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~~-1530
FITDBRAL RESERVE BOARD ANNOUNCEMENT
YJI:ZK DNDED JULY 2, 1926.
C:l:IAIW:SS IN STATE BANK MElffi:;:;RSHIP:
Dist.
No.
Date
Aci~i_tted.
to Membership:
None.
Closed.:
Peoples State Bank,
Humboldt, Iowa
6-26-26
VohmtarL Withdrawals:_
First State Bank, Stevensville, 1funt.
City Bank & Trust Co., :Bey City, Texas
9
Ba~r
11
P~flSSION
2
4
8-
8
11
GRANTED
TO
ELiRCIS:S TRUST POVBRS:
Fiahkill National Bank, Beacon, 1:1. Y.
First National Bank,
Portsmouth. Ohio
National Bank of Commerce, Jacl::son 1 Tenn.
First National Bank, Memphis, 'l'enn.
South Texas National Bank, Galveston, Texas
7- 1-26
6-30-26
6-29-26
6-29-26
6-29-26
6-29-26
6-29-26
2
X-1530
FEDERAL RESEB.VE :BOARD .A.NNOUNCEMEN'l1
\'lEEK EliDED JULY 9, 1926.
CHANGES IN STATE :M.NK MEMBERSHIP:
Adraitted to
1~mbership:
Date
None.
Absorbed by National :Bank:
4
The Adena Commercial & Savings :Bank, Adena, Ohio,
has been taken over by the Peoples National :Bank,
Adena, Ohio.
6-26-26
Voluntary Wi thdrs.wals:
7
12
Victor Savings ~k, Victor, Iowa
Deseret Savings :Bank, Salt Lake City, Utah
7- 6-26
7- l-26
PF.RiVIISSION GRANTED TO EXERCISE TRUS!J.1 POvVERS:
12
12
Merchants National Bank,
Coos Bay National :Bank,
Los Angeles, Calif.
}/lb.rshfield, Oreg.
7- 7-26
7- 7-26
a.
X-1530
:FEDERAL RESERVE BOARD ANNOUNCIDIIDNT
WEEK ENDED JULY 16, 1926.
CHANGES IN STATE BANK MEMBERSHIP:
Admitted to Membership:
Dist.
To:-2
2
Capital
Linden Trust Co.,
Linden, N. J •
. Total
resources
Surplus
----
Date
$200,000
$260,000
7-13-26
200,000
Greenpoint :Bank of
Brooklyn, N. Y.
$50,000
300,000
4,533,760
7-12-26
Consolidation of State Member Bcnks:
3
The Fidelity Trust Company, Philadelphia, Pa., and the
Philadelphia Trust Company, Philadelphia, Pa._ have consolidated w1der the title "Fidelity..;.Philadelphia Trust Company".
Converted to National
8
7-10-26
B~k:
The Citizens Bank of 1~plewood, Maplewood, ~fu., has converted into the Citizens National Bank of :Maplewood.
7- 1-26
Voluntary Withdrawals:
8
9
10
Farmers & NJ.erchants Bank,
Edgar State Bo.nk,
Bank of Lewellen,
Dyer, Tenn.
Edgc,r , lvion t .
Lewellen, Nebr.
7-15-26
7-14-26
7-15-26
PERMISSION GRANTED TO EX.ERCISE TRUST PO'i'.TERS:
l
1
1
1
2
3
7
8
12
Home National Bank, Brockton, lvass.
National Bo.nk of lvfiddlebury, Middlebury, Vt.
Derry National Bank, Derry, N. H.
First National Bank, Van Buren, lvhine
First Nr:r.t ional Bank, Pompton Lo.kes, N. J.
York Netional Bank,
York, Pa..
Chilton Na.tiona.l_:Bnnk,Chilton, Wis.
First National Bank, FUyettBville, Ark.
National Bank of Idaho, Pocatello, Ida..
7-16-26
7-14-26
7-14-26
7 .... 1·1-26
7-14-;26
7-14-26
7-14-26
7-14-26
7-16-26
4.
X-1530
FEDERAL RESERVE J30.A;l1D ~UTNOUNCE:tJEl.ifT
Y~JEEK E1TDED JULY 23, 1926.
CHANGES IN STATE :BANK MEliJBERSHIP;
Dist.
-
Date
l~o.
Admitted to
}~bershiR:
None.•
Change of Title:
6
The Citizens Trust Co., Savannah, Ga..• , has changed
its title to Citizens ~ank and Trust Go.
7- 8-26
Closed:
~ank
6
of Louisville,
7-22-26
Louisville, Ga.
Consolidation of State Members:
5
The Merchants and Farmers :Bank, Cheraw, S. C.,
has consolidated with the Bank of Cheraw, Cheraw, S.
c.
4-24-26
Converted to National _Bank:
6
The American Bank, Union Springs, Ala., has converted into The American National Bank of Union Springs. 7-20-26
Voluntarl Withdrawal:
7
:Marathon County :Bank, Wausau, Wis.
7-21-26
PERMISSIOU GRANTED TO EX:EHCISE TRUST POWERS:
1
1
10
10
11
12
12
First National Bank, Peterboro, N. H.
N~tiona1 ~ank of Derby Line, Derby Line, Vt.
l1.lbuquerque National :Sank, Albuquerque, N. Mex.
First National Bank in Raton, Raton, N. Mex.
Austin National Bank, Austin, Texas
First National :Bank, Pomona, Calif.
First Na.tionnl Bank, :Burlington, \"lash.
7-20-26
7-20-26
7-20-26
7-23-26
7-20•26
7-20-26
7-20-26
5
X-1530
l!'EDER.'\.1 RESEHVE BOARD LlifNOUNCEIVJENT
WEEIC ENDED JULY 30, 1926.
CHANGES
Dist.
No.
IN STATE :BANK ME11ffiERSHIP:
Date
Admitted to
~fumbership:
None.
Reopened:
8
Bank of Versailles,
Versailles, MO.
7-27-26
Converted to National Bank:
11
Caddo Mills State Bank,
Caddo Mills, Texas
6- l-26
Voluntary Withdrawals:
ll
11
Trent State Bank, Goldthwaite, Texas
Citizens State Bank, Luling, Texas
PERMISSION GRANTED TO EXERCISE TRUST
2
7-29-26
7-28-26
PO~~S:
First National Bank and Trust Co., Massena, N. Y.
7-27-26
6
X-1530
FEDERAL RESERVE BOAlill ANNOUNCEMENT
WEEK ENDED AUGUST 6, 1926.
CHANGES IN STATE BANK ..._- .. --........... -·-··'"'
MEMBERSHIP:
Dist.
No.
Ca.pi tal
Admitted to
Sw.·~~~f!
Tota.l
resources
Date
!~mbershi»~
1 Phoenix Bank, Hartford, Conn. #1,000,000 ~1,000,000 $18,072,850
7-31-26
2 Guardian Trust Co.9f New
Jersey, Newark. N. J.
8- 2-26
5,000,000 2,500,000
7,552,525
Converted to National Bank:
11
First State Bank, Post City, Texas
7-29-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
7
7
12
waltham National Bank,
Peoples National Bank,
First National Bank,
Capital National Bank,
Walt ham, .M!Iis s •
Independence, Io~v.a
Story City, Iowa
Olympia, Wash.
8888-
6-26
6-26
6-26
6-26
7
X-1530
FEDERAL RESERVE :BO.A..liD Allli0t.1NCE].1E!'l"T
WEE!..: ENDED AUGUST 13, 1926.
Diot.
No.
Capital
Surplus
Total
resources
Date
lubnitted to MembershiE:
2 :Ba.nk of Yorktown,
New York, N. Y.
8
$1,000,000
$250,000
$1,250,000
8- 9-26
50,000
10,000
379,566
B-12-26
Bank of La. Plata,
La. Plata, Mo.
Voluntary
9
Withd~~v~~~
. Lake City Bank of Minnesota, Lake City, :Minn.
5-13-26
Change of T:i. t le :_
11
. The Guaranty State :Bank, Trenton, Texas, has changed its
title to First State :Bank of Trenton.
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
3
3
8
Citizens National :Bank,
First. National Bank,
First NtJ.tional :Bank,
First National :Bank,
Englewood, N. J.
Blackwood, N. J.
Oley, Penna.
St. Charles, lfu.
. ,..
I .
9s..12-26
8-11-26
8-11-26
8-12-26
FE:DE.,."t:U\.1 RESERVE :Bo;.J:'l.J) J:.SIJC'll~c::;:: ~::NT
'FlEEK El-IDED .:~uc-u,s:;.• :~o, F86.
Dist.
--. -·
No.
....
Admitted to
Membership~
None.
Merged with State
2
8
N~mber:
The Greenpoint Bank of Brooklyn, N. Y., a me;:ibt>r ,.
has rrorged with the Bap.k of the Manhattan Ccm:;_:::e..a'r,
New York, N. Y., also a member.
The Warren Bank,
Warren, Ark.
8-14-26
8-19-26
X-1530
FEDEB..:'\.1 HESETIVE :BOLRD
WEER
E~~ED
~lliEOl.J:JCEl'JENT
AUGUST 27, 1926.
CHANGES IN STATE Bl.. NK Iv::EiviDERSHIP:
Dist.
No.
Date
None.
PERMISSIOH Gllt\NTED TO EXERCISE TRUST POWERS:
3
5
7
10
10
12
Citizens National Bank, Pottstown, Pa..
Citizens National :Bank, Orange, Va.
First National :Bank,
Platteville, VIis.
National State Bank,
Boul~, Colo.
Enid,\Okla.
First Ns.t ional Bank,
Northwestern National :Bank, :Bellingham, Wash.
8-23-26
8...23-26
8-23-26
8-26-26
8-26-26
8-23-26
10
Z--1530
l!"'.F.:!::ill1~~1
Et .->'.DRVE EOARD A1"'NOUNCEiiOOJT
V1K'5K Elii""DED SEPTEIVLBBR 3, 19 2 6
CHANGES IN STATE BANK MEMBERSHIP:
Dist.
No.
Capital
Total
resources
SurJ21US
J)ate
Admitted to Membership:
2
3
Murray H..i.ll Trust Co.,
New York, N. Y.
Shamokin Banking & Trust Co.,
Shamokin, Penna.
$1,000,000
$1,000,000
$2,050,291
9·- 2-26
125,000
125,000
931,798
8-28-26
PERMISSION GRANTED TO EXERCISE TRUST POV~S:
3
3
3
3
4
5
5
8
10
Pleasantville National Bank, Pleasantville, N. J.
Pacific Avenue National Bank, Atlantic City, N. J.
Hummelstown National Bank,
Hummelstown, Penna.
National Union Bank,
Reading, Penna •.
Nor\vo od Nat iona.l Bank,
Norwood, Ohio.
First National Bank,
Monroe, N. c.
Rockingham National Bank,
Harrisonburg, Va.
Cannelton National Bank,
Cannelton, Ind.
First National Bank,
Holdenville, Okla.
999999-
999-
2-26
2-26
2-26
2-26
2-26
2-26
2-26
2-26
2-26
j_j_
X-1530
FEDERAl. RESERVE BOARD ANNOUNCEMENT
WEEK ENDED SEPTEMBER 10, 1926.
CHAlJGES IN STATE BANK MEMBERSHIP:
..
Ca.pi tal
Admitted to
2 First Bank of Utica,
Utica, N.Y.
Surplus
Tota.l
resources
Date
Membership~
$1,250,000 $1,250,000
$19,367,466
9- 9-26
Converted to National Bank:
6
. t'
Alabama Bank
&
Tru.s t Co • , Montgomery, Ala •
Absorbed by Stat e
6
9- 7-26
V~mber ~
The Union Banking Company, Monroe, Ga., a member, has
been absorbed by the Bank of Monroe, ]!onroe, Ga., a member.
9- 2-26
VoluntarJL_Withdra~
7
9
Sparza State Bank, Cromwell, Ind.
Bank of New Richmond, New Richmond, Wis.
9- 4-26
9- 7-26
j_2
X-1530
FEDERAL RESERVE BOARD ANNOUNCID/iENT
vi1EEK EJIJ"'DED SEPT£1/ffiER 17, 19 2 6 •
CilliJGF:S IN STATE B.ANK MF.l.'IBERSHIP:
Admitted to Jlf.embersh.ip:
Dist.
No.
1
1
7
9
9
10
Capital
Phoenix State Bank & Trust
Co., Hartford, Conn.
$1,600,000
Slll'plus
Total
-·resources
----
$1,600,000 $28,352,673
Con:;.....ddated with 1~ .... 4c:!l:ber:
The Phoenix Bank, Hartford, Conn.; hB.s consolidated with
the State Bank & Trust Co., Hartford, Conn., under the title
Phoenix State Bank & Trust Company, Which has become a member.
Wi thdrawa1s:
Auburn Park Trust & Savings Bank, Chicago, Ill.
Bank of Commerce, Kalispell, MOnt.
Moccasin State Bank, Moccasin, Mont.
Elgin State Bank, Elgin, Nebr.
Date
9-11-26
9-11-26
9-15-26
9-13-26
9-13-26
9-15-26
Absorption of Nonmember Bank:
12
Gunnison Valley Bank, Gunnison, Utah, has absorbed the
Bank of Centerfield, Utah, nonmember.
PERMISSION GRANTED TO EXERCISE TRUST
2
5
6
8
10
Citizens National Bank, Rahway, N. J.
First National Bank, Emporia, V~.
First Nation~! Bank, Thomasville, Ga.
Col~bus National Bank, Columbus, Miss.
First National Bank, Blackwell, Okla.
9- 7-26
PO~v.ERS:
9-15-26
9-15-26
9-15-26
9-15-2'6
9-15-26
1_3
FEDERAL RESERVE BOARD ANlTOUNCEl'.::ENT
VVEEK E1\IDE:D S:sP TEIIIBER 24, 19 2 6 •
CHANGES IN STATE BllNK MEI::BERS.iUP:
Admitted to :Membership:
Dist.
No.
2
Total
resources
West Orange Trust Company
West Orange, N.J.
$150,000
$25,500
Date
$175,500
9-21-26
Voluntary Liouidation
12
Lake County Loan and Savings Bank, Lakeview, Oregon
9-8-26
Absorption of National Bank
2
Irving Bar~-Columbia Trust Company, New York, N. Y.
ho,s absorbed the National Butchers & Drovers Bank of
New York and chcmged its title to "Irving Bnnk and
Trust Company."
9-18-26
FEDERAL RESERVE BO.~:\.RD ANNOUNCEEENT
VffiEK ENDED OCTOBER 1, 1926.
CHAJ.~GES
IN STATE BANK ]JEMBERSHIP:
Admitted to Membership:
Dist.
No.
NONE
Dc.te.
Consolidation of State mo.mbers:
2
Fhe First Btmk of Utica. and the Oneida County
Trust Company of. Utica., Now York have merged
under the title "First Eant: and T!'U.st Company
of Utica."
9-25-26
Absorption of National Bcnk:
9
The G~,llatin T::-ust and Savings Bank, the Security
Bank and Trust Company, ar1d the Cm:ltnercia.l
Ut::.tional B<:.nk, all of Bozoman, lfv.mtana, have
a.bsorbed the National Ba.11}: of Gallatin Vr,_ley
at Bozeman, Montana..
3-22-26
PERMISSION GR.':..NTED TO EXEli.CISE TRUST :PO\J::::R.S
7
Citizens National Bank, Hammond, Indiana.
9··29-26
9
The Roughton National Banl:, Rought on, Michiga.ri.
9-29-26
1_5
X-1530
.F::IC::lliAL :RESERVE :BOJ:RD ANJIJ01.i1JCE11ENT
~3EK ENDBD OCTOBER 8, 1926.
CiLt iJ'JTS IN STATE
Dist.
--No.
2
:B.bl~K
S:~Pi ta~
Times Sq_uare Trust Co.,
New York, N. Y.
$2,000,000
M:S1viB3RSHIP:
Surplus
$500,000
irotal
reSOD_TC'-)S
------~·--
------T-$2,518,335
Date
10- 5-26
Closed:
7'
11
First State Bank, Carsonville, Mich.
Commercial Guaranty State Eru::tk, Longview, Texas
10- 7-26
9-30-26
PERlVllSSION GRPliJTED TO EXERCISE TRUST POWERS:
2
3
4
6
6
7
8
10
First National Bank,Saugerties, n. v •
J.
York County National Bank, York, Penna.
National Bank and Trust Company, Monessen, Penna.
Alabruma Nation~l Bank, Montgomery, . ua.
First Nt',t ion<J.l Bc.nk, Springfield, Tenn.
N~tional :Bank of l'httoon, Ivfuttoon, Ill.
Fir::;t National :Bonk, Mitchell, Ind.
Central No.ti on::>,l B~k, Okmulgee, Oklo,.
1010101010101010-
5-26
5-26
1-26
l-26
5-26
5-26
5-26
5-26
1.6
,
J~-1530
FEDEi:L',L RESERVZ BOARD AN1TOillJCEJ:::EJ'JT
Wll:EK END:iQ:l OCTOBSl'i 15, 1926.
CH.AI'JGES IN
SI':'~ TE
BANK J'.'::EKJ3:8RSHIP:
Admitted to Membership;_
Dist.
No.
3
Ce.:pi tal
Norristown-?enn Trust Co.
Norristown, Pa.
6
---·-
~1,000,000
$1,000,000
Sur~1us
Total
Resources
__ __ ,
310,?31,181
Bank of Pittsview, Pittsview, Ala.
Date
10-14-26
9-18-26
Voluntary Wi tl1dr:1wal :_
6
T:he Bartow Ban}::, Bartow,
Absorption of Nonmember
G~,.•
Il~n:::
Centra.l Mercantile BanJc, New York, has
absorbed the ..!berican B:::tl:k of Nc.v Yorl:,
nomnember.
7
10-9-26
Old IL<.tion:J.l E:::-.nk, Grand lt;:pi:'is, lli.chig::m.
10-13-26
10-12-26
1_7
X-1530
F3DE~::.L
RES ~VE BOiJ\D
~'JH!Oill'TCEJ~NT
WEEK ImDED OCTOBER 22, 1926.
~":..dmi tted
to_ l~emoersh_ip:
Dist.
Surplus
Capi t.~l
t:o.
2
5.
Interst9-.te Trust Compan·r
]'~ew York, N. Y.
~
~
~3,000,000 ~900,000.
Tot2,l
Resourc2s
Dcte
:;;>3,900,000
10-21-26
4,894,692
9-4-26
Kn.n~~:V:b.n
Bm1l::ing .:1nd
Compcmy,
Chnrleston, W. V~.
'l_lrcl.s t
500,000
250,000.
Closed
7.
12.
3.
5.
7~
7.
The
W~yne
First
Bi:l.nl~
Fc".rmers
County Stctc
:Oc..n~c,
Corydon, I ow~:..
of Pilot Roc\:, ?ilot Roc!:, Orcgun.
Nc~tiont:,l
B.:::,nl:, Hillhoh.l, I'onnsylv.::,ni8..
Nationcl ]n,nl~, vi"o.shington, D. C.
First H<::.tionr.:l Be1.nl:, Bcy City, l:ichigr:n.
First Natiouccl B'l.n~~. Mbort;;rvillo, Illinois.
Fr.~.n::lin
10-21-26
10-19-26
10-20-26
10-20-26
10-:20-26
10-~~0-52(:'.
1.8
X-1530
F"'.....DERAL RES::JRVE BOARD A..T\JNOUNC31/ENT
WEEK ENDED OCTOBER 29, 1926.
CHL.NC..ES IN STATE B.ANK 1\!GMBJRSHIP:
M.mi tted to
Membership~
Dist.
-No.
Date
Voluntary Withdrawal
6.
Union Bt'..nk and Trust Company, B.,,ton Rouge, La.
10-23-26
Clos.ed
7...
7.
State Bt.nk of Fremont, Fremont, Iowa.
Gc.rwin Stc..~ote Banl:::, G(;-.rwin, Iowa.
10-25-26
10-25-26
Lbsorption by National Bank
10.
Farmers Reserve State Bank, St. l':arys, Kans.
absorbed by First National :Bank of St. Marys,
Kansas.
10-23 ....26
Change of Title
ll~
The Gunra.rtty State Bank of Grand Pr~irie, Texas
has changed its title to Farmers St~te Bank of
Gro.nd Prairie.
10-21-26
ISRMISSION GRAN"T::"ill TO EX3RCIS:S TRUST POWSRS
2.
First No.tionn.l Banlc, Islip, New Yorl::
10-29-26
5.
Peoples National Bank, Bedford, Virginia.
10-28-26
j_9
x-1530
FEDERAL RESERVE BO.AIID ANNOUNCEMENT
•
\'lEEK ENDED NOV'El.ffiER 5, 1926~
..
CHANGES IN
STATE BANK 11EJIIB3RSHIP:
Admitted to Membership:
Dist.
No.
Date
NONE
Voluntary Withdrawal
9
.
Kandiyohi Oou..nty Bank, Willmar, :Minn.
pP~~ISSION GRANT~
1
5
5
5
5
7
10-23-26
TO EXERCISE TRUST POVmRS
Milford National Bank, Milford, Mass·.
National Bank of Fairfax, Fairfax, Virginia
First National Bank, Springfield~ S. c.
First National Bank, Williamson, W. Va:.
First liational Bank, Cumberle.nd; :r.lfB.ryland
First National Bank, Clinton, Indiana.
11-2-26
11-2-26
11-2-26
11-2-26
11-3-26
11-2-26.
20
X-1530
FEDERAL RESERVE BOARD .Al"fNOUHCEMENT
WEEK E~IDED NOVEMBER 12, 1926.
CHANGES IN STATE
BANK :MEMBERSHIP:
Dist.
Surplus
. Total
resources
2 American Exchange-Pacific Bank,
New York, N. Y.
$7,500,000 $8,500,000 $254,901,022
Date
11-10-26
Closed:
7
7
12
9
Citizens Savings Bank•
Terril Savings Bank,
Fostoria, Iowa
Terril,
Iowa
11- 9-26
11- 9-26
Athena State Bank,
Athena, Oreg.
10-22-26
First Bank of Grantsburg, Grant:sburg, Wis.
PERl\USSION GRANTED TO E'X.ERCISE TRUSr POWERS:
None •
•
11- 8-26
2:1
X-1530
FEDERAL RESERVE BO.AF.D ANNOUNCEMENT
VJEEK EliDED NOVEJffiER 19, 1926. •
CHANGES IN
Dist.
No.
STATE BANK MEMBERSHIP:
Total
resources
Capital
Admitted to
Date
1~mbership~
•- fa Sedalia. Trust Co • , Sedalia, Mo • $100, 000
$2 5, 000
$694,·155
11-19-26
Voluntary Withdrawals:
6
7
10
Citizens Bank & Trust Co., West Point, Ga.
Union Bank of Winneconne, Winneconne, Wis.
Security Bank,
Meadow Grove, Nebr.
11-15-26
11-18-26
11-13-26
Closed:
10
Federal Trust Co.,
Kansas City, Mo.
11-12-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
2
2
3
3
3
4
7
Central National Bank, New York, N. Y.
First National Bank,
Warwick, N. Y.
Doylestown National Bank, Doylestown, Penna.
First National Bank,
Ebensburg, Penna.
Waynesboro National Bank & ~st co., Waynesboro, Penna.
National Eank & Trust Co., 1v1onessen, Penno..
First National Bank, Goodland, Ind.
11-11-26
11-17-26
11- 9-26
11-17-26
11-13-26
11-17-26
11-17-26
22
X-1530
PEDERU, RESERVE BOARD ANNOUNCElVIENT
iVJi.::;;K
E:0f~I.ED
NOTI1ffi1!iR 26, 192 6.
CH.AlWES IN STATE BANK l/lEivffiERSHIP:
Dist.
-No.
6
7
7
4
7
11
Date
-
Closed:
Hartwell Bank, Hartwell, Ga.
County St\vings Bank, .Algona, Iowa
Farmers & Drovers State Bank, Lakota, Iowa
The Ohio Trust Co., Cleveland, Ohio, a member, has
been absorbed by the Lake Erie Trust Co., Clevelr"nd, Ohio,
a member.
Mapleton Trust & Savings Bank, Mapleton, Iowa
.
The
11-20-26
11-24-26
Change of Title:
Guaranty State Bank, Kosse, Texas, has changed
its title to First State Bank of Kosse.
PERMISSION GRk"JT:ED TO EXER.CISE TRUST POWERS:
None.
11-23-26
11-26-26
11-26-26
11-19-26
X-1530
FEDF..JU.L RES"ZRlE BOARD
JIJTNOUNC::~l.iENT
VJBEK END:ID DECEl'ffiBR 3 J l S26.
CHlu'JGES IN STATE :BAi!TE M8JVTJ3I:RSHIP:
Dist.
No.
----__,_
...
3
Date
Admitted to l.Iem"berahip:
\
2
Total
resources
Ce,pi tal
·-----·-- ---·--""--
First Trust Company of Albany,
Albany, N. Y.
$600,000
Montour County Trust Co. ,
Dan ville, Penna.
125,000
$400,000
$18,613,785
ll-29--26
20,000
673,382
ll-30-26
Closed:
7
8
Hamilton County S iiate J3D,nk, Wabster City, Iowa
The Cotton BeU Ss.vings & fJ:'rust Co., Pine Bluff$ J..rk., a
member bamk, has bean Sl'C<~eel!.ed by the Cotton Belt Bank &
Trust Co., Pine Bluff, A.rk,, a nonmember.
PERMI3SI0N
5
5
7
GRP~lJTLD
11-29-26
TO r.xERCISB TRTJST PO'[JL'B.S:
Old Point Nu.tional B::ml:, Pboebus, Ve.•
ShenMdnah Val:i.eyNa:·cionel Bank, 1Yinchester, Va. (Su.p.)
First No.tional Bank, Stanton, Iowa
(Sup.)
12- l-26
•
11-30-26
11-30-26
11-30-26
24
X-1530
FEDERAL RESERVE :BOARD ANNOUNCEl~ENT
WE3K ZliJD:sD DEC:3I\1BER 10, 1926.
CHANGES IN STATE :BANK !l[!l'.J.:IEERSHIP:
Dis:t.
Date
No.
Admi ttE>d to W.embershi:e.!_
None.
Closed:
6
6
6
8
12
Bovman, Ga.
of Elberton, Elberton, Ga.
Royston Bru1k, Ruyston, ac•.
Bank of C~ittenden County, N~~ion, Ark.
Madras Sta.tP. Bank, Madras, Oreg.
121212···
12-·
:Bank of Boi'.matl,
B~~k
9-26
7-26
4-26
7-26
12- 7-26
Reopene~
7
7
12- 3-26
County Savings :Bunk, Algona, Im·~
Farmers & Drovers S-tate Bc;nk, L:.lkota, Iowa
12- 2-26
Voluntary_Vf.~t~dr~wa.l:
9
Mellette County State Bank, Wni te River, S.
DeJ~:.
12- 8-26
Absorb~-~!_~:np19mber ~
11
Austwell State Bank, Austwell, Texas
11-29-26
P:ERMISSION GRANTED TO EY.ERCISE TRUST POWERS:
3
4
5
6
First National Bank in Waynesboro, Waynesboro, P~.
First National Bank, Oil City, Pa.
Nti.tiona.l Bank of Charlottesville, Charlottesville,Va.
(Supplemental)
Traders Ne.tional Bank, Tullahoma., Tenn.
12- 7-26
12-10-26
12- 7-26
12-10-26
25
X-1530
FEDF.RAL RESERVE BOARD ANNOU:l'TCENENT
V~EK ENDRD DECE]ffiER 17, 1926.
CHANGES IN STATE BANK MEMBERSHIP!
Dist.
No.
Date
Admitted to Membership:
None.
Merger of' State Members:
2
The American Excr~nge-Pacific Bank, New York, N. Y.,
has merged with the Irving Bank & Trust Co., New York,
N. Y. , under the ti tl0 of AnBr ic an Exchange Irving Tru.s t
Company.
12-11-26
0losed:
The Bank of Lavonia, Lavonia, Ga.
Farmers Savings Bank, Ute, low~
6
7
12-10-26
12-11-26
Change of Title:
The Guaranty State Bank, Spearman, Texas, has changed
its title to the Fidelity Bank of Commerce.
11
12-15-26
PERMISSION GRANTED TO EXERCISE TRUST POWERS:
1
3
7
7
10
Providence National Bank,
Union National Bank,
First National Bank,
First National Bank,
First National Bank,
Providence, R. I.
Scranton, Pa.
Chicago Heights, Ill.
Lake Geneva, Wis.
1'fadis on, Nebr.
12-14-26
12-17-26
12-17-26
12-10-26
12-17-26
26
X-1530
FEDERAL RESERVE BO.ARD ANNOUNCEI\'w.:NT
V\I'EEK EN.DE:D DECEl:BER 24, 19 2 6 •
CHANGES IN STATE BA.t""JK MEMBERSHIP:
Ddlat.
-wo:-
:Oate
Admitted to ]Jem~-e!_s_!li P_~_
Capital
2
.,i:200,000
East Orange Trust Co.,
East Orange, N. J.
Surplus
$50,000
o:r
Change
2
Total
resources
----·---·-··00
$298,385
12-18 ....26
Title:
The Central Mercantile Bank of New York, N. Y., has
changed its title to Central Mercantile Bank & r.Prust Co.
12-16-26
Closed~
7
8
Iowa Loan & Trust Co., Des Moines, Iowa
Citizens Bank of Tlmica, Tunica, Miss.
12-20-26
12-18-2f.
7
7
8
Stewart State Bank, St. Charles, Ill.
H. C. J.fcLa,~hlin & Cc. State Bank, Petersburg, Mich.
Desha Bank & Trust Co., Arkansas City, Ark.
12-23-26
Voluntary
8
12-~l-26
12-23-26
Liq,uid_atio_~
12-23-26
Arkansas Valley Bank, Fort Smith, Ark.
Merged with Nonmember:_
12
The State Bank of Goldendale, Goldendale, Wash., has
merged with Brooks & Co. Bank, Goldendale, Vh.s;,., a nonmember.
PERMISSION GRANTED TO EXERCISE TRUST
None.
POWERS~
12-13~26
X-1530
FEDERAL RESERVE :BOARD ANNOUNCE!v'IENT
WEEK EliDED DECElffiER 31, 1926.
CHANGES IN STATE :BANK 11IDffiERSHIP:
Dist.
No.
Admitted to NJBmbership~.
None •.
~bsorbed
11
b,y National :Bank:
The :Blooming Grove State Ea.nk, :Blooming Grove,
Texas, has been absorbed by the Citizens National
:Bank of :Blooming Grove.
PERMISSION GRANTED
1
3
Date
rro
12-22-26
EXERCISE TRUST POWERS:
First National :Bank, Fort Kent, Maine
Merchants National Ea.nk, :Bangor, Ponnn.
12-30-26
12-30-26
28
X-4632
TRE!.SURY DEPARTM:ENT
Office of the Secretary
WASHINGTON
.
July 7, 1926.
The Governor
of the 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 June 1, 1926,
to June 30, 1926, amounting to $117,876, as follows:
$5
Boston
New York
Philadelphia
Cleveland
Atlanta
Chico.go
Minneapolis
Dallas
San Froncisco
$10
300,000
600,000
200,000
300,000
100,000
500,000
100,000
250,000
200,000
2,550,000
$20
100,000
$100··
100,000
150,000
5'0,000
300,000
75,000"
50,000
50,000
275,000
10,000
10,000
Tot$1
300,000
800,000
200,000
375,000
300,000
500,000
100,000
250,000
310,000
3,135,000
3,135,000 sheets@ $37.60 perM ••••••••••• $117,876.00
The charges against the several Federal Reserve Banks are as follows:
Boston
New York
Phi1o.delphia
C1evelo.nd
Atla.nta
Chicago
MinneG.polis
Dallo.s
Stl.n Froncisco
•
$ 11,280.00
30,080.00
7,520.00
14,100.00
11,280.00
18,800.00
3,760.00
9,400.00
11,656.00
117,876.00
The Bureau appropria.tions will be reimbursed in the above amount from
the indefinite appropriation "Preparation and Issue of Federal Reserve Notes,
Reimburso.ble", and it is requested tha.t your boa.rd cause such indefinite approprio.tion to be reimbursed in like amount.
Respectfully,
..
(signed) s. R. Ja.cobs,
. Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE: FEDERAL RESERVE BOARD
X-4f....~3
July 15, 1926.
Su'3JECT:
J:Tecessi ty for Assistant Federal Reserve .Agents a.t
Federal rese~ve branch banks where unissued Federal· reserve notes are carried.
Dear Sir:
Within the past few years several cases have ari$en
in which a Federal reserve agent desired to have an employee of
a branch bank act as Assistant Federal Reserve Agent in the handling and custody of unissued Federal reserve notes. The Board has
expressed clis11.p-proval of such arrangements.
Sectio:1 15 of the Federal Reserve Act requires that
Federal reserve notes shall be held for the Federal Reserve Agent,
under such rules Dnd re£.,Lllntions as the Federal :neserve Board may
prescribe, in the joint custody of himself and the Federal reserve b?..nk to which he is accredited.. A joint cm:tod.y of the
kind contemplated requires that the ?ed0.r::1l 3.eserve .Agent ana
accordingly each of his assistants should be se-pc:.rate and distinct
from, and entirely inderendent of, the Fedor<J.l reserve bank or
branch ba...'lk in so far as the custody o::J.d hc.cr:d.li~lt:'; of Fed.eral
reserve notes is concer;.1ed. The same person should not act as
Assista"lt Federal Reserve Agent in the handling or custody of unissued Federal reserve notes and perform the functions of a clerk
OI" employee of a Federal reserve bank or branch bank.
In order to
preserve the legal si tun:tion contemp:;_atod. by Section 16, it is
necessary to have at each Fed.eral reServe branc.h bank whore unissued. Federal reserve notes are held an Assistant Federal Reserve Agent, properly qualified &~d bonded, who is entirely independent of the Federal reserve bank or branch bank. As
stated in the Board's letter of March 31, 1925 (X-4574), however, it is not necessary that an Assista'lt Federal Reserve
Agent be a:ppointed in a:1y bra~ch at which unissued Federal reserve notes are not carried.
In one case in which a situation of this kind exose
recently the Federal Reserve Agent was able to secure the services of a gentleman engaged in other business in the city in
which the branch bank was located; to perform the duties of a11
-2..A.ssista.it Federal Reserve Agent i.n the handling ruld custody of
Fede1·al reserve notee. This Gen~ler:aen was :p..-operly qualified
under the law a.'ld, of ccurse, gave the usual bond. The time
required of him n.s Assist'lJ.lt }'edl:lral Reserve Agent in the
handling ru1d custody of Federal reserve notes was not sufficient
to prevent or interfere with his continued attention to his personal business. The Federo.l Reserve Board has no objection to
.an arrangeme:1 t of this l:i:1d, whereby a pe:-son engaged in an outside business or profession acts as Assistant Federal Reserve
Agent at a br:mc~ bnnk provided, of course, such person is properly quali:ied ~1der the provisions of the Federal Reserve Act
ru1d gives the customary bond required in such cases.
Very truly yours,
D. R. Crissinger,
Governor.
TO ALL F. R• .AG'E!':'TS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
X-4636
July 16, 1926 ..
SUBJECT:
Expense Main Line, Leased Wire System,
June, 1926.
Dear Sir:
Enclosed herewith you will find two
mimeograph statements, X-4636-a and X-4636-b,
covering in detail onerations of the main line,
Leased Wire System, during the month of June, 1926.
Please credit the amount payable by your
bank in the general account, Treasurer, U.S., on
your books, a~d issue C/D Form 1, National ~ariks,
for account of 11 Salaries and Expenses, Federal Reserve Board, Special Fund11 , Leased Wire System,
sending duplicate C/D to the Federal Reserve Board.
Yours very truly,
O. E. FOULK,
Deputy Fiscal Agent.
(Enclosures)
TO GOVERUORS OF ALL F. R. BANKS EXCEPT CHICA.GO.
a:t
X-4636-a •
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE
FEDERAL RESERVE LEASED WIF..E SJ.'STEM FOR THE MONTH OF JUNE, 1926.
Business
reported
by banks
From
Boston
NewYork
Phi laJ.elphia.
Cleveland
Richmond
AtlMta.
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
F.R.Board
Total
Words sent
by New York
chargeable
to other
F. R. B;:mks{l)
644
33.550
152,107
33,893
76,635
43,056
63,460
106,287
76,832
3 7' 412
75,697
58,046
105,706
613
1,197
2,239
2,800
2,155
2,048
l ,690
2,103
3,839
l ,996
873,681
21,324
Per cent of Total
Total
34,194
152,107
40,506
77,832
50,295
66,260
108,442
78,880
.'39",102
77,600
61,885
107' 702
895,005
}09! :222
1,204,3.37
100%
Treasury
Dept.
Business
War
Finance
Net
Corporation Fed. Reserve
Bank EusL'less
Business
·::s ,1J3
29,061
144,659
36 , 1,_4
-'
72,111
44,977
60,293
100,730
72,974
35"621
71,962
58,333
97,482
7,443
4,352
5, 721
5,318
5,967
7,712
5,906
3,481
5,838
3.552
10,220
70,648
;21 1 822
102,4 70
8.51%
Per cent of
total bank
Business(*)
824,357
277,400
1,101, 757
110
110
.Ol%
3-52
17-55
4.39
8. 75
5,46
7.31
12.22
3.85
4.32
8-73
7.08
11.82
100.00%
91.48%
(*)
These percentages used in calculating the pro ra.ta s""are of lea.sed wire expense as shown on the
accompanying statement (X-4636-b)
(1}
Number of words sent by New York to other F. R. Ban~s for their sole benefit charged to banks
indicated, in accordance with action taken at Governors' Conference November 2- 4, 1925.
REPORT OF EXPENSE MAJN LINE
FEDERAL RESERVE LEASED WIRE SY8TEM, JUNE, 1926.
Name
Operators' Operators'
Salaries
Overtime
of Ban.k'
$ 260.00
1,025.16
216.66
284.50
130.00
255-00
(#).3,938-94
200.00
263·55
275-64
251.00
360.00
Boston
New York
Phi lade1phia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kan sa.s Ci ty
Da~las
San Francisco
:5'ade:ra.1Re serve
Total
(&)
( #)
( *)
(a)
(b)
Board
Wire
Rental
Total
Expenses
Pro rata
Share of
Total
Expense
Credits
Payable .to
Federal
Reserve
Board
$
260.00 $ 736.13 $ 260.00 $
476.13
3,670.22 1,025.16
2,645.06
1,025-16
216.66
918.08
216.66
701.42
1,829.88
284.50
1,545.38
234.50
180.00
1,141.85
180.00 (&)1,166.52
1,528.74
255.00
1,273·74
255-00
2,555·56 .3,938.94(*)1,383·38
3,938-94
1,850.80
200.00
1,650.80
200.00
903.44
263·55
639.89
263.55
1,825. 70
275.64
1,550.06
275-64
1,480.64
251.00
1,229.64
251.00
2,471.91
360.00
2,111.91
360.00
$151 o.
$15,350·35
$7,510.45
Includes $204.67 for branch line business transrrdtted over main line circuit.
Includes salaries of Washington operators.
Credit.
Received $2.76 from War Finance Corporation and $1,945.09 from Treasury Dept. covering business
for month of Jm1e, 1926.
Amount reimbursable to Chicago.
FEDERAL RESERVE BOARD
X-4637
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
July 19, 1926.
SUBJECT:
Holidays during August, 1926.
Dear Sir:
~ne following Federal Reserve Bariks and Branches
will observe holidays during the month of August, 1926,
on the dates s~ecified:
Monday
August 2
Denver
Colorado JB.Y'
'Tuesday
August 3
St. Louis
PrUnary Election Day
Tue13day
August 3
IC8.!1sas City
Okla...l-J.oma City
General Election Day
Thursday
Augv.st 5
Nashville
State Election Day
Tuesday
Augl.lst 31
San Francisco Primary Election Day
Los Angeles
On the dates indicated, the batiks affected will not
participate in either the regular Gold Fund Clearing or the
Federal Reserve Note Clearir~·
Please include your crodits for the b3.;-:ko effected
on each of the holidays with ;>•our credits for the following
business day in your Gold Fund Clearing telegrams, and make
no shipment of Federal Reserve notes, fit or unfit, for
account of the head offices involved.
Please notify Branches.
Very truly ' yours,
J. C. Noell.
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS •
SUBJECT:
Clayton Act applications involving Banks m
more than one district.
Dear Sir.
The Federal Reserve Board desires that
a Clayton Act application which involves hanks m
more than one Federal Reserve District he accompanied
hy the recommendation of the Federal Reserve Agent of
each district involved before being transmitted to the
Board. It is Requested, therefore, that when such an
application is presented to you unaccompanied hy the
recommendation of the Federal Reserve Agent of the
other district involved, the application he sent to
the Federal Reserve Agent of such district m order
that he may attach his recommendation and forward the
application to the Board.
By order of the Federal Reserve Board.
Very truly yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
FEDERAL
RESERVE
:SOARD
X-4640
July 23, 1926.
For immediate release
cmmiS.J9.1LQ!
ACC:T.P_~};:~}!: l:~!£~Y..ET
June 17, 1923
to
July H,, 1926.
Acceptances.
The acceptance market was gerJ.erally quiet from the middle of June to the
middle of July and Few York dealers reported a considerable decline in the
vol1une of their purchases and sales as compared with the preceding four weeks.
The demand for bills, which had been unusually active in May and early June,
slackened after the middle of the month, partly on account of firmer money
conditions, and on June 23 dealers advanced their rates on 90 day bills.
Bills
of this maturity which had been quoted at 3 1/2 per cent bid and 3 3/8 per cent
offered late in May and had declined to 3 3/8 - 3 1/4 per cent early in June
were now again offered at 3 3/8 per cent.
after this increase
~1d
A somewhat better
deiDaJ.~d develo~ed
with supplies declining, dealers' portfolios were re-
duced to lower levels • Offerings to the reserve bc.n?.: in liTew York were moderate
but in Boston fa"irly heavy.
The dem.9.nd for 90 day bills improved still further
towc:trd the middle of July with no increase in supply and some dealers advanced
their rates on 120 day bills on July 14.
These bills wb.ich had borne the Saine
rates as 90 day roaturi ties wore no·\:· quoted by some dealers at 1/8 per cent more.
Rates on other maturities remained
,~~changed
throughout the reporting period.
The following table shows the rates on bills of various maturities on July 14:
30
60
90
120
150
180
Acceptance Rates in the New York Market
Maturity
July 14, 1926
Offered
Bid
days
3 1/8
.:> 1/4
II
3 1/4
3 3/8
II
3 1/2
3 3/8
II
3 5/8 - 3 1/2
3 1/2 - 3 3/8
II
3 5/8
3 1/2
II
3 3/4
3 5/8
'7
.......
X-4641
FEDE~AL
RESERVE
37
BOARD
STATEMEN'T FOR THE PRESS
For Release in Morning Papers,
Wednesday, July 28, 1926.
The following is a summary of general b1siness
and financial conditions th'roughout the several
Federal reserve districts, based upon statistics
for the months of June and July, as contained in
the forthcoming issue of the Federal Reserve
Bulletin.
Industrial activity was at the same level in June as in May, and was
slightly above the level of a year ago4
The average of cominodity prices ad-
vanced further between May and June.
Produc~ion.
-
The Federal Reserve Board 1 s index of production in basic industries
remained unchanged in June.
Prod~tion
of iron and steel and activity of woolen
machinery continued to decline, and there were also reductions in the output of
copper, zinc, and yetroleum, while cotton consumption, the
products, and the·output of coal and cement increased.
manufactur~
of food
Production of automobiles
was smaller in June than in May and for the first time this year was less than
in the corresponding month of 1925.
Declines took place in June in employment
and·pay rolls of all textile industries, except woolen and worsted goods and
men's
clothi~tg,
since 1924.
and some of these industries were less active than at any time
~~ilding
contracts awarded during June ware slightly less than in
/
!.fay and for the first time since early in 1925 were smaller than in the correspending month of the preceding year.
'Crop reports issued by the Department of Agriculture indicated a
slight improvement during June.
The
co~osi te
·condition of all crops on July 1
was reported at 6.4 per cent. below the average July condition during the last
X-4641
-2-
ten years.
'.''8
dt.
The production of winter wheat was est~ted at 568,000,000, or
172,000,000 more than in 1925, and that of spring wheat at 200,000,000, or
71,000,000 less than last year.
A production of 2,661,000,000 ml~hels of corn,
or 8.3 per cent less than last year, is indicated in the same report.
Cotton
production, on the basis of July 16 condition, was estiue.ted at 15,368,000
bales, or 7+8,000 bales less tl1an the production of last year.
Total volume of wholesale and :retail trace in Ju."'ie was larger than
for the same month in 1925.
Dep9-rtment store sales decUned seasonally in June,
a.nd wholesale t:tade in all leading lines, exce:pt groceries, also decrea3ed during
the month.
Sales of mail order houses increased mor0 than usual in June, and
were 5 per cent larger than in June, 1925.
Stocks of merchandise carried by
wholesale firms at the end of June were smaller than a year earlier.
Depart-
ment stores continued to reduce their stocks, and their inventories, which had
been considerably above last year 1 s level earlier in the year, were at the end
of
~xne
only about 1 per cent larger than a year ago.
Freight car loadings
showed seasonal increases during June and continued through the first half of
July at higher levels than in previous years.
Loadings of grains in the south-
western states have been particularly large.
Prices.The general level of wholesale prices, according to the index of the
Bureau of Labor Statistics, i!X!reased from May to June by less than half of one
per cent.
Prices of livestock and meats advanced, and there were small increases
for silk, petroleum products, nonferrous metals, and c..l-J.emicals and drugs. Price·
decreases occurred in grains, cotton, textiles, building materials, and house
furnishings.
In the first two weeks of July prices of grains, flour, cotton,
'}0
t_)-.7
X-4641
-3-
\Vool, and hides ir;.creased, while bo£:e of eattle, £wgs, silk, and rubber declined.
Bank Credit. Loans and inves tr1ents of mem1)er banks in leading cities at the end of
June were in larger volw'1le than at any previous time, and after declining during
be first hal: of July wora still $900,000,000 above the level of a year ago.
Of this increase abo1."Lt $385,000,000 was in loans on securities, $340,000,000 in
COII1'Ilercial loans, and $175,000,000 in investrnents.
Since t~1e beginning of 1926
an increase in commercial loans together with the growth of i:wcstments has more
than offset the reduction in loans on securities.
The demand for credit at the end of the fiscal year and the increased
currency requirements over the holiday were reflected in a growth of member
b~>k
borrowing at the reserve b~nks ffi1d on July 7 total discounts were· near the bighest
j)OL1t of the year.
With the retur:1 flow of currency from
c~rculation
after the
holiday, discounts declineci, and o:1 July 21 vrere in about the same volu:ne as in
the last half of June.
The reserve banks 1 holdings of acce)tances and of United
States securities changed little duri!¥; the period, and tee total volume of reserve bank credit outstandi:1g
i~
tbc third week of July was close to the June
level.
Money market conditions were firmer in July a.s indicated chiefly by
i~creases
in rates on call a::1d time security loans.
on commercial paper were also slightly higher.
Rates on acceptances and
(COPY)
4.0
BANK
OF 1UCBMOND
X-4642
July 26,
1926.
Federal Reserve Board,
Washington, D. C.
Attention of Mr. Walter Wyatt, General Counsel.
My dear Mr. Wy-att:
At the recent trial of the case of Craven Chemical Company
v. Federal Reserve Bank of Richmond and Cleve & White,' the District
Court of the United- States for _the Eastern District of Uorth Carolina
instructed a verdict in favor of the Federal Reserve Bank of Richmond
and against Cleve and mli te.The facts of this case were as follows: Cleve &td White·
drew a chec~ on the :Sank of Vanceboro in favor of the Craven Chemical
Cor.rpany. The check was deposited by the Craven Chemical Company in the
Murchison National Bank of ~Yil!.-!ington under a deposit slip whieh made
that bank a forwarding ~ent. The Murchison National Bank sent the
check to the Federal Reserve Bank of Richmond for collection in accordance
with the terms of its circular.
The Federal Reserve Bank of Richmond
sent the chec.l.t to the Bank of Vanceboro on which it was drawn for
remittance. The last mentioned bank sent a draft for the amount of this
check &td other·checks sent to it at the same time, which draft was
drawn upon the National Bank o:f New Bern, a designated reserve depositary
of the Bank of Vanceboro. The draft was promptly presented, but was
dishonored, and the Bank of Vanceboro failed. The Craven Chemical
Company instituted an action against the Federal Reserve Bank of Richmond
and Cleve and White, alleging that the Federal Reserve Bank was negligent,
and also alleging in the alternative that Cleve and White had not been
released from liability upon the original check given by them.
The suit was instituted in the State Courts of North Carolina,
but removed to a Federal Court before the passage of the Act of Congress
depriving Federal Courts of jurisdiction of actions against Federal
Reserve Banks. After several continuances the case was recently tried.
The Court, as I say, instructed a verdict in favor of the Federal Reserve.
Bank of Richmond and against Cleve and White. We, of course, had pleaded
and proved the sending of our circular concerning our liability for checks
received for collection to the Murchison National Bank. We also relied
upon Chapter 20 of the Public Laws of North Carolina for 1921, commonly
called the Anti-par Clearance Act, which authorizes a State bank to pay
a check presented by a Federal Reserve Bank by means of an exchange draft.
41_
X-4642
FederrJ. Reserve :Board,
Washflcigton, D. C.
There was no formal opinion but Judge Meekins in announcing his intention
to i:.:1struct a verdict in our favor stated that the last mentioned statute
of North Carolina certainly operated to relieve a Federal Reserve Bank of
any liability u-pon the ground that it accepted an exchange draft in
settlement.
Judge l<icekins also held that under the terms of this statute
the drawer of the check was not released. Prior to the statute a
check was an unconditional order for legal tender money, and the drawer
engaged that it would be paid according to its tenor - that is to say in
legal tender money. If the holder elected not to demand lawful money, but
to accept a substituted medium of payment such as an exchange draft, tho
holder failed to fulfill the condition u-oon which he could have recourse
to the. drawer, so that the dra.wer was·released, and the check paid as
to the drawer, but under the North Carolina Statute the holder is pres~~ed
to have given a.'l order payable by money, or by an exchange draft; consequently he engages that the check will be paid according to its tenor that is to say by means of lawful money or a collectible exchange· draft,
and if a wol:thless exchange draft be gi von by the drawee bank the drawer
is still bound upon his engagement because the holder has demanded payment
of the check according to its tenor, but has not received it.
You will readily see this decision is of no a:JPOcial interest,
except in North Carolina, and L~ those States, if any, which have similar
Acts.
The points decided by the trial judge appear to me to have been
already decided by the Su:preme Court of North Carolina in Federal Land
Bank v. Earrow, 127, S. C. p. 3, and in Graham v. Proctorsville Warehouse,
127
s. c.
p, 540.
The Judge stated to me informally that had the North Carolina
statute not been in force, he would have still been inclined to give judgment in favor of the Federal Reserve :Bank upon the authority of Fergus
County v. Federal Reserve Bank of Minneapolis, 244 Pac. 883; but as you can
see from the above discussion it was unnecessary for him to consider the
application of the uniform check collection circular in view of the fact
that he held that the Uo:rtl1 Carolina Statute was of itself a sufficient
defense to any action a~inst the Federal Reserve Bank.
In the course of the trial, an interesting question was rais~d
as to whether or not knowledge by the Federal Reserve Eank of the weakened
condition of the Bank of Vanceboro was material. We contended that as long
as the bank was open for business, we could not refuse an exchange draft,
and that, therefore, our lmowledge or ignoran.ce of its condition was immaterial. The Judge ~t first admitted evidence showing that the Bank of
Vanceboro had been for sometime in a weakened condition, but later struck
out this testimony upon the ground that the plaintiffs had failed to show
that we had any lmowledge of this condition, or could ~ave obtained such
42
X-4642
-3Federal Reserve Board,
Washington, D.C.
knowledge by the exercise of ordinary diUgence.
The 0:9posing ColL"lsel have informally notified me that they
appeal from the decision of the trial court, but no formal steps
have as yet been taken.
wo,~ld
With best personal regards, I remain
Very truly yours,
(Signed)
M. G. Wallace,
Counsel.
MGW: IB
,·
X-4644
4.~~
DISTRICT COURT
STATE GF MINNESOTA
:roURTH J."JDICW DIS'l!RICT
COUNTY 0 F DUTEPIN
Transcontinental Oil Company,
Plaintiff,
FINDINGS OF FACT
AND OONCWSIONS OF LAW.
'"'VS-
Federal Reserve lank of
Minneapolis,
Defendant.
This cause having been tried by the Court without a. jury on the
2nd, 3rd, and 4th days of
Feb~ary,
1926, Messrs. Rockwood
& MitChell ap-
peari:ng for the plaintiff, and Messrs. Ueland & Ueland for the defendant,
and. the Court having heard and considered the evidence adduced on the part
of plaintiff and on the part of defendant, f:i!nds as 'FACTS:
1.
That on Augu.tt2, 1920 the First National Bank of Eureka. issued to
the plaintiff its cashier's cheCk {Exhibit A to the compl.int) numbered
14896 in the sum of $1799.35, and transmitted said Che.ck on or about that day
by mail to the office of the plaintiff in Chicago, Illinois where the cheCk
was received by plaintiff on or about August 5, 1920.
2.
That em August 2, 1920 the First National Bank of Eureka issued to
the plaintiff its cashier's cheCk (Exhibit B to the complaint) numbered
14904 in the sum of $871.00, and transmitted said check on or about that day
by mail to the office o! the plaintiff in Chicago, Illinois where the cheCk
was received by plaintiff on or about lugust 5, 1920.
3.
That both of said mshier's checks were endorsed by plaintiff by
-2unrestricted e:1dorsements to the First National
X-4644
:Sa;.1)~
of Chicago and were
44
deposited by ~olaintiff in that bank on August 5, 1920, and the amount of
said checks was credited to plaintiff's checkb.g account in that bank.
Plaintiff's pass book il1 whic..'l the deposit of the chec'ks was entered contained the following provision:
"This bank in receiving checks or drafts on
deposit for collection acts only as your
agent, and beyond_ carefulness in selecting
agents at other points, and in forwarding to
them, assumes no responsibility. 11
4.
Thn t said First National Bank of Eureka was a member bank of de-
fendan t and said First lia ti ona.l Bank of Chicago was a. member bank of the
Federal Reserve Bank of Chicago.
5.
That during all of August, 1920, and prior thereto, defendant and
the Federal Reserve Bank of Chicago were exercising the fUnctions of a
clearing house for checks on behalf of their respective member bonkS pursuant
to the provisions of the Federal Reserve Act, and pursuant to on order of the
Federal Reserve Boord mde in accordance with such Act, which order of the
Federal Reserve Board was knoWn as
11 Regulation
J, Series of 1917 11 ; that in
the exercise of the functions of a clearing house for checks for defendant 1 s
member ba:iks, an
arr~~gement
had been entered into between
defend~~t,
the
Federal Reserve Bank of Chicago and the First National B~~k of.Chicago whereby the First National Bank of Chicago, instead of depositing checks drawn on
or payable bt member banks of defendant in the Federal Reserve Bank of Chicago,
was parmi tted to route such checks direct to the defendant, which privilege
was kl1ow:1 as the privilege of
11
direct routing"; that such arrangemel1t for
"direct routing" was ent erecl L:.,to merely for the pu:i.·pose of saving time in
-3-
X-4644
the collection of checks, the proceeds of checks so routed direct being
~15
credited by defendant to the Federal Reserve Bank of Chicago, and it was
understood and agreed between all three banks that their rights and liabilities should in all respects be the same as if cheeks so routed direct
:had been first doposi ted by the First National Bank of Chicago with the
Federal Reserve Bank of Chicago and by the Federal Reserve Bank of Chicago
deposited for colla ction with tho defendant.
6.
That said cashier's checlts for $1799.35 and $871.00 were, pursuant
to such arrangement for direct routing, forwarded by the First National
Bank of Chicago to defendant, and were received by defendant on August 6,
1920 and Augu.s t 7, 1920 respectively.
7.
That defendant on the days on which it received said ·checks for-
warded the same.for collection to the First National Bank of Eureka, together with other similar items drawn on or payable by said First National
Bank, ·the aggregate of all such i terns forwarded by defendant to the First
National Bank of Eureka on August 6 and 7, 1920 being $8277.30.
a.
That the defendant authorized the "Firs"t National Bank of Eureka
to rami t for said i tams by its draft on a Minneapolis or St. Paul bank but
did not authorize .said First National Batik to remit such a draft drawn
against insufficient f'Uilds.
9.
That said cashier's checks were received by said First National
Bank of Eu.rektl. either on .A:u€;ust 7, 1920, AugtLst 9, 1920, or August 10, 1920;
that on A1J€U.St 10, 1920 the First National Bank of Eu.reka attempted to remit
to defendont for said cashier's checks and for the other items forwarded
by defendant at the SDme timo by drawing its draft in the sum of $8277.30
upon the First & Secu.ri ty National :Baflk of Minnoap olis, Minnesota; that
X-4644
-4-
sD.id First National Bank of 3w.·elm. mo.iled sa.id draft to defendant which
4.6
received the same at Min..-·1ecr1olis, Minnesota either after ba..Ylking hours on
August 11, 1920 or early
011
.A:ug"U.St 12, 1920, and :9resented the some for
payment on August 12, 1920, and thnt payment of said dra.ft vms refused by
&Security
said First
National Batik which then had no funds to the credit
of the drawer bank and said draft has never been paid.
10.
That prior to
"Regulation
A~t
J, Series of
1920, the Federal Reserve Board promulgated
191711 with respect to the check clearing operations
of defendant and other Federal reserve banks; that said Regulation J provided in part a.s follo\vs:
"In handling items for member * * * banks, a
Federal Reserve !ank will act as agent only. The
Boo.rd will require tha. t each l:nember * * * bank authorize its Federal Reserve Ba~ to send checks for
collection to "Qo.nkS 011. which checks are drawn, and,
except for negligence, such Federal Reserve Ba..'Jk
will assume no liability. Any further requirements
that the Board ~ deem necessary rrill be set forth
by the Federal Reserve Banks in their le.tters of
instructions to their member * • Ill banks. Each
Federal Reserve Bank Will also promuigate rules and
regulations governing the details df its operations
as a clearing house, such rules and regulations to be
binding on all member * * * banks uhich are clearing
through the Federal Reserve Bank. 11
11.
That pursuant to al1d in accordance with said Regulation of the
Federal Reserve Board defendant did promulgate rules and regulations
governing the details of its operations as a clearing house under the Feder~l Reserve Act, in the form ~f its CheCk Clearing and Collection Circular,
No. 193 which circular was in force during all of August 1920
am
had boen
prior thereto mailed to and received by the Federal ·Reserve Ba.l"1k of Chicago
and the First National Bank of Chicago; that said Cirou.lar provided ill part
as follows:
X-4644
-5..
Checks received by the Federal Reserve :Bank
on its member banks uill be forunrded direct to
such member bnnks o.nd are to "be remit ted for by the
member banks on dny of receipt if possible, by their
draft on the Federal Reserve :Bm1k provided they have
n balance in excess of their required reserve, or by
their draft on a bonk in Minneapolis or St. Paul.
Member banks are reqQired by the Federal Reserve :Bo~rd
to proYide funds to cover at par all checks received
from, or for account of, their Federal aeserve Bank.
In handling items for member bonks, the Federal
Reserve Bank of Minneapolis acts as agent only. It is
understood that each memeer bank authorizes i t to send
cheCks for collection direct to batiks on ~hich cheCks
are drawn, and except for negligence the Federal Reserve
Bank of Minneopolis assumes no liability until ftu1ds
are actually in its hands, and is authorized to charge
back any item for which it has not received final payment, including items lost in transit."
11
dra~
12.
That during all of August 1920 and prior thereto it \las the es-
tablished, general, uniform and certain usage and custom omong banking institutions in Minnesota and South Dakota, uhere checks deposited for collection drm7:.1 on banks located at a distance had been forVTarded direct to
the drawee or payer bank for collection, for the drawee or payor bank to
remit the proceeds of the collection in exchange drafts drawn on banks in
the vicinity of the forwarding bank, and it
~as
the established, general,
uniform and certain usage ond custom among baPlting institutions in sa.id
states for the forwarding bank to permit such remittance by draft and upon
receipt of the exchange drafts to endeavor to collect the same; that plaintiff
had no actual knowledge of this custom.·
13.
That d1ll ing all of .August, 1920 it was understood and agreed be;,
4
tween defendant and the Federal Reserve Batik of Chicago that defendant should
forward all che.cks drawn on or payable by member banks of defendant which
were received by defendant from the Federal Reserve Bank of Chicag.o or for
its account direct to the drawee or :pa.YQr bank, and that such checks should
X-4644
-6-
be remitted for by the drawee or payor bank by its draft on a bank in
4.H
Minneapolis or St. Paul.
14.
That during all of August 1920 it was ti.1e duly eno.cted statute law
of the State of South Dakota thD.t -
"Any bDllk banker or trust company 1 hereinafter culled
bank, organized under the laws of 1 or doing business
in, this State, receiving for collection or deposit,
any check, note or other negotiable instrument drawn
U')On or payable at any other ba.n..U;:, located in another
city or town whether within or uithout this State, ~y
forward such instrument for collection directly to the
bank on 11hich it is drawn or at \Vhich it is made payable and such method of for\1arding direct to the peyer,
shall bo deemed due diligence Dnd tho failure of such
payer bank, because of its insolvency or other default,
to account for the proceeds thereof, shall not render
tho forwarding ba.nk liable therefor, provided, ho\7evor,
such forwarding bank shall have used due diligence in
other respects in connection with the collection of such
ins tru.men t. II
15.
That on august 11, 1920 the First National Bank of Eureka suspended
payment and a receiver was subseq1ently appointed for said bank by the Comptroller of the CUrrency.
16.
That on August ? , 1920 o..."ld thereafter to the time of the suspension
of the First National Bank of Eureka there was sufficient money on hand in
said brut..";: so tha.t the two ca.shier 1s check:s, if the same had been presented
separately over the counter of said bank and payment thereof in money demn.nded,
would have been paid in cash, but there \"'las not sufficient money in said bank
to pay all of the $82??.30 in items held by defondnnt, and if all of said
items had been presented by defendant over the
cou_~ter
of said First National
Bank of Eurelro and payment thereof in money demanded, none of such i toms, including the two cashier's cheCks, would have boon paid.
1?.
That plaintiff has been paid on account of the
t~o
co.shier 1 s checks
X-4644
-7-
Ll9
the following sums - $1231.03 on January 5, 1922, &~d $411.00 on December 9,
1925.
18.
That the only terms and conditions assented to by defendant
~ith
reference to the collection of the two cashier's cheCks were the terms and
conditions agreed upon by and between defendant and the Federal Reserve Bank
of Chicago as hereinbefore found$
19.
That there was no negligence on the part of defendant in forwarding
the cashier 1 s checks direct to
~1e
First National Bank of Eureka for col-
lection~
20.
That there was no negligence on the part of the defendant in au-
thorizing the First !rational Bank of.Eureka. to remit for said checks
by its
draft on a bank in Minneapolis or St. Paul and that no loss resulted to
plaintiff as a result of
~ch
authorization.
As CONCLUSIONS OF LAW the Court finds:
That defendant is entitled
to judgment of dismissal against the plaintiff and for its costs and disbursements to be taxed by the Clerk.
Let judgment be entered accordingly.
Dated July 27, 1926.
BY TEE OOURT:
(signed) Horace D. Dickinson
Judge.
Let all proceedings in the above action be stayed for forty
days from the date of the above order.
(signed)
H.D.D.
Judge.
50
FEDERAL RESERVE BOARD
x~4646
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 11, 1926.
SUBJECT:
Revised Principles Governing Resenrch,
Statistical nnd Publication Activities.
Dear Sir:
It has recently come to the attention of the
Federal Reserve Board that one or two of the Federal re-·
serve banks have prepared for general distribution printed
pamphlets descriptive of the operations of the Federal Reserve System and other educational material without previously submitting the text to the Board for approval.
The Board believes that all publications of the
Federal reserve banks dealing with matters of more than
local interest and all educational material should be
submitted to it prior to publication and should receive
its approval before being issued to the public.
~
The Board's statement of the principles governing research, statistical and publication activities of
the Federal reserve banks and the Federal Reserve Board,
which was transmitted to you with the Board's letter of
December 3, 1924, X-4200, has been revised accordingly.
Copy of the revised statement is enclosed herewith.
By direction of the Federal Reserve Board.
Very truly yours,
Walter L. Eddy,
Secretary •
. TO ALL FEDERAL RESERVE AGENTS.
Enclosure:
X-4646-o.
5:1
PBIXCIPLES GOV:sBJ.,.IlJG R!SE.A3.CH, STATISTICAL AND PUBLICATION
ACTIVITIES OF THE FEDE..'IUL RESERVE B.A.N!CS .A!m THE FEDERAL
R:SSERVE BOARD.
Scope ro1d Puroo se.
The purpose of the work of the research o.nd statistical divisions of
the Federal reserve bnnks and the Board is to collect ru1.d dj.gest information be,~ing on tho problems with which the Foderal reserve system is confronted, either as a matter of current operation or as the basis of Federal
reserve policies.
All such work shall be under the general suporvlslon of the Federal Reserve Board acting through its Division of Research and Statistics.
While research studies and scientific investigations may be undertaken
on the initiative of the Federal reserve banks or of the Federal Reserve Board,
the Federal reserve banks, before e:<pcnse is incurred for their prosecution,
shall secure the rr9proval of tho Federal aosorvo Board. It is not intended,
however, that ap~roval be awaited before studies of small scope are undertaken
which involve no considerable BX?ense. In conductbg research studies, the
Director of the Board's Division cf Rosoarch and Statistics mey make assignments to one or more of the Fode~al reserve banks of such partions as may
seem desirable.
Publications.
All publications of the Federal reserve banks dealing with matters of more
than local interest nnd all educational mato::-ia.l shall be submitted to the Federal Reserve Board prior to publication and shall be issued only with the approval of the Board. The monthly reviews, published by the Federal reserve
agents, shall be under the general editorial aupervlSlon of the Director of Research and Statistics of the Federal Reserve Board.
The monthly reviews of the Federal reserve banks shall not exceed eight
pages. Free distribution of these reviews shnll bo confined to member bn.nks, to
other Federal reserve banks, to the Federal Reserve Board, and to firms reporting statistical information, nonmemoer par list banks, and to such others as may
·oe determined through the Board's Division of Reseax·ch and Statistics in contact
with a comnittee of the agents. For copies delivered in'bulk for distribution,
the Federal reserve banks shall make a charge s·ufficient to cover costs.
..
52
TRE.A.SURY D:E.P.tl..RT1\!El~'l'
Office of the Secretary
WASHINGTON
~-4647
August 6, 1926.
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, 1926,
to July 31, 1926, amounting to $105,957, as follows:
Federal Reserve Notes, Series 1914
Boston
New York
Cleveland
Atlanta
Chicago
Kansas City
San Francisco
$10
200,000
725,000
100,000
200,000
500,000
100,000
100,000
1,925,000
150,000
200,000
50,000
100,000
100,000
100,000
50,000
50,000
10,000
10,000
_]00,000
700,000
50,000
250,000
10,000
10,000
$20
2,895,000 sheets @ $36.60 per M
The
Total
$100
$5
$50
--·--··-350,000
1,025,000
200,000
370,000
600,000
100,000
_!50,000
2,895,000
........... $105,957.00
charges against the several Federal Reserve Banks are as follows:
Boston ............... .
New York •....•.•.....
Cleveland ••••.•••••..
Atlanta .••.•.•.•.....
Chict:. go •••....•......
Rar.sas City •.•••••..•
San Francisco ••••••••
$
12,810.00
37,515.00
7,320.00
13,542.00
21,960.00
3,660.00
9,150.00
105,957.00
The Bureau a.ppro:;_F iations wi 11 be reimb.:trsed in the ~fobove amount from the
indefinite aprr opriat ion "Preparation and Issue of Federal Reserve Notes, Reimbursablea, and it is requested that your board cause such indefinite appropriation to be reimbursed in like amount.
Res)ectfully,
·
S. R. Jacobs,
Acting Commissioner.
..
X-4647r:..
53
TR:::u'...SURY DEP...~RT13NT
OFPICE OF irHl!: SEC?.ET~\RY
W.":Jil INGTON
August 6, 1926.
The Governor,
Federal Reserve Board.
Sir
•
You are hereby advised that the Department has referred to the
Disbursing Clerk, Treasury Department, f'or payment• the account of the
Bureau of Engraving and Printing for preparing Federal reserve notes,
Series 1918, during the period July 1, 1926, to July 31, 1926, for the
Federal Reserve Bank of Atlanta, as follows:
1,000 sheets, $1,000,
@ $36.60 perM ••••••• $36.60
The Bureau appropriations will be reimbursed in the above
amount from the indefinite a.ppr opr iat ion ''Preparation and Issue of
Federal Reserve Notes, Reimbursable", and it is requ.ested that your
board. cau.se such indefinite appropriation to be reimbursed in like o.mount.
Respectfully,
s.
R. Jacobs,
Acting Commissioner.
X-4648
54
...,or''od~y·,.,.
(su·J:-1
·'·~·b
>,)
-:-..,.,..,,1,.,-~.io·· .,., of 19....,3)
.a.\.I...•:.:~I...L
.!!
... ..~
(.V\,.1
....
Sucticn I. Statutory Provisions
The !'cdor::tl r;sorvc
1918, :p:c·oviden LJ. purt:
Se~.
e!:mo·:;orcd:
ll.
n.ct n.n nru0:1dcd by tho act of Snytcmbcr 26,
The Fed.err.l Reserve Bon.rd. shn.ll bo authorized nnd
~ (k) To gr:;.nt by specin.l u0rmi t to ~lr"~.t io-:.:-11 bmC:{S appl;:,ril1[.:
thcrei'or, r1hen not i:1 c:n1travention of ::Jtate or local law, tile
rit;ht to act an trustee, executor, adrr.inistratcr, ret;istrar of:
stocks and bond::, cuardic.n nf estatef\, a£sib·nec, r~ccivor, committee of estates of lunatics, or in any other fiti.u0iary capaci+.y 5.n which State banks, tru~;t com~anies, or other corporations
\7h:.ch cor:1e int~ compot5.tio::J. with national oanl;:s are pcrmi tt0d to
act u:::der the lmvs of t:1c State in which the national bn.nk is
l0cated.
Wb.enever the laws of' s1:.ch State authorize or :permit the exercise of any or n:a of the foregoing powe:-s by Stute b.:Lnl::s,
trust conpanies, or other corporatio:as -.:hi~h cor~pcte y;i tl". nntionn.l bG.nks, · t.hc f:.Tn.ntinc tc n..."ld the exorc~.sc of such powers by
nationul banks shall not bo clecr.'!ed to be in co::-.~.tro..ve:1tion of
State or local lau within the meaning of this act.
National bo..."ll-::s exorcis:.1J.r; any or all of the pc:\7ers cnuneratod in this subsection shall sog~ogatc all assets hold in any
fiduciary ca.paci ty frorr the [;Cl1oral assets of t.ho bo...'1k a.r.d shall
keep a so!)arato sot of books and records shcvii::r:: in ::;Jro:por dctaiJ
all transnctions engac:cd in. u:-idcr n.uthor:l. ty of this subsoctio:1.
Such books and records shall be open -to inspection by tl1o Stntc
authorities to tho sn:.1o cxto::1t as the books a:1d rucords of cor:porativns org.:t':lized u:nder State lav.;.'\7hich exercise fiducio.ry
poy;crs, but nothin{; in tl1is uct shD.ll be co:·:strucri as authorizing tl1o State nuthoritios to oxcmi':lC the books, records, end.
assets of the natioLal bn::.Jr.: \>hich arc not held in trJ.st unior
c.uthority of this subsection.
No national bank shnll rc~civo in its t!"Ust d0:Partoont doposits of curro~1t funds subject to check or tho deposit of c!10ck:s,
drafts, bills of exchLmgo, or other ite~s for collection or oxclli~nge purposes.
Funds deposited or held i~ trust by tho bo.DR
o:rmiting invcstnent shall be carrioci. in a separate account and
shall :10t be used by the barJ:.: in the conduct of its business
unles~ it shall first set aside in tho trust dopartoent United
Stutes bonds or other securities a!)provod by the Federal Reserve
:Soard.
55
X-46~C
- 2-
In tho evc:1t of tho fniluro of such l;anl: tho owners of tho
funds hclcl in t!'l..:st for bvoctmont shnll Lnvo n. lien on tho bo:1cls
or other soc,rri tics s0 sot apart i::1. a(ldi tior.L to tl1oir blain
ar;ninst tho ()St·'ltc of the btl.;:J.r..
'TI1cnovcr tho laws cf a Stat~ require corporations actinG in
u fiduciary ct:r1)acit;y, to deposit securities \':itl: the Stllto o.uthoritio~ for t':lo prctocticn ('f prhrate or court trustc, :mtional bnnl::s
so actir:c shall be required to naJ...::o ~ioilar deposits and securities
11lo clogositcd shall be hold. for the protecti:m of priw1to or court
tructs, as nrovidc:l by thu State law.
1Tutic:nal bo.nks L1 such cr. . soE" s:ta.ll not ":)o rcq1::.irod to cxoc"t.:.te
tho brJnd usually required of i:vlividuaJ.s if Sta:c corporations
under si::J.ib.r circurstcncos fll'e CX8r.1pt frc,n tbic roquirer.1m'l'~.
Nntior..al bm-.Jcs shc.ll hn::e ?Oucr to execute s~1cr. bond w'llen so
requ.ircd ":ly the lar.& of t:w State.
lil any case i:1 \"i~ic::1 tho lav.s of [1.. State require that a corporu.tiori o.ct::.nc o.s tr~r,t;.}A, ex3c1.:.tor, ad.':l:.nictrc.tor, or in arry ca:1acity
specified in thir scct~o:l., shc...ll truce u.n oath or r:1nke an affidavit,
tho president, vice prcsi~ont, cashier, 0r trust officer of such
naticnal banlc nA.y tukc t~w noce::>sa::.·y oath O:::' execute the necessary
r.ffida~Ji t ..
It sball be u:1la•.1ful for an:' nati:-·nal bankinG association to
lend any officer, director, or employee any funds held in trust
ur.der the powers conferred by this sectioL. Any officer, director,
or employee making :mch loan, or to whom such lo~m is mad.e,may be
fined not more than $5,000, or impris:med not :nore than fi vc yce..rs,
or may be both fined a.nd ill"prlsoneJ, in tho discretion of tho cour-t.
In pa.ssing upon applications for pormisnion to exercise the
powers enumerated in this ~.mb£:.ection, tho :F'ed.oral RosGrvo Board may
truce into coneidcration the ruuount of ca:!;)ital and surplu::; of the
applying bank, whether or not s11ch 'ca:pi tal and surp}.us is sufficient
under the circ~~st~ncos of the case, the needs of the community to
'be served, any,. 3.nd other fncts and circumstances that coco to it
proper, and ~ay gr3.nt or refuse the ap:plication ac~ordingly:
Provided, That no pei~it shall be issued to uny no.tio~l bonking
acsociation h::wing a capital cm(l surplus less thlm tho curi tal and
St.:.:r3)lus required by State law of State 'ta.nks, tre.st co!!';panics, and
ccr,orations exorcising such powers.
SECTION II.
AI'PLICATIO!~
A national bar~ desiring t:1 exer~ise any or all of the })Owers authorized by section 11 (k) of the Federal reserve net, ac a.-:1ended py the
act of Se"!_?tember 26, 1918, shall o!:>.ke ap"")lica.tL.n to the Federul Reserve
Board, 0::1 a form approved by so.id board, for a s·pecial pernit authorizing
·-·56
- 3 -
X-4648
it to exercise such powers.
In the case of an original np:plication ":"' that in, where the ap9lying barik has never been granted tho right to exercise any of the powers authorized by section 11 (k) - - tho application
should be ~ade on ?. R. ]. Form 61.
In the cane of n supplemental application - - thnt is, whore the a-pplying bank has already been granted
the right to exercise one of more of the po-;vors authOrized by sectio:-1 11 (k)
- - the a~:rolication shoulC:. 'be md.e on F. R. B. Form 61-b.
Both foras are
made a part· of this regulation and ~ay be obtained froo the Federal Reserve
Board or any Federal reserve 'banl:.
SECTIO~T
III. SEP.l.:RATE DEPARTMENTS
Every rJ.ational bankti?ermi tted to act under this section shall establish a separ~te tr~st department, and shall place such department under
the management of an officer or officers, whose duties sball be prescribed.
by the board of directors of the batik.
SECT IOU I'V. CUSTODY 01 TRUST SECURITIES .llT]) INVES'Jl!ENTS
The securities and invcstr.lents held in each trust shall be kept
separate and distinct from tho securities owned by tho bank n.nd separate and
distinct gn.e from another. Trust secu1·ities and inve,p,:tments shall be placed
in tl:e joint custoct" of two or more officers or other ··employees designated
by the board of directors of the bank and all suCh officers and employees
shall be bonded.
SECTION V. DEPOSIT OF FUN]S AWAITING INVESTMENT OR DISTRIBUTION
Funds receivsd or held in the trust department of a national batik
awaiting investment or distributicn may be deposited in the comnercial department of the barik to the credit of the trust department, provided that
the bank first delivers to the trust department, as collateral security,
United States bonds, or other readily ~~rketablc seeurities owned by the
bank, which collateral security shall at all times be at least equal in
mo.rket value to the amount of the funds so deposited. *
SECTION VI. INVESTMElT OF TRUST FUNDS
(a) Private trusts. - - Funds held in. trust mu.st be invested in
strict accordance with the ter.ms of the will, deed, or other instrunent
creating the trust.
