expected to abdicate either of
his joint functions at any time.
His chairmanship should not cease when
the meeting of the Directors adjourns, any more than his fUnctions as Federal
...
Reserve .Agent cease
vrho~1
the Directors have meeting.'
The duties of the
30:1
X-4486
-3-
Chairrna:'l of the Board of Directors and Federal Reserve J~ent are lodged in
•
one official to the end that he should be directed as to general policies
by the Federal Reserve Board ru1d so give direction to the policy of
•
...
Board of Directors.
tl~
As policies of management arise from time to time, which
warrant consideration in Washil~ton at the instance of the Bauk, the
questio:1s should be presented tl1rough the
Chai1~~1
of the Board of Directors.
Recor:ni tion of this official by the Board as their direct and
resoonsible representative is
imnort~~t.
1l1y procedure that tends to sub-
merge him, or go past him in the transactions of the Federal Reserve Board
•
with the
ba1~~.
impairs his usefulness to the Board and does :1ot tend in tho
direction of strengthening the Board.
By virtue of his office he should be
Chairman of all commi tteos, ond vote h1 commi ttoe.
..
The Chairnuu1 of the Board and Federal Reserve
~\gent
should be re-
garded not only as the official representative of the Federal Reserve Board;
it should be known that he is also the direct adviser of the Board by virtue
•
of the joint office and its statutory Character.
As your adviser, his calls
to Washington could well be separate and distinct from your calls upon the
Governor for conference with the latter.
The calls upon the Governor by
the Federal Reserve.Board should be through the Statutory Officer, and it
could well be made optional with him as to whether he should go to
Washington for the same conference or not, unless your Board wishes him
.
specifically to go.
When he so goes, the conference to be so handled tba. t
the Statutory Officerts official relationship to the Board is given the importm1ce of the position, without being in any way made offensive in the
•
Governors.
He should have precedence.
302
-4~ven
X-4486
matter of conmensation should be dealt with according to common
usage, which is in terms of salary.
By virtue of his office yhe Statutory
Officer has to perform regular daily duties, maintaining and being responsible
for an organization with office and field forces.
In business lifo, terms of
such responsibility are interpreted in terms of compensation.
Alike to offi-
cers and ewgloyos of tho Bank and of the Federal Reserve Jlgent, the senior
officer of highest responsibility is trult officer whoso compensation is the
greatest.
With the lAanager of the
B~~
getting $25,000 a year, for example,
the Statutory Officer should be paid not less than $30,000 as a mere raatter
of wholesome organization.
The Federal Reserve Board, of course, in matters of detail ca1n1ot
control the routine of the Ba1k 1 s business, but can deal with discount rates,
open market operations, unusual credits given or
~reposed
to be given by any
Reserve Ba1k to any of its member Bariks; also with policies under one-product
conditions which call for special consideration ond caution in granting or
withholding of credit, or other conditions of an abnormal character arising
from time to time.
sho~
These are dealt with now in mixed fashion.
The open
operations are under the Governor for instance, although such operations
belong to the realm of policy in which the voice of the Statutory Officer
might properly have weight.
The givi~g of credits is in charge of
001
Exe-
cutive Committee the Chair~n of which is tho Governor ~ho is not a Director.
It is true, as a further
ex~)le,
that
~~e
Federal Reserve
~\gent
is supposed
to be a check on the paper submitted for loans but this is in the nature of
a11
unpleasa.1t veto pouer, of which I understand he has been deprived by a
ruling that makes the Executive Committee's action final.
i Loan Committee might be created to consist of the Chairman,
ao3
X-4486
-5-
Deputy Chainnan, a member of the Bank 1 s Board representing the mujor Banks,
~~d
one representing tho minor Bonks, each of these four members to vote.
This would give two Class C Directors a11d two of the Directors representing
member Bonks, so that all interests would be protected.
There would seldom
be a tie, but a tie would have the effect of negative action.
It should not
be too easy to tie up the reserve of the Bru1ks in doubtful cases.
The losses
to the B8.l.J.ks through bad loans. might well be checked up for closer L1forffi3,tion.
There is no rule
tr~t
takes the place of consideration of question as to
whether member Banks 1 capital is unimpaired, value a:1d character of its
surplus, and the
sounlli~ess
of its
m~1agement.
True, in these three, Wash-
ington's interest is general but it is not remote, because it runs not only
to-the returns derived by the Government from the Reserve Banks 1 operations,
- it nu1s finally to the
soun~~ess
of the member Bank in its relations to
the depositors the Reserve System is in part designed to protect.
The Manager of the Bank may sit ex officio as now with the Board of
Directors, without vote, to give them information they require.
In like
manner and for same purpose, he could sit in the Loan Committee or in any
other com<nittee desirable.
In matters of
poli~r.
it may occur from time to time that there are
differences of opinion upon matters deemed material.
matters of appointments.
The Federal Reserve
~oard
This may occur even in
could require that in
such cases whenever the Chairman of the Board and one or both of the Class
C members dissent from the vote of the majority, the subjects are to be submitted to the Federal Reserve Board with statement of the vote and reasons
for or against, to the end that approval may be given or denied as advisable,
the
~1air1~"1.
to decide uuon wisdom of such submission to Washington.
304
X-4486
-6-
In su.rmnary, the "9resen t vrorking of Federal Reserve Bank organization is centrifugal so to
spea~:.
The Federal Reserve Boord, on the con-
trary, is interested in Reserve Ba11k organization that will have a centripetal tendency, in preserving the proper relation and influence of Washington
within the councils of the Bank.
This can still be done by the firm and
consistent attitude of Washington in support of the Chairman of the Board
and Federal Reserve Agent as a joint officer who functions in that duel official relation continuously and not intermittently.
As such, Washington
looks to him to be the dominant factor in conserving the interests of
Government in the stability of the Federal Reserve Banks, and their functioning as a system of Banks rather than as widely scattered banking units.
The
Federal Reserve Board has to decide whether tho Manager of the Bank is the
dominant figure in the Board, or the Statutory Officer is to be that figure.
If the Manager is to be dominant, then the Chairman of the Board is merely
the person designated to preside when there is a Directors' oeeting, which
is the present drift.
As to which it is to be, this is for Washington to
decide in order that the present unseemly uncertainties may be brought to
a conclusion, even though that conclusion be gradual once the policy is
fixed and consistently adhered to.
Putting the moral influence of the
Board strongly behind the Statutory Officer in the Bank, will alone be a
start in the direction desired, and the councils of the Bank should gradually
be
reorganized to fit.
No one Balli( serves for criterion.
The Board might consider it
well to call into council three or more Directors of the broadest experience
from Class C in three or more Federal Reserve Banks, if Washington is not
satisfied with the present
tre~d
of Reserve Banks.
The trend appears to be
...
305
X-4486
-7-
the localizing of tho Reserve Bonks in view of the Class C Directors being
in a ninority.
With strong
Cfr~irnen
strongly supported by Washington, that
support gradually established, but pursuant to a fixed policy interpreted
by regulations issued from time to
t~e,
there should come without undue
friction a better recognition of the immediate interest of Government in
~!. .... ·''
the conduct of the Bank, both as to policies and as to conservation of the
capital resources of the Bank and of its member Banks, that the reserves may
be put to their best uses ,e and providently •.
It· may be conceded tba t such a change would make the chairmanship
the d.ominan t
place and the Manager of the Bank would run the nachine under
the dominating influence of the Statutory Officer.
If the Federal Reserve
ba.11king system is to have the Fe:deral Reserve Board for its hub, i.t would
seem that this policy
~~ll
become necessary, whatever nay be the
1~chinery
designed to carry it out •. Otherwise there seems to be little reason why
the Federal Reserve Board's influence in the Banks should be any more than
merely to enable the Directors of the Banks to get by without conflict with
the Federal Reserve Act.
The fact is that defects in the law leave undefined the fUnctions
of these officers and so cmllenge human nature.
r~n
for conditions of conflict they have not created but of which they are
the victims•
This will have to be corrected sooner or later.
San Francisco, Cal.,
..
It is not fair to blaDe
December 24, 1925 •
aon
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
July 2, 1925.
St. 4578.
SUBJECT:
Branches and Agencies of
Federal Reserve Banks.
Dear Sir:
There are being forwarded to you today, under
separate cover,
copies of a
parr~hlet
relating
to Branches and Agencies of Federal reserve banks, showing their powers
ano
f'unctions and volume of business
handled, revised as of June 1925.
It is desired to keep the data on pages 1 to
S current at all times, and it is therefore requested
that the Board's attention be called to any alterations
or revisions that may become necessary due to changes
in the functions performed by branches of your bank,
if any.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
Enclosures
LETTER TO EACH FEI11i;RAJ_, RESEHVE AGENT.
;_~.-
..·
307
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 15,
St. 4623.
SUBJECT:
1925.
Condition of Member banks
as of June 30, 1925.
Dear Sir:
Fbr your inforrration there is enclosed herewith
a preliminary statement regarding the condition of all
member banks combined as of June
abstract (No.
29)
30, 1925.
The Board's
showing the detailed ~igures for
State bank and Trust cornpany members and the combined
figures for all member banks will be ready for distribution in the
ne~r
future.
Very truly yours,
Walter L. Eddy,
Secretary.
Enclosure.
LETTER TO .ALL FEDER.AL RESERVE AGENTS.
308
CONDITION OF ME:4!BER BANKS AS OF JUNE 30, 1925.
Loans and investments of all :nerr.b~:- banks, as at each call date since
September 14, 1923, reac.;1ed a new raco:::·cl trJtal ano on June 30, 1925 amounted to
$29,702,525,000, or $418',000 1 000 in excess of the April 6 total and $3,570,020,000
in excess of the maximum figure reported 0:1 a:1y call date during the early post
war period of expansion. Loans ancl discounts including overdrafts aggregated
$20,814,180,000, an increase of $424,000,000 since April 6; 1925, a~d of
$1,550,000,000 since June 30, 1924. Increases in this item since April 6 were
shown by all Federal reserve districts except St. Louis, Minnea"?o lis, Kansas City
and Dallas. Investments in U. S. securities amounted to $3sS02,370,000, or
$113,000,000 less than the amount reported on April 6, but an increase of
$195,000,000 during the year. Holdings of other bonds, stoc:ks and securities
amounted to $5,085,975,000, a growth of $107,000,000 since .April 6 and of
$696,000,000 since June 30, 1924.
Total deposits aggregated $32,420,480,000, an increase of $1,194,000,000
since April 6 and of $2,891,000,000 since June 30, 1924. Of the increase during
the year, which was participated in by all districts, $1,503,000,000 was in demand
deposits, $1,178,000,000 in time deposits, $164,000,000 in amounts due to banks,
and $49,000,000 in certified and cashiers• checks. The increase in deposits over
the amount reported for April 6 is due in lar~ part to the usual midyear S\~11
in uncollected items for which depositors have received credit as is evidenced by
the fact that items with the Federal reserve banks in process of collection, exchanges for clearing house ancl checks on other banks in the same place were
$758,000,000 in excess of amounts reported on April 6. In the attached table are
presented :figures reflecting the condition oi' state bankl · and trust company members and oi' all mamber banks on June 30, 1925.
The folloWing statement shows changes in the principal resources and
liabilities oi' all member banka on the last call date as compared with figures for
April 6, 1925, and June 30, 1924.