Where the instrument creating the trust contains provisions authorizing the bank, its officers, or its directors to exercise
their discretion in the matter of investments, funds held in trust nay be
invested only in those classes of securities which are ~pproved by the directors of the bank. Wnere tho instruoent creating the trust docs not
specify the character or class of investoents to be made and does not expressly vest in tho barik; its officers, or its directors a discretion in
the oattor of investoents, funds hold in trust shall be invested in any
X-4648
- 4-
. sec~rities in which co~;orate or individ~l fid~cinri0s in the State
in whic!1 the bf1nk i-3 l:>catcd r;1ay lanfully inves-t.
(b) 9o-~r:.L:tL::..sJcl, - - Ex~er;t as l:crdnafter provided, a
national bu.nk a.cdng a<> c.&E;cJ.tor, adu.inistratcr, or in any other fiduciary capac: ty, urder arT)o:ntnent by a cO'J.rt of competent jo.u·isd.iction. shall make all im·es:;ments und.er an order of that :.::ourt, and
co-yles of [!,11 sur!h 0rdcn·s sba:l ·be :L'ilod and 11r0served with tho roccrdc
of the tru~ t · :lepart::wt:t of t':le bank,
If the court by gercert>.l order
vcstc. a diucr.;tion in the national ba:nk to invest funds hold in tn,_st,
or if under the laws of t£w State in w:hic11 tho bank is l0ca ted cor-por-a to fiduciarior. appointed ;W tho court arc; parmi ttJd to exercise suc"i
discrctton, the nr.tion11l b<J.nk so apiiointccl may invJst su~h fund.s in .:my
secUJ'iUos in which corporate or individ:u.u1 fiducinrios in the State
in w?r.ich t::-.c banl:: is bcatcd me.y b.wfully invest.
SECTIO:iJ VIT.
:BOOKS Ju'1D ACCOT.m'IS
All books &.n1 rocords of 'cnc trJ.st department shall be ke:rt
separate a:::o. d.istin~t fro:n othe!' bool':s and reco:cc.s of the bank. All
acco1:.nts opened sha:l be ::w kept as to cnacle the national bank at
rmy t~me to furnish j_nform.?:. tior.. or report~ req_uhed by the Federal or
State aut~orities, and such books and !'ecords s~all be open to the
inspection of such authcrities.
SEO:J.'ION VIII.
EXAMI1~A:J:I011S
Examiners appointed by the Comptroller of the Currency or -.
designated. by the FeC!.er.;~l Reserve Eoar·i will be instructed to make
thorough and complete ::tud.its of the cash, securiti.:;s, accou;.1ts, and
investments of the trust dop.artmcn.t cf tho bank at tho same time that
examination. is m:J.de of tho banking department.
SECTIOl~
IX.
C01\l"FORMITY WITH STATE LAWS
Nothin,~ in t"l1ese regulations shall be construed to give a
national bank exorcisi::1g tho powers permitted under the provisions of
section ll(k) of tho Fodcral reserve act, as runended, any rightn::pr
privileges in contravention of tho laws of tho State in which the bnr-2::
is located within the meaning of that act.
SECTION X.
REVOCATION OF PEEHTS
The Feder'"ll Reserve :Eoard reserves the ri{;ht to revoke penni ts
granted under the provisions of section ll(l~), as aruendcd, in any
case where in the opinicn of the board a batik has willfully violated
the pr6visions of the Fcder.al recerve act or of these regulations or
the laws of any State relating to t11e operations of such bai~~ whon
acting in any of tho capacities permitted under the provisions of
section ll(k), as arnonded..
X-464J58
- 5-
SECTIOU XI.
CHAJJG'ES
nr
RGGTJIJ.TICN'3
Those regule.tions arc subject to change by t'hc Federal Rosorvc
Boord; p?:'oviclocl, howovc:r, tl<:tt no s0.ch char,l7,C sh:.t.ll proju,i.ico any obligaticn c:.ndc!rtcko:1 i:J. gr:10::1 fo.i th u.n~ler regulations ir effect at tho tine tho
obligutiun ".:c.s assur.wr.•
*
T'lc act roqu1r..::e. that t:1o bo.r..:k sl1all set aside in tho trust G.c:partnent
States bones or ot?1nr secnrities approved D::r the Federal Ro~:JOrvc
11
Eoard..
This rrovis:!.on of the regulations is inte'1de•1 E!.s a gc 11eral a::;_Yprov"J.l
b~r thr. FoC.oro.l He serve Board of all sec:.tri tics whic'1 cx.1ply ~-;i tl:l tl1c rcquironents thcre"Jf n.nd spocific a:p-prov£,1 'uy the Federal Reserve :Board is unnccossm·y as to suc:1 socu:l.'i tics. The J3oard. wUl not a~:provc any socu:ri tics v/hich
do not cor.'pl:r id.tl.1. t:-;.oso rel"]t..irG;:ler.ts.
11 'Unitoc~
X-4649
c
59
0
p
y
IN THE DISTRICT COtJRT OF THE SEVENTH JUDICIA!. DISTRICT
OF THE SUTE OF IDAHO, IN AND FOR THE
COU1r.rY OF WASHINGTON.
B. W. Grover,
Plaintiff,
vs
The Federal Reserve Bank,
of San Francisco, California,
a corporation.
Defendant.
)
)
)
)
)
)
)
)
Civil No. 2657
DECISION.
~!IDMORJu~UM
This action is brou~~t to recover from th~ defendant the amounts
of certain checks drawn upon the Fruitland State :Sank and delivered
to defendant by original ban...l.ts of deposit for collection. It is
admitted trui.t defendant received the checks llfor collection11 from
its correspondents, The Weiser l~ational :Sank, The First National :Sank
of Ontario, Oregon, The Pacific National Bank of :Boise, Idaho, and
the Boise City National Bank of Boise, Idaho. upon receipt of the
several checks defendant promptly sent them direct to the Fruitland
State Bank which stamped them "Paidll and returned the cancelled checks
td the several makers thereof, and remitted to defendant by draft upon
the Payette National or other Idaho :Sanks. Defendant without delay
forwarded t4e several drafts issued by the Fruitland State :Sank, received by it prior to November 16, 1922, to the drawees thereof for
payment, but before they could be presented the drafts were dishonored
by reason of the failure of the Fruitland State :Sank to open its doors
on November 16, 1922. The complaint contains six causes of action,
the first being founded upon a check for $533.00 drawn by Geo. P. Davis
on the Fruitland State :Sank in favor of plaintiff. Plaintiff received the check on November 7, 1922, at Fruitland, Idaho, and mailed
it the same evening, endorsed by him in blank, to the Weiser National
Bank, at Weiser, where he had an account. The latter bank gave
plaintiff credit for the Dl!lount u subject to final payment" and forwarded it to the defendant bank for collection. This check was received by defendant at Salt Lake on November 11, 1922, and forwarded
to the Fruitland State Bank on that date.
The second cause of action is based upon a check for $1,000.00
drawn by the Fruitland Fruitgrowers 1 Exchange in favor of A. G. Street,
dated November 3, 1922. ~e payee deposited this check about November 4, 1922, in the Western National :Sank at Caldwell, Idaho, and
on that day said bank endorsed the check and forwarded it to The Boise
City National :Sank, in due course of business for collection, and the
check was thereupon forwarded in due course of business to tho defendant
at Salt Lake City for collection. Defendant on the day of its reception
- 2 -
X-4649
HO
for~arded the check to tho Fruitland State Bank at Fruitlond for
payment with instructions to pay said check upon prosont~tion and
if not paid to protest the somo for non-p~aent. Tho check arrived at the Fruitl~~d Bank on November 10, 1922, and at that time
the drawer did not ha~c sufficient funds to its credit with said
bank to pay said checlt. The check was held until No'lfambor 13,
1922, when the Fruitland Fruitgro~ers Exchange had sufficient
funds on deposit to pay the check when it was marked llpaid11 ood
charged to the drawer• s o.coount. A draft for the runount thereof
payable to defendant~ dated November' 10, 1922, drawn on The First
National Bank of Payette, was mailed to defendant. Said draft
was dated November 10, 1922, but was not received. by defendant
until November 15, 1922, when it was promptly ~iled to the drawee
bank for payment. Befo.re it was received at Payette, the Fruitland State Barik had closed its doors and the draft. Was thereby dishonored. The Fruitland State Bank did not protest the check for
non-palr.mont after its receipt on November 10, 1922, nor notify defondarit of the failure of the payor to pay it.
The third cause of action is basad upon thirty six checks
drawn by divers persons upon the Fruitland State Bank, payable to
Tho Golden Rule Store, aggregating $287.45 in. amount •. All of said
checks wete deposited by the C. c.. Anderson Company doing business
as tho Golden Rule Store, with the First National Bank at .Ontario,
Oregon, and wore by it sent to the Boise City National Bank at Boise,
and were by that b®k endorsed and duly forwarded to tho defendant at
Salt Lake City, Utah, for collection~ They were promptly sent by
defendant direct to 2ho Fruitland State Bank for p~ent and were ~ked
"paid11 , charged to tile res1jective accounts of the makers thereof and
returned to them. Drafts for the amounts covered by said checks,
dated November 13 and 14, 1922, respectively, were forwarded to de.fendant ood reached it on the 16 and 17 of November, 1922, respectively,
after tho failure of The Fruitland State Bank, and were promptly on
said dates forwarded by defendant for protest. They were dishonored
by reason of the Fruitland State Bank failing to open its doors on November 16, 1922, and wero therefore not paid.
The fourth cause. of action is based upon four several checks, thrG('
of which are payable to the Ontario Furniture Company and one payable to
Mrs. H. E. Duell and endorsed by her to the Ontario Furniture Company,
signed by divers persons and aggregating $70.20 in amount. All of said
checks were deposited by H. L. Peterson, doing business under the trade
name o:f the Ontario Furniture Company, with the First National Bank of
Ontario, and by it endorsed and sent to the defendant for collection.
All of said checks were mailed direct to .the Fruitland State Ban:k for
payment, which charged the amoun 1B of the several checks to the accounts of the respective drawers thereof t marked the checks 11 paid11 ~d
returned them to the several drawers. Drafts covering the amounts of
these checks, were sent to the defendant, dated November 10, 13 and 14,
1922, respectively, and were received by the defendant bank by mail on
- 3-
X-4649
~b:1
November 15, 16 and 17, 1922, respectively and those received on the
the 15th and 16th were forwarded for collection on the same day
they were received; that received on the 17th was forwarded for
protest on the day received. All were dishonored by reason of
the failure of tho Fruitland State Bank to open its doors on
November 16, 1922.
The fifth cause of action is based upon two checks drawn
on the Fruitland State Bank, aggregating $498.39, one for $100.00 ·
drawn by E. A. Stenger in favor of the Davidson Grocery Company,
and a check for $398.39 drawn by the Mohler Mercantile Company in
favor of the Davidson Grocery Company• Said checks were dated
on or about the 4th and 8th of November, 1922, respectively.
Each of said checks we.(; deposited with the Pacific National :Bank
at :Boise, Idaho, by the said payee therein named, and were in turn
endorsed and forwarded by said The Pacific National :Bank to the
defendant for collection, who in turn mailed .them to the Fruitland
State Bank for p~ent. The payee btmk marked each of said checks
paid, charged the accounts of the makers thereof with the several
amounts, and returned tho cancelled checks to the drawers. Said
bank mailed to defendant its draft dated November 10, 1922, for
$10Q.OO, the proceeds of tno first check, which said draft was received bY defendant on November 15, 1922, and on the same date
mailed for collection. The draft covering the item of $398.39,
was dated November 14. 1922, mailed by the Fr~itland State Bank to
defendant, was received by it November 17, 1922, and was mailed on
the same date for protest. The Fruitland State Bank having closed
its doors before either draft was presented, they were not paid.
The sixth cause of action is based upon a check for $65.80
dated November 4, 1922, drawn by Fruitland Drug Company,on the
Fruitland State :Bank in favor of Haas 'Wholesale Company.
Said
check was the~aafter deposited by tho payee thereof in the First
National Bank of Weiser, which endorsed and delivered said check to
The Pacific National Bank at Boise, which endorsed and mailed it for
collection. Thereafter the dofendant without dola1 ~ilod said
check to.-tho Fruitlrovl State :Sank for peyment. It was marked 11 paid11
by the payee bank, charged to the drawee's account, and on November
15, 1922, defendant rece!ved at Salt Lake City, Utah, a dl•aft drawn
upon anothe1· bank for said amount, which draft was on said last named
date mailed to drawee for payment. Said draft was not paid because
of the failure of the Fruitland State Bank to open its doors on November 16, 1922, before it could be presented for payment. The
check sued on was not admitted in evidence.
It was stipulated at the trial that all of the checks involved
in the last five causes of action were deposited with tho initial
banks of deposit for collection, to tho credit of the assignors of
the plaintiff, their respective accounts credited with tho amounts
thereof, and that subsequently the several amounts wore charged back
to the several accounts.
- 4 -
X-4649
62
None of the checks in the second, third, fourth, fifth and
sixth causes of action are in evidence. There is no testimon1
as to the character or form of the endorsement~a thereon, if any.
Thare is likewise no proof of any custom by the banks in the
territory in which the said deposit banks are situate, to require
the endorsement of checks, before accepting them for deposit.
On the other hand, there has been no offer of proof of any special
contract with the banks of deposit. Nothing to show that said
checks were not in fact endorsed in the usual manner. The burden
of this proof being upon the plaintiff, I incline to the view that
the court would be justified in finding that the checiks were enThe record being silent as to any
dorsed as well as deposited.
special form of endorsement or contract for the collection of those
checks, it would seem justifiable to conclude that they were deposited by tho holders in their accounts in the usual ~~or, because it is stipulated that credit wa.s given for tho amounts thereof
and on failure of Pa¥ment of the drafts, they were charged back to
the several accounts.
Plaintiff's counsel concede that it was not negligence on the
part of the defendant to send the various checks direct to the payee
for presentation and payment. They contend that because in each
instance tho defendant accepted d:..·:\ft;:. in pavmont of the sev:cral
checks in lieu of cash, it was negligent and plaintiff should, on
that ground alone, recover.
I shall not attempt to
no useful purpose here.
dis~ss
the question as it would serve
On the question as to whether the defendant has been guilty of
any negligence, the answer sets up a general custom of all banks ond
bankers obtaining in the states of IcL"lho and Utah, o.t the Mme of the
transactions complained of, to accept in settlement of collection
items received from banks in other cities or towns, exchange upon
correspondent banks, and that plaintiff and his assignors ond ngents
in forwarding said checks for collection, did so with full knowledge
and notice of the existence of said custom. This defense is clearly
sustained by the evidence.
It is true that it was not shown that the depositors had actual
notice of such a cuotom,.;:rtiJ.l, the circumstances were st::cl;, that they
mu.st be charged with notice. All of the persons receiving the checks
were business men, as may be inferred from the evidence. They were
apparently receiving checks from time to time and knew or were charged
with knowing, how checks wore collected on out of town banks. Tho
custom must be held to be ~easonable under the evidence here. It may
be said to be dictated by necessity since it would not be possible,
·owing to the great volume of business transacted in this country, for ·
banks to function if compelled to make collections in cash or currency.
On the other hand, the rule docs not hold that a person cannot make a
special contract for the collection of commercial paper in a..w way he
desires. It simply goes to the extent of holding that when paper
/
X-4649
- 5-
is deposited for collection, in the ordinary and usual course of
business, without any special agreement, it will not bo negligence
for the collecting agents to follow the prescribed custom.
flaintiff alleges that on presentation of each of tho several
checks involved, there was sufficient cash on hand in tho Fruitland
Stt:.to · Bank to have paid them in cash or currency.. The proof is
not sufficient to sustain this allegation, and so I find.
I run constrained therefore to find for the defendant on all
six causes of action.
At the trial defendant asked leavo to amend its answer in
certain particulars referred to on page 55 of defendant 1 s brief.
The amendment was resisted and the court reserved the ruling~
tt does not appear that any SU.b'stantial right of the plaintiff
will be jeopardized, and ! therefore rule that the amendment may
be made a.s preyed for.
. . dounsel for d.efendan t may p:tepare findings and decree' :furniShing copies thereof to counsal fo~ plaintiff.
Dated at Weiser, Idaho, July 31, 1926.
(Signed)
B. D. Varian
District Jud€;e
Rice & Bicknell Es qs. ,
Caldwell, Idaho,
George Donart Esq.,
Weiser,
Attorneys for Plaintiff....
A. C. Al!;new Esq.,
San Francisco, Cal.
Merrill & Merrill Esqs.,
Pocatello, Idaho,
Atto~eys for Defendant.
(?)
64.
X-4651
STl~.T.EMZ!JT
F03 THE PP.ESS.
August 12, 1926.
3:30 olcloek p• m.
For tmmodiate release.
The FedElrc.l Reserve Boord o.nnounces thAt it ha.s o.pprovod
c.n opplication of. tho Fodorn.l
~esorvc
Bo.nk of Ne'fl: York for ponnis-
siou to establish a. rediscount rate of 4 per cent on__ t;Lll classes
. of po.pcr of all maturities, effective August 13, 1926 •.
~
...
()5
FEDERAL RESERVE BOARD
WASHINGTON
X-4652
ADDRESS OFFICIAL CORRESPONDENhE TO
THE FEDERAL RESERVE BOARD
.A.ugu.st 16, 1926.
Su:BJECT:
Ex:pense, US.in Line, Leased Wire SJtstem,
July, 1926.
Dear Sir:
Enclosed h~rewi th you will find two mimeograph statements, X-4652-a and.X-4652-b, covering in
detail operations of the main line, Leased Wire System,
during the l!lOnth of July, 1926.
· Please credit the amount payable by your bank
in the genoral account, Treasurer, u. s., .on your books,
and issue C/D Form 1, National ]anks, for account of
"Salaries and Expenses, Federal Reserve :Board, Special
Fund", Leased Wire System, sending duplicate C/ D to
the Federal Reserve :SOard.
Yours very truly,
Fiscal Agent.
:Bnclo1ure~.
TO GOVERNORS OF .AUt F. R. :a.A:NKS EXCEPT CHIC.AGO.
X-4652-a
REPORT SHOWING CLASSIFICATION .AND NUMB:ER OF WORDS TRANSMITTED OVER MAIN LINE
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JULY, 1926.
Bu. sin ell
reported
by bank•
From
Boetom
New York
Phi lad.elphia
Oleveland
Richmond
.A.tlanta
Chicago
St. Louia
Mi..1'lneapolia
K.an1a1 City
Dalla•
San Francieco
Total
Word• lent
by New York
chargeable
to other
F. R. Ba.nkl(l)
692
33 I 700
155,291
37, 116
76,598
47,252
701
1,4o2
2,338
98 ,56o
74,386
34,005
73,547
55,219
105,878
2,206
1,975
1,749
2,JOO
4,493
2,132
857,701
22,982
War
Total
Jlt-~392
155,291
37,817
78,000
49,590
69,1lt-3
100,766
76,361
Ne'
Treasury
Finance
Fedtiral
Depart!nent Corporation Reserve
:SU.iness
Bueiness
Ba.r..k Buaine11
3,422
3, 746
2,~4
F. R. Board
Tctal
Per cent of Total
75,8 7
59, 712
108,010
3.270
3,242
a·580
,528
3,717
1,586
3.279
1,762
5,581
880,683
4o,697
62,7 8
22 1 0~1
839,986
280 1 ~
1,120,
100.00%
2,9~
Butinen(*)
30,970
151,5145
34,833
74.7~
46,3
65,563
1,183, 52
66,1~,
Per cent of·
total bank
5·30%
3·69
18.04
4.15
8.89
5-52
7.00
11.46
. 8.65
4.07
8.64
6.9:)
12.19
94.70%
35,7~
302a~69
96,2~
72,6
}4,168
72,568
57,950
102,l+29
100.00%
(*) These percentage• uaed in calculating the pro rata share of leaaed wire e.xpenta ae shown on the
acconpanying
1 ta.temen t
(X-4652b).
(1) Number of worde sent by New York to other F • .R • .Banks for their sole benefit charged to banka
indicated, in accordance with action ta.kan at Governors' Conference November 2- 4, 1925·
•
•
.REPORT. OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, JULY,
1926•
. fro rata
Share ot
Operator a 1
Salaries
Name of :Bank
~ ~~1~0
1,072-41
216.66
284..50
255-00
Federal lleaSM'e Board
274.00
3)1.35
215.64
251 ..00
:no.oo
Total
EJ:,pense 1 .·
Total
. ta'o-00
,bienS$
Credits
1,072.41
216.66
. 284.50
227.00
227·00
(#}4,0J8.49
Wire
Rental
.-
$26o.oo
:Boat on
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas CitT
Dallas
Opera~..,ra'
Overtiae
1.00
255·00
4,0J9 .. 49
·274.00
20l.J5
. ·275-64
251.00
370.00
15, J4S,. 75
!l'otal
(&) Includes $204.67 tor branch line buainesa tranau4tted over main line circUit.
(I) Includes salaries of Wa-shington operators.
(*) credtt.
(a) Received $1,223.30 tr~m Treasury Department covering business for the month of
.b) Amount reimbursable ·t-o Chicago •
..
Jul.T, 1926•
Parable to
Federal
ReserTe
Board
X-4653
11
! :Bit of Information and Advice for the Home Folks".
(An address to the Annual Convention of the
Cotton States Merchants Association,
at Memphis, Tenn., on August 26, 1926.)
68
by
Geo. R. James.
Mr. Chairman and Friends:
I can 1 t begin to tell you how glad I am to be back home or
how gratifying it is to have the privilege of meeting and talking with rr13
home folks again.
During the three years that I have been in Washington, serving as a member of the Federal Reserve Board, my work-has been quite interesting, my colleagues most congenial and my home life very happy, but at
that there have been times when I have been mighty homesick and I frequently
find myself thinking of, and trying to figure out, the many perplexing prob-e ...
lema that I lmow are peculiar to our own beloved section of the country.·
The study of national and international business and finance,
together with watching the fluctuations in the money markets both at home
and abroad is as fascinating as was the reading of romances like "Ivanhoe" ,
11
Robin Hood" and the
11
Count of Monte Cristo" in my younger dqs.
Then, too,
the routine work of the Board itself, the constant and persistent effort that
is being made to adjust the machinery .of the Federal Reserve System to meet
the more or less frequent changes and the gradual evolution that is taking
place in the business of the nation is in itself an
in~iration,
and I can
say that I get a great deal of pleasure and satisfaction from my work.
But
all the time, along with these matters, there is constantly before me the
questions - How are the many changes in business and financial methods affecting my home territory, and how are our people meeting these changes?
- 2 -
X-4653
69
Just a few days ago I received a letter from the President
of one· of the large and important bmlking institutions in New York which
I am going to read to you.
The letter referred to reads as fol.lows:
"New York, July 30,1926.
"Dear Mr. James:
"In the last few years,as you··.lmow, a radical
change has taken place in the purchasing methods of the retailers, distributors and consumers of conunodities and manufactured
articles. Whereas formerly, with very few exceptions, it was
the custom to anticipate the demands of the ultimate consumers
by forward b~ing, it is now the exception rather than the rule
whe.n purchases are made in excess of an amount necessary. to supply the immediate dooand. This practice has come to be characterized by the colloquial term of. "hand-to-mouth" b~ing. On- '.all
sides are heard expressions of approval and disapproval of this
practice.
"The manufacturers contend that it is becomJ.ng increasingly difficult for them to anticipate the demands that may
be made upon their output. .And in many instances the manufacturer• s choice is between piling up an inventory of manufactured
goods or executing orders as received at increased costs.
"On the other hand, retailers and distributors
claim that with the present high efficiency of the railway transportation systems of the country it is possible for them to secure quickly such articles as may be necessary to meet the demands
of their customers, and that because of that fact they see no
reason for their carrying a large and expenaive in"l!entory.
"Others advise that because of the radical and frequently occun·il.J;g changes in styles it wguld be the height of folly
for them to make purchases other than are necessary in the routine
conduct of their business •
..
11 It is quite evident that it will be necessary for
either the manufacturers or the distributors to make such readjustments in their methods of operation as will. meet present conditions.
This adjustnienj;'-. has, in fact, begun.
Wbat the solution of the problem may be is to me
very perplexing. A reduction in the volume of mass production on
the part of the manufacturer, resulting as it would in the majority
of cases in~increased costs, would not seem to be the only method
of reaching the fundamental difficulties in the situation. And on
the other hand, in view of the uncertainty of the consumers 1 demands
11
- 3-
X-4653
due to changes in styles, ~~d the valid objections to piling
up inventories, it would not seem reasonable to expect retailers, distributors and others to do an~ great amount af' forward
buying with the consequent possibility of having their shelves
stocked with unsaleable or unusable merchandise.
/
11 I should appreciate greatly your letting me have the
benefit of your thoughts in regard to this problem. To w~t
extent can and should 11 hand-to-mouthts buying be overcome? ·Should
this practice be accepted as a permanent condition, and if so,
what adjustments are necessary and what are the effects to be expected? These are among the questions on which I should greatly
value your opinion. I feel sure that if I can secure the opinions
of a number of well-informed man such as yourself I may be in a
position where I can bring to the attention of tho thinking business men of tho country an intelligent discussion of the subject."
(Signed)
President"
In reply to this communication, I wrote the gentleman as follows:
"Washington, D.C., August 7, 1926.
n Dear
W..r. :Blank:
11 Your very interesting letter of July 30th addressed
to me as President of the Wm. R. Moore Dry Goods Company, Memphis,
Tenn., having been forwarded, reached me here this morning.
•
"There have, as I see it, been many various factors
contributing to the growth of the so-called 11 hand-to-mouth11 buying
of merchandise and no satisfactory solution of the problem can be
found without due consideration of them all. In addition to the
things you mention, we have a marked difference between the past
and present in the matter of credits, for instance, the shifting
from credits based on 11 inventories" to "receivables" in one form
or another. Then, too, there is the development of the 11 mail order
houses 11 , "department storesn, nchain stores" and other forms of competition that have grown up, in a very large degree, to take the
place of the old fashioned 11 jobbern and nretailer11 • The passing of
the cross roads country merchant has quite a bearing on this problem.
"Still another factor that must be taken into consideration is the shifting of the population from farms and country to the
cities and along with it the change in the buying power of the average person due (a) to frequent distribution of funds through payrolls,
and (b) the almost 11 full employment of labor11 that has prevailed in
this country for the past five or perhaps tan years. All through
this 11 evolutionu in merchandising the old law of the 11 survival of the
fittest" has been at work and now the manufacturer and the distributor
- 4
X-4653
~
71.
are feeling its effects. Both are facing increasing overhead and
other costs on one hand and diminishing profits on the other.
"Frankly, I do not know what the. outcome will be. I
cannot say which method of distribution (because of the superiority
of the service) will survive, but·I do venture the assertion that
this question carmot be answered until the newer methods shall
have passed through a rather long period of depression and unemployment in this country.
"Under existing circumstances and conditions I feel
that it is wisdom on the part of the distributors to pursue a "handA quick 11 turn-over" minto-mouth" policy in buying merchandise.
imizes both e~nse and risk and is, therefore, most commendable.
11 Assuring you that I appreciate the
in asking my opinion, I am,
d'o~liment
paid me
Yours very truly,
:
(Signed) Geo.R.James".
I have brought this correspondence to your attention believing that
•
it brings up subjects in which you as merchants have a very vital interest.
.
I am sura that you will agree with the New York banker that
11
a radical change
has taken place in the :purchasing methods of the retailers, distributors and
consumers of commodities and manufactured articles" in the last few years.
I am sure also that you will agree with me that the growth of mail order
.
houses, department stores and chain stores has been little less than remarkable since the ending of the world war.
Every live merchant in the country
must have noted the very remarkable increase in instalment buying and perhaps
there is no development of recent years that has a more important bearing on
this question of distributing merchandise than docs the practice of buying
and selling on the instalment plan.
In the belief that Shakespeare was right when he said "There is good
in everything'', I have given a great deal of thought and study to this matter
of instalment buying and I confess that there are many
I can and do commend.
•
feature~
of 1t which
On the other hand, I cannot refrain from a feeling
-
X-4653
- 5-
72
that to a very greut extent the practice is being carried to excess, - in fact,
to an extent that I regard as extremely dangerous.
with alarm the steady
incre~\se
I cannot help
~t
view
in the debts of the individuals and insti-
tutions that make up this great nation of ours.
One statistician has made
the statement that if every man, woman and child could maintain their preeent earnings and incomes for a. period of two years and that during the same
period nothing whatsoever should be expended for current necessities or for
anything other than to liquidate the present indebtedness, the end of the
period would show the people still very much in debt.
This strikes me as a most serious situation, for, as I pointed out
in my letter to the New York banker, during the time this increase in indebtedness was taking place this country has been enjoying nearer full· em;ployment
of labor and manufacturing capacity of industry than at any time ever recorded in history.
During the period, the figures representing the business ac-
tivity of this country both as to production, employment, prices and wages
. as well as the debts have been going up, and I want to call your attention
to the fact that nobody ever got hurt going up,- even the aviators get along
all right while their machines arc moving slcyward.
The thing that perturbs me is what must inevitably happen when the
trend is the other way.
decline?
What are we doing now to prepare ourselves for the
In other words, we have been mounting the hill in a rather smooth
running machine - taking a joy ride if you please - speeding on with little
thought as. to what may be tho condition of the road beyond the brow of the
hill,
I wonder how many people there are today who know whether or not
their 11 brakes 11 are in working order?
I think if we view the records
73
X-4653
- 6 -
of the numerous automobile accidents we would find that the caso was
an inability to stop in time rather than to breaking
down
in the move-
ment forward.
The answer to the question "Is instalment buying good or bad11
depends upon the individual.
For one who fails to budget his income and
expenses and who does not provide a cash reserve of not loss than twenty
per cent of hfs total indebtedness, instalment buying is certainly very
ye.ry bad; in fact, in my opinion it is a very. dangerous procedure.
:aut
whether one is using the instalment plan of buying or not, I still want
to emphasize with all the force available the advisability and desirability of everybody making a budget of his income and expenses not only for
his business affairs but for himself as an individual.
See for a certain-
ty whether or not your income exceeds your expenses and provides for your
commitmen~s,
and then when you have finished that job for your ownselvos
and your own business, do a little figuring along the same lines for your
communities.
As in the case of individuals or business concerns, no
community can be permanently prosperous unless it receives for its products more money than it
p~s
out for purchases made in other communities,
and sets up a. "reserve" out of the favorable balance.
:Business throughout the country at the present time is good.
Taking the United States as a whole, it is a country wherein prosperity
prevails to a very remarkable degree.
Just how long this prosperity can
and will prevail, I do net believe any one can tell.
I hope it
may
con-
tinue for a long time, but no matter whether the duration of the present
prosperity continues for a long or Short period, now is tho time
when the wise man is Pa¥ing his debts and is getting his house in
X-4653
- 7 -
?14
order for whatever may follow in the business world.
By all means look t) your reserves.
There is nothing more
important either to an individual or a business ooncorn than is this
matter of
providin~
and
oaintaini~g
this true of those who use credit.
by
a cash reserve, and especially is
Every banking
insti~tion
is required
law to maintain a cash reserve against its deposits, but even if
there were no law on the sUbject, no good banker would for a moment
think Gf running hi a bank without adequate reserves.
carry
~ot
Good bankers
only the reserves required by law but maintain reserves far
in excess of the legal requirements.
Maintaining a. cash reserve is just as important to the business
house or to the individual who uses credit as it is to a bank. · The best
managed banks require their borrowing customers to carry a balance usually amounting to twenty per cent of the loan.
more or less than reserves.
I know there
These balances are nothing
are many banks
(usually those
known as country banks) that do net make this requirement of their custom-
ers but who endeavor to make up for the absence of these balances by
charging a. higher rate of interest.
Now the fact is, there is no differ-
ence in dollars and cents between what the customer actually pays for
his accornmodatian whether he borrows frem a city bank which requires a
I
twenty per cent balance and charges a six per cent rate of interest or
borrows from a country bank which makes no such requirorn.ents and charges
seven and one-half per cent, but my friends there is a very vital difference both to the bank and to the customer; the position of either or both
being very much stronger when the proper reserves arc carried.
The
I:lail
who carries a good balance with a bank never has any trouble getting ac-
- 8 -
X-4653
75
commodation when he needs it and if one could only see and ap-
preciate the difference in attitude on the part of the banker towards
his
custome~
when the customer has a large balance and when he has. no
balance, I am sure no further argument would be needed.
The greatest and strongest banking system the world has ever
known is your Federal Reserve System, the very foundation of which is
the reserves of its member banks.
I say YOUR Federal Reserve System,
because it was created by and is a very vital part of your Government,"That Government of the people, by the people, fo;o the people".
The
fact that the Government stands squarely behind the notes of the reserve
banks, which notes play such an important part in providing a currency
for the nation, gives you as part of the public a most decided interest
in, if. not ownership of, the Federal reserve banks and the System.
While the Federal Reserve System deals with the public only
through its member banks, the very purpose for which it was created was
to be of service to the agriculture, industry and commerce of the nation
functioning, if you please, through the member banks which in turn are
the custodians of the cash reserves of the people.
The Federal reserve banks were not established to make money.
The law provides that for the money tho member banks subscribe to the
capital of the Federal reserve batiks there shall be paid interest at tho
rate of six per cent per annum.
After this dividend or interest is taken
care of and the expenses of operating the reserve banks are paid, tho bal8.IlC()
of the earnings go to the Treasury of the United States.
The law permits the Federal reserve banks to perform certain
services for the member banks without charge and at the expense of the
reserve banks because it was believed that the reserve banks could reduce
X-4653
::.. 9-
the costs of performing these services,
~
7'6
I can tell you that the
services now rendered by the Federal roservo banks are performed at a
saving in cost that is far greater than was originally anticipated.
The
cost of the collection of chocks, transfer of funds, and handling of
currency by the Federal Reserve System is only a small percentage of
what those functions cost when performed by individual banks.
i
The econ-
omies that are .possible through me.ss production e.pplies with equal force
in the Federal Reserve System as it does in ·the plants of the Ford Motor
Company.
The earnings of the Federal reserve banks arise out of the
interest charged member banks when the member banks borrow.
They
are increased or diminished only as the requirements of the member banks
dictate.
And perhaps it
may
be imPortant to state that the facilities
of the Federal Reserve System are available for the smallest and for the
largest member banks on exactly the same terms and conditions.
I am giving you this information because I think it is
just and right that you should know that the so-called free service
w:-,ich the Federal Reserve System renders to its members is in the last
analysis, given at the expense of the public, and I feel that as a part of
this great American public you should be in a position to inquire (1)
whether or not you are getting the benefit of these services, and (2) if
not, why not?
I~
other words, you are paying for something so it is up
to you to get wha. t you pczy for.
Because of my interest in and love for my own home territory, it hurts me terribly to tell you that the South, and this partieular section of it especially, is far behind the rest of the country in avail,
ing itself of the security, facilities and benefits of the Federal Reserve
X-4653
- 10 -
77
System.
In the territory served by the Memphis Branch of the Federal
Reserve Bank of St. Louis '(that is to s~, in West Tennessee, Northern
Mississipp~
and. Eastern Arkansas) there is the smallest percentage of
member banks to banks in the terri tory of any section of the United
States.
In this territory, less than fifteen per cent of the banks are
members of the Federal Reserve System, whereas, in the great State
New York seventy per cent of all the banks
are
of
members of the System.
Of course, ali of the natidnal banks and practically all of the big
State bankl& in the cities are members of the System.
As a member of the Federal Reserve :Soard, a good part of my
time has been taken up in
stu~ing
the question of why so many bankS in
our territory do not belong to tho Federal Reserve System, but I.am still
unable to get anything like a satisfactory answer to the problem.
The fact
is that when I try to sum up the reasons I have heard for banks not being
members of the System, I am reminded of the old story about the .Arabian
sheik who was noted for being rather thrifty, and one who looked after
his business closely and carefully.
hi~
One day a neighbor sent over to
and asked to borrow a piece of rope.
In answer to ·this request
he said that he was sorry he could not let him have the rope because
he was using it to tie up his milk.
To this the neighbor very indignantly
asked .. "Whoever heard of tying up milk with a rope?"
replied -
11 My
The old sheik
friend, when you dont want to do anything, one excuse is
just as good as anothertt,.
One of the popular answers t'o my inquiry as to why the nonmember
banks do not join the Federal Reserve System, has been that the System
does not PSl any interest, on reserves, whereas, by
ke~ing
their reserves
with some city correspondent bank they receive interest on their balances;
X-4653
78
in consequence, in the one case they get no return on their reserve balances, in the other, they make a profit.
This statement always brings to
my mind the story of the two negroes who were passing a graveyard.
them could read and the other couldn't.
One of
The educated fellow was enter-
taining his companion by reading the epitaphs on the tombstones.
they came to one which said "He is not dead but sleepeth11 •
Finally
The ignorant
fellow said "Umph, big boy,. that white man ain'tfoolin' nobody •capt hissef!1 • •
My good friend Dr. Tait Butler once said that the greatest agricultural implement ever invented was the load pencil, but to a banker who
springs that sort of an answer as his reason for not joining the Federal
Reserve System, I
o~fer
the suggestion that he get himself a supply of lead
pencils not to use as agricultural implements but to sharpen and use in analyzing his own affairs.
I could gp into details in explaining to you just why this suggestion is offered but my time is too limited and I will only say in this connection that if there are any bankers in the audience they know what I am
talking about, and if you who are not bankers ever want to talk to a man who
is supposed to be a banker and this same s-J.bject comes up, you may be absolutely certain that if he is anything of a good banker at all he will know
in his heart that what I am saying is absolutely true.
Another reason freqaently offered by country bankers in the South
for not joining the Federal Reserve System is that they are denied the
·right to charge exchange when remitting for their checks.
banker asked in my presence on one occasion 11 Wh8.t
ri~t
One so-called
has the Federal Re-
serve System to deny my bank tho right to charge exchange?" To t4is I very
promptly answered by asking him the question - ''What right have you to de-
- 12 ...
X-4653
79
duct anything when paying a customer's chock that is presented either
ovor the counter or through a Federal reserve bank?"
It is true that in the old days prior to the establishment of
the Federal Reserve System it was necessary for banks, in order to pay
their customers' checks when the payee of the check lived at a distant
point, either to ship the currency or else maintain balances with correspondent banks against which they could draw, and, of course, in either
case.this costs money and the banks were entitled to collect
forth~
service. But with the coming of the Federal Reserve System this situation changed.
The cost of shipping currency is absorbed by the reserve
bank and it is not only less expensive but it is safer and more convenient for a bank to pay the checks of his customer when they are presented through a reserve bank than when presented by the customer at the
teller's window.
Anyhow, the Supreme Court of the United States has settled the
question and has established the
11
right 11 , once and for all, of the re-
quirement that member banks shall remit at par for all checks sent for
collection through the reserve banks.
Furthermore, this right and principle has been recognized by
ninety per cent of all banks in the United States, and today every
b~
in the First, Second, and Third Fedoral Reserve Districts is a member
bank or is on the par lists of the reserve banks.
In this, the Eighth or St. Louis Federal Reserve District,
there are all told 3073 banks.
and 2454 nonmember State banks.
par list.
Of this number 619 are member banks,
Of the nonmember banks 2036 are on the
They voluntarily remit to the reserve banks at par for checks
on them that are collected through the Federal Reserve System.
418 non-
member banks (only l3i per cent of the banks in tho entire district)
•
~
13 ...
X-4653
80
still stond out for their 11 rightu (?) to collect exchange.
A8 you doubtless know, tho Federal Reserve Bank of St. Louis
has, in addition to the homo office, branches
~t Loui~villo,
and Memphis, ru1d tho territory is divided accordingly.
the district served by the home, or
st.
Little Rock
In .that part of
.
Louis, office, over 95 per cant
of tho nonmember banks remit to the reserve bank at par.
served_ by the Louisville Branch 97 per cent remit at par.
.
served by Little Rock 62 per cent remit at par.
In the part
In the
p~t
In that territory served
by the Memphis Branch only 29 per cent of the nonmanber banks remit at
par.
As I said bafere, less than fifteen per cent of the banks ii,l the
territory covered by the Meli!Phis Branch are members of ·the System.
Can
you wonder that I feel humiliated when this situation and these figures
are up for consideration?
•
Next to the Memphis territory in the ratio of banks not on the
par list, comes the Atlanta District, and you who read the newspapers
know what recently happened to a chain of nonmember banks with more than
a hundred members, in that District.
That outfit, headed by the Bankers Trust Company, was not affiliated in any way with the Federal Reserve System.
On the contrary, they
were against the System; they were leaders in the fight against "par
clearance of checks" , and declined to keop their reserves in a reserve
bank.
ca~se
When the st1•a1n came and the need of their reserves developed beof a decrease in the deposits of some of the banks in the chain,
those reserves were not available and the crash followed.
The banks in-
valved wore small, it is true, and the damage measured in dollars was
relatively light, but think, my friends, of the tragedies that followed
in those hundred and more communities whoso hard-earned savings were
wiped out.
X-4653.
- 14-
81.
It seams to me most
d~lorable
that such
a
largo proportion of
our people should be denied the financial protection and benefits created
for them by the Government, simply because a large group of so-called
bankers are asleep on the job.
Already tho Atlanta Constitution, one of the great newspapers
of
~he
South, is discussing the urgency of forcing by law all commercial
banking institutions into a N'a.tional System under Federal superv.ision.
Certainly the discussions of branch banking and the failure to pass in the
last two sessions of Congress the so-called McFadden !ill, designed to
check the growth of branch
ban1~1ng.
in this country, should cause the
cera of independent unit banks to wake up and to
endea~r
offi~
to give the com- ·
munities that a~e dependent upon tham for banking facilities every advantage in banking service that is now available.
Every State bank with requisite capitalization and proper management is not only entitled to members~ip in the Fedetal Reserve System
but has been and is. constantly being invited to join the System.
I have
told you what I thought of the reasons I have heard for not joining.
I
wonder what will happen when the depositing customers begin to study the
situation and to aSk questions?
.
I do not for one moment mean to· sq that being a member of the
Federal Reserve Systam guarantees deposits, nor does it insure the pu.bl:tc
and the depositors against dishonest or incompetent banking, but I do
that
imr
s~
a bank is a member of the Federal Reserve System and its
.
business is conducted within the limitations and restrictions laid down
...,:.:
by the law and the rules and regulations of the ''"Federal Reserve :Board
~~CANNOT~.
There have been. a great many bank failures in the United States
during the past few y-ears.
A small percentage of them - and a. small per-
that
X-4653
- 15 -
82
centage only - have been members of the Fodera+.,_Reserve System, but NOT
ONE
SIG~LE
ONE OF THEM failed that had lived up to the letter and spirit
of tm law and the rules and regulations of the Federal Reserve Ik>ard •
.Another thing; a very careful analysis of the earnings of the
somethin~
like thirty thousand banks in the United States shows that the
member banks, who live up to the letter ro1d the spirit of the law and the
rules and regulations relating to the Federal Reserve Systemj make more
money on the capital invested than do those banks on the average that are
not members of the System.
As a result of my study of this great problem, I am willing to
say that it is
my
judgment that if and when a commercial bank finds out
tha)· it cannot make money for its stockholders as a member in good standing of the Federal Reserve System, then the best thing that bank can do i::1
the interest of its depositors, its stockholders and its community is to
liquidate and get out of the way for certainly there are too many banks in
this day and time for the business now available.
I have a good many friends in the banking business in this territory and it is possible that some of them may not like what I am saying to
you now, but in that event I can only say that I am sorry.
is
my
I feel that it
duty as a public servant to call your attention to such matters as
these in which I have a real responsibility.
The views and opinions I have e:x;9ressed are
my
own and should not
be taken as representing those of the other members of the Federal Reserve
l3oard.
W'.aat I have said to you is in the hope that
you in this time of
p~ace
I thank you.
to prepare for war.
my
rema;rks
may
help
FE:OERAL RESERVE BOARD
83
X-4654
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJEOI':
August 16, 1926.
Eligibility for Rediscount of Certain Notes
of a Cold Storage and Warehouse Company.
Dear Sir:
I arn e:J.closing herewith for your informe.tion
a copy of a ruling which the Federal Reserve Board
recently made upon the eligibility· for rediscount at
a Federal reserve bank of certain notes of a cold
storage and warehouse
ccmpa~y.
Very truly yours,
J. c. Noell,
Assistant Secretary.
EncloSI:U' e.
TO ALL FEDERAL .RESERVE AG:ENTS AND GOVERNQRS
E~4
X-4654-a
Eligibility of Notes of
Co~d
Storage and Warehouse Company.
The Federal P.eserve Board has been requested to rule upon the
eligibility of certain notas of a cold storage and warehouse company
for rediscount at a Federal Resorvc Eanm.
It appeared that this compaey is regularly engaged in the
finance business through tho making of loans to customers against the
security of goods stored with the company. It issues two classes of
paper: (l) collateral trust notes secured by tho pledge to a trustee
of customers' notes payable to tho company, representing advances made
to customers on the security of goods stored; and (2) straight unsecured notes payable to bo.n.1cs. It conceded that its collateral trust
notes are ineligible for rediscount; but contended that its straight
unsecured notes are eligible, on the ground that they are issued to
finance its current operations. In sup,ort of this contention it was
stated that the company's quiCk assets (exclusive of advances to customers) arc in excess of its current liabilities (exclusive of its
liability on collatero.l trust notes); that its current accounts
receivable consist of accrued storage charges billed to customers
but not yet paid and bills rendered to customers for services, ice
and material; and that its current operating expenses consist of
labor, electric power, material, interest on bonds, administrative
expenses, and other usual expenses incident to a going business. On
the other hand, it was admdtted that tho co~any's bills receivable
representing adva~ces made to customers somotimes exceed its collateral trust notes outstanding 'by as much as 10 or 15%, although the usual
practice is to deposit customers' notes in the hands of the trustee,
·and issue collateral trust notes against them as ,soon as possible, and
tho amount of customers' notes pledged to tho trustee is approximately
the amount of the collateral trust notes outsto.nding, the only margin
required being represented in the value of the goods in storage against
which advances have been made.
The Bbard has given careful consideration to the question
:prooented, and is of tho opinion that these notes are not properly
eligible for rediscount at a ~ederal Reserve Bank.
The financial statement showing an excess of quick assets
over aurrent liabilities is valuable only as indicating that the
borrower is in a liquid condition and that the borrowing is not for
capital purposes or for permanent or fixed investment~ of any kind.
In order to be eligible for rediscount under the terms of Section 13
of the Federal Reserve Act, a note must arise out of an actual commercial transaction, that is, it must have been issued or drawn for agricultural, industrial or commercial :pur~ses or tho proceeds must have
been used or rr.ust be intended to be used for such purposes.
The
eligibility of the notes in ~estion therefore, depends upon the Char-
X-4654-a
(2)
~,
8fj
acter of the transactions o1:.t of which they arise or the use :aade of the
proceeds, and the mere fact t.1at the company's statement shows an excess
of quick assets over cur~ent l:abilities is not alone sufficient to
establish tho eligibility of the notes.
It appeared that this corporation is regularly eng~ed in tho
finance business through the making of loans to other parties 'against
the security of goods stored with the company by such parties, and that
it finances the major portion of this business through tho issuance of
collateral trust notes secured by tho notes of its customers, It conceded
that such colL~teral trust notes are ineligible for rediscount, because
they clearly are finance paper under the terms of Section II(b) of the
Board's Regulation A and the ruling published on page 308 of the March
1921 Bulletin.
This company, however, borrows some money from banks on its
own straight U-T"J.securod notes and desired to have such notes declared
eligible for rodiscou..."1.t, on the theory that thu proceeds of such notes
are used exclusively for its current operating ex:pens es. The co~any 1 s
current operating expenses, however, are neceasarily incidental to its
principal business and their character must be determined by the character of its principal business. Even if its borrowings for current
operating expenses could be completely segregated from its borrowing
of funds to be advanced to other parti~s, therefore, it would seem
that its borrowings for current operatfng OA~cnscs should be classed
as a borrowing for finance purposes, becaune- it arises out of the
finance business and not out of a comroercial, agricultural or industrial
business within the rroaning of the Federal Reserve Act and the Board's
Regulations.
Moreove1·; a corporation engaged in the finance business necessarily must have some working funds to enable it to make advances to
its customers in the first instance and to carry paper resulting from
such advances until it can refinance itself by the issue and sale of
collateral trust notes secured by such :paper. The proceeds of the un-·
secured notes made by such a corporation, therefore, would almost
certainly be used to some extent in making advances to its customers,
and this corporation admits that the amount of advances made to its
custo¢crs occasionally exceeds tho amount of collateral trust notes
outstanding by as ~ch as 10 or 15%. It is clear that the borrowings
of the company on its straight unsecured notes payable to the bank
would, at least to the extent of such excess, be for the purpose of
making loa~s to third parties. As a practical matter, it is almost
certain that the proceeds of all borrowings made by the company either
on collateral trust notes or on straight notes payable to the banks
go into a common .fund out of which advoncos to customers as well as
current operating expenses are taken, and it would be impossible to
distinguish the proceeds of one cl,ass of loans from the proceeds of
the other. even if the borrowings of a finance company for its current
operating expenses could be considered a borrowing for a commercial
instead of a finance purpose.
In view of these considerations the Board is of the opinion
that the notes of this corporation cannot properly be considered
eligible f0r rediscount at a Federal reserve bank.
X-4655
FEDERAL RESERVE BOARD
86
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Dear Si:r:
On Mondu:r, Se_otember 6th, there will 1le no Gold Settlement
Fund or Federal Reserve Note Clearing, on account of observance of
Labor Da.:r, and the :Board•s books will be closed.
In ti.ddi tion to the holiday mentioned above, the following
Federal Reserve Banks and Branches will observe holidays during the
month of September on the days specified:
Monda~t,
TuesdB.y,
San Francisco - A&nission Day, Cali~ornia.
Los Angeles
S~t. 13- :Ba.l timore - Defenders Day, Maryland.
Sept. 14- Detroit - Primary Election Day, Michi~.
T;~or(:'fore, on the dates indicated. the banks affected will
not pe.rticirate in either the regular Gold Fund Clearing or the Federc.l Reserve Note Clearing. Please include your credits for the banks
affected on ~~ch of the holidays with your credits for the following
~~si~ess day in your Gold Fund Clearing telegrams, and ~~e no shipments of Federal Reserve Notes, fit or unfit, for account of the
Feder::::1 Reserve B~nk: of San Fran~isco on September 9th.
Kindly notify Brunches.
Very truly yours,
J. C. Noell.
Assistant Secretary.
TO GOVERliDRS OF ALL FEllERAL RmERVE Bru1KS.
FEDERAL RESERVE BOARD
X-4657
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 24, 1926.
SUBJE0Tt
:Bankers' acceptances drawn to finance the
storage of cotton seed.
Dear Sir:
I a;n enclosing herewith for your information
a cop:;• of a ruling w:·dch the Federal Reserve
adopted wi tl1
referen~c
~Board
has
to the eligioHiJ.;y for rediscount
at Federal reserve bRnko of banke:;.·s' acceptances drawn
to finance the storase of cotton seed.
Very truly yours,
D. :a.. Crissinger
Governor.
To Governors of all F ;R.Bankr-
Enclosure:
X-4657-a
88
BANKERS
1
ACCEPT~tG".li:S
DRAWN TO FINA1,rCE 'HIE STORAGE OF COTTON SEED.
The Federal Reserve Board has been requested to rule ~)on the eligibility
for rediscount at Federal reserve banks of bankers' accepta~ces drawn to finance
the storage of cotton seed under t:O.e following circumstances:
Certain cotton seed oil mills own warehouses which they propose to
lease to independent warehouse corporations under bona fide leases, the corporations to asswae full control ru1d management of such warehouses and to operate them
as public warehouses which will be bonded and licensed under the United States
W~ehouse Act.
It is proposed that such prime seed as is received by the mills that is, seed which is in such condition that it may be safely stored for an indefinite period of time - will be stored by the mills in these warehouses until
it can be processed into various cotton seed products, and the mills desire to
finance such storage by means of bankers' acceptances secure& by warehouse receipts
for such seed. The owners of the cotton seed thus stored to have access to it at
:;_)roper times for purposes of inspect.ion.
T'ne Federal Reserve Board has heretofore ruled that cotton seed, when
stored under proper conditions, is a nonperishable readily marketable staple agricultural product within the meaning of the Federal Reserve Act and the Board's
Regulation A; and that, therefore, a bankers' acceptance secured by a warehouse
receipt for cotton seed is eligible for rediscount at a Federal reserve bank, provided the cotton seed v.:.•on which the acce::lta;.'l.ce is based is stored under such coneli tions as to pro tee·~ it adequately from deterioration and provided the acce~?t&J.ce
eonrplieo in all oti1.:.~· :..·es:~ects with the requirements of the law and the :Board 1 s
regulations. This :.."11.ling may be found in the 1925 Federal Reserve Bulletin at pa,~~~
737.
The Board ha$ also had occasion to rule wJon the right of member banks to
make acceptances isaued a..;ainst goods. stored on premises owned by the owner of the
goods but leased to an independent lessee who issues warehouse receipts covering the
goods in stora.~;e. The :3oard held in this ruling published on page 634 of tl1e 1918
Bulletin that i~ t~e premises in qu~stion were actually turned over to the lessee
on a bona fide lease, the iessee being independent of the borrower and having entire custody and control of the goods, a member bank could properly accept drafts
dram1 against warehouse receipts issued by the lessaei but held further that the
borrower should not have access to the nremises and should exercise no control over
the goods stored. Such drafts eligible for acceptance by member banks would also
be eligible for rediscount at Federal reserve b~iks, if of proper maturity.
Under the ruling of the Federal Reserve Board just mentioned access to
the premises where the goods are stored is not pel'mi tted to the owner of the goods
for inspection or for any other purpose. This condition of the previous ruling
cannot be met in the storing of cotton seed. Due to the fact that cotton seed is
subject to deterioration from heating, cotton seed oYmers storing their seed in
w~·ehouses are accustomed to visit these warehouses from time to time for the
purpose of inspecting the seed. In order, therefore, that bankers' acceptances
drawn to finance the storage of cotton seed may be eligible for rediscount, a
modification of the principle stated in the Board's previous ruling with reference
to the owner's access to the goods is necessary.
I
...
.
8B
- 2-
X-4657-a
After a consideration of these questions the Board now rules that Bankers) acceptBnces secured b:r cotton seed stored in a
warehouse ow:.1ed. ·oy t::e owner of the cotton seed but
leased to an inde~endent public warehouse corporation
-under bona fide lease, the corporation ass1.1ming exclusive co~1trol and rnaaagement of such warehouse and
operating it as a :r,r~blic warehouse bonded and licensed
under. the UnHed States Warehouse Act, may be eligible
for ::cediscow..J.·~ at a :Federal reserve ba::1k, although the
owners of ·the cotton seed are permi ·~ted access to the
seed i:a storaf.e at :}:i.'Ojier and reasonable tj.mes for the
}m.:;O)ose o:.1ly of ins::_Jecting the condition of the seed,
providecl ·that on all such occasions the consent of the
indepe:1dent wal·enou~:;e corporation is first secured and
that tl1e ow-.o.er of the seed or his roprese:1tative is accompanied ·o:r a proper representative of tl1e warehouse
corporation.
It should ·oe unders'i;ood that suc:h acceptances must be of proper
rnaturit:r and must in a.ll otl:.e:r· res~'!ects corr.pl~· w~.tl1 the pertine:J.t provisions of
the Federal Reserve Act and the :aoarcl' s Ref,ulation .A. In ad.di tion, it is necessary that the cottoJ.1 seed upon wl1.ic~1 such acce:pt.:-mces are based be stored under
such co:1di tions as to protect it a.doouately fro:n deterioration.
The Federal Reserve :Soard is informed that t11e Department of Agricul tu.re is soon to issue a. special re&'Ulation governing the storage of cotton
seed by warehouses licensed under the United States Warehouse Act. This regulation, a te:1 tati ve draft of w~"1ich has ·been carefully considered at a conference
between representatives of the Department of Agriculture and the Federal Reserve Boa:.·d wUl, it is believed, provide adequate safeguards. If the storage of
cotton seed complies with this regulation.which is to be promulgated by the Degoxtr:lent of .A_;·riculture, it will be deemed by the :Soard a storage under such
conditions as to protect the cotton seed adequately from the deterioration within
the i;;ea.nii:ig of t:1is ruling.
~1e question whether
c~edit st~"1dpoint is, properly, a
bankers' acceptances are de~irable from the
question for determination by the Federal reserve bank to which the papeT is offered for rediscount rather th~~ by the Federal Reserve 3oard.
X-4658
FEDERAL E:SSERVE :SOARD
STATEMEi.~T FOR THE PRESS
For
i~~ediate
90
.August 25, 1926
release
CO!IDITIO::T OF ACCEPT.Ai"'l'CE MARKET
July 15; 1926
to August 18, 1926.
Acceptances:
The market in bankers• acceptances was dull in all of the principal centers during the last half of July and the first half of August, a period during
which the bill market is usually less active than at any other time of the year.
Very few new bills came into the market and the weekly volume of purchases by reporting dealers in New York was the smallest since September of last year.
The de-
man.d for bills was also slack although there was an increase in purchases for foreign accounts.
Largely as a result of these foreign purchases and of sales to Fed-
eral reserve banks, New York dealers• portfolios were reduced by August 18 to the
lowest figure reported for a year.
The bills purchased by the reserve banks were
based chiefly on importations of sugar, wood pulp, rubber, wool, and coffee, and on
exports of cotton and grain.
Immediately after the advance in the discount rate
of the Federal Reserve Bank of Now York on AugUst 13, market rates on bills of
all maturities, most of which had remained unchanged since June, increased by
·•
1/8 of one per cent and on August 16 by a further 1/8 per cent; but these ad-
'
vances were followed by no notable change in the condition of the market.
The
table below shows the rates in effect on bills of various maturities at the beginning and end of the reporting period.
ACCEPTANCE BATES IN THE NEW YORK M.AR.lCET
Maturity
30 days
60:day.s
90 days
120 days
150 days
180 days
July 15, 1926
Bid
Offered
3 1/8
3114
3
3
3
3
3
3/8
l/2
5/8
5/8
3/4
3 1/4
3 3/8
3 1/2
3 1/2
3 5/8
August 18, 1926
Offered
Bid
3
3
3
3
l/2
5/8
3/4
7/8
3 3/8
3 1/2
3 5/8
3 3/4
4
3 7/8
4 1/8
4
X-4659
F E D E P A :::,
.. : "'-'· S E R V E
:B 0 A R D
9:t.
S~'.AT~lfEliT :B'OR THill PRESS
For Release in !,1orning Papers
Friday, August 27, 1926.
The following is a S"WI!ffiary of general business
and financial conditions throughout the several
Federal reserve districts, based upon statistics
for the man trs of July and .Au.gus t, as contained
in the forthcoming issue of the Federal Reserve
Bulletin.
Production in basic industries and factory
en~loyment
and pay rolls declined
slightly in July, but the decrease in production was smaller than is usual at this
season.
Wholesale prices, after a further decline in July, were at the lowest level
in nearly two years.
Production.
--The Federal Reserve :Board's index of production in basic industries, which is
adjusted for seasonal variations, increased about one per cent in July.
Declines
in the output of iron and steel ru1d anthracite, and in the activity of textile mills
were larger than the. usual
seaco~al
reductions, while the production of flour, cop-
.
per, zinc, cement, and petroleum increased.
further and was smaller than a year ago.
The manufacture of automobiles declined
Factory employment and pay rolls showed
the usual seasonal decline in July, which·is due largely to closing for stock-taking
and repairs and to summer vacations.
Declines were noted in nearly all the im-
portant industries for which reports were received, with the exception of leather
and shoes and certain food products and building materials.
:Building contracts
awarded in 37 states east of the Rocky Mountains declined in July for the fourth
consecutive month and, as in Juno, were smalJ..er thnn a year ago.
Figures for the
first three weeks in August were also below those for the corresponding period of
last year.
The
~rincipal docre~ses
were in the
~ew
York and Atlanta districts.
The composite condition of all crops, as reported by the Department of Agriculture, shows an improvement of 2 per cent in July owing largely to the increase
in the expected production of wheat. Cotton production, on the basis of August 16
X-4659
- 2 -
92
conditions, io estimated at l5,d3,C')U bales, compared with an output of 16,104,000
in 1925.
Trade.
Volume of trade at wholesale and retail showed a further seasonal decline in
July, but co~ttnued to be large. Retail trade was larger than a year ago, while
wholesale trad.o was· slightly smaller.
Sales of department stores and mail order
houses declined less than is usual at this season and were 4 per cent ru1d 13 per
cent, respectively, larger tha.'l i:J. July of last year. Merchandise inventories at
dopartment storos continued to decline in July and at the end of the month were
:i.n about the same vol1ime as last year.
Stocks of meat, dry goods, and shoes carried
by wholese.le firms were smaller than a yea:r ago but stocks of groceries, hardware,
ru1d drugs were larger.
Shipments of goods by railroads were maintained at a high level during July
for nearly all types of commodities. Loadings of grn.in were larger than for any
month since October, 1924, and wGre in record volume for July.
Priceo.
The Bureau of Labor Statistics index of Wholesale commodity prices declined
about one per cent in July to the lowest level since September, 1924.
Price'~.
"i
declines 'l'ere sho'V'm for most cominodity groups, particularly farm products and
while prices of steel and other metals advanced.
food~.
In the first three weeks of August
the prices of grains, cotton, and rubber declined further, while cattle, hogs,
potatoes, coal, and coke advanced in price.
Bank credit.
Between the middle of July and the middle of August, total loans
~'1d
invest-
ments of member banks in leading cities increased slightly, reflecting a growth in
the seasonal demand for credit for commercial purposes.
Loans on securities on
August 18 were in about the same volume as a month earlier, while the banks'
investments declined.
X-4659
- 3 -
•
ga
:Between J~.l.ly 21 and .Allgust 18 discounts for member banks and the holdings of
acceptal1ces ir,croasod con1::idorably, while Uni t~d States security holdings were
somewhat reduced, with tho consequence tlw.t the total voJ.un1e of reserve bank credit
increased by about $50,000,000.
Money market conditione bec&Je firmer in August.
The rate on commercial
paper, which was 4 per cent in June ~~d July, increased to 4 1/4 - 4 1/2 per cent,
a...~d the rate on
90-day bankers 1 !\Cceptances adva...J.cod to 3 3/4 :per cent.
count rate of the l!'ederal Reser~re 13ank of Now York
3_
.._,.,.,
1/2 to 4 per cent,
...
W<lS
The dh-
advanced on August 13 from
_,.l'
94
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
TH.E FEDERAL RESERVE BOARD
X-4661
Auo-u.st 30, 1926.
SUBJECT:
Bills and Securities of Finance
and Crsdit Companies.
Dear Sir:
The Board in its letter.St. 4720 of
November 12 1 1925. requested that at the end of
each month a report be submitted regarding bills
and securities of finance and credit companies
held by member banks based u:pon reports of examinations and credi.t investigations received during
the month.
Since the inauguration of these monthly reports examinations or credit investigations
have been conducted in the case of practically all
member banks, and accordingly ;y·ou are authorized
to discontinue these reports beginning with the
month of Se~tenber.
Very truly yours,-
J. C. Noell,
Assistant Secretary.
TO ALL FED:@RAL ;RESERVE AGENTS
I
X-4662
95
THE RELATION OF THE COUNTRY BANKER TO TIG FEDERAL RESERVE BANK
(An address before the Kentucky Bankers Association
at Louisville, Ky., Sept. 16, 1926.)
by
Geo. R. James
"' "' *
MR. CHAIRMAN, LADIES AND GENTLEMEN:
As a member of the Federal Reserve Eoaru, nothing has given
me as much concern as does "The Relation of the Country Banker to the Federal Reserve Bank", and my one regret is that so few of the country bankers
•
have availed themselves of the priviiege and opportunity of becoming members.
I
s~y
this because of my regard for and my unbounded faith in the Federal
Reserve System.
I feel that all of you agree with me in the belief that it
is the greatest and strongest banking system in the world and that its usefulness, soundness and success have been demonstrated both in times of war
and in times of peace.
In co m idering its functions, I always try to look at the
System not from the viewpoint of a banker altogether, but more from the
standpoint of the public.
For, while the System deals with the public almost
entirely through its member banks, the question of how the public would be
benefited was of paramount interest and vital importance in its creation
and its continued existence depends entirely on whether or not the public is
benefited.
I, therefore, regard the public's interest in, and the public's
opinion of, the System as the one great consideration.
I do not share the opinion one frequently hears to the effect
that the Federal Reserve System is an independent organization and that it
-2is owned by the member banks.
X-4662
I feel that the public has quite as much
interest in the Federal reserve banks as have the member
selves.
B6
This public interest centers in our Government.
baru~s
them-
"That Government
of the people, by the people t for the people", ·and of which the Federal Reserve System is a vital part.
As a citizen, the country banker, whether his bank is or is
not a member of the Federal Reserve System, has an interest in the System
growing out of his citizenship.
True, the reserve denosits of the member banks may well be
said to be the foundation of the Fe.deral Reserve System, and it is also true
that the capital stock of the reserve banks was supplied by the member banks.
But we must not overlook tho fact that the Act of Corgress, under which the
System was established, provided at the outset that "Should the total subscriptions by banks and the public to the stock of said Federal reserve
banks, or any one or more of thorn, be, in the judgment of the Organization
Committee, insufficient to provide the amount of capital stoCk required
therefor, then and in that event the said Organization Committee shall allot
to the United States such an amount of said stock as said Committee shall
determine."
Then, too, let us for a moment consider "The Division of
,
Earnings of the reserve banks".
The Act says -
"After all necessary expenses of a Federal reserve bank
have been paid or provided for, the stockholders shall be
entitled to receive an annual divident of six per centum on
the paid-in capital stock, which dividend shall be cwnulative.
After tho aforesaid dividen4 claims have been fully met, the
not earning::~ shall be paid to the United States as a franchise
tax except that the whole of such net earnL1gs, includil-,g
those for the year ending December thirty-first, nineteen hundred and eighteen, shall be paid into a ~urplus fund until it
X-4662
-3-
~)7
shall amount to one hundred per centum of tho subscribed
capital stock of such bank, and thereafter ten per centum
of such net earnings shall be paid into the surplus.
11 Tbe net earnings derived by the United States from
Federal reserve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against
outstanding United States notes, or shall be applied to the
reduction of the outstanding bonded indebtedness of the
United States ucner regulations to be prescribed bt the Secretary of the Treasury.
Should a Federal reserve bank be
dissolved or go into liquidation, any surplus remaining,
after the :payme:1t of f;l.ll debts, dividend requirements as
hereinbefore provided, and the ~ar value of the stock, shall
be paid to and become the property of the United States and
shall be similarly applied".
The
earni~gs
a~plication,
under these provisions of the law, of the
of the System in the past, results in the capital account of the
Reserve System being one-third under the
ownershi~
of the member banks a1n
two-thirds (representing the surplus) belonging to the Treasury of the
United States.
Neither must we forget the fact that the Government stands
squarely behind the notes of the reserve banks, which notes play such an
important part in providing a currency for the nation.
Even though by any
combination of circumstances all of the gold held by the System should be
taken away and out of the country, still those notes backed by the integrity
of our Government would be worth one hundred cents on the dollar.
It is perfectly clear to my mind that the reserve banks were
not created to make money either for
thems~lves
or for the member banks be-
yond the six per cent interest on the money invested in the capital stock.
It is equally clear that the System was designed to be an aid to agriculture,
industry and commerce,- or, in other words, the public, although, as I said
before, it functions through its member banks.
The law does permit the Federal reserve banks to perform
X-4662
-4-
certain services for the me,nber banks without charge and at the expense
of the reserve banks because it was believed that the reserve banks
could reduce the costs of performing these services, and I can tell you
that the services now rendered by the Federal reserve banks are performed
at a saving in cost that is far greater than was originally anticipated.
The cost of the collection of CheCks, transfer of funds, and handling of
currency by the Federal Reserve System is only a small percentage of what
those fu:ootions
cost when performed by individual banks.
that are possible through mass production
appl~
The economies
with equal force in the
Federal Reserve System as they do in the plants of the Ford Motor Company.
The major earnings of the Federal reserve banks arise out
of the interest charged meniber banks when the meniber banks borrow.
They
are increased or diminished only as the requirements of the member banks
dictate.
And, perhaps it may be important to state that tho facilities
of the Federal Reserve System are available for the smallest and for the
largest member banks on exactly the same terms and conditions.
I am giving you this information because I thirik it is just
and right that you should ktx:>w tha.t the so-called free service which the
Federal Reserve System renders to its members is in the last analysis given
at the expense of the public, and I feel that this great American public
should he in a position to inquire (1) whether or not .it is getting the
·benefit of these services, and (2) if not, why not?
A good part of my time has been taken up in the study of the
question "why so many banks do not belong to the Federal Reserve System",
but I am still unable to get anything like a satisfactory answer to this
· problem.
The fact is that when I sumup the replies I have seen or heard
99
X-4662
-5-
I reach the conclusion that an alibi or an excuse has been offered in
lieu of reasons.
It appears to rre that a good many bankers, like a great
many business men and individuals, have the habit of looking at every•
thing through a pair of spectacles with the dollar sign on one lens and
the personal pronoun
11 ! 11
on the other.
Their vision is both narrow and
distorted and this perhaps accounts for the attempt so many people make
to go through life on the principle "How much can I get and how little
can I give!"
Oh, what a terrible mistake they make!
If they would
only take off the spectacles and get a clear. broad view of this
wonderful universe they would see that those who have achieved the
greatest
s~ccess
operated on the one and only principle of service which
is just the opposite.
No matter what one's avocation may be, to be successful
he must have for his first and most important consideration the interest
of the
CllS tamers.
Not 11 how much can I &tl_11 but
11
how much can I give"
and "how much can I do 11 to extend my service to the greatest numbor of
people.
One of the popular answers to tho inquiry as to why
•
non-member banks do not join the Federal Reserve System has been that
the System does not pay interest on reserve deposits, whereas, by
keeping their reserves with some city correspondent bank they do receive interest on their bal&lces;
in consequence, in the one case they
get no return on their reserve balances, in the other, they make a
X-4662
-6profit.
This statement always brings to my mind tho story of tho
two negroes who were passing a graveyard.
and tho other couldn 1 t.
One of them cOQld read
Tho educated follow was entertaining his
companion by reading the epitaphs on tho tombstones.
came to one v.vhich said
11
He is not dead, but sleepeth11 •
fellow said - .· 11 Umph, big boy, that white
1
Finally, they
ma..'1
The ignorant
ain 1 t fooling no body
copt hissef. 11
~
good friend Dr. Tait Butler once said that the
greatest agricultural implement ever invented was a load pencil, so
to a banker who springs that sort of an answer as his reason for not
joining the Federal Reserve System, I offer the suggestion that he
get himself a supply of lead pencils not to use as agricultural implements but to sharpen and usa in analyzing his own affairs.
I could go into details in explaining to you just
why this suggestion is offered but my time is too limited and I will
only say in this connection that the city banks who act as correspondents for countty banks have quite a way of requiring
11
commen-
surate balances 11 and there are mighty few of them but what mak:o a
profit out of the country banks account.
Every now and then we have the suggestion offered
that the reserve banks Should give imnediate credit for items
de~
iOO
1_01_
X-4662
-7-
posited with thom by their members on the theory that
11 i t
would not
cost the System anything to do so", but any one who holds this view
is very greatly mistaken.
Experience has shown that member banks
borrow from the reserve banks almost entirely for the purpose of
replenishing their required reserve balances and the moment their
balances at the reserve banks are in excess of tho legal requirements
the excess is immediately used to retire the borrowings.
If you will notice the "Report of Condition of the
Federal Reserve Banks" published weekly in the leading newspapers
of the
as
11
you will find that the item listed in the assets
c~ntry,
Total Bills Discounted" very closely approxirrntes the amount of
the item listed in the liabilities as "Deferred .A.vailabili ty Items 11•
In other words, the direct borrowings of member banks• except for
infrequent peak
periods~
To give
11
offset the
II float"
•
immediate credit" would cut the earning
assets of the reserve banks very materially.
last report available, it
To replace these
market
w~ld
11
w~lu
Oalcuin~od
on the
mean approximately fifty per cent.
direct borrowings" by purchase:, in the open
cause inflation that I
~hould
regard as both unthink-
able and unpardonable and it would also work a tremendous hardship on the com:rercial banks of the country by unnaturally forcing a
reduction in rates.
Possibly the effect upon the country banks would be less
i02
- 8 -
X-4662
noticQable at the start than would be the effect upon the larger city
banks, but you may be certain it would reach even the smallest and most remote banks through competition in one form or another.
It is extremely difficult, if not impossible, to get accurately the effect "giving immediate credit" at the reserve banks would have
on general interest rates but
of more than one per cent.
my
guess is that it would cause a reduction
So, from the standpoint of the commercial banks
only and without regard to or for the Reserve System, see what price would
be paid for getting this immediate credit.
Say a bank with $200,000.00 of
deposits and loans amounting say to $150,000.00, - such a bank might reasonably be expected to have something less than $5,000.00 of items in process
of collection, which at four per cent - the present rediscount rate - would
mean that "immediate cred:l.t 11 resulted in a aav:\,.ng of $200.00.
But as an
offset to this, consider the meaning to that bank of the forced reduction
in interest rates to its customera.
If the reduction was one per cent it
would make a net loss of $1,300.00 to the bank.
This is among those things
that should be considered and figured on with a very sharp pencil.
Another reason frequently offered by country bankers in the
South for not joining the Federal Reserve System is that they are denied
the right to charge exchange when remitting for their checks.
banker asked in
my
One so-called
presence on one occasion 11 What right has the Federal Re-
serve System to deny
my
bank the right to charge exchange7 11
To this I very
promptly answered by asking him the question - "What right have you to deduct
anything when paying a customer's check that is presented either over the
counter or through a Federal reserve bank?"
It ts trae that in tba old a.qa· prto~ to - . eatablt. . .
fl3
ot the Jed.al leatWn $7ftem it ...
pq their
cu.atomea-•'
o~ wha
.
neceoaey fo¥" bake,
the pape
ot
in order to
the check lived at a. dia•
taut. point, eith_. to ah1t;t the currccy or elae raaintain balances with
.
~
coneQOndent baalD aplaat Which
could dt'aw and, <>f course, in
either case this coats money end the banb 'ftra e.ntltlecl to collect for
the aervice.
Bo.t with· the comtac of the Jederal leacve stat• thi•
!'he coat of ahippinc cutrenc1 t• absorbed by the
ai tua.tion changed.•
reserve bank and it 11 not only leal e:x;penaive 'but it ia aa.fer and more
.
.
convenient for a bank to· pq the checks ot ita cu.atomer when they are
.
pre1ented throup a reserve b&Dk than whc preacte4 bJ the cuatomer at
the teller's window.
oyholf, the Supreme CounIf of tlle t1ni ted States baa aet tled
.
~
the question and baa eata'bliahed the "riebt", onde aDd tor all. at the
requirement that manber bank::a ah$1.1 !r.Ut at
collection through the reserve
·pall
tor all checq ·act for
'bank~~.
Jurthermoi"Ct, this ifl4r:bt ancl principle has 'been recOgnized
by
ninety per cent ot ali 'bankl in the tl':lx1te4 ltatM, .·and.· to4q e"'er;r
ba11k tn· the Firat, Secollcl·and. Third Jtederal·:aeaer._ -.wiota 1• a
ber bank or ia on tb.e par liata of tbe reaerve:
mem-
baaakl.
I undlretand. there are onl¥ 16 out
·ot the
458 bankS in tlle
State ot tentuck:v not on the ·~ temi ttln$ list" $\4 I congra\ulat• the
people of your State accoN.ilJ&ly.
It
aeea quite possible that lome c0.\17' ·batllta have been
kept out of the l'ecWtal Ileaerve S;rete
'becaU8'e thW dld not· 1f•t to
diarupt their re-latfonaS.p with thetr city cos-r. . . . . .tl.
1M chance'
j_Q,l
X-4662
-10-
are that the relationship has been and is most pleasant and in the main
satisfying, but, as I see it, joining the Federal Reserve System does not
rnee.n that this relationship should be broken, not by any means, although it
would make a change in the nature of the relationship and a change which in
my
opinion can and should be of advantage to both parties.
Undoubtedly,
the city correspondent bank can and will find a way for rendering a service
th/1·~
will fully justify the country bank in carrying a balance.
I do not for
a minute advocate cutting out the city corres:'?ondent, bu't I do urge the country
banker to mru:e available for his community every facility the Government provides as an aid to the business of the country.
Another thing, I wonder if "the bankers, particularly the
country bankers, realize what a great change has taken place and is now
taking place in the business methods and condi tiona of this entire country?
Think of the evolutio:!:l i:r.. methods of transportation in the past twentyfive to thirt;y years.
~hink
buggy and the steamboats.
of the passing of the ox cart, the horse and
Recall for the moment the coming of automobiles,
and good roads, the increased use of the telephone and the inauguration
of the rural postal service.
~:~,.res
c:;:·u
Then think of the development of chain
and the growth of large department stores in cities and what these
doing to the crosE:-roads storekeeper and the small town merchant.
Dorlt
overlook the shifting of the population from farms
to cities, and keep your eye on the cooperative movement and its effect on
the marketing of agricultural products.
All of these tnings have a direct bearing and must be taken
X-4662
- 11 -
into account when you are figuring on whether or not it pays to belong:105
to the Federal Reserve System, and it would be well to take notice of
them whether you consider joining the System or not for they are vital
factors in your future, - you may be certain of that.
After all, as I see it, the changes that are taking place
in both the business and social life of the nation are only the working
out of naturo 1 s law of tho survival of tho fittest.
Tho American pub-
lic not only demands but it is entitled to the best and the individual
..
or the organization that provides the best service is the one who will
survive.
And this applies to banking just as well as it does to any
other line of business.
You who read the newspapers know what recently happened
•
to a chain of nonmember banks with more than a hundred members in the Atlanta
District.
That outfit, headed by the Bankers Trust
affiliated with the Federal Reserve System.
Co~any,
was not
On the contrary, they were
against tho System; they were leaders in the fight against 11 par clearance of checks 11
,
and declined to keop their reserves in a reserve bank.
When the strain came and tho need of their reserves developed because
of a decrease in the deposits of some of the banks in the chain, those
reserves were not available and the crash
followed~
'The banks involved
were srooll, it is true, and the damage measured in dollars was relatively
1ight, but think, my friends, of the tragedies that followed in those
hundred and more communities whose hard-earned savings were wiped out.
It seems to me most deplorable that such a large proportion
of our people should be denied the financial protection and benefits created for them by the Government, simply because a large group of so-called
- 12-
X-:-4662
bankers a.ro asleep on the job.
Already the Atlanta Constitution, one of the great newspapers of the
Sout~,
is discnssing the urgency of forcing by law all
commercial banking institutions into a National System under Federal
supervision.
Certainly the discussions of branCh banking and the failure
to pass in the last two sessions of Congress the so-called McFadden Bill,
designed to Check the growth of branch banking in this country, should
cause the officers of independent unit banks to wake up and endeavor to
give the communities that are dependent upon them for banking facilities
,~
every advantage in banking service that is now available.
Every State bank with requisite capitalization and proper
management is not only entitled to membership in the Federal Reserve System but has been and is constantly being invited to join the System.
I
have told you what I thought of the reasons I have heard for not joining.
I wonder what will happen when the depositing customers begin to study
the situation and to ask questions?
I do not for one moment mean to say that being a member of
the Federal Reserve System guarantees deposits, nor does it insure the
public and the depositors against dishonest or incompetent banking, but
I do say that WHEN a bank is a member of the Federal Reserve System and
its business is conducted within the limitations and restrictions laid
..
down by the law and the rules and regulations of the Federal Reserve
Board, THAT BANK CANNOT FAIL.
There· have been a great many bank failures in the United
States during the past few years.
A small percentage of them - and a
small percentage only - have been members of the Federal Reserve System,
but NOT ONE SINGLE ONE ·Q! THm failed that had lived up to the letter
and spirit of the law and the rules and regulations of the Federal
X-4662
- 13-
Res·erve Hoard.
1_0'(
Another thing; a very careful analysis of the earnings of
the something like .thirty thousand banks in the United States shows
that the member banks who live up to the letter and the spirit of the
law and the rules and regulations relating to the Federal Reserve System
make more money on the capital invested than do those banks on the average that are not members of the System.
As a result of my study of this great problem, I am willing
to say that it is my judgment that if and when a commercial bank finds
out that it cannot make money for its stockholders as a member in good
standing of the Federal Reserve System, then the best thing that bank can
do in the interest of its depositors, its stockholders and its community
is to liquidate and get out of the wa;y for certainly there are too many
banks in this day and time for the business now available,
Lot me, in conclusion, urge you to look upon the law and
the rules and regulations of the Federal Reserve Board not as restrictive
measures, intended to harass and handicap, but as a standard of good
banking, for, after all, that is exactly what they are.
It may seem to the nonmember country banker that the require4
mente of the reserve banks, relative to the paper that is to be discounted,
are difficult to meet, but let me assure you that
is not the case.
It is like it was when I began to realize that if I was to keep peace in
my family I would havo to bey an automobile.
I just hated to give up my
horses, and then, too, I feared that I never would be able to operate a
car.
•
One da:y I realized how many: people there were driving cars,
then said to myself surely if other people can learn I can too, and
with the determination to run an automobile or die in the attempt, my
fears vanished, and I soon found that after all it was a very easy and
- 14 simple matter, and
~
was in -this way enabled to again toke my place on
the public highways.
Don't be afraid to ask your borrowing customers for a
statement or to insist that they carry a balance with you as a reserve
against the loan.
Surely you carry reserves against your obligations
to your depositors, not because it is the law but because it is good
banking.
Good for you as well as the depositor.
It is equally good for
you and for your borrowing customer to require him to keep a reserve.
Don't st·ick to the antiquated methods of getting your
accommodations for seasonal needs just because it seems to be the easy way.
I learned as a boy at Sunday School that the easy route was not the road
to salvation.
The future of the country banker will rest upon his ability
to meet changed conditions by adopting the new methods.
going to be an easy one by any means.
His road is not
Most likely it is and will be full
of ruts, but right here let me remind you that the only difference between
a rut and a grave is that one is longer and the other deeper.
Study your position and do not be ashamed to acknowledge mistakes or to learn from the experiences of others.
As Mr. Hubbard once
said, 11 While we are green we are growing and when we think we are ripe we
.
are beginning to get rotten 11 •
My last and possibly most important suggestion is that you
keep in mind the slogan of your own great Commonwealth -
•
divided we fall 11 •
Uni ted we stand;
.And then, if you have not already done so, join the
Federal Reserve System.
I thank you.
11
iOH
FEDERAL RESERVE BOARD
WASHINGTON .
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4664
September 7, 1926.
SUB,TECT:
Code Word to cover new issue of Certificates
of Indebtedness, Series TJ-1927, in telegraphic
transactions.
Dear Sir:
In connection with telegrnphic tr~~sactions in
Government·securities between Federal reserve banks, the
code word 11 :BEWNGING.I1 has been designated to cover the new
issue of Treasury Certificates of Indebtedness dated September 15, 1926, Series TJ-1927.
This word should be inserted in th~ Federal Reserve Telegraphic Code Book, fo],lowing the supplemental
code word 11 BEI.ONGETH11 , at the bottom of page 25.
Yours very truly,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF .ALL F.R.:B.ANKS •
•
...
....
1:10
X-4665
TRF.ASURY DEPARTlllENT
Office of the Secretcry
WASHINGTON
September 4, 1926.
T'ne Governor,
Feder~l
Reserve Board.
Sir:
You are hereby advised tlnt the Department has referred to the
Disbursing 01.0rk, Treasury Depo.rtment, for ~yment, the nccount of the
Bureau of Engraving and Printing for prepnring Federal reserve notes
during the period August 1, 1926, to August 31, 1926, amounting to
$109 1 983, ns follows:
Federt..l H.escrvo Notes, Series 1914
-1
$10
$5
$50
$20
$100
Total
7
850,000
New York
Cleveland
Richmond
100,000
Atlo.nto.
400,000
400,000
Chico.go
Minnoc.polis
100.,000
Ko.nso.s City
150,000
San Francisco 100,000
2,100,000
150,000
50,000
550,000
150,000
20,000
5,000
_1.00,00~
200,000
200,000
10,000
10,000
40,000
5,000
5,00_9_
15,000
300,000
1,000,000
60,000
·100,000
775,000
600,000
100,000
155,000
215,000
·3,005,000
3,005,000 sheets@ 36.60 perM •••••••• $109,983.00
The charges ugo.inst the several Fcdcrc.l Reserve Bo.nks o.re as
follows
New York
ClevelQ.nd
Richmond
AtlrmtD,
Clticc.go
Minner.polis
Kansas City
Snn Francisco
$
36,600.00
2,196.00
3,660.00
;:;8,365.00
21,960.00
3,660.00
5,673.00
7,869.00
109,983.00
The Bure!i;u o.pproprictions will bc reimbursed in the c.bove OJnount
from tho indefinite ~propric.tion "Propa.rt:'.tion ru1d Issue of Federal Reserve
Notes, Roimbursnblc", nnd it is recpcsted tht..t your Bonrd cruse such indefinite nppropria.tion to be reimbursed in like amount.
Respectfully,
R. w. Bnrr
Acting Deputy Commissioner.
.
1_j_j_
TR:;TIASURY DEP J.J.i.'l'I,:ENT
Office of the Secretary
WASHINGTON
Sel~ember
4, 1926.
The Gover nat:~
F,;det>l'd :tleserve Board.
Sir:
You are hereby advised that the Dc::,_;e.r·c1.1ent has referred to the
Disbu.rsine; Clerk, Treasmy Department, for payment, the account of the
Bureau of Engraving and Printing for :preparing Federal reserve notes,
Series 1918, during the :period August 1, 1926, to August 31, 1926,
amounting to $73.20, as follows:
Federal Reserve Bank of Atlanta.
1,000 sheets
$500
1,000 sheets
1000
2,000 sheets @ 36.60 :perM ••••• $73.20
T}le Bureau appropriations will be reimbursed in the
:;~,bove
wnount from the indefinite appropriation "Preparation and Issue of
Federal Reserve Notes, Reim1mrso.ble", and it is requested th..--.,t your
board oause such indefinite n.pproprio.t ion to be reimbursed in like .:omou.nt.
Respectfully,
R. W. Bc.rr,
Acting DeDuty Comrnissioner •
•
:11.2
( COPY )
X-4667
FEDERAL RESERVE BANK OF CHI CA.GO
Chas. L. Powell, Counsel,
Continental and Commercjal Bank Bldg.
CHICAGO
Au.gu.s t 11, 1926
Mr. Walter Wyatt, General Counsel
FedeiRl Reserve Board,
Washiilgton, D. C.
My dear Mr. Wyatt:
...,
Yoa perhaps will be interested to know of a case
which I brought for the Federal Reserve Bank of Chicago out in
one of the State District Courts in Iowa. The principal defendant
was the National Surety Company which is a corporation organized
under the laws of the State of New York. That Company took
appropriate steps and removed the case from the State Court to
the United States District Court for the Northern District of
Iowa alleging as a ground diversity of citizenship and, in that
connection, alleged that the Federal ~eAerve Bank of Chicagp was
a citizens of Illinois within the mer:L:.ling of the Judiciary Act.
i
I filed motion to remand. to the State Court on the ground
that Federal Reserve Bank of Chicago was not a citizen of any State.
My motion was sustained a'1.cl the case was remanded but no formal
opinion by the Judge was rendered.
I,
I relied upon the case of Bank:ers Trust Company v.
Texas and Pacific Railway Co., 241 U. s. 295, and State of Texas
v. Interstate Commerce Commission, 258 U. S. 158; and I have no
doubt of the soundness of the conclusion of the coart that the
Federal Reserve Bank under the present condition of the law cannot
be considered a citizen of any State.
Yours truly,
I
,>
(signed)
CLP.
Chas. L. Powell
Chas. L. Powell,
Counsel.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4668
September 15, 1926.
SUBJECT: Expc:1Se, Main Line, Leased Wire System,
August, 1926.
Dear Sir:
Enclosed herewith you will find two mimeograph
statements, X-4668-a and X-46.68-b, covering in detail
operations of the main line• Leased Wire System, during
the month of August, 1926.
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,. sendir.g duplicate 0/D to
the Federal Reserve Board.
Yours very truly,
Fis cal Agent.
Enclosures.
TO GOVERNORS OF ALL F. R. :aANKS EXCEPT CHICAGO.
v
X-4668-a
REPORT SHOWING CLASSIFICATION AL'JD NUMBER OF .WORDS TRk"fSMITTED OVER MAIN LINE
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1926.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cl~veland
Richmond
Atlant&
Chica.go
St. Loui>3
Wnneapolit
Y.JJ•:lsau City
Dallal
Sf:m Fra.nciaco
To·~li.l
30, 7~
126,175
35,781
72,625
44,178
59 ,09~
97,717
84,789
35,549
70,915
51,489
98,56}
807,617
F.R.Board
Toto.l
Por cant of Total
Words sent
by New York
chargeable
to other
F. R. Banks (1)
Total
~85
31,315
126,175
36,466
1,570
2,836
3.338
2,589
2,047
1,905
2,395
4,303
2,247
24,490
4 7,014
,2, 4j4
100,306
86,836
37,454
73,310
55.792
100,81()
832,107
575
7!~,195
~L~
1,125,468
100%
Treasury
Department
Business
War
Finance
Corporation
Business
3,5044,cso
2,660
2,971
2,921
3,697
4,301
3,941
1,469
3,31+2
1,591
5,}18
39,795
~J_671
~,4bb
5-82%
25,
.02%
Net
Federal
Reserv9
Bank Bus in es a
27,811
122,095
33,806
71,224
44,093
58,737
96,005
82,895
35,985
69,968
51+,201
95,492
792,a12
26~~
1,059,7
94.Hi%
(*)
Thede percenta.geil used in calculating the pro ra.ta. sh<1.re of leased wire expense as shown on the
accompanying statement (X-46•8-b).
(1)
Nunber of words sent by New York to other r. R. Banks for their sole benefit charged to banks indicated, in accordance with action taken &t Governors' Confer.uce November 2- 4, 1925.
Per cent of
total bank
Busineu(*)
3-51
15.41
4.27
8.99
5-57
7.41
12.12
10.46
4.54
8.83
6.84
12~65
1CC.C0
..,
J
>
X-4668-b
REPORT OF EXPENSE W.AIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, AUGUST, 1926.
/
Na.rpe of Bank
1
'
Bq'<>ton
N~" York
P.hi lade lphia.
Cleveland
Operators'
Salaries
Operators'
Overtime
Wire
Rental
$26C.vC
$260.00
1,100.16
2 1 b. 66
... r
$21.00
1,121.16
216.66
284.50
185.00
255.00
4,172.90
272.00
183·34
284,50
~i ~ h.'Xlon d
185.00
.J,1;-.La.nta
255.0J
Chic~go
(#)4,172.90
St. Lou:i.s
272.00
Minneapolis
183-34
:&.mll!aS City
275.64
:Oa11J.s
251. J::San Franci.;co
3"(C.Cv
Y'ederal Reserve Bos.rd
Total
$7,826.20
Tots.l
Expenses
275~64
$15,339·53
$21.00
251.CC
37v.CO
15,339·53
$15,339·5j $23,186.73
(a) 1.354. 90
$21,831.83
Pro Eata
Share of
Total
Expenaa
Credits
$ 7S6. 30
3,364.28
932.22
1,962.68
1,216.03
1,617.74
2,646.02
2,283. 61
991.16
1,927-75
1 1 L}9}, 30
2,630.74
.~ 26-:. cc
1,121.16
216.66
254. 5G
135o0(..
255.00
4,172.90
272.00
183.34
275.64
251. (;:;:,
370o00
$5(;6. 30
2,243.12
715.56
1,678.18
(&}1,235· 70
. 1,362. 74
(*)1,526.88
2,Cll. 61
S07 .82
1,652.11
1,242.3C
2,26o.74
:t21 ,831. 8 3
;'(,7 ,547. 20
$15,716.18
(b)l 1 226.8S
$14,189.30
(&) Inc:::.udes ;~204. 67 fer br.l!U'lCh line business tra."l.ami tted ever rr..n.in line circuit.
(#) Includes salaries of W&~.shington operators.
(*)Credit.
(a) Received $1,348.72 from Treasury Dept., and $6.18 from War FinB.nce Corpora.tion covering
business for the month of Auguat, 1926.
(b) .A,...'Ilount reimbursable to Chicago.
Payable to
Federal
Reserve
Board
:11.6
X-4569
FOit THE DISTRICT OF lmB:BASKA
1<1\~B
PLA.TT:Bl DIVISION.
-----------·----·-------------...·--------·-----. War Finance Corporation,
. Plaintiff
-vs.William E. Duff <and .
M. :F. Duff,
Defendants.
----------------------------------------IDstruct iOns to .the
J't'J:q
:By the Court
J. W. 1foodrough, Judge.
Ohaa. '1. Pearsall,
Reporter.
i i.i-""-1
- I
X-4669
TEE COURT:
Gentlemen of the Jury·:
In this case at the conclusion of
the testimony the plaintiff has moved for judgment for the amount of
the note sued on, with interest as provided in the note.
.•
The evidence
does show beyond question that plaintiff is entitled to judgment for
:
at least that part of the note as to which no claim of :payment is made,
so, in any event, nlainti:::'f should have judgment for that amount,
but his motion at the
·1rose~1t
time, and the motion which I will now
consider, is for judgment for the full a.'!lount of the note.
The defendants do not move for a directed verdict but take
the :position that there is at least one disputed fact on which they
should
~ave
a verdict of the jury, and that is upon the question of
the conversation between the defendants and one, Irving M. Hall, and
one , Mu.rphy.
Now the situation qppears to be that by act of Congress there
has been established a War Finance Corporation and that, among other
things, the War Finance Corporation, on conditions specified in the act
are
e~owered
to make advances not inconsistent with the act to banks
which may have made advances for agricultural purposes.
Pursuant to
the act and the establishment of the War Finance CoruoratiOJ.l it
that plaintiff did 1nake to the First National
Ba~c
~pears
of Gering certain
advnnces evidenced by writings ru.1d by the testimony of witnesses, and
that as collateral secari ty various notes were taken into the actual
custody of the War
Fina~ce
Corporation, amongst others the note exe-
cuted by the defendant in this case, being the note sued on.
In the
act power is given to make regulations concerning the transaction of
1_18
X-4669
-2-
this business, but no regulations are called to the attention of the
court, and the case comes on as one in which the government engaged in
a business that is ordinarily private business, asks that the same
rules be applied to its private transactions as are applied to transactions between individuals similarly occupied, and it would
such are the rules which the court must
ap~ly
that
to the case at bar.
It is undoubtedly the general rule of the Law
..
•
se~m
Mercha~t,
and
part of our law concerning notes and bills and negotiable :paper, that
the holder, whether as a purchaser of the whole title or as a holder
as collateral, is entitled to this
~rotection;
that it is the dut,y
of the maker of the note, when he makes either a peyment thereon or
a full
p~ent
of the note, to ascertain that the party to whom he
makes the payment has the note in his possession.
..
And it was undoubtedly
the rule of the English law, and the law originally, that the possession
of the negotiable instrument Tias tho only permissible evidence of
authority to receive payments, either partial or in full, thereon, and
this for a very clear reason.
One who considers the commercial insti-
tutions of the United States upon whicl1 its progress has rested is
immediately struck with the fundamental part that our Law Merchant has
.
played in our advance as a commercial and industrial nation, and one
of the principal things ie the protection wnich the law has afforded
to the holders of negotiable instruments.
Negotiable instruments impute
notice to those who make them of certain protections and certain rights
which accrue to those who, in the course of business, acquire them and
gain ownership of them.
It has been essential and found to be the only
safe rule that the maker of a negotiable instrument nms t anticipate
X-4669
-3-
:11.9
that in the course of trade it may at any momnt pass from the hands
of one person to the hands of another in remote narts of the country,
and, therefore, the rule was established, and has been affirmed in
innumerable decisions that the possessor of the negotiable instrument
is the owner to vr:1om :t_:>eymen t must be made.
this feature of
tr~t
But there is und.oub tedly
rule not inconsistent therewith: that the holder,
one who has either absolute or qualified
ownershi~,
at a
neg~tiable
instrument may constitute parties as agent to deal in regard to the
negotiable instrument, and the real question we have hero now is the
question of whose agent the First National Bank of Gering was when_it
accepted partial payment of the note in question, the note sued on.
It is ·undisputed that a
~oartial
payr:tent of some twelve hundred dollars,
as I remember the amou_~t - - it is not uncertain, it is fixed by the
evidence - was actually made by the defendro1ts to the First National
Bank of Gering, and that they ma.d.e that neyment in tho belief at the
time that the bank was the agent authorized to receive it, and in reliance upon that belief.
The Corporation
conten~is,
however, that as a
matter of fact, and as a matter of law under a.ll of the circur.mta.."lces,
that the Bank was not its agent but was the agent of the defendants,
and that is the inquiry here.
..
m1d I
•
here.
thi~~
determined as a
Regard must first"be
Now, that inquiry must be determined,
~tter
l~'ld
of law, upon the state of the record
to the nature of the busi:1ess of which
this was a mere i tern, one i ter.Jl a.;nongst ma:ay.
..
The evidence
establishe~
that U..."'lder the o.u.thorit;r of the .Act of Co:::gress the War Fina.."1ce CoTl!oration has made in this small terri tory th::.t w·e o.re concerned with here
at least thousands - had to.ke:1 over at le:1st thousa.:.1ds of notes nnd
·X-4669
-4-
120
obligations from the ag;ricult"<lral district, a:.'ld thono obligatio:1s,
negotiablcnotcs- I guons it may be stated exclusively negotiable
notes - were at the office of the War Finance Corporation in Om11m.
The War Fi~r:tce Corroro.tion did not e!Y9?loy any agents of its ovm clircctlyno !employees to attend to
t~1e
collateral notes, to the collection of them
and the givL1g of notices that such a quantity of notes v:ould necessarily occasion from tim<J to time, and the various dom-:rnds thnt ''Tould
have to be l'D[;l.de upon c;uch collateral notes.
It Cill'Jloyed one age:1t who is
l1ere before us, Mr. Murpi1y, who states what his authority and J.uties were,
and it is unquestimwd whr.tt they were.
He was a field IIJ.!.m of tho War
Finance Corporation whos~l duty it vrc.s to inspect the socuri tius behind
the collateral th:l.t wa3 cnken "by the War Finance Corn oration, to inquire
furth.cr as to tho valid.i ty of signatures, and. such as tlmt he was to do
in tho course of his em.plo;;r;nen t, and CL 1..1.ring tho -period of time we :r...o.ve
to co:midor hero did that L1 thousrmclf~ of i:1.st::mces.
failed then tho War Fin.ance Corr;or t:tti on l:tdo:,ted
attend to the collection of collnterul,
its blsi::J.ecs
~
did not.
b'~t
-~1cl
In case c. oo.nk
bad agencies to
in the ordinnry course of
T:1e evidence establishes clearly that that
business was curried on for the benefit of the Vlo.r Finance Co:r:rJoratim.:.
on o. large scale.
.
!{1r. Mu.rphy testified t:O..a t in tho terri tory in '.rhich
he 'ms concerned, which in
r1
comparatively smnll terri tory, that l.1e m::.d
hundred ba..."lks, connected with this 'business.
So that it is apparent
)
from the testimony that a very large
volu~e
of business was carried on
arising out of the large number of .collateral notes which the
War FLJ.ance Corporation had
~wesumably
e.t
.
X-4669
-5-
12:1
OIDD.ha, or at least away from the place 7.-bere the notes vrere given.
[l,
Now it seems to me that the court rrm.st k:nov1, as/matter of
co~~o~ k~owledge,
th3.t it is a large part of the business of banl::s to see to the collection
of thoir notes; that that business
i~volves
a great activity of a great
number of ?eople; even in one bnnk, the smallest bank, i t :r:rust be that
•
t~
considerable portion of the time of the banl-c is given to that very
matter of collecting its ::1otes, of dealing 1i'l'ith the makers of the notes,
and doing the thousu.nd a':'lG. one things that go to tne maintaining of the
...
integrity of notes in ba':'lks and the value tnereof as security.
evidence here shows tnat as to certainty a
~roportion,
very large proportion, of those collateral
~otes,
The
and probably a
they were secured by
chattel mortgages upon livestock of various kinds, and that as to those
securities tbe nature of the business was such that shipments must be
made at the time thnt in the course of the business it seemed advantageous
to do so.
So that as to that class of notes it is perfectly obvious
that there is a large amow"lt of work whic:i.1 must necessarily be done by
the owner of paper secured l?Y that ;;:ind of secu.ri ty, in maintaining the
integrity and value of the notes, work such as determining when shipments can be advantageously made under all the
cir~mstnnces,
in seeing
that they o.re made so as to best maintnin the socuri ty, and in seeing
th~t
the payments are made to the parties entitled thereto.
to me, therefore, that the
evide~ce
It seems
shovm, and it is obvious, thnt a
large omount, almost say a vast amount of such work was done in the
course of the transactions of t.ho War Finall.CC Corporation, and it was
done in such way, as Mr. Flanagan testifies, tbat the money cnme into
the War Finance Corporation, a.."'ld, when in full payment of the note 11hich
X-4669
-6-
.
11o.s held as collateral, went to the satisfc.ction of the note.
did not reach that point it was a
would be endorsed on the note.
~ayment
·,vhen it
on the note which in due course
Now, with a hundred banks in the terri-
tory actively engaged in doing this work we cannot avoid seeing n ')icture
of great ECctivi ty being carried on, n.-1.d
•
tm t
is a co:1ditio:1, of course,
r:hich must be known to ti1o War Fi:ila).lCO Cor::;>oro.tion.
It knew, of course,
that such activities i7ere going on, and undoubtedly obviously it acquiesced and u:1derstood
tl~~t
such would be tho course of business; that
there were two or three kinds of activities being carried on in its behalf to maintain its scclll'itios, and o.lweys carried on by the banks with
which it was doing lJusinoss and to which it made its advances.
Those
bauks made, to start in \7i th, a complete showing of their condition,
a..YJ.d then ti.1eir condition was checked from time to time so thc.t tho CO'"ditio:i.1 of tho banks v:as k:nown, m1d, therefore, necessarily, the
activities of the banks and the course of the business as it is disclosed
that it was carried on were known to the War Finance Corporation.
Further, it is obvious that in conducting a bank where notes are taken
•
in large numbers from various borrowers, that a part of the business of
the bank, and one of its most usual and well lG:1own means of collection.
. of its notes and securing itself is the fact that its customers dealing
with it have, through one transaction and another ro1d in one way and
another, sums of money or credits which are in tho bank and which the
bankers customarily 1"-p"'.>ly in payment or partial payment of the notes
and obligations ciue to tbe banks; that the banks, therefore, are in a
position of advantage in the matter of making collections additional to
X-4669
-?""'
the aclvanta{';e of close mntact with the borrower.
.A...J.d it is clear that
in the course of this busL1ess these advantages and the benefits tl1ereof accrue to the holder of the collateral security, the War FinaJ.'lce
Corporation.
ap~ears
So it
to me trnt the evidence
ca~
leave no other
inference wnatever than tt.e inference tho.t the War Fina..'1.ce Corporation
had co;.1Stituted those ba..11.ks, i:1cludi:ng t1.1e First lTational Bonk of GerL1g
to be its e.gen ts in tl-n mo.tter of looking after the very large nu.-·nber of
collateral loans thct were behind the ba:iks 1 own obligations to the War
Finance Corporation.
It is, of course, open to the War
tion under the Act of Congress to mak9
regQl~tions
Fin~J.ce
Corpora-
whereby a different
course of dealing may ·oe set up ood \'!hereby notice may be brought home
directly to the borrowers, the local agriculturists, that the War Finance
Cor..,oration shall be dealt with directly and tbat it h?.s not constituted
the bank its agent.
Such regulation might well be \7ithin the r,>urview
of the Act and within the powers of the War
•
such regulations are shown.
Fin~1ce
Corporation, but no
Therefore, in this case, as in all other
l_)rivate transactions we must look to the situation as it ·i)resents itself to the borrower himself.
•
borrower himself?
Now, how does it '!!resent itself to th.e
This dealing, this advance to the bank of Gering
covers more than a year, covers possibly two and a half years -- I forget the exact length of time, but a.
to the borro?Tors
co.~:1sidera.ble
period of time -- o.s
ge~1e
rally t::1en some of them rray know that their notes
•
have been transferred as collateral to tho War Fina:nce Corporation, and
•
there are :probably
TD<:Ul.~f
cti1crs who do :..1ot know.
It is
sho'<7~1
in the
evidence in this case that certainly as to ono loan, the defendant, the
younger man here, he testified he did not kl1ow that his note had been
tra."lsferrE<d.
But as to t..llose customers of
t.~e
bauk, dealing with H
X-4669
-8-
in the ordinary course nothing arises to suggest to them that there is
any qualification of the bank's authority to deal with them, to do so
.
promiscuously and generally with a large nurriber of people and a large
number of instruments, all of which
~~st
be known to the War Finance
CQrporation because it is the usual course of business.
.
That being so,
the borrowers then, who are in the posit ion of the defendants in this
case, have nothir.g to ~'-p:orisG them of c,ny limitu,tions upon the authority
of the ba1ik
..
ui~1
which they have dealt, and with which they are dealing,
to receive a partial payment on a note.
And that is so ·.1hether the note
is due at the time of the partiol payment or is not due.
No absolute
difference of rule exists in the cane of payment before due from "?ayments after due, and this situation is controlled by the course of
business, and the course of business is such as to show beyond any
question tl:ot the War Finance Corporation did confide those matters to
the bank
a~d
should be held
bo1L~d
payments or partial payments.
by the act of the bank in accepting
The ban"k will be considered the agents of
the War Finance Corporation in the absence of rogu.J.o.tions and in the absence of any course of conduct to bring a different inference or
'
~owledge
home to the borrower.
Uow, as to the contention of the defenda:.1ts that there is an
issue of fact by reason of
Hall and the defendants.
~~e
conversation bad between Mr. Murphy,
I am satisfied that there is no issue of fact
there which. would change the situation.
•
1~.
The nature of Murphy's agency
for the War Fina:c1ce Co:;;·-noration is established a.Tld. could not l:e changed
by anything said or done by Murphy.
Besides which, the conversation,
even ns it is detailed by the borrowers, by the defendant Duff, is
X-4669
-9-
equally consistent with t:1.e intentio:1 to I!Ulke the bank the agent of tho
:125
War FiP..n::.:ce Cor·poro.tion as with the intention of Duff to rmke the bank
his agent.
The claim is th'l t Hall sai.. d to Duff, and Duff agrees, tm t
he could pay the money to the local bank and said that he would transmit it to the War
Fir~ce
Corporation.
That conversation is asserted
b;y.t the two wi t~1esses for tho defendant ani, to a certain cxte"1 t possibly,
it is denied ~~equivocolly by Murphy
•
•
it.
That is, he said he didn't hear
But I am satisfied that whether it occurred or not it couldn't
cha~J.ge
tho situation.
If, as a matter of fact, by reaso:1 of the way in
·which the business was carried on, the inference could be draw:J. that the
bailie was its customer's agent, why, t:1.en, that kil1d of conversation
would not change the result.
It depencs upon the way the business was
in fact actually carried on, and not upon. any promise that Hall mlly have
made at thn.t time to the borrower,, Du.:'f.
•
•
I, therefore, hold that, as a matter of law, upon the evidence
shown, the paymer..t to the ba:1k was a sufficient
Finance Corporation a...'1d
•
•
t~mt
the
defe~1dant
is entitled to credit for
ference with interest as provided in the note.
rrk~e
t4e record correct I will
overrule the motion by the plaintiff, and allow an exception •
I will then give the direction to the jury that I have indicated, and will allow an
•
to the War
what he paid, and that plaintiff is entitled to a judgment for the dif-
Before I do that, in order to
•
,.
payme~1t
exc~~tion to
both parties.
Let the record
so show •
•
Now, if you will compute for the
be~efit
of the clerk the
amount due in the wa:y I have indicated it, the clerk will prepare a
... lQ....
X-4669
126
form of verd:L ct.
MR. MCLAUGP..LUT.
I now move to dismiss the action without
•
prejudice, it not yet having been submitted to the jury, and there
"
being nothing to prevent dismissing the action without prejudice •
•
In view of the fact that both parties have not joined in the motion
•
to direct a verdict it is
eleme~tary
that the action can be dis-
)t
missed wi tho~.1t ::?reju.dice any time before a verdict is rendered.
THE CC:T;:'i.T.
W,;ll, the plaintiff, may at any time before final
judgment move to dismiss without prejudice.
Now that motion is
made at this time, I am satisfied that the right to make that
motion is lost after the definite ruling
•
•
the law of the case by the court, and
r~s
t~~t
been announced upon
the motion is made too
late and should be denied, and is denied •
To which ruling of the court the plaintiff excepts.
•
•
l
'
•
THE COURT:
Gentlemen of the Jury:
You are instructed to
return the verdict as I have indicated and which the clerk has
prepared.
To which instructions by the court to
THE COURT:
tl~
jury the plaintiff excepts.
I will ask the first juror in the front ro'\7 to
step forward and sign the verdict •.
Thereupon the juror indicated signed the verdict as directed.
The Court then directed the clerk to read the verdict and the
clerk read theverdict,.
•
t
THE COURT.
So say you all, Ge::ltleiDr:m of the Jury, under
direction of the court.
The verdict will be entered and recorded
-11-
X-4669
as and for the verdict of tho jury, and judgment
rendered thereon.
To all of which the plaintiff .excepts.
THE COURT.
Plaintiff is allo..-red thirty days in rrhich
to file motion for new trial.
i28
X-4671
FEDERAL RESERVE
BOARD
STATEMENT FOR THE PRESS
September 21, 1926.
For immediate release
CONDITION OF ACCEPTANCE MARKET
August 19, 1926 to September 15,1926 •
...
Acceptanc~s:
The market in bankers, accepta.-•J.ces was quiet during the last part
of August and first part of September but improved somewhat later in the month.
Both the supply of bills and the demand for them were
repo~ted
small throughout
August by New York and Boston dealers and in Chicago there was a marked scarcity
of new bills although the demand was fair.
In September a better demand de-
velop.ed in the New York market, principally for ninety day bills.
came principally from out of town purchasers and from
were buying for foreign clients.
This demand
local banks which
The total pu;;.•chasOB and sales of New York
dealers during the period from August 19 to September 15 was the smallest for
any reporting period since February.
Rates on bills of all maturities of less
than 120 days were increased by 1/4 per cent on August 23 and the buying rates
of the Federal reserve bank:;· were also advanced.
The following table
the rates in effect on bills of various maturities at the
begin~ing
s~ows
and end
of the reporting period:
Acceptance Ratos in the New York Market
Maturity
Bid
30 days
60
90
120
...
150
II
180
II
II
11
September 15,1926
August lf, 1926
3
3
3
3
4
4
3
3
3
3
3
4
Bid
Offered
1/2
5/8
3/4
7/8
1/8
3/8
1/2
5/8
3/4
7/8
3 3/4
3 7/8
6
4 1/8
4 1/4
4/1/4
Offered
3
3
3
4
4
4
5/8
3/4
7/8
1/8
1/8
FEDERAL RESERVE BOARD
X-4672
i.29
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
September 23, 1926.
SUBJECT:
Discretion of Federal Reserve Agent in accepting or
rejecting paper offered as collateral for Federal
reserve notes.
Dear Sir:
The question has been raised whether the action of the
Board of Directors of a Federal reserve bank in accepting paper
for discount deprives a Federal Reserve -~ent of discretion in accepting or rejecting such paper when offered as collateral for Federal reserve notes. The Board has given careful consideration to
this matter and the conclusions which it has reached may be set out
. as follows:
Under the terms of Section 16 of the Federal Reserve
Act, the Federal Reserve Board, acting through the Federal Reserve
Agent, is charged with tho responsibility of determining in each case
whether an application by a Federal reserve bank for Federal reserve
notes should be rejected or granted in whole or in part. It is clear
that the Board is empowered to exercise its discretion in passing upon
the desirability of collateral tendered as security agninst the issue
of Federal reserve notes. ~~is discretion is ordinarily exercised
through the Federal Reserve Agent to whom the collateral is offered.
In order that Federal reserve notes may always be fully protected by
collateral security of proper kinds and amounts, it is importa~t that
the function of passing upon such collateral security should not be
exercised in a perfunctory mrumor but it should be perfm."!ned with
care, ai!d it should not be assumed that all paper discounted by a
Federal reserve bank constitutes, without further examination as to
its quality or goodness, acceptable collateral for the protection of
Jederal reserve notes~
The fact that a Federal Reserve Agent as a member of the
Executive Committee of a Federal reserve bank may have participated
in admitting a particular piece of paper to rediscount by the bank
in no way precludes the.exercise by him of independent judement as
to the desirability of such paper when it is te~dered as collateral
for the issue of ]'ederal reserve notes.
X-4672
- 2 -
The Federal Reserve Board expects Federal reserve
agents at all times to see to it that all Federal reserve notes
issued by them to their respective banks are fully protected by
proper collateral dc,ositod with them, and that in any cases
where collateral tende=ed to them is deemed unsatisfactory in
quality or amolli~t. it shall be rejected and other collateral
asked, and the matter of such rejection shall be reported to
the·Federal Reserve Board.
Very truly yours,
D. R. Crissinger,
Governor.
To all Federal Reserve Agents.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FED~ RESERVE BOARJ)
X-4673
September 23, 1926.
SUBJE 01':
Holidays during October, 1926.
Dear Sir:
There will be no Gold Settlement Fund or Federal Reserve
Note Clearing on Tuesday, October 12, 1~26, on account of observance
of Columbus Day. ( Fra tarnal Day at Birmingham), and the books of the
For your information, ~
Gold Settlement Division will be closed.
offices of the Board and the following banks and branches will remai~ open for business as usual:
Richmond
Atlanta
Nashville
Jacksonville
Detroit
St. Louis
Little Rock
Memphis
Minneapolis
Kansas City
Denver
Oklal10!Di..i. City
In addition to the holiday mentioned above, Jacksonville
·Branch of the Federal Reserve Bank of Atlanta wi 11 be closed on Fridey.
October 8th. account observance of Farmers 1 Day.
Supplemental wire advice as to the Portland Branch of the
Federal Reserve Bank of San Francisco observing October 12th as a
holi~ will be sent as soon as the Attorney General of Oregon renders his decision in regard to that da.y being observed as a legal
holiday in tln t state.
Kindly notify BranChes.
Ver.y truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. :BANKS.
FEDERAL RESERVE BOARD
X-4675
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
September 23, 1926.
SUBJECT:
Election of _Class 11 A" and 11 B" Directors.
Dear Sir:
This will confirm my telegram to you of
this date advising that t:1.e :Board ha.s designated
November 15, 1926, as the date for opening the polls
for the electio!l of Class "An and n:gn directors and
that no chango will be rr~de in the group classifications which ha.ve governed in these elections for the
past several years.
Very truly yours,
Walter L. Eddy.
Secretary.
TO CHAIRMEN OF ALL FEDERAL RESERVE :B.ANKS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS' OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4676
September 23, 1926.
SUBJECT:
Procedure in Elections of Class
Directors.
".A."
and n:au
Dear Sir:
The Federal Reserve Board desires to have from
you an expression of your opinion as to the workings of
the present system of electing Class 11 A" and11 B11 directors
of the Federal reserve banks. It would also appreciate
your giving it an outline of the various steps taken by
you in the conduct of suoh elections and to have you send
it specimen c~pies of nomination blan~, your advices to
member banks, ballot forms, etc. If any criticisms or ·
suggestions nave been made to you by member banks; concerning the election procedure, the Board would like to
be advised of them.
It would also like to have your views as to
whether or not any change should l?e made in the grouping
of the membet banks of your district.
The Board also requests that the Federal Reserve
Agents discuss this su~ject of election procedure at their
forthcoming conference, in addition to replying individually in writing to this communication.
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-4677
September 24, 1926.
Dear Sir:
In the considerations which have been given
during the past two years to the ~estion of whether
or not the Federal reserve banks should discontinue the
handling of so-called non•caSh collection items, considerable opposition has developed to the continuance
of the service as at present, ~~at is, without charge
and without limitation as to items pa¥-eble at street
addresses.
The provisions of the Federal Reserve Act
authorize •but d.o not require the Federal reserve· banks
to handle non-cash items and the inauguration of the
function was not the result of an order by the Federal
Reserve Board, but rather at its suggestion. The ~ard
wishes to suggest to the Federal reserve banlm that each
bank exercise its own option as to the collection of
non-cash items at street addresses, but continue the
collection of non-cash items collectible at banks.
Very tru.ly yours,
D. R. Crissinger,
Governor.
TO GOVEB.BORS OF
~LL
F. R. B..;u"Ulli.
X-4678
(Superseding X-4545)
BY- LAWS OF THE FEDERAL RESERVE BOARD
E-~ECTii~
SEPTEM3ER 23, 1926.
Article 1.
Tho Chairman.
The Secretary of the Treasury, as Chairman of the Board, shall
preside at all meetings when present. In the absence of the Chairman,
tho Governor shall act:.a.s presiding officer. In the absence of both the
Chairman and the Governor, the Vice-Governor shall preside, and in the
absence of all three such officers, the remaining member of the Executive
Committee shall preside.
.Article 11.
The Govermr.
Sec. 1. The Governor of the Federal Reserve Board shall be the
active executive officer thereof; subject, however, to the supervision of
the Baard and to such rules and regulations as may be incorporated herein
or may from time to time, by resolution, be established.
Sec. 2. The Governor shall have general charge of the executive
and routine business of the Board not specifically assigned under the bylaws or by resolution of the Board to ~~Y individual member or committee
thereof, and shall have supervision of the Board's staff.
Sec. 3. The Governor shall be an ex-officio member of all
Standing Comrnittees of the BonrQ •
.Al~ticle
111.
The Vice-Governor.
Sec. 1. In tho absence or disability of the Governor, his powers
shall be exercised and his duties discharged by the Vice-Governor, and in
the absence or disability of both of these officers, such powers shall be
exercised and such duties discharged by the remaining member of the
Executive Committee; in the absence or disability of all members of the
Executive Committee the powers and duties of the Governor shall be exercised by the senior member of the B-Jard present.
Sec. 2. It shall be the duty of the Vice-Governor to cooperate
with the Governor in the administration of the executive business of the
Board.
X-4678
(Superseding X-4545)
-2-
Article IV.
Secrr-;tnr" <•nd Ass is tcmt
Secreto.rj.~.
Sec. 1. 1'he i'oc::,rd shall o.:9poh1t n Secretary and one or more o.s;:is to.nt sccreto.ries.
Sec. 2. The Secretary shall keep o.n accurate record of the nroccedin~s of the :Boo.rd ~md sho.ll conduct such corres-pondence end perform
s:_;_ch other duties as :my be assigned to him by the Governor or by the BoDrd.
In the o.bsence or disability of the Socreto.ry, the duties of that office
may, b:l direction of the Board, be :performed by an assistant socrotary.
Sec. 3. The Secretar~r shall nave custody of the soo.l and, acting
under the authority of tho Boord., sho.ll have :power to affix so.me to o.ll instr-tlLients requiring it. Such L1strumonts shall b.; attested by the Socrot.:l.ry.
Sec. <1, The ass is tLw.1t secretaries sno.ll each perform such duties
as may be assigned to them from time to time by the Board or by the Secretary.
.Article V.
Assist~nt
Sec. 1.
the
D.s
to the
Gpver~.
The Bo:1rd mo.y authorize apnointment of an Assistant to
Gover-~1.or.
Sec. 2. The Assistant to the Governor shall perfor:n such duties
shall be assigned to him by the Governor.
Article VI.
The Executive
Co~nittee.
Sec. 1. There shall be an Executive Co~nittee of the Boo.rd consisting of three members, which shall include the Governor, Vice-Governor
nnd o;,1e of the appointive members of the :Bo?.rd. The ap:9ointive member of
the Comwi ttee shall be nominated a.J.d elected at o. regular meeting of the
:Soard. Members of the :Bo:.1rd sho.ll st. rv J o.s far as -pro.cticable in rotution
and for approximately equal ter:ns. The presence of three members shetll be
requisite for the tretnsactio:'l of business by the Executive Co~ni ttee, . OJ."ld
action shetll be tetkon only on unanimous vote of the Committee.
Sec. 2. In the o..bsence of the Go·.rernor and.Vico-Governor the o..pnointive member of the Executive Co~nittee shall act ns Chairman and shall,
~~i th two other appointive members of the Board present in Washington to be
~1osen by hi~ in the order of their seniority, exercise the powers and discharge the duties of the Executive Co:nmi ttee. In the absence of all three
:1:{7
X-4678
(superseding X-4545)
- 3-
regular members of the Executive Committee the three remaining ~ppointive
members of the Board, provided there be three in Washington, shall act as
an interim comn1ittee and exercise the powers and discharge the duties of
the Executive Committee, the senior member acting as Chairman.
Sec.3. It shall be the duty of the Executive Committee to review and submit drafts of important correspondence involving the expression
of opinions or decisions of the Board, and to prepare and make recommendations governing the conduct of the Board's business.
·sec.4. The Executive Committee shall also have charge of all
matters appertaining to the internal organization of the Board, and shall
make recOimnendations from time to time on this matter. It shall also prepare annually a budget of proposed expenditures.
Sec.5. In the absence of a quorum of the Federal Reserve Board
and for the transaction of business requiring action during the absence of
such quorum, the Executive Co;nmittee is authorized to transact business
which can be transacted in accordance with established principles and
policies of the Board and to perform such additional duties as may be specifically delegated to it from time to time by instruction of the Federal
Reserve Board.
The Secretary of the Board shall serve as Secretary of
the Executive Committee.
.Article VII.
Stro1ding
Committ~.
In addition to the Executive Co~~ittee there shall be the following Standing Committees, appointments to which shall be made by the Governor, subject to the approval of the Board.
Sec.l. Law.
To the Law Committee shall be referred for study and report all questions of a legal nature. To this Committee shall also be assi~ned the preparation or revision of the Board's regulations, contemplated
~~endments to the Federal Reserve Act, au~lications under the Kern amendment to the Clayton Act, and application~-- for the ():;.;;:ercise by national banks
of trust powers.
The General Counsel shall serve as Secretary of the Committee.
Sec.2.
Examination.
To this Committee shall be rcfe~red all questions relating to the examination of Federal Reserve or member banks including admission of state banks ~~d permission to establish and operate branches.
The Chief Examiner shall serve as Secretary of this
Committee.
X-4678
(SUperseding X-4545)
Sec. 3.
l~es .. o.rch
ond Statistics.
Thb CoLlmitteG shall h::we chD.rge of all i:.westigatio_ts
of 0.:1 eco~1omic [UC. statistical cbD.racter authorized by the Board and shall
supervise the work of the Divisio:.l of Resenrch and Statistics and the preparation c.nd publicc.tio:t of the Federal Reserve BulletL1. This Com;ni ttee
shall also have suuervisio:1 of the statistical o.n.d uublicatio:1 work of the
Federal Reserve Bc11k;s.
··
The Director of the Di visio~l of Research o.."'ld Statistics
shall serve as Secretary of this Committee, or i~ his abse~ce thQ Assist~tt
Director shall so serve.
Sec. 4.
Salaries u.:.1d Bxuc:·.di turos of Federal Reserve :Brutks.
To this CoHrnittee shall be assig:ted all recomme!tdatio~s
from Federal Reserve Banks for changes of salaries a~d other expenditures.
This Committee shall make reports with respect to dlo.rge-offs and fra~. . chise
tax of Federal Reserve Brutks.
The Secretary of the Board shall serve as Secretary of
this Committee.
Sec. 5.
District Committees.
To each Federal Reserve Bonk a~d District shall be assigned a Co~nittee of not less than two members of the Federal Reserve Board.
It stall be the duty of each Committee to keep itself infor:ned by corres~ondence and visit of the affairs of the Ba:ik aad the condition of the
District, Dnd make investigatio::l and report on all questions appertaining
to the operation of any Federal Reserve Bmik or the condition of any Federal
Reserve District that may be referred to it by the Board.
These Co~ittees
shall also aid the Committee o~ Salaries and Expenditures with information
regarding perso~~el of the respective Fedctai Reserve B~"'lks of which they
have charge. These Committees shall also m~e recommendation• to tAe Board
for the a~pointment of Directors at Federal Reserve Banks and Branches.
Article Vlll.
The Fiscal
~ent
and Deputy Fiscal #gent.
Sec. 1. The Board shall appoint n Fiscal Agent a~d a Deputy
Fiscal Agent. The duty of the Fiscal ~~ent s~ll be to collect and deposit
all mmteys receivable by the Board with the Treasurer of the United S~tes,
to be placed in o. special fu:1d established. o::l the books of the Treasurer
for the Federnl Reserve Bo::::.rd. The Deputy Fiscal .Agent shnll perform the
duties of &Jte Jtscal Agent du,.ri:1g his absc::lce or disability.
Soc. 2. The Fiscal Agent and Deputy Fiscal Agent shall ench execute o. cco;o.rnte bo~d wi t:h surety satisfactory to the :So~rd.
Sec. 3. Payme1jls of exoenses ~1d othsr disbursements of the
Board shnll be made by tHe Fiscal Agent upon proper vouchers out of moneys
X-4678
(Srrperseding X-4545)
-5-
e:.dvn:.1ccd to him by roquisi tion and warrn::t out of the ~ecial f1L"ld :ud
::?ln.ced to his offici'.ll credit vii t~1 the Treasurer of tho U.1i ted Stutes as
:9rovided by Soctb:-. 5 of this Article. In tho absence of tha Fiscal Agapt
pa,y-ment of expenses and other disbursements shall be :rode by tlu.e Deputy
Fiscol .Agent upon rroper vouchers out of moneys aci.vanceci. to the Fiscal
~gent by requisition and warrant out of the special ftu1d and placed to his
official credit with the Treasurer of the United States as provided by Sections 5 and 6 of this e:.rticle.
Sec. 4. The Fiscal ~\gent shall prepare n qunrterly aeco~t in
such form ns shD.ll be approved by the Co~troller General of the United
States and, after npnrovo.l by the Gover11or, such qu.o.rterly account shall be
submitted. to the Guneral Accounting Office. Su6'1 account shall cover. r>ayments of er9'nses and oth0r disbursements ~~de by b~th the Fiscal Agent and
the Deputy Fiscal Agent.
Sec. 5. The Governor shall, when ne o::ssary, make roqui si tion on
the Treasurer of the United States for the advance of such sums to the Fiscal
Agent as may be necessary from tho Federal Reserve Board fund.
Sec. 6. The De~uty Fiscal .\gent in making disbursements of the
Board U!?On )?roper vouchers out of the moneys adv.::tnced to tl1e Fi seal Agent
shall sign against funds to the official credit of the Fis~l .Agent with
the !l'rcasurer of the United States :1,.l:l. t.he name of the Fiscal Agent by himself as Deputy Fiscal Agent.
·. ·•.'
·
Article lX.
Gold Settlement Fund.
o.nd
Federal Reserve .Agents• fund.
All funds deposited by or for account of the respective Federal
Reserve ~\gents in the Federal Reserve Agents' fund of tho Federal Reserve
Board and all funds deposited by or for account of the respective Federal
Reserve Banks in the Gold Settlement ~~ of the Federal Reserve ~oard
shall be held on dsposit wit~ the Treasurer of the United States and shall
be subject to withdrawal only by chock of the Federal Reserve Board signed
by the Secretary or an Assistant Secretary c~d countersigned by the Governor
or acting exe~ative officer of the Board •
.Article X.
Rco"Lris'i tion for IJelivory.
of
Federal Roscryc Notes
Requisitions uuon tho Comptroller of the Currency for the delivery
X-4678
(Superseding X-4545)
-6-
:140
of Federnl Reserve notes to thu respective Federal Reserve Agents shall
be mn.de by the Secre to.ry or .i'lssis tn;.1 t Secroto.ry in rospon~o oaly to requests made by the Federal Reserve .A(;ents to the :So·1rd for such notes.
The Secreto.r~' or .Assistant Secret:;,ry shall submit do.ily for o.pproval to
the Governor or acting executive officer of the Board a schedule shQwil'lg
the amount of each denomination of Federal Reserve Notes requisitioned by
him for the accou.Tlt of each Federal Reserve .Agent •
.Article Xl.
The Seal.
The following is en impression of the seo.l adopted by the Board.
SEAL.
Arti9le Xll.
Counsel.
Sec. 1. The Board shall appoint a General Cour1sel whose duty
it shall be to.~vise with the Board, or o.ny member thereof, as to such
legal questions as mo.y arise in the conduct of its business; to prepare,
at the Board 1 s request opinions, regulations, rulings, forms Q.lld.other legal
papers and to perform generally such legal services as he may be called upon
by the Boo.rd to perform.
Sec. 2. Subject to the direction of the Governor, the General
Counsel skall have authority to correspond directly with the Cotu1sel of
the various Federal Reserve Banks and to request their opinions as to the
interpretation of the local laws of the States included in their respective
Federal Reserve Districts. Copies of all such correspondence shall be furnished to the Board for its informo.tion.
Sec. 3. Whenever it may be deemed advisable, the Board may ap1Joint one or more Associate or ..d.ssistant Counsel, or one or more Assistants
to Co"U.nsel. Tne duty of such Associate er ..:i.ssistant Counsel shall be to
assist the General Counsel in the performance of his duties and to perform
the duty of the General ColU~sel in his a.~sence. The duty of such Assistant
to Counsel or Assistants to Counsel shall be to assist the General CoUL~sel
in the performance of his duties.
Sec. 4. The Bourd may appoint irom time to time Consulting Counsel,
who may b6 attorneys .'J.t law engo.ged in ou.tsW,e practice.
~··:
- 7 -
X-4678
(Superseding X-4545
14:1
.Article Xlll.
Meetings.
Sec. 1. Five members of the Board shall constitute a quorum for
of business.
Sec. 2. Stated meetings of the Board shall be held on such days
of the week and at such hours as the Board by a majority vote may fix from
time to time. One meeting day each week shall be set apart for consideration
of the following matters, advance notice of not less than two days being
sent to members of important questions to be ta~en up at tho meeting:
the
tr~~saction
Discount and open market matters;
Approval of expenditures and salaries;
Establishment of Federal Reserve Branches,
Agencies, Currency Stations;
Permission for establishment of member
bank branches;
Amendment of Board's rules and regulations;
New policies or changes of policy;
Such other major matters as may be reserved
for consideration at the weekly meeting.
Sec. 3. Special meetings of the Board may bo called by the Cbairman or Governor or upon the written request of three members of the Board.
Sec. 4. At all meetings of the Board the following shall be the
order of business:
(1) Reading or inspection of the Minutes of the last
regular meeting and Minutes of meetings of the
Executive Committee.
(2) Report of the Governor.
(3) Report of the Secretary.
(4) Reports of the committees or m~mbers on assigned
business.
(5) Unfinished business.
(6) New business.
Sec. 5. No vote shall be taken or motion made by the Board at a
meeting or conference when others than the members of the Board and its Secretarial staff are present.
.Article XlV.
Absences.
Sec. 1. Absences of appointive members of the Board shall as far
as practicable be arranged so as not to interfere with the expeditious conduct of the Board 1 s business in Washington.
X-4678
(Su11erseding X-4545)
-S-
~':..rt.icle
Inform:1tion und
:142
XV.
Publico.tio~l.
Sec. 1. All persons employed by the :Soc.rd shall keep inviolate
its oo.siness, affairs, and concerns, and shall not disclose or divulge the
same to o:ny unauthorized person whomsoever, and any OJ1I?loyee who shall
give informo.tion contrary to this by-law shall be liable to irmnediate dismissal. ~xcept u0on vote of tho :Soard, no one other than o. Member of the
:Eon.rd, or the Secrota:c·y, ..,\.snista.nt Secretaries, Assist.'l:1t to the Governor,
Q.nd General Counsel, shnlJ, be__:Q£rm.itted to ins-pect nny of the Boc.rd's :ninutes.
S0c. 2. lro stato:ncnts shall 'be made to L1e press expressive of
1 s ·nolicy or des cri1)ti vc of its action oxce~;t c.s .::mt:1orizod a:1d apthe :Soc.rd
proved by tho Bonrd. Such sto.tomcnts shull be issnoO. only in written form
and when n.uthorized and approved they sh..:.'l.ll be iasuerl through the offi co of
the Governor or such other officer or memool' of tl1o :Soard. n.s :any be specifically designated. While each member of tho Board ~st determine for hinself
the propriety or necessity of expressing publicly his L1ciividu.o.l o:pinio:..1 0!1
any question, members shall not quote publicly the opinion of ot:1er members
on matters wl1ich rove not formally been passed upon by the :So:1rd.
Sec. 3. There shall be published monthly, a bulletin to be 'lmown
11 The Federal :Reserve Bulletin", which sh~ll be the official periodical
as
organ or publication of the Federal :Raserve Board.
Soc. 4. No resolutions of a personal c~"racter, except upon the
death of a member of the Federal Reserve Bon.rd while serving as such, shall
appear in any publication of tho Foderal Reserve :Soar~.
4\.rticle XVl.
Junendment~.
These by-laws IDD.y bo ar.nended at any regular mectLlg of the :Board
by a 1Illljori ty vote of the en tire :Soard, provided that a copy of such amendments shall have been delivered to each member at least seven days prior to
such meeting.
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For Release in Morni~g Papers,
Tuesday, Sept. 28th.
X-4679
The following is a sununary of general business and
financial conditions throughout the several Federal
Reserve Districts, based upon statistics for the
months of AU£~t and September, as contained in the
forthcoming issue of the Federal Reserve Bulletin.
Industrial activity and distribution of commodities continued in
large volunie in August at a level higher than a year ago.
of wholesale prices receded further in August, reflecting
The general level
~rice
declines for
agricultural commodities.
PRODUQTIOlT: - The index of production in basic industries, which
is adjusted for the usual seasonal variations, declined slightly in August,
but this decline was accounted for by the fact that there were five Sundays
in August as against four in July.
Textile mill activity and production of
steel ingots, zinc, and petroleum increased, while the output of pig iron,
lumber, coal, copper, cement, and sugar was smaller than the month before.
Automobile production increased considerably in August and was larger than in
any month since April.
Factory employment and pay rolls, after declining in
July, increased in August, as is usual at this season of the year.
activity, as measured by contract awards in 37 states east of the
Mountains, was in larger volume in August than in July or in
month with the exception of August, 1925.
a:ny
Building
RoCky
other previou.B
In eastern and southeastern states
the volume of building was smaller in August than a year ago, while in the
middle west contracts awarded were larger.
Contracts for residential struc-
tures were smaller than last year, while those for industrial buildings and
for public
war~
and public utilities were substantially larger.
X-4679
-2-
i4.4
Crop conditions improved in August, according to a statement by
the Department of Agriculture.
hay, tobacco, and most
f~~it
September forecasts of yields of'corn, barley,
and vegetable crops were above those made in
August, while expected yields of oats and spring wheat were slightly less.
A cotton crop of 15,810,000 bales was indicated on the basis of the condition of the crop at the middle of September.
The crop, however, is later
than last year and ginnings up to September 16 amounted to only 2,511,000
bales, compared with 4,282,000 bales prior to September 16, 1925 •
.TRADE:
·volume of wholesale trade and of sales at
d~partment
creased in August and retail sales were larger than a year ago.
stores inStocks of
dry goods and shoes carried by wholesale firms were smaller at the end of
.August than last ;wear, while those of groceries and hardware were larger.
In-
ventories of department storea increased in preparation for autumn trade, but
this increase was less than is usual at this season and at the end of the
month stocks were smaller than a year ago.
Freight car loadings in August
continued higher than in the corresponding months of previous years and for
the weeks of August 28 and September 4 exceeded all previou.s weekly records.
Loadings of grain continued large and shipments of merchandise in
les~-than-
car-load lots, miscellaneous commodities, ore, and coke were considerably
''
larger than in the correspondi1~ period of previous years.
PRICES:
Wholesale commodity prices, according to ti1e inde: of the Bureau of
Labor Statistics, declined by over 1 per cent in .August, reflecting largely
price decreases for grains, livestoCk, and meat products.
.
Prices of clothing
materials, fuels, and metals increased between July and August, while prices
X-4679
-3-
of cotton, wool, sugar,
buildi~
materials, and rubber showed
litt~e
1_45
change.
In the first half of September prices of grai~s, cattle, sugar, bituminous
coal,
~nd
coke advanced, while prices of raw cotton, silver, and briCks de-
clined.
BANK CREDIT:
Increased
dew~d
for batik credit in connection with the harvesting
and rrarketing of crops and autumn trade, together with an increase in loans
on securities, was reflected in a considerable_growth between the middle of
August and the middle of September in loans of member banks in leading cities.
The banks' holdings of investments also increased, though there was a decrease in investments at banks in New York City, and total loans and investments on September 15 were larger than at any previous time.
The volume of reserve bank credit increased by about $90,000,000
between August 18 and September 22, partly in response to seasonal demands
for currency.
Discounts for
~ember
banks rose in Septemeer to the highest
figure for the year, and acceptance holdings also increased, while United
States securities declined by about $55,000,000.
Money rates continued to rise in September.
Rates on commercial
paper advanced by one-fourth per cent to 4 1/2 - 4 3/4 per cent, and rates
on security loans also averaged higher than in August.
FEDERAL RESERVE BOARD
X-4681
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE: TO
October 6,1926.
THE: FEDERAL. RESERVE: BOARD
I
SUBJECT:
Litigation Affecting Federal Reserve System as a Whole.
Dear Sir:
At the last conference of Governors of all Federal reserve
banks, it was voted:
To recomo;J.end to the Federal Reserve :Board that
the Federal Reserve System, acting through the Federal Reserve Board, retain,as special counsel, Mr. Newton D. Baker,
to consider litigable matters only, and that all Federal reserve banks shall refer to the Counsel of the Federal Reserve
Board as soon as it arises every litigated question, together
with all papers relating thereto, and that the Counsel of the
Federal Reserve Board· should refer to such special counsel
all such cases as he thinks concern the system as a whole and
any other cases which Counsel of the forwarding Federal reserve banks req'J.est be referred to the special counsel. 11
11
U?on consideration of this subject, the Federal Reserve
Board voted to disapprove the recommendation of the Governors• Conference to the effect that the system retain Hon. Newton D. Baker as
Special Counsel to consider litigable matters only. The Board voted,
however, that all Federal reserve banks be requested to forward to the
General Counsel of the Federal Reserve Board all papers in suits brought
against Federal reserve banks and also all papers in suits brought by
Federal reserve banks which are of system-wide interest, in order that
the queation of employing special system counsel might be determined in
each specific case.
The obvious purpQse of the plan recommended by tho
Governors• Conference was to obtain better coordination of the litigation involving the various Federal reserve banks. to the end that the
interests of the Federal Reserve Systen as a whole in the legal principles involved in such litigation might be more adequately safeguarded. The Board is in symp3.thy with this purpose, but believes that it
is not necessary to obtain the services of a lawyer of national reputation on a regular retainer in order to accomplish the desired results.
X-4681
- 2 -
The Office of the Board's General Counsel has for some time been
acting as a clearing !1ouse for information res:pecting recently decided cases of interest to the entire Federal Reserve System, and
it is ·believed that t:1is service might be extended in such a way
a~ to accomplisl1 tho :;_:mr::_oose of the recommendation of the Governors 1
Conference without incurring the expense involved in the employment
of a lawyer of national reputation on a regular retainer basis.
~'he :Soard believes that, if information concerning all :s:>Onding ca~es is promptly sent to the Board's General Counsel, the necessary cooperation c~1 be obtained through correspondence with co~~sol
for tbe Federal reserve banks ~~d through conferences participated
in by colli~sel for all Federal reserve banks. \Vhenever it is considered advisable to obtain the services of a lawyer of national
reputation to assist in the trial of a case involving questions of
system-wide interest, such special system counsel can be retained in
that particulo.r case.
You are requested, therefore, to arrru1ge with counsel for
your btu1k to forward promptly to the General Counsel of the Federal
Reserve Board co,ies of all papers in suits brought against Federal
reserve banks and copies of all papers b suits brought by Federal
reserve b~~ks which are of system-wide interest.
Very truly yottrs,
D. R. Crissinger,
GovorilOr.
To Governors of all
Fedoral Reserve Bro1ks.
FEDERAL RESERVE BOARD
X-4682
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
October 7, 1926.
Assistant Federal Reserve Agents at Branches.
Dear Sir:
A question has been raised as to the necessity for appointing assistant Federal reserve agents at branch Federal reserve banks
where the duties of such assistant Federal reserve agents are confined largely to the issue and retirement of Federal reserve notes.
At several branches, the office of assistant Federal reserve
agent has been abolished ru1d the stoc1::s of Federal reserve currency
held there are carried in the form of isoued notes.
At one branch
where a stock of ~~issued notes is carried-,-the Federal reserve agent
is represented by two directors of the branch, one having been designated assistant Federal reserve agent &~d the other alternate assistant Federal reserve agent. These representatives of the agent each
receive a nominal salary in addition to a small fee for each time they
are called upon to engage in ctu·rency operations. ~1e Board feels
that under such an arrangement the design~_tion of a representative of
the Federal reserve agent need not be confined to Dembers of the board
of directors of the br8nch, but anyone, other tha.."'l an employee of the
branch Federal reserve ba"'lk, residing locally ro1d legally qualified,
may be designated.
Consideration is being given by one of the Federal reserve agents to the abolis~~ent of the office of assist~~t Federal
reserve agent at the bra..~ches of his bank. The agent feels that a
greater a.'tlount of Federal reserve notes should be maintained at each
branch than the amo'Jll t which the bank should be called U'?On to carry
at the branch in the form of issued notes. The proposal has been
made that the :Soard a::;>prove of the agent carrying at each branch what
might be termed an emercency stock of unissued Federal reserve notes,
the stock of unissued notes to be placed in a number of chests - each
chest to be u....~d.er triple control of an officer of the branch, a representative of the auditing department ste,tioned at the branch and the
Federal reserve agent at the head office. When Federal reserve notes
are needed for emergency purposes, the need will be cow.'Tiunicated to the
Federal reserve agent at the head office, who will telegraph his control
combination or combinations for a specific chest or chests to the branch.
Under ~~ agreement between the Federal reserve agent &~d the Federal reserve ba~k the dispatch of the wire containing the control combination
to a particular chest will be considered as a delivery to the Federal
reserve bank of the a.moun t of notes shov:n by the records of the agent
-
X-4682
- 2 -
and of tho other joint rustodians to havo been placed in this
chest at tho ti~e the control was established. and this amount
will be accepted by the bank as conclusive for all purposes.
The branch wil~ prepare and mail to the agent the usual vault
record sheet showing the serial numbers, denominations and amount
of notes issued. attested by the officer of the branch and the
repr.esentative of the auditor designated as joint custodia..'1.s,
and cnrrying a receipt signed by an officer of the'branch for the
amount of notes received from the Federal reserve agent through
the release of the particular chest or chests.
Under the foregoing suggested arrangement, either the Fed.eral reserve agent or his assista..~t must be present at the branch
·Bach. time it is necessary to replenish the ·emergency supply of Federal
reserve notes, in order to receive them from the Post Office authorities, (or from the branch whenever an accumalation of fit notes is
turned back to the agGnt) and in order to see that they are properly
deposited in the c:1ests under the necessary control combinations.
It might also be necessary for the agent or his assistant at the
head office to visit the branch once or twice a year on tho occasion of the examination made by the Federal Reserve ~oard's examiners.
Tho Board desires that the Federal reserve agents at their
forthcoming conference give consideration to tho :practicability and
desirability of establishing some uniform procedure for handling the
note functions of the agents at those branches where the full-time
service of an assistant Federal reaerve agent does not appear to be
required.
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-4686
October 12, 1926.
SUBJECT:
Topic for Next Governors' C0nference.
Dear Sir:
The Federal Reserve Board has voted to place
upon the prograTil for the next conference of Governors
of Federal Reserve Banks for their consideration and
advice, the qn.estion as to the acivisabili ty of the
Board adopting for o,ll national banks a minimurn capital requircme:at nnd ingosing other requirements in connection with its gr.::l.t.lting a:uthori ty to such banks to
exercise trust poWG:.t's.
Fo= your information in this connection, thero
is enclosed ncrewi th a CO}JY of a memorandum ·by the
Board 1 s Colmsol reb.tive to the legal right -of the Board
to place a minimum limit on capital of national banks
to which it will grant trust powers.
Very truly yours,
Walter L. Eddy,
Secretary.
To Governors of all F .R.Banks.
Enclosure:
.~
i!il
X-4687-a
May 21, 1926.
Tho Federal Reserve Board
Mr. Wyatt - General
Counsel~
Right of Board to place minimum
limit on capital of national banks
to which it will grant trust powers.
The opinion of this office has been requested on the question
whether the Board can legally place a minimum limit upon the capital of
a national bank to which 1 t will grant trust powers.
The last paragraph of Section ll(k) of the Federal Reserve Act
reads as follows:
11 In passing upon applications for permission to
exercise the powers enumerated in this sub-section,
the Federal Reserve Board ~ take into consideration
the amount of caui tal and surplus of the applying bank,
whether or not such capital and surplus is sufficient .
under the circumstances of tho case, the needs of the
conr.:ru.ni ty to be served, and a.rJ¥ other facts and circuostances that seem to it proper, and may grant or refuse
the auplication accordingl~: Provided, That no permit
shall be issued to any national banking association
having a capital and surplus less than the capital and
surplus required by State law of State banks, trust
com:panies, and corporations exe:.·cising such powors. 11
In view of this provision thoro can be no doubt that the Federal
Reserve Board nay legally prescribe a minimuc capital for national batiks
applying for trust powers and may decline to grant trust powers to any
national bank which has not a capital equal to or in excess of the minir.:rom limit so prescribed by the Board. Of course, the miniz:Iurl ca.pi tal
prescribed by the Federal Reserve Board cust not bo loss than the capital
required by State law of State banks, trust companies, and othor corporations exercising trust powers.
Respectfully,
Walter Wyatt,
Goneral Counsel.
WW/NS
FEDERAL RESERVE BOARD
X-4687
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 12, 1926.
SUBJECT:
Topic to be Placed on Progr5e of Conference
of Federal Reserve Agents.
Dear Sir:
The Federal Reserve Board has voted to place
upon the prograc for the next conference of Federal Reserve Agents for their consideration and advice the
question as to the advisability of the Board adopting
for all national ba~~s a oiniouc capital requirecent.and
icposing other requireoents in connection with its granting authority to such bariks to exercise trust powers.
For your infor.oation in this connection, there
is enclosed herewith a copy of a oeooranduc b,y the Eoard 1s
Counsel relative to the.leial right of the Board to place
a oin:iouo liriit on capital of national banks to which it
will grant trust powers.
Very truly yours,
Walter L. Eddy.
Secretary.
Enclosure.
TO .ALL FEllBlRAJ, RESERTIJ AG·ENTS •
X-4687-a
May
Tho l'aderel Reserve Board
Ur. Wyatt - General Counsel ..
21, 1926.
Right of Board to place minimum
limit on capital of national banks
to which it will grant trust powers.
The opinion of this office has been requested on the question
whether the Board can legally place a minimum limit upon the capital of
a national bank to which it will grant trust powers.
The last paragraph of Section ll(k) of the Federal Reserve Act
reads as follows:
·
"In passing upon applications for permission to
exercise the powers enumerated in this sub-section,
the Federal Reserve Board ma..y take into consideration
the amount of ca-pital and surt?lus of the applying bank,
whether or not such capital and surplus is sufficient .
under the circumstances of tho case, the needs of the
comounity to be served, and any other facts and circucstances that seem to it proper, and IIIB)Y grant or refuse
the application accordingly: Provided, That no permit
shall be issued to e:n.y national banking association
having a capital and surplus less than the capital. and
surplus required by State law of State banks, trust
companies, and corporations exercising such powers."
In view of this provision there can be no doubt that the Federal
Reserve Board may legally prescribe a minimuc capital for national bariks
applying for trust powers and tJay decline to grant trust :powers to a.ny
national bank which has not a capital equal to or in excess cf the oinir:rom licit so prescribed by the Board. Of course, the minit::tuo capital
prescribed by the Federal Reserve Board tnlst not be less than the capital
required by State law of State banks, trust companies, and other corporations exercising trust powers.
Respectfully,
Walter Wyatt,
General Counsel.
WW/NS
..
FEDERAL RESERVE BOARD
X-4688
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL. RESERVE BOARD
October 12, 1926.
SUBJECT:
TOPIC FOR
GOVFJlJ.~ORS 1
CONFEREJ:T CE.
Dear Sir:
The question of ado,ting regulations covering the
rediscount of notes secured by adjusted service certificates
under the provisions of Section 502 of the World War Adjusted
Compensation Act, which was on the program for the last conference of Governors, has also been placed upon the program
for the forthcoming conference.
For your information in this
connection, there are enclosed herewith a copy of
th~
Board's
letter of March 13, 1926, (X-4561) suggesting ·this topic for
the last conference, and also a copy of a letter received from
the Director of the United States Veterans' ]".ll'oau on this su-oject, together with a copy of the Board's reply thereto.
Very truly yours,
Walter L. Eddy,
Secretary.
(Enclo3uros)
To Governors of all F.R.Banks.
j_fj5
c 0
p
y
X-4688-a
August 3,
1926.
Honorable Frank T. Hinec, ·Director,
United States Veterans 1 Bureau,
Washington, D.C.
My dear Mr. Hines:
The ]oard has considered further your letter of
July 14th requesting its advice as to the best method of advising banks throughout the country of the provisions of the
World War Adjusted Compensation Act and also requesting the
advice of the Board as to whether or not it would be feasible
to prescribe a standard form of promisaory note to be used by
banks in making loans on adjusted service certificates.
Before advising you on these questions the Board desires to
have the suggestions of the Governors of the Federal Reserve
Banks with reference thereto. It will, th&reiore, present your
questions to the Governors of the Federal Reserve Banks at their
next conference which will be held in Washington this JJ'all. It
is noted that no loans can be made on adjusted service certificates before January 1, 1927, and it is believed sufficient time
will remain after the.Conference of Governors of Federal Reserve
Banks to advise banks throughout the country of the provisions
of the Adjusted Compensation Act before Ja~uary 1, 1927.
Very truly yours,
(signed) D.
:a.
Crissinger ·
D. R. Crissinger,
Governor.
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-:x:~4688-b
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UNITED STATES "I?'ETI:RMTS :BUREAU
WASIENGTON
July 14, 1926.
Honorable D. R. Crissinge~,
Governor, Federal R3se~ve Board,
Treasury Department Building,
Washington, D.C.
My dear Mr. Crissinger:
Under the provisions of the World Wa:r Adjusted Co!TI!'ensation
Act (Public No. 120 - 68th Congz·ess) approximately 2,400,000 adjusted
service certificates with a fc..ce value of approximately $2,500,000,000
have been issued, effective January l, 1925. Loans may be made on and
after January 1, 1927 I to the holders of such certificateo by banks as
provided by Title V of the Act.
The adjusted service certificate co~tains a reprint of Section 502 of Title V1 which provides autho.rit~· for the gr z.nting of loans
by banks and for redemption of such loans by the VeterarHl Bureau in the
event of non-pe,yment by the veteran. The certificate alGo contains a
table for determining the loan value of the certificate.
It is dedrable that ba.'1.ks makin5 such loans be fully advised
as to the requir~men ts of the law before JGnua.ry 1, 1927, and it is
thought that pos.;;ibly a strw.d2Xd form of promissory note might be devised
that could be recom;nended for use by the member banks of the Federal Reserve System and others.
Your advice in tho premises, especially as to the best method
of advising the banks and as to whether or not a stand,qrd form of promissory note isfeasible, will be greatly appreciated.
For your convenience a copy of the World War Adjusted Compensation Act and a specimen of the adjusted service certificate are inclosed.
Very truly yours,
(Signed) Fran.J;. T. Hines
FRANK T. ''HINES,
Director.
Incls.
X-4b61
1.57
Me.rch 13, 1926
ST.JJ3JECT:
Ad.d.i tiona.l Topic for Governors' Conference.
Der->r Sir:
In an inquiry re.::ently received by the Eoard certain
questions were asked regerding the requirements which will be made
by the Federal Reserve Board and by the Feder~l reserve banks before
rediscounting notes secured by adjusted se::-vice certificates under
t:he provisions of Section 502 of the World Wa:.· Ad.iusted Compensation
Act. The specific questions asked. in tb.e inquiry received were whether the affidavit of the le:1dbg "Ja.n~t 1.1rovided for by Section 502(h)
would be requil·ed to be executed hefo;e rediscou..'lt and rthat ~?roof
tb.at the required notice of tr<.~nsfer of the note has b•:>.en given the
maker would be necess<.try. The ::Joa::d l:as not, of co·J.rsa, iss-:;.ed any
regulations on this subject, and in its reply stated that it could
not answer these questions at this time.
1
"
As a consequence of the :provisi.:ms ·of the World War Adjusted Corrpensation Act no valid r.oto of t~is kind can possibly be
offered for redisco1mt :')rior to Jonuz.ry 1, 1927. Before undertaking
to answer any inquiries with rega1·d to the requirements whic"L1 will
be made for the rediscount of notes of this kind, the Board desires
to have the co~sideration and suggesti~ns of the Governors as to the
advisability of issuing regulations on this subject at this time ?nd
as to what requirements should be contained in such regulations, if
issued. The :Eoard has therefore directed that this :mtte1· be made
an additional topic for the program of the forthcoming Governors'
Conference.
For your information in this connection there is enclosed :1erewi th a copy of Section 502 of the World War .Adjusted
Compensation Act.
Very truly yours,
t'Jal tcr
L~
SE~cretary.
T) GOVERUORS OF ALL F.R.FAJKS.
E~1closure.
Eddy
·'-
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l•.iJ.L" .l)
X-·±561-a
158
IOi\JT PRI7IL.i4GES
SEC • .502. (a) A loa..'1 rna.y be macie to a vGte:::-an U};lon m.s adjusted
oervi ce certificate only i:1 accordance with tl1e provisions of this
section.