Increase (+) or decrease (-)
on June 30, 1925, since
April 6, 1925
June 30, 1924
Loans and discounts (including overdrafts)
United States securities
Other bonds, stocks and securities
Total loans and investments
Demand deposits (including certified and
cashiers• checks)
Time deposits
Goverm1ent deposita
rue to banks and bankers
Acceptances execured for customers
Bills payable and rediscounts
+$424,000,000
. . :. 113,000,000
+ 107,000,000
+ 418,000,000
*+1,238~000,000
+ 254;000 ,000
- 235,000,000
63,000$000
109,000,000
+ 18,000,000
+$1,550,000,000
195,000,000
696,000,000
+2,441,000,000
-i-i-
+1,552,000,000
+1, 178,000,000
2,000,000
+ 164,000,000
-i89,000,000
+ 215,000,000
*Demand deposits, less exchanges for the clearing house, items \vith the
Federal reserve banks in process oi' collection and checks on other banks
in the sarne place, increased only $480,000,000.
.
•
309
RESOURCES .AND LIABILITIES OF STATE BANK AND TRUST COMPANY
· MEMBERS AND OF ALL MEMBER BANKS ON JUNE 30, 1925.
.All member
banks
Loans and discounts (including
overdra.:ft s)
U. ·s. securitiae
Other bonds,-stocks and securities
Total loans and investments
Cash in vault
Reserve with F. R. Banks
Items with Federal Reserve Banks in
process of" collection
Due from banks and bankers
Exchanges for clearing house, and
Checks on other banks in same place
All other resources
'f.)tal l"esources
.Dernund dapcsits
Time deposits.
U. s. deposita
Certified and cashiers' checks
Total deposits (other than
Due to banks and bankers
Bills payable and rediscounts
Acceptances
Capital stock paio in
Surplus
All other liabilities
bank~-
State b enk and
trust company members
$20,814,180,000
3,802,370,000
5,085,975,000
29,702,525,000
$8' 134,714,000
1,268,604,000
1,894,119,000
11,297,437,000
. 52}f, 3?0 ,ooo
2,190,991,000
165,622,000
864,127,000
67? ,;;56,ooo
2,017,445,000
208,569,000
518,994,000
1,882,317JOOO
2,112,071,000
813,527,000
897,918,000
39,105,025 ,ooo
14,766,194,000
16,811,751,000
10,381,486,000
176,653,000
1,032,804,000
6,386,479,000
4,458,510,000
70,396,000
472,683,000
2~.~2 ,_§9.~.QqQ
4,017 ,."[86 ,000
11, 388 '068 J 000.
-
.
·-·-·
717,701 J 000
l.!o7,815,000
2,085,732,000
1, 750,815 poo
1,722,482,000
1,132,579,000
238 '720,000
226,465,000
717,097,000
6 32 ,597,000
430,668,000
(st. 4623)
..
·
...
FEDERAL RESERVE BOARD
Septambe:r 15, 1925.
St. 4645.
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE: FEDERAL RESERVE BOARD
Dea:r Si:r:
The Board is <'lesi:rous of obtaining information showing
the number of member banka which rns.y be classed as continuous
bc:r:rcwe:rs, that is, banks which have not at some time during the
past year liquidatecl all their in:'lebtedness to the Fe<'!e:ral :rose:rve
bank.
It will be app:repiatecl, t:be:refo:re, i f you will furnish '~S
at rour e9.:rly convenience with a statement listing by name each
:nerdJe:r bank in ;your clist:rict v;hich v:as continuo·:::.sly indebted to
your bank from September 1, 192!.~, to August 31, 1925. This statement shoulcl inclu<'l e all banks that have been continuous bor:rowe:rs
rega:r,-'llcss of whether o:r not their bo:r:rowi:r.gs wG:re in excess of
o:r less than their capital a111,'l surplus.
In submitting this :repc:rt, it Will be appreciated i f
you will present ti.1e info-ryr;ation in a form !'l imilar to that inclicat eel in the atte.chsd statement St. 4645a, which calls fo:r information E.s follows:
l.
Date on which er~ch continuous bor-r-ov:er was laat
out of debt to the :res e:rve bank.
2.
PT"act ice of bar.ks as :rega:rds borrowing from
cor1·espondent banks.
3·
Capital anc'i surplus on June 30, l~C5.
4.
Eo.,..,. owings from Res e:rve bank on Aug·us t 31, 1925.
5·
6.
Net d srranc1 .::.nc1 t irne c'l epos its on August 31, 1925.
7.
Net ds~nd and time. clepos its on elates of maximum
anc1 minimum borrowings as call eel fo:r. in item 6.
Maximum and rr.inimu.m bor:rcwings from Rese:rve bank
CltJ.ring each calenoa:r. year of the period in
which the bank has been a continuous borrower,
with dates.
Ve:ry truly you:rs,
...
Walter I .. Ecl<'ly,
Secretary.
LETTER TO ALL FEDERAL RJi.SERVE AGEJ.ilTS.
MEt•>IBEB BANKS BC'RPOWING r.:ON'J'HWO~ST·Y FROM Tlffi FNJE'P.AL RESERVE BANK
DUBIN'G THE TWELVE MOllTBS ElDING AUGUST 31, 192).
_[_ _ _ _ __
Name an.'! Location
pf b£n~'
Ras been continuous bor~ower
from F. B. ba~ since
Makes a pract. ice of ·corrowing f:rom
o:.ha:" ba~~3 (ans. Yes or Nc.)
Ga·.-Jite.l an(i au:rp!.us - June 30, l'::l25
Bcr.·c.v::.n;;;s - l·r::;"L:3t 31, 1925
Lep0::1 its - Au.glliii t 31, 1925
Ct::.l c:r:·.~ t::~:r y 3E~:r
l92t) - r:Iw::::.r:~J.ln bo·,·rowJng:o *
Depr:·s ~. ts or. <;!.l JJ''j c1 ate
ill t·~i:~·l: .._~;i b o:r~¥c~vi :~.6S *
Deposits on same 0ate
192!+ - IL.1..Xir::u.;1 bv:r;·o·,vi.nge*
Dep or i ~. s on !'lr...r:;e 6 ate
~::;.1::_·:-:~ bo·:.•:r:Vi~Ir.g:-:
*
Daposi·.;s on san,e cia.te
NOTE:
Figu.res of r.n£.v.i m.1m ancl mini.m,:un bor,:ro'VI:ir.~s (:red isc01.1:nt.s an(l bills p2.yable) anc'l the dates.
thc,reof anc1 of ne-t Cl amQ.r"0 a:il t it:"l 0 ::.;o:: its fo:::- tLe snc1 (1c.t·.?s sh::ml0 be s':own fc:r
each ye,a:r of the periocl clurL1g v:hicn b&.nk hr;.s bean a continuous bon·ower.
*
Date of anc1 amount •
(~t.
4645a)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
September
21, 1925.
"'t
y • 45C..l
' v •
SUBJECT: Bank Suspensions and Insolvencies.
Dear Sir:
In continuation o:f the list o:f banks S'lspended or
declared insolvent up to July 31, 1925, which was sent to you
vd th t!le Board's letter X-44o9 of Augu.st 25, 19~~5, there is
enclosed herewith a list o:f m'3mber ano nonmember banks reported
to the Board as having suspended operations clu.ring the mor: th of
.c\ugust, and o:fbanks previously closed which resumed business
during the same month. The statement also incl•Jdes any banks
whi~h closed or reopened prior to August cut w:h.i.ch were not reported to the B~ard in time to be included in the list sent to
you on .August 25.
It will be appreciated if you will kindly check the
data pertaining to your district against your records and advise the Board on or before September 26, by telegraph if
necessary, whether or not any corrections or additions are
necessary in the list, in order that correct data may be publiohed in the Federal Reserve Bulletin.
Very truly yours,
Walter :r;... Eddy,
Secratary,
Enclosure.
TO ALL FEDERAL RESERVE
AGE1~S.
II
CONFIDEN'T LA.L"
Not for publication
F. R.
district
nur1ber
6
8
8
8
9
9
9
9
10
10
10
10
10
10
10
11
BANKS CLOSED OR SUSPENDED DURING AUGUST, 1925
(Including 'banks suspended before August 1925 but not previously reported to the
Federal Reserve Board)
Date
closed
Name and location of bank
Orrville Bank & Trus~ Co.. , Orrville , .Ala.
:Wgan State Bank, Logan, Ill.
Bank of Battlefield, :Battlefield, Mo.
Wayne County Bank 1 Greenville, Mo.
Fanners State Bank, Mavis, Minn.
Farmers State Bank, Jasper, Minn.
First National Bank, Lake Park, Minn.
Fanners & Merchants :Bank, Aneta., N. Dak.
First State Bank, Cheraw, Colorado
Scranton State Bank, Scranton, Kansas
Cedar State Bank, Cedar, Kansas
First National Bank, Walters, Okla.
Peoples Bank & ,Trust Co., Las Vegas, N. Mexico
Las Vegas State Bank., Las Vegas, N. Mexico
Bank of Roy, Roy, New Mexico
Bank of Scotland, Scotland, Texas
"
8-27-25
8-27-25
8-12--25
8-12-·25
8-10-25
8-15-25
8-24-25
8-13-25
8-24-25
8- 5-25
8-19-25
8- 3-25
8-·21-25
8-21-25
8-31-25
8-19-25
Capital
$25,000
15,000
10,000
12,500
10,000
30,000
25JOOO
15,000
20,000
10,000
10,000
50,000
100,000
25,000
30,000
10,0()0
Surplus
$30,26o
3,500
2,800
3,370
2,220.
14,050
5,000
5,000
5,000
12,000
1,000
10,000
100,226
1,100
2,000
3,000
Member
or nonmerr1ber
Merriber
Non-merriber
"
"n
11
Member
Non-member
11
11
"
Member
Non-member
fl
"
"
BANKS CLOSED PRIOR TO AUGUST 1925, BUT NOT PREVIOUSLY REPORTED:
1
6
8
9
10
10
ll
Peoples Trust Company, Lebanon, New Hampshire
.Allen Bank & Trust Co., Oakdale, La.
Farmers Bank, Big Sandy, Tennessee
First State Bank, leonard, Minn.
•
.Angora State Bank, Angora., Nebraska
Fanners State Bank, Adams, Nebraska
First State Bank, Trinity, Texas
1-13-25
7- 9-25
7-21-25
7-31-25
3-30-25
6-17-25
7-25-25
50,000
50,000
12,000
10,000
25,000
25,000
50,000
55,000
11
tf
1,000
3,000
II
"
II
7,000
24,000
II
"
St. 4661.
:,.:)
~
~
•
.,
C0 NF I DE N T I AL
..Not for publication
F. R.
district
number
4
7
9
9
SUSPENDED E.A11KS REOP1!.1-:'"ED DURING AUGUST
Name and location of bank :
Vanlue Banking Co., Vanlue, Ohio
Otisville State :Bank, Otisville, Mich.
Fanners State Eanlt, Mantador, N. Dakota
Fam1ers & Mercha.."lts State 13a.nk, Eagle Rivei', Wis.
1925 .
Date
closed
7-29-25
7-23-25
11-19-24
7-8- 25
Member
or nonmember
Date
reo:p~nad
S--18-25
S-3-25
S-17-25
S-10-25
Non-member
"n
"
st.li661.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAl. RESERVE BOARD
Oct'Jber 1, 1325.
St.4o7G.
SUBJECT:
Revision of Weekly Federal Ruserva
Bank Press StCt.te:n,ent.
Dear Sir:
In oroer to shew se:;arately the amount of balances held
abroac1 and the amounts due to foreign corresponoents, t1Je Boarc1' s
v:eekly statement showing the condition of Fec1eral reserve banks
will be revised, effective October 7, 1325, to show two new i terns,
"Due from foreign ba.'1k2 11 on the resource side, and nForeign bank"
under the heacling 11 Deposits 11 on the liability side. At the s:JrLe
time, the caption 11 All other earning assets,n which comprises Feoeral Intennec1iate Crelli t Bank c'lebentures a:rH1 municipal warr<mts,
will be changed to "Other S'3curities, 11 and the caption "Totc-cl
earning assets" to "Total bills and securities. 11
The analysis ac~orr:panyir.g the Board 1 s ~'feel::ly statement
for October 7 will contain the i'ollowing corrnJent regarding the
changes:
"Beginning this week two new items have been
adc1ec1 to the statement in order to show separately the
amount o-P balances held abroac'l ar..c1 emounts d'..:;.e to foreign correspondents.