(b) Any national banl-r, or any bank or trust company incorporated
unuer the laws of any State, Territory, possessio~, or the District of
Colu.:ubia (hereL·;after in this section called 11 ba~lk 11 ), is authorized,
after the expiration of two years after the date of the certificate, to
loan to any vetera:n upon his :~romissory note secured by his adjusted service certificate (with or wi t:1out the consent of the beneficiary thereof) any ammJ.l1t not in excess of the loa.11. basis (as defined in subdivision
(g) of this section) of the certificate. The rate of interest charged
U_:Jon the loan ·by the bank s:nll not exceed, by more than 2 per centum
per anrlu::J., the ratE: charged at the date of the loan for the discount of
90-day com.uercial paper under section 13 of the Federal Reserve Act by
the Federal reoerve bank for the Federal reserve district in which the
bank is located. Any bank: holding a :;:wte for a loan under this sectio:1
secm·ed ·by a certificate (whether the bank origL1ally making the loan or
a bank: to which the note anc. certificate have been transferred) may sell
the note to, or discount or reciiscount it wi t~1, any bank authorized to
make a loan to a veteran u:1der this section a;:JC'. transfer tho certificate
to such bank. Upon the indorsemmt of any banl:, which shall be deemed
a waiver of d.ei,18.i.1d, notice, a•1d pro test by such banl-c as to its own indorsement exclusively, a:J.d subject to regulations to be :prescribed by
the Federal Reserve Board, cmy such note secured by a certificate and
held by a bank shall be eligible for disco..m.t or rediscount by the Federal reserve bank for the Federa.l reserve district in which the bank: is
located •. Such note shall be eligible for disccunt or rediscount whether
or not the bank offering t~1e note for discount or rediscoUJ.J.t is a member
of the Federal Resorve S:"s tern e.nd whether or not it acquired the note in
the first instance from the veteran or acquired it by tr~msfer upon the
indorsement of &J.y other bank. Suc.."l1 note shall not be eligible for discount or rediscou:1t unless it has c~t the time of C:.iscou..11.t or rediscount
a '"na.turi ty i.10t in excess of nine months exclusive of da;ys of gra~e. The
rate of interest charged by the Federal reserve bank shall be the same as
that cr~rged by it for the discou..~t or rediscount of 90-day notes drawn
for comme:rcial l)lJ.rpoees. T:1e Federal Reserve Board is authorized to
permit, or on the affirmative vote of at least five members of the Federal
Reserve Board to require, a Federal reserve bank to rediscount, for any
·other Federal reserve bank, notes secured b;;r a certificate. The rate of
interest for such rediscounts shall·be fixed by the Federal Reserve Boa:::-d.
In case the note is sold, discounted, or rediscoUll ted the bank making the
transfer shall promptly notify the veteran by mail at his last known postoffice e.dciress.
(c) If the veteran does not pay the principal and interest of the
loan upo:..1 its maturity, the bank holding the note and certificate may, at
any ti~e after rm. turi ty of t~1e loan but not bei'ore the expiratio::.1 of six
months after the loan was made, present them to the Director. Tne Director may, in his discretion, accept the certificn.te and note, cancel the
-2-
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•
I
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I
?.
l
'
I
l!
~:-4561-a
1.59
note (b'lt :1ot th') certifi cr~tc), m:d ray tho ·i)c',n:-c, i:1 full aatisfactio:1 of
its daim, the u;noU'-'lt of tho 'J.U:;)nid :;ri-:1ci;}al due it, :md the unnaid illteres t accrn.&d, at the ra to fixed in t':-10 ':1ot'3, 112) to t:.1e de. to oi' t:i:le check
ise'J.ec!. to the ban!.:. TlF3 Diro.::·~o-: s~1all rGstoro to tl1c votcru.:.":, [',t o.:i.1y
ti1~e :crior to its maturity, o:..1y certificate so acceoted, upon rccei}:')t from
him o:::· n;;.1 a;uQ'1.l,;.'lt uqual to che sun of (l) tlw D.rno,r;:::.t :pail;. o;y- tho united
States to the bai'< in cur.cGllation of :nis ::loto, J?lU:'J (:1) interest on such
az:1ou~1t fro:;1 the timo of Gach :'1.::-,ymcnt to tho dute of suc..'IJ. recoi'pt, at 3 'Per
ce~~-tum per an:1.1.l.ln, compounclocl n::.::r:w.lly.
(d) If the veto1·a.'1 failn t0 rsdeom his certifica.tc from the Director
before its caturi-~y, or be:'orw the doat;h of the veteran, the Director shall
doCiuct f:r·o·n thu fc...ce va.l1~.e of the cort~ficato (us determined in soctio~1 5Jl)
a1 a:·1o~1t equ.3.l to t:ne sum of (1) tho ailOU:."'lt :._')aid by tho U:Ll.i ted Stn.tcs to
tl'lc 'Jan::.;: oa c.c:count of the note of tho veteran, I>lus (2) interest on sucl1
a;,::aoti..:~ t, f:;.~om tlw time of :.,uch yO.yr.ncnt to tho cl::.:.tc of :1aturi ty of tho ce:r:tifica te or of" tho Ciec. th of th,3 v -:;tora~1, o, t the ra to of 6 ucr ceatum uer a:.1nu~:.1,
compoU!~dcd am1u.ally, and shall 'l}:J.Y t;he remabdor ill accordn.."'lcc w:.. th tho
pl·ovisi·:ms of sectio:;_~ 5JJ..
(e) If tht: vcterro1 diE'S before the m."lturit~r of the loa·1, the runou..."'lt
of tl1e u...'lpaid ::>ri:1cipal c.nd the T4lpaid :btoro::>t :1cc:"Ued U:.:.J to the dato of
his d.oath she.lJ. on im!a0\lio..tcly duo O:l.d :po.y'"blu. In such co..so, or i::' the
vetero....J. C.ies o:1 the d.ay tho::~ loan matures or within six months thereafter,
the bo.n.'k: holding we no ~e c.nd ce:..·tifico.tc shall, upo:r.. notice of the death,
prese:1t ther.a to the Director, ;vho shnll ti.lel'ecl:pon ccmcel the notE.: (but not
the certific.;:-.te) and pay to tile -of'nk, in fu.ll satisfc.ctio-:1. of its claim,
t:1e o..no;.x:1t of the un:nuid principfll ald. w1uc.id i:'l'.;erJst, nt the rate fixed
in tilE' :c,ote, accrued up to the date of the check ism:cd to tlle bank; exce:r:t that if, 'r)rior to the :payment, the bank is ;1otii'ied of tho c"teath by
the Direqtor a~d fails to proJent ~'IJ.e certificate end note to the Director
wit:i1in. fifteen.d.ays after t!l> :1.otice, such L1tcrest shall be only up to the
fiftGe!lth day after such notico. Tho Directo:- s 1.-u:.ll deciuct the amount so
uaid from the face value (ns determi::1od under se~ti.:m 501) of tne certifi-cate eJ.ld pay the remainder in accordance with th0 p::ovisions of section 501.
(f) If the vetcra:.1. h:1s ~.1ot died before the rr.atl1.ri-ty cf the certific::1.tc,
and has failed to pay his ~ot0 'to the bank or tho Federal rescrvo bar~
holding the note a...J.d certificate, su.ch bu:nl~ shall, at the r.1atu.ri -~y of the
certificate, present the note e.nd ce~tificate to the Director, who shall
UJ.ereupon cancel the r~otc (but not the certificate) and pay to the bank,
L1 fu.ll satisfaction of its clai'll, tJ.1e amo·ll.nt of the u..J.:yaid principal and
un:0aid b.te1·est, at the rate fixed in the note, accrued u:p to tb.e date of
the mat:.t:.:i ty of t:1e certificate. The Director shall deduct t::.e amo-u.."'lt so
pnid frau the ia.ce value (as determined in sect io11 501) of the certificate ~1d pay the remainder in accordance with the ~revision~ of section 501.
(g) -The loan basis of any certificate at a:ay·- time s:1all, for the
:purpose of this section, be a.n a;nou.nt whiCh is not in excess of 90 !"er
centum of the resarve value of the certificate on the last day of the ~Jr
reat certif~cate year. The reserve value of a certi:icate on the last day
of a:.1y certificate year shall be the full reserve required on such certificate, based on a.J. annual level net premium for tweil ty years a.n<i calculated
i:a accordance with the .America:1 Experie:1ce Table of Mortality and interest
-3--
:160
at 4 -per centum :9cr <:F~:J:,J.i11, cO:ll!_"'O"X'ciad. a:::l::ltlc".ll:•.
-(h) No :)a;vmo~::t L:.~)on a:..·~y ....oto sLall bo m:::.de under this sectio:1 by the
Director to a:;.1y JR~:k, U'.1less tho ::..otc whoa pr0se:1ted to him is acconrpa:~.iod
by a_ affi6P.vit mo.d.e by a::.:. officer of the l1an:i;: w~Li.c~1 :TLtC.e tho loe.:J., before
a ~~otf_ry public o:;.~ other officer dosig:1atc<i for the purl;osc b~· regulation
of tho Directo::.:, <.<.nd sta.tLJ.g that su.ch ba:1k :1a.s not cha:.·geri or colloctod,
or attcr1~_oted to ci:.c.'!'go or coll0ct, directl:· or i:1directl;f, a:::y foe or other
con~9r.;::.sation (oxce-c;-t i:1terest cs u.nt::orizoC. by this section) in ros:rect of
a:1y loa~l !Iklde uncior this soctio~1 "u;>r the ba."lk to a VJtora!l. A:1y ba;:1k which,
or director, officer, or n::rnl:;yoo tl1er0of vih.), docs so clurge, collect, or
atte;r~ot ·co ch8:"ge or collect u:\Y st:.ch foe or co~,~:->c.:~>L.tio:1, sh<-~11 bo lic.blc
to the vcto:..·a::1 for a pe.:Ja.l·~y of $100,to be l'OCOV0l'ed i~1 a civil suit brought
by the votora:1. The Director shall upon requ.ost of any bank or veteran
fuT1:.ish a bla.1k for:n for such nf:fidavi t.
SE0. ::-:03. ::.'Jo certificL.te issueC:. or rig:1t conferred under the ~"ro
visio:':!s of thir: ti tlo shall, except as ~Jrovided ir:. sectioa 502, be negotial)le or assig:1able or serve as sec'.lrity for a loan. .A1:y :-"egotiatio:1,
assi~:J.lne::.. t, or loa::1 :11ade L1 vi.olatiol1 of any nrovisio:i.1 of this sectio:1 sroll
be held void.
SEC. 504. Any certificate issued -u.ndor the provisio:1s of this title
sl1all luve nrinted u:non its f8.ce the co:1di tions &nd ter·rns u'!?on which it is
isr;ue d a::d. to Y'hich it is subject, i~1clu.dL"1g loa..."l. values ur.der sectio:1 502.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4689
October 12, 1926
SUBJECT:
Conference Topic - Reduction in Reserve Requirements.
Dear Sir:
In passing upon applications from member banks
located in outlyir~ sections of reserve or central reserve cities, for reductions in their reserve require~ents
o~ demand deposits to 7% or 10%, respectively, the Board
has followed the policy outlined in its letter of December 19, 1924 (X-4221), which was recommended to it by the
Federal Reserve Agents at their conference in November of
that year.
The Board now requests tbat the Federal Reserve
Agents, at their forthcoming conference, consider the
practicability of their reviewing at leust once each year
the situation with respect to member bar~s which have been
graated the reduced reserve privilege, with a view torecommending to th~ Bo~rd revocation of its permission in
the casas of member ba::1ks, the character of whose business shows a material change.
Very truly your3,
Edmund Platt,
Vice Governor.
(Enclosure)
TO ALL F. R. AGENTS
.
x-4221
December
19, 1924.
Determine.ticn of Outlying District for Purpose of
Ressrve Red~ction.
SUBJFCS::
Dear Sir:
You are hereby e.dvised that the Federa.l Reserve :Soard
has approved the following reconmendation of t~e recent confer0nce
of Federal Reserve Agents:
Th,'3.t the Federal Reserve :Soard in determining
whether a member bank lo,;:;P.ted in an outlying district of a reserve or central reserve city should
be permitted to carry reduced reserves as provided in Section 19, Federal Reserve .h.ct, should be
gu.ic'..ed in each insta.nce by the results of an anal;rsis of the character of the business of t:le applicant mamber bank or o:f all the banks of the
ne:!.gh-'Jor:1ocd group showing a prcportion of (l) E.slan:::es due ether banks
(2) :Sa.lances of corporations
(3) Public depos~.ts
(Ll-) Cash in vaults.n
11
You are further advised tha.t the Federal Reserve Board
has ruled tba.t a bank applying for a reduction in reserves under
the provisions of Section 19 must have been a member of the Federal Reserve System and. in operation a.s such for a. period of at
least one year prior to the date of such application.
Very trv.ly yours,
Walter L. Eddy,
Secretary.
TO .ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
X-4690
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
OctJber 12, 1926.
Su:BJECT:
TOPIC FOR GOVE:lNORS 1 COl\JFEilENCE.
Dear Sir:
T'ne BJard has voted to plnce
1.ti_10:1
the program
for the next conference of Governors the question of the
authority
of~
Federal reserve
b~~k
to receive deposits
of securities for safekeeping froo. Faro Loan Registrars,
from Federal Land Ba..'1kS a,."ld fron Federal InterDediate
Credit Banks.
This
~testion
is discussed in a menoran-
dum prepa1•ed in the office of the Board 1 s C:n.l.l."lsel, a
copy of which is enclosed herewith for y.:mr informati:m.
Very tr'.ll;:r y:urs,
•
To Govorn:.n·s of all F.R.Banks.
Enclosure:
Walter L. Eddy,
Secretary.
:104
X-4690-a
Federal Reserve Board
Mr. Vest - Assistant Counsel.
June 4, l94ti.
Authority of Federal reserve
banks to receive deposits of securities from Federal land banks for
safekeeping.
The attached letter from tho Cashier of the Federal Reserve Bank of
raises the question whether Federal reserve
banks arc a1J.thorized to accept securities for safekeeping from
Farm Loa..'l Registrars, from Federal land banks and from Federal intermediate credit banks.
After a careful consideration of this question, I am of
the oyinion that Federal reserve banks are authorized to receive
deyosits of securities for safekeeping from Federal intermediate
credit banks, but are without authority to receive such deposits
from Federal land b~~ks or from Farm Loan Rcgistrcrs.
With reference to the authority of Federal reserve banks
to receive deposits of securities from Federal intermediate credit
banks the following provision of la:w found in Section 406 of the Agricultural Credits Act of 1923, is pertinent:
"Federal reserve banks are hereby authorized to
act as depositories for a."'ld fiscal .a;;.ents of any national
agricultural credit corporation or Federal intermediate
credit bank. u
In my opinion, this provision of law is sufficiently broad to include
authority to Federal reserve banks to accept deposits of funds or
securities from Federal intermediate credit banks. In fa.ct, the Board
has previously held, under a statute containing substantially the same
provision with reference to the War Finance Corporation as the above
statute has with reference to Intermediate credit banks, that Federal reserve banks rna~ hold securities for safekeeping for the ~ccount of
the War Finance Corporation.
The question w~ether tho reserve banks may receive deposits
of securities from Federal land banks or from Farm Loan Registrars
is mvre involved. There is no express authority given in either
the Federal Reserve Act or the Farm Loan Act for Federal reserve
banks to receive deposits of funds or securities from Federal land
banks or from Farm Loan Registrars. This in itself makes the receipt of such deposits beyond tho powers of Federal reserve banks.
In addition, however, there is a provision of the Farm Loan Act
which seems by implication to deny the existence of a right in
Federal land banks to make deposits in Federal reserve banks. This
is folli!d in Section 13 of the Farm Loan Act and authorizes a Federal land bank "to deposit its socuri ties, a.J.'ld its current funds
subject to check, with any member bank of the Federal Reserve
System." It is reasonable to assu.rne from this provision of law
i65
- 2 -
X-4690-a
and from the abse~cc of any prov1s1on authorizing deposits in Federal reserve banks, that·it was not intended that Federal land banks
shJuld mruce deposits in Federal reserve b&vtl{S.
Section 19 of the Farm Loan Act provides that mortgages
and bonds held by a Farm Loan Registrar as collateral security for farm
loon bonds shall be dep-' sited 11 in such clepo sit vati.l t or bank 'as the
Federal Farm Loan :Soard shall approve, subject to the C-'ntrol of said
Registrar and in his name as trustee * * * . 11
The words "in any bank11
W)uld seem to include a Federal reserve ba.11k, and there appears to be
no reason why a Federal reserve bank, approved by the Farm Loan :Soard,
might not be used as such a d.opcsi tory, so far as the Registrar's
authority is concerned. This statute obviously, however, does not in
any way enlarge the powers of Federa~ reserve banks or give them authority to receive deposits from Farm Loan Registrars.
The Federal Heserve :Soard has a:pproved the right of
Federal reserve btmks to pay coupons of Farm loan bonds and also to
accept deposits of funds from Federal land banks in anticipation of
such maturing coupons. The authority to receive deposits for this purpose is found in the fir& p:Jragraph of Section 13 of the Federal Reserve Act which authorizes Federal reserve banks, solely for the purposes of exchange or collection, to receive from a nonmember bank deposits ':lf current fu..'lds, provided such nonmember bank maintains balances
sufficient to offset the items in transit held for its account by the
Federal reserve bank. This provision of law, however, does not authorize Federal reserve banks generally to receiva deposits from Federal
land banks for other purposes. ~1e decision of the Federal Reserve
:Soard that coupons of Farm loan :Bonds might be paid by Federal reserve
b~'lks out of deposits u~do by Federal land baru~s was based upon an
opinion rendered by Judge Elliott, then General Counsel for the Federal Reserve :Soard. In ~1other opinion, however, Judge Elliott took
the position tbat the Federal reserve banks have no a~thority to receive deposits generally from Federal land banks, ~•d also in his opinion
with reference to the payment of Farm Loan :Bond coupons he stated that
Section 13 does not authorize Federal reserve banks to receive deposits 11 fron Farm land banks to tho same extent that such deposits ar~.
received fror:l member banks or fro!n the United States Government. 11
Under Section 6 of the Farm Loru1 Act the Secretary
of the Treasury is directed to require all Federal land b~'lks acting
as financial agents of the Gover~mont or depositaries of public money
to furnish satisfactory security by the deposit of bonds or otherwise.
No doubt the Secretary of the Treasury, under his authority to require Federal reserve banks to act as fiscal agents of the United
States, could require tho Reserve :Sanks to receive deposits of such
securities fror:1 Federal land banks as are required of them under Section 6 of the Farm Loan Act. In so doing, however, Federal reserve
banks wJuld be acting as fisca~ agents of the United States and w~uld
be receiving and holding securities for the United States rather
than for the Federal land banks.
:l66
- 3 -
X-4690-a
Except in such cases as this, however, it is not believed
that a Federal reserve bank could properly bo considered to be acting
as a fiscal agent or d~pository of the Government in receiving deposits of securities from Federal land banks. The United States
at the present time owns only a small amount of the capital stock
of the Federal land bru1ks. Funds and securities of the land banks
are not the p:;.·opcrty of t::ae Government, and a bank receiving a deposit of funds or securities of Federal land ba~ks is not in my
opinion thereby rendered a fiscal agent or a depository of the United
States.
As stated above, therefore, I am of the op1n1on that
Federal reserve banks are without legal authority to receive a deposit of funds or securities from Farm Loan Registrars, or from
Federal land banks except where such depoGi to are r..a.de in an ticipation of maturing coupons of Farm loan bonds which are to be paid by
the Federal reserve banks. * * * * .
Respectfully,
George :B. Vest,
Assistant Counsel.
FEDERAL RESERVE BOARD
. WASHINGTON
X-4691
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE IIOARD
October 12, 192£
SUBJECT:
Conference· Topic - Federal Reserve Bank
Representation at :Ba...'lkers 1 Conventions.
Dear Sir:
In a recent discussion of the benefits accruing as a result of representation of the Federal Reserve banks at ba11kers' conventions, question arose as
to the necessity for a given Federal Reserve bank arranging to send more than one officer or employee to
such a o:mvention, at the expense of the bank, and whether or not the practice of two or more officers attending bankers• conventions at the expense of a Federal
Reserve ba1li~ and with the loss to the bank of their services for a period of several days, is entirely justified. With the thought tr~t it might be possible for
the Governors and Chairmen of the Reserve banks to work
out some uniform practice to be followed with respect
to the extent to which Federal Reserve baiL~s should be
represented at b~~ers' conventions, it was suggested
that this matter be 1na~e the subject of discussion by
the forthcoming conferences.
Very truly yours;
Edmund Platt,
Vice-Gover:1or.
TO ALL GOVERNORS .AND FEDERAL
RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4692
October 13. 1926
SU:JECT:
To11ic for Uext Co:1forc:1ce of Gover:1ors.
Dear Sir:
.As you were ac vi sed i::.1 tho :oa:rd 1 s lot tor of May 11th. the :oard
has voted to place u.:;;)Q:-:. the program for the ne:Jrt conference o·f Governors
for their co:1sidcration, ccrtaL1 qu.estio:1s which ::-lll.vo arisen with regard to
the Doc.rd 1 s ruling upon· the oligibili ty for rediscou.:1t of :1otos of parent
corporations representi1~ borrowi~gs of funds to be advanced to subsidiaries. T:i1ose questio:as are discussed in the :Board's letters of Decer.iber
30, 1925, (X-4484), March 12, 1926 (X-4560, X-4560a, X-4560b) and May 11,
1926, (X-4602). Copies of these icttcrs are enclosed herewith for your inforr~tion in this connection.
On the occasion of the last meeting of the Federcl Advisory
Council, which was hold in Washington on Septeobor 17, there was a purely
inforr~l discussion of this subject between the Federal Reserve :card and
the Federal Advisory Council, during which it was developed that the facts
in the case which gave rise to above ::1entio:1ed letters ::uy have been incorrectly stated to tho Doard; and that if they t~d 0eon correctly stated, it aicht have boon posEible for the :oard.to declare this :paper eligible for rediscount on a theory entirely different fro;-:1 tho theory on
which it bas heretofore been diS<.."USscd. Heretofore it has bee:.1 assu::J.ed
that the payment of noney by tho pareat corporatio~1 to t:10 subsidiaries is
in the nature of a loan to the subsidiaries; 1::ut it nov; appears that sucl1
pc.y:ments oay possibly be considered payr:1ents on o.ccuunt of ~:oods purchased for future delivery, in which event they rrou.ld 'Je po.;y-:-:1cnts for a coomcrcial purpose rather than a finance purpose.
Daring this discussion it was represented to the Jon.rd that
the subsidiaries to which the M .A.. Han~a. Company makes advances are un•
der contract to deliver to the M .A.. Hanna Company in the spring pip: iro::1,
•
ore, etc., produced du.ri::l.g the winter nonths and that such goods are "willed to the Hanna CoL~any by the subsidiaries and are sold by the Hanna Coopany, wnicl1 collects the no;~ey, deducts the a-r:1ount of 11 advn...'1ces 11 , a~1d rer:d. ts to the sucsidiarie3 the -!Jalance duo them. It was then suggested that,
if the transacUon cGtr;:vJn tl:.-3 Hanna C01:1pany and its subsidiaries involves an actual, bema nde sale by the subsidiaries to the parent corporatic!1 B-'1d a re-so.lo ·0y tho parent corporation for its ~ account,
the pay;.1ent of ::1onoy cy tho parent corpol·a.tion to the subsidiaries
wdc,ht be construed to be an advance pa.ywont on account of the purcr~se of
goods for future delivery rather than a loan. It was recognized, however,
th:..1.t the CJ_uostion as to the true :K,ture of such a paynent would be a very
close question which could not be deteruined until after a very careful
169
X-4692
-2-
scrutiny of the facts and of tho contractual relation existin~ between the
parent corporation and tho subsidiary. r:t"ne ulti:o.o.te determinn.tion of this
question would depend very largely upon the existence of a bona fide contract between the parent cor1Jcration and the su"bsicliary for tho purchase
of goods for future delivery. at Q: fixed price. Such a contract would necessarily result in the parent corporation assuming the ultimate credit
risk on the ro-sale of tho goods and taking the profit or loss resulting
from the price rea.lized on such re-sale.
As indicated above, this discussion was purely informal, and
this new aspect of the probler;. has not yet been formally suomitted to the
Federal Reserve noard for a ruling. This information is being furnished
to you, therefore, merely in order that you may be advised of the possible
further developments in connection Yri th this problem.
Very tru.ly yours,
Ed.rJU.nd Platt,
Vice-Governor.
(Enclosures)
To Governors of all F. R. Ban1.cs.
X-4484
December 30, 1925.
SUBJECT:
Eligibility for Rediscount of Notes of Corporation
Representing Borrow:i.ngs of Funds to bo Advanced to
Subsidiaries.
Dear Sir:
The Federal Reserve Board has recentl;y had occasion to rule
upon the eligibility for rcdiscotmt 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 :particular case :presented to tho BoarQ.. for a ruling
it appeared that formerly member banks took the notes of the subsidiaries
with the endorsement ef the narent corooration and that such notes were
considered eligible for rediscour.t at tedoral reserve ba1~~; but that
recently the parent corporation ba.d decided tr·at it would be better and
simpler financinb for it to borrow all funds to be used by it or its
subsidiaries on its OW1l notes and to mP:ke advances from such borrowings
to its subsidie,ries. ~1'/'o of the Federal reserve banks, however, took
tho position that, under the regulatioas of the Fed.eral Reserve Board,
notes of the :parent corporation given for fu~1c.s borrowed for the purpose
of making advances to its orm subsidiaries must be claused as 11 finance
paper" which is ineligible for rediscount at Federal reserve banks; and
a member ba1ik requested the Board to reco~sider the question with a view
of ascertaining '\7hether a more libera.l interpretati-on could be placed
upon tha.t provision of its regulations '¥7hich pertains to fina,.'"lcO :paper.
The ~osition taken by the Federal reserve banks in this ~tter
is in accordance ~ith a strict technical inte1~retation of that :provision
of the Board's regul~tions which ~rovid.es t~at in order for paper tG
be eligible for rediscount the :proceeds of such paper must have been·
uned 11 in the first instance" for an eligible :purpose and that paper 11 the ·
proceeds of which haYe been or are to be advanced or loaned to some other
borrower" is not eligible for redis..C'Gunt. Upon further consideration of
this question, hov;ever, the Board reached the conclusion that this is
an unnecessarily strict interpretation of its regulations in cases of
this kind, and the Board ruled that where a :parent corporation owns at
least 75 :per cont of tho stock of each of a number- of subsidiary
corporations the noto.s of such parent corporation the proceeds of whic...'L
X-4484
-2-
have been adv~~ced or loaned to its subsidiary corporations will not be
considered fin~~ce paper within the neaning of tho Board 1 s regulations;
provided that (1) the parent corporatior. makes no adva~ces except to its
own subsidiaries, (2) tho subsidiaries borrow no money except from the
parent corporation, and (3) the proceeds of sue~ adv&~ces have boon or
are to be used by the subsidiQry corporation for ~l industrial, commercial, or agricultural puryose, within the meaning o: the Federal Reserve Act and the Bo;:trd 1 s rcgu.lations. It is un::lerotood, of course, that
h1 order to be eligible for rediscount such paper must also comply in all
other respects with the requirements of the law and the Board 1 s regulations.
The Board l1as heretofore published several rulings to the effect
t~~t p~~cr re~resenting bo~rowings 0y one person, firm, or corporation of
funds to be advanced to a:1 independent person, firm, or corporation, is
11 finance paper 11 a~1d is therefore ineligible for rediscount; ru1d this ruliag
is not intended as a .reversal or qualification of ti10so rulings. Thoro is
a clear distinction, howevc.r, bet·wee:l casos such ns those covered in tho
rulings o.bove mentio:1ed and t:1o case here proso:1tcd; bocause, •vhcro tho
borrower is a J?CU'Gnt corporation vnd makes advances only to su.bsidiary
corporations owned by it, tr.o parent corporation and the sub3idiaries aro
in practical effect one sin€le orero1ization ~~d may with propriety be
viewed as a single borrower.
D. R.
CRISSINGER,
Governor.
TO GOVERNORS .AliD FEDERA.L RESERVE AGEHTS OF ALL F. R.
R~KS
X-4560
March 12, 1926.
S1JR.ECT:
~\(~(i tio:~nl
To:;>ic for Governors 1
Co~1fere::ce.
Dear Sir:
The Eor:.rd bas voted to place u·:>o~1 the
program of the forthcomin;; Conf.srence of Gover.!ors
for their co~1~ideration certaL1 questions Yrhich have
arisen \7ith re['lrd to tl:e :Board's r0ce::::t :-uling upon the eligibility for rediscount of notes of a
co~9oratio::'l reiJr,::ser~.ting borrowi:;.gs of fu:.1ds to be
advar:ced. tc stibsidi?.ries, \7hich was co~1tai::ed L1
the Board's letter of December 30 (X-4484). These
questio~1s are discussed in a letter from Governor
Fancher ~nd in a JY,emorandum from Counsel to the
:Board, both of ·,7hich arc e::closed. hcrerri th for your
information in this matter.
Yours very truly,
Walter L. Eddy,
Secretary.
( i:nclo sur es)
TO GOVERlifORS 0]' ALL F. R. BAL'TKS.
1.f(3
X-4560-a
To
The Federal :Reserve :Soard.
From~~.
Wyatt- General Cvunsel.
March 10, 1926.
Su"TJ::JCT: Eligibility for rediscount of
notes of corporation representing borrcwings of funds to be advanced to
subsidiaries.
The attached letter from Govel~or Fancher raises
a further·questicn with reference to the above subJect which
wa~ ruled on in the Board's circular letter of December ~0,
1925, (X-4484).
In a letter dated !Jovember 2$., 1925, Mr. Thomas
P. Beal, President of the Second National :Sank of Boston,
called tbe Board's attention to the fact that, because of
a recent change in the m-ethod of financing the business of the
M. A. Eanna Company a~d its subsidiaries, the paper of the
Hanna Company has recently been declared ineligible for rediscount by the FeQeral Reserve Bar~s of Cleveland and Boston.
It ap,eared tr~t the former practice of the H~na Company had
been to make loans to its subsidiaries taking the notes of
the subsidiaries which w~re tnen endorsed by the Hanna Company
and discounted at various banks. Such notes were considered
eligible for rediscount when the ?roceeds were used by the
subsidiaries in the first instance for B.t,"'''.icul tural, industrial
or commercial purposes. Believing it to be a better fo~m of
financing, however, the Hanna Company had rece:.:tly in8Jl.c:,orurated
a new system wl1ereby it borrows on its own notes backed by
the consolidated financial statement of the EaL"1.na Corrq:any and
all of its subsidiaries, and from the f~~ds thus obtained the
Hanna Conwany rnalres advances to its subsidiaries. These notes
of the Hanna Company had been held to be ineligible because
Section II(a) and (b) of Regulation A provides that, in order
for notes, drafts and bills of excha~ge to be eligible for
rediscount the proceeds must be used "in the first instance"
for an eligible purpose and must not be "advanced or loaned
to some other borrower}~'; T~'lis provision of Regulation .4..
is based upon long established and well rec~gnized rulings of
the Board which have always been.. ....deemed of fUndamental import. .
.
ance.
--~ :-~
Mr. Bealls letter was discussed at an informal
meeting of the Board held in Governor Crissinger's office
on December 1st, 1925, at which Governors Harding, Strong
and Fancher were present. T.l:".Le business of the Hanna Company
was discussed at some length a~d it was the understanding
of all those present that the 4anna Company made no adva~ces
except to its own subsidiaxies and that the subsidiaries
borrowed no money except from the Hanna Company. On the
basis of the assumed facts, it was agreed that the Hanna Company
and its subsidiaries could be considered together as a single
borrower and that the above quoted provisio•w of the Board's
Regulation A pertaining to "finance paper11 could be interpreted
http://fraser.stlouisfed.org/
as not
With this ~~derstanding,
Federal Reserve Bank of St. Louis a~lying to ~ case of this kind.
'\
-
-
- 2 -
X-4560-a··
I left the meeting and irmncdie~tely prepared a ruling on the
subject and submitted it to the :Board on the same day. This ruling, which was approved at the Board meeting on December 14, was
to the effect that where a parent corporation owns at least 75
per cent of the stock of each of a number of;;subsidiary corporations the notes of such parent corporation the proceeds of which
have been advanced or loaned to its subsidiary corporations will
not be considered finance paper within the meaning of the Board's
regulations: provided. that (1) the parent corporation makes no
advru1cesexcept to its own subsidiaries, (2) the subsidiaries borrow
no money except from the parent corporation, and (3)- the proceeds
of such adva..11ces have been or are to be used by the subsidiary
corporation for an industrial, commercial or agricultural purpose,
within the meaning of the Fedoral Reserve Act and the :Board's
regulation"'l. It is understood, of course, that in order to be
eligible for rediscount such paper must also comply in all other
respects with the requirernents of the law and the :Soard's regulations.
The ruling was later incorporated in a circular letter
(X-4484) approved at Board meeting on December 29th and. sent
to all Federal reserve b~J>.s under date of December 30th which
stated the fundamental basis for the ruling as follows:
•
11 The 3oard has heret;)fore :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 'fina11ce
paper' and is therefore inelibible for rediscount; and
this ruling is not intended as a reversal or cualification
of those ruli~gs. There is a clear Qistincti;n, however,
between cases such as those covered in the rulings above
mentioned and the case here presented; because, where the
borro~~ i~ ~ E§;_~en! _£orporatioE_ and makes adva:;.1ces onll
to subsidiary coruorations owned by it, the parent corporation a'1d the subsidiaries _?.re in E_actica!_ ~ffect ~ single
organization and maz with propri~ be viewed ~ ~ single
borrower."
It now develo"Ps, however, +.hat the M. A. Ha..'1na Company
does :i1ot confine its advanceS'' to i 'le own su·osidiaries in which
it owns 75% of the stock, but ~~s advances to some corporations
in which it owns only a minority of the stock and to some other
corporations in which it owns no stock but for which it merely
acts as a factor or cor-mission merchant. This being the fact, it
is clear that the Board's ruli~g (X~4484) is not applicable
to such paper of the Hanna Compcny, nor do I believe that the
:Board could amend the ruling in. su.ch a wa~· as to make it applicable
to such paper without :practically abrogating in toto the ruling
against finance paper.
Governor Fancher suggests that the first condition
mentioned in the Board's ruling- i •. e., that ~he parent corporation shall make no advances except to its own subsidiaries,
be eliminated from the ruling; but if this were do~e the fun-
X_;4560-a
- 3 -
dai1Wntal principle U?On which that ruling was based would bo
elimh1ated. and t:1orc would be no basis for the distinction
between the circwnstances covered by that ruling and circwnstances of numerous other casec where the Board has .held
certain :pa9er to be 11 finance ~)aper" and, t:1erefore, ineligible.
I a'I! unable to recommend, therefore, t}lat the Board
attempt to amend the above mentioned ruling in such a way as
to apply to the paper of the Hanna Company in the light of
the facts which have develoyed since that ruling was made;
and. I can see no way in which the :Board can go a.r1;:,• further, in
declaring such :pa:)er to be eligible, unless it desires to
abrogate entirely the r-.1J.L1g regarding finance paper.
I believe that the rulings heretofore made by the
:Board rer,arding fina;.1ce J?a-per are sound nnd reasonable constructions of the Federal Reserve Act and are calculated
fairly to carry out the purpose and intent of those portions
of Section 13 which define the classes of paper eligible for
rediscount at Federal reserve banks.
The requirement that the :9roceeds of paper offered for
rediscount must have been used in the first instanee for
an agricultural, industrial or cow~ercial purpose, however,
is not aosolutely required by a. strict technical construction
of the language of the act; and it is conceivable that the
Board might abolish that requi~emont if it so desires. That
requirernen t, however, has always been considered one of
fundamental importance and has long been in effect; and I
believe it would be unwise to go any further in the direction
of letting down the ·oars with res:!fect to finance paper without
fi~st having a thorough study made of the practical effects
of such a ruling and having the matter tho~oughly discussed
by the Governors of all Federal reserve banks at a Governors 1
Conference.
If, therefore, the Board is inclined to further
liberalize its rulings with respect to finance paper in
order to be of further assistanc~ to the Hanna Company and
other corporations similarly sit*~e4.t. I respectfully recommend
that the Board place this subj~9t en 'the program for discussion
at the next Governors' Conferen~e ana se~ out to the Governors
of all Federal reserve banks complete eopies of the attached file
at· the earliest possible date, in order that each Governor may
study the subject and come to the Conf~rence prepared to discuss
the matter and make a well consia~red recommendation te the :Board.
~8SiJ0Ctfully,
,~,
Walter Wyatt
General Counsel.
WW OMC
File
attached.
X-4560-b
F:ITJE:s.AL :iiESBP'VZI BANK
CF CDVELUITJ
February 10, 1923.
Mr. D. R. Crissir(;er, Gove:::-no:::-,
FeCeral Reserve Board,
YiashL1gton, 1. C.
DaEtr Mr. Cr is singer:
The H• .ll.. -::Ianna Company of Clevela.."'l.d, wl~ich company carries
with and borrows from some of our local member baul::s as well
as some rue:n·oer ballks in ot:ner districts, has taken up with us the
qu.estio:1 of the eligibility for rediscount of their paper.
accou~1ts
It l1appens that this is the compar,y in con~1.ection with which
the recent ruling of th:J Fsc~eral Reserve Bcurd (letter X-4484 dated
December 30, 1925. Subj.zct: Eligibility for Rediscour:t of Notes of Corporatio:'l. Represcn ting :Borrowinr.::s of :E'u:'ld.s to 0e .Advanced to Subsidiarien)
was rnado.
This ruling set up the follo·.1ing conditions:
iVhere the :;~arent compa:1.y oWi.iS at least sevent;;r-five perce:1t o: the stock oi each of a nu.:nbcr of sU:o~idiar~r corporations,
the notes of such parGnt co~]Joratio~, the proceeds of which have
·oeen ad.va~1ced Ol' loaned to its subsidi.ary corporatio':w, vrill ::1ot
be co~1sidered fL:.aace paper 1.'Ti thin the meaning of the Board's
rulL1g; Provided, tlla t 1.
The pare:1.t corporation maJ:es no advances except
those to its mvn subsidiaries;
2.
The subsicliaries borrow
parent corporation;
3.
Tho proceeds of Each advances lxwe been or are to
be used oy the suo s idiary corporation for an
i::1dustrial, C',QJThTercial, or agr5.cultural pl.L.'j;>ose
within the rnE:a.'1~.n~ of tho Federal Reserve ltct a!ld
the Board 1 s regulati.ons.
:10
rnoney· except from tlte
T:'1ese conditio:.1s ca.."'l. be rr:ot by tho corrrpa:1y in quostio;,1, with
the exce:_otion of :ro. 1, which (for re&sor. . s outlbud later in this letter)
can::1ot be met and nhich appea.~.· to the compa.'1y to vmrrant further consideration by the Federal Rcse:;.·ve :Soard.
The company owns one hundred perccn t of tile stock of aine
different conn;>aai es operating as miners and s.::1ippors of coal and oro
a:..1d operators of docks a.'1d shiys.
Tl>ey also own seventy-nine percent
of the stock of a fu.r::1ace company; sove:1ty-nb.e yercent
the stock of
a coke cor::pa:.w; eighty pcrcmt of the steel:: of a coal a.nd dock compar.;y;
of
-2-
X-45130-b
and L-,;. addition to this, from fort;r-threc to sixty-seven percent of the
stoCk of seven different companies.
These seven companies are coal and
ore mining companies, ma"lufacturers of by-products, iron companies and
transportation companies •
.Along with those operations, the M. A. Hanna COinpan;:r acts as
selling· agent for ore mini:1g companies and furnace operators, and it is
in this capacity that the con-q:>any at certain seasons fLJ.ds it necessary
to make advances for the stripping and mining of ore to be sold b;r tho
company when the shipping s0ason is opened and for the production and
carrying of pi.g iron during slack seasons or pending orderly marketing.
Their banks prefer that the obligations for borrowed money
be represent~d by notes of the M .A. Han11a Company and that tr..a t company
•
only should do t..':le borrowing for the various operations of this cornpans\;·
a:..1d its affiliated oompanies.
T~e consolidated statement of the compaP~, as of December 31,
1925, would show current assets of approxire tely $15,000,000 of which
a:;:rproximately $2,150,000 is advances made to com"}anios other t.~an thoso
i:1 which they cmn seventy-five percent or more of the stock.
Their current liabilities are approximately $4, 600, 000 .
It appears that it is not
possible for this compa"ly to segrecate their borrowings or earmark them
to any particular one of their various operations but that their borrowings are necessarily a part of their general ~~orations as outli~ed
above.
.As we understand it, these ad-va.Tlces are not in the nature of
;to ana the r ::;>arty evidenced by notes or other paper but e.re in fact
adva.:."lces carried in separate accounts and are eventually settled through
deli very of goods or commodities to this company or to cu.s tamers to whom
this company sells.
lo~ms
If another company without subsidiaries or affiliated companies
were engaged in the same kind of operations, showing a similar condition
of liquidity and atrongth, the paper of ro ch company would hardly be considered ineligible roorely because the con~any showed in their statement
adv~~ccs made to others, but provision No. 1 of ti1e Federal Reserve Board's
r~ling in letter X-4484 at lea3t appearsfto preclude the eligibility of
the p.<;q:Jer of the M:. A. Hanna Company.
U11der the circumsta.:.~ces, would the fact that the comp~1y is
maki.ng.adva.nces other tha.::~ those outl,ined in No.1 of the Board's ru.ling
preclude the eligibility of their paper under RegQlation .A, Section it,
which in effect states tba t tha proceeds must have been used or borrowed
to be used in the ftrst, ir..s t;a..nce in producing, purchasing, carryiDg, etc. ,
and (b) that it must not be a :.-wte, draft, or bill of exchar..ge, the proceeds of which have been or c~re to be advanced or loaned to some other
{)ori;.9.~e:r;;·:: etc.?
Very truly ;>rours,
(si&wd) E. R. Fancher,
Governor.
P.S. The company in question hcts subi.1itted to us tentatively separate
statements of their oWiJ. company a.11d all of its subsidiary or affiliated
compa.::.1ies.
X-4602
Ma~r
SUBJ::CT:
11 ,. 1926.
?Totes of Par-ent Corporations Re~:>resentirig
Jorrowings to be Advanced to Subsidiaries.
Dsar Sir:
Acting pursuant to the request of the recent Governors Co:aference the Board has voted to place unon the program
for the next Conference of Governors for their consideration,
certain 0"Ue£tions wn:'-c':1 have arisen with regard to the :Board's
rulin5 U~Jon the eligibility for rediscount of no·tes of a corporation represe:1ting borrowings of funds to be advanced to
s~bsidiaries, which wa~ c:>ntained in tho Board's circular letter of Decornber 30, 1925, X-4484. These questions were raised
in a letter from the Governor of the Federal Reserve Bank of
Cleveland ar.d comr~ented on in a memoratidwa from the Eoard 1 s
Cou;.1.sel, copies of w:llich were transmitted to e11 Governors
with the Board's letter X-4560 of March lG, 1920.
?ending a reconsideration of these questions by
the next Governors Conference and for the ~iaanc~ of Federal
reserve banks in the mea.nt::.me, the Board hol.-is that notes of
a parent corporation representing borrowings of funds to be
advanced to subsidiaries will not be eligible for rediscount
at a Federal rescrv~ b~rk unless thoy com)ly with all of the
conditions laid down in the :Board's circular letter o-:: December 30, 1925. Accordingly, t~e notos of a parent coryoration
the proceeds of which huve been :advw1ced or loaned to its subsidiaries, will not be elie;ible pfor rediscount, if the parent
corporation also makes advancesfto other corporations than
its own subsidiaries.
Very trul;r yours,
D. R. Crissinger
G o v e r n o r.
FEDERAL RESERVE BOARD
X-4693
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
Octo"bor 13, 1926.
THEFEDERAL.RESERvEaoARo
SUBJECT:
~I.'OPIC FO:ii THE GOVE..,:mORS 1 COl'I?ERENCE.
Dear Sir:
The Bonrd has voted to place u1xm the prograr.1
for the next conference of G·JVernors the question whether
the J:3onrd 1 s Regulation A shJuld be ru:1ended so as to make
eligible for redisCJ1,.;11t .::>r purchase by Federal reserve
"'::ln.nks a "'oru1kers 1 ac.:::eptance 'irawn ·:;y an elevator or
warehouse coqoa..'1y and secured by teroinal warehouse
receipts issued by the elevator or warehouse
co:.~9~1y
that draws the draft •
. For your inforr:..-JatiJn
il1
c:m:1cction wi t}·l
this r.:atter thoro are enclosed herewith copies of
certain corrosiJoadoaco and r.:enoranda die.cussing this
questiJn.
Vcry trul;/ y::mrs,
Walter
t. Ed.J.y,
Socrcbxy.
To all
&~vernors.
http://fraser.stlouisfed.org/ Enclosure~:;
Federal Reserve Bank of St. Louis
X-4693-a
Aut:;ust 23, 1926.
Mr. E. P.. K0nzcl,
Deputy Govorn.:>r,
]\;doro1 Reserve Ba..'1k of New York,
New York City, New York.
Dear Mr. Kcnzcl:
I have your letter of AUo-ust 20th with reference
to bro1kers• acceptru1ces drawn by an elevator or warehouse
co;:~pany a..11d secured by terr~:inal warehouse receipts of the
co:::;pany that draws the draft.
You state that you assume
that the Board• s action in :postponing tho c:msideration of
a:1 a:-.1enc1L1er. . t to Regu.la tio11 A on this subject U...'1 til ~u tor the
~ext Governors' Conference would not necessarily preclude
a ruling by tho Board along t~e lines irdicated in the last
paragraph of Governor YJung's letter to Y.r. Eddy dated July
26th.
At the t~ne when the Board decided to refer this
::1atter to the next Governors' Conference it had under consideration l:·O t only the :proposed ar.1Cnd:.1en t to RCE:,i.1.la t ion A but
also thG :proposal m::.de in Governor Young's letter that the
Board so interpret its :present regulations as t·:> make eligiole
the acceptances under consideration.. The :Board's action ·in
deferring this matter was intended to include both of these
:proposals and consideration of the entire subject was :postponed
until the next Conference of Governors.
Very truly yours,
(sibned) J. C. Noell,
J. C. Noell,
Assistant Secretary.
F E D E. It .A.. L. it J S E It V ll .'B A. N lC
O'i Ill YO!nt
.A.ugu.et 20, 1926.
J. C. Noell, lleq.,
Aasfstan.t Secretary, :hdwa.l Roaervo :Board, '
Washington,
D.C.
Dear Mr. lloell:
I have your letter of :August 18, advising me that after
careful consideration the Board has decided to refer back to the Conterence of Governors for further conaidera.tion
at).
aa1dment to Sec'ion
X (3) of Reglllation A. which was discuaaed. at the laat conference, and
tha.nk ;rou for the information.
I assume· that this would not n.-..ar'-17 preclude a ruling
by the :SOard meanwhile along the linea indicated in the last paragraph
of Governor Youn.g•a letter to Mr. Zd.dr, dated July 26, 1926.
If that
were done it would, I think, serve the llinneapolis and St. Paul btmka
quite as well during the approaching grain soason, which is almost upon
us and which, fr011 aU accounta, I surmise will bring pretty hea'f7 demands on the ba.nlta in that section.
Very truly yours,
(signed)
:z. :a.
lt.
a.
Eonzol
lCEmz.ol,
Depu't7 Govamor.
X-4693-c
August 18,
1926.
Mr • .:a. A. Young, Governor,
Foderul Reserve Bank of Minneapolis,
Minneapolis,
Minn.
Dear Sir:
Tho Board has given careful consideration to
the matter of adopting an amendment to section X(3) of
its Regulation A as proposed by the last Governors' Conference so as to Dk~e eligible for rediscount or purcbase
by Federal reserve banks a bankers' acceptance drawn by an
elevator or warehouse company and secured by terminal
warehouse receipts of the elevator or warehouse comJanY ·
that drmvs the draft •.
Although this subject was discussed at the
last Conference of Governors, it was not on the program
and the stenographic record indicates that the Governors
had not had a sufficient opportunity to study the question. Since the Conference took place some question has
arisen as to whether the adoption of the a.>nendmen t to
the re5ulations in the form proposed would properly accomplish the desired purpose.
In view of these facts the Board oelieves
that this matter should be given further consideration
by the Governors' Conference before being acted upon
by tho Board and has accordingly decided to put it upon
tho program for further discussion at the next conference of Governors.
Very truly yours,
(signed) J. C. Noell
J. C. Noell,
Assistant Secretary.
GBV Qlv!C
1_82
X-4693-d
Aug~
Federal Reserve Eoard
Mr. Wyatt - General Counsel
10, 1926.
Bankers• acce~tances
secured by terminal warehouse receipts issued by the borrower.
Pu.rsua.nt to the instructions issued by the Board at
its meating of Au£ust 6th, I have drafted and respectfully submit herewith a proposed ruling which would permit Federal reserve
banks to rodisco1mt or purchase on the open market bankers' acceptances sec~·ed by registered terminal warehouse receipts issued by
the -borrowers when such receipts conform to the essential condi tior.s
prescribed in the attached correspondence.
I feel it my duty, however, to advise the Board that, in
my opinion, it would be unwise to issue a ruling of this kind and
that if the Board desires to make acceptances of this kind eligible
for rediscount, it would be much wiser to do so by means of an amendment to Regulation A along tho lines of that recom~ended by the last
Governors' Conference. I have, therefore, taken the liberty of
preparing and respectfully submit herewith a revised draft of the
proposed anendment to Regulation A which, in my judgment, will meet
most of the objections raised by Mr. Xenzel.
I respectfully request permission to discuss this subject orally with the Board when it comes u:p :for d.efini te action.
Res)eC tfu.ll;:.·,
(signed) Walter
W~ra.tt
Walter Wyatt,
General Cou.."ls el •
..
:184_
X-4693-e
( PROPOSED RULING OF T~ FEDERAL ::tESER.VE BOARD. )
BAL~RS 1 ACCEPTANCES SECURED BY TERMINAL GRAIN ELEVATOR OR WARE.HOUSE RECEIPTS ISSUED BY THE BORROWER.
Notwithstanding that provision of Section X(3) of
Regulation A which requires that, in order to be eligible for.
rediscount by Federal reserve banks, bankers' acceptances issued
to finance the storage of readily marketable staples must be
secured at the time of acceptance by warehouse, terminal or
other similar receipts, issued by a party independent of the
borrower, the Federal Reserve Board has ruled that Federal reserve banks may rediscount bankers' acce-.9tances drawn by terminal
grain elevator or warehouse compa~ies and secured by terminal
grain elevator or warehouse receipts issued by the drawers;
provided that:
(1) Such te1•minal grain elevator or warehouse company is
duly bonded and licensed and is regularly inspected by State or
Federal authorities with whom all receipts for grain and all
tra...."lsfers thereof are registered and without whose consent no
grain ca;1 be withdrawn;
(2) Unde:t• the laws of the State in which such terminal
grain elevator or warehouse is located, as interpreted by the
court£ of such State, such receipts give the holder good legal
tit::i.e to, or an effective legal lien on, grain of the amount
and quality for which such receipt is issued, wh5.ch title
or lien is good as against bona fide ptU'ch::,sers ru1d general
credi to1·s; end
( 3) Such accep tru1ces comply in a.ll o the:~ reopec ts with the
relevant provisions of the Federal Reserve Act cmd the regulations and rulings of the Federal Reserve Board.
'!his ruling is designed to give recognition to receipts
issued by terminal grain elevator or warehouse companies located
in certain States tho laws of which provide for the supervision
of such elevator or warehouse companies and the registration of
receipts to such an extent that in practical effect, the grain
is under the control of State officials independent of the issuing
warehouse or elevator. Such State supervision and control is
·
believed sufficient to warrant the Federal Reserve Board in making
an exception to its general rule that warehouse receipts securing
bankers' accept~~ces issued to finance the storage of readily
marketable staples must be issued by a party independent of the
borrower.
185
x.:..4693-f
?-ROPOSED AMENDM:ElT'r TO REGULATION A •
.BE IT RESOLVED by the Federal Reserve Board that Section
X (3) o£ Regulation A be amended to read as follows:
11 (3) The storage of readily marketable staples, provided that the bill is secured at the time of acceptance
by a warehouse, terminal, or other similar receipt, conveying security title to such staples, issued by a party
independent of ~ho customer or issued by a terminal grain
elev?-tor or warehouse company duly bonded and licensed and
regularly inspected by State. or Federal authorities with whom
all receipts for grain and all transfers thereof are registered. and without whose consent no grain can be withdrawn;
and provided further that the acceptor remains secUl~ed throughout the life of the acceptance. In the event that the gpods
must be withdrawn from storage prior to the maturity of the
acceptance or the retirement of the credit, a trust receipt
or other similar document covering the goods may be substituted in lieu of the original document, provided that
such substitution is conditioned upon a reasonably prompt
liquidation of the credit. In order to insure co~liance
with this condition it should be required, when the original document is released, either (a) that the proceeds
of the goods will be applied within a specified time
toward a liquidation of the ac~eptance credit or (b) that
a new document, similar to the original one, will be resubsti tuted within a specified time. 11
.
Augu.st 10,
1926.
( CO?l' )
X-4693-g
FBDERAL RESEltVE :SANK
OF~
:18{)
MINNE.APOLIS
July 26, 1926
V~. Walter L. Eddy, Secretary,
Federal Reserve Board,
i7ashin€;ton, D.C.
Dear Mr. Eddy:
This will acknowledge receipt of your letter of July 24, enclosing; copy of letter of Mr. E. R. Kenzel, Chairman of the General
Committee on Bankers Acceptances, dated July 9, to Mr. Walter Wyatt,
Mr. Xenzel is correct in his interpretation of rules nu;nbers
63, 64 and 65, adopted by the Railroad & Warehouse Commission of the
State of Minnesota. It is not compulsory for an elevator in this state
to issue receipts for all the grain stored.
Likewise, it is not compulsory for these receipts to be registered. Therefore, the receipts
of an elev2.tor co~pany in tho state of Minnesota may be good, or may
not be good.
However, an elevator company may issue receipts for all
grain stored and may have the receipts registered by a representative
of the State Department, as to quantity and grade.
The Twin City bankers long agp recognized that if receipts
were to be good se01.1.ri ty, receipts shoulcl be issued for all grain stored
and that such receipts should. be rogisterod by the Ste.te Department,.
and, in reality, be U..."lder state control.
In fact, a regular registered
terminal warehouse receipt is the only security that a northwestern
banker can accept on ·the domestic storage of grain and. feel absolutely
sure of what he is getting. The Twin City bankers would not care to
accept many receipts that arc issued by elevators in this state that
comply with the law. Th.e::..~efore, the amendment to Subdivision 3 of
Section 10 of Article B of Regulation A, was worded in such a way so
that the receipts of elevators that were not bonded, that did not issue
receipts for all of the grain stored in their elevators, or that did
not have the recei:pts registered, would be excluded.
I am still convinced that the suggested amendment will cover.
the situation and throw out the proper safeguar~s.
Nevertheless, I
cannot help but feel that the whole question could be handled much
better if Mr. Kenzel 1 s suggestion be adopted - that is, that the Board
interpret its own regulations to mean that regulex registered terminal
warehouse receints constitute documents for commodities so controlled
by a third party independent of the borrower, as to make them good and
eligible ,collateral.
Yaurs
re~pectfully,
(signed) R. A. Young
R. A. Young,
AI
July 24, 1926.
Dear Governor Young:
There is enclosed herewith copy of a
letter addressed to the Board under date of
July 9th by Mr. Xenzel, Deputy Governor of
the Federal Reserve :Bank of New York, which
is self-explanatory. It is requested that
you aovise the Board of your views on the matters discussed in Mr. Kenzelrs letter.
Very tru.l:r ::ours,
Walter L. Eddy,
Secretary.
Mr. R. A. Young, Governor,
Federal Reserve Bank,
Minneapolis, Minn.
(Enclosures)
~)tA1
_LC)I (
( C.OPY )
ttif-J
(COPY)
-,
X-4693-i
July 13, 1926.
•
To Federal Reserve Board
From Mr. Wyatt - General Counsel
Subject:_ Bankers• Acceptances
secured by terminal warehouse receipts issued by the bo~rower.
At the last Governors' Conference, the Conference voted to
request the Board to amend Section X(3) of Regulation A to read as follows, the words underlined being added to the prosent regulation:
·.
11 (3)
The storage of readily marketable staples, provided that the bill is secured at the time of acceptance
by a warehouse, terminal, or other similar receipt,conveying security title to such staples, issued by a party
independent of the customer· or issued by a terminal grain
elevator company duly bonded and licensed and regularly inspected by State or Federal authorities with whom all re£eipts for grain and all transfers thereof must be regis~d and without whose consent no grain can be withdrawn;
and provided further that the acceptor remains secured throughout the life of the acceptance. In the event that the goods
must be withdrawn from storage prior to the maturity of the
~acceptance or the retirement of the credit, a trust receipt or other similar document covering the goods may be
substituted in lieu of the original document, provided that
such substitution is conditioned upon a reasonably prompt
liquidation of the credit. In order to insure compliance
with this condition 1 t should be required., when the original document is releas~d, either (a) that the proceeds
of the goods will be applied within a specified time
toward ... a liquidation of the acce~9ta!1ce credit or (b) that.
a new document, similar to the orighal one, will be resubsti tuted within a s.pecified time. 11
The purpose of this proposed amendment ia to <Ik"'lke eligible for
rediscount or purchase by Federal reserve banks, bm1kers 1 acceptances
drawn by an elevator company a.nd secured by a terminal warehouse receipt of the elevator company that draws the draft.
OPINION
.rn ~rey opinion, the Board ruay legally adopt and promulgate this
amendment to its regulations. The question whether it should do so
ie a question of policy to be decided by the :Soard.
DISCUSSION
This proposed amendment to the :Soard's regulations was first
recommended by Governor Young in a letter address.ed to the :Soard und~r
date of Sept·ember 17, 1924-. The matter was referred to this office
~~d Mr. Freeman rendered an opinion in wh~ch he stated that there was
some doubt whether warehouse receipts of the kind described in Governor
:189
X-4693-l
- 2-
Young 1 s letter would comply with that provision of the Federal Reserve .Act wl1ich requires that tl;.ey co:r:.veJ· or secuxe title, es:_:Jecially
in view of tho fact that the grain is · stored in an elevator ~wnad by
the borrower and that the wore~ouse receipts arc issued by the borrower to himself. Mr. Freema..>J. sta.ted that there is a conflict in the decided cases as to whether such a receipt does secure title to the goods
or whether a bona fid.e puxchaser of goods from the ware21ousoman does
not take precedence over the h:>lder "Jf the receipt. In my opinion,
the question whether these particular receipts convey a good title or
give the holder a valid lie~ enforceable against a bona fide purchaser
of the whe.?.t, is a question which will depend upon the laws of tho
state in which the elevator is located a..1d upon tho construction of
those laws by the courts of that state. This is a question of local
law upon which this office Crolnot-undertake to pass.
Mr. Free~~ also stated t~t, even if such warehouse receipts could be considered as complying with the letter of the law,
there would still remain an important question of policy whether the
Board should make &l exception to the fundamental principle heretofore established by it and uniformly adhered to, that such receipts
must be issued by a party independent of the borrower. In view of
the importance of this question V~. Freeman recommended that it be
considered by the .A.ccepta.."lce Committee of the Governors' Conference
aud that cor.1mittee be requested to r.uti~e a reco~Jendation to the
Federal Reserve Board.
The Board advised · Governor Yo"Jllg uno.er dc;.te of Oct:>ber
ii!ll~~ediate c:1a.'lge in the regulatLms was possible
in such an importw.1t matter and suggested that he subr.1it the ques ·
tion for conside=ation at the next GovernJrs' Conference. The question, however, was not subr:1.itted tJ, or co:;.sic:crcd by, t:~e Governors.t
Conference at that time.
15, 1924, that n·:>
Under date of Septoobor 9, 1925, GoverrDr You.a.J.g ag.~in
brought up this questbn and urged a.."l early r1.1.lb.g upon it. Mr.
Mitchell caoe to Washington to discuss the question with the Board
and, by directio:>n of the Board, t:':J.is office prepared a. propoued foro
of ar.1endnent designed to acco:>mplish whD.t the Fe<ieral Reserve Ba;.1k of
M~rutoapolis a.""lcl its r.1enber ba.."lks desired.
T11is ar:tendoent was prepared after a discussion with l/.r. Mitchell a..1d he was entirely satis...
fied with it. At the :Soard :oeeting 0:::1 SeptGJ-:l~er 29, 1925, the nat-.
tor was discussed inforr.1ally by the Board with Mr. Mitchell. No definite action was taken by the Board because tho oatter had never been
passed upon by tho GJven1ors' donferen~e. The discussion resulted
ip. an inforual understro1ding to the effect that the Board would not
consider t21e adoption of ~1Y such xJendnent to its regulations without the question having first been considered by the G~vernors'
Conference and that, if tho Federal Reserve B~1k of Minneapolis
desired to have the subject c:msidored by the Governors' Conference,
X-4693-i
- 3-
Governor Young should have it :put
next Governors' Conference.
O:!l
the progra;·n for disc-u.ssion at tho
This subject was finally put on the progrDJl1 for discussion
at the last Governors• Conference and the Conference reco~1ended the
adoption of the proposed an.end.~ent t.J Regulation A.
Under date of July 2nd, Mr. Konzel, Chairnro1 of the
General Co~nittee on Banking Acceptances, addressed a letter to the
Board in which he suggested that, in view of the close approach of
the grain marketing season, it would be . desirable for the Board to deal
with this question at its early convenience. I have had soce further
correspondence with Mr. Kenzel on this subject, which develops the
fact that Mr. Kenzel fears that the proposed anenr:.l.r.1ent is so strictly worded that it WO).ld 'be cUfficul t for tho torcinal elevator companies to cot:Iply with its requil'C!:J.ents. In this connection I desire
to call attention to the fact that the &~endcent recommended by the
Governors• Conference was drafted by this office at the Board's direction and after thorough consultation with Mr. Mitchell. Mr. Mitchell
and I discussed the subject personally at great length, and Mr.
Mitchell was thoroughly satisfied with the la,ngu.age of the anendcent and advised me that it would satisfactorily fit tho practical
situation in his district. In view of these facts, I am inclined to
think that Mr. Kenzel r s fears are unfounded, though I cannot undertake to interpret tho Minnesota law, which is not at all clear.
The law requires that a bankers' acceptance drawn
to finance the domestic storage of readily ~~ketable staples oust
be secured by a warehouse receipt 11 conveying or securing ti tle11 to
such staples; and the Board ca."lnot waive this roquirei:lent of the law.
In order to make sure that this requirement of the la~ is cor.Jplied
with, the Board has heretofOl e ruled unifori!lly, a.:nd ha .. i required by
the terms of its regulations, that such receipts must be issuGd by a
party independent of the borrower. If, u..11d.er the laws of the state in
which the warehouse or elevator is located, a receipt lil:e that
described in Governor Young's letter is hold by the couxts to convey
valid. title to the grain and to give the holder a valid lien on such
grain which is good against a bona fide purchaser of the &rain, the
Board l!lould waive the requirenent of its regulations that such x·eceipt be issued by a party independent of tho borrower. The question whether, even under these circuostances, the Board should waive
this fundru~ental requirement of ita regulations, however, is an extremely important question of policy.
4
The atto.nhed draft ;Jf a pr::>posod D.tnendr.1ent to ReE;Ulation
A would make an exception tJ the requireocmt that the warehouso
receipt be issued by a party independent of tthe borrower, but would
not waive the requirement ~f tho law that such receipt must convey
or secure title. T'.ne que:;;tion whether receipts securing bankers'
acceptances cJoply with tho law as conveying or securing title would
in each instnnce be a question for detorcination b~r the Federal re
1.9t
X-4693-i
- 4-
serve ba..."'lk upon the advice of local counsel; because the court
decisions in the VL>.rious states are in such conflict upon this subject
that the Board could not well atteopt to issue any general ruling on it.
I wish to make 1 t clear tf....c'lt this office does not
the adoption of this amenfujent. If, however, the Board
decides to adopt this anendment, I respectfully suggest t ~"l.t the l:J.atter
is not of sufficient general i~ortance to warrant the publication
of a new edition of the regulations at this ti~e, and that the matter
could be sufficiently covered by the publication of the a.mend.r..1ent in
the Federal Reserve Bulletin. Such a stateoent in the Federal Reserve
:Bulletin should call particular attention to the fact that this amendment to the Regulations does not waive the requireoent of t~e law
that such warehouse or t erninal recei;tts oust convey good security
title and that undel.. the regulation as a.::.1ended it is essential that,
such terminal or warehouse receirts nust actually convey to the holder
a valid lien which is enforceable as a~ainst general creditors of
the warehouse COI:lpany or bona fide purchasers fran the warehouse coiJpany.
recon~end
For the futher. inforr.1ation of the :Soard, there is attached
hereto the Board 1 s previous file on this subject and the recent
correspondence with Mr. Kenzel.
Respectfully,
(Signed)
Walter Wyatt,
C':reneral Cou.."lsel.
File attached.
( COPY )
X-4693-j
~'EDER.AL
:192
RESERVE :B.A.lTK
OF J:JE\V
YORK
July 9, 1926.
Federal Reserve :Board,
Washington, D.C.
Attention: Mr. Walter Wyatt
Dear Mr. Wyatt:·
Refe~ring to our conversation this morning over the telephone as
to the adequacy of the terms of Regulation A if modified aa suggested by
Governor Yo~~g (see page 383 of Stenographer's Minutes of the Governors Conference of March 1926), to admit as eligible security for warehouse secured
bankers acceptance credits the receipts issued by the Minneapolis terminal
elevators, I shall endeavor to state the doubts that arose in my mind in that
regard.
The pertinent language in the proposed amendment is nor issued by a
terminal grain elevator company duly bonded and licensed and regularly inspected by State or Federal authorities with whom all receipts for grain and
all transfers thereof must be registered and without whose consent no grain
can be wi thdrawn. 11 Nothing that I have seen, either in the law of the State
of Minnesota, the rules or by-laws of t:he Railroad and Warehouse Commission
of the State of Minnesota or in any communicatio:1s from bankers, indicates
that the Minneapolis terminal elevator grain con('JFtnies are duly bonded and
licensed or that all of their receipts for grain ~d all transfers thereof
must be registered. ·
"
I think it is quite clear from the documer,;,ts waich I sent to Mr.Ve::~t
on July 2 that the Bartlett Frazier Company of Mi:o.ne13polis c~-uducts its Soo
Line terminal elevator a.s a public termina.l warehouse a...1d tha.t it is as a
public terminal warehouse rather than as a, terminal gra,in elevator that they
come within the warehouse provisio.1s of the law.
Rule /f64 ador.Jted by the Railroad a.;.1d Warehouse Col.T.Plission states
that holders of warehouse re~eipts should promptly present them, etc., for
registration. You will note that it is pernissive, not conpulsory.
Hule :IF63 covering the dslivery of gra.in on storage receipts provide<>
for delivery of the grain upon surrender of thd raceipt properly indorsed. I
do not sea tha.t the rule requir1:3s that the receipt shall have been registered
by the Commission. Another pa,rt of the sa.me rule authorizes the State Registration Department to accept terminal public warehouse receipts.for cancellation,
etc. No mention i$ !I18,de of registered receipt&, from which I infer that some
receipts may not be registered.
Rule #65 refers in its latter part to grain delivered for which no
receipts hava been issued, which to my mind presents the probability of· the fact
- 2-
(COPY)
Mr. Walter Wyatt
. 7/9/26
.·.
.-'i ._}'
X"'" 46 93- j.&- 0 3
that it is conterrplated that grain shall be recdi vad for which no receipts are
issued and which, therefore, wnen delivered must bo delivered without the
surren~er of receipts.
It W011ld seem to me, therefore, at least from these rules a..'1d la.cking
further definite information, that serious doubt is created in respect of the
complia..'1Ce of these t ermina.l eleva.tor receipts with the terms of the amendment
suggested by Governor Young, and in every case it would be a. question in which
Federal reserve banks would have to ascertain the facts as to exact compliance
with the proposed regulation w ich, in rey opinion, would be a serious detriment
to the rearly negotiability of the bills.
If it is desired to admit this class of receipt as eligible by a
change in the Regule.tions, in rey opinion, for practical purposes the change woulJ
have to be so dra.fted as to relieve all apprehension or doubt as to the co!IlPli- ance of the collateral with the terms of the regulation. This, I consider, might
well require such a general description of the collateral as would be difficult
to draft in such a way as would exclude other receipts not safeguarded a.s the
Minneapolis grain receipts are by the Railroad and Warehouse Commission, provided
the holder of the receipts chooses to avail of the protection provided by
the Commission.
On the other hand, carrying a little fur t•1er tl1e thought that I intended
to convey in my letter of July 2, it ha.s alwB.ys been my understanding that the
purpose of all of the Boa,rd 1 s special rulings in respect of wa.rehousing facilities controlled by trustees or agents of creditors was to assure tha.t the security title would be conveyed by the wa.rehou.semf-!11' s receipt a.ad tha.t the physical
property would u e SAfeguarded to the creditors by R. physical control as well, exercisad by the trustees or a.t;ent,s, ra.ther thE;.n that the signa.ture of the actual
receipt issued should be by someone .othar thF,:Cl til:; oorrO\Ner. In fa.ct, I am quite
sure thAt :i.n rr~:my credits that ha.ve been grm;t,;,d -x,:der tJ.1aso sr;ecial rulings the
actual r2:ceipts ware execute::i Oj' the borrow;1r. S::·e.L·sfora, I hA.ve felt and I believe that the acc:epting bankers g•:marall;y fsal t~1n.t rhe spirit And intent of the
Regulations as interpreted by these spacj.al ruling<> is corLplied with if the physical custody of the goods plGdgcd is n<lda pr.•ctic:;.lly Lda;:;Gnjcr:t of the borrower
by the supervision end acts of tha trust,3eS or Bt;:3Llts.
It seerus to me that, for prActica.l purpo::>es,
tL~at
is e. raasonc:tbl0 view
And it w,:,.s with such thoughts il: mind tilat I a.ttempteci to stA.te my belief that
these Minn.sa.pclis t.srarl.rilii.l wsre.c.ouse r.;:;ceiptt; for grain in terminal elevators,
whan registered by the Corm,ission, knowing ,<1.11 th<:J.t we now do about the physical
control of the grain by the reprE,sent;tive of t.le Ccmmissiont the inspection o~
it on raceipt, tl:.e waigl1i1::.g it in ,,nd tha woig.."ling it cut, the registratlon r~:.:vt
tha saA.ling up of tha spo·J.ts a.t night whJn the ;o,gent of the Cora:dssion is absell t
from the eleva. tor, Gonsti tuto documan ts for co1modit ies so con trolled by tl1e CcJ;.
mission indapcnd;:;r..tly of tha borrower 8.S to Ill8.k:e them good And eligible coll·.tc.;>
al under t.~e pr8sen t rag;.lP.tions as n.odifi,;:;d and in terpr-3ted by the speciA.l n:u
ings · the Bc::1rd ha.s nr-;.cie frcm time tc time heretofore in connection with com··
modi ties stored in t~1e bcrrO'Ner 1 s we.rehcuties or on the borrower's premisas but
physically controll8d by trustaes or a.gents of the cr.~di tors.
I should be glP.d to discuss any cthar points in t,Jis rr;A~.tt.:;r with ycu
fJ.t your convenience.
Very truly yuurs,
(signed) E. :H. Ken zel
E. J;. Kenzel,
C:1a.irlil8.n, General Committee on
( COPY )
x-4693-k
194
FEDERAL
OF
RESERVE BANK
NEW
ATTENTION OF:
YORK
July 2, 1926
.MR. G. B. VEST, ASSISTANT COUNSEL
Federal Reserve Boaxd,
Washington, D.C.
Dea.r Sirs:
Referring to our conversation over the telepaane this afternoon
with respect to the eligibility fer a.cceptance by member banks of bankers
acceptances s.ecured by terminal elevator receipts for grain issued by
Minneapolis terminal elevators or warehouses w_;ich are owned by the taker
of crodit and drawer of the bill but which a,rc operated under the supervision.of the Railroa~ and Warehouse Conndssicn of the State of Minnesota,
I am enclosing as arranged a copy of a. lettar rece.l1tly received by Mr.
Fred I. Kent, Vice President of the Bankers Trust Company and former President of the American Acceptance Council, from the First National Bank of
Minneapolis, dated June 24, 1926; also copies of excerpts from the law of
Minnesota pertaining to wa.rehouse receipts and a copy of some of the rules
and regulations adopted by tha Railroa.d and Warehouse Commission of the
State of Minnesota, ~1d a photostatic copy of a wnxehouse receipt registered
by the Railroad and Warehouse Commission, all being copies of the enclosures
mentioned in the aforesaid letter of the First Nationa.l Baak of Minneapolis
received by ~~. Kent and loaned to me by nim.
In our conversation over the telephone I referred to the fa.ct that
the real question at issue, w.1ich is whether or not warehouse receipts issued
under such circumstances are issued by a warehousing concern independent of
the borrower, wa.s pre sen ted by Governor Young at the corlference of governors
in March, 1926, when the question was discussed and the conference acted f~v
orably upon Governor Young's suggestion that the Board's regulations governing warehouse secured credits should be amended in S"'J.Ch a way as wa.s intended
to includd such ware house rt;)ceipts as security for an 0ligible bill.. (See
Stenographic Minut.3S of Confer,zmce, :pages 378-389) ..
As stated to you over the telephone, it would hardly seem to me ne::c;,·.
sary to amend the r<:1gulation as suggested to the confar:mce if tha control b~,:
the Ra.ilroaj and Warehouse Commission of the grain stored in such terminal
elevators is such as to make a receipt issued by the eleva.tor company and
registered by the Commission such an "other similar document" as conforms t~
the spirit and intent of the present regulations.
I ma.y say that I have discussed the degrl)e of actual security as
represented by such receipts with the leg.ding bankers in Minneapolis, with
Governor ~Dougal and Deputy Governor McKB¥ of the Chicago Federal Reserve
Bank and with lea.ding bankers in Chicago, B.l1.d have been assured by ea.ch of
them that such receipts are taken freely a.s colla.tera.l for loans in inportant
- 2-
(COPY)
Federal Reservs BGard
7/2/26
X-4693-k
a.moun ts ·by the Minneapolis a.nd C3:lica.gc ba::1ks and are by them rega.rded as being
absolutely sa.fe and about tha best collat.ara.l that they handle in their institutions. Each of th~m ha.s referred tc the pra.c tical con trcl of the warehouses
by the Commission through its representB.tive sta.tioned at each we.rehouse and
t.ad told me in effac t that it would be practically i!ll)ossible for the gra.in to
bd removed from the warehouse without the surrender of the receipts.
Personally 1 I am assured in my own mind that t~ese terminal receipts
register8d by the Commission exe the full equivalent of the kind of receipts
intended to be required by the Board in its Regulations.
Mr. Kent had stated to me tha.t the First National Bank of MinneF.lpolis
would ha.ve occasion during the coming ·grein sea.son to extend a large amount of
credit on gra.in in terminal elevators in Minneapolis, possibly as much as
$5 1 000 1 000 and that the other banks in Minneapolis would have relative opportuniii~s and that he himself would consider receipts issued 8nd registered under
these conditions as collatera.l abundantly good end entirely satisfActory to secure acceptance credits; also that it had been his intention to take the ma.tter
up with the Board through the American Acceptance Council. He, however 1 d~d
not know tha.t the matter W9.S a.lree.dy before the Boa.rd and hae. been under discussion for some cons:i.der.sble period of time a..'1d he, therefore, gladly a.cquiescad
in my suggestion that I forwF•xd you this new information wJ:1ich had come to him.
In view of t.he c1ose approach of the grain shipping season I would
respectfully suggest that it would seem desirable that the Board might dea.l wit
this question e.t its early convonienco.
Hespectfully,
(signed) .E. R. Kenzel,
E. H. :cenzel,
Cha.irm.<:l..n, Ge:1eral Ccnmi ttee on
BAnkers Acceptances.
FJ.tK/VRM
Encs.
X-4693-1
(COPY)
FIRST
NATION.~
BAEIA
EI~JE.APOLIS,
MINN.
June 24th, 1926.
Mr. F. I. Kent, Vice President,
Bankers Trust Co.,
16 Wall Street, New York City.
Dear Mr. Kent:
Referring to our conversation of a few days ago regardine; the
eligibility of bills secured by warehouse receipts issued by the sarne
coqpany us the drawer of the bill. I enclose herewith photostatic copy
of a terminal elevator receipt issued in accord$nce withthe rules and
regulations :)f the R. R. & Warehouse Comr:1ission of Minnesota. You will
note t~e receipt reads for a specified amount of a certain grade of grain
and bears a stamp showing date of registration by the R. R. & Warehouse
Conmission. As stated in oy conversation, it is our practice to check the
reeistration and genuineness of the receipts by presenting them at the
office of the R. R. & Warehouse Commission in Minneapolis, so that we are
assured of the genuineness of tho collateral in our hD!lds. The Statute
distinctly states that grain can only be delivered upon
.delivery of the
warehouse receipt.
I tl1inJ: I mentioned to you that trJroinal elevators are inspected
by the B.. R. & Warel1ouse Col!llJissio:..1 at rer:ulnr intoJ:•vals, and that also in
each elevator is a representative of the Cc::Jr:iSl:>ion who actually checks
the inc::>oine; and outgoing grain, and who:1. this :.:·e;;n·os,..;ntative leaves at
night, the spouts are sealed by him.
As requested by you, I enclose c·Jpics o:t exceJ.?ts froo the
L-:1w of Minnesota pertaining to warehouse recei:lts, a11rl also a. copy of
s.n:~e of the rules and regulations adopted by the R. R. & Warehouse Comnission. We feel that bills secured by these wo.rehJuso receipts conform
wi tl1 the requirements fvr eliGible bills and will appreciate your assist~1ce in havinc them declared eligiole.
Governor Yv~~g has already had
the ~attar up bef::>re the Governvrs ofthe Federal Reserve Bank, ~id it
is my understanding the chenge was ap11roved by th0r:1 and. their action
has been suboit.ted to the Federal Reserve Board w~:.) now have the oattor
under adviseoent. With kindest regards, I aD,
Yours very truly,
(Si€J1ed)
J. G. 3YAM
Vice Presid.en t.
JGB 1Il
1_97
(COPt)
X-4693-o
~aptor 28, of tho General Statutes of Minnesota for 1923 covers
railroads, warehouses and grain, including the power and duties offue Railroad ~~d Warehouse Conoission under Sections 5020 and 5021, as follows:
5020. - GRAIN TO
~E ~DELIVERED
ON &ntlENDER OF WAREHOUSE
RECEIPT.~
Ul">On return of the receipt of grain not stored in separate bins to the proper
warehouser.:J.al1, properly indorsed, and upon ]_)aynen t or tender of all a.d:vances
and legal cha.rt;es, grain of the saoe grade aJl.d qua.'1tity na.r.1ed therein shall
:,e delivered to t:he !lolder of such receipt within twenty-four hours after
facilities for receiving the same have been provided. The identical grain,
if stored in separate bins, shall be so delivered. If such warehouseman
shall fail so to deliver· it, he shall be lia~le to the owner i~ daoages at
the rate of one cent a bushel for each day's delay, unless he shall deliver
the p·operty to the several owners in the order of deoanli, as rapidly as it
can be done by ordinary diligence. If the warehouser.1an shall fail so to
deliver such grain, the person entitled thereto may recover the sane, if
kept in separate bins, or the sace amount of grain of like grade, if stored
with other grain, or the value thereof, in a civil action; ~~d such warehouser.1all shall also be gu.il ty of la.rce:J.y.
5021. -
WAB.EHOUSEM~~
NOT TO SELL WITHOUT AUTHORITY FROU OWNER. -
No such warehousenan shall sell or otherwise dispose of or deliver out of
store any grain stored in his warehouse without the express authority of
its owner and the l'eturn of the storage receipt, except as herein provided,
nor mix together grain of different grades in store, nor select grain of
different qualities, but of t~e same grade, for storage or delivery, nor
shall he in any way tacyer with grain of others while in his possession or
custody, with the purpose of securing a~y profit to himself or ~~y other
person, or atteJ:lpt to deliver~ grain of one grade for tb.a,t of another •
.Any pers:>n violating any provision of this secti.:m shall be punished by
fine of not more than one thousand dollars or imprisonment in the state
prison for not more tha1 five years, or both.
X-4693-:c.
..urn :3.EGUUTIONS
.ADOPTED 31 THE .:U.IL:.:W..\.D .AJ."iTD WA.lEHO"JSE COMMISSION
.lULES 61, 62, 63, 64, 65 tu1d. 66 of :U.ULES
:a.ule 61
INSPECTIOU AT TERMINAL W.AREHOUSES
.All grain rocei ved into or sh;Lpped fro:o public terminal warehouses
r.mst be inspected by a duly authorized State Inspector and weighed by a duly
authorized State Weigher.
:aula 62
Warehouse receil;ts in the foro proscribed by law r.:ru.st be issued upon
the application of the owner or consignee for all grain received, but only upon
actual delivery of grain into store. No receipts shall be issued for a Greater qua:;.'lti ty of grain tha.."l is actually r ecoi ved.
Rule 63
DELIV3:RY OF G:W:N ON STORAGE :aECEIPTS
Upon return of the receipt to the proper 'Warehousooan properly
indorsed, ru1d upon puyr::~en t or tender of all advances and legal charges, grain
of the grade e~d quantity naoed therein shall be delivered to the holder of
such receipt within twenty-four hou.rs after facilities for -receiving the
samo have been provided.
The g:rain represented by said roce:i.l)t is ir:Jnedia,toly deliverable and
not subject to further charge for storage, e.:nd the '\7archouser:Jan s~1all be held
in default if doli very is not made in the order dor.cru1ded and as rapidly as
due diligence,ca.riJ· and pru.dence will justify.
The State Registration Departr.,ent is hereby autl:Jrizod to accept
ter::1inal :;:mblic warehouse receipts for cancellation, also lJading out inutructions, from parties surrendering the sar.1e, wh:> r.--.1.Y l.u.Jvo taken delivery of
wheat on May, July and other future contracts. The Registration Department
shall furnish to such receipt h::>lders, blank f·:Jrr.1s in triplicate ofthe surrender notice and loading out i~structions, and upon surrender of the receipts
to the Departuent by the holder thereof, accorrrpanied by surrender notice and
loading instructions, said receirts shall 'be cancelled by the Department and
returned to t.."lo ternina.l COl:t1?aD.Y issui!-:.g the saDe, taking duplicate receipts
therefor, one to be retained by the Department and the other returned to the
party surrenderinc said receipts.
HOLD:EBS OF :L'\ECEIPTS TO fitESENT SAME FOR REGISTRATION
Holders of warehouse receipts should promptly present them at the
office of the Warehouse Registrar for registration, and upon the delivery of
grain represented by any of the said receipts such receipts shall be im~ediately cancelled and s~~ll thereafter be void and not again placed in
circula
http://fraser.stlouisfed.org/ ti .Jn.
Federal Reserve Bank of St. Louis
X -4693-n
- -
.
'
' "'
.:;
:iulo 65
WA:t.EHOUSEM.tu~' S
DAILY
1l.EP0~1T
TO ::1EGISTI'JQ.
i7nrch.)USCl~1en oust state in thoir daily reports tJ the :U.e~:;istrar
the ru:1::nmt of each kind nnd ,;rade of special bin erain received or delivered;
also what warehouoc receipts representinG such t;rain have been cancelled,
civin5 nunter of each receil1t and tho nno1.mt, }dnd a.'1d grade received and
delivered upon each; they oust also state the onount, kind and 5Tadc of all
other bTain &elivcrod, for which no receipts have been issued; also show
when ru1C. l1ow such unreceipt0d grain was rccei ved.
Rule 66
WAREHOUSWA"TIT' s STATEMENT
It shall be the duty of Public Warehousonen on or before Tuesday
noruing of each week to nclce a stateoent, under oath, of the aoo~'1t of each
grade of grain in store in his warehouse at the close of business on the
previous Saturd~r, and shall furnish to the ~arehouse negistrar and Railroad
and Warehouse ColJ.r.1ission such daily and weekly stater.1ents as they nay require.
( COPY )
X-4693-o .
September
29,1925·
PROPOSED ~~Mru{T TO REGULATION A, ARTICLE B, SECTION X, SG~DIVISION (3).
In order to effect the amendment suggested by Governor Young
of the Federa.l Reserve Bank of Minneapolis in his letter of Septerrber
9, 1925, W~. John R. Mitchell, at a meeting of the Federal Reserve
Board today, suggested that Subdivision (3) of Section X, of Article
B, of Regulation A, be amended to read as follows, the words in capital
letters being inserted:
"(3) The storage of readily marketable staples,
provided that the bill is secured at the time of acceptance by
a warehouse, terminal, or other similar receipt, conveying security title to such staples, issued by a party independent of
the customer OR ISSUED BY A TE...11MINAL GRAIN ELEVATOR COMPANY DULY
BONDED .AND LICENSED .AND REGULARLY INSPECTED BY STATE OR FEDERAL
AUTHORITIES WITH WHOM ALL RECEIPTS FOR GRAIN AND ALL TRANSFERS
THEREOF MUST BE REGISTERED AND WITHOUT WHOSE CONSENT NO GRAIN
CAN BE WITHDRAWNj and provided further that the accap tor rerr.aina
secured throughout the life of the a.cceptance. In the event
that the goods must ba withdra\'V'n from stora.ge prior to the
maturity of the acceptance or the retirement of the credit, a.
trust receipt or other similar doc1.1me;1t covering the goods ID8Y
be ;;Jubstituted in lieu of the origina.l document, provided tha.t
such substitution is conditioned upcn a rea.aonably prompt
liquidation of the credit. In order to insure corrpliancc3 with
this condition it should be required, when the original document
is relea.sad, ai ther (a) that the proceeds of the goods will be
applied within a. sp.vcified time towa.rd a liquida.tion of the acceptance credit or (b) that a new document, similar to the
original one, will be resubstituted within a. specified time. 11
( COPY )
20:t
FEDERAL
RESERVE
BANK
X-4693-P
OF !v.INNE.APOLIS
September 9, 1925.
Hon. D. R. Crissinger,' Governor,
Federal Reserve Board,
Washington, D.C.
Dear Governor Crissinger:
Under date of ·September 17, 1924, I wrote you in reference
to acceptances in this district, which our lA.rger banks were executing
on domestic storage of grain. Copy of my letter is enclosed herewith,
which will be self-explanatory. Under data of October 15, 1924,
Mr. Platt replied to my communication upon behalf of the Board, and
suggested tha.t the matter be discussed before the Governors 1 Co·,1ference.
I also received a letter from Mr. Cunningham in reference to the
matter, dated October 16, 1924. Inasnuch as I was going to Wa.shington,
I did not reply to their commu.nica.tions by letter, but discussed
the matter with them in detail when I was in Wa.shi:;.1gton.
It appea.rs to our people that these a.ccept:3.nces are entirely
legitimate and secured by a. receipt that is .iust as good a.s that of
an independent elevator. Some of our banks are again accepting in
this manner, and while there is nothing to prohibit them from doing
it, that I know of, still ·r have to inform them th::>.t there is a question
about their eligibility for purchase or disco-c.-::1t by a Federal Reserve
Bank.
I do not know tilB.t it is absolutely necessary to finance
by this method at the moment, but at the same time I am satisfied that
the time will come whan our banks wlll ha.ve to resort to the acceptance
form of credit to enable them to handle the marketing of grain in an
orderly and syst;amatic way. I therefore would appreciate it very
mu.ch if the Board would again consider the request of our people 1 and
see if it is not possible·to amend the regulations in such a way as to
permit a.cceptances of terminal elevator COIIlPanies, which are under State
supervision, to be eligible for discount or purcha.se at a. Federal Reserve
Bank, even if such acceptances are secured by regula.r, registered, terminal
warehouse receipts of the eleva.tor that dra.ws the drA.ft.
I do not see
how it is possible for me to give any more infor!II8.tion in reference to
the transaction other than was contained in my latter of September 17,
;md the verbal talks I have he.d with Messrs.Cunningha.'ll and Platt. Nevertheless, Mr. Mitchell contelllPlates being in Washington in the very near future,
and if there are additional inquiries which you care to make of him, he is
thoroughly familia.r with the transa.ction end can explain the deta.ils.
I would appreciate a ruling on this q11estion as soon as possible
after your interview with Mr.• Wdtchell,because soma of our ·banks a.ra
anxious to get a reply.
Yours respactfully,
http://fraser.stlouisfed.org/
(signed) R. A. Young
Federal Reserve Bank of St. Louis
.20~<!
X-4690-q
(COPY)
Octooer 15, 1924.
Denr Governor Youn5: .
~•e TioOl~d, at it3 ~0eting on Tu0sday, considered tho
l)Oints raisod in yot1.r letter of Sc:)ter.Jber 17th, ·sugeel:ltine
a chal1ge in Section X, .Article ::S, of :legulation: .i'l.., so that
acceptances basod u:_1on terr.:linal elevator v.-n.rehouse receipts
covering the stora~e of their o~n grain night be rJade
eligible for discount by Federal reserve ~auks, and directed
ne to reply that no i~~ediato chanee in the Regulations is
possible in such ro1 ir~ortant r~1tter. This question is not
a new one ~~d there is at least sone dou~t as to the power
of the Joard to aoend tha Regulations in the desired rJanner
under the law. The qu.estion of :policy involved is so
ir.~ortant that the noard su5eests that you suboit this for
consideration at the forthcooing confl~rence of Governors.
I have heard the suggestion oade that the control of
grain in theBe elevators by .the State Railroad and Warehouse
Co~~ission is eo complete their operation is practically
that of independent warel1ouses. A full statc::J.ent of tho
facts involved in the operation of checking in and checking
out t,Tain should be made.
Ver;r ,·;:truly yours,.
(Signed)
Edr.mnd Platt
Vice Governor •.
Mr.
:a. A •. Young, Governor,
Federal ~oserve J~1k,
l.iinncn.?olis, :t.t:inn.
(COPY)
FEDE~AL
~ESEJ.VE
X-4693-r
TIANK
OF HINNE ..l.POLIS
Septcr.1ber 17, 1924.
Hon. D. J. CrissinGer, Governor,
Federal ~eserve ~oard,
~ashington,
Dear
D.
c.
Gover~or Crissin~er:
It has been the practice of teminal elevator
conpanies in this district to establish an acce~tance credit with local
bonks on the domestic storage of grain. The elevator coopany draws on the
bank, which accc:;?ts, and such acceptance is secured by regulor registered
terminal warehouse receipts of the elevator company that draws the draft.
This form of accept~~ce was recently referred to our Counsel, and I am
sending herewith a copy of his opinion. You.will observe that in Judge
Ueland 1 s opinion such acceptances are not eligible for discount or
purchase by a Federal Reserve :Dank. 1Tevertheless, the a cccptancos nre
so well secured. that I ao writing to you to see if it would not be
possible tc have the Board amend its regulation in such a way that
acceptances of this class would be eligible for discount or purchase by
a Federal Reserve ~ank, and in making such suggestion I offer the following:
A terminal elevator in Minnesota is under
strict superv1s1on and control of our State Railroad & Warehouse Co~1ission.
All grain that is stored in the elevator is checked in by a representative
of the State :U.ailroad & Warehouse CorDiasion as to GJ,~ades and weights. .All
grain is checked in like I:lanner that is removed fro:.1 the elevator. Therefore, if an elevator company issues a neeotia"!Jle terr.1inal warehouse receipt
against grain stored in its own elevator, the t;rain Co.tL."'lot be rei':toved froo
the elevator except with the knowledge and perr:1isoion of a representative
of the State Railroad & Warehouse Co~~ission. There is one exception to
this statement. It would be possible for the elevator conpany to oove
the grain between 6 o'clock in the evening and 7 o'clock the following
morning. However, the possibility of an elevator coopany reooving grain
from its own elevator during these hours is aloost negligible and need not
be considered, because the only way it could remove any ereat amount would
be by box cars, and the railroads would not handle the grain between those
hours. Even if it is adoitted that it is possible to re~ve a. portion of
the grain between these hours·, the State has thrown out an additional safeguard by requiring the elevator conpany to furnish a bond of 15¢ a bushel
on the elevator'·s capacity. In the case of the Electric Steel Elevator
Company the bond is for $600,000. In addition to this, every terminal
elevator in the Twin Cities is under the direct surveillance of our local
Chamber of Con~erce, i. e •.a representative of the Chaober of Co~erce
can check any teroinal elevator as to 'bushels and grades at any time. I an
informed that this is done regularly by the Ch~ber of Commerce about every
three weeks. I point out these facts to show that every possible safe-guard
-a'
'
ba.$ been ~ b ~i"!)t_oet \l:lo .. deii.vei':r of the g:ro.in uhen t!le _holder o~
a._rec&ift d8Qtmda de11vvr~ .. !n oi4\c )YOJ'fla,. •:~egUlar .-eGtatei'Gd teitdnal
~lile r~eeip~ ia~ 'b7 t!w eleva·tor<~ :that 4J'a.wia the cfr'att t.a
ju.st Ill. good collateral. ea ·a- receJ.pt- iaaued )j . a party. b4ependent of the
drawer..
It will be !Jl1CieatEX1 tb:l.t an 1n40J;>end.ent co~ be carcanuea. to
or· tho grain, .})ut o-r~ if auch e. «»~·- 4,rpl\1a- a:A4 ·It.
s.s.- a. re~ . regiet_.4Jd ·W&l"o!'l.ouu receipt 'll.'lidel!".•*-'- ......,lttoa.~ .. •• . ·
would no.t be 1J1>.7 better collateral, a.n4 it it 1&JUe4 lta
l'eotipt
.•.. witllrQ.' atil.te au;>t)l"-.t.toa, ·~two~" i)ot<bo aa poa..t:.
....-•~
C\ll&~ :the elevator coapcr •to~o •the gain in • ·1Jld~1 el.,.to,-._ lt t:lt.eJ
· ··contfll9late.£inan<:in& 'b;; $CCGptancoa. KowOl'er. an el..,.\c)l"ta·prottt OOII8t . ·
.. ·1•~1 tr:>:;~lta a\!)~ cbR,-.a. emd'tt'lt
prq .... _ .Wpe, t.t
· .WOW4 have to get the a44iti.cmal protit elthel" floc
or \lle aell••
Of CQU1"80 it 'WOuld. bo kJ.poaa1ble 1io $Ot it frC ~ ..,..., azul it ~ 'be
~ ..-:t• old atoey tb.&t; ••• cr~-- ot
~
...Ulu&•• -~.
ttarul. the e:J.l*lae• ......... l'J.cb,t in the Jttc14.11 ot a. . -~ pt'rlod, and
it .~· ov~hing to Ol# a&l'icultunl =~--• to. ~a..-. ..~ •~ with ·
aa l1 ttle _,.... a:a po•a1ble. . It 1 t -a'tioul& ,... ~eclat ihl• tiM that .·
. · : thee• · bill• are ineliei"ble, ·~ would Dli\Vd-17 A11 at a hS.por .l'ate ln
.
· take Q\18tocly
-.r.,_.
tt·w. tlltt.••.-
'**··• the....,_..
·
tu ....... ...... , .....
· ... ~o 4pen tlaJ'ke.t. ~·. ~.· .......to. ·.•· , '........ ••.t. I.Jle.:_ .aa.t.-..·......·· tba..·
..
. . ·.·
. -.·
...
. .·
· · ....
-'.h&•• 'b~en ,UCed . ~. . ' .ihel'et.•~"!.•~. natp;a,... -.~ it 110uJ4, 'be •UI'•lT '.·.: .
. prow aad ad•iea:ble tO!' the ~ lftene »•4 to . -.. t*t. ~tf.Qa .A..
$erlea 19241, .Articl-e XJ, .. -'4l.S•toil (3) u. llUOli a .., • to ,...._, -.M.tlcea · ·
(It OUI'. teft.'d.nal el.e't'ator co...,.ioa \h&t • • _.... a-.te ~t!oa '•·-. ·
el~le to~
diacount 01' pu7~e b7 a :reclel'alle..- l\~ •t•l:f' ·~ . .
accogtaucea ue a~edlq r.cte"l• rctb~IWe4
the. •1.-.ator tha.t. dt'&WJ the 41rf&ft. . · · · ·
*~
·
•.:b9ua• J>eoetpte Of
I feel tllat ~•: _.__. 1• urpnt ·aile\ •ul4 appreciate it
very much if tb.e Doard wou14 ..c:t tavorabq ,.on r31 •wotion.
' . Goveftl.Ort
P~
8.
t have f'afttr.r• ;ht,a. letter
or .._..,toa....~.·
w ur.
lli,tcboll ud he appS"OTM
·
..
ot
( COP'?" )
X-4693-s
Septerrib er 15, 1924.
Mr. John R. Mitchell, Chai:rman,
Board of Diract.or:..>,
Federal Reserve Bank
of Minneapolis.
Dear Sir:In conn-acticn with the
l~tter
from lvJr. Curtiss of the
Fadera.l Reserve Bank of Bcston of Ausust 9th ir;quiring c::mcerning
the eligibility of a. banker's acceptance dra.wn by thel.Electric
Steel Elevator Conpany or the Russell-Miller Milling ·Con:rpany of
this city and secured by the gra.i.l1. warehouse receipts of the Elevator Con;p::my, I submit the· following for your informa.tion:
Reet,ula.tion A, Series 1924, Article B, subd. (3) provides
tha.t such an acceptance is to be secured
11
f.l.t the tinK;. of acceptance
by a warehouse, terminal, or other sirrilar raceipt, conveyirlg securi ty title to such staples 1 issued by a. pa.rty inci.apend..:mt of the cus..s..
torner 11 •
The Elevator Corrpany is a public terminal w<::rehouse 1 independent in point of law of the Russell-Miller Milling Company, and.
a banker 1 s acceptance of the Milling Company 1 secured by the wa.rehouse
receipts of the Elevator Compa.."w, is clearly eligible.
As
B
public tcn·rdna.l
wc..r3h01.~
se the Elevatol"' Company is
under very strict S1.::pGrvbion and ccntrol by our State Ra.ilrcad and
Warehouse Commiasicn.
Laws 1923.
The law on tr...at subject in fou."ld in Chap.201,
It requires license from
tl.~.e
State, and bond to the State
( COPY )
20'5
Jvhn E. WutchGll-#2
X-4693-S
.,
to secure the vvarehouse receipts.
The bond in this instance is for
$600,000 .. The grain tak6n L.1 to th8 warehouse is weighod ~nd
graded by St1-1t0 e:rrployeJs.
make daily reports to th.:;
Tn0 Ebvator Cornpany is required to
Ccn~r:;issi.on
of grain te.\i:on out a.nd of
cancellation of the r<:·,coi.pts for th3 sB.:Do, <m J of tha grain remaining from tima to tim-:o w.J.d.::r ou tstending r.:lceipts.
Tho la:vv, in
short, pla.ces t:':lG warcllo11se under :.mcl1 rigid Sta,t<a control so as
to ma.k:e the r.scaipts most excellent sacurity.
Tha Corr:rr:ission having
constant information a.oout the gra.in in the wa:rt;b.OUSG and ti.1e outstBl:lding receipts, it is the practice here to b.ave its registra.r certify on the rc:ceipts tha.t t"ie gra.in called for is a.ctually in the
warehouse.
But ;,vlJ.ile this is the practice such a certification is
not tna..."ldatory under the law, and a receipt issued wit,."l.out that certification is valid, and en ti tlei:l the holder to thd graL1 CFa.lled for.
It has been sug6ested that in effect the grain is in tha custody of
the Commission 8.nd that the receipts s.re therefore wi t.dn th0 ruling
of the Boe.rd
r~ported
in Vol.
9 1 page 1194, Federa.l B..;: serve Bulletin,
1923, concorning coal on the Duluth docks.
be successfully clA.imed.
I do not t:::ink tnis can
The storage rt3ceipts for coal in the.t
ca.se were issuQd by a. storage company which held the title to the
coal as truste.a and had possession and custody of the coal, independent of any contro·l on th,; part of the drA.wer of tha acceptR:nce.
In the pr;;;;sent i.nstm1cer notwithstanding the supervision and control
of the Railroad and Wfl.rehouse Corrrnission, and tho excellence of the
storage recaiptsr:J.S security, the Elevator
Comp~:my
roo.st be conceded
207
X-4693-s
...
t:lC
•
to be ;custodia:.'1 of tho ero.in ·repr.~s.emted by the receipts •
The receipts are hence not flissued by a pa.rty independent of the
cus toner 11
•
What is said abov.e applies exclusively to
t~1~
.
of eligibility for discount in a Federal reserve bank•·~i
(Signed)
.A.U*MS •
...
<W-'ost·ion_
'J~-~i
.'(.::,;r·
.A. UELAND
Counsel •
.
20H
FEDERAL RESERVE BOARD
WASHINGTON
t
ADDRESS OFFICIAL CORRESPONDENCE. TO
THE FEDERAL RESERVE BOARD
X-4694
October 13, 1926.
}
SUBJECT:
Topic for Governors' Conference.
Dear Sir:
At the last Conference of Governors it was voted that the
Counsel of the several Federal reserve banks be asked to prepare an
opinian on the advisability of seeking an amendment to the law to restore to Federal courts jurisdiction over suits by and against Federal reserve banks, and that all of these opinions when prepared should
be forwarded to the Governor of the Federal Reserve Board. Accordingly several of the Counsel to the Federal reserve banks have forwarded
to the Governor of the Board opinions on this question. Counsel to
~ some of the other Federal reserve ba1iks have expressed their opinions
in letters addressed to the Board's General Counsel.
,;
In order that the Board may have an expression of the views
of the Governors on this question in the light of the opinions rendered by the several couu1sel, the Board has voted to place this topic upon the program for the forthcoming Conference of Governors. For your
information in this connection there ure enclosed herewith a copy of
a memorandum on this subject prepared by Counsel to the Federal Reserve Board and also copies of the opinions which have boon rendered
by counsel for the Federal reserve baru.:s. There are also enclosed a
letter received by the Board from Mr. De•.vey, Assistant Secretary of
the Treasury, asking that the Federal Land Banks and the Joint StoCk
Land Banks be included in any request for legislation of this kind,
and a copy of the Board's reply thereto.
Very truly yours,
Walter L. Eddy
Secretary.
Enclosures
FOR GOVERNORS OF ALL F. R. BANKS
209
1\fi'.arch 9, 1926.
·,
To:
Federal Reserve Board
From: }f.r. Wyatt - General Cou...1sel.
Subject: Tonic :for Governors' Conference - .Advisaoility of sec~:in.:; a.':l.end,nent to restore to Federal courts
jurisdiction over suits b_y and agai~1s t
Federal reserve banks.
It is respectfully reco:nmendcd that the above sub,ject be placed
on the :program for dis cuss.ion at the forthco:ninf.:· Cbve:::-nors 1 Conference and that ceries of this memorandura be sent imrnediately to the
Governors of all ]·edera.l .~esorV•3 banks i!l order that they may study the
subject a.nd consult with their couxlSel prior to the Cor..ference.
Prior to the Act oi Feoru.s.ry 13, 1~25, the Federal courts had
jurisdiction of suits iJl'Oll{)1t by or ar::;uinst Federal roserve bru1ks which
involved as much as $3,(;00, bvcause of tho fact that they were Federal
cornorations. Aaerica~1_;g9:;~1l-( ~nd Trust Corrro~ v. Federal Reserve Bank
of Atla:1t~b 256 U.·S. 5~50.
.A s-.Iit brought by or agdnst a Federal
reserve ballJ!::, thore:r'ore, whic:b. involved as LWJ.ch as $3,000 could be
bro-:J.ght originally in a U~1i ted Statos District Court, and a suit
broU(::ht against a Federal reserve b~-c in a State court could be re.noved to a United Statos District Court if i t iavolved as mu.ch as
$3,000.
The Act of Fc~brtl&r~' 13, 1925, however, w~·,ich was :cecommcndod by the .ArnoricaL :Bnr Lssocintion and by the Supreme Court of the
U:1itod. States and wh~ch d.e[~lt nrimarily with the a~mellate jurisdiction of the Fe<ieral COUl'tS, contained the follOVli:1g.provision:
"SEC. 12. That no district court shc."ill have
jurisdiction of a:"~' action or suit b:r or a,:,ai:u;t
any corporation unon the ground that it \O:as i:J.cor.porated by or Ullder an Act of Cor..e:;rczs: Provid.od,
tlmt this section sh.'l.ll not apply to any su.i t, De~
tion, or proc6edL1g brought by or agaL1st a cJ:.:~_?or
ation incorporated by or uru:ler an .b.ct of Co~~.g:~~osr;
wherein the Govor:1ment of the United States is tho
ow:1e;r of mCJre than one-half of its capital stock. 11
•
This amendment has the offe~t of dcprivi:~ Federal courts of
jurisdi ctio:1 of all suits by or ekaj.:;;.st Federal reserve banks u~1less
the pleadings of the plo.L1tiff o1' t~ci.r f'J.cos o.ctually raise so.ne
question necessarily i:wol'tirig tke Jntqlr,etatbn of the Co:1sti tution
of tho Unitod States or SQLlO Fedo:,.,~,l st.":tu.to. It, is :10t sufficic!lt
for the nloadi~J€S ef L.: d.:::fe:.J.d.~nt to rr-dsA a Federal questio:!.
Morcovz;r, :B\::c1orn.J.
rbs.c;rv;~ ·ba::~ks can~:ot
get into the Federal
-2-
X- ±551
2 ...
a~l ()
1
courts 0'1 the grow.1o of ..::ivcrsity of citize~lshi:o, because the
Supre:ne Court has :neld t.i.wt o. Federal cornoro.tion is ::ot a citize:1
of any State.
:Banl:ers irr~1.1st Corrm::my v. Texo.s and Pacific Railway,
241 U.S. 295.
The Fode;.·c.l reserve ·oanks, therefore, rove not even
us :nuc~1 ri~:i1ts in the Federal courts as ht.we natio:.:al panks.
Soctic::. 24(16) of the Judicial Code sncJcifi cally provides that, for jurisdi ctio:1c.l purpos os, na tio:1;;1l ba:1.\.s shall be deemed citizens of tho
States in Yihich they are locc.tod and this e~mbles them to· bring
suits in tJ.-:.e ?cdcrnl courts or remove suits brought ogo.inst then to
tho ]'odoral courts on the grounis of diversity of citizenship where
the ot::er parties are citizens cf States other tha:J. tha.t in which
the head office of the natione..l bank: is loreted.
There is no l&\V,
however, givi:1g Federal reserve "t.anks a similar status.
The present f'li tu.atio~'l is of serious disadvantage to the
Federal reserve oan.;rs, because they ca:1 sue or be sued in the Federal courts only when the initial plead.L'l{:;s s ho·.., on t.'l:eir fac€s
that the suits necessarily involve the co:1st:uctio~1 of the Constitution of the United States or. of some Federal statute; a:1d suits
brought against them in the Sto:te courts can be removed. to the ]'ederal courts only whe:1 the nleQ.di::.gs of th~1.£4_:1ti.ffi. shm7 on their
faces t:i.~1at the suits necessarily LJ.volve t~1e construction of the
Co:1stitutioa of t;le Udted. St:::.tes or some :B'oder:ll statute, and this
is rarely the casu. It is :aot sufficie:J.t for the Federal :reserve
ba~1k to plead in d.efence some provision of the Federal Reserve Act
or some Regulation of the i'edoral Reserve :Board (e.g., Regu1-'1tion
J upon which they rely for protectio.Il in collecting chocks.)
Moreover, cou:1scl for a number of the Federal res~rvo bx:ks advise me
that they frequ<:c1tly fi:1d both the judges and the juries in the
State courts to be u:-:treaso:mbly prejudiced against, and hostile to,
th.e Federal reserve banks; so that it is very difficu.lt for them to
get a fair tria.l in the State courts. For these reasoclS, cou:1sel for
most of the Fed.eral resP-rve banks feel :~,-ery stro:.1gly that the Federal Reserve Sys tom should seek an Qmendment to th~ Judicial Code restoring the jurisdiction of Federal co-;.J.rts over suits by a.:.1d against
Federal reserve b~~ks.
I have not brought this question up before, becruse I ;ms
advised i::-;.fonnn.lly that a bill pl!Obably would be introduced at
this session of Congress to amend the Judicial Code in several pnrticula:rs and I had ho:ned that it woulQ. be possi blc to have a provision restorillg; the Federal jl.U' isdiGt ion over s1.li ts by and a.gai:::.st
Federal reserve bar;.~ incornorated i:. such a general st~tute.
This
I believe would be 'much better tha tJ ~~k for special legislation
L1 a sepo.rate ste.tuto benef:i;ting tiJ,.e Fe<iert:J. r~;.s0rve banks alone.
I c.rn now advised, hovrever, th'lt the dcnnnd for a further ame:adment
to the Judicia.l Cod& which rra:s e;;t:TlOCted. to d.evclon has not yet develo~ed u:1d that thel'c seems to b~; n.tJ ... j"/ ..
nr.r.•wpcd fo~· :!melt lwslation
X-4551
211_
at the nresent session of Consress. It becornas important to co.:sider. the!'efore, ,.,hether the Fetleral :r;es':~rv-o banks should seek to obtc.:.L1 the enactme:1t of a S1?ecia.l statute rastori:1g the jurisdiction of
the Federal courts over suj. ts brought b,s' and agai:1s t t~em.
There are a. number of ways in which the present situation
could be improved by a special a:7lend.rnent to the law:
1.
.A."'l amendment might be sow~ht either to the Judicial Code or ~o the Federal Reserve Act providing that, for jurisdictional p:.u·poses, Federe.l reserve 'be.n:::s shall be deemed to 'be
ci tizons of th;; States i:1 wJlicil their head. offices are located,
thus placinG tl1em upo:1 an 0 qu.ali ty wi tll na ti onnl banks cmd enabling
them to get L1to t:1e JfcdoraJ. courts on the g;ro'U.:..1d of diversity of
citizenship whe:·• t:-:e othor party is a citizen of a differe:J.t State
from tLa.t in which the head office of the Federal reserve bank is
located. I:.:.asmuch es this would only give the Faderal reserve banks
such privileges as 1-:atione.l banks and. any ordinary citizen or corpar atio::.1 would r.a.ve it ought to be co;np::~ratively easy to get such
a:1 amendment; but such an amendment would. grant only partial relief.
2.
k'l a.:nendi·nent might be sought chanbing that proof Sectior.. 4 of the Federal Reserve Act which authorizes Federal res3rve banks 11 to sue a::d· be sued, complain and defend, in any
court of law or equity" so as to authorize them 11 to sue and be sued,
coi~)laiu and defend, in any U11ited States District Court. 11
This
·would be simila:c to a urovision contained in tr1e charter of the :Ba.nk
of the United. Statos which was held by the S1:..preme Court to be suffieient to co1:.fer 'tJ..poa the Federal circuit courts jurisdiction of
suits by a1:d against the J3ank of the United States.
Osborn v. United
States Bank, 9 Wheat. (22 U.S. ) 737.
VlSlc:1
3.
A.'1 amendme:1t might '!:le sought to the o.bove quoted
provision of the Act of Febr~ry 13, 1925, d.an[;irlg tLe provise to
reaa somewhat as follows:
11 Pr·ovided that this sec tio:1 shall n~t apply to
suit, action, or proceedi~g broD€Dt by or against a
Federal L3.nd J3a:.'1k, Joint Stock Lend Ea;,:k, Federal reserve
bank o:r any corporation i:1eorpora.ted. by or. under a:1 Act
of Congress wherein the Gove,rr.unent of the United States
is free ow~er of r::ere than Jn,;l-r.JJ.lf of its capital stock."
~~Y
Such a:1 amendme:1t 7tould sirrqly extend t.he proviso to cever a fevr
specific classes of COI1lo:ratic:1s, t:i::e r:ajority of the stock of which
is ::1ot Oi7l1ed l\T the Gove:r:.::.rr,ent but in whieh the Gover:1II1e~1t obvious ...
ly hc,s an interest c-.:nci viilich obviously ought to be protected to the
same exte:.1t as cor:?oratio;:s in 'l1hich the 3-overnm.ent msrely ov·ns onen
half of the capital stock. This I believe would be the best kind of
X-4551
-4-
a.r1 amendme:1t to seek ·if a;ly special lei;islation is sought.
It
could be supported by u:1a.:..1.swerable logic; and, b~r including the
Joint Stock Land :Banks, the Federal Land. Banks and possibly some
other Federal corporations whose position is ~~alogous to that of
Federal reserve ba..'"lks, it 111ight be possible to obtain additional
supp1rt for the bill and to avoid t~e appearance of seeldng special
privileges for Federal reserve banks.
The principle whic."l-J. led Congres~ to excl J.de from the
provisio~s of Section 12 of t~e Act of February 13, 1925, any
Federal eo~~oratio~ ~herein the Government of the United States
is the ovmer of more than oJe-half of its capital stockwould seem
to epply v.ri th eq~al force to Federal z·esei"'re ba11ks for the following
reasons:
1. Although none of tho sto~~ of Federal reserve b~~s
is owned bY, the United States Government, ~1e Government has a
reversimw.·ry interest in the slU·plus of the Federal reserve banks,
Tihich amou..'"lts to approximately twice as rmch 3S the capital of the
Federal reserve ba~s.
2. The Federal reserve bal'lks have taken over the fnnctions of the sub-treasuries and perform ;nany very important services as depositaries a;.1d fiscal agents of the Gover:::unent.
While Federal reserve ba::ilr..s are private corp ora. tio~1.s,
they are corporations created for public &ld semigovernme~tal purposes and are under the supervision of a. :Board
com:pose<i of officers of the United States.
3.
~evertheless
4. They were creat'Jd. and actually fu:1ction as important
instramentalities of the Federal Government, acting net o:J.ly as
deposi tarios a..J.d fiscal age:1ts and performi:i(; tl:,e functions
previously :performed 0y the sub-treasuries but a.cti ·~16 also as the
:n.edia through which the great bulk of our C'llrre::1.cy is issued.
5. All the 11et earnL1gs of the Federal reserve banks 1
after providing for expenses, limited divide~iis, ruld the surpl~s
a'l:'..thorized by the Act, go to the Governme.."1.t as a fra:1chise tax; so
that the Gover11111ent has a;.::. actual interest in the protection of Fed:oral reserve ba:'fr'..s against losses :res·~lting from u:1fair treat:ne:;.it ia
the State co~rts.
The above merely indicates some of the grom1ds tl:'..a t might
be urged as bri:1ginc; the Federal rr..:serve ban.. wi t~1in the principles
~s
of the proviso to Section 12 of the Act of February 13, 1925. · It
is believed that if these were am.plified a.."ld SU')?ported by stnti s~ics
showing the volu.1ne of Gover:11-nental operations performed by the Federal reserve banks i:1 t~2cir capacities as depositaries 1 fiscal
agents and sub~treasuries of the Goverr~e~t, ru1 u~answerablc arg-u.me:1t could be bu.il t u:n in suo~ort of S"llch an amendment •
•:.
.J,;.
'
212
X--4551
I::. vicm of tiu: rcluctar:co of t~1c FcG.cral courts
to have tl1cir jur isc:ictio~~ o:.~la::."g(;cl a~1d i:1 viow of t:1c ?l'ejudice
ex is tL1r; .:::.gains t FeC:.erul rcs..:.;rvw oc.:1'.cs in 11.1a:1y qUD.rtors, hovrcver,
it is c close qo.estio~.l ·.:'r.wt~1.er it woulci. to d.esira.ole or expedie::J.t
to attempt to seek a S~;'lecio.l a:ne::-;.dme:J.t for tr.e relief of tho ?oderal reserve ban.l:s eve:1 o:.1 this obviously sou::J.d basis. It is for
this rec.so~1 that I believe it 11ighJ.y desirable to have this su·oject
discussed ut le::.1cth by the G0vernors of all Federal reserve ba:llcs
L1 co:J.ju,'1ction ~7ith the Eoord bufore a:1y attempt is m.'lde to obtnin lcgislatio"l·
It hns :!.lso ·uee:l s~sbested th;;;.t an ame~1dment should be
sou.;:;ht o:x:e;:'lptin;::; Feuero.l reserve banks fron the :process of attach.-rnel1t and go.r~1iS~l."no;.1t before fLml jude;Den. t i!l a:-.y case, :::.s
:mtio:1al ba.."l.ks nre il·:JW e:x:errmtod under the urovisions of Section
5242 of the Revised Statute~.
I h.ave not"' give:1 r.Il.:tch thought to
this question, because I believe the other qu.estiol1 discussed
above is fnr more importa..'1.t and should be dealt with first; "but
it would seem ob~rious tlmt if Congress has seen fit to exempt natio:1al banks from the process of attnciu::ent a~1d i;araisr.l. tne1:t pendin~
the re::1di tion of final judgment!!!, it should c.lso exempt :federal re-serve banks, which are ~mch more inportant from a public standpoint and which "!)erform. tmch Dore i1:1porta:1t functions as ins trumentn.li ties of the Gover:::;r:1ent.
For the fl.'. rther information of the
:Soard, I E>.ttach a cop;y of a letter frorJ Judge Uelond, Counsel to tho
Federal Reserve :Sank of lLi::1aeapolis suggestint: a:~ a::1endr.1ent along
this li•1e.
In view of tl:e si:ort ti~. io rer:.1a1n1ng before the Governors 1
Confere~1ce, i t is resrectfully rocomr:1end.ed th:?.t a eopy of this
memo1·e.ndum n..'"'ld the attached letter from Judge Ucla.'1d be sent direct
to t!1e Governors of each Fod.eral reserve bank a.t tho eo.rliest
possibJe date and that a c::;py be sent to the Secretary of the GoYernors' Conference rti th advice that the :Soard r..o.a -..rotod to add this
topic to t':le program for discilSsion at the fort~1co:~1L,~: Gover:wrs 1
Conference and has already sent copies of this :·:1er:1oran.du.:J direct
to the Federal reserve banks i!1 order to save ti:::e.
B.espe ctfully
Walter \'lyatt
Ger;.eral Cou:1sol.
Copy of letter
attached.
WW
S.AD
(COPY)
X-4551-a
FEDERAL RESERV"..8 EJu'f"l{
OF MII~:E.APOLIS
21.4
Fe'orua;>y 2S, 1926.
Mr.
W~lter Wyatt,
General Com1sel,
Federal Reserve Board,
Washington, D.C.
My dear Wyatt:
Congress being now in session I v~nture to s1:g•r,est t:'le
ii11!Jortance of an ar;·~endmer:t to the Fed.er~,l ::teserve Act cxe:;Ipting
F.~deral reserve ba.nks from the :pr.)cess of att::..c:b...;nent and. garnis::Went,
tl1e same as Natio::1al ba:1b::s. In tJ:lis, tlw ~7bt:b District, I have
been vexed a good deal by o. sJ.i t staded age.inst this bank in a
north Da:.rota stat_, court, wi t'h r;arnishme1;. t as basis of jurisdiction,
and, of course, for jud6f:1eut in rem in case of no a:npeara.11ce on the
part of ·~t,he delend::.nt. Wi t~1ou.t s;::.cl1 an a.'Ilendrnent as that suggested,
it seerr:s"' to me there can scarcely be a11y limit to a:moyance of that
sort, for :L1 the absence of a clear provision in the act exem;?ting
Federal :::-eservo banks f:::·om attachment and garnisl1rr.ent a claim that
they are exeriT?t by Lilj·lication ca'1not be maintained so clearly as to
have the State eo·c.rts sustain it.
The Federal rese>:ve banks are also much concerned in having
the Act of February 13, 1925 with respeCt to the jurisdiction of the
district courts of t~1e United States a11ended, for, as you lmow,
Section 12 providos that incorporation tmder an act of Con;;:;ress is
no longer to give those co·Jrts jurisdiction, and tl1':3 Federo.l reserve
banks havbg not ·been given tho status of citize!lshi:P of .my state,
the SPJUe as national ba'lks, the present situation seems to be that
a Federal reserve ba:ak can neith2r sue in a Federo1 court or have
a suit against it re~noved from a State to a Federal court unless the
s:J.i t arises 1mder the Constitution or Laws of the United States, aside
from that of bein5 a Federal corporation. It is of co·J.rse emtirely
unnecessAry to point out to you the practical importance of giving
Fede1~a1 reserve banks the righ'0 to l i tigato tl1eir con troversi,es in the
Federal courts.
·
You:rs very truly,
A. Ueland
A. u"ELAJTD
Czmnsel.
P.S. As to a Feder.::l reserve ot:n~-c being able to rem::>ve a suit against
it from a State to .::.. :federal co11.rt on the g;round that the suit
arises under t:::1e C:)nsti tution or Laws of the United States, please
rernem0er the rule that t:1is can;:wt be done unless the fact of the
suit a:i.'isii:Jg under the Consh t:J.tion or Laws of the United States
ap:Jt:l8IJ on ''the face of the 6omplaint.
This is hardly ever the case.
c
0 p
215
y
•
i'
7.-r.:573
Mr. Gc orr:e J • Sea.y,t .,.Governor
~ddition.:l
Topics for
Gov.-:-rnor 1 a Contorenoe.
1.ty dear f:c.vc:r nr;r Soay;
ot
I hAve o~'.r :i'ull '. roo.d the ..letter
tbe· ~deral Reserve
Boo.rd, •·.:4li58, o.nd 'the let~rr of ;Jt. 17b.lte.i" flyntt{.J:-4551, whi9h
..
.·
is atti.dllod.
··
·
)
Mr. \l~tt ho.s di~t.•:.sscd so thOro~hl.l the. present situation thllt additional discus&> ion is lt;.rg~ly aUper.f'luous •. As .he ·
·states at th8 present til.oo ,.i'Odcr~ Rceorvc a,.n11l+may not bring suits
in, or rGmOW suits. to Federal Courts upen ;tho ground that the ..
ba.n!.:s o.ro cltiaons ot d.$.tfotent Stntos from that . o£ othor po.rtic a
to tho .suit... ;~.lao the banks U.O.y not, a.a formerlJ, . brill& f1Uits in~
· or rel!love suits. to Fe®~ CO\U''tts. ~on the. ground that any 8ttit
c..gr.inst the It'ede:ra.l R~IGr'tO a·- ~B qno. arising under the laws of
the United. States • 'fho rosul t ia. Ji'Qd<lral Court• rll.l 11:owr .Mve
jurisdiction, of lltiption oonocrning 1fcderal Roservo Banks,
unles.s tho suit, .tJf'· a.otion, na brought by tho plaintiff snows tho.t
a quostion imolvi.~ the oonet:ruetion ct tho oOMtitution ot tho
laws 'ot the UnitoQ. Stntos is involved. This :woUld exclude us from
tho Fcdoru.l Cou.rta in noa.rly nll usual litiga·Uon.
z·thoro'Ughly a.greo tho.t it vro.ul~ bo ~ll to sock some .•.
ronondmcnt of tht
of. Con&···r(.;.ss, and. I •.'." ino. U.ned .to ·.think that
...
tho third om.nndnlonl auggcstcd by Mr. Wyntt \10ttld be tho best.
A••.·
It tho first amcndtncnt suggested by lfr. WyQ.tt bG o.doptod•
Fcdcrul Rt;Jsol"(o Barnk,a .could onJ:y romO'IIc s·nft$ to FederAl. Courts·
when tho suit wo.a bro:ught in a()ilte State othqr than thtJ,t in which
the main oftioo of the bnnk was looa.tcd• ·
It t.ho socond slJggOatj.on were a.doptcd, the n.mcndmont
,rould a.uthorizo Fo4oro.l Resono Bo.nk.a to institut~ auita in tho
llietr:l.ot C<>urta o£ .the Unite.4 ~tAtoa, nnd wo\U_d authorize other
persons to bring au1ts ~!..inst tb<lm in tb.c District Courts of the
Unitod sta:i;,cs. ·. Itc woUld scqm.1 .koWo-.or, tho.t tho. s.ootion must be
construed to uwnfl' either thtlt f()40to.l RoscM~ . . . may not sue
or bt> sued in. o.ny State Cot.trt, F .e:lae that tbeyJ'Do.y sue in an¥.
State Court or in tho Distriot 'Court ot the United States • . It the
former construction be adop~d., it will a01mJWhat. embarrass the
,
ba.w ; beofl.uae .Proceedings in ~dera.l courta. are as a rule more
·expensive than they t+re i9 St~e Courts, antl it vtill be. inconvenient to lao o~oll.od to •Ps9tt to e. FGderGl qourt 'W'henover we
found it neeoaaa~7 'bf.\J·'J)rirlg a~t to oolle(t't; o. note,. er tor other
alight
·tM. ~ mlcht ~~ o.nd ~ au~d in the l~triot
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oo.u.••
Federal Reserve Bank of St. Louis
:o•,;
1~.
2t6·'
Goorgo J. Soay, Governor.
f
The third runcnd!J.ont \vould morely ·rest oro 'the status which
·axistad prior to tho ""ct o:.L ,ii'cbruary l3th1 which it sot>trlS to mo
wns fair, both to the b.:l.n.L:; u.nd to other persona, aa it permitted
us to remove suits in whic>. t:1c amount in controversy exceeded
~s,ooo.oo, but did not pcnuit us to bring) or remove suits, to tho
Federal Court if the umouitt wore less •
Ur. r;yatt a.nd Judge Ueland in his letter of.' February 23rd
raise other oloaoly rcln.tod but somowho.t different questions which
to my mind o.re pcrho.ps of grcato:r importance' than the quoatioJ1 of
FcdorQJ. jurisdl.otiott • that it to 8af tho quoetion of tbc looo.tion,
or domicile, or a J'edGral Reaorw .Bo.nk. The Federal RoaoMro Act is
not specific upon this point, and it soou. to mo tbat a. Fc.dcrol
Reserve Bank might bo regarded as d~cilcd only ia tbo place in which
its hc.1.1.d off.'ioc, or in a.nt event, whore some bra.nch is located, or
cl so it mir;ht be rogvd.od ae in contemplation of lo.w domiciled
throughout its District.
h-
Judge UQla.nd points out that his oppononts have ueuc.lly
procaod.od against
upon the thoft'J that a 11\'idoral Rotol"Ve Bank
wo.s not doing buaineaa in o.ny Sta.t.D1 o:*:oopt that in Vlhieh. its head
office, or som.o Branch. ·as loeatcd. OR .tho othot- hu.r:ul-~: in acverlll
suits brought a.gaiaat ·this 'bo.nk our opponents M'V'O t~n tho groUnd
th.c.t o. Fodora.l Roso:rvo Be.nk-w&;s.in contomplat~on of lo.w· present in
avery Sto.tc of ita Diatriot., e.nd. subject to suits in such S~ttl in the
samo iilllnncr as a corpOZ"a.tion duly domiciled therein. .In ot}t.er words,
tho suit& mentioned by Judge Ueland proceed upon the thoory tho.t :the
Fodctlll Reserve Bank: is o. f'oroign oorporo.tion o.nd not domieilqd
throughout its District. Tho suits c.guin.st us proceed upon tho theory
tlw.t we c.rc quna i ... dolll.Ostic oo:rporatio·ns in ovary State ot our District.
The suits u.ga.inst' u• ht.\vo not 'boon prossed to ~ tina.l jWilplont, bUt
are now pending. Tho l~r Courts b.Q.yo hold tha.t we 1'4Vre doing business
in every Sto.te in our District. It is impouiblo to predict. tho final
outcoUUJ of these nui·t.s, til\ it socm,J to 1110 tbo.t oithor Jud&o Ueland, or
myself 1n.ust lose. It socm.s to nw thAt a Federal. RosoMC Banlt is· either
doing business in ·every Stn.to 1n its J)istriQt,. and) th(}rotoro •.
subject to px:-occs!: in such Stflto as a ,.oorporo.tion doing busincsa
theroin1 or else it is not doing b~uti!loas il) that Sto.te, and, there•
foro., subjcc·t to attu.ehmont as a non-resident.
.
/
J
It is difficult to (ocido •rllieh ot those two nltor~ti~
would be most a.dvnnta.geo\1.8 to tho. Federal .Rea<irfo Bank.
It. ~aro .
d~iciled throurhout our District, and liable to suit ill .....,. State,
we ar.e liable t.o the ooneto.nt anno~noe of suits in r~- pla.oea,
orill the expense llnd ineoft'Yenience ot tald.ng depositio,6f. or Ma4inc
wi~ssea to testi..f:l in •\lob pl$.0. but on ·the othet' 'band, • will
probably be entitled to· thO' sto.tutea. of limitations. :Jlnd oer\a.in other
ronwdiol ato.tutee which· only q.pply to residents of. o. ~··
~r.
George J.
Sc~y,
21.7
Governor.
It ~h<- r.ourta hold tbn'l. vro ..1re not doing business in a.ny
pl"'ce o:::cept \T~1cro '\TO hD."7'u an oi'.:C'ice, we a.ro, I think., lit1.blo to
a.ttt..c.lulanJ,. in other Sta.tt;s. ?bore o.ppoo.rs to be nothing in tho
r'edcra.l Hcserve Act which extends to Fcdora.l Reserve llo.nl:s tho protection which lbtioml b~l.nks hr.vo r.ga.inst a.tta.ohlllcmts b•:.:C'ore c.
ju~nt.
fhilo a. parson with a. clc.im a.t,:;o.inst us mo.y nt>t .·.lwnys bo
t'.blc to a.ttu.ch money., or propcri;y1 bclongiuz to us in thG h.~nds of a.
member ba.1lk, thoy could usunlly do so, nm! t.V<.n though tho pror>crty
a.tt..lchcd belonged to sane mombor b:-.nk, a.s, for examplo, checks sent for
oollootion, still we could by thu c-.tt~.chmont be pla.ood in o. position
whoro we should bo compelled to givo ~roa.-t. inconvonioncc to our ~mbor ·
bunks, .or ~lsc submit to ntta.ohncnt.
As you will notice oit~!(.r dt.cisioll vrhich mo.y bo mndc ~dor tho
prosont la.w would b.xvc mny dis•l.dvant<~t,;os a.nd some a.dw.ntc~gosto tho
Fedcra.l Rosorvo Ba.nks. If' it tiCrc rossiblo to !-.nvc a. sta.tute pa.sscd
providiug tha.t Fodorol Roaorv\3 Bc-.nka should be considered doing business only in tho pla.ccs in which tacir head offices, or brenohcs., were
loca.tcd., a.nd should not b\: subject to c::tccut;ion ~>r c.ttrchmcnt bci'orc
finh.l judgment, the dif'f'ic•uti<.s o.nd czponso a.ttendant upon litigation
of' Fcdcra.l no servo Bnnks 1ro\\:a.d b.::. grcc.;.tly di."linishod.
However., I C''lll :.;~>·Jr nttc.ntion to tho fa.ct thr.t the :1bovo
mentioned provi~ion w!11.ch ~,·u.ld -rotc.ct us would mo~n tb..:.t uny porcon
~Tho undertook to brine;: c. s11it :~.:5.nst us would be com.:?c::llcd to submit
t,o t.'lc c...:r·msc a.nd incouvc.:u.:;nc. uh:i.ch now fc.lls upon us, t:'ld it would
ust.~lly l'li.Ca.n the.~ c. OJ.embcr buul.:~ or o'Jher person with c. SJll{'ll cl~im
o.st.inst tho F~dcro.l Reserve: Bc.n!c rpould be compelled to r.ba.ndon it.
rat~cr than to proDocut~ it to judgmc1~, ~nd it Qicht be thr~ such a.
condition -:.1ould lc.o..d to such fric·~ion .\nd ill-fc~.oline; t:tn.t it '\'10\Jld be
bettor for us to stt\~ld ·tile expense .'.lld t:o-oublc of suH:.. tha.n to S(.Ck a.
provision which woul.~ rclicvo us of ·~his troublo but cc.:-t it.upon ~hose
who ha.d1 or ~~ugh\~ \hey ha.d good claims u.g~.o.inst us.
I roma.in
Vr.ry tru!.y yours,
I
U. G.
MGW:IB
~ ·:l.llacc..,
Counsel.
2:tH
(COPY)
FEDERAL RESERVE BANK
OF ~lEW YORK
X-4694-a
Ma.rch 12, 1926
Walter Wyatt, Esq.,
General Counsel,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Wyatt:
I l1ave r~ccivod your letter of 1hrch 10, with the encloSU+c, relative to amendments to Federal legislation in regard to
the jurisdiction of ~~o Federal courts over suits by and against
Federal reserve bru:lks and exa1rption of reserve banks from the process of attachment and garnishment before final judgment in a11.y
case.
I hcve advised Governor Strong that I think legislation
along these lines is highly desirable and that I think an amendment in substantially tho form of the amendment which you propose
in paragraph 3 of page 3 of your memorandum to the Board will afford relief, so far as tho question of Federal jurisdiction is concerned. I have also a&vised the Governor that I thi:lk that perhaps
a decision as to what form of relief to ask of Congress and in what
mmmer and a·t; what time it shall be brought up can best be reached
by the Governors' Confel'ence after reviewing the legislative needs
of the System and after possj.blc inquiry of members of Congress and
of others, if there arc any, interested in procuring amendments to
the Federal Judicial Code. I do not feel it is possible for me to
say more along the lines of procedure at the present time.
With kind regards,
Very truly yours,
(Signed) L. R. Mason
L. R. Mason
General Counsel.
(COPY)
Williams & Si:Udor
Attorneys at Law
Philadelphia
2:1.9
X-4694-b
April 30, 1926
Hon. George W. Norris, Governor,
Federal Reserve Bank,
925 Chestnut Street, Philadelphia.
Dear Governor Norris:
I am writing in reply to your letter of the 19th inst. requesting v.n opinion on 11 tho advisability of seeking a.."'l amendment to tho law
in order to resto~to Federal courts jurisdiction over suits by ana against
Federal Reserve Banks. 11 I note that this request is bei11g made to counsel
for the several Federal Reserve Banks pursunnt to resohttion adopted ut the
recent Conference of Governors.
I wrote you on March 12, 1926, after receiving a memorandum on
this subject from 1~. Wyatt, Counsel for the Federal Reserve Board, informally expressing my view that such an amendment would be very desirable and
thnt the best form it could take would bo the third of three suggestions
made bY. Mr. Wyatt in the memorru1dum referred to. Since the receipt of your
letter of the 19th inst. I have had an opportunity to consider more carefully the decisions bearing on the supject in connection with the legislation
establishing and limiting the jurisdiction of Federal courts. The result
of this further consideration of the subject has merely been to strengthen
tho view previously expressed to you.
I think that there would be obvious disadvru1tage in ~~ending
either tho Judicial Code or tha Federal Reserve A.ct, to provide t~~t for
jurisdictional purposes the Federal Reserve Banks shall be deemed to be citizens of the states in which their principal offices are located. It would
seem that merely to amend Section 4 of the Federal Reserve Act, which authorizes Federal Reserve Banks 11 to suo and l:.e sued, complain and defend, in
any court of law or equ.i ty 11 so as to authorize them to sue und be sued, complain and defend in any United States District Court is still less to be desired. The objections to these first two suggestions in Mr. Wyatt's memorandum are, I think, sufficiently indicated by him to render further discussion on my part unnecessary.
The Act of February 13, 1925, which has had the effect of depr1Vlng Federal Courts of jurisdiction in a suit by or against a Federal Reserve Bank, unless the initial pleading on the part of the plaintiff actually raises a. question necessarily involvi:Jg the interpretation of the Constitution of the United States or some Foderal Statute, provides i~ Section 12
as follows:
11 T'.aat no district court shall have jurisdiction of
any action or suit by or against any corporation upon the ground that it was i~corporated by or under
2~0
X-4694-b
-2-
an ...~ct of Co~~.gross: Provided, that tJ:1is sectiou
shall not ap:9ly to ony suit, actio:'l or proceodL1g
brought by or against a c0rporatio:.1 incorpore.ted by
or ~~der ru1 Act of Congress wherein the Government
of the United Stntes is the 0'7ner of more than o:::.ehalf of its ca:pi tal stock. 11
Tho aL.1en&nent suggested by li.II'. Wyatt, -:.vhich a-ppears to ne the
most desirable under all t::le circumsta::J.ces, is to change the -proviso in this
section to read as follows:
"Provided that this section shall r-ot apply to any
suit, actio:1, or proceeding brought by or against
a Federal Land Bank, Joint Stock Land Bank, Federal
reserve ba~~ or any corporation incorporated by or
under a~ Act of Congress wherein the Goverw~ent of
the United States is the owner of noro than o~1e-half
of its capital stock."
Though not specifically referred to in your letter, or in the
Resolution adopted by the Conference of Governors, I should perhaps add that
it w~~ld seew to ne ir~ortant in connection with the a~en~~ont particularly
referred to that a further a.;~Iendi·J.ent should be sought to relieve Federal Reserve Ba11ks as National ~~~Y~ are now relieved under the provisions of Section 5242 of the Revised Statutes fron being subject to the process of attac..rn:lent an.d gar~1isbJ.1ent before final judgr:1ent in any case. It would seen
even ;:10re appropriate that the Federal Reserve :Ba"1J.cs should have _the benefit
of such exenption than National Banks, Even without the bcmefi t of this statutory exeoption the status of a na.tiona.l bank as a ci tize:1 of the state in
which it is located would place it in a bettor position in this respect than
a Federal Reserve Bank. The disadvantages would in :.-cy- ,j1:'.dt;uent very clearly
outweigh the advantages of establishi::1g by legislation e.:r.ch Federal Reserve
:Ba:.1k as a citizen of the state in which its principal office is located or
as a ci tize~1 of each of the states wi thi~l its district., Reasons for localizing ordinary co:x.1urcial banks do not apply to F·odernl Reserve Banks. The
govcrn;Jental functions of Federal Reserve Ba::J::s arc such t:b...r.t if for no other
reason I should consider it desirable that their status as corporations of
the United States and ::1ot of any state or states should continue. I should
therefore thi~~. especially if an O.l:le:-.dl:tcnt such as suggested above can be
enacted to restore the ju:ds<iiction of tile Federal courts that there should
be an n..~end..-:1ent to the Federal Reserve Act in effect exectpting Federal Reserve Banks fro~-:1 the process of attach::;ent and go.rnislment before fino.l judgnent.
I w.tderst~:mcl th~J.t it is :1ot necessary for your purposes for me
n.t this tir.:~e to further elo.burato the viC\7S I have expressed, but I shall be
glad to do so later should you so desire.
Very truly yours,
(Signed) Parker S. Williams.
(COPY)
FEDERAL RESERVE BANK
OF .ATWTTA
April 10, 1926
Mr. Walter Wyatt,
Go'1crn.l Counsel,
?e<lcral Reserv~ Board,
WashL1gto~1, D. C.
Dear Mr. 't7ya t t:
It has not boon possible heretofor& to give tho proper c~nsi
deration to your ;:ae,Jorandum addressed to tho Federal Reserve Board with reference to the acivisabili ty of obtaining an am.cndue:;::.t to the law which would
restore to the Federal Courts jurisdiction of suits by and against Federal
Reserve Banks. We l1av·o today, however, been able to give consideration
thereto, as well as to the r.1or.;orandur"1 prc~pared by !vir. Wallace on the sa-Je
subject.
We believe ·thc.t en a;:~or:.draO::lt of the kind suggested in subdivision three of your semorandur:.1 shoulC:. be sought. Your suggeution No. 1
woulcl, at best, give only partial relief and, u~1less there be s01:19 determi:1ed OJ???Osi tion to a:1 amondr.10:1t similar to your third suggestion, it might be
as easy to ob.tain the one type of a.":lendment as the other.
As a practical sattor, we would suggest tr~t you try to ascertain the reason which iwpolled the American Ear Association and the Supreme
Court to subr:1it for the consideration of Congress the _provision which was embodied in Section 12 of tho Act of February 13, 1925. We recall that i~ former correspondence yo·u quoted someone in the office of t~1e Department of
Justice who told you that Section 12 was not e:1acted with a:1y particular
tho11ght of the Federal Reserve Banks, but that on the other 2:lm-.d those who
suggested the enactment had in mind other Federal corport1tious. At the time
it occurred to us that it was possible that the primary purpose of the enactmont vms to keep the Federal Farm Land Banks and Joint S·tock La::1d Ba~'lks from
utilizL1g the Federal Courts in foreclosure procoedings. If in fact this wE•.s
the purpose sought to be accornplisi.1ed,. then an attempt to gain relief for
the :Reserve Banks might be handicapped rather tha;;1 helped by coupling the Reserve Banlcs with Federal Lo.:.1d Banks and ,Toint Stoclc ki'ld Banks in the proposed a.D.endmen t.
We r.1eroly sw;gest tho above for your consideration.
We also thi:'ll-c it would be desirable to secure legislatio:J. which
;1oulcl exe::wt the Rescr:c Ba~iJ-cg f1·w1 the lov;y· of attachments or executions until after fino.l judgnent.
We have never had a case in \7hich suit bus been brought against
the Atlu..11 to. :&'ink by e. t taC:hnon t, o.nd, therefore, :have :1ever studied the qu.es
-2-
X-4694-c
tioa of attachr:J.onts against Reserve Ban1cs with any particular care. As to
·,·:hethor or not the right of attach~:1ont would obtain in a particular State
noulct, it seens to us, depend o:::1tiroly upon the poculiar statu tor;>~ proviDions of such State. In Georgia, for exa.~lc, one ground for attach:::1ent is
that 11 the debtor resides out of the State". This provision has been constru.ed as referring to actual reside:::1ce as distil'lguished from constructive or legal residence or political douicile. In fact our Court in one case l1as quoted with approval the following la.."'lguage: 11 It is tho question of actual residence and not of do::.1icile oerely; o.nG. this is a fact to be determL.1ed by tho
ordin..
'lry a.1c. obvious indicia of residence. 11
In another c'J.se tho Supre;·.1e Court of Georgia has said: 11 The
mere fo.ct that a non-reside~•t r.1ay be found and served does not prevent a creditor from exercising his right to sue by attachr.1ent. 11
Obviously the statutes of the different States roy vary, but,so
far as our observation goes, the usual attachm.ent statute is sijjilar to the
one which is of force in this State.
In Georgia, a..'1.d in r.wst States, the rule seems to be that a
foreign corporation, even th~~gh it does business in the State, is regarded
as a 11 no:1-resident 11 • In Georgia, for instance, the statute specifically provides, 11 Attachments may issue against incorporations not incorporated by the
laws of this Sto.te, who are transacting business within the State, under the
same rules and regulations as are by this Code prescribed in relation to issuing attachments and garnishments in other cases. 11
Manifestly, a Federal Reserve Ba!lk is not t=L foreign corporation
within the meaning of those st.:1tutes. As to whether or not it would be subject to attachment under a statute similar to tho Georgia stav~te would seem
to depend upon the determination of the question of nhother or not it has a
11 rosidence 11 in the ordinary sense.
If so • then it woulc. properly be regarded
as being a non-reside:J.t of States other thc'lll the State of its reside;.1ce. The
case of Bacon vs. Federal Reserve Bank of San Fra.:1cisco, if pro:,;>erly reasoned,
would seen to establish the proposition thc~t a Federal Reserve Bank has a. dol"!licile or habitat, to wit: the locality where its principal office is located. Our best judgrJent is that a Federal Reserve Bank should properly be regarded as a resident of the State wherein is located its principal office a~d,
therefore, a non-resident of the other States. Although strong reasons sight
be urged to the contrary, a:id the question is a new one, so far as our investigation goes, we believe thnt under a statute like the Georgia statute a
Federal Reserve :Eanl;: would be liable to attach':lent in any State whereof it is
a non-resident; and that this would be true although the Reserve :Bank is a cit;zen of. no particular State and. may be said to have a field for the prosecuhon of lts corporate t:tctivities coincidc!lt with the boundaries of the United States, exce:pt in so far as its operations r:JEJ.y be cirCUJ::J.scribed by the statute of its creation.
·
We are further of the opinion that a Reserve Bank 1nay be sued
-3in ordi:::J.ary actions at co::T.1on lm1 or ia equ.i ty in any Sta.tc wherein service
may be validly perfected upon it in nccord.nncc v;i th the s to. tu tes of such
Sta.te, unless, of course, such statutes purport to authorize service upon
persons or by modes which rrould violate the general co:1sti tutio:1al guo.ra:1ties.
Vic aro of the opinio:J. that a Federal Boserve Ba.:1.1-: is suable at law or in equity in the Courts of a State wherein service ~y be properly perfected u~on a
l:ra::ch, provided the statutes of the State provide for such service. Wo do
not think, however, that a nesorve :aa"ik: couJ.d be broB.ght into Court by ordinary :>recess issuing fror:1 tho Court of a SteGe wharcin there is no office or
place of business upon \Vhich service could be had. Mr. Wallace in his mcmora:1du:.:1 r0fers to tho fact thnt in several su.i ts brought against the Richmond
Ban..'~{ the position has bec~1. tvkon tl:at 11 a Federal· Reserve Bank wao, in contemplation of law, present in every State of its District and subject to suits
in such States in the s.~.1c ::1£l.::ner as a col'i)Cra tion duly dozn ciled therein. 11
We assu.-ae that service of rn.·ocoss in the s~i ts referred to v;as made on the
officers in charge of a branch office, or that service was otherwise properly
perfected. AssUI:ling that there we.s no questio:1 as to service~ it would seom
to us that the position tc..1.kon by tho plaintiffs ia those cct.sos was logical
and correct.
If the suits brought by attach1nont against the Mi~1neapolis :Sank,
mentioned in Judge Ueland!s Jetter, wore instituted in States other than the
State of the residel'lCe of t-ho Minnea-polis Bank, and if the revelant statutes
authorized attachn1ent ))rocecdings against non-residents, then it appec.rs to
us that the attach.nents \70ro probably :properly sued out. Nor do we see any
essential inconsistency between the right to maintain attact~~ent suits, as
related by JuJ.ge Uclancl, f.md tho right to sue the Reserve :Sank at co~;1rnon law,
as r~s been done in the case of the Ric~~mnd Eank.
The Atlanta }3~t;,il:e has been sued onco i:1 a St.'lto Court in Louisia.r,a, service having be,::n ~·:lade u:,>on the New 01·leans :r.ranc:1, n1:d we reached the
'conclusion in that case t~at jurisdiction h'ld been obtebed e.g~:d:1st the :Bank
by the State CoUI·t. Were a."l attachme:1t to be brought; against the Atlc.nta
Jan.:.c in Mississippi, for exouple, where there is no bn:mch 1:1pon the officers
of 11hich service could be had, we ·believe that '.7e wouJ.d o.dvise the Bank to
tdo;.o the necessary steps to dissolve the attacbnent ana. to ;;roceed to defend
tl:e case on the ::1eri ts, assTh-ning, of course, th0.t })ro:perty ~1ad been 11 caught"
by the attachuent.
We are not entirely clear on the proposition as to whether a
Reserve :Wank wou.ld be regarded az a non-roside~1t of a State in which a branch
office is located, and, of co1.trse, the ri 1:;ht to attach L1 such case would be
determinable by :;>nrtic:.1J.c.r statutes. ...~s D. gonerD.l proposition, however, ue
incline to tho boliof tlmt a llcserve :ar..k resides in the State where its
principal office is lo.::nt~~~ a1d that it is a r;.on-resident of other States.
We arc, of cou.rse, doalin::; o::.J.y with the ques·tio:J. of resicle~ as (listinguished fron c:i. tizenshi:)•
Our interest in the ~~estion under consideration has i~1rigued
us into writing a letter of "J.npardonable length. ire stand rr-;ady to assist
-4you in overy way possi blc in secu.ri•1C en onendmo:1t to the law, which will e:;.1a0le Federal Reserve Bo.nl:s again to invoke t.l1.o jurisdiction of tho Federal
Courts, as rrell as an e:::w.ctue:1t of a statute '.':hich c7ould. j?revent atta.chr.1ents
a.;?~ai:1s t the assets and pror>orty of Reserve 3aj:ili:s bl advance of :final j1.l.dgr:tc~1 t.
with regards,
~e
ere
Yours very truly,
(Si(nod) ?..a:.1dolph & Parker,
General Counsel.
(COPY)
OF CHICAGO
X-4694-d
April 14, 1926
J. J. McDougal, Esq.,
Gover::•or,
Federal Reserve :~u.":.'.: of Cnicac;o,
Chic~o. Illinois.
My
da~r
Governor:
I a..-:1 advised by Mr. Dillard that &t- tb.o::raccnt conference of the Governors of the twelve Federal Reserve Banks held
L1 Washington, a. resolution was passed to the effect that the
counsel of the several Federal Reserve BaPJ:s be asked to prepare an opinion on the advisability of seeking an a~endment
to the law in order to restore to Federal Courts jurisdiction
ovor suits by m1d against Federal Reserve ]auks, and that all
of thesc3 opinio:~.s, whe:..1 prepared, should be forwarded. to the
Governor of the Federal Reserve Board.
Prior to that conforonce, I had roceived from ~~. Wyatt,
counsel for tho Federal Reserve :Board, a copy of his r;"!emorandurn
of date March 9, 1926, to the Federal Reserve :oard on this subject; and -u.nder date of March 12, 1926, I '1!rote you (3x:pressing
my views; and I beg to refer you to that lett:)r read in connection with Mr. Wyatt's r:1ernorandurn, of which you have c011Y, for a~1
ex-pression of my views on the subJect. I clo not believe I cm1
add. anything to what I there said; and a copy of that letter may
be attached to this letter and for~arded to the Governor of the
Federal lle!'orvo ]oard, as my response to t1l0 resolutio:l.
Very truly yours,
(Signed) Chas. 1. Powell
COUl1SCl
(COPY)
FED~ui.L r~SE:L.VE
::lill'!K
OF CHICAGO
Cho.s. L. Pa\'7oll,
Cou:J.sel,
Continental & Co~rcial
:a:~~
:ldg.
X-4694-o
March 12, 1926
Mr. J.•1. MCDougal, Governor
FodGral nesorve Ja:~ of Chicago,
Chicago, Illinois.
My dear
Gover~or:
Ro: Topic for Gover~ors' Co~fercnce - advisability of seekiD6 a~endmcnt to restore to Federal
courts jurisdiction over suits by and against Fedoral Reserve ~anks.
I ara in receipt of a letter from la. Walter Wyatt, Counsel for the
Federal Res~rve ~oard, enclosing for my information copy of a meoor~~duc
of date March 9th on tho above subject passed by him to the Federal Reserve Board.
In Mr. Wyatt's letter he suggested that I discnss this subject briefly with you before your departure for the conference ru1d that I write hiw
expressing oy views to him on the matter covered thereby.
I assume that you have seen Mr. Wyatt's memorandum and there is no
necessity for me to rehearse the oatters discussed by him.
I
I can only say to you that I deem the matter of very great importa.."lce.
ty the Amenw~ent to the Judiciary Act of February 13, 19251 the Federal Reserve Eanks are in effect shut out of the Federal courts. They are
thus left absolutely at the mercy of the state courts, except in the very
limited cases where a right is asserted under the Consti~tion of the United States or some Federal Sta~te. However it arises and whatever may be
the cause thereof, prejudice is apt to result to the Federal Reserve ~~s
by being driven to rely on the state courts.
Aside from this catter of jurisdiction which is thoroughly dis~ssed
in Mr. Wyatt's meoorandur:l, he also discu.sses therein 11 tho r:JD.tter of a.tta.chmellts and garnishments against Federal Reserve Bank:s 11 m'l.d that subject, too,
is of vital importance, except that I do not believe tho ruatter of gar~ish
ment of a Federal Reserve ~atik as a debtor of some other bu1~ or individual
is of iq>ortanco. The ioporta."'lt thing is that Federal Reserve Danks be
free from a writ of attac~ent under which its property can be tied up by
garnishment or otherwise. Our own bank was very seriously inconvenienced
by a. writ of attachment ta~en out in a state court in Iona. ;n1ereby funds
to the omaunt of four or five thousand dollars ~elonging to the Federal
Reserve I3a.nk were tied up by neans ·of a c;arnishment of an Iowa. ba:'.k which
had possessio~ of the Federal Reserve ~1ds.
-2Section 5242 of tho I\cvisod Stutut'-'s, being a part of t>w £l"atiom:1.l
expressly 1jrovidos wi tl:.. rcforo:J.co to National :anks us follm7G:
~a.1k .Act
nttachL'1c:J.t, injunctiou or execution shall be issuod ~wainst
such association (a lJatio:1al :o.:1k) or its property beforo final judgnent in any suit, action or proceeding in any state,
county or r.m.nicilJD.l court. 11
11 No
The ::mtter of frcodo;:.1 fr01:1 attuchrno:J.t by which its pro11crty cv.:1 be
tied up and tho no.ttor of cxCL1ption fron a writ of inj~J.ction by whicil its
opcr.::;.tio11.S ca~1 be b. torf0red wi tr1 are of 1:1ore vi tal ir:rporto.nce to the Federal Reserve :a:lks as ;:;.o·.1 constituted than to l'Jutional :Janks w~1ich arc
givc:1 this exm:rptio:u by statute.
Tho above quoted lun{;,"Uo.ge was discussed 'cy tl1e Supreme Court of tho
United States in Pacific National ::o.!1k Y. !Hxter, .124 U. S. 721, a.nd the
law was upheld and a reason for tho law, if ULJ.Y were noccsso.:ry to be given,
was fou:1d to be in the para:":lount interest of the United. States in such institutions.
It will be seen that this soctio"1 t7i tt reference to lTo.tionc.l ::a.nks
also prohibits injunctions--a prohijition r:ru.ch uore ir.l[lortant to Federal
Reserve :Ja;.lks and to the Govorr.r.J.ont tlnn s1..;.ch pro.hibi tion is ay)~Jlico.ble to
Na. ti onal J:anks.
I ao of the vicv,r thDt i:1 aay o..ttor.1pted ameno.t:1ont to the Judicio.ry
Act \"Ti th reference to ju.risci.ictivn thoro should be included an effort to
obtain a 11rovision. of t~1e lc.w prohi'biti::J.g the issuance of an attachr.1ent or
inju.J.ction acains t a. Fedcre.l ~1oservc :a:;:ik or its property prior to final
Olld{;;T.10l1 t
•
Tho third si1f;gostion r.mdo i)y Mr. Wyatt on pc.r;e 3 of his t1enorandun.
is in qy juQgnont the sinplost ru1d Dost effoctivc way to promlre an amendment to the Judiciary Act touching the r.:ntter of jurisdictioa; and how best
to call the othor r:1atter to the atte::.;tion of Congress and procure legislation I have not had tioe to fully consider. The desired rcs·:J.l t could. be
brought about by ar..1en.ding the language in section 4 of the Foc.cral ~osor·ro
Act w·:1ich now 1•eads
11 to suo and be sued, coc'l"lain and defend in any court of lm1
or equi ty11
so as to oalce it road
to suo and be sued, co.:.:rplo.in and defend in any ccurt of law
or equity; out :.10 o.ttc..ch:~1e:1t or i:1ju':1ction shall co issued
against such bank: or its prope1·ty before fi21al juclg;:wnt in
any suit, action or ]!l'oceedinr; in o.ny state, cou:1ty or ::mnici:;?al court. n
11
-3-
The foroi::oiac: is u. noro sue;c;estion o.s to ho~< the Act could bo o.::J.ondod to cover this 70int; but the vital thing is that it shrr~ld be anendod
n.:1c-:. tho rr....
'1nor of bringi::lg about the ar.1endr1ent can bettor be considered by
cx-:~orts ,1-long that line tha11. by no.
Yours very truly,
.
(Sicned) Ohas. L. Po~1ell,
Counsel.
X-4694-f
FEDERAL
RESERVE
BANK
229
0 F
ST.
LOUIS
April 29, 1926.
Mr. Walter Wyatt,
General Counsel,
Federal Reserve Board,
Washington, D. c.
Dear Mr. Wyatt:
I have been so til3d up in court proceedings
since the recej.pt of your letter of March 31 as to preclude
mo from giving Mr. Wallace's letter serious consideration until tho present timo.