In addition, the cartion'All
other earning assets, 1 now made up of Federal Intermediate Creel it Bank clel;entures, has been changed to
'Other securities,' an~ the captio~ 'Total earning
a c:.set s 1 to 1 Total bills and securities. 1 The latter
tenn h~s bee~ adoptec1 as a more g,ccurate Clescri:ption
of the total o:f tl:e C:iscounts, acce'::'ta:nces 3..Ylcl seC'.lrities ac~uired ~"lder the ~rovisicns of sections 13 and
14 of the F'ecl9r<:'<l Rsserv2- Aet, which ar2 the only
items include j there in, 11
231, showing the :form of the
new statement and giving the code words which will be useo 1n
the weekly CONI! telegra'l'J sent by the Board to Fed2ral reserve
agents, is attached hereto. There is also enclosed a stato;ment
showing for all Federal reserve banks con,binecJ, the amounts of
A copy o-f revi ;:;Gd form St.
- 2 -
"Due from foreign banks 11 and 11 Foreigr. bank" deposits, together
with revised figQres of "All oti.1er resources" and "Other deposits,"
for each weekly statement elate from October 8, 1924 to Septerriber 30,
1925, in order that you may have the data available for publication
in the consolidated statement, if one is preparad for local release
by your bank.
ban~
It is raquest·3d that tha weel.{.ly statements issued 'by your
be chang8d to confomJ to the revised forn1 adopted by the Boarcl.
Very truly yours,
Walter 1. Eddy,
Secretary.
Enclosures.
TO ALL FEDERAL RESERVE AGE1,!TS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Oc'~obor
5, 1925.
St, 4671.
Su:BJECT:
Comparativa statarnents o:f Esrnings
end E:..::rensn ~ 1914-1924.
Dear Sir;
The statements showing flarnings, current expenses,
profit and loss account and reimbursable Fiscal Agency expenses o:f the Federal reserve banks :for the period since
their orgardzation, copies o:f which were ori;ginally sent to
the Federal reserve b::mks :for checking with the Board 1 s
letter St,
reconciled.
4119
o:f J~~e
24, 1924,
have now been corr~letaly
The number o:f copies o:f these statemants re-
que steel by your bank are being :forwarded to you today under
separate cover.
Very truly yours,
E, L. Sme a a, Chief',
Divis ion of' Bank Operation~.
LETTER TO GoVERNORS OF .ALL FEDEEAl~ RGSEHV::£ B.ANYS.
.
FEDERAL RESERVE BOARD
Cctcl'Dl..
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE soARD
StJSJECIJ.':
6~
192~).
St. 4672
F'.L.'1ct ic~1al :S:-:;t:Or. so ReT ::Jrt s.
D3ar Sir:
.?rom tir-u:: to ti;y; in recen"~ rr.:.:r.t::s ::_nfcra.:t} TLf:_]:_,s':;ic1s :1a\'3 t3en
rr.-a.J ·3 ·by- ~tar~ c us b;3_.nk cf·ficia.l s re gs_r -~ii Y'!.:j t .d.e q1; 9..l"t. s .;._..l;f :-~~1ct i.o::.c.1l :; XJ ar1 se
re:;or""s, f'o::"m :S, ~,n,~ in orJer tl::r::; tne -.vb:He ql:es+i.:n ::,:'::~1" cs thcr'')t-g~'lly
C.OL.siJer0d the Bo:..trd recentl:;- deci6?-d to ap~~-,:Jir:t u. cc:Y~nj:ttce c:f.' rs-;_J:";SS(Jntati-v""83 cf t"he !1ac;_r·o:.-- ·oe..r~r~s t-~ lr.::-.·?t v."i"~.}~rne:r;b~Srs 0-f t~s 13,.:...a.r~~:'s st.:1.:f'f tore--
'riev.·· tLs .i\.n1ctic:1al e::,ens--3 r3ror~-s 2r1d to rr~~r:e sue~ r-.~cc:-~.::~ . e:Ida.ticn-3 in
r-s f~. . r '1 t ~sr-? to t:..s it L·~i ('(:-:t see fit.
jr:1i s c.c:~n: it te 3 rr~·J t :1.t ~he: :-::c arC i s
OI~lc-:·s ~n Scpte·:r~oer 2.3 an~ 23, -8-rid o..:ftar ca.r.J=flllJ';t· re-.,:i,:::.~:ir~g ti1:3 r2J.<::rts
crnJ tT:J:- :.... es·-.-~lt·.::.; a.-:.:co~-rrplist-30 ti1rc:>uc:t t~1~r. it r,~ac:r~ed tDe ur:a:..'l~uic.r'J.S ccn-clc:.sion ;;Y,a~ t::.c ::·c--pJrt;; s::1o1.::.l<'l 'Je ~oLtiLued in a:_:-::;rcxi:,at lv th::ir rr3se::1t
:f:)IL~ b1.~ t t.l1a t t t.e .'l c Jl~.l d 1J e ?;o~·E.\V~.s t f~ i -~-; 1 i:f it:; ,1 ru~ c~ re ~-~-Ll..C8 ..-j in. size , e..:: so
t~1at ec;_2allv gocd r::s:.c.lt: CC'c:lr1 'o3 o·bt9inec1 b;.· s·:lm,ittil~£ ,~1~'8L sc;riarmuall_y insteG.c1 o:· ·T~art,'3r~~·,:.
J~l1e corr~~·;J_t'...;ee'::: ~e-p-:~rt, 2. cC~);-T o::.L. . 'N!1ic~1. is
enclo ::;ed, hs,s he en a-:c;>,~~::>c<'E:Jd c'.r t.~AJ.·..:~ So:-r~..i, ;_~.no re -,,...i sJ :_"i fcr~Ds _S for ~J.ss bcgirlllirlg 1:ext ;l'Jar "v\·i:_l 31lcrt2.:l t~-3 rrj_r_td~ 8.rj [:._ S'lJ!,;:~J:v fur!:.is'!-1ed tv 6ac1.i.
Fe ~:e ral res,:; rv·:; 1'- 'ink,
b:y t.i1~~ d-""'r:::r:itt~~;:; 3Jj.Cl .:.1r·':::ccv~r lJ:t
eo::1so:id::t"tiJr1 ir1tn c·:1L-:: i""Ge~li cf the
pr!?sent t.l-~~~5--fcJ..:-1 clas~lTice.tic.n of errlT::lo;·_-,-:-~es! 3a.l.J-ri~s, i.?., a.£:Sif:nsd
st:lf'f, eL:ploye·?s loa>J.eci or 0orrc'>vec1 (Dr. o,~ G:·.), an" ::xtl"D. help; the acnso :_ide.. t ion ·Jf tr in t i:1 s .·mG st 3.1: i or1G r_y ·.vi t h c. tnt~ r 211p:·l. i~" s, an~-.1 o:{=" t .:,; le~!iotle
with telecr::.rh; a1cl the elir i:",;1tion ryf scps,rat-' :i:ig-t"C'3·~ fo:r· c~::rt::1in i t·"nns
cf ex_oer.. sE: ·v~it:erevc;:r tt.~ c~L.OLcrl~~~ involve-1 arG rt::-1-::t-~iV;::ly· s·:T:J..ll, ~f\~;r ;~Xa:~~pl:J
c:1 tb.e :1e<..v fern~ t-h0 itGrcs of ·pcstl?2, sten'lgr:-.:.};_,·f:i~:~, ~-;t,:_:;:;::...i._;~t.irJ.f, r:-y~;;rti.n:e
an, ~Ptpp3 r rr~cn·3J'"', \i'i 1: i~:--~ prac t icL~~ll~l all ~s.s _ : s l)e i :~c l u6 _j d \Vi t !.1 "All
ot:-~er e:;x:,;sr-Jc:: s. 11
il:c:r.:- will, ~J.C'YJV3l", oe no cha:1gEO ire tL.3 to ca.l a.noLnt. of
8X})6D:.;es reporte0 i~cr a·:1:r 9Xf'3!1£,-=:; 'C.YlJ.t, Z:.rJ.d t.c.r3 =fi[.~..lr-;:;,a \A;i}l tt.. c;rc~for~ ·te
co:; ..rar2ble with t21osa r3ncrt8:1 at :r::re:.ent,
tr1e
The
eho.~e:~-cs
in forr.:· :E:
Bo.s.r.~
cor. sist
r.:.rir-~ci;:.·all~/
recol:.:·~;en3e,~
cf.'
tl~e
Vva: t<J r L. E:'l c)y 4
Se ._;ret.. r .'.~,
Enclost:.re ..
IEr'11ER TO CHAIB',:!AN OF LAGl; FEDE2AL .R!L.IFR7B B,.,N-~
CO?I:E;S TO GOVERNCRS ME 'IG c::ilT:::.;,.lKT C;? P~1)C~~DL:,F
:X:;;v::aT~EES
t
..
REPORT TO FE.DERAIJ RESF.:LVE BOLFC 0!.' s-c.:::cLiL CO!vll.iiT='EE o:ncE:::tNING
:E1TNGTIGNXL ~'=·~p·:ns:~ FE;:·O£i..t'f!.
At the request o::? tl1P 7ec'le!''.1.l Roserve Boa::--cl th-3 following met in Washington
September 25 an<'! 2g, 1925 as a special cOimnit.tae to consider what changes if <:m"Jr
\Vould Ce desira.ble in Forrn ~' Fu,.~.Jtiong,l ex:-r_·:er1se r""'nor.f.·
c,;,
v.
Mr. E. L. Smead and Mr. J. F. Herson
~.1r. M. J. Fleming of CleveJanC!
Mr. J. S. Walden cf Ricbmon0
J,!r, w. G. McCreac1y of Phi1adslp~ia
&·ir.· 1. R, Rour:cls of Ne•.v Y.Jrk
ni.~:ressnting ths
Fflderal Reserve Boaro
A:::'ter a lengthy discussion of t:-ne value and usa o.f the Fonr1 E functional
expense reports a:1c'l of the exhibit prepared by the
:fl()
clers.l B.eser-;re Bo arcl q_uarter-
ly it was the opinion of the con..'1;ittee: that w'nib such reports and G:x:hi'bi·lis are
of doubtful vah...a as a basis fJr comparing expen.acs ar. . d o_?arating efficiency at
the S•3Veral ba.'1.ks, it was nevertheless i'el t by all present th<:-:.t these reports
have made a valuable contribution. to th8 progran.; :for greater economy a..'lcl ef'ficiency in the operation of the banks and i t was tl:J view that the reports should bo
continued.
In this connection it was recognized that the repcrt3 give valuable
inf'orma.tion with respect to th2 C()St of op0rating the variovs functions and
services conducted by the Federal Reserve
S~rstsrr; en~iroly
a:p.:1rt i·rmn any vr.clue
they r:;s,y have as a basis for the corrrpe,rison o:f 3xren:ss by th? bcm.ic:l.
It waa
felt, however, that the report !'I could be son.ewhat sin,pl:ifiud .:m c1 recJuc0cl in <;iZ;e.
Tha committee mac.'le n. detailed
stuc'l~r
o:£' tl1e report, considering each 1rr.it
separately, with a view to eliminating a nur:b •.;r of '.;he c'le t-:dlf•d it0r::s of' expenses
wher'2l the
~r:ounts
alloc::tteo ware small.
It also recorrm.t..:ndecl the consolidation
of a few units with a view to rech:cing the nurriber c::' s:1cl:". ur.its.
Such changes as
have bean me.Cle will not require cha.nges in tho rr:mu::tl of' instru.ctions ancl will
not affect the comparison of the figures o:f futur,:;: psricos with those past.
s-~.
4672
• •
2
de :finite recornn.snoa t ions,
1. That t~e :-ep0rt hertS2.fter oe I rerared sem.i-a..'1nually instead
of quarterly,
2. That in preparine; tl:e exhibit o£' tl1esJ reports tte section at
ths fcot ot' each p3ge in which it nes been t:::e practice to
show the :f:igu.res of ear:-.h head office ovmbinecJ with its branches
"he eliminate c1 as it was f:l t th::1t these filjclre s W9rc o:f srr:al1
vah1e corr:pe.rJcl '.vith the work involv8ci in thair pra:'")aration,
It wes 8.lsc suggested that occasionally tLere be sc;.bmittec'l as a s'J.py.>lemer.tal report a
mer<:~
c'letaLlecl st:.1,teL:ent 1::1 comr;arable f'orm of the SY.penses
of some ono unit or 1i.:nctior:. ir..
whicr~
cc:r,,·r:::rative figures should be of value.
L •. S:r:eari
Herson
:vi. J. Flcrr:i r.g
W. G. McCreoc1y
t. R. Rounc1s
c
Walc1en, Jr'
J. "-'•
E
J,
"'
.L.
Corrn:i ttee,
St. l-/672.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAl. CORRESPONDENCE TO
THE FEDERAl. RESERVE BOARD
October
3,
St,4674.
192~.
SUBJECT: Form 33, Classification of
Discou...YJ.tsd and Furche.sed Bills.
rsar Sir:
Beginning with the Novem-ber issue, the Bulletin tal1le
shewing holdings of earning assets (page
693 in th-=o Septen:ber
Bulletin) will be revised to sho-N holding:_; o:: "Bills payable
in foreign currencies" ssparatsly fron; "Bills pa;pible in c1olLars.
It is therefore reauestcd that
0-:-1
:futu-re reports on f'orm
"'llot<tl bills boug·nt" be ranurrJ::er-:;d 13, and that thG i terr.
:r:;a.;raols in f'oreign
:;t..lrren~issn
38 itew
1113-ills
te sl1c-JVn as No. 12.
It is also req...._,ested th<:,t thG Board be advised o:f the
aiC10un t of such b i l J s, if
business
S~pterrib<H
an~r 1
r.al c1
·b~r
your b iillk at the close of
j0.
Walter L. Ec1c1y,
Secretary.
'?0 GOVEBNDRS OF .ALL EJER.AL RFS;_RV.G 3 'J.{'\0
11
FEDERAL RESERVE BOARD
WASHINGTON
October 12, 1925.
St. 4686.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Sul3JECT:
Forms for use 0 uring 1926.
Dear Sir:
It will be apprecic.tec'l if
the Boaro at yo'-lr early conv-enience
the forms listect below that will be
(incluc'iing branches, i f any) c1ur-ing
Form Number
you will kinoly ac1vise
the number of copies of
requiracl by you:r bank
the calenclar yea:r 1926:
Title ________________________
Daily balance sheet. Please state the
number req'..li roo fo:r the heM offica anii
each branch separately ancl also give
any special punching that may be c'lesi:rect.
F. R. A.-5
E
Daily statement of
Fe~eral
reser.va agent.
Serni-arnual functional expense report.
33
Classification of cHecountect ani purchasec1
bills helcl at the enc1 of the month.
95
Monthly repo,.t of earninga.
96
Monthly report of
97
Monthly :report of income ani expense Oth2r real estate.
97a
Monthly :report of reimb~rsable Fiscal
Agency expencl. itures.
cu~rent
expenses.
170
Monthly report of clearing op0,.1!i.ticns
171
Monthly report of average c1aily hole' ings of
earning asset a, earnir.g s there en, and
an.'1ual :rat_es of. earnirJ.gs.
V:;:ry t:ruly yc·:.1.rs,
E. I,. Srr.ecil, Chief,
Division of Ba:ik Op,:;rations.
LETTER TC AI,L FEDERAL RESEPVE AGENTS.
FEDERAL. RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 14, 1925.
St. 4667.
SUBJECT:
Reports of Condition of State
J3 ,-,n1{ and Trust Companies.
Dear Sir:
It will be greatly appraciatec'l if in ~ccoro<mce
with your usur:tl practice ~rou will kindly furnish the Federal Reserve Board, as soon .:~s available, with a copy of
the abstract of reports of condition of state ·banks liDO
trust companies in your state on Scpterr:ber 2~, 1925, or
other recent date in oase you did not issue a c'lll for
reports of condition as of Septenjber 23,
In su"brni tting the above mentioned data it is
req_uested that the number of bsnks be st".l.ted and th3.t
separate figures be furnished :for mutual savings banks
provioing there a.ra any such banks operating in your atate,
also that the figures ·be segregated by Fedsr.::..l res0rve
districts,
A franked and self-adoressed envelore, raq_uiring
no postage, is enclosed for usa in transmitjjing the data
req_uested,
Vary truly yours,
J. C. Uoell,
Assistant Secretary,
Enclosure.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
October 14, 1925.
st. 46ss.
SUBJEC:T:
Rer.orts of C:onclition of State
an0 Trust CoruFanies.
Ba~$s
Dear Sir:
It wi 11 be greatly appreciated i f in accorc1ance with your usual practice you will kincny
furnish the Federal Reserve Boarcl, as scon as
available, with a copy of the abstract of :reports
of conclition of state banks ancl trust companies in
your state on September 28, 1925, or other recent
elate in case you clio not issue a call for repo:rts
of concl it ion as of Sep ternbe:r 28.
In submitting the above rnentionecl data
it is requestacl that the nurnbe:r of banks be statec1
ancl that separate figures be fu:rnishad for rrutual
savings banks T·rovicl ing there a:re aey such banks
~erating in your state.
A frar~ec1 ancl self-aclclressed envelope,
requiring no postage, is enclosei1 fo:r use in
transmitting the clata requesteri.
Very truly y au rs,
J. C. Neall,
Assistant Secretary.
Encl osu:re.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
21, 1925.
St. 4695·
Octcb~r
SU3JECT:
Bilnk SuspEmsicns
~-:cnc1
I"lsolvencias.
Del.r Sir:
In continuntion of the 1 ist of bc'!.'1ks suspenr1 eel or cl ecla.rec1 insolvent up to July 31, 19 25,
v:hieb was se:1t to you with the Bcarc1 1 s letter X-4409
of August 25, 1925, tbere is enclcsecl herewith n list
of member an,1 nonmember brmks reporte(i to the 13c:::trc1
as having suspenriec'l opera.t ions r1uring the mcnth of
September, anc1 of bcmks previonsly closec'l which resurnc~c'l businass c1uring tbe s,:me month.
rr'he stat<3rcmt
also incluc1es any bn,nks w>icl; clos,:;r'l or ·r,::cpener1
p-rior to Septernb8r but Vl'hich w::;re nc·t repc-rtec'l to
the Bo:,rc1 in time to be inclur1ec1 in lists previously
sent to you for verificaticn.
It will be c'tppreciLtsc1 if you will kinrily
check the ctatn pJrt:ctining to yo~1r cl istrict against
your r"cor,~s anc1 aflvise L1e 13oa·rcl en or before
Octsber 27, by teL:Jgr~'lph if necessa.nJ, wl'vther or not
any corrections or aflciitiOl:s ar0 n0c·ass::1.ry in the
list, in orc'ler thc:tt con·,3c.t r'lata :nay be publish:oc'l in
the Fe(1eral R.:s2rva Jjullatin.
Very t:ruly Y'urs,
Y:c11 ter
r.
E,~ci:t,
S2c.reta-r:,...
C C "' 8' I D E N ~' I A 1
Hot for publicati en
St. 4695a
BANKS CLOS!~D OP S~;sp~·~l·:~EI' DUPING SEP'IK·GETI 1925.
(Inc1uclini;>; banks suspc;:n(l ec'l be fore Septerr:ber 1325, but: not previcusly LJ.cl u0 eel)
·----~--~;te_Tc
r1istrict
Fame anc1
rlc1rr;':yer
!.+
5
7
7
7
7
7
7
7
7
2
g
9
9
9
9
9
9
10
10
10
10
10
10
10
10
10
1.0
12
12
3
3
7
7
7
7
7
7
10
10
locat.ic~1
of ban1r
j dosec'l
!
_____" _____
t _ Mernber- -
Canital ~Surplus ~- or nonmember
------·--------------------------·
Pi rst SU1te 132'mk, Newcastle, Pa.
Btlnk of Greene, Snow Hill, N. C.
Far. State Bank & ~-'ras t Co.
Jec:-ttur, Ill.
-~t. lJVa:yne State Blc. Ft.VTayna, Incl.
Peoplss 'T'rust & Savi:e1gs B.sn]:o:-,
Perry, Iawa
Ei'armers Sav. Bk. Berkley, Iowa
Beene Coun-+:,v Bk. Berkley, Iowa
f.unlop State Bk. Dunlop, Iowa
Far. State Bank, .itl1iott, Iowa
'The State B:>nk, Iv1t. S+er.lin::_:;, Wis.
"Peoples B3.nP:, J•Jleac1vil"..e, ''0c.
Bank of Prcterr, Prct9m, "lfo,
Fi·rst Nat. 3~mk, T_~ibby, t/Iont.
First Nat. 3ank, S'1eyen::ce, N. 2),
Tabor State B;cmk, Tabor, s . .C.
Hirst Nat. Bank, J,'lll h<lpic1s, S. D.
Wc:gner State Bk. Wagnc:n:-, 0. D.
.bank of Centerville,Centerville,S.D.
G-lobe i'Jat, Bank, Denver, Colo.
First Stclte Bk. Cun lingham, r=ans.
Fc<r. State Bank, Wilson, Kans.
rt'ar. St~cte Bank, Hope, Ka.,s.
li'•:tr. State Bank, ~'Jash, Ckla.
:::itizens State 3ank, :i:!inton, Old£..
Honnesse:y State Bk. HeTh.""l.essey, Okla.
F'irst Nc:.t. Bank, Devol, Okla.
Niobrara Valley 3k. Nio-orara, Nebr.
S'ar. & T·,ier. Bnnk, Hudson, i;Yyo.
Bank of Pasco, Pasco, v·ash.
American Secu:r.i ty 3ar.k,
Kennewick, W:-ts1-l.
South Philn.c'leJ.phLl State Banli,
Phila., Pa.
:Srcvm & St ev3ns, "3:ml:ers, Phil"~· ,Pa.
Inr'l.1strial S3-v.~k. Dc'.Vanpo.,.t, Ia.
Sancis & Burr, Bc,nk,-,rs, ~.1anisL3a, Tv:ic'h.
J. Keenftn B snk, T_,eros, Ill.
Farmers St::o.te 13e.nk, JcT~JD.n, Ill.
p,:;,rm2rs & i!Ierchant;
n:nk,
V.>'l.nci.1.1ia, Iviich.
3an.k cf 3'3-nfor(l., San+'crc1, 'Jlich.
Macy St&titi Eanlf, '~;..c:;, "Jebr.
V'lle'1tine State Bk. 1hcl3:·Jin8, ;,:c:Jr.
9-17-25 ~100,000
25, JOO
9-25-25
f7, 190
5,250
9-23-25
9-22-25
200,000
57,500
66,500
2,000
9-21-25
9-24-25
9-24-25
9-25-25
9-12-25
9-23-25
9-16-25
9-28-25
9-23-25
9- 1-:~5
9- 4-25
9-12-25
" "9 -C.j
'k
'j-c.;:
C:- 2-25
./
9-21-25
q_ 6-25
./
9-30-25
50,000
10, -JOO
10, ·JOG
50,000
27' 500
15,000
1'), )00
10, ooo
40,000
.:25, C·OO
6,-800
1,400
,-_,......