As suggested in;~ letter to you under date
of March 16, I believe tho most:'successful way to tackle the
proposition would bo to try and PaVe tho ju~isdiction restored as ncar as possible to wnat it was prior to the
jurisdictional amendment, Fo~y 13, 1925.
I believe tho third plan suggested in your
letter of March 9, addressed to the Federal Reserve Board, is
best sui ted to bring about this rosul t with tho least opposition, since it is plainly apparent that by tho Feb. 13, 1925,
amendment, Congress desired to exclude from tho effect of the
amendment corporations in which the Uni tad Ste.tos :1ad a substantial fi~~cial interest; and while the United States does
not own any of the stock of the Federal Reserve :Banks, its
receipts from the excess earnings and its reversionary
interest in the Reserve ba..'liks brings these broik:s clearly
within the intent of the Act, as .revised·.
The same thing,
to a lesser degree, might be said to apply to Federal Land
Jhnk:s and Joint Stock Land :Bal1kso
Under these circumstances, we would not be
aSking for any class legislation especially favorable to the
Federal Reserve Bonks, but wo·..Ud sinrply be asking that the
Act bo so omondcd as to carry out wh.t1.t was in rea.li ty intended by Co::g:oss uhen corporations, organized under the
United States, in y;hich the Government owns an interest,
wore exempted fron the provisions of the amendment.
The suggestion :ma.de by Judge Uhland as to
placing tho Fodorol Reserve BarJts on the same footing as
National ba."1ks in the matter of suits by attachment is likewise important. In this District so far this method has not
'·f!.)
2 cH.
1:··469t,;,-.f
been used against us. I con soo, however, tho pitfalls it
offers to a successful defense of suits against Federal
Reserve Ba.."1ks, and while the jurisdictional runendmcnt
sought will not help us in attachment suits in cases where
the amount is loss th8l1 $3,000.00, I still believe that
it would not be best to bring tho two matters up under the
sru:ne amendment since tho jurisdictional aoendment sought
would only place the Reserve Banks in the class intended
by the February 13, 1925 amendment as being corporations
in which the United States Government had a fintmcial
interest; whereas the attachment runendment would be open
to the clam that we were seeking class legislation favorable to Federal Reserve Bruiks.
After securing the onondoont restoring the
jurisdiction, we could then take up the matter of suits by
a.ttachr.1ont and probably have the Fede:;-al Reserve Act so
anendod so as to place suits of this nature on the sene
plane as those againot nationo.l banks. In this, I think
we would h~vc an absolutely logical position.
· With kindest regards, I om
Very truly your-s,
(signed) Jas. G. };:cConkcy
Counsel.
JCMcC/GP
X-4694:-g
]'L}m;RAL ID:SERVE BANK OF MINNEAPOLIS
lUnth District
kpril 6, 1926.
Mr. Walter Wyatt
General Counsel
Federal Reserve :Soo.rO.
Washington D. C.
My dear Mr. Wyatt:
I think that the
siL~lest
way for rectifying the present
situation as respects tho right of tho Federal reserve banks to litigate
cases in the ]'ederol courts would be to get Section 12 of the .Act of
February 13, 1925 amended so as to read:
11 1!0
district court shall have jurisdiction of
any action or suit by or against any corporation,
bank, upon the ground that
it was incorporated by or under an .Act of Cor~ess:
provided, &c."
~xcept ~ F~deral ~~e
This, it seems to me, TIOuld leave the Federal reserve batiks
)lith respect to jurisdiction just as they i7cro bcforo, TJ.Dmcly, that
they could bring suits in the district courts of tho
~nited
States alld
remove suits to those courts from State courts in all cases involving
the requisite amount in controversy.
If, in addition to this, an
~~eJdment
was made to the
Federal Reserve Act to the effect that no property of a Federal reserve
bank should bo snbjoct to attachment or garnishment, I think tho prosent difficul tics of tl10 Fcd.oral reserve banks in nm.ttors of litigation
would be removed.
-
2
-
4694-g.
This in answer to your letter of MarCh 31st with copy of
the letter of
1~.
G. Wallace to Mr. George J. Seny, Go·.rernor of
March 19th.
Yours ver;r tn:ly,
(signed) A. Ueland
(COPY)
:E":3DlD:ul.L I\.ES :El~VE :·. JlTIC
OF I\;:.55..:-\S CITY
•.
. .:..pril 26th,
X-4694-h
U26.
Hon. ~alter ~yatt,
Go:ntJral Counsel,
Federal Reser•re :::oard,
Washington, D. C.
My dear Mr. 7lyc. t t :
I a.rn very sorr;:r t::w t o·.1 uccom1t of absence frorJ. the offi co I have
not sooaer had the o;:nortJ.ni ty to ro!JlY to your letter, transmi tti~1g copy
of letter addressed by Mr. Wallace to Governor Soay, of the Federal Reserve Dank of E.ichno:~.d, with reference to tho character of relief which
should be atter.ptod to l)O obtained frm-:1 Congress affecti:Jg the jurisdiction of Fedorn.l District Courts in suits broueht by and ae:ainst the Federal Reserve La1iks~
I thorouchly agree coth 1.ith you and Mr. Wallace that the oost effective legislatio:l which could "bo obtai!1Cd would be to restore the jurisdiction of the district courts as tho sa..-:1e existed prior to the aL1<ndmo;.1t of Februa.r·y 13, 1925. If the jurisdiction could be so restored, I
foel t:b...c"J.t ne would have all t~1e relief v1hich v1e could reo.so~1o.bly e:xr)ect,
unless, in additio:1, wo shoul<l be ;:Jade exempt from o.ttach.-ne:1t, prior to
final judgnent, as ~ntional bre1ks are.
I :have h::ui conuidoro.tlc dot'.'bt, howcYer, as to whether 0...'1 a."l'loadment
of this kind could. be obtai;,1ed. fro::-1 Congress, a:1d for t:b.o.t reaso11 have
felt that we should only atteL~t to obtain such legislation as would place
us on a parity with natio:i.lal ba:1ks, which, of course, vro-u.J.cl mea.a that v;e
would be declared residents of the eto.tos in which tho soverw.l bo.nl{;S
naintain their heo.d offices.
At the time that Governor :nilcy discusr;ed the cro.estio:J. with r;1c before the recent conference of covernors, I expressed theso views to hiu,
but endeavored to rnake it :rlain that if thoro a·9penred an~r liklihood. of
an effort being successful to restore the forr.:.tcr jurisdic'cio::l, I felt tho.t
the so..-·oo should by all nea:1s be dono.
I know that you arc in a much 1;et tor position to judge 'iiha t :-.1ight
be expected from Congress alo:lf' thoso lines tl".an a:1y of us who are distru1t
froo Washington, and if ~on feel, as I assuD.c you do, that tho full relief, as L1rlicntod, r.~iE:;ht 1:c <'J'bto.incd., I o.::; heartily i~1 fc..vor of rol<i11g
the effort to c;ct it. It :.1i-:~:1t be ::oll, in any cvo:1t, to ;:J1ll-\:c tl:.e c.ttei:mt, and thc:.1 if i·t is u:1succossful to ask for tho lesser relief. The
o:1ly objection t::> that proccclurc, of cousc, '17ould 'Jc that ·ao ;:1ir;ht be delayed in obtai:1inr; tho logislatim:, ;;ut in view of the for roaching effect
of tho cha.l'l{':e in o.ll the futuro 1i tigation, that delay wo-u.ld 'oo noc;lif:able.
X-4694-h
-2-
I shall be :·;roa.tl;T i~1torestod i:1 hco.ring ·.1hnt dctcr~.1i:1utio:.;. you finally roo.ch, o.:1d shall IJ.J!l'l'Ociato it if you will advise 1:10 'N~Wll ~"ou ln,ro
co>.lO to l3uch co:1clusior..
17i th bos t porso:ml rccards, I am
Very truly yotu-s,
(Signed) Ii. G. Leedy.
X-4694-1
FEDERAL
OF
RESERVE
SAN
BANK
FRANCISCO
April 28, 1926.
Walter Wyatt, Esq.,
Gonere~ Counsel,
Fodero..l Reserve :Board,
Washington, D. c.
Dear Mr. Wyatt:
I have read with a great deal of interest your able
and comprehensive memorandum to the Federal Reserve Board (X-4551,
MarCh 9, 1926), upon the advisability of seeking legislation to
restore to the Federal courts jurisdiction over b~its by and against
Federal reserve bariks.
I believe that at the Governors' Conference it was
determined to refer this matter to counsel for the several banks,
with tho idea of getting their expressions of opinion thereon.
I cDn add nothing in the wa:y of argument to that which
you hnvo alroo.dy placed before tho Board. I am very strongly of tho
opinion that legislation of some Character, restoring federal jurisdiction in suits by ~~d against Federal reserve bo.nks should be sought.
In tho litigation which I have conducted for this bank in the T\voifth
Fodoral Reserve District since tho amendment of the Judicial Code, I
have on several occasions found myself at a serious disadvantage by
reason of being required to either bring the action or defend it
before a state court.
It is undoubtedly true that in the groat majority
of cases federal judges are better qualified and federal juries are
of a higher character than those encountered in tho state courts.
Access to tho Federal Court tends to dissipate local prejudice which
so often exists in relation to the Federal reserve ~~ks and gives us
o.n appellate right to tho United States Circuit Court of AppoB.ls and,
in some instar-ces, to tho Supramo Court of tho United States. Those
are advantages of a very real character which should not be overlooked.
I am also of the opinion that the best and most expeditious method of obtaining the remedy which we desire is through an
amend~ent to Sec. 12 of the Act of Feb. 13, 1925, and I believe that
tho amendment quoted on page 3 of your mC'Jnjrand.um would fulfill every
necessary purpose.
This method of approach has the advantage of not
appearing to be o.n effort on tho pa.rt of tho Federal reserve banks to ·
obto.in special logislati0n in their behalf and simply servos to extend
tho proviso so that it will cover the Federal Reserve Batik and other
similar or analogous institutions. I sincerely trust that legislation
of this cho.racter mny be obtained at the present session.
-
2 -
X-4694-i
I have also roaJ and stu.J.icd with interest the r.J.cmora..1'ldUI:l prepared by ll.r. Wollacc for the Federal Reserve :Sank of Richnand (X-4573, .March 19, 1926).
I havo alw~s boon decidedly of tho opinion that a
:B'edorol reserve bank should be considered as 11 doing business" in
every state within tho reserve district in which it is located. This
district oobrncos all of six states and part of another state. In
each of these states, ox.copt two, \"W ei thor n..'"lintain branch offices
or field agents.
Of course in WashinGton, Oregon and Ut~~, whore
we have branch offices, it wot:..ld seem useless to are;uo that we arc
not doing business in t~oso stat~s. In Idaho we maintain a nunber
of field agents engaged in the liquidat:i.on of paper inherited by us
from failed banko a:J.d. it 11ould scE;11n equally .!utile for us to co:1tcnd
hl1at in that state we oro not doi~~ business. In C~lifornia we oaintain the head office il1. one branch ·a."'ld of course thoro is no question
as to jurisdiction there.
Ariza~ ru1.d Nevada are the only states ~n
this district in v:hich we do not ~intain either branch offices or
field abents. We are,however, dailY trar.sacting business with many
bank3 in both of these states and I would be extremely embarrassed
were I forced to contend that even in these states we are not technically "doing business 11 as that term is legally used. In fact it seems
to me that this contention on our part might serve as a boomerang,
both on account of the attach"".lent statutes and on account of the fact
that if in one case it is contended as a defense that we are not
legally 11 doing business" within the state it might be contended in
another case l:ihat we have no right of action id thin tho stA.te until we
had complied with tho laws relating to foreign corporationis; the appointment of resident agents upon whom process mi&~t bo served, the
payment of statutory fees and compliance with other fb:.fii!alitios required of foreign corporationso
Of course you are familiar ni th the decision of the
District Court of the Eastern District of Kentucky in the matter of
Farmers and Merchants J3rulk of Catlettsburg v. F'edoro.l Reserve :Sank of
Clevela.nd, 566 Fed. 286.
In that case Judge Cochran 'WrOte a very
exhaustive (I might sny ex.lk'lusting) opinion covering 46 pages, in which
practically all of the authorities rolatinb to this subject were revio~od and a1~lyzod.
I have always agreed with the conclusion reached
by Judge Cochran that tho employrJJ.ont by tho Focteral Reserve :Banlt of
Cleveland of even an isolate~ a£ent for the purpose of collecting cheCks
drawn on a state bar;~:, constituted doing business within the state to
a degree which would render the Reserve bextit subject to suit in such
state.
The qu.es t:':.on of 11 doing business" was also touched
upon in the case of Bacon v. Federal Reserve Bank of San Francisco, 289
Fed. 513. There, of course, the primary question was whether or not the·
Federal Reserve :Sank of San Francisco was an 11 inhabitant 11 of the State
~
3 ...
of Washington within the meaning of Soc.. 51 of t...~o Judicial Code ilnd
the court determined that this bank was an ·''inha.bitant 11 only of the
federal Judicial District within which its head office is located.
This conclus~on, to my mind, does not confliat with the question of
the situs of tho Federal reserve banks for the purpose Of suit in
J3tate courts.
Aside from the strictly legal question involved, it
seams to me that morally the Federal reserve bnriks should be subject
to suit in any state embraced within the Federal Rosorvo Disttict
in which they arc doing business. It would seem to me highly
inequitable to require tho holder of a small claim against a Fed":"
oral reserve batik to employ non-resident counsel a.ndperl1aps
travel many hundred miles for tho purpose of enforcing tho claim.
I think that the Federal reserve btinks should be suable in any
state over which they rospectively:have jurisdiction,.
.
Lastly, I am thoroughly in accord with the suggestion
by Judge Ueland in his letter addressed to you under date of
Feb. 23, 1926 (X-4551-a)..
I have never been embarrassed by
!.k~ving a litigant atta~t attachment or garnishment ~inst the
Federal Reserve Eank.of San Francisco.
Claims filed against us
have always been e.llowed to go to judgment before· o.r:JY attempt has
boon made to collect~ I can uoll realize, however, tho ambarrassment which Judge Ueland has suffored by reason of the garnishment
isgued in the case to Which he refers. I think it is not only fair
but necessary to a proper administration of the affairs of the
Federal reserve banks that legislation be passed exempting such
banks from the process of attachment or gnrnishr.lent until final
judgment is rendered. SuCh legislation sca~s to oo to co oore
essential in the case of Federal reserve lk~s tb£u1 in the case
of National bariks which, by statute, a:re e;iven a locaJ. situs.
~de
If I can assist you in any wo:y in preparing further
oaoora.nda or briefs on these subjects, please cor~and oe.
Very truly yours,
(s~.gned)
Albert
c. Agnew.
Counsel,.
X-4694-j
September 24 1 1926
Hon. C. S. Dewey,
.Assistant Secretary of the TreMury,
Washi:1gton, D. C.
My dear Mr. Dowoy:
In reply to your letter of Sel)tCi::lbcr 20th
you are advised that tho Federal ::U.eservo :oard bas under consideration tho qu.ostion of reco::conding to
Congress leGislation permitting Fedora.l nesorvo ]anks
to sue a~d oo sued in the Federal cotu·ts; but the
I:·oard has not yet decided whethor to reco:['T.lend such legislation. If the Loard does decide to reco~nond such
legislation it will be very clad to include the Federal Land IJanks a.ncl Jcint Stock Land !ianks in such request
and will bo Jleasod to have the cooperation of tho
Treasury Departr.1ont and. tho Farr.1 Loan Doard in co:moctio:J. with such legislation.
Very truly yours
(Sicned) D.
n.
Crissinger
D. R. Crissinger
Governor
(COPY)
DEI?JillTMEJJT
\7ashil1t;ton
Ti:"~EASU'IlY
X-4694-k
s~!tenbor
20, 1926
lif:y dear Governor:
I understand that yaur Doa.rd hn.s undor consideration tho question of legislation permitting Federal
Reserve 13a.n.'lts to. sue B.J.J.d be sued .in Fedcrnl Courts.
In considering this situation, tho Treasury
fools that Federal Land Jo.n..1cs and Joint Stoclt: Land :Oo.nks
are in the same catc~ory as Federal Reserve Danks and asks
t:b..o.t these banks bo h1cluded in m1y req-J.est for legisla-'
tion which you iTJD.Y r.nko along these lines, pfo"7.i-doC. , of
course, tr!D.t in your opinion their inclusion would not
oilitato asainst tho successfUl passaco of tho bill.
Very truly yours,
(Signed) C. S. Dewey,
C. S. D.i'.!{i£JY,
Assistant Secretary of t'1e Treasury
Honorable D. R. Crissinger,
Governor, Federal Rosorve noard,
Uashin~ton, D. C.
240
X-4695
TREASURY
DEPARTMENT
OFFICE OF THE SECRETARY
WASHINGTON
October 6, 1926.
The Governor,
Federal Reserve Board.
S i r :
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 September 1, 1926, to OSeptember 30, 1926, amounting ~o $108,336,
as follows:
Fedoeral Reserve Notes 1 Series 1914
_!Q_
Boston
New York
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Kansas City
Dallas
San Francisco
_ng_
$20
$50
Total Sheets
200,000
600,000
150,000
100,000
250,000
200,000
100,000
100,000
200,000
100,000
100,000
300,000
75,.000
50,000
100,000
25,000
50,000
200,000
850,000
160,000
100,000
425,000
500,000
100,000
100,000
275,000
250,000
2,000,000
800,000
150,000
10,000 2,960,000
250,000
10,000
2,960,00~sheets
0$36.60 perM • • . . . • $108,336.00
24:1
X-4695
2 -
Tho charges against tho several Federal
Rosc~1o
Banks are as
follows:
Boston •.•• ~ .................... ~
Now Yorlt •••••
Clo\-olan(i..... !
:U.icllinond.~. ~
$7,320"00
. 31, 110 .. 00
5,856,00
3,660.00
15,555.00
18,300.00
3,660,00
3,660.00
10,065.00
9,150.00
! •••••• ! ••••••••••
• • • • • '! • ! • • • • • • • • • •
! ! •
~
••••••••••••••• !
A. tlo.nta •• ! ! • ! • ! • ~ • ! • • • • • • • • • ! • ~
Chicago~ •••••••••••.•••••••••••
St. Louis.o••••••••••••••••••!•
Kansas City. • ~ . • . . . . . ...• ~ .... ~
n--ul as~ ~ •..•.......••.••.••••••
San Francisco •••••••••.••••••••
$108,336.00
.
The :Bureau appropriations will bo 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 appropTiation to bo reimbursed in like amount.
Respectfully,
(s) S. R. Jacobs,
Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
x-4697
.October 15, 1926.
SUBJECT:
Expense, Main tine, Leased Wire System,
Sept enib er, 1926.
Dear Sir:
Jlhclosed nc)rewi th you will find two mimeograph
statements, X-4697-a and X-4697-.;b, cov::ring in detail
operations of the m.;:•. in line, Leased Wire System, during
the month of September, 1926.
Plea.se credit the amount payable by your bank
in the general a.ccount, Treasurer, U. S., on ycur books,
and issue C/D Form 1, Nationa.l Banks, for a.ccou.."lt of
•Salaries and Expans13s, Federa.l Reserve Board, Special
Fund", Leased Wire System, sending duplicate CJD to
tne Federal Reserve Beard.
Yours very truly,
Fl seal Agent.
TO Governors of all :F'.R.Banks except Chicago.
X-4697-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER .lii.AIN LINE
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF SEPTEMBER,l926.
From
Boston
New York
Philadelphia.
Cleveland
R-ichmond
AtlBlita
Chicago
St.. Lol+is
Minn~olis
Businass
reported
by banks
33,412
133.106
.38,362
76,909
~5.382
62,553
104,678
62,151
36,357
72,579
60,769
105z250
831,810
: Ktm.se.s City
Dallas
San Francisco
_Total
F'.R.Board
Total
Per cent of tota.l
Words sent
by Naw York
chargeable
to other
F.R.Banlts (1)
535
643
1,591
2,843
3,221
2, 753
1,549
1,875
2,293
4,618
2,06~
23,98
Total
33.947
133,108
39,005
78,500
48,22a
65,77
107,431
63,700
}8,232
74,872
65,387
107161~
855,79
;227 2 478
1,183,274
100%
·'lTea.sury
Department
Business
4,824
7,104
. 4,398
6,599
5,678
6,578
·7, 617
6,393
J,436
6,082
3,883
i 10 '~l6
.. 72, 8
. '5~,283
131 ,i951
11.15%
War
Net
Federal
Finance
Corporation Reserve
Business
Bank Business
..
•
29,12a
: 126,.00
34,607
71,901
42,547
59,196
99,814
5.7,307
)4.,..196
68,790
61-,504
91.539
783,128
268,;1.95
1,051,323
~!'~5;;
Per cent of
total bank
Business (*)
3· 72
16.09
4.42
·9.18
5·4i
7-5
12-75
7-32
4.44
8. 78
7-85
12.46
100.00
(*) These percentages used in calculating the pro ra.ta. share of lea.sed wire expense as sho~ on the
acco11panying sta.tement (X-4697-b)
(1) Number of words sent by New York to other F. R. Banks for their sole benefit charged to banks indicated,
in accordance with action taken at Governors 1 Conference November 2 - 4, 1925.
REPORT OF EXPENSE V:AIN
X-4697-b
LmE
FEDERAL RESERVE LEASED WIRE SYSTEM, .S'il?TT:~IBF.R, 1926.
l\T-ame of Bank
Operators'
Sa.lari;;;s
$ 260.00
1,076.16
216.66
284.50
213.00
255·00
(fl-)3,947.16
200.00
Y.innaapo lis
183·34
Kansa..s City
275.64
Dallas
251.00
San Francisco
370.00
Faderal Reserve Board
Boston
Eew York
Philadelphia
C:!.avelend
Eichmond
AtlAnta
Chicago
St. Louis
Total
$7.532.46
Operators'
Ov~rtime
Wire
Rental
.
$ 1.00
$
Total
Expenses
$
261.00
1,076.16
216.66
284.50
213.00
255-00
3,947.16
20C.OO
183-34
275.64
251.00
370.00
15,348.75
$ 1.00
Pro Rata
Share of
Total
Expense
$22,882.21
(a} 2a251.6Z
$20,JJ0.54
Credits
756.30 $ 261.00
3,271.18 1,076.16
216.66
898.61
1,366.J4
284.50
213.00
1,103-95
1,536.99
255-00
2,592.14 3,947.16
l,Lj.88.20
200.00
902.68
l8J.J4
11785.02
275-64
251.00
1,595·95
370.00
2,533·18
.15,3~·75
$15,}48.75
$
$ 20,330-54 $7,533·46
{&) Includes $204.67 for branch line business tra.nemittad over Il.l8.in line circuit.
(#) Includes sa.laries of WAshington operators.
(*) Credit
(a.) Received $2,551.67 from Treasury Department covering business for the month of September, 1926.
{b) Amcunt reimbursable to CDicago.
Payable to
Federal
Reserve
Board
$
495· 30
2,195-02
681.9a
1,581.8
(&) 1,095.62
1 ,281. 99
(*) 1,355.02
1, 288.20
719.34
1,509·38
1,344. 95
2,163.18
X-4698
FEDERAL RESERVE BOARD
2L15
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
October 18, 1926.
Holidays during NOJvember, 1926.
Dear Sir:
On Monday, November 1st, the New Orleans :Branch of the Federal Reserve :Bank of Atlanta will be closed in observance of All Saints' Day.
Please include your credits of November 1st for the New Orleans :Branch in
the Gold Fund Clearing of November 3rd.
On Tuesday, November 2nd, (Election Day); Thursday, November
11th, (Armistice Day), and Thursday, November 25th, (Thanksgiving Day),
there will be no Gold Settlement Fund or Federal Reserve Note Clearing,
and the books of the :Board's Gold Settlement Division will be closed.
For your information, the offices of the ]l~ederal Reserve :Board
and the following banks and branches will be open for business on the dates
specified:
November 2nd
November 11th
:Boston
:Boston
Cleveland
Cincinnati
(1/2 day)
(1/2 day)
Atlanta
New Orleans
Birmingharn
Jacksonville
Little Rock
Louisville
New York
:Buffalo
Cleveland
Cincinnati
Atlanta
Detroit
Omaha
Salt Lake City.
Very truly yours,
J. C. Noell,
Assistant Secretary.
To Governors
of all F.R.Eanks.
X-4700
0 0 p y
24.6
!N IF.tiE DIST1'q:CT COURT OF OOUGLAS CDUNTY, NEBRASKA.
William Whittingham,
Plajntiff
)
)
)
)
vs.
Federal Reserve Bank of
Kansas City, Mo., a corporation,
)
)
O?BTION OF THE C)URT.
)
)
)
)
Plaintiff brings this suit nt law against the defendant to recover
from the defendant the amount of a certain cashier's check issued by the
Wyoming State 'Ban'k of I1usk, Wyo., made payable to the plaintiff herein, a
resident of the City of Village of Pardeeville, Wisconsin, on the ground that
as the agent of the plaintiff for the collectio:n of said check the defendant vic:<
lated its rluty and was grossly negligent in its proceedings to collect said
check, resulting in its failure to collect.
Insofar as it is necessary here to relate plaintiff in his amended
petition alleges that on or about
--- date
of Febru...<U'y 1923, he callsed to
be pla.ced with the defendant for the purpose of immediate collection and payment in legal··tender money of the United States, the cashier's check referred
to, same being for $1220.40 ~~d plaintiff alleges that he did so by depositing said check in the Pardeeville State Bank of Wisconsin for collection on
February 17, 1923, which bank immediat0ly forwardod same to the First WiGconsin
,
.
National Bank of Milwaukee for collection, the latter bank 1n turn forwarding
same to this defendant; that the defondant negligently mailed said check, with
other items, direct to the Wyoming State 3rulk at Lusk, which issued said check
and negligently accepted in payment therefor the Lusk Bank's draft on the
Digitized for First National
FRASER
Bank of Cheyenne, Wyoming, and thereupon the Lusk Bank stamped
- 2 -
its cashier's check paid; that c.. t tho time of the presentation of said cas:1ier 1 ~;
check to the Lusk Bank for :9ayment, and at the tirJ.e plaintiff accepted its
worthless draft in payment therefor, said Lusk Bank had in its possession sufficient legal tender
~oney
"
to pay sai4 cashier's check in full; that very soon
after defendant's receipt of the Lusk
.~ank
draft aforesaid, said Lusk bank
failed. and a receiver therefor was ap";)ointed, whereupon defendant filed. with
the receiver it's claim Qlld proof of ownership of said draft.
That by
reason of the foregoing facts the defendant becar.ne and is liable to the plaintiff for the amount of plaintiff's cashier's check, placed in defendru1t•s
hands for collection, and for which he prays judgment, with interest and costs.
To this petition the defendant filed it's answer in which it
alleges that on 6r about February
--- ,
1923, it received for collection
from the 1st Wiocbnsin Uat '1 BEmk of lf.ilwaukec for the account and credit of
the :B,edernl Reserve Bank of Chicago, of which the Milwaukee bank was nnd is
a member, the cashier's check refer1·ed to in plaintiff's petition, in the sum
I
,
'
of $1220.40, which the plaintiff had endorsed and depOclited in the Pardeeville
State Bank of Pardeeville, Wise.,
w~1ich
bMk had forwarded said chock to the
said 1st Wisconsin Nat' 1 Bank of Milwaukee; that defendc.n t in due course of
business and without any negligence, but in the exercise of due diligence and
with lawful right and authority so to do, promptly forwarded said check to
said Wyoming Sta.tc Bank of Lusk for payment, and thereupon received from said
bank it's draft in the amount of said check which dre..ft, however, was dishonored, and not pn.id because of the failure and closing of said Lusk bank,
whereupon defendant charged back to the nccount of the Federal Reserve
Chicago the amount of eaid
dan~
cr~ock,
D..s it had a right to do.
Ther~upon
~nnk
of
dofen-
pleads regulations J-series of 1920 promulgated by the Federal acsorvc
Board, and also Bulletin #184, issued by said Federal Reserve Bank 'of Chicago,
under date of December 7, 1922, as contained in a general letter
kno'~
as
- 3 General Letter
D~l,
undet
da~~
'•
of january 15, 1923, likewise a general letter
of authority by said Chicago bank to defendant under date of Nov. 16, 1922,
and alleges that it was
operat~ng
under and in pursuance of the same, and that
it received and handled the check in question in conformance to said rules and
regulations, and the statutes of, the United States pertaining to the subjectj
that the 1st Wisconsin Nat'l Ba.TJ.k from which defendant received said check was
and is a member bank of the Chicago Federal Reserve District and had full
lmowledge and notice of all of the rules and regulations under which defendant
as a Federal 2eserve
Ban~
Oj_)erated and was required to 01)era-te in the handling
of said check; that defendant believed said 1st Wisconsin Nat 1 1 Bank was the
owner. of said check and entitled to the proceeds thereof and dealt with said
•
bank accordingly and that prior to the filing of plaintiff! s petition in this
case, the defendant had no knowledge
or notice of any alleged right or claim
of plaintiff in or to said check or tho proceeds thereof, or of any connection between plaintiff and the Pardeeville bank or between plaintiff or
the Pardeeville Bank a.,.""ld the lst Wisconsin Nat' 1 Bank of Milwaukee.
Defendant admits that for the benefit of the said Milwaukee bru1k,
w::1ich w:C1ich it dealt as the presumed oVvner of said cashier's check, it filed
proof of claim for the amount of said check with the receiver of tho insolvent
bank at Lusk and that it did so with the consent and authority of said Milwaukee
bank.
~nat
said claim was allowed and that since the allowance thereof de-
fendant has received two dividends thereon which it promptly transmitted to
the
~aid
Milwaukee bank, w:1ic:1 were recci ved nnd accepted by said bank with-
out objection.
Defendant further plcc:1.dS a gcn.eral and uniform custom of long and
continuous standing prevailing among all banks and b[.U.""lkers in the United
,
States, including those of Illi!l.ois, Wisconsin,
Nebras~m
and '\":yoming, for
banks having checks, drafts a..YJ.d other like paper for collection to send said
http://fraser.stlouisfed.org/
instruments direct
Federal Reserve Bank of St. Louis
to the bank af issue for collection, and to receive and
X-4700
- 4-
249
accept in payment therefor, said bank's draft instead of requiring said bank
to remit by actual cash, and that in the instant transaction, defendant simply
followed the universal custom in it's effort to collect the cashier's check
in question,
.
Defendant further allegef:l that i t appears from the face of the
amended petition that plaintiff has not the legal capacity to maintain this
action, and further satd an1(mded petition doea not state facts sufficient to
constitute a cause of action in favor of plaintiff and
~gainst
this defendant.
From the evidence in the case, the most, if not all of which is
expressly admitted in the record or stands undisputed, it appears that some
time about the early part of February, 1923, the plaintiff was the owner of a
note a;rtd mortgage which had become due and tho mortgagee, rosi<ling at or near
Lusk, Wyoming, had indicated his readiness to pay same, whereupon plaintiff
h~ds
placed the same in tho
to forward and collect.
of the Pardeeville Bank, in which he did business,
In due time and on or about
F~bruary
17, 1923, the
Pardeeville Bank received remittance of the amount of said notB and mortgage
in the form of a cashiert s check of the Wyoming State Bank at J:,usk, Wyo, for
. the sum of $1220.40, payable to the plain tiff; on or fll;ou t the aame. day plaintiff endorsed said cashier's check in blank and gave it to the Pardeeville
bank, which in return
therofo~ g~vo
plaintiff $20.40 in cash
ru1d
a regular
negotiable certificate of deposit on it's own bank for the balance of $1200.00
and plaintiff says that is all he knows about it and
t~t
he never saw or
heard anything of tho cashier's check after that,
It further appearo that the Pardeeville Bnnk received the cashier's
check endorsed by plain tiff, duly endorsed saruo i tsolf
it-ts
corre~pondont
&id
forwarded it to
the First 11'iiscon_sin Natfl Bank of Milwaukee, taking credit
for the same 1 tself and charging same to tho r::ilwaukee bank,
The Milwaukee
·oank receiving said check gave the Pardeeville Bank duo credit for same, enDigitized fordorsad the same
FRASER
itself and forwarded
ch~ck
to the defendant herein, thru the
X-4700
2~)0
Federal Reserve Bank of Chicago, w~ich defendant bank in turn endorsed the
check ro1d promptly forwa=ded same direct to the bank of issue, The Wyoming
State Bank at Lusk, Wyo. for payment.
That bank upon receipt of it's cashier's
check, stamped the same paid and in payment therefor issued and sent to defendant it's own draft upon it's correspondent, the First Nat 1 1 Bank of Cheyenne,
Wyo.
That at the time of the presentation of said cashier's checL to the Lusk
bank for payment and defendru1t 1 s acceptance of a draft in·payment therefor instead of cash, said Lusk bank had in it's possession available for the payment
of said check more than su1'ficient sum of legal tender money to pay said check.
That defendant having received said draft as aforesaid, promptly forwarded the
same to the First Nat'l Bank of Cheyenne, Wyo., the drawee, for payment, but
before said draft could be presented for payment, the tusk bank had closed itts
doors and the State Bank Controller for the State of Wyoming had taken possession.
Said draft was duly protested for nonpayment and returned to the defendant.
Upon defenda.."'lt receiving the return of the unpaid draft it notified
the Milwaukee Bank of that fact and that it had charged back against said
bank the amount of the cashier's check and the Milwaukee bank in turn charged
back said item to the Pardeeville bank and notified said bank accordingly,
whereupon it seems that an officer of said Pardeeville bank went to the plaintiff
herein and procured from him a surrender of the certificate of deposit that said
bank had theretofore issued to him and cancelled the
s~e
by stamping it paid.
Full and satisfactory proof has bem1 made of the existence and
operation of all of the rules, regulations and other like matters pleaded in
defendant's answer, includ.ing the prevailbg universal custom among all banks
and bankers of the United States for the bank having conunercial or bank papers
for collection against a distant bank, to m~m·d :~uch. pe~~r di1.1{;c:t ..to the bank
.·. .
. .......
of issue and to receive said banks draft in payment therefor, and that this
custom was well known and understood by all the parties handling
cashie~'s
•
- 6 -
check in this case (including tho
self.
To him it was perhaps not
Pu~deevllle
bank) excent the plaintiff him-
~1own.
It is in evidence that the defendant retained the dishonored draft
for the purpose of filing the same for allowance with the receiver for the
insolvent bank and that it did so by and with the consent of the Milwaukee
bank; that :.mid claim was filed, proof made, and judgment rendered therefor
in the name of the defendant as a general creditor.
•
Since said allowance two
5% dividends thereon have been paid to defendant, amounting to something less
than $125.00, which was duly remitted by defendant to the Milwaukee bank and
by it credited to the Pardeeville bank.
Therefore, under the allegations of his
~~ended
petition and the proof
in support thereof, the plaintiff claims the defendant is liable upon any one
or more of the following grounds:
1.
Because defendant as plaintiff's agent for the collection of said cashier's
check was negligent nnd violated it's duty in sending said check direct. to
the bank that issued it ru1d in accepting in p~ent therefor· said banks
draft instead of cash.
2.
Because defendant filed it's claim as a general creditor with the receiver
of the insolvent ba.l1k instead of a preferred creditor claiming the right
to the money received by said bank in payment of plaintiff's note and
mortgage as a separate or segregated fund for the use and benefit of
plaintiff.
3.
Because the defend~1t in filing a claim for payment of it's draft representing the proceeds of plaintiff's cashial''s chec'k. in· itts own name,
making proof thereof accordingly and obtaining a jud@nent therefor in H' s
own name, thereby became the absolute debtor of plaintiff for the amount
of his cashier's check.
I have thus set forth an abstract of the pleadings and evidence in
the case at the length I have more for the benefit of those who might wish to
have an outline of it's history than because the same is necessary for the
pronouncement of a decision.
For, as I view the case and the
transact~on
in-
valved, I am firmly of the opinion that it falls clearly within the cantralling principles announced in the very recent case of CITY OF DOUGLAS vs FEDERAL
RES;ERVE :BANK OF DALLAS, decided by the Supreme Court of the United States on
X-4700
- 7 June lst of the present year,
and..~e:pcirtt\ld
as also the decisions of our own
Su~reme
.
2£)2
in 46 Sup.Ct.Rep. at page 554;
Court in the case of National Bank of
Commerce vs Bossemyer, 101 Nebr. 96, and other cases cited in the City of
Douglas case, supra.
From the opinion tn the case last referred to, it appears that the
County of Cochise, Ariz., drew it's check on the Central Bank of Wilcox, .Ariz.
in favor of plaintiff, the City of Douglas,which endorsed it in blank to the
First Nat 1 1 Bro1k of Douglas, Ariz., and that bank credited the amount of said
check to the account and in the pass book of plaintiff, on the face of which
pass book was printed: "All out of town items credited subject to final paymen t".
The Douglas bank endorsed the check: "Pay to the order of the El Paso
Branch, Federal Reserve Bank of Dallas," the defendant herein and forwarded
it to that bank for collection.
The defendant bank in due time forwarded the
cheqk to the drawer bank at Wilcox.
The latter bank debited the drawer's
account with the amount of the check, s·ta.nwed. it paid, and returned i t to the
drawer and transmitted to the defendant, in lieu of cash, it 1 s own check upon
the Central Bank of Phoenix, in an a110unt covering this and other items.
Be-
fore this check could be presented for payment both the Wilcox Bank and the
Pho~nix
Bank failed, and said check was dishoFored.
Douglas receiving no proceeds of the check,
the account of plaintiff.
c~~rged
The First Nat 1 1 Bank of
back the amount of it to
Thereupon plaintiff brought suit in the Federal
District Court against the defendant Federal Reserve B9nk of Dallas to recover
the amount of the check on the ground that defendant was negligent in accepting
'the check of the Wilcox Bank in payment instead of cash.
The case was tried without a jury, resulting in a judgment for
defendant, which was later affirmed by the Circuit Court of Appeals, and still
later reaffirmed by the Supreme Court of the United States in it's opinion
just referred to and in which it a?pears that plaintiff assigned as error the
http://fraser.stlouisfed.org/ of the
holding
Federal Reserve Bank of St. Louis
Circuit Court of Appeals "that defendant was not in sucll rela-
- 8 -
25:3
X-470LJ
tionship with plaintiff as to permit ?laintiff to recover for defendants
negligence."
Mr. Justice Stone, in writing the opinion in the case, after stating
the facts substantially as above recited, refers to what is known aS the "New
York rule", in respect to the liability of a bank having commercial paper for
collection and what the courts have held thereunder; also to what is known as
the "Massachusetts rule" in respect to the same subject matter, and what the
courts have held under that rule; also to the particular theory advanced by
the plaintiff on which it claims the right to recover, and that advanced by
the
defenda~t
on which it claims plaintiff cannot recover, and then says:
"It is not necessary to decide a..Dy of these questions here, for
when paper is endorsed without restrictions by the depositor, and is at once
passed to his credit by tho bank to which he delivered it, he becomes the
creditor of the bank; the bru1k becomes the owner of the paper and in mal{ing
the collection is not the agent for the depositor," (citing numerous cases.)
11 Such was the relation here between the plaintiff and the Douglas
bank, unless it was altered by the words printed on the passbook to the
effect that out of town iteri1s \7ere credited 11 subject to final payment 11 • The
meaning of this language, as tl1e cas~1ier of the Douglas bank testified, and
as the court below held, was that if the check was not paid on presentation,
it was to be charged back to plaintiff's acco~~t. The check was paid, ~"d
the drawer and indorsers discharged." (citing nur.aerous ca:Jes.)
11 Wi thout these words, the relationship betweon the plaintiff and
the bank was that of indorser and indorsee; and their usc here did not vary
the legal rights ax1d liabilities incident to that relationship, unless it dispensed with notice of dishonor to the depositor. 11
and thare is no evidence of that, either in that cnse or the case at bar.
While there is not entire ~•iformi ty of opinion, the weight of
authority supports the view that upon tho deposit of paper unrestrictedly indorsed, and credit of the amount to the depositor's acco~~t, the bank becomes
the om1er of the paper, notwithstanding a custom or agreement to charge the
paper back to the depositor in the event of dishonor 11 , (citing numerous cases,
including that of National Bank of Commerce vs. Bossmyer, 101 Neb. 96.)
11
"Plain tiff having thus surrendered it 1 s rig.."l ts in the paper, only
rights arising out of its contract with the initial bank remained. If those
rights were affected by the act or o:llission of defendant, they were affected
only because that contract so stipulated. Defendant's duties arose out of
its contract with the ini tial.;bank, or out of its relation to that bank as
owner of the paper.
Hence there was no relationship between plaintiff and
defendant which could be made the basis of recovery for defendant's want of
http://fraser.stlouisfed.org/
diligence. 11
Federal Reserve Bank of St. Louis
X-4700
- 9 -
2f)4
This case, it seems to me, covers in all substaptial respects the
tra."lsaction in the ca.se at bar, except that in the case at bar which occurred
between plaintiff and the initial bank at the very inception of the transaction
offers a much stronger reason for the application of the rule announced than
in the ordinary case.
The evidence in the case at bar is that plaintiff,
having possession of the cashier's check, endorsed the same in blank without
any restrictive terms or conditions whatsoever, and gave it to the Pardeeville
bank, which in return therefor gave to plaintiff $20.40 in cash and a regular
negotiable certificate of deposit on its own bank for, $1200.00, without any
qualifications or conditions whatever attached thereto.
In my opinion, that
constituted a complete purchase and sale of the cashier's check.
The bank
thereby became the absolute owner of the check and the plaintiff the absolute
owner of the cash and the certificate
of deposit, each to do with their re-
spective instruments whatsoever they liked.
But it is said that it is in evidence that the cashier's check was
given to and accepted by the bank of Pardeeville for collection.
It is my
candid opinion that no such idea was ever O}.":pressed or thought of by either
plaintiff or the bank at the time the instruments wer·e exchanged, but that that
theory is a"l after-thought suggested by the bank after it discovered the failure
to collect the proceeds of the cashier's check and in the attempt to have that
theory prevail persuaded the aged plaintiff to surrender his certificate of
deposit back to the bank.
The theory now
adv~1ced
serves as a most striking illustration of
the truth of the old proverb that actions
spea~
louder than words; ro1d that
the character of the endorsement of the check by plaintiff to the bank, and
his receiving therefor from the bank part cash and a negotiable certificate
of deposit for the
bal~ce,
constitutes a transaction between the parties en-
tirely inconsistent with the theory of a bailment for collection.
it would seem
Besides,
that such an oral agreement between plaintiff and the initial
- 10 -
X-4700
2f)5
bnnk, particularly if unJrnov::1 to the dofend,•.:tJJ.t; would not alter in any vmy the
legal effect of plaintiff t s unrestricted endorsement.
t!'hat much, apparently 1
is either expressod or plainly inferred from the most, if not all; of the decided. cases.
T:.1e same view as announced in the case of City of Douglas, supra,
seems to have been expressed by our own Supreme Court in the National 2ank
of Commerce vs. Bossmyer, 101 Nebr. 96, above referred to.
In that case,
the court said:
11 While th8re is some conflic.t in the authorities, the better view
is that the deposit of a check or draft in a bank with a general enaorsement,
nnd the giving of credit for its amofult by the bmk to the depositor, in the
absence of other evidence as to the intention -of the parties passes the title
to the bank and makes it a holder for value, entitled to recourse on prior
endorsements upon the protest of the paper. In other words when such a state
of facts ie proven, there is a 12rima faci~ case made that the title has passed,
and the fact that it, the receiving bank, may charge back the protested draft
does not affect the relation.
In Higgins vs. Hayden, 53 Neb. 61, before the
enactment of the Neg.otiable Instruments Act, it was held that a bill of exchange dravm to the ::>rder of a ba.."lk b;/ its customer, the arnoun t of which was
placed to his credit, and on which tho customer drew and the bank paid checks,
becrune the property of the ba.."l.k, such conduct being inconsistent with the
theory of a bailment for collection."
It may be proper here to note that
11
other evidence" as to the in ten-
tion of the parties in transferring the paper, appearing in the above quotation,
means .:>ther written words as part of, or connected with, the indorsement itself
appearing on the face of the instrument, tending to alter or modify the otherwise unrestricted endorsement.
This much clearly appears from other parts of
the same opinion as well as from other decided cases.
Plaintiff, in support of his action herein, seems to rely strongly
upon the case of Malloy vs. Federal Reserve Ba.:."lk of Richmond, 264 U. S. 160.
There would seem to be at least two important distinctions between the case referred to and the case at bar.
The first is, that it nowhere
a~pears
in the
Malloy case, supra, that the endorsement of the paper by the depositor with the
initial bank was an unrestricted endorsement, or that anyone connected with the
transaction claimed that it was such.
About the only indication we are afford-
- 11 -
x~7400
2~:~6
ed as to the character of the endorsem!:ltlt is the following statement taken from
the opinion of the court in its statement of the facts in the case.
It wa.s properly endorsed a:::1d de:posi te.d with the Perry :Banking Company of Perry, Fla. ,for collection and credit , 11
11
The 2nd distinction is, as was said by Justice Stone in the City of
Douglas case, supra, in stating the distinction betweer. that case and the Malloy
case, - that in the Malloy case
11
a local statute relieved the bank receiving
:paper for collection from any liability except that
of
due care in selecting a
sub-agent for collection and in transmitting the paper to it, and it was held
that the owner of the paper might proceed against the sub-agent
failure to collect the paper 11 •
legal
~ffect
f~r
negligent
The question of unrestricted endorsement or the
thereof did not arise in the case:
The plaintiff has not sought either to plead or prove a li1re:
lo~al
statute of t'!isconsin, and, so far as the court is aware, none exists.
J3ecaus.e of the legal
~feet
of plaintiff's unrestricted. endorsement
in the case at bar, he has never been able to 1·each that point or situation in
the case where the alleged negligence of the defendant could be considered as
was done in the Malloy case.
It may be proper to observe that the City of Douglas case, decided
on June lst of the present year, met with the approval of the entire bench of
that court, including, of course, Justice Sutherland, who wrote the opinion in
the Malloy case.
I arn of the opinion that plaintiff has shown no relationship between
himself ru1d the defendru!t herein which could be made the basis of recovery for
defendant's alleged want of diligence.
~~d
that if plaintiff has a cause of
action at all arising from the transaction in question, as probably he has,
it is against the Pardeeville brulk for tho restoration of his certificate of
deposit.
Plaintiffs action will be dismissed and judgment for
(SGD)
A.
c.
TROUP,
defend~~t
Judge.
for costs.
X-4 701
•
F E D" F A L RE S F RV E B 0 ARD
257
STATFMENT FOR THE PRESS
For relea.se in Morning Pa.pers,
Thursday, October 2oth, B26o
The following is a summary of general business and
financ ia.l conditions throughout the severa.l Federal
Reserve Districts, b8.sed upon stA.tistics for the
months of S.::pt~mber and October, as ccnta.ined in the
forthcoming issue of the Federal Reserve Bulletin.
Industrial and trade sctivity increa.sed in Septemb&r and is a.t present in·
considerably larger volume than in mid-sumn:er.
The price of cotton has declined
3ha.rply wit'1in recent weeks while prices ofmost groups of commodities hA.ve a.dvanced. Volume of ba.nk credit has increased seasonB.lly, and mcney rates have remained firm.
Production
Production in basic industries and fA.ctory employment and pa.y rolls, according to the Federa.l Reserve Board 1 s indexes, after changing but little for a.bout
four months, advanced in September to the nighest point::; .since la.cit spring.
The
•
increA.se has been pa.rticula.rly large in textile mill activity, C_nsumption of coti::~
ton has increa.sed considera.bly, woolen mill a.c tivi ty
th.:: 1A.r6est since JAnugry,
and employment ha.s increased in nearly F.J.ll branches of the textile industry.
Iron
and steel production was maintained from ea.rly in August until the l8.tter part of
October at a level higher thAn for the corresponding period of previous yea.rs ..
•
•
Automobile output wa.s reduced in September uu t continued la.rger than a. yeAr ago.
Mining of coa.l has. steadily increased since mid-summer, Fmd the weekly run of crude
petroleum from wells in Octooer reA.chdd the highest level since June of la.st year.
Building contracts awA.rded during August A.nd SeptGrnber were only slightly SI!18.ller
in value than the awArds for the corresponding period of la.st year and in the first
half of October far exceeded those of a. year ago.
A ::.ubsta.o.tia.l decline in con-
tr.s.cts for residential structures has been lart:;ely offset by increAses in a.warja
X-4701
- 2-
~r-.~
for industriA.1 and
engineerin~
projac ts.
The DepP-.rtmen t of Agricu1 ture saOCtober 18
,sti!T.I9.te placed Cotton production A.t 17,454,000 bales, an increa.se of e.bout three'Y_uarters of
FJ.
million ovar the estim<l-te !M.de on the first of the m:mth and of
1,350,000 bales more thAn la.st yea.r's crop .•
Trade
Wholesale and reta.il trade incre."l.Sad in Septerr:ber and WR.s sligntly la.rger
than la.st yeA.r.
Invantories of DBpartment stores incr<:>F!.sad slig:&tly more than is
.
usual in September, and a.t th<.> end of the mo.;th were in A.bcut the sAme volume as a.
year a.go.
Railr'C>."J.d freight CR.r loadings rea.chad ne>•v nigh weekly records in Septem-
oer, and shipments were ma.i.i.lta.inedtdlfring the eA.rly w.aeks of October in much lA.re:;er
volume thAn in previous yeR.rs.
A grea.t pA.rt of the increa.se a.s corrpared with last
yea.r is due to shipments of coal A.nJ ore, but loadings of manufactured comrnodi tiea
Prices
The general level of wholeSF.tle prices a.dva.nced slightly in September and
October, notwithstanding the drop in tha price of cotton to tile lowest level since
1921.
The BureFJ:u of Labor Statistics index of wholesale pricas was about one per
cant higher in September than in .August, reflecting FJ.dvances beth in a.gricultural
and in non-agricultural commodities.
In recent weeks prices of corn, nonferrous
meta.ls, And pAper have declined, while prices of livestock, meats, poultry And
dairy products, anj bituminous coal have incre:=::.sed.
Bank Credit
Between September 22 and October 20 the seasonal increase in the demand
•
for cradi t for a.gricul turAl
AnJ.
commercial purposes
WR.S
.
reflected in a. continued
growth in the commercia.l loAns of member banks in lea.ding cities.
Loans on
securities and holdings of i.nvestments d0clined, but the b1mk 1 s total loans and
investments were a.bout $60,000,000 larger on Octobe'r 20 thAn four waeks·ea.rlier.
259
- - )
X-4(~1
At the reserve banks, the volum3 of member bank borrowing, B.ft:;r considerBble flue tua.tions 1in response to tempor::Jry conditions, was in October at
about the sa.me l':l.Verage level as in September.
There WB.S little change in the
bhnks 1 holdings of United Statas securities, while e.cceptrmce holdings ccn tinued
••
to increAsa, as is usual B.t this ses.son.
Except for
B.
teri4Jora.ry firming a.round the first of October, there nas been
little change in the condition of thd money market.
Ra.tes on commercial pa.per
ai.ld on acceptances nave remained at the levels established in September.
260
X-4703
FEDERAL RESERVE BOARD
STATEMENT FOR THF PRESS
For imnediate r.:-l:39.se
•
CONDITION OF ACCEPTANCE MARKET
September 16, 1926 to October 20, 1926.
Acceptances:
•
During the period from September 16 to October 20 t!.tere was a substan-
tial increase in the supply of bills coming into the a.ccepta.nce ma.rket, the
majority of therr, based on transactions in cotton.
Bills dravvn to finance the
importa.tion of silk and sugar and the exportation of grain and copper also appeared in considerable volume.
A good out of tovvn derr.9nd was reported from New
york and a good local demand from Boston, and the volume of dealers 1 sales, aside
·from the sales· to Federal reserve banks, wa.s larger than for any corresponding
reporting period since June.
Nevertheless the supply was in excess o:t:
de-
mand and in spite of fairly hea.vy offerings to the reserve banks, dealers 1 port:...
folios were larger at the end than a.t the beginning of the period.
occurred in rates W.Ji'ch were quoted as follows on October 20:
A-.:ceptance Rates in the New York Market, October 20, 1926
Maturity
Bid
Offered
30
6o
3 3/4
3 5/8
3 3/4
3 7/3
da.ys
11
3 7/8'
90
11
4
120
II
150
11
180
11
4 1/3
4 1/4
4 1/4
'
4
4 1/8
4 1/8
No changes
FEDERAL RESERVE BOARD
WASHINGTON
_ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
October 26, 1926
Cotton Seed Oil as an Agricultural Product.
Dear Sir:
The Federal Reserve Board has recently been requested to
rule -~pan the question '.7hcthor crude cotton seed oil is a "nonperishable, readily marketable staple agricultural product11 within the
meaning of the third paragraph of Section 13 which authorizes Federal reserve banks to discount or purchase sir,ht drafts drawn to fino.<"lcc the dooestic shipro:1ent of nonperishable, readily rno.rketable
staple agricultural products•
After careful consideration of this question, the Board
is of the opinion that cotton seed oil is essentially a product of
ra.anufacture and cannot properly be deemed an agricultural product
within the meaning of the third paragraph of Section 13.
Under date of }&lrch 19, 1926, the Federal Reserve Board
addressed a letter to all Federal reserve batiks (X-4564) wherein
it ruled that flour and bran are essentially products of nu4~ufac
ture and cannot properly be considered aGricultural products within the meaning of the above r:1cntioned provision of Section 13.
This ruling was based upon a decisio~ of the Supreme Court of Knnsas in the case of Getty v. C. R. Barnes Milling Co., 19 Pac. 617,
wherein it was s~arely held that flour is not an agricultural product.
Cotton seed oil is a product of some three or four steps
of nanufacture whicll are n.nalogous to the steps involved in the
production of flour and bran froo wheat and tho Board feels that
the saoe rule must necessarily apply to cotton seed oil as to flour
and bra.n.
Very truly yours,
D. R. Crissinger,
Governor.
TO
http://fraser.stlouisfed.org/ ALL
Federal Reserve Bank of St. Louis
GOVERNORS.
-·-~--
__ ,.
FEDERAL RESERVE BOARD
WASHINGTON
October 27, 1926.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Deductions in computing reserves of member banks.
Dear Sir:
One of the Federal reserve banks recently addressed an inquiry
to the Board raising the question whether a forwarding member bank in computing its reserves may pro~etly treat as amounts due from banks credits
actually entered by correspondent banks, representing such items as coupons,
checks drawn on themselves by corporations other than banks, bill of lading
drafts, etc., which items have not yet actuall~l been collected by the correspondent banks. It a,pears that it is not a~ uncom~on practice for a correspondent bank to give credit to a forwarding bank i~~ediately upon receipt of
items of this kind, adjusting the difference between the date of credit and
date of collection by interest charges or by analysis deductions for float.·
The Board has heretofore ruled that bonds, coupons and bill of
lading drafts forwarded for collection may not be deducted as items due from
banks until such items have actually been collected and the proceeds have been
credited to the account of the forwarding bank. In these rulings, however, the
Board was considering the case where items are forwarded for collection, and
credit is not given by the correspondent bank until the items have been collected. Under the facta of the instant 'case, the correspondent bank gives
credit to the forwarding bank i~~ediately upon-receipt of the items, regardless of the fact that these items have not yet been collected. The two
cases are thus fundamentally different. If immediate credit is given by a
correspondent bank, reserving only the right to charge back the items in case
of nonpayment, the correspondent bank at once becomes indebted to the forwarding bank in the amoa~t of the items and the forwarding bank is entitled to
draw against the credit so made as soon as the items are received by the
correspondent bank.
. In the Boardis opinion when credit has actually been entered by
a correspondent bank on an i tom forwarded to it -oy a member bank and the member bank is irn.~ediately entitled to draw against the crcdi t so entered, the
amount.of this credit may properly be considered an amo1mt due from ba~ks
and deducted by the member bank in computing its reserve from its bala.aces
due to banks, notwithstanding t~e fact that the correspondent bank has not
yet actually collected the item.
By order of the Federal Reserve Board.
Walter L. Eddy,
Secretary.
To Governors of all F.R.Banks.
( C.JFY)
X-4706
. .
:F:tDERAL
RESERVE
:BANK
OF NEW YORK
September 22, 1926.
Walter
Esq., General Counsel,
Federal Reserve Board,
Washington, D.C.
~yatt,
Dear Mr. Wyatt:
I beg to acknowlodg3 the receipt of your letter of September 17,
with the enclosed copy of opinion of the United States District Court for
the District of Nebraska in the case of War Finance Corporation v. Duff.
I have read the opinion of the Court with much interest.
to me that in a like case a reserve bank rediscounting
p~per
It occurs
for one of its
members might conceivably find itself subject to the same inference of agency.
I have thought of means which might be adopted to prevent any inference that
a member bank receiving payment on account of a note in like circumstances, received such payment as the agent of the reserve bank, if, after more mature consideration, it should be deemed advisable or naccr1sary to take action in this
regard.
The practice of making such payments in this cistrict, I am informed,
is very rare indeed - so much so that the question is thought by some of our
operating men to be of
~
great practical importance.
Moreover, the present
strong position of mem~er banks in this district minimizes the necessity of
adopting such mcasill'es.
may
It has occurred to me. however, that the situation
be very different in some of tho other Q.istricts, and I should like very
much indeed to be advised ;;f what action has been taken, if any, by other reserve banks.
It seems to me the principle is the same in all districts and
that the case might be a good one for uniform
treatmen~.
Very truly yours,
(signed) L. R. Mason
L. :a. Mason,
General Counsel.
264
(COPY)
FEDERAL RESERVE BANK
OF SAN F.RA..~CIS CO.
X-4706-a
September 22, 1926
Walter Wyatt, Esq.,
General Counsel, ·
Feder~l Reserve Board,
'fashirt.gton, D. c.
Dear Mr. Wyatt:
~ thank you for your letter of September 17, 1926, transmitting copy of
the d~cision of the District Court of the United States for the District pf
N'ebraQka in the case of War Finance Corporation v. Duff. The same. qu.estion as
that presented in this case has arisen several times in ~ experience hero.
We have not suffered any considerable losses by reason of collections
made qn paper held by this bank under rediscount and which collections we~e
not rQmitted by the member bank prior to its failure, and I have not, tho~e
fore, had an occasion to present the q1ostion to the court of last resort in
any of tho states comprised in this district. I did, however, try tho mattor ov.t on a small item in tho courts of Utah and in that case it was dotermined by the court that the member bank, in .effecting the collection, acted
as o~ agent and the maker of the paper co.uld not be required to duplicate
the p~ymont. I feel, however, that when the maker of a. note ~s something
on account and fails to see that the payment is indorsed on the note, or
pays ~he obligation entirely and fails to requ.ire the surrender of the note,
marke~ cancelled, such acts constitute negligence on the part of the maker
which should prevent him from successfully maintaining that the bank to ·
which the payment is made is the t:igent of a discounting agency in whose possession the note is retained.
For some years I have urged upon the officers of this ba.nk the advisability of recording assignments of chattel mortgages in those cases where we
discount paper so secured. Our practice at the present time is to take an
assignment of the mortgage but to hold it unrecorded as lor..g as the member
bank from which we received it is going insti~tion. Of course in cases
of this kind, the record shows that the member bank is the owner of the mort•
gaga '\'lithout ass:lgnmtmt and in such casos the mortgagor might be warranted
in paying the mortgage debt to the discounting bank, resting upon the assurance of the record. The officers of this bank feel, however, that the expense, time, and trouble c0nnected with recording assignments of chattel
mortgages, coupled with the possible embarrassment to the member bank by reason of record notice that the mortgagor~s paper has been discounted, make it
inadvisable to recorti su(:h nssignments. Perhaps it is tru.e that the practical consideration3 outweigh tho ~iek ~ntailed in leaving the assignments unrecorded.
a
Yours very truly,
c.
(Signed) Albe~t
Agnew;
Counsel.
265
FEDERAL
LAW DEP.ARTl.IEN'T
422-430 Healey :Bldg.
!\..:\i.!:!Xl'I2S
RESERVE
:BANK
X-4706-'b
OF ATLAI.1TA
& P.;\.'a:CER
General Counsel.
September 28, 1926.
Mr. Walter Wyatt, General Counsel,
Federal Reserve Board,
Washington, D.C.
Dear Mr. Wyatt:
We thank you for your letter of September
17th, enclosing copy of a recent decision in the
District Court of the United States for the District
of Nebraska in the case of War Finance Corporation v.
·Duff. The case is an interesting one, but one which,
it seems to us, must necessarily be determinable u9on
the particular facts at bar. Of course* had the note
actually been in the hands of the bank for coilection,
there would have been no doubt about the fact that a
directed verdict in favor of the plaintiff would have
been proper. We assttme that the decision of the
Court must have been predicated U?On the general
proposition that the War Finance Corporation had
allowed persons generally to make payments for its
account to the bank and that this copxse of conduct
estopped the corporation from questioning the e;,:.t.hori ty
of the bank to receive such PaYments. It does -~eem as
if the Court went a long way in its decision.
We had an alm6st identical case in Georgia
involving an alleged ::_:>ayrnent which had been made to
a bank shortly prior to its closing for the account of
the War Finane~ Corporation. In the particular case
we co~vinced op~osing counsel that the closed bank
had not been in f~ct the agent of the Corporation for
the pucyose of :'0(!•Ji v5.ng pa~JTnent and the matter
finally tarmina•.:;cJ. in favor of the Corporation. Had
the facts been d.tt':"e:r.ont, however, in our case, we
would have been m1wh ·~roubled by the same.
Yours very truly,
(signed) Randolph & Parker
General Counsel.
f
•
26S
<con>
FEDERAL aESERVE BANK
OF RICHMOND.
X-4706-c
September 18, 1926
Federal Reserve Board,
Washington, D. c.
Attention of Mr. Walter Wyatt, General
Co~el.
My dear Mr. Wyatt:
I have your letter of September 17th, enclosing
.
me a copy of the dccision.of th9 District Court of the
Unit~d States for tho District of Nebraska in the case of
War Finance Corporation v. Duff.
The decision rests, of course, primarily upon
the faets Qf the case, or rather the inferences which ~
be drawn from tho facts, but I agree with Mr .. ~errill that it
may prove of great interest to the Federal Reserve Banks,
and any bank which discaunts paper for another. It seems to
me that the opinion is palpably illogical in that the court
in the beginning states that any person who makes a negotiable
note is bound to know that it maJ be transferred, but in the
end apparently holds that the War Finance. Corporation is
estopped to deny that tile originalpa.yee is itself agent
simply because the War Finance Corporation lmows that the
original p~ee is in the bu~iness of collecting notes, and
that the.maker does not know the note has been transferred to
the War Finance Corporation. I trust that the case may be
appealed.
Very truly yours ,
(Signed) M. G. Wallace,
L G. Wallace •
Caunsel.
MGW:IB
••
(COPY)
267
X-4706-d
FEDERAL RESERVE BANX
OF ST. :WUIS
Septembe~
20, 1926
Mr. Walter Wyatt,
Genoral Counsel,
Federal Reserve Board,
Washington, D~ C.
Dear Mr. Wyatt:
P.E: - WAR FINANCE CORPORATION
vs.
I em jn receipt of your letter of the
17th enclcsi~g the Court's instructions to the
jury in a recent decision of the District Court
of the United States for the Nebraska District
in the case of tha War Finance Corporation v~.
Duff.
I am inclined to agree with Mr. Merrill that
the case was wrongly decided; - and, I have a case
in the matter of the failure of one of ot~ member
hanks involving several small OttOunts, in lihich
I am going to try to convince the Court that the
payment to the rediscounting bank (when the
maker knew that we held the note) did not
constitute payment to us.
With kindest regards.
Very truly yours,
(signed) Jas. G. McConkey
Counsel.
2i>8
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4711
November 6, 1926
Subject:
Code Word f o r use by the Federal Reserve Agent
a t Hew York i n a d v i s i n g other Federal Reserve
Agents of t r a n s a c t i o n s i n c e r t a i n bankers' a c ceptances sold by the Federal Reserve Bank of
Boston to other Reserve Banks f o r the account
of the Open Market Committee.
Dear S i r :
I t has been suggested t h a t i n order to reduce the
phraseology i n telegrams between the Federal Reserve Agent
a t New York and other Federal Reserve Agents advising of
t r a n s a c t i o n s i n c e r t a i n bankers' acceptances sold by the Fed e r a l Reserve Bank of Boston to other r e s e r v e banks f o r the
account of the Open Market Committee, an a d d i t i o n a l code
word be s u p p l i e d from the Federal Reserve Telegraphic Code.
This suggestion has been approved, and e f f e c t i v e November 13th, the following code word w i l l be used covering the
t r a n s a c t i o n s r e f e r r e d to:
"Abstract" I have today received from Federal Reserve Bank Boston bankers acceptances aggregating
$
to be h e l d in t r u s t f o r your account as c o l l a t e r a l s e c u r i t y your Federal Reserve n o t e s . "
This code word should be i n s e r t e d i n the Federal Reserve Telegraphic Code a t the bottom of page 3 , following the
supplementary code word "Abstinent".
Yours very t r u l y ,
J . C. Noell,
Assistant Secretary.
TO A L L F E D E R A L R 3 S E R V 3 A G E N T S .
(COPY)
X-4712
I fi E A S U E Y D E P A R T M E N T
O f f i c e of the S e c r e t a r y
Commissioner of the P u b l i c Debt.
WASHINGTON
\
*
November 6, 1926.
The Governor
Federal Reserve Board.
Sir;
You a r e hereby advised t h a t the Department has r e f e r r e d to the
Disbursing Clerk, Treasury Department, f o r payment, the account of the Bureau
of Engraving and P r i n t i n g f o r p r e p a r i n g Federal r e s e r v e n o t e s during the p e r i o d
October 1, 1926, to October 31, 1926, amounting to $143,106.00, as f o l l o w s :
Federal Reserve Notes, S e r i e s 1914
M
250,000
650,000
100,000
100,000
100,000
200,000
200,000
200,000
100,000
200,000
150,000
200,000
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
£25.
•
$20,
m
$100
150,000
50,000
150,000
600,000
100,000
50,000
50,000
50,000
25,000
25,000
10,000
400,000
650,000
100,000
225,000
200,000
435,000
850,000
200,000
100,000
200,000
150,000
150,000
50,000
2,450,000
1,100,000
300,000
3,910,000
s h e e t s @ 36.60 per M
Total
400,000
50,000
10,000
$143,106.00
3,910,000
270
X-4712
— 2
—
The charges a g a i n s t the s e v e r a l Federal Reserve Banks a r e a s
follo*^:
$ 14,640.00
23,790.00
3,650.00
8,235.00
7,320.00
15,921.00
31,110.00
7,320.00
3,660.00
7,320 .00
5,490.00
14,640.00
$143,106.00
Boston
Hew York . . . .
Philadelphia
Cleveland . . .
Richmond . . . .
Atlonta
Chicago . . . . .
S t . Louis . . .
Minneapolis .
Kansas City .
Dallas
San Francisco
The Bureau a p p r o p r i a t i o n s w i l l be reimbursed in the above amount
from the i n d e f i n i t e a p p r o p r i a t i o n " P r e p a r a t i o n and Issue of Federal Reserve
Motes, Reimbursable", and i t i s requested t h a t your board cause such i n d e f i n i t e a p p r o p r i a t i o n to be reimbursed in l i k e amount.
Respectfully,
(signed) R. W. B a r r .
Acting Deputy Commissioner.
FEDERAL RESERVE BOARD
WASHINGTON
271
X-4713
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
November 17, 1926.
SUBJECT:
Complimentary Copies of Federal
Reserve B u l l e t i n f o r S t a t e Bank
Examiners.
Dear S i r :
R e f e r r i n g t o the Board's l e t t e r
X-4467 of December 9, 1925, on the above
s u b j e c t , you a r e advised t h e Board has approved a s i m i l a r arrangement f o r the year
1927. I t i s r e q u e s t e d , t h e r e f o r e , t h a t you
send to the Board, n o t l a t e r than December
15th, a l i s t of names of S t a t e bank examiners
in your d i s t r i c t to whom a complimentary copy
of the Federal Reserve B u l l e t i n should be
forwarded during the year 1927.
Yours very t r u l y ,
J . C. Noell,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
X-4714
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
2"
HOVeiliber 9, 1926
Fees and Expenses i n Par Clearance Case of Pascagoula
National Bank v s . the Federal Reserve Bank of A t l a n t a ,
et a l .
Dear S i r :
R e f e r r i n g to the Board's l e t t e r (X-4138) of August 22,
1924, t h e r e i s enclosed herewith a statement covering the f e e s and
expenses in the p a r clearance case of the Pascagoula National Bank
v s . the Federal Reserve Bank of A t l a n t a e t a l , which the Federal
Reserve Beard has approved.
I t i s r e q u e s t e d t h a t each Federal r e s e r v e bank r e m i t to
the Federal Reserve Bank of A t l a n t a i t s pro r a t a share of t h i s expense (based on c a p i t a l and s u r p l u s as of November 3* 1926), as
follows:
Boston New York Philadelphia Cleveland - Richmond - JLtlanta
— —
Chi cago
St* Louis — —
Minneapolis Kansas City Dallas — — —
San Francisco
$
—
—
—
3, 334.,14
12, 412.,49
4, 260.,13
4, 706.,53
2 , 326.. 66
1, 773,,21
6, 108.,88
1, 924.,55
1, 366.,97
1, 699,, 61
1, 539.,10
3, 057.,41
By d i r e c t i o n of the Federal Reserve Board#
Very t r u l y y o u r s ,
Walter L. Eddy,
Secretary.
(Enclosure)
TO ALL GOVERNORS.
273
X-4714-a
STATEMENT OF EXPENSES WHICH iBS'TO BB IHGIZJDID IN THE FINAL-FRO-RATING IN CASE OP
PASGAGOULA RATIONAL BAM AGAINST FBDE?ATf
BAM OF ATLAM&.
Pate
7-13-25
Amount
Description
Amount paid, to Newton D. Baker i n connection with
Par Clearance Case, Pascagoula, Miss,, as per l e t t e r
from Federal Reserve Board 7-29-25.
$ 2,394.43
8-29-25
Remittance to Montgomery B. Angellcovering expenses
i n connection with Pascagoula ITationol Bank case.
275.02
9-11-25
Amount to "be prorated among Federal Reserve Banks i n
connection with Pascagoula Case, 1-1-25, covering
M i l of Foote and Davies Company, p r i n t i n g b r i e f .
568.81
12-9-25
Cashier's chock to Douglas 0 . Morgan, Washington, D.
C., covering s e r v i c e s of reporting and. transcribing
oral argument o f Pascagoula Case i n October term United
States Supreme Court.
12-10-25
Cashier's check to Newton D. Baker for s e r v i c e s rendered
i n Pascagoula Case, as per statement 11-27-35.
12-17-25
21.60
Fee paid to Newton D. Baker as per statement rendered
12-10-25, covering services i n connection with
Pascagoula Par Clearance Case#
947.22
10,000.00
1-18-26
Paid Foote and Davies Conpany, Atlanta, 8 a . , f o r
twenty-six b r i e f corners and twenty-five b r i e f s printed.
10.00
2-20-26
Paid Clerk, United States Court of Appeals, Hew Orleans,
La., for c e r t i f i e d copy of court opinion i n connection
with Pascagoula Case.
5.00
8-17-26
11-5-26
Fee and expenses s i n c e December 10, 1925, paid to
Newton D. Baker, a s per statement rendered 7-24-26,
covering s e r v i c e s i n connection with Pascagoula Par
Clearance Case.
25,262,28
Cashier^ chock to Montgomery B. Angell, covering
s e r v i c e s and expenses i n connection with Pascagoula
case, per statement October 13, 1926.
5,025,%%
Total.
,$
44,509.68
2 7 4
FEDERAL RESERVE BOARD
^
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-4715
November 11, 1926
SUBJECTi
Expense, Main Line, Leased Wire System,
October, 1926.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph
statements, X-4715-a and X-4715-"bf covering i n d e t a i l
operations of the main l i n e , Leased Wire System, during
the month of October, 1926.
Please credit the amount payable by your bank
i n the general account, Treasurer, U« S . , on your books,
and i s s u e O/D Form 1, National Basks, for account of
"Salaries and Expenses, Federal Reserve Board, Special
Fund", Leased Wire System, sending duplicate C/D to the
Federal Reserve Board.
Yours very t r u l y ,
Fiscal Agent.
)
(Enclosures)
TO
< X M M M
OF
ALL
F . B . BASKS
EXCEPT
CHICIQO.
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF OCTOBER, 1926.
Business
reported
by banks
From
Boston
34,055
New York
136,445
Philadelphia
38,810
Cleveland
76,867
Richmond
45,735
Atlanta
64,652
Chicago
101,187
S t . Louis
74,366
Minneapolis
37,306
Kansas C i t y
73,&50
Dallas
67,706
San F r a n c i s c o
105,369
T o tal
856,351
F.R.Board
To t a l
Percent of T o t a l
Words sent
by New York.
chargeable
to o t n e r
F.R.Banks (1)
503
313
1,540
2,962
3,611
2,985
2,089
2,125
2,791
4,465
1,850
25,237
Total
34,558
136,445
39,123
78,407
48,700
68,263
104,175
76,455
39,431
76,641
72,171
107,219
881,588
298,565
1,180,153
100.00#
Treasury
Department
Business
3,658
4,711
3,022
3,274
3,199
4,140
4,605
3,824
2,021
3,206
1,518
. 5,752
43,230
26,561
69,791
5.9156
War Finance
Corporation
Business
Net Federal
Reserve Bank
Business
30,900
131,734
36,101
75,133
45,501
64,123
99,570
72,631
37,410
73,435
70,353
101,467
838,358
272,004
1,110,362
94.09$
X-4715 - a
P e r c e n t of
t o t a l bank
Business (*)
3.69
15.71
4-31
8.96
5.43
7.65
11.88
8.66
4.46
8.76
S.39
12.10
100.00%
*
(*)
These p e r c e n t a g e s used in c a l c u l a t i n g the pro r a t a s h a r e of l e a s e d wire expense a s shorn on the
accompanying statement (X-4/15-b)
m
(1)
Number of Aords s e n t by New York to o t h e r F. R. Banks f o r t h e i r s o l e b e n e f i t charged to banks i n d i c a t e d ,
in accordance with a c t i o n taken at Governors' Conference November 2 - 4 , 1925*
to
01
REPORT OF EXPENSE MAIN LINE
FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER, 1926
Ncoue of Bank
Operators'
Salaries
Boston
$ 260.00
New York
944.16
Philadelphia
216.66
Cleveland
284.50
Richmond
185-00
Atlanta
255.00
Chicago
3,89l.58(#)
St. Louis
200.00
Minneapolis
183.34
Kansas City
275.64
Dallas
251.00
San Francisco
370.00
Federal Reserve Board Total
$7,316.88
Operators'
Overtime
Wire
Rental
Total
Expense a
$ 260.00
944.16
216.66
284.50
185.00
255.00
3,891.58
200.00
183.34
275*64
$15.141.61
$15,341.63
•
251.00
370.00
15,341.63
$22,658.51
1.319.96(a)
$21,318.55
X^4715-b
Pro Rata
Share of
Total
Expenses
$ 786.65
3,349.14
918.83
1,910.14
1,157.60
1,630.87
2,532.64
1,846.19
fc 260.00
944.16
216.66
284.50
185.00
255.00
3,891.5S
200.00
950.81
1,867.51
1,788.63
2,579.54
183-34
275.64
251.00
370.00
$21,318.55
$7,316.88
(&) Includes $204.67 for branch line business transmitted over main l i n e c i r c u i t .
(#) Includes s a l a r i e s of Washington operators.
(*)
(a)
(b)
Credits
Credit.
Received $1,339*96 from Treasury Department covering business for the month of October, 1926
Amount reimbursable to Chicago.
Payable to
Federal
Reserve
Board
$
526.65
2,404.98
702.17
1,625.64
1,177.27(&
1,375-87
l,358.94(*
1,646.19
767.47
1,591.87
1,537.63
2,209.54
$15,565.28
1.358.94(b)
$14,206.34
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4718
November 12, 1926
Dear S i r :
There i s handed, you herewith, f o r
your i n f o r m a t i o n , copy of a l e t t e r and enc l o s u r e received from the Treasury Department,
a d v i s i n g t h a t the insurance r a t e covering
shipments of money and s e c u r i t i e s "by r e g i s t e r ed mail under insurance p o l i c i e s held by the
Treasury Department has been reduced from
4 7/8^ to 4 1/2^ p e r each $l,000v00, e f f e c t i v e November 1, 1926.
Very t r u l y y o u r s ,
Walter 1. Eddy,
Secretary
Enclosures
TO ALL GOVERNORS OP F. R. BANKS.
277
•
m
(COPY)
TREASURY DEPARTMENT
Washington
2 7 8
•
X—4?18~a
November 5, 1926
The S e c r e t a r y ,
Federal Reserve Board,
Washington, D. C.
Sir:
There a r e enclosed herewith s e v e r a l copies of c i r c u l a r n o t i c e i s s u e d
t h i s day to the p r i n c i p a l o f f i c e r s of the Treasury Department and o t h e r s
concerned, r e l a t i n g to the insurance p o l i c i e s h e l d "by the Treasury Department with the Aetna Insurance Company, United S t a t e s F i r e Insurance Company, Federal Insurance Company,
The Continental Insurance Company, and
The Globe and Rutgers F i r e Insurance Company, covering shipments of money
and s e c u r i t i e s by r e g i s t e r e d mail, n o t i f y i n g a l l p a r t i e s i n t e r e s t e d of an
adjustment i n the r a t e from 4-7/8# to 4-1/2^ p e r each $1,000, e f f e c t i v e
November 1, 1926.
I t i s requested t h a t a l l Federal Reserve Banks and branch banks be
n o t i f i e d of t h i s adjustment i n r a t e .