·"'\
....,"""
')v,v.JU
6J,OOO
20' 000
50,000
2GO,OOO
15,)00
t+o,ooe;
5-25
1r ,..,,......
1-25
1-25
2-25
25,000
15,000
3:5,000
s:-17-25
("\.
(_.;_
/
"
'j-
9-
),.Jvv
30,000
14,600
3,410
10,000
,IJ, 300
11' 320
8, GOO
5,00:J
1,510
2, 7CO
19' 560
67,520
2,000
92,100
7,000
[~-25
20, '000
10,000
58,000
9-;25-25
2:)' 000
5,000
./
s-:~5-25
9-28-25
()_
_.
,--,.-
) ......
.::::) ' --'Jv'
l- 2>i-24
\
1- 2-24-
71),000
7, 715
lOO,COO *40,250
lC'J,CJO
2,260
( Dri vat e bank)
75 l 000 20' 000
54-,000 l3' 500
1- 2-24l-15-24f·- 3·::_ ~~:-;
:-1 1_-25
(Private bank)
( "
)
lJ,:OJ 13,:00
25, ~00
5, 000
'::- 6-24
2-11-25
3-18-2'5
7- 3-25
/
"
"
l1
~!Terrb er
Non-merrber
-~
5,370
6,000
3, 730
7,000
9,700
13,420
Q_
Non-member
"
!I
11
It
11
It
"
Member
"
Non-member
Memoer
Non-member
l1
Memoer
Non-mernb er
l1
11
"
"
It
T·:Tember
Jcn-mernb er
It
11
"
N en-member
tf
ll
n
II
n
C0 NF I DE
~ ~
I AL
St. 4695o
f\Tct fer pub1icaticn
F-:-~~-----------------r-------r--Da~-
I1:Ternber
c'lisb·ict j Name an0 lccation of bank 1
Date
j
re-·
or non_mnnbe=. __l_______________________
l __ :~ostJci __ l__ open?~_______rnern~::=.____ _
9
3
State '3enk of Lestsr PrairiG;
Laster Prairie, Min~.
Citizens State Jnnk,
Jarnesvi1.le; Min:1.
12-13-24
7-15-24
9-
l-25
9-10-25
Non-member
II
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
October 26, 1925.
St. ~701.
SUB.JECT:
'.''eekly Fs,~c~r:ll ?eserve Ba.nk
Presz StE:terner.t.
Den.r Sir:
As rnos t of t h0 F ..;;r1 e r.:-cl res 3r\T a ·or'.r"lrs an(l
brancnes will obs0r\T0 W<Jclnesda;;r, liovemo.3r ll, as a
holi(lay, the 3or,rc1 1 s \·e-::l~ly Fec1 errcl :res,;rv2 b.:-,nk
statement will be iss1.:eri as at close of b1:.oiness
on 'l'uesc1ay, Nc1·ernher 10.
r~'he state·n~:mt ,_,-nl, bovvev:;r, be propareri on ~'h~lrs;lay as usual nr.Cl re].,3D.sec1 fer p1.1b:ication in "rrido.y r10TT.in[?; po:r:;ers.
'[j,_;; s~:crr.2 proceci1.1rra s:1ollCl oe fo1lovtec1 in local
press statements issucrl [~t ;,·our bank •
.Feoeral reserve banks which are op·3n
for business on \~Toonos0::.y, Nc!erri'oer 11, shoulc'l
forwarc'l their complete for;n 34 t8Jeg}·am to the
Boarc'l an that day showing their conc1iticn as of
Tuesc1ay, anCI a 0aily TEND telegram on Tbur::;day
morning showing their conc1ition at closa of business on ~'e0nesc1ay. Bm1:ks which are closer> on
We0nGsci ay, November 11, sb oulr1 fnrw'l:rcl tb e cornp1ete form 34 report on 'rhurs0ay mcr·ning shewing
their cerYl i tion at closa cf business on Tuea.0ay.
Very truly yours,
Walter L. Ec'ldy,
Sec ·re tary.
LETTER TO ALL F.
:n.
AGE.i:·FS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE: BOARD
Novecnber 10, 1925.
St. 4 717.
SUBJECT:
Revision of Feri~1ral Reserve Bank
Balance sheet form j4 for use
c1udng 1926.
Dea.... Sir:
Th:::re is encl os eel herewith an unrulecl proof
copy of c'laily balance sheet form
_4'er1eral reserve banks c1urin<;
34
1926.
to be usec1 by the
It vdll be notecl that
only a few changes have been macie ir tte form now in use,
all of which it is "believecl are
self-expl['~nator;y.
'The year's s·8_pply of the form will be n:ailecl
as s ocn as receiv 90 f.,..orn the printer, which shou 10 be
about the rniciclle of December.
Ve-ry truly yc:;.rs,
E. 1. Scaaci, Ctiaf,
Division of Barile Or:,erutions.
FEDERAL RESERVE BOARD
WASHINGTON
NOVember 12 1 192J,
S t , 4720 ,
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SD3JECT:
Bills and Securities of Fin!'.Lnce
and Cre Cl it Corn""!ln ie s.
Lear Sir:
There is enclosed herewith a copy o-f a letter sent to all
national ·bank examiners under date of November 10, 1925, by the Comptroller o+' the Currency, r~q_ue sting: them to set out in the next examination report oi' e 'l.Ch natio"nl ·b ·:mk the amount of paper or
securities held which was issued by or bears the endorsement of fin9.Xlce
or credit corrrp.mies which 'lre described in the Comptroller's letter as
"compsnies which fins,nce the ss,le of automo.biles, furniture, musical
instruments, etceter;;>., sold on the installment plan, which buy receivables from business firn;s or otherwise 9.ct as intern~ediaries ·between
commercial org':lniz::~.tions and the bar,ks in fin-mcing· the s9le and marketing
of merchG.ndi se: 11
The Bo'lrd is anxious to know the extent to which member b9..!1A:S
hold paper md securities of the character ment ioneo, and it will therefore be s,ppnciated if you will instruct your Exardm.tion Department to
obtain similar inforn;ation for each state bar:.k ancl trust corr;pany member
at the time of rr,aldng the next examination or credit investigation of
the bs,nk, At the encl of each n~onth, beginning with Noverrjber, will y011
kindly have the information bearing on such paper and securities
abstracted, in accordance with the attached form, frorr1 the reports of
examin:1.tions '=lnd ere eli t investigations received during tbe month and
forward the stq,tement to the Board. The statenjen·t should cover nation3.l
·b'lnks as well "-l.S state bank and trust company members. A. sep'"l..r!lte
statement should 'lccomps,ny your report listing those member banks which,
according to the reports of ex11rnins.tions or credit investie;ations r3ceived during the month, did not hold '1ny p'lper or securities of finance
or credit compani2s.
"By direction of the Feder1.l Reserve
Ve~y
Bo~rd.
truly yours,
Walter 1. Edc1y,
Se ere t e,ry.
Enclosure.
TO AI,L FEDERAL
RESERVE AGENTS
TRE.<fl~.SURY
DEPARTMENT
WASHINGTON
ft.DD~.~."S·'S:
f:'r'PJ...Y TO
"COMPTP.CLLLE CI' 'LI:: CUE.F'2:NCY"
November 10, 1925.
To All National Bank Examiners:
There have cooe into existence during the recent
years a comparatively large number of f•inance or credit
com1--anies, i. e., companies >~hioh finance the sale of
automobiles, furniture, musical instruments, etcetera,
sold on the installment plan, which buy receivables
from business firms or otherwise act as intermediaries
between commercial organizat~ons and the bar~s in
financing the sale and marketing of merchandise, and it
is believed that a consiuerable amount of paper or securities issued by such finance companies, or paper
endorsed by them, has been ncquired ~y national banks.
The Comptroller's office is desirous of obtaining
some definite information as'to the extent to which such
paper is now hold by the national banks; and accordingly
you are instructed to obtain such information at the time
of the next examin~tion of the banks in your assignment
and set out in the report on Page 3 under Item 1 the statement of the amount of paper or securities held by the
national bank which was issued by or bears the endorsem€nt
of a finance or credit company of the kind described.
Please state the names of the finance or credit comranies,
the total amount of such holdings, and whether their borrowi·ngs are on their direct obligations or through the
rediscount of bills receivsble.
In order that the information may be reoeivi'J<i at this
office in a uniform style, the following form should be used:
NAME
.Am. Finance Co.
AMOUNT
DIRECT
INDIRECT
$75.000
$30,000
~45,000.
Respectfully,
J.
w.
Mcintosh,
of the Currency.
C~T.ptroll~r
I
OJNFIDENTIAL REPORT TO FEDERAL RESERVE BOARD
P .APER AND SECUBITIES OF FINANCE Al:.JD CREDIT CO!vTP ANIES HELD BY MEMBER BANKS
AS SHOWN 'BY REPORTS OF EXAMINATIONS AND CREDIT INVESTIGATIONS RECEIVED DURING TEE l.10NTH OF - - - - - FederAl Beserve District ------·-------and location of
member ·bank
N~ne
'rotal loans
and
\ex!>minainvestments
tion
1Date of
N~ne
ancl location of finmce
or credit company
IP.aner and securities of finance or credit
com anies
Direct obliga- !Bills receivable
Total
tions of company I recliscounted
I
i
---
St. 4720a.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Novcrrit J r 12 , 19215.
St, 4722.
SUBJECT: Concli tion of li!err.ber Ban}:cs
as of September 28, 192'1.
Dear Sir:
For your inforrration there is enclosed
herewith a preliminary statement regarding the
condition o:f all wen.ber banks combined as of
September 28, 1925.
The Board's abstract (No. 30)
showing the detailed :figures :for State
bar~
and
Trust company members and the combined :figures for
all member banks will be ready fbr distribution in
the near future.
Very truly yours,
Walter L. Eddy,
Secretary.
Enclosure
LETTER TO .ALL FEDERAL RESERVE .AGENTS,
•
CONDITI00T OF MElvlBER
BAI'~S
AS OF Sl<_.Tr.f'El/B.rm 28, 1925.
St,4722.
Loans and investrr.ents of all rr/3rr,ber ban~>::s 3.gein reached a new record total
and :for tr..e first time on a call date aggrGga~8cl ovar $:50 1 CC:) ,000 ;000, the total
o:f $30,369,000,000 being $666,000,000 in ez.ce3s o:f Jure 30 holdings. Of this
increase only $55,000,000 was reportecl by beli{;s in the central re sa rve ci tie e o:f
New York and Chicago, while the remainder was about eq_u.:~ll;y· eli vi cleo between banks
in other reserve cities and country banks. Loans and discounts, including overdrafts, aggregated $21,450,373,000, an increase of' $636 1 000,000 since June 30,
1925, and of $1,630,000,000 eince October 10, 1924. Increas3s in this item since
June 30 were shown by all Federal reserve districts, the principal incrsases being
as follows: New York, $134,000,000; Atlanta, $85.000,000; Boeton, $70,000,000;
Ph:iladelphia, $67,000,000; and Chicago, $63;000 1 000. Investments in U, S, securities amounted to $3,785,436,000 or $17,000 1 000 less than the amount reported
on June 30, and-.$109,000,000 less th')Jl on October 10, 1924. Holdings of' other
·bonds, stocks and securities amounted to $5,133,273,000, a growth of $47,000,000
since June 30 and of' $397,000,000 during the y-ear.