S u f f i c i e n t copies a r e enclosed f o r
t h i s purpose.
By d i r e c t i o n of the S e c r e t a r y :
Respectfully,
(Signed) F. A. B i r g f e l d ,
F. A. BIRGFELD,
Chief Clerk,
Enclosure,
X-4720
2 v 9
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
N0V@IHD6r 1 5 ,
1926.
Dear S i r ;
As you probably know, under date of June 3, 1926, Congress adopted
an a c t to c o n s o l i d a t e , c o d i f y , and s e t f o r t h the general and permanent laws
of the United S t a t e s in f o r c e December 7, 1925. This Act i s known a s "The
Code of Laws of the United S t a t e s of .America/'
The e n a c t i n g p r o v i s i o n provides t h a t the Code " s h a l l e s t a b l i s h
prima f a c i e t h e laws of the United S t a t e s , general and permanent in t h e i r
n a t u r e , in f o r c e on t h e 7 t h day of December, 1925; but nothing in t h i s Act
s h a l l be construed a s r e p e a l i n g or amending any such law or as e n a c t i n g a s
new law any m a t t e r contained in the Code. In case of any i n c o n s i s t e n c y a r i s i n g
through omissions or otherwise between the p r o v i s i o n s of any s e c t i o n of t h i s
Code and the corresponding p o r t i o n of the l e g i s l a t i o n h e r e t o f o r e enacted, e f f e c t s h a l l be given f o r a l l purposes whatsoever to such enactments."
While the Code a t p r e s e n t i s thus only prima f a c i e evidence of t h e
law, i t i s planned to r e e n a c t i t and give i t t h e e f f e c t of r e p e a l i n g and superseding a l l law i n f o r c e December 7, 1925, a s soon as i t i s i p o s s i b l e to discover
and c o r r e c t such e r r o r s as a r e contained i n the Code in i t s p r e s e n t form. I t
i s h i g h l y important, t h e r e f o r e , to discover and c a l l a t t e n t i o n to a l l important
e r r o r s in the c o d i f i c a t i o n of t h e Federal He serve Act and r e l a t e d s t a t u t e s as
soon as p o s s i b l e , in order t h a t such s t a t u t e s may not be amended u n i n t e n t i o n a l l y when the Code i s given f i n a l e f f e c t .
A c a r e f u l examination by t h i s o f f i c e of t h a t p a r t of the Code which
corresponds to the p r o v i s i o n s of the Federal Reserve Act has d i s c l o s e d a number
of omissions and i n a c c u r a c i e s which have been c a l l e d to the a t t e n t i o n of Congroar;. I enclose f o r your information a copy of a l e t t e r on t h i s s u b j e c t which
the Board addressed to Honorable Boy Gr, F i t z g e r a l d , Chairman of the House Comm i t t e e on Revision of Laws under date of November 9, and a l s o a copy of a memorandum prepared by t h i s o f f i c e c a l l i n g a t t e n t i o n to such e r r o r s and omissions
as have been discovered. If in the course of your work you should discover
any f u r t h e r e r r o r s in the c o d i f i c a t i o n of t h e Federal Reserve Act or r e l a t e d
s t a t u t e s , I should a p p r e c i a t e i t i f you w i l l c a l l such e r r o r s promptly to the
a t t e n t i o n of t h i s o f f i c e , in order t h a t proper s t e p s may be taken to have
them c o r r e c t e d .
P r e l i m i n a r y copies of t h i s Code, bound in buckram but without index
or t a b l e s , can be purchased from the Government P r i n t i n g O f f i c e f o r $3 p e r copy.
Digitized for Enclosures.
FRASER
Very t r u l y yours,
Walter Wyatt
General Counsel.
(COPY)
280
X-4702-a
November 9, 1926
Honorable Roy Q. F i t z g e r a l d , Chairman,
Committee on Revision of Laws,
House of R e p r e s e n t a t i v e s ,
Washington, D. C.
My dear Congressman :
The Federal Reserve Board has received a copy of the Code of the
Laws of the United S t a t e s passed by Congress June 30, 1926, and has noted your
r e q u e s t , accompanying each volume of the Code, t h a t those who use the Code i n form your Committee of any omission or misstatement which may be discovered.
In compliance with your r e q u e s t , Counsel tb the Federal Reserve Board has
made a c a r e f u l examination of t h a t p a r t of the Code which corresponds to the
p r o v i s i o n s of the Federal Reserve Act, and has prepared a memorandum c a l l i n g
a t t e n t i o n to a number of omissions and i n a c c u r a c i e s , A copy of t h i s memorandum
i s enclosed herewith f o r the information of your committee.
Among the m a t t e r s omitted from the Code a r e the s i x t h and seventh
paragraphs of S c c t i o n 2 of the Federal Reserve Act, which provide f o r the f o r f e i t u r e of the f r a n c h i s e s of n a t i o n a l banks f o r f a i l u r e to comply with the
p r o v i s i o n s of the Federal Reserve Act, I t i f probable t h a t these p r o v i s i o n s
were omitted from the c o d i f i c a t i o z l because t%ie c o d i f i o r s considered them obs o l e t e . The f i r s t sentence of the 6th paragraph p r o v i d e s :
"Should any n a t i o n a l banking a s s o c i a t i o n i n the U n i t e s
S t a t e s now organized f a i l within one yeat a f t e r the passage of t h i s Act
to becohe a member bank or f a i l to comply with any of the p r o v i s i o n s
of t h i s Act tepplidable t h e r e t o , a l l of the r i g h t s , p r i v i l e g e s , and
f r a n c h i s e ^ of such a s s o c i a t i o n granted to i t under the n a t i o n a l bank Act, or under the p r o v i s i o n s of t h i s Act, s h a l l bo thereby f o r feited."
Because of the words " w i t h i n one year a f t e r the passage of t h i s Act", the codi f i e r s e v i d e n t l y thought t h a t t h i s p r o v i s i o n expired by l i m i t a t i o n one year
a f t e r the passage of the Federal Reserve Aot; but such was not the i n t e n t of
Congress. Congress intended t h a t a l l natiena,! banks then i n e x i s t e n c e or
which might subsequently be organized should become members of the Federal Reserve System and a t a l l times comply wit& fcjae p r o v i s i o n s of the Federal Reserve Act. The words above quoted were i n s e r t e d i n the Act merely f o r the
purpose of g i v i n g n a t i o n a l banks then i n e x i s t e n c e one^ycar w i t h i n which te
comply with the p r o v i s i o n s ef the Federal Reserve Act b e f o r e they should be
s u b j e c t e d to the f o r f e i t u r e of t h e i r c h a r t e r s f o r f a i l u r e to do s o . Although
the language of the law i s not e n t i r e l y c l e a r , t h i s was the obvious i n t e n t
of Congress and t h i s i s tho c o n s t r u c t i o n which has been given to t h e law and
has been g e n e r a l l y accepted as c o r r e c t . The s i x t h and seventh paragraphs of
X-4702-a
881
the Federal Reserve Act, t h e r e f o r e , are not obsolete; and i t i s h i g h l y import a n t t h a t thfey be r e t a i n e d i n the law, because they provide the most e f f e c t i v e means of e n f o r c i n g those p r o v i s i o n s of the Federal Reserve Act which p e r t a i n t# n a t i o n a l banks.
v
The f i r s t sentence of the f o u r t h paragraph of Section 10 of t h e Federal
Reserve Act p r o v i d i n g t h a t the f i r s t meeting of the f e d e r a l Reserve Soard
glial1 be h e l d i n Washington has been omitted, a p p a r e n t l y because i t was considered o b s o l e t e . This p r o v i s i o n , however, i s s t i l l of importance i n the d e t e r mination of the l o c a t i o n or s i t u s of the Federal Reserve Board f o r s u i t or
otherwise. The question of the s i t u s of the Federal Reserve Board has ailready been r a i s e d i n one important case, and t h i s p r o v i s i o n of law was one of
the grounds upon which the Court based i t s opinion t h a t the Federal Reserve
Board i s an i n h a b i t a n t of the D i s t r i c t of Columbia w i t h i n the meaning oif Sect i o n 51 of the J u d i c i a l Code.
\
Section 29 of the Federal Reserve Act which provides t h a t i f any p a r t
of the Act i s adjudged i n v a l i d such i n v a l i d i t y s h a l l not extend to other
p a t t s of th@ Act, has been omitted. This p r o v i s i o n i s an important one and
should be r e t a i n e d , u n l e s s the Code cotitains a s i m i l a r p r o v i s i o n g e n e r a l l y
a p p l i c a b l e to a l l the p r o v i s i o n s of the Code. Such a g e n e r a l p r o v i s i o n of
the Code has n o t been found i n the i n v e s t i g a t i o n made by the Board's Counsel.
Section 30 of the Federal Reserve Act which e x p r e s s l y r e s e r v e s to Congress the r i g h t to amend, a l t e r or r e p e a l the Act i s omitted. While the
Board i s of the opinion t h a t Congress would have t h i s r i g h t without an exp r e s s r e s e r v a t i o n , the r e t e n t i o n of such a p r o v i s i o n i n the law i s b e l i e v e d
to be very d e s i r a b l e because i t e f f e c t i v e l y s e t t l e s the question beyond any
p o s s i b i l i t y of d i s p u t e . A s i m i l a r p r o v i s i o n of the National Bank Act was
omitted when t h a t Act was incorporated i n the Revised S t a t u t e s of the United
S t a t e s , and such omission has given r i s e t o much debate as to the r i g h t of
Congress to amend c e r t a i n p r o v i s i o n s of the National Bank Act. A r e p e t i t i o n
of t h a t u n f o r t u n a t e occurrence i s u n d e s i r a b l e .
Some of the e r r o r s in the c o d i f i c a t i o n which a r e mentioned i n the enclosed memorandum, such as those in Sections 1, 92, 231 and 462 a r e unimport a n t , but a r e mentioned f o r the sake of accuracy and completeness. The e r r o r s occurring i n the following s e c t i o n s of T i t l e 12 of the Code, however, are
important and should be c o r r e c t e d : 2 4 8 ( e ) , 248(1), 324, 327, 330, 331, 345,
346, 351, 373, 411, 412, 413, 414, 420, 422, 447, 448, 467, 482, 611, 613,
615, 616., 617, 619, 629, 630, 631, 943, 1222 and 1223; and a l s o Section 771
of T i t l e 31. Some of these e r r o r s very s e r i o u s l y a f f e c t the e x i s t i n g p r o v i sions of the Federal Reserve Act, and i t i s highly important t h a t they be corr e c t e d b e f o r e the Code i s given the e f f e p t 'pf superseding p r e e x i s t i n g law.
One er two of these e r r o r s w i l l be discussed, by way of i l l u s t r a t i o n .
Section 327 of T i t l e 12 of the Code corresponds to the seventh p a r a graph ef S e c t i o n 9 of the Federal Reserve Act, which authorized, the Federal
Reserve Board to r e q u i r e any member bank which has f a i l e d to comply with the
p r o v i s i o n s of " t h i s s e c t i o n " ( i . e . , Section 9 of the Federal Reserve Act) to
-3-
X-4702-a
2 8 2
surrender i t s stock i n the Federal reserve bank and to f o r f e i t a l l r i g h t s and
p r i v i l e g e s of membership. Although t h i s p r o v i s i o n r e f e r s to the -.thole of Sect i o n 9 of the Federal Reserve Act, containing some twelve paragraphs which are
incorporated i n the Code as Sections 321 to 331, i n c l u s i v e , the c o d i f i e r s f a i l ed to change the words " t h i s section" so as to r e f e r to the other s e c t i o n s of
the Code which correspond to the other paragraphs of S e c t i o n 9 of the Federal
Reserve Act. The r e s u l t i s t h a t Section 327 of the Code i s p r a c t i c a l l y meani n g l e s s ; and, i f the Code should "be given the e f f e c t of superseding p r e e x i s t i n g
law without c o r r e c t i n g t h i s mistake, i t would deprive t h e Federal Reserve Board
of t h i s very important power to enforce the p r o v i s i o n s of Section 9 of the Fed e r a l Reserve Act.
Section 412 of T i t l e 12 of the Code would very s e r i o u s l y change the v i t a l l y important p r o v i s i o n s of the law with r e f e r e n c e to the c h a r a c t e r of c o l l a t e r a l which may "be pledged ™ith the Federal Reserve Board to secure Federal
Reserve n o t e s . Thus the Code a u t h o r i z e s the pledging of n o t e s , d r a f t s and "bills
of exchange acquired under the p r o v i s i o n s of Section 342 of the Code, whereas
under t h a t Section of the Code n o t e s , d r a f t s and "bills of exchange may "be a c quired by Federal r e s e r v e banks only f o r purposes of c o l l e c t i o n , the Federal
reserve banks a c q u i r e them merely as Agents, have no t i t l e to them, and could
not p r o p e r l y pledge them as s e c u r i t y f o r Federal Reserve n o t e s . Section 412
ef the Code a l s o a u t h o r i z e s the pledging of acceptances acquired "by Federal
r e s e r v e banks under Section 372, whereas Section 372 merely confers powqr on
member banks to i s s u e bankers' acceptances. On the o t h e r hand, S e c t i o n 412 of
the Code omits r e f e r e n c e to Section 359, which corresponds to Section 1 4 ( f )
of the Federal Reserve Act, and thus would deprive Federal r e s e r v e banks of the
r i g h t to pledge as c o l l a t e r a l s e c u r i t y to Federal Reserve notes acceptances
of Federal Intermediate Credit Banks and National A g r i c u l t u r a l Corporations
which may now be purchased by Federal r e s e r v e banks under the p r o v i s i o n s of
Section 1 4 ( f ) . The important c o r r e c t i o n s which should bo made i n Section 412
are c l e a r l y i n d i c a t e d in the enclosed memorandum prepared by the Board's
Counsel.
The Board cannot undertake to d i s c u s s in d e t a i l a l l of the e r r o r s in
the C o d i f i c a t i o n which would s e r i o u s l y a f f e c t the e x i s t i n g p r o v i s i o n s of the Fed e r a l Reserve Act;, but they a r e pointed out i n the enclosed nioaorandum, and
the Board urges most s t r o n g l y t h a t the necessary c o r r e c t i o n s be made b e f o r e
the c o d i f i c a t i o n i s given the e f f e c t of superseding p r e e x i s t i n g law.
The Federal Reserve Board d e s i r e s to do everything p o s s i b l e to a s s i s t
you and your Committee i n the important t a s ^ of making t h i s Code a b s o l u t e l y accurate and complete and hopes t h a t you w i l l c a l l upon i t i f i t can be of any
f u r t h e r a s s i s t a n c e to you i n the m a t t e r . In tjMs connection, the Board r e quests t h a t i t be given an opportunity of %avi$g i t s Counsel confer *7ith your
c o d i f i c a t i o n experts i n order to -take sure t h a t the important mistakes i n those
p o r t i o n s of t h e c o d i f i c a t i o n vrhich cover the p r o v i s i o n s of the Federal Reserve
Act may be c o r r e c t e d b e f o r e the c o d i f i c a t i o n i s given f i n a l e f f e c t . Very t r u l y yours,
Enclosure.
D. R. C r i s s i n g e r ,
Governor
%
ERRORS IN "THE CODE OF THE LAWS OF THE UNITED STATES
OF AMERICA" RELATING TO THE FEDERAL RESERVE ACT.
Those p a r t s of "The Code of the Laws of the United S t a t e s of America,"
Act of Congress approved June 30, 1926, which correspond to the v a r i o u s p r o v i sions of the Federal Reserve Act have "been c a r e f u l l y examined and the e r r o r s and
i
other i n a c c u r a c i e s which have "been discovered a r e l i s t e d "below.- This l i s t i n cludes a l s o a few e r r o r s which have been found i n o t h e r s t a t u t e s which a f f e c t
i n d i r e c t l y the Federal Reserve System.
The c o d i f i c a t i o n of such o t h e r s t a t u t e s ,
h o w e v e r h a s not been car $ f u l l y checked and such e r r o r s as a r e mentioned were
discovered i n c i d e n t a l l y ' i n connection with the examination of the c o d i f i c a t i o n
of the Federal Reserve Act and the amendments.
OMISSIONS.
The s i x t h and seventh paragraphs of Section 2 of the Federal Reserve Act
providing f o r the f o r f e i t u r e of the f r a n c h i s e s of n a t i o n a l banks, have been
omitted from t h e . b i l l , .
This omission was made e v i d e n t l y because t h e s e p r o v i -
sions were considered o b s o l e t e .
A c a r e f u l examination, however, shows t h a t they
a r c not o b s o l e t e but a r e s t i l l i n f u l l force and e f f e c t and a p p l i c a b l e to n a t i o n a l banks a t the p r e s e n t time..
These p r o v i s i o n s should, t h e r e f o r e , be r e t a i n e d
i n the Code.
The f i r s t sentence of the f o u r t h paragrippal of Section 10 providing t h a t the
f i r s t meeting of the Federal Reserve Board s h a l l be held i n Washington i s o m i t t ed.
This was a l s o omitted no doubt because considered, obsolete but the p r o v i -
sion i s one whic^| may have a bearing upon the l o c a t i o n ®r s i t u s of the Federal
Reserve Board f o r purposes of s u i t or otherwise and should be r e t a i n e d .
Section 29 of the Federal Reserve Act providing t h a t i f any p a r t of the Act
i s adjudged i n v a l i d such i n v a l i d i t y s h a l l not extend to other p a r t s of the Act,
omitted.
has been
Section 30 of the Federal Reserve Act providing that the Act may "be a l t e r e d , amended, or r e p e a l e d , has a l s o "been omitted.
There are c e r t a i n other p o r t i o n s of the Federal Reserve Act which have
"been omitted from the c o d i f i c a t i o n but the omissions mentioned above are the
only ones found to be m a t e r i a l .
A l l other p r o v i s i o n s vzhich have been omitted
are b e l i e v e d to be o b s o l e t e .
OTHSR ERRORS.
All r e f e r e n c e s are to T i t l e 12 unless otherwise stated#
Section 1*
Corresponds to a p a r t of Section 10 of the Federal Reserve Act*
In the f o u r t h l i n e "a" b e f o r e the words " n a t i o n a l currency"
should be omitted i n order to comply with the o r i g i n a l s t a t u t e #
Section 82.
Corresponds to Section 5202 of the Revised S t a t u t e s as amended
by Section 13, Federal Reserve Act#
The Gth exception ia&de uhder t h i s s e c t i o n i s nGvi$ now law#
This exception was intended to be made by Section 504 of the
A g r i c u l t u r a l Credits Act of 1923 but by mistake the amending
p r o v i s i o n r e f e r r e d to Section 502 of the Revised S t a t u t e s i n stead of 5202 of the Revised S t a t u t e s .
Section 92.
Corresponds to the t e n t h paragraph of Section 13 of the Federal
Reserve Act.
In the l a s t l i n e of t h i s s e c t i o n the word " f i l i n g "
has been omitted between
Section 221.
^ords "in" and " h i s " ,
Corresponds to Section 1 of the Federal Reserve Act.
The d e f l n i *
t i o n of a "member bank" r e a d s , i n p a r t , "* * a member of one @f
the r e s e r v e banks created by t h i s c h a p t e r . "
Inasmuch as Federal
X(*4702
-3-
"
r e s e r v e banks were created under the I s a c r a l He servo Act of December 23,1913 and the provisions f o r t h e i r c r e a t i o n a r e omitted
from the code, i t ^ould be b e t t e r to say "a member of one of the
Federal r e s e r v e banks. 11
Section 222,
Corresponds to f i r s t -paragraph of Section 2 of the Federal Beserve
Act.
Leaves out p r o v i s i o n s .regarding r e s e r v e bnnk o r g a n i z a t i o n
committee but r e t a i n s p r o v i s i o n that- new d i s t r i c t s may be from t i s e
to time c r e a t e d by the Federal Beserve Board not to exceed twelve
in a l l .
Inasmuch as twelve d i s t r i c t s have a l r e a d y been c r e a t e d ,
t h i s p r o v i s i o n i s obsolete and should be omitted u n l e s s i t i s des i r e d to preserve a l l of the p r o v i s i o n s r e l a t i n g t o t h e o r i g i n a l
c r e a t i o n of the Federal reserve d i s t r i c t s .
The a u t h o r i t y to r e -
ad.iust d i s t r i c t s * however, should bo p r e s e r v e d .
Section 223.
Corresponds to a p a r t of Section 2 of the Federal Beserve Act.
Provides t h a t , "The Federal r e s e r v e c i t i e s now i n e x i s t e n c e are
continued."
This i s now and might-be construed to f o r b i d the
changing of any Federal r e s e r v e c i t y .
The p r e s e n t law does not
f o r b i d the changing of a Federal r e s e r v e c i t y ; but the Attorney
General has r u l e d t h a t the p r e s e n t law does not a u t h o r i z e the Fed e r a l Beserve Board to change a Federal r e s e r v e c i t y once e s t a b lished.
Section 225.
Corresponds to a p a r t of Section 2 of the Federal Beserve Act.
This contains a ne? p r o v i s i o n to the e f f e c t t h a t , "The Federal
r e s e r v e banks HOT in existence in the v a r i o u s Federal reserve
c i t i e s a r e continued".
This a l s o might be construed to p r o h i b i t
the discontinuance of any Federal r e s e r v e bank but the Attorney
General has ruled t h a t the prosent law does not a u t h o r i z e the
X-4702
OH
Federal Reserve Board to d i s c o n t i n u e any Federal r e s e r v e bank once
established.
Section 348
M
This corresponds to Section 11(c) of the Federal Reserve Act and
r e f e r s to the reserve requirements s e t f o r t h i n "Section 20 of t h i s
chapter".
There i s no Section 20 i n the same chapter of the Code,
/
and the proper s e c t i o n number snould be s u b s t i t u t e d .
3 e c t i o n 11(e)
of the Federal Beservo Act r e f e r s to S e c t i o n 20 of the Federal Reserve Act; but t h i s obviously i s a c l e r i c a l e r r o r , and Congress obv i o u s l y intended to r e f e r to S e c t i o n 19 of the Federal Beserve A c t ,
which i s covered by Sections 481-465 of the Code.
Section 240
ill
Corresponds to Section 1 1 ( f ) of the Federal Reserve A c t .
The r e -
f e r e n c e a t the end of t h i s s e c t i o n "December 25, 1925" should be
changed to read "December 25, 1913*"
Section 240
(it)
Corresponds to Section l l ( k ) of the Federal Reserve Act.
The r e f e r -
ence a t the end of t h i s s e c t i o n contains tvo typographical e r r o r s .
The proper r e f e r e n c e i s as f o l l o w s : "Loc-.-aacr 25, 1915, C.6, Section
11, 33 S t a t . 262; September 26, 1910, C. 177, Section 2, 40 S t a t .
968".
Section. 34G
(1)
Corresponds to Section 11(1) gf the Federal Reserve Act.
The r e -
f e r e n c e to Section 632 of T i t l e 5 should be to "Chapter 12 of T i t l e
5 and amendments t h e r e t o " .
Section 261
'
Corresponds to a p a r t of So?rt4ojj. 12 of the Federal Reserve Act.
The
comma i n the next to the l a s t l i n u ®f t h i s s e c t i o n does not appear
i n the o r i g i n a l s t a t u t e ar.d should be omitted.
Section 234.
Corresponds to a p o r t i o n of Section 2 of the Federal Reserve Act.
This c o n t a i n s p a r t but not a l l of the corresponding paragraph ef
the F e d e r a l Reserve Act, a l l of TThich i s p r a c t i c a l l y obsolete be-
X-4702
cause no stock has over been a l i o ted to the United S t a t e s mid r.cne
ever w i l l be a l l o t t e d to the United S t a t e s under the p r e s e n t lav:.
I t would seem t h a t the corresponding paragraph of the Federal noserve Act should e i t h e r be omitted e n t i r e l y or a l l of i t should be
covered i n the c o d i f i c a t i o n a c t .
Section 322.
Corresponds to a p a r t of Section 9 of the Federal Reserve Act.
The
word " a p p l i c a t i o n s " i n the second l i n e should be made s i n g u l a r "application" .
Section 334.
Corresponds to a p a r t of Section 9 of the Federal Reserve Act.
The
r e f e r e n c e to " t h i s s e c t i o n " i n the second l i n o should be changed to
read "Sections 321 t o 331".
The r e f e r e n c o to Section 5209 of the
Revised S t a t u t e s should bo changed to r e a d "Section. 592."
Section 325.
Corresponds to a p a r t of Section 9 *'f the Federal Reserve Act.
r e f e r e n c e a t the end of t h i s s e c t i o n
,r
The
30 S t a t . 232" should be chang-
ed to r e a d "40 S t a t . 232".
Section 327.
Corresponds to p a r t of Section 9 of the Federal Reserve Act.
The
word " s e c t i o n " appearing i n the f o u r t h l i n o and a l s o i n the l a s t l i n e
should be changed to read "Sections 321 to 331 i n c l u s i v e . "
Section 350.
Corresponds to a p a r t of Section 9 of the Federal Reserve Act.
The
t h r e e r e f e r e n c e s to " t h i s s e c t i o n " should be changed to read "Sect i o n s 321 to 331 i n c l u s i v e " .
The r e f e r e n c e a t the end of t h i s s e c t i o n "30 S t a t . 257"
should be changed to read " | 0 S t a t . 259".
Section 33$ii
Corresponds to a p a r t of Section 9 of the Federal Reserve Act.
The two r e f e r e n c e s to " t h i s section" should be changed to read
" S e c t i o n s 321 to 331 i n c l u s i v e " .
Section 341.
Corresponds to a p a r t of Section 4 of the Federal Reserve Act.
In
_6_
x-4?02
Son
the third, l i n e of t h i s s o c t i o a , the -"ords "the o r g a n i z a t i o n of" a r c
meaningless and. should be omitted.
The comma i n the f i r s t l i n e of the paragraph marked " F i f t h "
does not appear i n the o r i g i n a l s t a t u t e *
A coma should bs placed
a f t e r the 7ord " d i r e c t o r s " i n the f i r s t l i n e of the paragraph narked "Sixth" i n order to coqply with t h e o r i g i n a l s t a t u t e .
The l a s t paragraph of t h i s s e c t i o n provides t h a t no Federal
r e s e r v e "bank s h a l l t r a n s a c t any b u s i n e s s except such a s i s i n c i d e n t a l and n e c e s s a r i l y p r e l i m i n a r y to i t s o r g a n i z a t i o n u n t i l rathorieod
by the Comptroller of the Currency to commence b u s i n e s s .
If i t is
the p o l i c y of the c o d i f i c a t i o n to omit a l l o b s o l e t e m a t t e r i t would .
Seem t h a t t h i s paragraph should bo or.it tod.
Section 342.
Corresponds to a p a r t of Section 13 of the f e d e r a l Eeservo Act.
The comma a f t e r the word "checks" in the s i x t e e n t h l i n e should be
omitted ixB i t was not in the ori/ hvil a c t and i t s i n s e r t i o n a t t h i s
p l a c e might be construed to change the meaning- of the law.
Section 343.
Corresponds to a p a r t of Section 13 of the Federal Reserve Act.
There i s a typographical e r r o r in the middle of t h i s s e c t i o n ; the
word "or" should be i n s e r t e d a f t e r tho word "wares".
Soction 344.
Corresponds to a p a r t of tho A g r i c u l t u r a l Credits Act of 1923.
The
t i t l e to t h i s s e c t i o n would §><i m c h more a p p r o p r i a t e i f changed to
- read "Rediscount or purchase of b i l l s of exchange payable a t s i g h t
or on demand".
Section 345.
Corresponds tc a p a r t of Section 13 of the Federal Reserve Act.
The c a t c h - l i n e of t h i s s e c t i o n i s i n c o r r e c t and misleading.
The
l i m i t a t i o n contained i n t h i s s e c t i o n a p p l i e s to the r e d i s c o u n t of
any and a l l paper but the catch l i n e would i n d i c a t e t h a t i t a p p l i e s
only to a g r i c u l t u r a l p a p e r .
In view of the subdivision i n t o sepa-
r a t e s e c t i o n s i t would seen t h a t the word "such" i n tho t h i r d l i n e
of t h i s s e c t i o n could well ho omitted.
Section 346,
Corresponds to a p a r t of Section 13 of the Federal Reserve Act.
Ir.
view of the rearrangement of tho p r o v i s i o n s of the Federal Reserve
Act r e l a t i n g to acceptances of neriber "banks i t would seen t h a t tho
phrase "of the kinds h e r e i n a f t e r described" should bo changed to
read "of tho kinds described i n s e c t i o n s 372 and 373."
Section 347.
Corresponds to a p a r t of Section 13 of the Federal Keserve Act.
The r e f e r e n c e a t tho end of t h i s s e c t i o n to "March 4, 1923, C. 252,
T i t l e IV, Sections 402, 403, 42 S t a t . 1478, 1479" i s i n c o r r e c t .
The Act of March 4, 1923, did not amend t h i s p a r t of Section 13 of
the Federal Boscrve Act.
Section 350.
Corresponds to a p a r t of the A g r i c u l t u r a l Credits Act of 1923.
Re-
f e r e n c e to T i t l e I of the Federal Farm Loan Act should be changed so
as to r e f e r to the proper chapter and t i t l e of the c o d i f i c a t i o n .
Section 351.
Corresponds to a p a r t of tho A g r i c u l t u r a l Credits Act of 1923.
The p h r a s e "within the meaning of the throe preceding s e c t i o n s "
should be changed to read "within the meaning of S e c t i o n 340."
Section 355.
Corresponds to a p a r t of Section 14 of the Federal Reserve Act.
The r e f e r e n c e a t tho end
| h i s s e c t i o n "38 S t a t . 274" should be
changed to road: "33 S t a t , § | 4 " .
Section 372.
Corresponds to a p a r t of Section 13 of the Federal Heserve Act.
Tho t i t l e to t h i s s e c t i o n i s somewhat misleading because the section
r e f e r s not only to the acceptance of d r a f t s or b i l l s r e l a t i n g to
shipments but also to o t h e r kinds of d r a f t s or b i l l s .
I t would seen
novo a p p r o p r i a t e to make the t i t l e road "Acceptance of d r a f t s or
X—±702
——
8
"bills "by member t a n k s .
Section 575.
Corresponds to a p a r t of Section IS of the Federal Unserve Act.
Tlx
word, "or" should be i n s e r t e d a f t e r the vrord " t i t l e " i n the 13th line .
Section 375.
Corresponds to a p a r t of Section 22 of the Federal Beserve Act.
The word "subsection" in the second, paragraph i t would
be changed to " s e c t i o n " .
BOOU
should
The co^.ia appearing a l t e r t h e ™oru "Boaid"
i n the next to the l a s t l i n e of the f i r s t paragraph i s not to be
found i n the o r i g i n a l s t a t u t e .
Section 391.
Corresponds to a p a r t of Section 15 of the Federal Beserve Act.
The word "noney" should be changed to "moneys"*
This s e c t i o n i s i n
e f f e c t amended by the Appropriation Act of 1920 approved May 29,
1920, but the amendment i s not noted i n the c o d i f i c a t i o n .
In the
f i f t h l i n e a f t e r the word " m y " , a doima should appear i n order to
correspond to the o r i g i n a l s t a t u t e .
I u the n i n t h l i n e the setii**
colon should be changed to a corona.
Section 411&
Corresponds to a p a r t of SectioA 16 of the Federal Reserve Act.
The words* " h e r e i n a f t e r net f o r t h " i n the f o u r t h l i n o should be
changed to read "as s e t f o r t h i n Sections 412 to 422 i n c l u s i v e " .
In the r e f e r e n c e a t the end of t h i s s e c t i o n the dabe "1913" i s
omitted a f t e r the words "Pa^erjber 23".
Section 412.
Corresponds to a p a r t of Section 16 of the Federal Beserve Act.
The
r e f e r e n c e to Section 342 i s wrong; because, under t h a t s e c t i o n ,
n o t e s , d r a f t s and b i l l s of exchange nay be received only f o r p u r poses of c o l l e c t i o n
and the Federal r e s e r v e bank holds then merely
as agent and t h e r e f o r e could not pledge then with t h e Federal Be
x-t'Ofj
-yserve Agent as c o l l a t e r a l s e c u r i t y .
29:1
The r e f e r e n c e to Section 372
i s i n c o r r e c t because t h a t s e c t i o n merely r e f e r s to the power of neat e r "banks to accept the d r a f t s and "bills of exchange drawn upon
• then.
Reference to Sections 343-347 would "be c o r r e c t .
Where r e f e r -
ence i s m d e to s e c t i o n s 353 to 350 i t should r e f e r to Sections 353
to 359 so as to include acceptances of Federal I n t e r m e d i a t e Credit
Banks and National A g r i c u l t u r a l Credit Corporations purchased "by
Federal r e s e r v e "banks (under Section 1 4 ( f ) of Federal Reserve Act).
I t would a l s o seem t h a t a r e f e r e n c e should "be made to Section 340;
"but t h i s i s not e s s e n t i a l , i n view of the f a c t t h a t Section 340
i t s e l f r.iakes a g r i c u l t u r a l paper acquired thereunder e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r Feueral r e s e r v e n o t e s .
Section 413.
Corresponds to a p a r t of Section 16 of the Federal Reserve Act.
The r e f e r e n c e a t the end of t h i s s e c t i o n "Dccer.roer 23, 1923",
should "be changed to r e a d : "December 23, 1313".
In tho nineteenth
l i n e tho co.xia should be placed a f t e r the word "or" i n s t e a d of bef o r e the word "or" i n order to conply a c c u r a t e l y with the o r i g i n a l
statute.
The words " h e r e i n a f t e r provided" enould bo changed to
read: "provided i n Sections 414 and 415".
The r e f e r e n c e a t the
end of t h i s soction "December 23, 1923" should be changed to read
"December 23, 1913".
Section 414.
Corresponds to a p a r t of Section 16 of the Federal EGserve Act*
Tho r e f e r e n c e a t the end of t h i s s e c t i o n "December 23, 1923" should
be changed to read "December 23, 1913".
The words " h e r e i n b e f o r e
r e q u i r e d " should be changed to read " r e q u i r e d by s e c t i o n 413".
Section 415.
Corresponds to a p a r t of Section 16 of the Federal Reserve Act.
At the end of t h i s s e c t i o n the r e f e r e n c e "December 23, 1923"
X-4702
-10-
should lio changed to rend.
Section 41S.
11
Beco.auer 23, 1913".
Corresponds to a p a r t of Section IS of the Federal Reserve Act.
Die r e f e r e n c e a t t h e end of t h i s s e c t i o n "December 23, 1923" should
"be changed to read "December 23, 1913".
Section 417.
Corresponds to a p a r t of Section 16 of the Federal Reserve Act.
The r e f e r e n c e a t t h e end of t h i s s e c t i o n
should "be changed• to read
Section 410.
11
11
September 21, 1917"
June 21, 1917",
Corresponds to a p a r t of Section 16 of the Federal Reserve Act.
The r e f e r e n c e a t t h e end of t h i s s e c t i o n "December 23, 1923"
should be changed to road "December 23, 1913".
Section 419.
Corresponds to a p a r t of Section IS of the Federal Reserve Act.
The r e f e r e n c e a t tne end of t h i s s e c t i o n "Decern-or 23, 1923"
should be changed to road "December 23, 1513".
Section 420.
Corresponds to a p a r t of Section IS of the Federal Reserve Act.
•
The •voirds "herein provided f o r " should be changed to read "provided f o r in Sections - i l l to 422 i n c l u s i v e " *
The r e f e r e n c e a t the
end of t h i s s e c t i o n "December 23, 1923" should be changed to read
"December 23, 1913".
Section 423.
Corresponds to a p a r t of Section 16 of the Federal Reserve Act.
This r e f e r s to "notes p$pv|.dod f o r by Act of May 30, 190#*,
Refer-
ence should bo rnde to m a t s e c t i o n of the Code which corresponds
to the Act of May 30, 1#0%
This s e c t i o n of the c o d i f i c a t i o n also
contains a phrase " a t the time of the passage of t h i s c h a p t e r " ,
"c h a p t e r " being s u b s t i t u t e d f o r the word " a c t " as contained i n
the Federal Reserve Act.
I t wcyld seen t h a t t h i s pnrase should
be changed to read " a t the time of the passage of the Federal Reserve
Act."
X—1702
nn<
-11-
Section 447.
Corresponds to a p a r t ox' Section 1C of the Federal liesurvo Act.
T-s
words " h e r e i n provided f o r " should be changed to r e i d "provided f o r
i n S e c t i o n s 441 to 443 i n c l u s i v e " .
Section 448.
Corresponds to a p a r t of Section 10 of the f e d e r a l Reserve Act.
The
word "herein" in t h e l a s t l i n e should "be s t r i c k e n out and the words
" i n S e c t i o n 441 t o 440 of t h i s chapter" added a t tho end of the
section.
Section 461.
Corresponds to a p a r t of Section 19 of the Federal Reserve Act.
The
r e f e r e n c e a t the end of t h i s s e c t i o n should a l s o include a r e f e r e n c e
to "Juno 21, 1917, C. 32, 40 S t a t . 232".
Section 462.
Corresponds to a p a r t of Section 19 of the Federal Reserve Act.
In
the sevetith l i n e of paragraph (b) "a" should be i n s e r t e d b e f o r e the
word " c i t y " .
Section 463*
Corresponds to a p a r t of Section 19 of the Federal Reserve Act*
The
r e f e r e n c e a t the end of t h i s s e c t i o n "39 S t a t . 591" should be changed to read "30 S t a t . 691".
Section 464.
Corresponds to a p a r t of Section 19 of the Federal Reserve Act.
The
r e f e r e n c e a t the end of t h i s s e c t i o n ;"32 S t a t . 691" should be changed to read•*33 S t a t . 691".
Section 467$
Corresponds to a p a r t of Section 16 of the Federal Reserve Act.
The words "or any A s s i s t a n t Typasurer" which a r e now found i n the
t h i r d l i n e of the p r e s e n t lasr a f t e r the word "Treasurer" a r e omitted
from the c o d i f i c a t i o n .
The words "or A s s i s t a n t Treasurer" now found
i n the e i g h t h l i n e of the p r e s e n t lav? a f t e r the word "Treasurer" a r e
a l s o omitted.
Inasmuch a s the Sub t r e a s u r i e s . and the o f f i c e of As-
s i s t a n t Treasurer wore abolished by the Appropriation Act of May 29,
1920,
the omission of r e f e r e n c e s to the A s s i s t a n t Treasurers i s p r o -
3
X 4703
-12-
b a l l y c o r r e c t but tno words " A s s i s t a n t - r e a s u r e r " have been r e t a i n ed i n the t w e l f t h l i n e .
The word
11
section" found i n the f i r s t and
t h i r d l i n e s of the l a s t paragraph of t h i s s e c t i o n snould be changed to read " c h a p t e r " .
The r e f e r e n c e a t the end of t h i 3 s e c t i o n
to "June 21, 1917', C. 328" should "be changed to road "June 21,
1917, C. 32".
Section 431,
Corresponds to a p a r t of Section 21 of the Federal Reserve Act.
In the 15th l i n o a co.ima should "be p l a c e d a f t e r the word "bank" to
comply a c c u r a t e l y with the -v-ovisions of the o r i g i n a l s t a t u t e .
Section 402.
Corresponds to a p a r t of Section 5240 of the Revised S t a t u t e s as
amended by Section 21 of the Federal Reserve Act*
The word " h e r e -
in" i n the f i f t h l i n e should be s t r i c k e n out and the words " i n
Section 481" i n s e r t e d a f t e r the words "provided f o r . "
Section 501.
Corresponds to a p a r t of Section 5208 of the Revised S t a t u t e s .
The r e f e r e n c e to Section 331 should be changod to r e a d "Sections
321 to 331 i n c l u s i v e . "
Section 594.
Corresponds to a p a r t of Section 22 of the Federal Reserve Act.
In the 14th l i n e the c o m a a f t e r the word "House" aoes not appear
i n the o r i g i n a l s t a t u t e .
Section 611.
Corresponds to a p a r t of § e q t i o a 25(a) of the Federal Reserve Act.
The word " s e c t i o n " i n the n i n t h , t w e l f t h and f o u r t e e n t h l i n e s
should be changed to read " s u b d i v i s i o n of Chapter 5".
Section 613.
Corresponds to a p a r t of Section 25(a) of the Federal Reserve Act.
The word " s e c t i o n " i n the l a s t l i n e should be changed to read
" s u b d i v i s i o n of chapter S."
Section 614.
Corresponds to a p a r t of Section 25(a) of the Federal Reserve Act.
A-'t a
-13the second vord of the t e x t of t h i s s e c t i o n , "person" nhould "bj
made p l u r a l , "persons."
Soction 615,
Corresponds to a p a r t of Section 35(a) of the Federal He.serve Act.
The word "chapter" i n the f o u r t e e n t h l i n e from the end of
paragraph (a) should be " s u b d i v i s i o n of Chapter 6".
The word "sec-
tion" i n the n i n t h l i n e from the end of paragraph (a) in the f i f t h
l i n o from the end of paragraph ( a ) , in the f o u r t h l i n e fror.i the
end of paragraph ( a ) , i n the f o u r t h l i n e from the beginning of
paragraph (c) and i n the s i x t h l i n e of the l a s t p a r a g r a p h , should
be changed to " s u b d i v i s i o n of Chapter 6 . "
Section 616.
Corresponds to a p a r t of Section 25(a) of tho Federal Eesorvo Act.
The word " s e c t i o n " i n the eighth l i n e should be changed to "subd i v i s i o n of chapter 5" and the same changc should bo niade in the
l a s t word of t h i s s e c t i o n .
Section 617.
Corresponds to c. p a r t of Section 25(a) of the Federal lieservo Act.
The word " s e c t i o n " i n the f i f t h lino should be changed to road
" s u b d i v i s i o n of chapter 6."
The word " s e c t i o n " i n the t e n t h l i n o
should a l s o be changed.
Section 619.
Corresponds to a p a r t of Section 25(a) of the Federal Hoservc Act.
• The word " s e c t i o n " appea^in£ i n the 9th l i n e from the end of t h i s
s e c t i o n and a l s o as the l a s t word of t h i s s e c t i o n should be changed
to " s u b d i v i s i o n of chaptor 6".
A f t e r the word " s e c t i o n " i n the
n i n t h l i n e f r o n the end of t h i s s e c t i o n the word "in" which i n the
p r e s e n t law precedes the words "whose c a p i t a l stock" has been omitted.
Section 624.
This changes the moaning of the sentence e n t i r e l y .
Corresponds to a p a r t of Section 25(a) of the Federal Reserve Act.
I n the next to the l a s t l i n e of t h i s s e c t i o n the word " j u r i s d i c -
tion" should be made p l u r a l " j u r i s d i c t i o n s " .
Section 629.
Corresponds to a p a r t of Suction 25(a) of the Federal Reserve Act.
In the eighth l i n o from the end of the s e c t i o n , the word "section"
should bo ciian ;od to " s u b d i v i s i o n of chapter 6".
The l a s t word ap-
p e a r i n g i n t h i s s e c t i o n , "hereunder" should be changed to read
"thereunder".
Section 530.
Corresponds to. a p a r t of Section 35(a) of the Federal Reserve Act.
The word " s e c t i o n " i n the f o u r t h l i n e from the end should be changed to "subdivision of chapter 6."
The word "or" appearing a f t e r
' ^ O f f i c e r " i n the f o u r t e e n t h l i n o should oe changed to rer\d " o f " .
Section 631.
Corresponds to a p a r t of Section 25(a) of the Federal Reserve Act.
In the seventh l i n e of t h i s s e c t i o n the rzord "horounder" should bo
changed to read "under t h i s subdivision of chapter 5".
Section 943.
Corresponds to a p a r t of the Farm Loan Act.
The words "subsection
(b) of" i n the f i f t h and s i x t h linoi. chcalJ co o m i t t e d .
Section 1222,
Corresponds to a p a r t of the A g r i c u l t u r a l Credits Act of 1923.
The word " s e c t i o n " i n the eocond l i n e should be changed to road
"chapter".
Section 1333.
Corresponds to a p a r t of the A g r i c u l t u r a l Credits Act of 1923.
The word " s e c t i o n " i n the second l i n e should be changed to read
" chap t o r " .
Section 771.
of T i t l e 31.
Corresponds to a p a r t of the Act approved A p r i l 4 , 1910.
The r e -
f e r e n c e i n the 15th and 16th l i n e s to Sections 141 to 143 of T i t l e
12 should be changed t o read " s e c t i o n s 141 to 144 i n c l u s i v e of Ti~
297
X-4702
t i e 12 cmd Sections 451 dad 462 of T i t l e 12".
Section 759.
of T i t l e 3S.
• Corresponds to a port or the Postal Savings Act as otuondod May
1G, 1916,
After the wojrds "federal Heservo Syston", appearing in
the 5th l i n e and almo in, the 26th l i n e of t h i s s e c t i o n of the Code,
' J
the o r i g i n a l s t a t u t e contains the words
approved Deceribcr 35, 1913*.
"established
by the Act
Those words have been omitted from
the Code and i t i s suggested that there tie substituted i n thoir
'stead the words flas described i a Chester 3 of T i t l e 12",
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federal reserve board
WASHINGTON
891
X-4722
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
[November 16, 1926,
SUBJECT:
Bank S a l a r i e s .
Dear S i r :
Following the u s u a l p r a c t i c e , w i l l you k i n d l y
have prepared and forwarded to t h e Board on or b e f o r e
December 10 s a l a r y recommendations of your Board of
D i r e c t o r s f o r the year 192? in the same form as submitted
l a s t year i n accordance with the Board's l e t t e r X-4452 of
November 17, 1925, a copy of which i s enclosed. The
recommendations should cover a l l employees on the b a n k ' s
p a y r o l l , including those whose s a l a r i e s a r e reimbursable
to t h e bank e i t h e r i n whole ot i n p a r t from n o t a r y f e e s ,
c a f e t e r i a r e c e i p t s , e t c . If the b a n k ' s counsel i s not an
o f f i c e r (does not devote h i s e n t i r e time to t h e bank)
a s e p a r a t e recommendation should be made covering the
annual r e t a i n e r f e e to be p a i d and f o r any a d d i t i o n a l
compensation f o r c l e r k h i r e or o t h e r a s s i s t a n c e .
The recommendations should, a s l a s t y e a r , be
accompanied with a statement showing t o t a l s a l a r y payments
made during 1926 (December estimated) and the estimated
s a l a r y requirements f o r o f f i c e r s and employees during
1927, c l a s s i f i e d by f u n c t i o n s .
Very t r u l y yours,
Walter L. Eddy*
Secretary.
L e t t e r to Chairmen of till S1.E.Banks
Enclosure.
except New Y6rk.
X-4452
November 17, 1925.
SUBJECT: Bank S a l a r i e s .
Dear S i r :
In accordance T.ith previous p r a c t i c e and
i n view of Section 4 of the Federal Reserve Act,
which p r o v i d e s t h a t any compensation t h a t may he
p r o v i d e d by boards of d i r e c t o r s of Federal R e s e r v e
banks f o r d i r e c t o r s , o f f i c e r s or employees s h a l l be
s u b j e c t to the approval of the Federal Reserve Board,
i t i s r e q u e s t e d t h a t you p r e p a r e and forward to the
Board on or b e f o r e December 10 schedules, i n accordance
with the Sample forms a t t a c h e d h e r e t o , c o n t a i n i n g the
names and s a l a r i e s of a l l o f f i c e r s and employees of
your bank.
I t w i l l be noted t h a t the schedules a r e to
show the p r e s e n t and proposed annual s a l a r i e s of a l j
o f f i c e r s and of employees r e c e i v i n g i n excess of $20^00
p e r annum, and the s a l a r i e s a t the beginning of 192#
and those proposed f o r January 1, 1926, of employees
r e c e i v i n g $2,500 or l e s s . Separate schedules should
be submitted f o r the Head O f f i c e and each Branch.
T i l l you a l s o k i n d l y accompany your s a l a r y
recommendations with at statement showing s a l a r i e s p a i d
to o f f i c e r s and to employees during 1925 (December
e s t i m a t e d ) , and the estimated s a l a r y requirements f o r
o f f i c e r s and employees during 1926, c l a s s i f i e d by
f u n c t i o n s i n accordance with the enclosed form.
Very t r u l y yours,
Walter L. Eddy.
Secretary.
Enclosure.
TO CHAIRMEN OF ALL F . R. BANKS
i
X-4452-a
HAM3S A D SALARIES OF OFFICERS ON DECEMBER 1, 1935.
M
(Includes only the p o s i t i o n s l i s t e d i n Federal Reserve
Board's l e t t e r X-3532 of Oct. 5, 1922)
Federal Reserve Bank - Branch
Kama
Title
Functions
_ _ _ supervised
Total,
of f i c e r s
P-rseent
annual
salary
Proposed
salary
J a n , 1, lv23
X-4452-Td '
TOILER. AIID SALARIES OP EMPLOYEES RECEIVING MOBS THAU $2,500 PER AISUM.
(5hploy3Gs recommended, for s a l a r i e s in excess of $2,500 should
a l s o "be included in t h i s report)
Federal Reserve Bank - Branch
ITfrae
Title
Total,
, Dec. 1, 1925.
Functions to
Present
which assigned ..^annual
salary
employees
Proposed s a l a r y
J a n . 1, 1926.
X-4452-c
NUMBER AND SALARIES CF EMPLOYEES BECEIVTNG $2,500 OE LESS PER ANNUM.
(Employees recommended f o r s a l a r i e s i n excess of $2,500
should not bo included in t h i s r e p o r t ) .
Federal Reserve Bank - Branch
Name
Title
1
• , Dec. 1, 1925.
S a l a r y on
Proposed s a l a r y
J a n . 1, 1926
J a n . 1, 1925*
*
—
function
Total,
employees
'NOTE: Employees should be grouped according to the f u n c t i o n s given i n the funct i o n a l expense r e p o r t , form E, and t o t a l s shown f o r a l l f u n c t i o n s . An employee a s signed to more than one f u n c t i o n should be l i s t e d i n the f u n c t i o n to which he devotes the g r e a t e r p a r t of h i s t i n e , with a note i n d i c a t i n g i n what o t h e r f u n c t i o n s
he i s employed. The r e p o r t should not include e x t r a h e l p or temporary employees,
but i t should include a l l r e g u l a r employees whose s a l a r i e s a r e reimbursable to the
bank e i t h e r i n whole or i n p a r t . In the case of employees who a r e on a p e r diem
or hourly b a s i s , the estimated t o t a l annual compensation should ala;o be shown.
• I f h i r e d during 1925, p l e a s e show the i n i t i a l s a l a r y .
304
X-4452-d
SALARIES* PAID DURIITG ,i$35 AZD ESTIMATED PAYMENTS DURING 1926
Federal Reserve Bank ( i n c l u d i n g "branches)
Functions
(Form E c l a s s i f i c a t i o n )
P a i d during 1925
(December e s t i n a t e d )
O f f i c e r s j Employees
General Overhead
Provision of Space
Provision of Personnel
General Service
F a i l e d Banks
Loans, Rediscounts and Acceptances
Securities
Currency and coin
Check c o l l e c t i o n s
Non-cash c o l l e c t i o n s
Accounting
F i s c a l Agency
Legal
Auditing
Bank Relations
Federal Reserve Hot© I s s u e s
Bank Examination
S t a t i s t i c a l and A n a l y t i c a l
Total
^Includes e x t r a h e l p , overtime and supper money.
__
\ Estimated payments
,
during 1926
! O f f i c e r s | Employees
805
federal reserve board
WASHINGTON
X-4723
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
November 16, 1926.
SUBJECT:
1927 Budget f o r S t a t i s t i c a l and A n a l y t i c a l Work.
Dear S i r :
In c o n t i n u a t i o n of the p o l i c y adopted l a s t y e a r ,
w i l l you k i n d l y p r e p a r e and submit to the Board f o r approval,
not l a t e r than December 10, a budget of expenditures covering
work in t h e S t a t i s t i c a l and A n a l y t i c a l f u n c t i o n of your bank
( i n c l u d i n g branches, i f any), to be c a r r i e d on during the
year 1927. The budget should be submitted on the a t t a c h e d
form which corresponds with t h e f u n c t i o n a l expense r e p o r t
form E, and which provides f o r showing in p a r a l l e l columns
the budget approved f o r and amounts a c t u a l l y expended during
1926 (December estimated) and the proposed budget f o r t h e
calendar year 1927. The proposed s a l a r y payments as shown
in t h e budget f o r 1927 should be based on the s a l a r y recommendations made f o r next y e a r ;
Very t r u l y yours»
Walter L. Eddy,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
Enclosure.
f&MRAL 3MSBV1 SMK 0 ?
( I n c l u d i n g b r a n d l ^ ) ^:
'
• '
•
;<A
|? **oposed "budget of expenses in the S t a t i s t i c a l and Analytical function (as
f
; defined in tho Idauual of Instructions covering functional expense reoorts
V1 form S) f o r the year 1927.
•
p.; I
(All f i g u r e s to he shown to the nearest d o l l a r , cents omitted)
B0T3GBT
2XFWSES • BUBOSE •
for
during
for
1926
1926*
1927
|
mmsmsmt
Salaries - o f f i c e r s
'I
Salaries - employees
'( Traveling expenses
-I Print. & s t a t . & other s u p p l i e s
Telephone and telegraph
All other**
TOTAL
K
X STATISTICAL:
,
Salaries - employees
traveling axpenaes
r<\ Br i n t . & s t a t . & other supplies
telephone and telegraph
:! Postage
A l l other**
.
;i
w
'
/
TOTAL
MOBTHLT ISOTffi:
Printing and stationery
Postage
TOTAL
i
I
LIBRARTs
Salaries - employees
t r a v e l i n g eaqpeases
|
Print. & s t a t , & other supplies
!
Telephone cad telegraph
Hews s e r v i c e - subscription to
p e r i o d i c a l s , etc#
f
Books
. A l l other -**
—
fOfAl
&3AHD TOTAL
ITumber of copies of monthly l e t t e r printed, December 1926 ____________
'
Receipts from monthly l e t t e r s soldi
Te«P 1926
Sstimted,Year,1937
•Bccetiber expenses estimated.
• • C l a s s i f y , i f in e x c « w of # 0 0 .
.
'
S
_ $
•
So m * de~
, dw*
,
•' ?
0
0
.
X-4724
P.
Y
FEDERAL
RESERVE
BAHK
«%U /
OF DALLAS.
L W DEPASE.'IEST'T
A
Locke,Locke,Stroud & Randolph
Counsel.
November 5, 1926.
Mr. Walter Wyatt, General Counsel
The Federal Reserve Board
Washington, D.C.
Dear Walter;
I acknowledge r e c e i p t of your l e t t e r of October 28,
in which you enclose copies of s e v e r a l l e t t e r s you have r e c e i v e d
commenting upon the case of the War Finance Corporation v. D u f f .
I have intended w r i t i n g you about t h i s c a s e , but have delayed i t
due to the f a c t t h a t we have had a case involving almost i d e n t i c a l
f a c t s , which wo l o s t in the t r i a l court and a l s o in the Court of
C i v i l Appeals.
We now have pending an a p p l i c a t i o n f o r w r i t of
e r r o r f o r the Supreme Court of Texas.
I am e n c l o s i n g herewith a copy of t h e opinion of t h e
Court of C i v i l Appeals in the case in which the Federal Reserve Bank
i s i n t e r e s t e d , and a l s o a copy of the a p p l i c a t i o n f o r w r i t of e r r o r .
I am a l s o sending under s e p a r a t e cover t h i r t e e n copies of the b r i e f
which we f i l e d in the Court of C i v i l Appeals.
• I t h i n k t h a t the m a t t e r s p o i n t e d out in Paragraph Number
Two in our a p p l i c a t i o n f o r w r i t of e r r o r , under Grounds of J u r i s d i c t i o n , f u l l y cover anything which I might have to say with r e f e r e n c e to
the importance of the question,
I w i l l keep you advised a s to the p r o g r e s s of the case
in the Supreme Court.
Sincerely,
(signed) E. B. Stroud, J r .
E. B. STROUD, JR.
Enclosures.
X-4724-a
Ho. 392 .
In thr
,'•08
COURT OF CIVIL APPEALS
FOB THE
TENTH SUPREME JUDICIAL DISTRICT
OF TEXAS , AT W C
AO
FEDERAL RESERVE BANK OF DALLAS
Appellant,
v.
T. A. KAMA BT AL, APPELLEES.
Appeal from D i s t r i c t Court,
Johnson County
This s u i t was i n s t i t u t e d , "by a p p e l l a n t , Federal Reserve Bank
of D a l l a s , a g a i n s t a p p e l l e e s , T. A. Hanna and C. D. Dickerson, to r e cover on two promissory n o t e s in the sum of $750.00 each, with i n t e r e s t and a t t o r n e y ' s f e e s .
court.
The p a r t i e s w i l l be designated a s in the t r i a l
Said n o t e s were executed by defendant Hanna to defendant Dickerson
and made payable a t the F i r s t National Bank of Cleburne, h e r e a f t e r c a l l e d
the Cleburne Bank, on J u l y 1 s t , 1931 and September 1 s t , 1921, r e s p e c t i v e l y . They were both duly endorsed by Dickerson and sold and d e l i v e r e d
by him to s a i d Cleburne Bank.
v i s e d of s a i d f a c t .
Defendant Hanna was a f t e r w a r d s duly ad-
On August 23rd, 1921, the Cleburne Bank n o t i f i e d
defendant Hanna t h a t s a i d f i r s t note was p a s t due, and t h a t s a i d second
n o t e would be due September 1 s t , and t h a t both were payable a t i t s
office.
Defendant Hanna immediately wrote s a i d bank asking t h a t both
n o t e s be extended to November 1 s t . Said bank r e f u s e d the r e q u e s t , and
d e c l a r e d i t would take necessary s t o p s to c o l l e c t the same i f not p a i d
-
within ten days.
2
-
X-4724-
Defendant Hanna mailed to s a i d bank h i s check
the amount due on both n o t e s . ^Baid check was r e c e i v e d by s a i d bank
on September 8, 1921, and was promptly cashed and the proceeds approp r i a t e d by i t to i t s own u s e .
Said Cleburne bank was indebted to the
p l a i n t i f f and had long p r i o r to the m a t u r i t y of s a i d n o t e s endorsed and
d e l i v e r e d the same to i t as c o l l a t e r a l s e c u r i t y f o r such indebtedness.
Defendants, among o t h e r d e f e n s e s , pleaded t h a t s a i d n o t e s
had been p a i d in f u l l to t h e Cleburne Bank and t h a t s a i d bank was the
agent of p l a i n t i f f a t the time of such payment and a u t h o r i z e d to r e ceive the same.
The case was submitted to a j u r y on s p e c i a l i s s u e and judgment
was rendered f o r the defendants on the v e r d i c t r e t u r n e d in response
thereto.
OPINION.
The court submitted to the j u r y the f o l l o w i n g s p e c i a l i s s u e :
"Was the National Bank of Cleburne the
Agent of the Federal Reserve Bank of Dallas in t h e c o l l e c t i o n of the two notes sued upon on September 8th,1921?"
The j u r y answered s a i d i s s u e "ffes".
P l a i n t i f f o b j e c t e d to the sub-
mission of s a i d i s s u e on t h e ground t h a t t h e r e was no evidence to
a u t h o r i z e i t s submission.
P l a i n t i f f contends t h a t the court e r r e d
in o v e r r u l i n g s&id o b j e c t i o n , and such contention i s t h e p r i n c i p a l
*
i s s u e p r e s e n t e d in t h i s appeal.
Defendant's check f o r the amount of s a i d n o t e s was
sent to the Cleburne Bank by mail and he was not p r e s e n t a t the
time i t was r e c e i v e d to r e q u i r e production and surrender of s a i d
n o t e s . While i t appears t h a t s a i d n o t e s were probably in s a i d bank in
the hands of the manager of p l a i n t i f f ' s loan department f o r c o l l e c t i o n
a t the time, i t did n o t have a c t u a l p o s s e s s i o n of t h e same. The r u l e
in such cases i s l a i d down in 3rd R.C.I,., p . 1289, sec. 521, a s f o l l o w s :
— 3 —
X—4724—A,
"Yf.ieii payment i c made to a person not
having possession of the s e c u r i t i e s p r o p e r l y endorsed,
the burden of showing t h a t such person was a u t h o r i z e d to
r e c e i v e payment f o r the c r e d i t o r r e s t s upon t h e p a r t y who
makes the claim of payment."
See a l s o 2 C . J . ,
624; Hhodos v. Belches, 59 Pac. 117.
The mere
f a c t t h a t the person to whom payment i s made i s not a t the time of
payment in a c t u a l possession of the s e c u r i t i e s or n o t e s intended to
"be discharged i s n o t conclusive of l a c k of a u t h o r i t y , but i s a mere
circumstance to be duly considered in determining t h e i s s u e of agency
or a u t h o r i t y to r e c e i v e such payment.
2 C.J. p . 525, sec. 262.
It is
n o t , however, necessary t h a t agency oV a u t h o r i t y in f a c t to r e c e i v e
payment be e s t a b l i s h e d by d i r e c t evidence.
Like any o t h e r m a t e r i a l
f a c t i n i s s u e , i t may be proved by circumstances. 2 C . J . , p . 944, sec.
708; 21 B. C. 1 . , pp.820-1, sec. 6; Daugherty v. Wiles, 207 S.W.900,
901-2; S t r i n g f e l l o w v. Brazelton, 142 S.W. 936, 938-9; Ward V. Powell,
127 S. W. 851, 852; Wilson v. LaTour, 66 H. W. 474; B i s s e l l v.
Dowling, 76 BT. W. 100.
Where evidence i s introduced tending to show
agency or a u t h o r i t y the issue should be submitted to t h e j u r y . 2 C. J . ,
p . 960, s e c . 731; B r a d s t r e e t v. G i l l , 72 Tex. 115, 116.
The Cleburne Bank was indebted to t h e p l a i n t i f f i n the
sum of more than $600,000.00, which indebtedness was secured by n o t e s
owned by i t and endorsed and d e l i v e r e d by i t to t h e p l a i n t i f f a s c o l lateral.
Mr. Gentry, the manager of p l a i n t i f f ' s loan department, was
a w i t n e s s in i t s b e h a l f .
He t e s t i f i e d on cross-examination t h a t he
v i s i t e d the Cleburne bank every day from the e a r l y p a r t of August, 1921,
u n t i l i t f a i l e d on or about the 18th day of October of t h a t y e a r , except on two occasions, when someone e l s e from h i s department cane in
h i s s t e a d ; t h a t during a l l t h a t time he knew t h a t t h e Cleburne bank
was borrowing h e a v i l y , was hard p r e s s e d f o r money, and was in what
he termed an "extended" c o n d i t i o n .
He did n o t d e f i n e t h a t term but on
- 4 -
X-4724-a
c o n s i d e r a t i o n of h i s testimony as 'a whole we understand, t h a t he fclrlnir
thereby a c o n d i t i o n of p r o b a b l e b u t n o t c e r t a i n i n s o l v e n c y .
He f u r -
t h e r t e s t i f i e d t h a t he kngw during a l l t h a t time t h a t p l a i n t i f f d i d
n o t c a r e to send s a i d bank any more n o t e s through t h e m a i l f o r c o l l e c t i o n ; t h a t h i s d a i l y v i s i t s to s a i d bank were to c o l l e c t s a i d c o l l a t e r a l n o t e s and a l s o checks on s a i d bank; t h a t he brought each day
a l l n o t e s t h a t were due, a l l t h a t were p a s t due and a l l t h a t would
mature in t h e next ten days; t h a t he d i d not p r e s e n t s a i d n o t e s to the
makers b u t t h a t he c o l l e c t e d them by p r e s e n t i n g them to Mr. Norwood,
p r e s i d e n t of t h e Cleburne bank; t h a t t h e bank p a i d very few n o t e s in
comparison w i t h the n o t e s they had o u t .
We quote from t h e testimony
of s a i d w i t n e s s as follows?
" I d o n ' t know who would n o t i f y t h e v a r i o u s
makers of t h e v a r i o u s notes I would b r i n g down h e r e to come
i n and pay t h e n o t e s . Mr. Norwood never d i d a t my i n s t a n c e
n o t i f y anybody t h a t t h e i r n o t e was due and f o r them to come
in and pay i t . No one i n the bank d i d t h a t I know o f ; they
d i d n ' t do a n y t h i n g a t my i n s t a n c e . I would come i n t h e r e with
my n o t e s p a s t due, b u t I brought no p r e s s u r e on them a t a l l
t o go o u t and n o t i f y the makers of t h e n o t e s to come i n and
pay up. * * * As to whether or not I j u s t s a t down t h e r e and
guarded the n o t e s and d i d n ' t a s k anybody to make any e f f o r t
to c o l l e c t t h o s e n o t e s , I looked a f t e r t h e n o t e s . That i s
what I was supposed to do. That was my b u s i n e s s . I d i d n ' t
g i v e any of them away. I never d i d see any of the makers of
t h e n o t e s m y s e l f , go out and t e l l them to come i n and pay
them. I never d i d w r i t e any of them n o t i c e s . * * *1 d i d n ' t
even suggest t h a t to t h e N a t i o n a l Bank of Cleburne; I assumed
t h a t he was looking a f t e r t h e c o l l e c t i o n s h i m s e l f . " ( I t a l i c s
ours).
This w i t n e s s f u r t h e r t e s t i f i e d t h a t he would not s u r r e n d e r a n o t e to
t h e employes of t h e Cleburne Bank and p e r m i t them to take i t to t h e
window and c o l l e c t i t and b r i n g t h e money back to him, b u t t h a t he r e q u i r e d them to b r i n g t h e money to him b e f o r e he would p a r t w i t h t h e
note.
This testimony was c o n t r a d i c t e d by d e f e n d a n t ' s w i t n e s s Handle,
who t e s t i f i e d t h a t he was employed by t h e Cleburne Bank and t h a t he
kept the loan and discount l e d g e r t h e r e o f d u r i n g t h e time in q u e s t i o n .
X-4?24-a
We quote from h i s testimony as follows:
„ .f)
o3.i<5
" I t i s a f a c t t h a t f o r s e v e r a l months p r i o r
to t h e f a i l u r e of the n a t i o n a l Bank of Cleburne Mr. Gentry
on p r a c t i c a l l y every day came down to the National Bank of
Cleburne and brought the n o t e s t h a t t h e National Bank of
Cleburne had placed as c o l l a t e r a l with the Federal Reserve
Bank with him f o r c o l l e c t i o n . With r e f e r e n c e to what the
method was of c o l l e c t i n g the n o t e s , when customers of the
bank would come into the bank and come up to the window and
want to pay a note held by the Federal Reserve Bank, Mr.
Gentry would bring h i s n o t e s , together with h i s cash l e t t e r ,
every morning, and he would s i t back in the back end of
the bank, a s well as I remember, and the n o t e s were u s u a l l y
p a i d a t the f r o n t , and i f a, man came i n to pay h i s note we
would have to go back and get the note from Mr. Gentry and
come up and c o l l e c t the money and then take the money back
to Mr. Gentry * * * In c o l l e c t i n g these n o t e s from the makers
of them and paying the money to Mr. Gentry, i t i s a f a c t t h a t
on account of the f i n a n c i a l c o n d i t i o n of t h e National Bank
a t t h a t time t h a t the only money they were a b l e to pay the
n o t e s with was from what they c o l l e c t e d and what money was
d e p o s i t e d in t h e bank."
We t h i n k the testimony above quoted, considered r i t h a l l the
other testimony in the ease, r a i s e d a reasonable i n f e r e n c e t h a t the
Cleburne bank was n o t i f y i n g the makers of the n o t e s pledged by i t to
p l a i n t i f f of the m a t u r i t y of the same as they became due, and endeavoring to c o l l e c t the same, and t h a t p l a i n t i f f knew of such a c t i o n and
n o t only acquiesced t h e r e i n b u t t a c i t l y approved the same; t h a t n e i t h e r
the Cleburne bank nor p l a i n t i f f saw f i t to d i s c l o s e t h a t s a i d n o t e s
had oeen so pledged; t h a t p l a i n t i f f intended t h a t t h e Cleburne bank
should continue to c o l l e c t s a i d n o t e s as the o s t e n s i b l e owner and
holder t h e r e o f , but f o r i t s b e n e f i t , and t h a t the procedure adopted by
p l a i n t i f f was intended merely to keep i t in touch with such c o l l e c t i o n s
and prevent a d i v e r s i o n or m i s a p p l i c a t i o n of the p r e c e e d s .
The n o t e s
involved in t h i s case were a p a r t of s a i d c o l l a t e r a l , and were,according
to the testimony of the witness Gentry, brought by him to the Cleburne
bank f o r c o l l e c t i o n the same as the o t h e r n o t e s t e s t i f i e d about by him.
We think the testimony was ample to j u s t i f y the c o u r t in submitting the
i s s u e of the %gcncy of the Cleburne Bank in c o l l e c t i n g s a i d c o l l a t e r a l .
No complaint was made of the manner in which such i s s u e was submitted.
- 6 -
X-4724-
313
P l a i n t i f f ' s contention t h a t the court eittfed in submitting the same
i s overruled.
We have examined a l l the o t h e r c o n t e n t i o n s p r e s e n t e d by
p l a i n t i f f as ground f o r r e v e r s a l and have concluded t h a t they ^
should be o v e r r u l e d .
The judgment of the t r i a l court i s a f f i r m e d .
J . N. GALLAGHER
Chief J u s t i c e
X-4724-b
_
_
P
Y
ITo • • •
31.4
In the
SUPREME COURT OF THE STATE OF TEXAS
— ™O— •
— oo —
Federal Reserve Bank of D a l l a s ,
P l a i n t i f f i n Error
v.
T. A. HAMA, e t a l ,
Defendants in Error
—-oOo——
APPLICATION FOB D9RIT OF E3R0R
——oOo
TO THE SUPREME COURT OF THE STATE OF TEXAS:
The Federal Reserve Bank of D a l l a s , a banking corporation
organized under a n t by v i r t u e of the laws of t h e United S t a t e s of America,
hereby a p p l i e s f o r a w r i t of e r r o r to t h e Court of C i v i l Appeals f o r the Tenth
Supreme J u d i c i a l D i s t r i c t of Texas, to c o r r e c t the e r r o r s committed by s a i d
Court and to render such judgment as s a i d court should have rendered in the
causes, therein pending, numbered 392, wherein the s a i d Federal Reserve Bank of
Dallas i s a p p e l l a n t , and T. A. Hanna and C. D. Dickerson a r e a p p e l l e e s .
NATURE OF THE CASE
The statement of the n a t u r e of the case made, by the Court
of C i v i l Appeals in i t s opinion i s complete and a c c u r a t e except in the f o l l o w ing p a r t i c u l a r s :
1 . The opinion does not d i s c l o s e t h a t
the indebtedness of $600,000 on the p a r t of the Cleburne
bank to the Federal Reserve Bank of D a l l a s , secured in
p a r t by the n o t e s in question, was a loan of $600,000
made by the Federal Reserve Bank of D a l l a s in due course
in pursuance of the purposes contemplated by law of lending
money to member banks upon the s e c u r i t y of commercial paper.
- 2 ~
X-4724-b
2. The opinion does not mention the undisrp u t e d f a c t t h a t the Cleburne hank was r e g u l a r l y open f o r
b u s i n e s s and f u n c t i o n i n g as a going concern each day u n t i l '
October 18, 1921, when i t f a i l e d .
3. The opinion mentions, but unimportantly,
t h a t the d e f e n d a n t ' s check was r e c e i v e d by the Cleburne bank
on September 8, 1921, f o r t y days p r i o r to the f a i l u r e of the
Cleburne bank.
4 . The opinion does not mention the f a c t
t h a t the maker of the n o t e s took no s t e p s during t h i s time
to obtain possession of the n o t e s , and t h a t he made no i n quiry concerning the same.
5. The opinion mentions, but l i k e w i s e
without emphasis, t h a t the notes i n question were payable
a t the Cleburne bank.
GROUNDS OF JURISDICTION
This Court possesses j u r i s d i c t i o n to i s s u e , and should i s s u e
the w r i t of e r r o r a p p l i e d f o r because:
1. The cause i s of a c i v i l n a t u r e , brought to the Court of
C i v i l Appeals by appeal from the f i n a l judgment of the D i s t r i c t Court of Johnson
County, Texas, and i s not of the c l a s s of cases in which the j u r i s d i c t i o n of the
Court of Civil Appeals i s by law made f i n a l .
2. In i t s d e c i s i o n of t h a case, the Court of C i v i l Appeals
has committed e r r o r s of law of such importance to the j u r i s p r u d e n c e of the S t a t e
as to r e q u i r e c o r r e c t i o n .
(a).The e f f e c t of the opinion of t h e
Court of C i v i l Appeals i s to make i t impossible f o r the
holder of a number of n o t e s payable a t the same bank to
p r e s e n t than t h e r e f o r payment and to r e c e i v e and accept
payment f o r a p o r t i o n of them without c o n s t i t u t i n g the
bank a t which the n o t e s a r e payable h i s agent to c o l l e c t
a l l of the n o t e s which he h o l d s , where the h o l d e r has any
knowledge t h a t the bank a t which the n o t e s a r e payable i s
encouraging t h e i r payment; and t h i s n o t w i t h s t a n d i n g such
bank as pledgor has such a l a w f u l r i g h t to do t h i s V.-at the
holder could not prevent him from so doing. Thus, the
opinion means t h a t the only p r o t e c t i o n which a h o l d e r has
i s to n o t i f y the maker of the n o t e s t h a t they have been
t r a n s f e r r e d to him, whereas i t i s a fundamental r u l e of
law t h a t no such duty devolves upon the h o l d e r of a
n e g o t i a b l e instrument, and whereas i t i s a l s o fundamental t h a t the maker of such commercial paper makes
- 3 -
X-4?24-b
payment a t h i s p e r i l i f ho does not secure the s u r r e n der of the instrument in exchange f o r payment.
( b ) . I n e f f e c t , the opinion of t h e Court
of Civil Appeals r e q u i r e s t h a t a holder in due course
of a n e g o t i a b l e instrument, wherein the maker d e f i n i t e l y
promises to pay a t a s p e c i f i e d p l a c e , must make some e f f o r t
to c o l l e c t the note from the maker o t h e r than merely to
p r e s e n t the note a t the s t i p u l a t e d d a t e and p l a c e of payment, whereas, the fundamental and u n i v e r s a l l y recognized
r u l e of commercial law i s t h a t i t i s t h e duty of the maker
of t h e note :to be p r e s e n t or to cause some one to be p r e s e n t
a t the date and p l a c e of payment to make payment and to r e ceive the n o t e in exchange.
(c).The e f f e c t of t h e opinion of the
Court of C i v i l Appeals i s to permit t h e establishment of
agency from a s e t of circumstances each in i t s e l f proper
and l a w f u l , or yholly i r r e l e v a n t , and t h i s notwithstanding
t h a t t h e r e i s admittedly no question of estoppel involved.
(d).There being no express evidence of agency
on the p a r t of the Cleburne bank to c o l l e c t the n o t e s ,
and t h e r e being on the c o n t r a r y express testimony t h a t t h e r e
was no such agency f o r c o l l e c t i o n , and t h a t the Federal Reserve Bank of Dallas had i t s own c o l l e c t o r , one Gentry, p r e s ent a t the s t i p u l a t e d d a t e and p l a c e of payment to r e c e i v e
payment, and to d e l i v e r the n o t e s only when he r e c e i v e d the
amount c a l l e d f o r , the Court of C i v i l Appeals has h e l d t h a t
the circumstance " t h a t the Cleburne bank was n o t i f y i n g the
makers of the n o t e s pledged by i t to p l a i n t i f f of the maturi t y of t h e same as they became due and endeavoring to c o l l e c t
the same, and t h a t p l a i n t i f f knew of such a c t i o n and not only
acquiesced t h e r e i n but t a c i t l y approved the same" implied
a c t u a l agency, whereas t h e r e i s no evidence t h a t the Federal
Reserve Bank knew the l e t t e r s were w r i t t e n , and if suph
knowledge may be i n f e r r e d , i t was the r i g h t and duty of the
Cleburne bank as pledgor, and t h e r e f o r e a s the owner of the
e q u i t a b l e t i t l e to t h e notes and the r e s i d u a r y i n t e r e s t in
the same, to e x e r t a l l of i t s e f f o r t s to secure the a t t e n d ance of the makers upon the d a t e and a t the p l a c e s t i p u l a t e d
with the money with which to make payment, and whereap tfye
l e t t e r s w r i t t e n by the Cleburne bank i?ere c o n s i s t e n t ^±t% t h i s
r i g h t and duty, and whereas t h e r e i s no evidence whatever i n d i c a t i n g any knowledge on the p a r t of t h e Federal Reserve Bank
of D a l l a s t h a t the Cleburne bank was doing anything other than
e x e r t i n g i t s e f f o r t s to such an end,; There was no evidence
whatever t h a t any m i s r e p r e s e n t a t i o n was made by the Cleburne
bank with r e f e r e n c e to i t s ownership of any n o t e s or holding
of any n o t e s , or t h a t the Federal Reserve Bank of D a l l a s had
any i n f o r m a t i o n whatever concerning any f r a u d u l e n t or improper m i s r e p r e s e n t a t i o n s . Moreover, t h i s d e c i s i o n was made V
by the Court of C i v i l Appeals n o t w i t h s t a n d i n g the fundamental
and u n i v e r s a l l y recognized r u l e jaf law t h a t agency may not be
proved by the d e c l a r a t i o n s or a c t s of the a l l e g e d agent himself.
— 4 —
X—47 *4 D
2—
. ,
.