Total deposits aggregated $32,049,168,000, a decrease of $~71,000,000 since
June 30, but an increase of $1,277,000,000 since October 10, 1924. Increases during the year in both demand and tune deposits, which aggregated $888,000,000 and
$870,000,000, res"9ectively, occurred in all Federal reserve distriq,\fu, scfW f/Jw..:-i 00
cipal increases .being reported £or the New York, Atlanta, Chicago/oistricts. -·Ban~
deposits, however, declined $612,000,000 during the year, decreases occurring in
all districts, except Richmond and Atlanta, but being most pronounce a in the New
York, Chicago ana Kansas City districts, Bank Cleposits in thG Atlanta district
went up from $144,000,000 to $244,000,000, or by $100,000,000. Governnent Cleposits :fell off $24,000,000 while the amount of' certified and cashiers• checks
outstanding increased $1??,000,000. Of the incre~se of $1,277,000,000 in total
deposits since October 10, 1924, the central reserve cities. of New York and Chicago
account ~or but $10,000,000, while other reserve cities report an increase in this
item of $396,000,000 and country banks of $871)000,000. The decrease in deposits
as comparea with June 30 is due primarily to charging depositors' accounts with
the reduction of $642,000,000 in items in process of collection including exchanges
for clearing house which took place between June 30 and Ser-terr:ber 28, such items
nonnally baing at a high level at midyear,
In the attacheo table are presented
figures reflecting the concli tion o:f state ban...{_ <md trust company merr~bers and of
all member banks on Septerr:ber 28, 1925.
Changes in the principal resources 3.nd lhibiliti-:;s on September 28, 1925
compared with figures for June 30, 1925, and October 10; 1924.
Incre~se (+) or decrease (-)
on Sept. 28, 1925, since
June 30, 1925 October 10,1924
Loans and discounts (including overdra:fts)
+$636,ooo,ooo +$1,63o,ooo,ooo
. 17,000.000
109,000,000
United States securities
Other ·bonds, stocks and securities
+ 47,0001000 + 397,000,000
Total loans ancl investments
+ 666,000,000
+ 1,918,000,000
Demano deposits (including certif'iecl and
*..:. 418,000,000
cashiers' checks)
+ 1,043,000,000
+ 86,000,000 + 870,000,000
Time deposit a
Government deposits
24,000,000
+ 102 '000 l 000
- 14o,ooo,ooo
612,000,000
Due to banks and bankera
+ 18,000:000
Acceptances executed for customers
+ 68,000,000
445,000,000
+
159,000,000
+
Bills payable <mcl rediscounts
and
othar
uncollected
itoms
increa.seo
*Demand d epo sits, 1 ass exchanges
$224,000,000.
•
- 2-
RESOURCES .AND LIABILITIES OF STA'.LE B.ANK Aim TBUST COMPANY
MEJ.V!BERS AND OF .ALL I,mV:3l!;R B.ANKS ON SEPTEMBER 28, 1925
All merriber
banks
Loans ano Cliscounts (inc ludir>.g
overdrafts)
U. s. securities
Other bonos, stocks and aecur i ties
.
State bank and
cor.::pany rr.embers
I trust
$21, 45o, 373 ,ooo
3,735,436,000
5,133,273,000
$8' 304,309,000
1,276,231,000
1,892,673,000
Total loans and investments
30,369,032,000
11,473 '713 ,000
Cash in vau1 t
Reserve with F. R. Banks
I terns with Fe c'leral Re serTe Bmks i!l.
process of collection
Due from bank-e anc'l bankers
Exchanges for clearing house, and
checks on other banks in s:;uva place
All other resources
524,592,000
• 2 1 147 1 111 1 000
16 31131 ,000
322,735,000
647 ,43~,000
2,031,130,000
190 '766 ,000
518,233,000
1,263,037,000
2,065,920,000
476,001,000
351,165,000
39,053,354,000
14,495,354,000
16,617,456,000
10,467,237 ,000
2731211,000
303,756,000
6 '194, 702,000
4,474,455,000
1051636,000
342,787,000
28,171,66o,ooo
11,117,530,000
3,877,503,000
876,662,000
425,327,000
2,0921909,000
1,760,076,ooo
1,849, 212,000
l,Oll,272,000
314,493,000
204,912,000
718,700,000
635,301,000
493,591,000
Total resources
Demand deposits
Time deposits
U. S. deposits
Certified and cashiers' checKs
Total deposits (other than bank)
Due to ban,;s and bankers
Bills payable and rediscounts
Acceptances
Capital stock paid in
Surplus
All other li~bilities
-------
(st. 4722.)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
~Jov.:m[ber
14, lS25.
st. 4725.
SUBJECT:
ConcH tion of rnen:'ber 'ba:-:ti;:s
as o~ Se:otem'ber 23, l92S.
Dear Sir:
In order that yo'J may have available data
regarding the condition of mem'oer banks in each Federal
reserve district as of
Septe~ber
23, 192'J, in advance
of the Board 1 s forthcoming abstract (No. 3C), there is
enclosed herewith a mimeographed stateii1ent giving the
resources and liabilities of all n;ember banks, by
districts, for the elate rr.entioned.
Very truly yours,
E. 1. Smead, Chief,
Division of Ba..'1.k Operations.
Enclosure.
l,ETTER TO .ALJ_,
FEDERAJ..~
RESERVE AGFN''J::S.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Siovambar 21, 1925.
St. 4730.
SUB.JECT:
B.:m]{ Suspensions snd Insol vancias.
Daa.r Sir:
Thera is enclosed herswith d list of member
and nomn:.nnber ban.i.:s reported to the Beard a.s -~·<Wing
Eusp:mcad operations during tna month of O:::tob;:;r, and
of ba.nl>:s pravio"L.::>ly clos<:>d which rescrned bJ.clin.,;::,;, during t,'J.a same rnontn. 'Tho st-1teU1ant also in..::lu.des banks
whicn clos2d or nop:med prior to Octcbar, if any, out
whic.n were not raportad to t~~e Beard in t irn,, to o-::, included in lists pr·aviously sent to yo-u. for verifi.::ation.
L1 addition there is given for your i.nforrnaticn
a state:n.:mt of corrections mc-c1.de in L1e: lists pravicusly
sant to yc..u.
It will be appreciated if ycu will kindly
cne:ck ti.:a data p;::;rtaining to your district ag.•:1inst your
records and ~1dvis<:J tha .3oa.·d on or before Nvverr.ber 26,
by telegraph if ner::essary, whether or not any ccrrections
or ~ddit ions are necessary in the lists in order L1..1.t
correct dc:... ta rn:-1.y be publishc;d in tha F"derd.l ne::,erve
Bullatin.
Ve:ry truly yol.lrs,
Wal t<:r L. Eddy,
S<Jcretary.
Enclosure.
FEDERAL RESERVE BOARD
WASHINGTON
"Jo re;;:ber 19, 19 25.
St. 4731.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SJBJECT:
Weekl,y Federal Heserve Bank Statement
i or Nove.:nber .::-5, 1 jC.5.
Dear Sir:
Thursd.1.y, Ncvernbcr 2~, being a hcl iday, the
Board t s regular Fedsral reserve bank press state,n&nt as
at close of business on WednesdaJ-", Nove;nber 25, will be
prepared on Friday, NovembJr
27, and released for publi-
cation in Saturday morning papers, while the ccndition
statement of reportin:-::: member banks will be ri::lleased for
publication in Saturday afternoon
paper~.
The same
procedure should be followed in local prcss statements
issued by your bank.
Very trdy yours,
Wal tar L. Eddy,
Se era ta.ry.
TO ALL :FEDERAL HESBRVE AGENTS*
St. 47)2
Rasorva Board,
1Jovarcbcr 19, 1925.
Fedar~l
STATK:lEFT
FOR
TEE
PHESS
~~~--~~~----~~----'
Thursday Nov ::nnb-.:r 26 bd ng a holiday, t ne Bo c.rd 1 a
waeldy statements of condition of Federal B.esorve Ba;::ks and
of reporting marnber banks will bG issued on
Frid~zy.,
Novarnb<or 27, aDd ralaasad for publ ic~tion on Suturd:1.y,
Nove:·nber 23.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
25, 1925.
4735·
November
~t.
SUBJECT:
1926 Budget for Stltisticill
and Analytical Work.
Dear Sir:
In continuation of the policy adopted fer t}1is ye::tr, will
;r"ou ki dly prep::tre and subrni t to the :Soard for apr-;roval, not later
than D ;ce:nber 10, 1925, a budget of expenditures covering vvork in
the Statist icnl and Analytical function of ycur b:;,~"lk, to be carried
on durir~g the year 1926. The budget should be submitted on the
attached form which corresponds with the revised functional expense
report fonn E, and which provides for showing in par::tllel columns the
amounts ::1ctually expended durin,:; 1925 (Dacember e stir:Jated) and the
proposed tudget for the calend3..r ye,1r 1926.
Will you also accompany your budget re(1uest ·with a statement
showing the approximate proportion of thCJ tirr.e of the assistant Federal reserve a2:ent or aq;ents which is to be --::har~ed to each function
of your departrmnt or of the ba::1k during 1??6. In c':lse an as;:;istant
Federal reserve a,.,-ent is devotinf" a p,1rt of his time to gener:U
activities which are not chargeable> to any of the fur1ctions under t:he
supervlsion of th-e FedarJ.l res:Jrv-e E'ger:t, nor to any function of the
bank 8xcert Gene:Jro;.l Overhead, kindly give a description of such gc:mc;ra1 activities.
In d:otermining Wh21t r:rorortion of tlie tirr.e of
assista.nt Fed-:Jci.l re:,erve ag.:mts or of emplo;yees of the agent Is department should b0 charged to Ge,1er-1l OverheJ.d or to any othar functicn
of the bank, the matter sl10uld be discus3ed with tn2 op.::L1tin;:; ofr:i.cials of the bank with a vi2w to mal:ing a satisfa,~tor;v distribution of
the expense.
V8ry trul ;:i yccrs,
J. C. Noell,
A::::,oistant S3cretclry.
Enclosuj:e.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
Ncvember 25,
St. 47)b.
SCB.JECT:
1925.
V,e "i.dy s t:~t8Li8::ct o:::' Geld
Settl·e:;,ar:ct Fur.d Tr::cns.tctio:""·
Dear Sir:
The Bc:1-rd for sornr:' time has been considerir.g ;.'J. number
of cLanges in the weaidy r.".imsograp'cled sumrrary of transactions
thrcugh tlle rsold settlement funi, but befor0 adopting t::1e revisGd ~cr~n cf st.c-tternent we sho-uld be gLHi to have an expression
of your views with reference to the proposed ci:ktnges.
Fro~n the dr•-cft of tJ.1e new form a'1closed herewith, yc,u
will nr:te th3.t it is proposed to sh,=w fi:;ures for the Federal
resJrve note clearirw separatel;c,· frorr, t:r.ose for the transit
clearh.g, and t:"lat the net loss or gain of gold through the
fund would ba s:1cwn for transit clearL:gs and for combined
cle3.ri,1gs and transfer&. It occurs ts c:._s ::1lso that in:tsrnuch as
transfars through the fund are '111 cr 1-.racticar._y c1ll for
Govermnent account, tne statement would be: scrn2·.-.h3.t more valuaJle
if the words "For Gove rnrn.::nt ac ..::cunt 11 war,:; inserted a.fter t.::1e
word 11 'T'ran:sfers, 11 ::1nd .:1 note pL:cced at the bcttcrn of tha std.ternent indicating the amount of transfers, if ar;y; ot.t1.::r th_~n for
Govermaen t a·2ccunt.
It will be o,p~~r;c;cided if you will kindly :::tdvlse the
Board of your view;;; with reg21rd to tne proposed n:ow form of
st.1.tement at your e,;,rly c:mvenisnc.;.
No changes c:;,re contelilpLt ted in t~1e
transactions in the Fadcr~l R0scrva Ag3at~
3
1
t:::.. terr:0 nt sn.~wing
GOld fur~.
J. C. NGo:.l ~L,
P.. s sis t
Enclosur~.
~~r1t
Sor.r;:.;: _.r~.·.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESpONDENCE TO
THE FEDERAL RESERVE BOARD
4, 1925.
St. 4748
De ~err:b<:lr
SUBJECT:
Abstract of Condition Reports of
State Bank ar.d Trust Compan;y members aEd of all Me;,;ber Bc..nks as
of Septe'nber 23, 1925.
De:1.r Sir:
We are forwarding to you under separate
copies of the Board's Abstract No.
r.over
s~'lowing
30
the cond iticn of State Bank and Trust Corn-
pany members and of 9..11 member banks as at close of
business on September 28, 1925.
Consolidated
figures for all me:nber banks, both National and
Sta.te, are shewn on pa.gas l and 12.
Please
to each State
forw~rd
B::.~.nk
one copy of the abstract
and Trust Company rne:noer in your
district that has expressed a desire to receive
copies of
;abstracts as issued.
Very truly yours,
E. L. S1!lead, Chief,
rivision of Bank Operdions.
FEDERAL RESERVE BOARD
WASHINGTON
'DDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Decernoer 7, 1925.
St. 4750.
SU6JECT:
Annual R~::po:..~ts of Federal
ltesiZrva A,:;ents.
Dear 3ir:
In accorlance '!Ji t..:l L1.e plan adopted last
;yertr, the anrn:al reports of the ]'eder:1l rsserve asE:nts
for 1925 should 1::s co.ofined to a textual discussion
with such incU,:;r.ta1 data and tables as app.:;ar prope:c.
Detail·?;d sta.tistical tables should not be; used, but
referance :rd~' bJ rr.:1.d.e to the statistical data published in the r.;port of the ]'ederal Reserve 13oard.
In rrcp:lring its own annual report the
Beard will follow the sarns g;meral arrange1n3nt of the
stat.isticu tablss in both Parts I and II a.s was
s.dopted lnst yeg,r·, &nri copi3s of the ten schedules
pertaining to yot·r district which will be published
in Part II of the :3oard 1 s s..1.nu3l report will be forwarded. to you clc soon as <:wailahle, for comparison
with .'1.ny simiLu- dat..:1. that rro.y b.ave baen prepared by
yoi.lr bank.
V.ar-:l truly yours,
Walter L. l!;dd:t.
S.;;creta.ry.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 3, 1925.
St. 4751
SUBJECT:
Earninrs and Dividends Reports
of State 33-Dk and Trust Company
~ilernbers as of Dec8wber 31, 1925.
:Cear Sir:
There are being forwarded to you
today under separat3 cover by mail
copies
of form 107 for use of State bank and Trust company rr_embers in submitting their semi-annual
rerorts of earnings and dividends.
Pl e:'lse advise the bar.ks tl1a t the report, wl-ciC 11 should be submitted not Ltter than
Jam;ary 10, 1925, is to cover the six-month
period ending December 51, 1925, irre:;;pective
of wi1ether or not they may have closed their
bocks on that date, or whether any dividends
thJ.t may have been declared cover L1c1.t particulq,r period.
Kindly :'l.cknowledge receipt.
Very trdy yours,
Walter L. Eddy,
Secret,lry.
COPY 'I'O ALL FEJlERAL HES.EBV.E AGEN'IS *
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
December 3, 1925.
St. 4752.
SUBJECT: Form F.R.A. - 5, Daily Statement
of Federal Reserve Agent.
Dear Sir;
There is enclosed h2rewith a copy of
the 1926 edition of form F. R. A.-5, Daily Statement of Federal Reserve Agent, fro;n which you
will note that the report has been changed somewhat in order to confon:1 to the Board's press
statement showing the condition of Federal reserve banks.
The number of copies of the f orrn requested for use during 1926 is being forwarded
to you today under separate cover.
Very truly yours,
E. L. Smead, Chi::Jf,
Division of Bank Operations.
Enclosure.
TO ALL FEDEHAL RESER7E AGEliTS *
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
15, 1925.
4760
December
St~
SUBJECT:
Functional Expense Reports.
Dear Sir:
Thare is enclosed herewith for your inforrmtion a
proof copy of revised form E, Functional Expanse Report.
The
new form has bean drawn up in accordance with the racomnendat ions of the ccrnrni ttt3c which met at the Board 1 s offices on
September 23
.c~nd
23, of which you were advised in the Bourd1 s
letter St. 4672 of October 6, 1S;25.
The form will be p.rinted
as indicated by the proof, except that the titles of the expense units will be shown in bold-face type and a few minor
changes will be made in the ruling, etc.
The supply of the form will be forwarded to you as
soon as received from the printer, which probably will be
s orne t ima next month.
Very truly yours,
.E.. L. Smead, S.;;cretary,
Comrnittea on Salaries,
Expenditurss and Efficiency.
Enclosure .•
TO CHAIRl\lliN OF 1U.L FEDERlli. RESERVE BANKS*
COPY TO GOVEHNORS A:ND TO CHAIR\1EN OE' PROCEDURE CQI.'ll,:Fr'IEES.
FEDERAL :RESERVE BOARD
WASHINGTON
Iace,nber l 6, 1 S25.
~t. 47bl.
\DDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
SUBJECT:
}or~i ~5,
96, 97,
and 171.
Dear Sir:
There are being forwarded to you toctay undsr
separate cover the following number of cop.;.es of forms
95, 96, ';:7,
and l 71, rnont:bJ.y earnings :=lnd expense re-
ports, fur use dur-ing
1926:
Forn1
95,
co-ries
I orrr;
96,
copL;s
I orrr: oj I '
copi0s
Form 171'
copies
It will be noted that prcv is ion has baen m1-de at
the bottom of form
96
to show reimbursable Fi;:;cal Agency
Iepartment expenses, instead of rcc0porting them on a separ::1.te
form as &.t present.
Accordingly, form S7a wi.1.1 00 d1scon-
tinued at til2 end of this year.
In tne fu.ture cnly combined
reports need. be subrni ttad on fc rrn 171.
Vary truly yours,
E. 1. Sma::cd, Chief,
Division of ~a-fr Op=rations.
TO GOVERnORS OF 1~11 F. R. BAJ.\JKS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
L::cc;nO"r 12:,
St. 47uZ:.
SUBJEC'l'_: Vieedy ba11Y debits press
1925.
stat~:;;ner"t.
D.;;ar Sir:
'['h3 "Fs:leral Heserve Bo:1.rd 1 s press statem:~nt
sJ.1owing ·1ebits to individual accounts for the
week enclin::::
W,dnJsda~v,
'Tuesday, DcJce:::bar
re:::e:n:~2r
23, will be issued
29.
Very truly yours,
ViaL t2r L. Fdd,y,
ScJcro::tai"~.
TO ALL iEDERAL R.S:3EB.VE AGEH13*
St. 4769
Faddral Reserve Board
DacamJer 19) 1925.
STATEMENT
FCR
THE
?EESS
The Federal Ro ,,,erve Board 1 s statement of debits
to individual accounts :t'cr the W8ak ending Wedne:;day,
recernber
23,
will be issued en Monday' Decen:bcr 28 I
instead of on Saturday, December 26, and rel.aased for
publication en 'Tuesday, I'ecemb0r
29.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE DOARD
D~"cemb;:;:r
21, 1325.
St. 4771.
SUBJECT:· Ktnk Suspensions and Insolvoncies.
Thdra is enclosed herewith a list of membar
and nonmember banks reported to the Board .3.::; having
suspendad op,.:H~lt ions during the month cf r ovember,
and of banks praviously closed which reswr.3d busir,ass
during tho s::1me month. The statement also includes
any corrections rr.ade in the lists previousl;r sent to
you.
It will be ,;::ppreciated i f you will kindly
check the data pertaL1ing to your district against
your records and advise the Board on or before December 23, by telegr:Lph if necessary, wnether or not any
corrections or additions are necessary therein, in
order that correct ~ata rfi:~Y be published in the Federal
Reserve Bulletin.
Vary truly yours,
W:ll tar L. Edd~',
Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS.
*
FEDERAL RESERVE BOARD
WASHINGTON
iADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
D0C2U:Oior 21, 1925.
St. 47(2.
STJ13J3CT: fl.,:ports of Earnings, :E'xpc:nses,
Dividc;n1 s, and Irar.chisi..l Tax
Pn.yrm:,nts fc.;r 1925.
Den.r Sir:
In crder tb.at the Beard rr:ay hava inform::ttion reg:1rding
tJ.J.e fir.:.:1.ncial rt?3ults cf operations of }l'.;dora:. reserve banl~s during the ~ores-.:;nt C"l.lsnciar ye~cr :;"s seem as prE1.ctiG:1.ble s,fter Januar~' 1, it is rec]_uJ<>t,?,i t1:cat ~:. statement be tGlogl'.'cphed or mailed
in time to x·eac:il the Bc:1.rd 1 s offices en Sat-c:.rdo.,y rncrning, January 2, 1926, showing th0 following infonr,ation:
(CoC.e)
EACH - Gross ee1.rni~lgs .................. $ _________ _
EA1JS - Current 0xp"'rs2s •...............
EAll.N Currer.t :c2t o:.;,rnings ......... ~~~- .......... $ _______
ELBA - Addi ticns tc Current r-"et aarnings ___ - · · - - ENID - h;ducticns frcrn G'Jrr3nt Fet E.-1.rnings _________ _
Net additisns tc or deductlcnd
from current net earnin~s ................. .
bAST - Net earnings 3,vailable ior dividends,
franchise t0.x, ::1nd surplus ..................•
EYRE - I:i Yidends paid •.....................•..........
FlVIET - Paid to Government as f ranc!1iBci t_u ........... .
EVEN - 'h~::1nsf erred to surplus ::tccount •...............•
Total (to a=rea witD item EAST) ....•.....••
CAPP - Si.lbs,;ri bcci c;,pi tal Jarmm·;y 1, 1926 ............ .
CiDT<: - Suq;l,~s ,January l, l92b ....................... .
- 2 -
It is also req_uested that the l'egular monthly reports
of .sarnings cmcl expenses on forms 95, 96, 97 and 97-a be accompanied with an itemized staterr:ent showing in detail all additic·ns
to an:'. :ieductions fro:n current net earnings (Profit awl Loss
acsount) d1.1ring the ye2.r, and that in addition to the regular
balar..ce sheet form 34 for the L:.st day of the ye:1r representing
the condition of th0 bank after final closing of the books, a
fonn 34 be submitted showing th0 condition of the tank at close
of business but priCJ_£ to the rruking of any adjusting or closing
entries.
Very truly yours,
E. L. Smaad, Chiaf,
Division of J3ar..Z Operations.
TC GOVERNORS
1}B'
ALL FEflLRAL RE5Fc:HVB BANKS "
FEDERAL RESERVE BOARD
WASHINGTON
;ADDRESS OFFICIAL CORRESPONDENCE TO
December 24, 1925.
St. 4773·
THE FEDERAL RESERVE BOARD
SUBJECT: Condition reports of State tallir and
Trust Company Members, Form 105.
Dsar Sir:
'Ihers are being forward.ed to you toda.y under
separate cov8r
copies of form 105 revised as
of Sep'~e~nbsr 10, 1925. Please mail three copies of
the form to each State B:mk and Tncst Cornpany member
in ycc.:_r .·iistrL~t with instructions to hold the blank
fon~.s per1cijns rscaipt of a call for condition reports.
Dr;on nceipt of noti<;e from the Board of the
call for conri.i tion reports, kindly notify the banks
thareof by m2il o.nd request them to fill out the reports and r:/lil them to you promptly - in no ca;:;e lator
than 10 days after receipt of the call.
In ordar that the cornpil3,tion of the Board's
abstract showin;;1; tbe condition of 211 state banl: and
trust company members eombin~'d as of the date of the
next call e·:ay not l:e ur:.duly delayed, it is requested
that the reports be forwarded to the !3oard as soon as
practicable ·:tftsr they ars received by tile Federal
l"clSc:rvJ bo.nk. If it is necessary to corrurnmicate with
a bank regardin;s appat·.:mt errcrs in its rc:rort, a
note to that effect should be made en the r,3rort H.self oeforc it is mailed to the Boar·d, Gcnci t:,e i3card
should 1.:Je advised of the necessary corrections when
tha desired information is recaiv2d from the rnarnb.::r
bank.
Kidly acknowledge .receipt.
Yours very truly,
Walter L. Eddy,
Secretary.
LETTER TC ALL TEDI:'RAL RES!<.TVE AGENT3*
FEDERAL RESERVE BOARD
WASHINGTON
=~- :JC2.r.b3 .L'
)·0, 1 ·~ 2').
St. 4((7.
DDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SGBJE:C'I':
SCi'"adule oi. Fdcicrcil
B.:cnk Pcr::>crh"el.
Ld::oo:;,l'V...:
~rill :.-o-u. l:.i.11ly r·::~ri_isn tirL:; doul·:l as SOi....1£
::tfter· J:L.u'-•Y l, ::.s1c:-.~, _,s ,J.r:l_;ti:::able, vd.L1 a stat::;rr.:c;,lt .·ol..u.tiug tc tl>~ f8l'3C;L8.L of ;yoc'!' bcln]r, (L"clu.di"lg ·8rD.:lCD3;.,, if a~·:y) J.ci :-:tt C.iCSe ci' :Jo.c~in,.::ss 0n
fecs:nbc;r 31, l ~'-'-+ c.nd. 1 tkS, :l::C:. :;1,s of J~~nu.• ry l,
lJ26, :r.ade cut L1 ',cccid~.a::;c; wit:1 t'1.0 form 2.t~:1·cl"ed
:·1e1·eto.
'L.12 iic;"c1:·es f cr I'::ce:noer ~;l, lj24 and 1:325
'Ni: l
~e rub 1 . is::"ed in tn .;, Board 1 s lS2) :mr1:.:t1l report,
1
ct"'ld 3-CCOi'di.;;"Ly S.l0 -L.d :J.Ot t·1.l:e :1CCO''cr'Lt cf ch:l.lLges
L"~ e ith2r t:1e numoccr cr E:ll'.J.'ies cf officers or eu,ployses tJ::..1.t. 0-re p1.~t into e:'fect :.cs cf "T:lmJ3..LJ' l.
In determiniLg vv'::1st.::,.;r or net a. ;siven individc1al
should be list·Jd 1s ·m oj ficer cr an en:: lo~·:c:e tha
Bo::.rd 1 s letter X-3c:;}~ of C::::tcbor j, 1:;'2:~ s,:cu1C. os
lJSdd oi.S a cr,t.;id3.
After t~u st:l.t3rr•e,1.t ]:Yl.S bEc2'l carLplated it shcul.d be compJ.r<:'cJ. ::vitrl data publ.ished
C<1 f1.ges ?17-2:.20 Of tJ:-,e '30:lrd 1 S 19:::4 an·:ull. r?port,
so that ~·~ differenc;;s ~ay be reconcil0d bei~re
t~.12 r:?f·Ort i;.; tra0srr.itted t-.e t.12 0c:1.i'd.
1
Very truly ;yours,
Wal tar L, EJdy,
Se-cretary.
Enclosure.
St. 47(7a
FEDERAL. RESERVE
BAr~
OF
---
(Including Branches)
•
I
C"l::1irm:.1-n and "Feder·'ll Reserve A.nent
"-c-rsr::cr
Ot!".er offic0rs
Errployeei3 by departm-::nts:
B:::.ukiLg dapart:r.ent
J!c:,iar_:u Ii.a::;<:lrv.s A_g.:mt 1 3
A-:.::_d it i::'1€; Depc'-rtment
i
i
I
I
i
I
I
I
l
.I
l
I
P. . ga .~CJ·~ Dop .-1rtu:e:n. t
JaiJ. 1
_____ _
I
I
I
I
/
I
I
I
I
I
I
I
I
_L________j ________
_
____j
I
FJ.sr:al
I
L1e 'I reasury Depart:ne nt
Otr:.sr e>rr.rloyses whcse sal:1.ries :t.re
reirr.i:Jc.rsed to bank, incL:ding b<..dldL1g
employees in sp3.ce ranted to tenants
Grarii Total
T& mporary employees (not included above)
•
I
I
I
•
S~!:_,-;-rie s
I
Iec. )1 1
~-'~·:
I
I:ec. 31
I D,c. )l
_______j_l_g_~_g_j_1 q~s__l___1.90_J.________lqc:o ___ J__ _ _l9~2_____ L _____191_'± __ _
l
I
I
/
l
I
Oi f icers:
:i sc:l-l
1 _______________ 2~"'-131
J\Tu_;rbc r
j I''6c. 31
l
I
I
I
I
I
I
,_____l _____j.__ _ _ _
l_====:!:
I
I
-1---
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
racembar 3~, 1925.
St. Lq79.
SUBJEC'T:
Certii:icclt ion of Franclli2C: Tax..::s
~3id on Daca~bsr
31,
1~25.
Followinr: th.s usual practica, ttL .:Soard rJY.u;st;;
Ftat you ln.:v3 th3 Aulii tor of your bar:k r;rcrara and forvvard
to th3 Und.Jr-Secr8ta,ry of tha Treasury, 'Nas~li1.gtcn, D. C.,
certified st :ttc:rnants r0flectint=: tha financial rcsul ts of
operation of ;rour b'n;k c~t·rln~ the c ..1lend:1r y"ar
1925, in
acco1·dance with the f cnns outl inad ir: the Board's l c t ter
St.
4338 of Jar:ma,ry ::, 192", :1 copy of whicn is enclosed
Kindly fc rnis'1 tl19 Board with a dc<pl icat e cop;y
of the certified sLtternents forward3d to tL2 'lr·3a_s,Jry
;}er3.rtment.
Vary truly yours,
V.'alter L. Eddy,
Scocr" t :::.ry.
FEDERAL RESERVE BOARD
WASHINGTON
~DDRESS
OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
:a-·rrc..arz,~
1925,
),
St. 4)33.
Cs rt E ica t ion of J'ra..;1c-.l~i ~. e rf'e.x:os
-od0 on Deee,n'cJer ):., 19C.4.
In acec-..-.6a""'!ce vvi tl-1 t .;.e p:r.acti,:~e ac1opte(; a·~
tb:3 Sl_-:_g;.Jst icn of t.:-3 T~e113u:r;:r Dapcr.tc9n!, +l1e Bo"·Tcl
:rey_•Jests tb::.t :;cc.. h&7G the AuJitor. of yoccr 1::.an1::: D"epa:re ar.cl foTv·ar0 'c c -c::,e 1}!_"l:i c-n·-Secretar;,r ccf the 1}'-r·ea.sur:.', ;vr.sh2.n-;ton, D. :::., 2- s":;aterr;ent shc.·ring; t'::~e fcllo~~i:nrs
in:c"V"r·la"t
~o:1:
First.
GT-Jss eE~T.'T1ings, cur-;en-f:. e:,:pensas,
ar::.i -r;.r.o:it anf. less accc'tl.Ylt :or the-;
C'E•l<'m;1a:r- ~rear 1:~,;:_4, in t"'te for::n of
t:::.:J::..es 73 :c~nc'l 74 P"'intec'l en p::'g•C:!S
-:Sr -170 cf t':ce ~· oa rei 's 1 ·3 ~23 ar;nu2l
···en crt, exce:t: t that t~1A amcunts
~ro~i.ll::1
-~\e ri··.J3n in c1cl1&rs an0 cents.
Se~ct'...2_.
t.ta~clr:er..t
w~d ce~ts)
cf cor1~Ht::.on (L-~ ciclla.rs
after clcsi~g cf becks
on Jecemb.::Jr. }i, :i:92~, p-repared in
the fcr.rn Gf ~~l_e Sc._._-,·0 'a .:-.sr:.sc·licif~teci
r.reeldy press st..1tS1_~_~:::·~ c::: c.c:nf·i"tic:r.L
....,_ .
.( ~.-.:i.. 3
C~OL~.l..J
statt::rner..t
o.J..~:;.:;
zi ~~. . 3,
:·::s .': . ,
c : _· : ]:s
'b<:..nk 1 s s nbscrib 90 cu.pi tal en De0errr-
rr...r:.~-rn.o:r.a:lf urn
it. em, the
a~-:~O~lt
'Jer 31, 1924, also ths baJ.a':lce in
S'lr.plus accou:'lt after clcsir.g
~rc'T'
cf ,)CO:i.<;:s on :Uecar~b0::-
31, 1923.
c:.ppear. the A"."h~itcr's ccrt:ficaticn, col.mtersig;lecl by
f-:ha GO''Gr.ncr cr a D0p-1ty G-c7e:n·ncr, rea.ciL1g &s fc-ll.cvs:
"I
1-:.-:.:~~eb~- t~
at.:,ve stat~~~er~ttJ o·;_. .
lc.-5s of the·· .F~~ 4 -s~s.l
~cr
t:J.G
.
.;-r·t:i. z~
t1:3..t I t_:J..'\'le exarn.ineG
,;;c_.;.,...-ni~~gs,
e::~pe~ses,
~-3~:3:r"':-e ~Fa~.1~:
c:
t1~.e
rLr.td. profit
a~1CT
----- --- --·--·-
cale:-:·~c~ar- ~,.,.3L.. 1~ :·s:~4, &.nrl tho c::~n~·~t.i-::;n sta:~errsnt
- 2
St. 4)83
cf suc11 ba.nk after closie1~;:; ')-["bocks on DecernbGr 31, l924;
thect the items in s<.<Ch stc..t.:w.e:J.ts are correct as sr.own by
the records of s'•ch F.:::0eral res~rvs bank; that SL'ch p;~ofit
nn"i l0ss stat.smsr..t shov:s all items of gain riuring the periorlj th<:.t all clef,.lctions :-:;a:'l.s fro::-: g:r.oss an:'l net 0a:r.nings
in such statr.nne:lt app·:-,~:.r to be :f2i:r., jnst aml re<·sonable
in o.11 resp-::cts; and thcoct, •:;,::; shovvn thereon, there was
$- - - - - - - - - -~;:-ij~;-C:li
es ur.(i-87"the nro7is_:_
--·-- ·-~---- "t8clS-c:t
·--·--·------------"----·icns Qf S::cticr" 7__g_f_~~e F..c'l~~ral.:__Eo::oe?'.:Ye Ac~ apzoveri De·c:_srnE_cr ?3, 1Cjl3, a;; &rLr". 1':lr1 by the Act cf' ¥::trch 3, 1919. 11
Auoi+cr, Fer'1eral Pess'l'Ve
of
:B<mk
In t~e evc;:c1t that no francLis0 tc..x was paici on
Dec:em';_,ar 31, 1'~:24, tha -.-..n(Url ins0 p -:::-ticn of tr.e above
c,q-··ti_fie;__tion sl:crv.1::'l r.sdi! 11 an.i that tt.ere v;c. . s no 1::mount
(l''"-6 the cnite:1 States unr'ler tne p:rcvisiCL3 cf Seetion 7
0~ t:':le _?e:;(isral rss-:rvG Act n:pp:r.o·.-~c~ Di:h~·?:::o3r c:3, l:t~3. as
amen<1ec1 by the Act of ~Jia:r.ch 3, 19:!.)."
tl1e 5oa'Y'('i -,jit~ a ciL:)licate cop~~
o: the:, C0rt.::.:fi._:0 state:1Lonts forvv-lrc1sct to the Tr-easu:J1'
D 3'J::a1'tmont.
Kin,':~.y
fu.rnis~1
Very' tT'l:ly yours,
Wal tar L. Jll'iciy,
Sec,...et~::r;l.
@FedFRASER