<1:17
( G). The d i s r e g a r d by .the Court of C i v i l Appeals
of t h i a fundamental r u l e of evidence, i t s implied r u l i n g
t h a t the holder in due course of a n e g o t i a b l e instrument
must give socio n o t i c e t h a t the note has been t r a n s f e r r e d
to him, and t h a t ho must make some e f f o r t himself to c o l l e c t
the note other than merely to p r e s e n t i t a t t h e s t i p u l a t e d
time and p l a c e of payment, and t h a t he may not allow any p e r son who i s a pledgor of t h e n o t e and thus owner of i t s e q u i t a b l e t i t l e , to n o t i f y or urge the maker of t h e note to pay the
same a t the s t i p u l a t e d date and p l a c e of payncr.t or t h r e a t e n
the maker with l e g a l a c t i o n i f i t be not p a i d , a r e of t r e mendous consequence to t h e Federal Reserve Bank of Dallas in
the performance of i t s p u b l i c f u n c t i o n s , and a r e of tremendous consequence to s t a t e banks of t h i s s t a t e which discount
and r e d i s c o u n t commercial paper f o r t h e i r customers, and to
the commercial p u b l i c in g e n e r a l .
The Federal Reserve Bank of Dallas i s an i n s t i t u t i o n c r e a t e d
by the Federal Government f o r a n a t i o n a l purpose, and o p e r a t e s throughout the ent i r e S t a t e of Texas and a d d i t i o n a l t e r r i t o r y .
I t i s an e s t a b l i s h e d p o l i c y of
both s t a t e and n a t i o n a l law t h a t every bank should maintain in cash or u n r e s t r i c ted c r e d i t a c e r t a i n p o r t i o n of i t s d e p o s i t s .
This i s commonly known a s a bank 1 s
r e s e r v e , and one of t h e chief f u n c t i o n s of the Federal Reserve Bank of Dallas
i s to hold and have r e a d i l y a v a i l a b l e the r e s e r v e s of a l l n a t i o n a l banks of t h i s
d i s t r i c t , and such s t a t e banks as a r e members.
That t h i s l a r g e sum of money
may be u t i l i z e d f o r the b e n e f i t of the a g r i c u l t u r a l , l i v e s t o c k and commercial
i n t e r e s t s of t h i s d i s t r i c t , t h e Federal Reserve Bank of D a l l a s i s p e r m i t t e d by
the terms of the Federal Reserve Act to extend loans to i t s member banks upon
the s t r e n g t h of t h e i r customers' n o t e s , such aa those involved i n t h i s case,
thus supplying c r e d i t as and when the l e g i t i m a t e demands of a community r e q u i r e
more than the l o c a l banks a r e able to f u r n i s h without a s s i s t a n c e .
When with-
drawn and converted into money, t h e c r e d i t thus supplied i s l a r g e l y in the form
of Federal Reserve Bank n o t e s , which form approximately t h i r t y f i v e per cent of
the n a t i o n a l c i r c u l a t i o n .
They p a s s from hand to hand, and the p u b l i c a c c e p t s
them as r e a d i l y as i t does gold or s i l v e r coin issued by t h e p i n t s of the United
S t a t e s government.
These Federal Reserve Bank notes a r e made v a l u a b l e because
they a r e secured by a deposit of s i x t y per cent of t h e i r value i n gold, and f o r t y
Digitizedper cent of t h e i r
for FRASER
value in n o t e s taken by a Federal Reserve Bank to secure the
—
—
318
X—4*724--b
loans made to member banks, s i m i l a r to the notes involved in t h i s l i t i g a t i o n .
Obviously, tho member bank n o t e s securing the Federal Reserve Bank n o t e s must
be c o l l e c t e d as and when they n a t u r e , and i t i s of the g r e a t e s t importance t h a t
the c o u r t s of t h i s S t a t e do not permit the law on such questions' as a r e here
involved to become confused, and thus give r i s e to a s t a t e of law which n i g h t
impair the value of a l a r g e p o r t i o n of our n a t i o n a l currency and j e o p a r d i z e the
r e s e r v e s of the banks l o c a t e d in t h i s d i s t r i c t .
3, In t h i s case, the Court of Civil Appeals i s in c o n f l i c t
with other c o u r t s of C i v i l Appeals of t h i s S t a t e , in t h a t i t p e r m i t s the e s t a b lishment of a c t u a l agency upon evidence of much l e s s p r o b a t i v e f o r c e than was
held to be i n s u f f i c i e n t in the cases of Evans Snyder Buel Company v Holder,
41 S. W. 404; and Higley v. Dennis, 88 S. W. 400.
4. In t h i s case, the Court of C i v i l Appeals has h e l d d i f f e r e n t l y from a p r i o r d e c i s i o n of the Supreme Court of Texas upon a question of
law m a t e r i a l to the d e c i s i o n , in t h a t i t has held t h a t t h e n o t i c e s and l e t t e r s
mailed .to the maker by the Cleburne bank were circumstances to be considered in
connection with o t h e r circumstances f o r the purposfe of e s t a b l i s h i n g agency on
the p a r t of the Cleburne bank to r e c e i v e payment; whereas, i n the case of
Coleman v. Colgate, 6 S. W. 553, the Supreme Court holds t h a t the d e c l a r a t i o n s
of the a l l e g e d agent, even taken in connection with other circumstances, a r e
not to be considered in proving agency.
1
%
•
- 6 —
X—4724
ASSIQgETTS OF EtGOR
3.19
F i r s t Assignment of E r r o r ;
The Court e r r e d in r e f u s i n g to s u s t a i n A p p e l l e n t ' s f i r s t
assignment of e r r o r , and. in thereby holding t h a t the l e t t e r s e t out in p l a i n t i f f ' s B i l l of Exception lTo.2 f i l e d in the t r i a l court was a d m i s s i b l e in e v i dence over p l a i n t i f f ' s o b j e c t i o n t h a t the same was immaterial, i r r e l e v a n t , and
an attempt to prove agency by the d e c l a r a t i o n s of the a l l e g e d a g e n t . The l e t t e r
i s as f o l l o w s :
"Cleburne, Texas, Aug. 23, 1921.
Mr. T. A. Hanna,
Kaufman, Texas
Dear S i r :
Your n o t e in f a v o r of t h i s bank
f o r $750;00 was due and payable a t t h i s o f f i c e on J u l y 1, 1921.
Please give your a t t e n t i o n to the
n a t t e r on or b e f o r e the above d a t e .
Yours very t r u l y ,
S.B.JTorwood, P r e s i d e n t .
We a p p r e c i a t e promptness."
Proposition:
Declarations of an a l l e g e d agent a r e n o t admissible even as a
circumstance to be considered in connection with other circumstances to prove the
f a c t of agency.
Statement:
This assignment i s i d e n t i c a l with a p p e l l a n t 1 s :f i r s t assignment
of e r r o r d i r e c t e d to t h e a c t i o n of the D i s t r i c t Court, and i s p r e s e n t e d under the
second ground in A p p e l l a n t ' s Motion f o r Rehearing in the Court of C i v i l Appeals.
Further statement i s rendered unnecessary by the f u l l and complete statement app e a r i n g in the opinion of the Court of C i v i l Appeals,subject to the corrections app e a r i n g on Pages 1 and 2 of t h i s instrument.
Argument and Authorities:
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the discussion in the p r i n t e d b r i e f f i l e d by Appellant in the Court of Civil
Appeals, Pages 18-24, and to i t s Motion f o r Rehearing, Pages 16-19.
— 7 —
Second Assignment of 3rror:
X-47 24:—"b
3 2 0
The Court errod in r e f u s i n g to s u s t a i n A p p e l l a n t ' s second a s s i g n ment of e r r o r , .and i n thereby holding t h a t the l e t t e r s e t out in p l a i n t i f f '.s B i l l
of Exception No,3 was admissible in evidence over p l a i n t i f f ' s o b j e c t i o n s t h a t the
same was immaterial, i r r e l e v a n t , and an attempt to prove agency by the d e c l a r a t i o n s of the a l l e g e d a g e n t .
The l e t t e r i s a s f o l l o w s :
"Cleburne, Texas, Aug. 23,1921.
Mr. T.A.Hanna,
Kaufman, Texas.
Dear S i r :
Your n o t e in favor of t h i s bank
of $750.00 w i l l be due and payable a t t h i s
o f f i c e on S e p t . l , 1921.
P l e a s e give the matter your a t t e n t i o n on or b e f o r e the above d a t e .
Yours t r u l y ,
S. 3 . Norwood, p r e s i d e n t
We a p p r e c i a t e promptness."
Proposition:
The same p r o p o s i t i o n urged under our f i r s t assignment of e r r o r
i s a p p l i c a b l e to t h e second assignment of e r r o r .
Statement:
This assignment i s i d e n t i c a l with a p p e l l a n t ' s second a s s i g n ment of e r r o r d i r e c t e d to t h e a c t i o n of the D i s t r i c t Court, and i s p r e s e n t e d under
the second ground in A p p e l l a n t ' s Motion f o r Rehearing in t h e Court of C i v i l Appeals.
Further statement i s rendered unnecessary by the f u l l and. complete s t a t e -
ment appearing in the opinion of the Court of C i v i l Appeals s u b j e c t to the corr e c t i o n s appearing on Pages 1 and 2 of t h i s ins*rumiE6t.
Argument and A u t h o r i t i e s :
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the d i s c u s s i o n in the p r i n t e d b r i e f f i l e d by a p p e l l a n t in the Court of C i v i l
Appeals, Pages 18-24, and to i t s Motion f o r Rehearing, Pages 16-19.
Third Assignment of E r r o r :
The Court e r r e d in r e f u s i n g to s u s t a i n A p p e l l a n t ' s t h i r d a s -
X
- e -
' 1 M
signment of e r r o r , and i n thereby holding t h a t the l e t t e r s e t out in p l a i n t i f f ' s
B i l l of Exception No.4 f i l e d i n the t r i a l court was admissible in evidence over
p l a i n t i f f ' s o b j e c t i o n t h a t the same was immaterial, i r r e l e v a n t , and an attempt
*
to prove agency by the d e c l a r a t i o n s of the a l l e g e d agent.
The l e t t e r i s as f o l -
lows:
"THE NATIONAL BANK OF CLEBURNE
Cleburne, Texas, Aug.30, 1921 <
Mr. T. A. Hanna,
Kemp, Texas.
Dear S i r :
I have your l e t t e r of August 29th,
and in r e p l y beg
a d v i s e i t w i l l not be
agreeable with us to extend the se n o t e s to
November 1 s t a t a l l . We w i l l expect payment
in f u l l w i t h i n the next ten days, otherwise
we w i l l be compelled to t a k e such s t e p s as
necessary to c o l l e c t same.
Yours t r u l y ,
S. B. Norwood,
President"
PROPOSITION:
The same p r o p o s i t i o n urged under our f i r s t assignment of e r r o r
i s a p p l i c a b l e to t h e t h i r d assignment of e r r o r .
STATEMENT:
This assignment i s i d e n t i c a l with a p p e l l a n t ' s t h i r d assignment
of e r r o r d i r e c t e d to t h e a c t i o n of the D i s t r i c t Court, and i s p r e s e n t e d under the
second ground i n A p p e l l a n t ' s Motion f o r Rehearing in the Court of C i v i l Appeals.
Further statement i s rendered unnecessary by t h e f u l l and complete statement
appearing in t h e opinion of ftie Court of C i v i l Appeals s u b j e c t to t h e c o r r e c t i o n s
appearing on Pages 1 and 2 of t h i s instrument.
Argument and A u t h o r i t i e s :
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the d i s c u s s i o n in the p r i n t e d b r i e f f i l e d by a p p e l l a n t in the Court of C i v i l
Appeals, Pages 18-24, and to i t s Motion f o r Rehearing, pages 16-19.
X-4724-b
Fourth Assignment of E r r o r ;
3 ^ 3
The Court erred in r e f u s i n g to s u s t a i n A p p e l l a n t ' s f i f t h a s signment of e r r o r , and in thereby holding t h a t the l e t t e r p r e s e n t e d to the Court
of C i v i l Appeals i n p l a i n t i f f ' s
B i l l of Exception No. 6 f i l e d in the t r i a l court
was admissible in evidence over p l a i n t i f f ' s o b j e c t i o n t h a t the same was immat e r i a l , i r r e l e v a n t , and an attempt to prove agency by the d e c l a r a t i o n s of the
alleged agent.
The l e t t e r i s as f o l l o w s :
"THE NATIONAL BAM OF CLEBURNE,
Cleburne, Texas
A.P.Wooldridge,Receiver,
September 1, 1923.
Mr. C. R. P s n n i l l , Cashier,
F i r s t National Bank,
Kemp, Texas.
*
My dear S i r :
As r e c e i v e r of the f a i l e d National
Bank of Cleburne, I have two n o t e s of one T.A.
Eanna f o r $750.00 each and both p a s t due since
September 1, 1921.
I understand t h a t Mr. Hanna l i v e s
a t Kemp and Mr. Walter Tynes, J r . , Vice P r e s i dent of the F i r s t National Bank of Maybaxvk,
Texas has suggested t h a t I w r i t e you.
Will you p l e a s e l e t me know in conf i d e n c e something of the c h a r a c t e r , standing
and f i n a n c i a l r e s p o n s i b i l i t y of Mr. T. A. Hanna and i f I am f o r c e d to employ an a t t o r n e y ,
who would be a good lawyer a t Kemp to whom to
i n t r u s t t h i s c o l l e c t i o n . I w i l l accept what you
may be kind enough to w r i t e me in s t r i c t confidence.
I enclose a s e l f - a d d r e s s e d and
stamped envelope f o r your a n t i c i p a t e d kind
reply.
Respectfully,
A. P. Wooldridge, Receiver'!
Proposition:
The same p r o p o s i t i o n urged under our f i r s t assignment of e r r o r
i s a p p l i c a b l e to the f o u r t h assignment of e r r o r .
- 10 -
x-4724-b
Statement:
Qi"(Q
This assignment of e r r o r i s i d e n t i c a l with the a p p e l l a n t ' s
f i f t h assignment bf e r r o r d i r e c t e d to the action of the D i s t r i c t Cotlrt, and i s
presented under the second ground in A p p e l l a n t ' s Motion f o r .Rehearing in the Court
of Civil Appeals. Further statement i s rendered unnecessary by the f u l l and comp l e t e statement appearing in the opinion of the Court of C i v i l Aopeals subject to
the c o r r e c t i o n s appearing on Pages 1 and 2 of t h i s 'insiriLsent.
Argument and A u t h o r i t i e s :
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the discussion in the p r i n t e d b r i e f f i l e d by appellant in the Court of Civil
Appeals, Pages 18-24, and to i t s Motion f o r Rehearing, Pages 3,5-19.
F i f t h Assignment of Error;
The Court erred in r e f u s i n g to s u s t a i n A p p e l l a n t ' s s i x t h a s signment of e r r o r , and in thereby holding t h a t the l e t t e r s e t out in p l a i n t i f f ' s
S i l l of Exception Ho.7,. f i l e d i n the tibial boui-t, was admissible in evidence
over p l a i n t i f f ' s o b j e c t i o n t h a t the same was immaterial, i r r e l e v a n t , and an a t tempt to prove agency by the d e c l a r a t i o n s of the alleged agent.
The l e t t e r i s as
follows:
'
"THE NATIONAL BAH OF CLEBURNE,
A.P.Wooldridge, Receiver
' August 29, 1923. .
Mr. Walter Tynes, J r . , Cashier,
F i r s t National Bank,
Maybanks, Texas.
Dear S i r :
As r e c e i v e r of t h i s bank, I hold
^two notes of one T. A. Hanna f o r $750.00 each.
*0ne note i s p a s t due s i n c e J u l y 1, 1921, and
the other since September 1, 1921. I am t r y i n g
to l o c a t e Mr. Hanna and f i n d out something
about h i s character and s t a n d i n g . Do you
know t h i s gentleman and does he l i v e anywhere
in your v i c i n i t y , and may I ask you in the
s t r i c t e s t confidence, i s he good f o r the amount of the two notes of which I am w r i t i n g
or e i t h e r of them, and what does he do?
I i n c l o s e a stamped envelope f o r
your a n t i c i p a t e d kind r e p l y .
Respectfully,
(Signed)
A.P.Wooldridge, Receiver".
Proposition;
OH *
The same proposition urged under our f i r s t assignment*01 error
'#
i s a p p l i c a b l e to the f i f t h assignment of e r r o r .
Statement:.
This assignment i s i d e n t i c a l with a p p e l l a n t ' s s i x t h assignment
of e r r o r d i r e c t e d to t h e a c t i o n of the D i s t r i c t Court, and i s p r e s e n t e d under the
second ground i n A p p e l l a n t ' s Motion f o r Rehearing in the Court of C i v i l Appeals.
Further statement i s rendered unnecessary by the f u l l and complete statement
appearing i n the opinion of the Court of C i v i l Appeals s u b j e c t to t h e c o r r e c t i o n s
appearing on Pages 1 and 2 of t h i s instrument
Argxu.0-.-t and A u t h o r i t i e s ;
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the d i s c u s s i o n in the p r i n t e d b r i e f f i l e d by a p p e l l a n t in the Court of C i v i l
Appeals, Pages 18-24, and to i t a Motion f o r Hehearing, Pages 16-19.
Sixth Assignment of E r r o r ;
The Court e r r e d in r e f u s i n g to s u s t a i n a p p e l l a n t ' s seventh
assignment of e r r o r , and in thereby h o l d i n g t h a t the D i s t r i c t Court did not e r r
in a d m i t t i n g in evidence, over a p p e l l a n t ' s o b j e c t i o n t h a t the same was immaterial
and i r r e l e v a n t , as f u l l y s e t out in p l a i n t i f f ' s B i l l of Exception No.8, the t e s timony of George Randies, as f b l l o w s t
"A. Mr. Gentry would b r i n g h i s n o t e s , t o together w i t h h i s cash l e t t e r every morning
, and he would s i t back in the back end of the
bank as well as I remonber and the n o t e s were
u s u a l l y p a i d a t the f r o n t , and if a man came
in to pay h i s note we would have | o go back
and get the note from him and come up and c o l l e c t the money and take t h e money back to him.
That i s t h e way I remember i t . "
Proposition;
The f o r e g o i n g assignment i s submitted as a p r o p o s i t i o n .
Statement;
This assignment i s i d e n t i c a l with a p p e l l a n t ' s seventh a s s i g n -
"
*
1<:
-
X-4724-b
meat of e r r o r d i r e c t e d to the. a c t i o n of the D i s t r i c t Court, and i s preseto^S'dPunder
the f i r s t ground j.u. A p p e l l a n t ' s Motion f o r Rehearing in the Court of C i v i l Appeals.
Further statement i s rendered unnecessary by the f u l l and complete statement
appearing in the opinion of the Court of Civil Appeals, s u b j e c t to t h e c o r r e c t i o n s appearing on Pages 1 and 2 of t h i s instrument.
Argument and A u t h o r i t i e s ;
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the d i s c u s s i o n in t h e p r i n t e d "brief f i l e d by the Appellant i n the Court of
C i v i l Appeals» Pages 40-52, and i n i t s Motion f o r Rehearing, Pages 7 - 8 .
Seventh Assignment of E r r o r ;
The Court e r r e d in r e f u s i n g to s u s t a i n a p p e l l a n t ' s eighth
assignment of e r r o r based on p l a i n t i f f ' s motion f o r
peremptory i n s t r u c t i o n s , and
in thereby holding t h a t the testimony was ample to j u s t i f y the c o u r t in submitting
the i s s u e of agency.
Proposition;
Inasmuch as the p l a i n t i f f i n e r r o r was in p o s s e s s i o n of the
two n o t e s sued upon,properly endorsed, and t h e r e was no l e g a l evidence t h a t the
National Bank a t Cleburne was the agent of the p l a i n t i f f in e r r o r to c o l l e c t the
same, the motion f o r peremptory i n s t r u c t i o n s should have been g r a n t e d .
Statement:
*
The f o r e g o i n g assignment of e r r o r appears as Assignment of
Error Eo.8 f i l e d in the t r i a l court (Tr.43-44), and i s p r e s e n t e d under the f i r s t
ground in A p p e l l a n t ' s Motion f o r Rehearing in the Court of C i v i l Appeals.
This
assignment n e c e s s a r i l y involves the testimony educed upon the t r i a l of the case.
The opinion of the Court of C i v i l Appeals together with the statements i n the beginning of t h i s a p p l i c a t i o n cover- t h i s testimony,
Argument and Authorities;.
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the d i s c u s s i o n in the p r i n t e d b r i e f f i l e d by a p p e l l a n t in the
Court
of C i v i l
- 13 -
X_47&4-b
Appeals, Pages 64-85, and to i t s Motion f o r Rehearing, Pages 3-15,
Eighth-Assignment of Error;
The Court errod in o v e r r u l i n g a p p e l l a n t ' s t w e l f t h assignment
o± e r r o r d i r e c t e d to the a c t i o n of the t r i a l court i s submitting the i s s u e of
agency to the j u r y , on the grounds t h a t t h e r e was no evidence, and t h a t the evidence was i n s u f f i c i e n t to warrant the submission of such i s s u e to t h e j u r y , as
set out in p l a i n t i f f ! s o b j e c t i o n s and exception to the charge of the court (Tr. 47)
and t-iereoy holding t h a t the testimony was ample to j u s t i f y the t r i a l court in
submitting the i s s u e of agency.
Proposition:
The f o r e g o i n g assignment i s submitted as a p r o p o s i t i o n .
Statement;
This assignment i s i d e n t i c a l with a p p e l l a n t * s t w e l f t h a s s i g n ment of e r r o r d i r e c t e d to the a c t i o n of the t r i a l c o u r t , and i s p r e s e n t e d under
the f i r s t ground in Appellant* s Motion f o r Rehearing in the Court of C i v i l Appeals.
The statement under t h i s assignment i s n e c e s s a r i l y a r e p e t i t i o n of the
statement in the next preceding assignment, being p l a i n t i f f r in e r r o r ' s seventh
assignment of e r r o r , and f o r a statement h e r e i n we r e s p e c t f u l l y r e f e r the Court to
our statement under our seventh assignment of e r r o r .
Argument and A u t h o r i t i e s ;
We r e s p e c t f u l l y r e f e r the Court f o r argument and a u t h o r i t i e s
to the same p o r t i o n s of the p r i n t e d b r i e f f i l e d by a p p e l l a n t in the Court of Civil
Appeals and to the same p o r t i o n s of Appellant 1 s Motion.for Rehearing as s e t out
under our argument in the next preceding assignment of e r r o r .
— 14
—
X-4724-B
iH&Ui."5MT miDER FIRST TO FIFTH ASSIGNMENTS OF ERROR
127
The p r i n c i p l e of law t h a t d e c l a r a t i o n s of an a l l e g e d agent ore
not admissible to e s t a b l i s h the f a c t of agency, and are admissible only f o r , t h e
purpose of b i n d i n g the p r i n c i p a l a f t e r the f a c t of agency has been e s t a b l i s h e d ,
we think i s too well s e t t l e d to r e q u i r e f u r t h e r argument or c i t a t i o n of a u t h o r i ties,
In the p r e s e n t case, i f the Cleburne bank was in f a c t t h e agent of the
Federal Reserve Bank of D a l l a s , no d i s p u t e as to the payment b e i n g b i n d i n g on
the Federal Reserve Bank of Dallas could be made.
The above i s a statement
in which we t h i n k a l l w i l l concur, and i t i s made merely to show t h a t the only
question in t h i s case was and i s t h a t of t h e a u t h o r i t y of t h e Cleburne bank.
In
other words, t h i s i s not a case wherein i t was sought to bind the p r i n c i p a l by
the authorized a c t s or admissions of the agent, but one in which the a u t h o r i t y
was sought to be shown by the a c t s and conduct and admissions of the aMeged
agent, and the h e r e i n complained of n o t i c e s and l e t t e r s mailed by the Cleburne
bank were, over o b j e c t i o n s , introduced s o l e l y f o r the l a t t e r purpose, and counsel
so concedes i n a p p e l l e e ' s b r i e f f i l e d i n the Court of C i v i l Appeals, wherein i t
is stated:
"Appellees w i l l s t a t e p e r s p e c t i v e l y t h a t the purpose of the i n t r o -
duction of the two l e t t e r s in August 1921, taken in connection with the other
f a c t s and circumstances in the case, a f f i r m a t i v e l y and c l e a r l y show to the mind
of any reasonable man t h a t the National Bank of Cleburne in. w r i t i n g s a i d l e t t e r s
was a c t i n g as the agent of a p p e l l a n t . "
The Court of C i v i l Appeals, while not
passing d i r e c t l y on the assignments of e r r o r r e l a t i n g to these p o i n t s , did s e t
out as one of t h e circumstances tending t o show agency, to be taken i n t o conside r a t i o n with o t h e r circumstances, the f a c t t h a t the testimony " r a i s e d a reasonable
i n f e r e n c e t h a t t h e Cleburne bank was n o t i f y i n g the makers of the no^es pledged
by i t to p l a i n t i f f of the m a t u r i t y of the same as they became due, and endeavoring to c o l l e c t the same, and t h a t p l a i n t i f f knew of such a c t i o n and n o t only
acquiesced t h e r e i n , but t a c i t l y approved the same."
And a g a i n , i t i s p o i n t e d
out t h a t "on August 23, 1921, the Cleburne bank n o t i f i e d defendant Hanna
- 15 -
X-4724-"b
090
t h a t s a i d f i r s t note was p a s t due, and t h a t Said second note would be due o n '
September 1»
Defendant Hanna immediately wrote s a i d bank asking t h a t both notes
be extended to November 1.
Said bank r e f u s e d the r e q u e s t , and d e c l a r e d t h a t i t
would take necessary s t e p s to c o l l e c t the same i f n o t p a i d in ten daysj" thus, one
of the circumstances was the f a c t t h a t these n o t i c e s were sent to t h e makers by
the Cleburne bank.
In t h i s connection, we quote from the case of Coleman v.
Colgate, r e p o r t e d in 6 5.W.553, as f o l l o w s :
1
1
The p r o p o s i t i o n of the a p p e l l a n t , under
t h i s assignment of e r r o r , i s t h a t the 1 d e c l a r a t i o n s of the
p a r t y t h a t he i s an agent a r e good as a circumstance (taken
in connection with other circumstances) to be considered in
proving agency, especially # when accompanied with a c t s of
agency, a c t i o n , and advice in the i n t e r e s t and on behalf of
t h e same p r i n c i p a l . 1 There was no e r r o r i n excluding the
evidence of Walker. S t a r k w e a t h e r ' s d e c l a r a t i o n s , i f he had
made them, t h a t he was p l a i n t i f f ' s agent could not have est a b l i s h e d the agency. Agency cannot be e s t a b l i s h e d in t h i s
way; nor can the admissions and statements of one r e p r e s e n t i n g
himself to be an agent bind the p r i n c i p a l u n t i l the agency
is established."
ARGUMENT UNDER SIXTH, SEVENTH, MP EIGHTH ASSIGNMENTS OP ERROR
The submission to a j u r y of the question of agency in
t h i s case v i o l a t e s fundamental and well e s t a b l i s h e d r u l e s of commercial law, in
t h a t the a c t s and conduct r e l i e d upon to e s t a b l i s h agency were j u s t i f i e d by the
elemental r u l e s p e r t a i n i n g to t h e r i g h t s and o b l i g a t i o n s of the h o l d e r of commercial p a p e r .
The f o l l o w i n g r u l e s a r e fundamental:
1. There i s no duty r e s t i n g on the h o l d e r
of a n e g o t i a b l e note to n o t i f y the maker t h a t t h e n o t e has
been t r a n s f e r r e d to him and i s in h i s p o s s e s s i o n . (Sections
52 and 57 of the Uniform Negotiable Instruments Act - A r t i c l e
5935, Revised C i v i l S t a t u t e s , 1925, Sections 51 and 57).
2. Where a note on i t s f a c e i s made payable
a t a s p e c i f i e d p l a c e , the only duty r e s t i n g on the holder i s
to p r e s e n t the note a t t h e time and p l a c e where i t i s made
p a y a b l e . (Sections 70 and 73 of the Uniform Negotiable I n s t r u ments Act - A r t i c l e 5937, Revised Civil S t a t u t e s , 1925, Sect i o n s 70 and 7 3 ) .
3. The pledgor of commercial paper r e t a i n s
- 16 -
X-4724-b
329
an i n t e r e s t in ths same which e n t i t l e s him to advise the p a r t i e s l i a b l e thereon of the time and p l a c e of payment, and
in the event of non-payment, to take such s t e p s as a r e necessary to c o l l e c t the dame. Brown v. Bronson, 87 N.Y.Sup.,872;
Baker v. B u r k e t t , 21 Southern 970; Baldwin v . J o r d a n , 171 S.W.
1016*
4. I t i s the duty of the maker of a note to
demand the surrender of the note a t the time of payment. 3hodes
v. Belchee, 59 Pac.,117; Smith v. Kidd, 68 li.Y.lSO; Evans
Snyder 3uel Company v. Holder, 41 S.W.404.
5. Where a n e g o t i a b l e instrument i s
payable upon i t s f a c e a t a s p e c i f i e d bank, t h e bank so
s p e c i f i e d i s t h e agent of the debtor to make payment
u n l e s s the instrument i s a c t u a l l y lodged by the holder
with the bank. Ward v. Smith, 74 U. S. 447; S t a t e
N a t i o n a l Bank of St,Louis, v. J . J . Hyatt & Co., 86 S.W.1002.
To permit the submission of the question of agency upon the
f a c t s and circumstances p o i n t e d out in the opinion of the Court of C i v i l Appeals
destroys the p r o t e c t i o n thrown around the holder of commercial paper by the
p r i n c i p l e s above enumerated.
oOo—
WHEBSFOHE, premises considered, your p l a i n t i f f in e r r o r r e s p e c t f u l l y p r a y s t h i s Court to grant i t a w r i t of e r r o r f o r r e v i s i o n of the
judgment of the Court of C i v i l Appeals, and upon c o n s i d e r a t i o n to render such
judgment as s a i d Court should have rendered in f a v o r of p l a i n t i f f in e r r o r .
The defendant in e r r o r , T. A. Hanna, i s r e p r e s e n t e d by
G. 0. Crisp, Kaufman, Texas; Chriaman & Chrisman, Cleburne, Texas; Keith and
P r e s t r i d g e , Cleburne, Texas; and e s p e c i a l l y by Gayle P r e s t r i d g e of t h e f i r m of
Keith and P r e s t r i d g e , upon whom s e r v i c e may be had.
Tho defendant in e r r o r , C. D. Dickerson, i s a r e s i d e n t of
Cleburne, Johnson County, Texas, and i s not r e p r e s e n t e d by counsel, never having
answered in t h i s cause.
- 17 -
X-4724-b
330
The p l a i n t i f f i n e r r o r d e p o s i t s with t h e c l e r k herewith c a r uon copies of t h i s e x p l i c a t i o n , and has advised counsel f o r the defendant T. A.
Hanna, as well as the defendant C. D. Dickerson, of the f i l i n g of the same, and
of the deposit of s a i d copies.
Attorneys f o r p l a i n t i f f in
error
X-4725
federal reserve board
WASHINGTON
38
November 17, 1926.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Code Words to "be used by the Federal Reserve Bank of Hew
York i n a d v i s i n g o t h e r Federal r e s e r v e hanks of t r a n s a c t i o n s through the Gold Settlement Fund i n purchases of
f o r e i g n "bills f o r System account.
Bear S i r :
In order to s i m p l i f y and reduce the phraseology i n telegrams
"between the Federal Reserve Bank of New York and other Federal r e s e r v e
"banks i n connection with advices covering t r a n s a c t i o n s through the Gold
Settlement Fund i n purchases of f o r e i g n M i l s f o r system account, i t
has "been suggested f o r such purpose t h a t a d d i t i o n a l code words "be supp l i e d from the Federal Reserve Telegraphic Code.
The Board h a s approved t h i s suggestion, and e f f e c t i v e November
27, 1926* t h e f o l l o w i n g code words w i l l "be used "between the Federal Reserve Bank df New York and other Federal r e s e r v e "banks covering the
t r a n s a c t i o n s d e f e r r e d to t
JUNKETING: Purchased today from f o r e i g n "banks "bills f o r
system account t o t a l i n g $
f a c e amount. We charge you
total $
your apportionment.
Please credit us.
JURYMiST: Beginning
( d a t e ) d a i l y earnings of your
"bank on investments through f o r e i g n "banks w i l l "be $
.
We s h a l l c r e d i t your account with t h i s amount d a i l y u n t i l
you a r e otherwise a d v i s e d .
JUSTIFIED: We c r e d i t you today $
as reduction in
your p a r t i c i p a t i o n i n "bills purchased through f o r e i g n "banks
f o r system account, account of r e d u c t i o n i n t o t a l "bills h e l d .
I t i s r e q u e s t e d t h a t & record of the above a d d i t i o n s "be made
on page 130 of the Federal Reserve Telegraphic Code.
Very t r u l y yours,
J . C. N o e l l .
Assistant Secretary.
LETTER TO GOVERNORS OF ALL F . R. BANES.
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
November 17, 1926.
SUBJECT:
Christmas Holiday.
Dear S i r :
On Christmas Day, t h e o f f i c e s of
the Federal Reserve Board and a l l Federal
Reserve Banks and Branches w i l l be c l o s e d .
This i s the only h o l i d a y which
w i l l he observed during the month of December.
Very t r u l y yours,
J . C. Hoell,
Assistant Secretary.
TO GOVERNORS OF ALL F.R.BANKS.
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
November 19, 1926.
Dear S i r :
The Federal Reserve Board has
available for f r e e distriTmtion a limited
number of copies of i t s Index Digest of the
Federal Reserve Act, (1924 e d i t i o n ) . We w i l l
"be glad, upon r e q u e s t , to forward you a copy
of t h i s p u b l i c a t i o n .
Very t r u l y yours,
J . C. N o e l l .
Assistant Secretary.
X-4730
tM
X-4731
i
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
November 24, 1926
CONDITION OF ACCEPTANCE MARKET
October 21, 1926 to November 17, 1926.
Acceptances:
The acceptance market continued to show seasonal a c t i -
v i t y during the p e r i o d from October 21 to November 17 and d e a l e r s ' t r a n s a c t i o n s on a weekly average b a s i s were l a r g e r than during the preceding
f i v e weeks.
The m a j o r i t y of b i l l s i n the market were drawn a g a i n s t c o t -
ton, s i l k , sugar, and c o f f e e .
Toward the end of the p e r i o d o f f e r i n g s of
b i l l s to the market d e c l i n e d and d e a l e r s lowered t h e i r r a t e s on the
longest m a t u r i t i e s a t the end of the f i r s t week in November and on a l l
other m a t u r i t i e s longer than 30 days during the following week.
In New
York the longer b i l l s were purchased l a r g e l y f o r f o r e i g n account, the
domestic demand being confined p r i n c i p a l l y to s h o r t b i l l s .
New York
d e a l e r s ' s a l e s to the r e s e r v e bank were about the same as during the p r e ceding r e p o r t i n g p e r i o d , but those of Boston d e a l e r s were considerably
smaller.
The following t a b l e shows the r a t e s which p r e v a i l e d b e f o r e and
a f t e r they were lowered:
Acceptance Rates i n the New York Market
Maturi ty
October 20, 1926
Bid.
Offered.
November 17. 1926
Bid.
Offered.
30 days
60
"
90
"
120
"
150
"
180
"
3-3/4
3-7/8
4
4-1/8
4-1/4
4-1/4
3-3/4
3-3/4'
3-7/8
4
4-1/8
4-1/8
3-5/8
3-3/4
3-7/8
4
4-1/8
4-1/8
3-5/8
3-5/8
3-3/4
3-7/8
4
4
X-4732
fEDERAL
RESERVE
BOARD
3 3 5
STATEMENT FOR THE PRESS
for release in Morning Papers,
Friday, November 26th, 1926.
The following i s a summary of general "business and
f i n a n c i a l conditions throughout the several federal
Reserve D i s t r i c t s , "based upon s t a t i s t i c s for the
months of October and Sovember, as contained in the
forthcoming issue of the federal Reserve B u l l e t i n .
Industrial a c t i v i t y continued in latge voliime in October, while
the general l e v e l of p r i c e s declined s l i g h t l y .
Notwithstanding the seasonal
increase in "borrowing for commercial purposes, the Volume of bank credit outstanding declined i n recent weeks f e f l e b t i n g the continued liquidation of loans
on s e c u r i t i e s .
^
'
Production
Production in basic i n d u s t r i e s , as measured by the federal Reserve Board 1 s
index, which makes allowance for the usual seasonal v a r i a t i o n s , showed l i t t l e
change in October as compared with September.
T e x t i l e - m i l l a c t i v i t y and the
daily average output of iron and s t e e l wss maintained during October but i n
November there was a decrease In s t e e l production.
The output of bituminous
coal was stimulated by export and banker demand and attained new high ^ c o r d s
in October and November, and petroleum production was a l s o large.
There was
a sharp decline i g automobile production and the output of cars was smaller in
October than in any month since January.
The volume of building a c t i v i t y , as
indicated by the value of contracts awarded, has declined for the past three
months, as i s usual at t h i s season of the year, and has been throughout the
period at a s l i g h t l y lower l e v e l than during the exceptionally a c t i v e autumn
season mf 1925.
Residential contracts during the same period have been
smaller than a year ago, while those for engineering p r o j e c t s and public
works have been larger.
X-4732
-2-
Tm^je
D i s t r i b u t i o n of commodities a t wholesale declined i n October, contrary
to the u s u a l trend f o r t h a t qionth, and was i n smaller volume than in October
of any year s i n c e 1922.
Sales of department s t o r e s showed the u s u a l seasonal
growth i n October, but owing p a r t l y to l e s s favo?"able weather conditions and
to a smaller number of t r a d i n g days, were a t a somewhat lower l e v e l than in
the same month of l a s t y e a r .
than a year ago*
Sales of mail order houses were a l s o smaller
Stocks of merchandise c a r r i e d by wholesale firms were
s l i g h t l y smaller than a year ago, while department s t o r e stocks increased
more than i s u s u a l in September and October and a t the end of October were
l a r g e r than i n 1925.
Freight car loadings were in record volume i n October
and November, because of unusually l a r g e shipments of coal and ore and a
continued heavy movement of other commodities.
Prices
Wholesale p r i c e s of n e a r l y a l l groups of commodities declined i n October
and November.
P r i c e s of bituminous coal, however, advanced sharply as the r e -
s u l t of f o r e i g n demand caused by the B r i t i s h coal s t r i k e , but r e c e n t l y there
has been some d e c l i n e i n coal p r i c e s .
The p r i c e of raw cotton, a f t e r f a l l i n g
r a p i d l y in September and e a r l y October, has been steady in r e c e n t weeks.
P r i c e s of n o n - a g r i c u l t u r a l commodities, as c l a s s i f i e d i n the Bureau of Labor
S t a t i s t i c s p r i c e indexes, declined s l i g h t l y between September and October,
while those of a g r i c u l t u r a l products declined about 2 p e r cent to the lowest
l e v e l s in c e the summer of 1924.
-3—
X-47S2
I
Bank c r e d i t
Seasonal growth i n loans f o r commercial and a g r i c u l t u r a l purposes a t
member banks in leading c i t i e s has "been accompanied "by continued* l i q u i d a t i o n
of loans on s e c u r i t i e s , with the consequence t h a t the t o t a l volume of loans
and investments of these "banks in the middle of November was considerably
smaller than a month e a r l i e r .
At the r e s e r v e banks the d e c l i n e i n the volume of member bank c r e d i t
has been r e f l e c t e d i n a r e d u c t i o n of the t o t a l b i l l s and s e c u r i t i e s to a
l e v e l $37,000,000 below the corresponding date in 1925.
Discounts f o r mem-
ber banks were in about the same volume as a year ago, while holdings of
acceptances and of United S t a t e s s e c u r i t i e s were s m a l l e r .
E a s i e r conditions p r e v a i l e d i n the money market i n November.
Rates on
prime commercial paper declined from 4 - 1 / 2 - 4-3/4 p e r cent in October to
4 - 1 / 2 per cent in November, and there was a l s o a r e d u c t i o n of 1/8 per cent
in the r a t e s on bankers 1 acceptances.
3 3 8
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
4 7 G5
December 1, 1926.
a
SUBJECT:
Federal Reserve Bank Representation a t Bankers'
Conventions.
Dear S i r :
R e f e r r i n g to the Board's l e t t e r of October 12, 1926,
X-4691, on the s u b j e c t of Federal r e s e r v e "bank r e p r e s e n t a t i o n a t bankers' conventions, you a r e advised t h a t the
Federal Reserve Board concurs in the view of the r e c e n t
Governors' Conference, which was s u b s t a n t i a l l y the same
as t h a t of the Federal Reserve Agents, t h a t r e p r e s e n t a t i o n
of Federal r e s e r v e banks a t conventions w i t h i n t h e i r own
d i s t r i c t i s of utmost iimportance; t h a t attendance a t conv e n t i o n s o u t s i d e of t h e i r d i s t r i c t i s sometimes a d v i s a b l e ,
and t h a t determination of the extent to which Federal r e serve banks should be r e p r e s e n t e d a t such conventions by
o f f i c e r s and employees should be l e f t to t h e judgment of
the o f f i c e r s and d i r e c t o r s of the Federal r e s e r v e banks,
s i n c e i t i s impossible to l a y down any uniform p r a c t i c e .
"Very t r u l y yours,
Walter L. Eddy,
Secretary.
To All Governors and F-R.Agents.
federal reserve board
X-4737
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
December 3, 1926,
Dear S i r ;
The r e p o r t of the Pension Committee to t h e l a s t
Governors' Conference contains a recommendation to t h e
e f f e c t t h a t i t i s d e s i r a b l e t h a t the Governors 'and
Chairmen of the r e s p e c t i v e Federal reserve banks " a t tempt to i n t e r e s t members of Congress with whom t h e y
have p e r s o n a l acquaintance or i n f l u e n c e , with a view
to e x p e d i t i n g the e a r l y passage of the b i l l " to i n c o r p o r a t e the Federal Reserve Pension Fund, which was
introduced in the Senate l a s t March.
The Governors' Conference voted t h a t the a c t i o n
recommended t h e r e i n should be taken i n s o f a r as i t i s
p r a c t i c a b l e , and the a c t i o n of the conference has been
submitted to the Federal Reserve Board f o r i t s advice
or approval.
The Board does not approve of the above recommendat i o n contained in the Committee's r e p o r t , nor of t h e
a c t i o n of the Governors' Conference r e l a t i v e t h e r e t o .
Very t r u l y yours,
D. R. C r i s s i n g e r ,
Governor.
TO ALL GOVERNORS AITD F. R. AGENTS.
X-4738
3 4 0
federal reserve board
WASHINGTON
December 4, 1936.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
PRELIMINARY INFORMATION EE NOTES SECUBED BY ADJUSTED SERVICE
CERTIFICATES.
Dear S i r i
Pursuant to a c t i o n taken a t the r e c e n t Governors' Conference, Governor McDougal designated Messrs. W. J . Davis, A s s i s t a n t Cashier of t h e
Federal Reserve Bank of P h i l a d e l p h i a , George S. Sloan, A s s i s t a n t Cashier
of the Federal Beserve Bank of Richmond, and W. D. Gentry, A s s i s t a n t Cashi e r of the Federal Reserve Bank of D a l l a s , to serve a s a committee to conf e r with t h i s o f f i c e in connection with the p r e p a r a t i o n of r e g u l a t i o n s and ,
c i r c u l a r s r e l a t i v e to t h e discount of n o t e s secured "by a d j u s t e d s e r v i c e
c e r t i f i c a t e s . The Committee met i n Washington on t h e morning of Wednesday,
December i g t 4 and f i n i s h e d i t s work on the a f t e r n o o n of F r i d a y ,
December 3rd,,
Pursuant to the informal understanding a r r i v e d a t during t h e
Governors', Conference, t h i s o f f i c e , with the a s s i s t a n c e and very h e l p f u l
cooperation of t h e committee, proceeded to p r e p a r e proposed r e g u l a t i o n s
on t h i s s u b j e c t f o r submission to the Federal Reserve Board and a d r a f t
of a c i r c u l a r l e t t e r to be sent by each Federal reserve bank to every
incorporated member or nonmember bank in i t s d i s t r i c t . I t w i l l be r e membered t h a t the D i r e c t o r of the Veterans' Bureau had r e q u e s t e d the Fede r a l Reserve Board to o b t a i n the cooperation of the Federal r e s e r v e banks
in informing a l l banks as to the manner in which loans might be made
on a d j u s t e d s e r v i c e c e r t i f i c a t e s . In view of t h i s f a c t , the proposed
c i r c u l a r l e t t e r c o n t a i n s much. information of a general n a t u r e f o r the
guidance of banks in making loans on a d j u s t e d s e r v i c e c e r t i f i c a t e s , in
a d d i t i o n to information with r e s p e c t to t h e rediscount of n o t e s e v i dencing such l o a n s . I t i s b e l i e v e d t h a t t h i s l e t t e r w i l l save much
correspondence on t h e p a r t of t h e Federal r e s e r v e banks by answering
in advance many questions which banks would otherwise ask the Federal
r e s e r v e banks.
The o p e r a t i n g d e t a i l s s e t out in the c i r c u l a r l e t t e r w i l l not
comply in every p a r t i c u l a r with the p r a c t i c e in a l l Federal r e s e r v e
d i s t r i c t s , and i t i s expected t h a t c e r t a i n p o r t i o n s of t h e l e t t e r , e s p e c i a l l y those p e r t a i n i n g to "Method and Terras of Rediscount" and
" C o l l e c t i o n of Rediscounted Notes a t Maturity" w i l l have to be changed
toy some of t h e banks in order to comply with t h e i r p r a c t i c e s . I t i s
hoped, however, t h a t i n other r e s p e c t s the c i r c u l a r s f i n a l l y i s s u e d
by Federal reserve banks w i l l be uniform in so f a r as p r a c t i c a b l e .
t>
X—4738
- 2 -
There a r e onelosod f o r your information p r e l i m i n a r y copies of
the vrvrious documents prepared j o i n t l y by the committee and by t h i s o f f i c e .
J t i s important to note t h a t these documents a r e in t e n t a t i v e form and
a r e s u b j e c t to change. The proposed r e g u l a t i o n has not yet been submitted
to the Federal Reserve Board f o r approval and may be changed b e f o r e i t
i s f i n a l l y promulgated. Both the c i r c u l a r l e t t e r and the r e g u l a t i o n a r e
based on the assumption t h a t the Director of the Veterans' Bureau w i l l
promulgate c e r t a i n r e g u l a t i o n s ; and they w i l l have to be changed i f the
Veterans' Bureau d e c l i n e s to promulgate such r e g u l a t i o n s .
I t i s expected t h a t the Veterans' Bureau w i l l i s s u e r e g u l a t i o n s covering l o a n s on a d j u s t e d s e r v i c e c e r t i f i c a t e s within a few days.
As soon a s t h a t Bureau takes d e f i n i t e a c t i o n , the proposed r e g u l a t i o n s
of the Board w i l l be submitted to the Federal Reserve Board f o r approval
with such changes, i f any, as a r e found to be n e c e s s a r y .
As soon as tho Veterans' Bureau and the Federal Reserve Board
have o f f i c i a l l y promulgated r e g u l a t i o n s , copies of such r e g u l a t i o n s ,
together with f i n a l d r a f t s of the proposed c i r c u l a r l e t t e r and a l l the
other documents enclosed, w i l l be forwarded promptly to each Federal
r e s e r v e bank-* in order t h a t each Federal r e s e r v e bank may take the necessary s t e p s to send the c i r c u l a r l e t t e r and enclosures to a l l member
banks in i t s d i s t r i c t a t tho e a r l i e s t p o s s i b l e d a t e - by December 15,
* if possible.
I t i s expected t h a t the Director of t h e Veterans' Bureau
w i l l f u r n i s h to each Federal r e s e r v e bank a s u f f i c i e n t supply of copies
of the a d j u s t e d compensation a c t , the amendment t h e r e t o , the r e g u l a t i o n s of the Veterans' Bureau, and any forms which may be approved by
the Veterans' Bureau, to enable each Federal r e s e r v e bank to send a copy
of same to every bank in i t s d i s t r i c t . The Federal Reserve Board, of
course, w i l l f u r n i s h a s i m i l a r supply of copies of i t s r e g u l a t i o n s on
t h i s s u b j e c t . If t h i s i s done, i t w i l l be necessary f o r the Federal
r e s e r v e banks to have p r i n t e d only the c i r c u l a r l e t t e r , the a u t h o r i z a tion to r e d i s c o u n t , and tho a p p l i c a t i o n f o r r e d i s c o u n t .
Very t r u l y yours,
(Enclosures)
TO THE GOVERNORS OF ALL F.R. BANKS.
Walter Wyatt,
General Counsel.
" X-4758—a
(Tentative d r a f t " s u b j e c t to change.
Hot f o r p u b l i c a t i o n in t n i s form)
f
Circular No.
FEDERAL RESERVE BANK OF
_____
1925.
REDISCOUNT OF l-TOTES SECURED BY ADJUSTED SERVICE CERTIFICATES.
To a l l Incorporated Banks in the
Federal Reserve D i s t r i c t ,
Under the p r o v i s i o n s of t h e World War Adjusted Oon^eneiaticti*
Act, a d j u s t e d s e r v i c e c e r t i f i c a t e s s h a l l be dated #8 of
l i t day of
the month in which t h e a p p l i c a t i o n s f o r §uch c e r t i f i c a t e s a r e f i l e d * W t
in no case b e f o r e January 1, 1925.
Banks a r e a u t h o r i z e d to make loans
on the s e c u r i t y of such a d j u s t e d s e r v i c e c e r t i f i c a t e s , but n o t b e f o r e
the e x p i r a t i o n of
two years a f t e r the d a t e of the c e r t i f i c a t e .
Only the veteran named in the c e r t i f i c a t e can l a w f u l l y o b t a i n
a loan on h i s a d j u s t e d s e r v i c e c e r t i f i c a t e and n e i t h e r the b e n e f i c i a r y
nor any o t h e r person than the veteran has any r i g h t s in t h i s r e s p e c t .
LOANS Oil ADJUSTED SERVICE CERTIFICATES.
Any n a t i o n a l bank or any bank or t r u s t company i n c o r p o r a t e d
under the laws of any S t a t e , t e r r i t o r y , p o s s e s s i o n or the D i s t r i c t of
Columbia, h e r e i n a f t e r r e f e r r e d to as any
11
bank" , i s a u t h o r i z e d to loan
to any v e t e r a n upon h i s promissory note secured by h i s a d j u s t e d s e r v i c e c e r t i f i c a t e (without the consent of the b e n e f i c i a r y t h e r e o f ) any
amount not in excess of the loan value of the c e r t i f i c a t e a t the d a t e
the loan i s made.
Each c e r t i f i c a t e c o n t a i n s on i t s f a c e a t a b l e f o r
determining the loan value of the c e r t i f i c a t e .
Any bank h o l d i n g a note secured by an a d j u s t e d s e r v i c e
~2~
343
X-4738~a
c e r t i f i c a t e may s e l l the note to any "bank a u t h o r i z e d to make a loan to
a veteran and d e l i v e r the c e r t i f i c a t e to such "bank.
In case a note secured "by an a d j u s t e d s e r v i c e c e r t i f i c a t e i s
sold or t r a n s f e r r e d , the tank making the t r a n s f e r i s r e q u i r e d "by law to
n o t i f y the v e t e r a n promptly by mail a t h i s l a s t known p o s t o f f i c e a d d r e s s .
Up a d j u s t e d s e r v i c e c e r t i f i c a t e i s n e g o t i a b l e or a s s i g n a b l e , or
may serve as s e c u r i t y f o r a loan, except as provided i n Section 502 of the
World War Adjusted Compensation Act, which i s p r i n t e d on the f a c e of each
adjusted service c e r t i f i c a t e .
Any n e g o t i a t i o n , assignment or loan made i n
v i o l a t i o n of the p r o v i s i o n s of Section 502 of the World War Adjusted Comp e n s a t i o n Act i s v o i d .
The law provides t h a t the r a t e of i n t e r e s t which a bank may
charge upon such loan s h a l l not exceed by more than 2$ p e r annum the r a t e
charged a t the date of the loan f o r the discount of 90-day commercial
paper under s e c t i o n 13 of the Federal Beserve Act by the Federal Reserve
Bank of the d i s t r i c t in which the lending bank i s located*
The D i r e c t o r of the United S t a t e s Veterans* Bureau cannot lawf u l l y make payment on any note secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e ,
u n l e s s the note when p r e s e n t e d to him i s accompanied by an a f f i d a v i t made
by an o f f i c e r of the bank which made the loan, b e f o r e a Notary P u b l i c or
other o f f i c e r designated f o r the purpose by r e g u l a t i o n of the D i r e c t o r ,
s t a t i n g t h a t such bank has not charged or c o l l e c t e d , or attempted to
charge or c o l l e c t d i r e c t l y or i n d i r e c t l y , any f e e or other compensation
i n r e s p e c t of any loan made upon the s e c u r i t y of an a d j u s t e d s e r v i c e c e r t i f i c a t e by .the bank to a v e t e r a n , except the i n t e r e s t a u t h o r i z e d by law*
-3-
,
X-4738-a
^
The E m u l a t i o n s of the Veterans 1 Bureau a l s o r e q u i r e t h a t such
affidavit shall state:
(1)
That the person who obtained the loan evidenced "by such
note i s known to be the v e t e r a n named in the a d j u s t e d s e r v i c e c e r t i f i cate securing such n o t e , and
(2)
That the "bank has n o t i f i e d the v e t e r a n by mail a t h i s l a s t
known p o s t o f f i c e address of any s a l e , d i s c o u n t , or rediscount of such
note,
RBDEliPTIOF OF CERTIFICATES BY THE DIRECTOR
OF THE VZTZ&&BS * BURMU.
I f the v e t e r a n does not pay the loan a t i t s m a t u r i t y the "bank
holding the note and a d j u s t e d s e r v i c e c e r t i f i c a t e may a t any time
a f t e r the m a t u r i t y of the loan f "but not before the e x p i r a t i o n of
s i x months a f t e r the loan was made, p r e s e n t them to the D i r e c t o r of
the Veterans* Bureau.
The D i r e c t o r may in h i s d i s c r e t i o n accept the
c e r t i f i c a t e and note and pay the bank in f u l l s a t i s f a c t i o n of i t s
claim, the amount of the unpaid p r i n c i p a l due i t , and the unpaid i n t e r e s t accrued a t the r a t e f i x e d in the note, up to the d a t e of the
check issued to the bank.
I f the v e t e r a n d i e s b e f o r e the m a t u r i t y of t h e loan, the amount
of unpaid p r i n c i p a l and unnaid i n t e r e s t accrued up to t h e d a t e of
h i s d e a t h immediately becomes due and payable.
In such c a s e ,
or i f the v e t e r a n d i e s on the date the loan, matures or w i t h i n
s i x months t h e r e a f t e r ,
tificate shall,
the bank holding the note and the c e r -
upon n o t i c e of the death of the v e t e r a n ,
-4--
X-4738-a
3 4 5
p r e s e n t thorn to the Director of the Veterans 1 Bureau who s h a l l thereupon
pay the bank in f u l l s a t i s f a c t i o n of i t s claim the amount of the unpaid
p r i n c i p a l and unpaid i n t e r e s t a t the r a t e f i x e d in the note accrued up
to the date of the check issued to the bank; except t h a t i f , p r i o r to the
payment, the bank i s n o t i f i e d by the Director of the death of the veteran
and f a i l s to p r e s e n t the c e r t i f i c a t e and note to the D i r e c t o r w i t h i n 15
days a f t e r such n o t i c e , i n t e r e s t s h a l l be p a i d only up to the 15th day
a f t e r such n o t i c e .
I f the v e t e r a n has not died b e f o r e the m a t u r i t y of the c e r t i f i c a t e
and has f a i l e d to pay h i s note to the bank holding the note and c e r t i f i c a t e ,
such bank a t the m a t u r i t y of the c e r t i f i c a t e may p r e s e n t the note and c e r t i f i c a t e to the D i r e c t o r of the Veterans 1 Bureau, who i s thereupon r e q u i r e d
by law to pay to the bank in f u l l s a t i s f a c t i o n of i t s claim the amount of
the unpaid p r i n c i p a l and unpaid i n t e r e s t a t the r a t e f i x e d in the note
accrued up to the date of the m a t u r i t y of the c e r t i f i c a t e .
REDISCOUNTS WITH FEDERAL RESERVE BAMS.
Upon the indorsement of any bank, which s h a l l be deemed a waiver
of demand, n o t i c e and p r o t e s t by such bank as to i t s own indorsement exc l u s i v e l y , and s u b j e c t to r e g u l a t i o n s to be p r e s c r i b e d by the Federal Reserve Board, any such note secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e and
held by a bank i s made e l i g i b l e f o r discount or r e d i s c o u n t by the Federal
r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which such bank i s
l o c a t e d , whether or not the bank o f f e r i n g the note f o r discount
or r e d i s c o u n t i s a member of the Federal Reserve System and whether
or not i t acquired the note in the f i r s t i n s t a n c e from the v e t e r a n
or acquired i t by t r a n s f e r upon the indorsement of any other
X-473S-a
bank; provided t h a t a t tlio time of discount or r e d i s c o u n t such no t o
o ^
O^fcO
has a m a t u r i t y not in cxcess of nine months, exclusive of days of grace,
and complies in a l l other r e s p e c t s with the p r o v i s i o n s of the law and
the r e g u l a t i o n s of the Federal 2cservo Board.
5LIGIBILITY FOR ISDISCOWT.
In o r d e r to be e l i g i b l e f o r rediscount a t a Federal r e s e r v e bank,
any such note must:
1. Arise out of a loan made by a bank to a veteran in f u l l compliance
with
the p r o v i s i o n s of the World War Adjusted Compensation Act and the
r e g u l a t i o n s of the United S t a t e s Veterans * Bureau;
2. Be secured by the a d j u s t e d s e r v i c e c e r t i f i c a t e issued to the maker,
which c e r t i f i c a t e must accompany the note;
3. Be h e l d by t h e o f f e r i n g bank in i t s own r i g h t a t the time i t i s
offered for rediscount;
4. Be n e g o t i a b l e i n form and otherwise in the form approved by the
United S t a t e s Veterans* Bureau;
5. Have a m a t u r i t y a t the time of rediscount not in excess of nine
months, exclusive of days of grace;
6.
Evidence a loan the amount of which does n o t exceed the lean value
of the a d j u s t e d s e r v i c e c e r t i f i c a t e f o r the year in which such loan was
made;
7. Be payable with i n t e r e s t a c c r u i n g ^ a f t e r the d a t e of the note a t a
r a t e s t a t e d in the f a c e of the n o t e , which r a t e s h a l l not exceed by more
than 2 p e r cent per annum the r a t e charged a t the date of the loan f o r the
discount of 90-day commercial paper by t h e Federal r e s e r v e bank of t h e
Federal reserve d i s t r i c t in which the payee bank i s l o c a t e d ;
8. Bear the endorsement of t h e bank o f f e r i n g i t f o r r e d i s c o u n t ,
which endorsement s h a l l be deemed a waiver of demand, n o t i c e and p r o t e s t
- 6 -
X-4738-a
cy such bcoik as to i t s own endorsement e x c l u s i v e l y ;
84LV
H. 3e accompanied, by t h e evidence of e l i g i b i l i t y r e q u i r e d by the
Regulations of the Federal Reserve Board and by s6.ch other evidence of
e l i g i b i l i t y a.s t h i s bank may r e q u i r e ;
10. Be accompanied by such a f f i d a v i t s -md o t h e r evidence as would be
r e q u i r e d by the Veterans' Bureau in the event
•«.
t h i s bank should apply to
the Veterans' Bureau f o r payment of the note; and
11. Conply in a l l other r e s p e c t s with the requirements of t h e law and
of the r e g u l a t i o n s of the f e d e r a l Reserve Board.
INELIGIBILITY AS C0LLAT3RAL TO A BACK'S OTO HOTE.
Neither a member bank nor a nonmember bank may borrow from a Federal
r e s e r v e bank on i t s oyn promissory note secured by n o t e s of v e t e r a n s in turn
secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s ; because n e i t h e r the f e d e r a l Reserve
Act nor the World War Adjusted Compensation Act a u t h o r i z e s the Federal r e serve banks to make such l o a n s .
That p r o v i s i o n of Section 13 of the Federal
Reserve Act which a u t h o r i z e s Federal reserve banks to make loans to member
banks f o r p e r i o d s not in excess of 15 days on the promissory n o t e s of such
member banks r e q u i r e s t h a t s u c h ' n o t e s must be secured by paper e l i g i b l e f o r
r e d i s c o u n t or f o r purchase by Federal r e s e r v e banks under the p r o v i s i o n s of
the Federal Reserve Act or by bonds or n o t e s of the United S t a t e s .
Section
502 of the World War Adjusted Compensation Act which a u t h o r i z e s Federal
r e s e r v e banks to r e d i s c o u n t notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s
i s not made a p a r t of the Federal Reserve Act.
- 7 ~
3 4 8
X-4738-a
MEgBPD AT TEHI.,3 OF RZSISCOIJM1.
1D
P r i o r to the rediscount of any paper a c e r t i f i e d copy of a r e s o l u t i o n
passed by the board of d i r e c t o r s of the o f f e r i n g bank with the Seal of the
bank a f f i x e d , authorizing the proper o f f i c i a l s to r e d i s c o u n t , mast be f i l e d
with the Federal reserve bank. I t w i l l not be necessary f o r member banks which
have f i l e d such a r e s o l u t i o n in connection with r e d i s c o u n t s to f i l e any add i t i o n a l r e s o l u t i o n in connection with notes secured by a d j u s t e d service
certificates.
Before rediscounting any such notes f o r any nonmember bank, t h i s
bank w i l l r e q u i r e such nonmember bank to f u r n i s h to i t such information as
t h i s bank may consider necessary in order to s a t i s f y i t s e l f as to the condition of such bank and the a d v i s a b i l i t y of making r e d i s c o u n t s f o r i t .
Blank
a p p l i c a t i o n s f o r rediscount w i l l be supplied by t h i s bank upon r e q u e s t .
All such notes o f f e r e d f o r rediscount should be 1 i s t e d on the ap-*
p l i c a t i o n form provided and the a p p l i c a t i o n signed by a duly authorized
o f f i c e r . Full information must be f u r n i s h e d as provided on the form.
Upon acceptance f o r rediscount by the Federal r e s e r v e bank the
proceeds of such notes w i l l be c r e d i t e d to the r e s e r v e account of the bank,
in the case of a member bank, and, in the case of a nonmember bank, the
Federal roserve bank w i l l remit by check o r , upon r e q u e s t , w i l l c r e d i t
the account of a designated member bank l o c a t e d in t h i s Federal r e s e r v e
d i s t r i c t f o r the use and c r e d i t of tHe nonmember.
The r a t e of discount deducted by t h i s bank w i l l be the same
as t h a t deducted by i t in r e d i s c o u n t i n g SO day notes i s g i o d f o r commercial
purposes.
- 8 -
X-4733-a
COLLECTION OF REDI3 COUNTED BOTES AT MATURITY. .
In the case of nomber banks, the usual procedure w i l l "be to forward,
f o r c o l l e c t i o n a l l n o t e s secured by adjusted, s e r v i c e c e r t i f i c a t e s to t h e
banks d i s c o u n t i n g such n o t e s , s e v e r a l days i n advance of t h e i r m a t u r i t y .
Such notes w i l l be charged to the member b a n k ' s account when due without
n o t i c e , i t b e i n g assumed t h a t on t h e m a t u r i t y date the member bank w i l l
provide funds in excess of i t s r e q u i r e d r e s e r v e to meet the n o t e s .
In the case of nonmember banks, n o t i c e of approaching m a t u r i t y
w i l l be forwarded to the d i s c o u n t i n g banks approximately ten days in
advance of t h e m a t u r i t y of each n o t e , and the discounting banks w i l l be
r e q u i r e d to p l a c e funds i n t h e hands of the Federal reserve bank to pay
them, which funds must be a v a i l a b l e on the date of m a t u r i t y of t h e n o t e s .
FURTHER INFORMATION ECLOSSD.
For your information t h e r e a r e enclosed the f o l l o w i n g :
1. The World War Adjusted Compensation Act.
Sections 501,
502 and 504 deserve the s p e c i a l a t t e n t i o n of banks which contemplate
making loans on the s e c u r i t y of a d j u s t e d s e r v i c e c e r t i f i c a t e s .
2. The Act of J u l y 3, 1926, amending t h e World War Adjusted Compensation
Act.
Section 503 as amended by t h i s Act deserves s p e c i a l a t t e n t i o n .
3. The Regulations of the Veterans' Bureau with r e s p e c t to loans on
adjusted service c e r t i f i c a t e s .
4. Copies of forms of n o t e s , a f f i d a v i t s , e t c . , approved by the Veterans'
Bureau.
5. The Regulations of the Federal Reserve Board with r e s p e c t to the
rediscount of n o t e s secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s .
350
X-4?38~a
6m
A proposed form of r e s o l u t i o n to "be adopted "by "banks a u t h o r i z i n g
the endorsement and r e d i s c o u n t of such notes,.
7>
Copies of form of a p p l i c a t i o n to t h i s Federal r e s e r v e bank f o r
rediscount of such notes*
Very t r u l y yours,
( T e n t a t i v e d r a f t s u b j e c t to change.
Not for p u b l i c a t i o n in t h i s form)
X-4738-b
FEDERAL RESERVE BOARD.
REGULATION M, SERIES OF 1326
REDISCOUNT OF NOTES SECURED BY ADJUSTED SERVICE CERTIFICATES.
SECTION I . STATUTORY PROVISIONS.
Under the terms of the World War Adjusted Compensation Act,
loans may l a w f u l l y he made to veterans upon t h e i r a d j u s t e d s e r v i c e c e r t i f i c a t e s only in accordance with the p r o v i s i o n s of Section 502 thereof*
Any n a t i o n a l hank, or any hank or t r u s t company i n c o r p o r a t e d
under the laws of any S t a t e , T e r r i t o r y , p o s s e s s i o n , t r the D i s t r i c t
of Columbia i s a u t h o r i z e d , a f t e r the e x p i r a t i o n of two years a f t e r the
date of the c e r t i f i c a t e , to loan to any v e t e r a n upon h i s promissory
note secured "by h i s a d j u s t e d s e r v i c e c e r t i f i c a t e , any amount not i n
excess of the loan value of the c e r t i f i c a t e , which i s s t a t e d on the
face of the c e r t i f i c a t e .
The law provides t h a t the r a t e of i n t e r e s t
charged upon the loan by the lending hank s h a l l not exceed by more
than 2 p e r cent p e r annum the r a t e charged a t the d a t e of the loan f a r
the discount of 90 day commercial paper by the Federal r e s e r v e bank of
the Federal r e s e r v e d i s t r i c t i n which the lending bank i s l o c a t e d .
Upon the indorsement of any bank, which s h a l l be deemed a
waiver of demand, n o t i c e and p r o t e s t by such bank as to i t s own
indorsement e x c l u s i v e l y , and s u b j e c t to r e g u l a t i o n s to be p r e s c r i b e d
by the Federal Reserve Board, any such note secured by an a d j u s t e d s e r v i c e
c e r t i f i c a t e and held by a bank i s made e l i g i b l e f o r discount or r e d i s c o u n t
with the Federal r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which such
-2-
X-4738-b
• "bank i s l o c a t e d , whether or not the "bank o f f e r i n g t h e note f o r discount
or r e d i s c o u n t i s a member of the Federal Reserve System and whether or
not i t acquired the note in the f i r s t i a s t a n c e from the v e t e r a n or a c quired i t "by t r a n s f e r upon the indorsement of any other bauk; provided
t h a t a t the time of discount or rediscount such note has a m a t u r i t y not
i n excess of nine months, exclusive of days of g r a c e , and complies i n
a l l o t h e r r e s p e c f e with the p r o v i s i o n s of the law and the r e g u l a t i o n s of
the Federal Reserve Board.
SECTION I I . DEFINITIONS.
Within the meaning of t h i s Regulation :
(a)
The term "the Act" s h a l l mean the World War Adjusted Com-
p e n s a t i o n Act;
(b)
The term "Director" s h a l l mean the D i r e c t o r of the United
S t a t e s Veterans' Bureau;
(c)
The term " c e r t i f i c a t e " s h a l l mean an a d j u s t e d s e r v i c e c e r -
t i f i c a t e issued under the p r o v i s i o n s of Section 501 of the World War
Adjusted Compensation Act;
(d)
The term "veteran" s h a l l mean any person to whom an ad-
j u s t e d s e r v i c e c e r t i f i c a t e has been issued by the D i r e c t o r under the
p r o v i s i o n s of the #orld War Adjusted Comoensation Act;
(e)
The term "bank" s h a l l mean any n a t i o n a l bank or any bank or
t r u s t company i n c o r p o r a t e d under the laws of any S t a t e , T e r r i t o r y ,
p o s s e s s i o n or the D i s t r i c t of Columbia;
(f)
The term "note" s h a l l mean a promissory n o t e , n e g o t i -
able i n form, secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e , and
-i3*
X-4738-b
3 5 3
evidencing a loan mado by a bank on the s e c u r i t y of such c e r t i f i c a t e
i n f u l l compliance with the p r o v i s i o n s of tho World War Adjusted Compens a t i o n Act.
SECTION I I I . ELIGIBILITY.
In order to be e l i g i b l e f o r r e d i s c o u n t a t a Federal r e s e r v e
bank, any such note mast:
(a)
A r i s e out of a loan mode by a bank to a v e t e r a n in f u l l
compliance with the p r o v i s i o n s of the Act and of any r e g u l a t i o n which
the B i s e c t o r may p r e s c r i b e ;
(b)
Be secured by the c e r t i f i c a t e i s s u e d to the maker,
which c e r t i f i c a t e must accompany the note;
(c)
Be held by the o f f e r i n g bank i n i t s orm r i g h t a t t h e
time i t i s o f f e r e d f o r r e d i s c o u n t ;
(d)
Be n e g o t i a b l e i n form and othorvriso i n the form a p -
proved by the D i r e c t o r ;
(e)
Have a m a t u r i t y a t the time of r e d i s c o u n t not i n ex-
cess of nine months, e x c l u s i v e of days of g r a c e .
(f)
Evidence a loan the amount of which does not exceed
the loan value of the c e r t i f i c a t e f o r the year i n which such loan
was made$
(g)
Be payable with i n t e r e s t accruing a f t e r the d a t e of the
note a t a r a t e s t a t e d i n the f a c e of the n o t e , which r a t e mast n o t exceed
by more than 2 p e r cent p e r annum the r a t e charged a t the d a t e of the loan
f o r the discount of 90-day commercial paper by the Federal r e s e r v e bank
of the Federal r e s e r v e d i s t r i c t i n which the payee bank i s l o c a t e d ;
354.
-4(h)
x-4738-Vb
Be&r the endorsement of t h e ,b&nk o-ffertag i t f o r r e d i s -
count , which endorsement s h a l l "be deemed a waiver of demand, n o t i c e ,
and p r o t e s t by such bank as to i t s own endorsement e x c l u s i v e l y ;
(i)
Be accompanied by the evidence of e l i g i b i l i t y r e q u i r e d by
t h i s Regulation and such other evidence of e l i g i b i l i t y as may- be r e quired by the Federal reserve bank to which i t i s o f f e r e d f o r r e d i s count; and
(j)
Comply i n a l l othej* r e s p e c t s with the requirements of the
law and of t h i s R e g u l a t i o n .
SECTION IV»
(a)
EVIDENCE OF ELIGIBILITY.
General. - The Federal r e s e r v e bank to which a note i s o f f e r e d
f o r rediscount must be s a t i s f i e d e i t h e r by r e f e r e n c e to the note i t s e l f *or otherwise t h a t the loStn evidenced by the note or any a s s i g n ment thereof complies i n a l l r e s p e c t s with the p r o v i s i o n s of s e c t i o n
502 of the Act and t h a t the note i s e l i g i b l e , f o r discount by a Federa l r e s e r v e bank under the terms of the law and the p r o v i s i o n s of t h i s
Regulation.
^ A f f i d a v i t of Lending 3ank,^ - Any note o f f e r e d , to a Fede r a l r e s e r v e bank f o r r e d i s c o u n t must be accompanied by the a f f i d a v i t r e q u i r e d by Section 502(h) @f the Act and the r e g u l a t i o n s of
$
the D i r e c t o r , in farm approved by the D i r e c t o r , made by an o f f i c e r
af the bank which made the loan, b e f o r e a n o t a r y p u b l i c or other
o f f i c e r designated f o r the purpose by r e g u l a t i o n of the D i r e c t o r ,
stating that:
855
-5!•
X-4738-b
Such bank has not charged, or c o l l e c t e d , or attempted to
charge or c o l l e c t * d i r e c t l y or i n d i r e c t l y , any f e e or other comrp e n s a t i o n i n r e s p e c t of any loan, made by such "bank to any v e t e r a n
under Section 502 of the Act, except the i n t e r e s t a u t h o r i z e d "by such
section;
2.
The person who obtained the loan evidenced by such note i s
known to be the v e t e r a n named in the c e r t i f i c a t e securing such
note; and
3f
That such bank has n o t i f i e d the v e t e r a n by mail a t h i s
l a s t known p o s t o f f i c e address of any s a l e , d i s c o u n t , or r e d i s c o u n t
of such note by such bank, as r e q u i r e d by Section 502(b) of the Act#
(c)
A f f i d a v i t of Other Banks« - I f such note i s o f f e r e d f o r
r e d i s c o u n t by a bank other than the bank which made the loan there-*
on, i t must a l s o be accompanied by an a f f i d a v i t of an o f f i c e r of
the o f f e r i n g bank and an a f f i d a v i t of an o f f i c e r of each other bank
which has s o l d , discounted or rediscounted such n o t e , which a f f i d a v i t s h a l l be in form approved by the D i r e c t o r and s h a l l s t a t e t h a t
*
the bank of which the a f f i a n t i s an o f f i c e r has promptly n o t i f i e d
the v e t e r a n by mail a t h i s l a s t known p o s t o f f i c e address cf the
s a l e , discount or r e d i s c o u n t of such note by such bank, a s , r e q u i r e d
by Section 502(b) of the Act,
SECTION 7.
APPLICATION
ES3)IS00UIIT.
Every a p p l i c a t i o n f o r the r e d i s c o u n t o f ' s u c h notes s h a l l
be made on a form approved by the Federal reserve bank to which such
A
*
35(3
-6-
X-473S-0
note i s o f f e r e d and s h a l l contain a c e r t i f i c a t e of the o f f e r i n g bank
to the e f f e c t t h a t , to the "best of i t s knowledge and b e l i e f , such
note arose out of a loan made i n f u l l compliance with the p r o v i s i o n s
of the Act and the r e g u l a t i o n s of the D i r e c t o r and i s e l i g i b l e f o r
r e d i s c o u n t under the p r o v i s i o n s of Section 502 of the Act and of t h i s
Regulation#
SECTION VI.
PROPER BANK FOR REDISCOUNT.
No such note s h a l l be r e d i s c o u n t e d by any Federal r e s e r v e
bank f o r any bank not l o c a t e d i n i t s own Federal r e s e r v e d i s t r i c t ,
except t h a t such notes may be rediscounted by any Federal r e s e r v e bank
f o r any other Federal r e s e r v e bank.
SECTION V l l ,
/
RATS OF REDISCOUNT.
The r a t e of i n t e r e s t charged by any Federal r e s e r v e bank on
any such note r e d i s c o u n t e d by i t s h a l l be the same a s t h a t charged by
i t f o r the r e d i s c o u n t of 90-day notes drawn f o r a commercial purpose,
except t h a t when such notes a r e rediscounted f o r another Federal r e s e r v e
bank the r a t e s h a l l be t h a t f i x e d by the Federal Reserve Board.
SECTION V I I I .
REDISCOUNTS FOR NONMEMBER BANKS..
No Federal r e s e r v e bank s h a l l r e d i s c o u n t such notes f o r any
nonmember bank u n t i l such bank has f u r n i s h e d to t h e Federal r e s e r v e
bank such i n f o r m a t i o n as i t may r e q u e s t i n order to s a t i s f y i t s e l f as
to the condition of such bank and the a d v i s a b i l i t y of making the r e d i s count f o r i t .
(TENTATIVE DRAFT SUBJECT TO CHANGE. NOT FOR PUBLICATION IN THIS FOB:)
857
X-4738-c
$
(Place)
(Bate)
a f t e r date, I promise to
pay to the order of
(Name of Bank or Trust Company!
of
~
(City or Town and S t a t e )
„
Dollars
f o r value r e c e i v e d , with i n t e r e s t a f t e r date a t
note i s payable a t the bank named above.
per cent.
This
The makers and endorsers of t h i s
note waive p r e s e n t a t i o n , p r o t e s t , and n o t i c e of dishonor.
As c o l l a t e r a l s e c u r i t y f o r the prompt payment of t h i s note
I have d e l i v e r e d to and do hereby pledge with the holder of t h i s note my
a d j u s t e d s e r v i c e c e r t i f i c a t e No.
dated
f u r t h e r i d e n t i f i e d by No. A
.
This note may be sold, d i s -
counted or r e discounted and the c e r t i f i c a t e pledged herewith may be t r a n s f e r r e d i n accordance with the p r o v i s i o n s of the World War Adjusted Compensat i o n Act.
If the p r i n c i p a l and i n t e r e s t of t h i s note a r e not p a i d a t i t s
m a t u r i t y any bank h o l d i n g t h i s note and c e r t i f i c a t e may, a t any time a f t e r
m a t u r i t y of the loan, but not b e f o r e the e x p i r a t i o n of s i x months a f t e r the
loan was made, p r e s e n t t h i s note and c e r t i f i c a t e to the D i r e c t o r of the
United S t a t e s Veterans' Bureau i n order to secure payment of t h i s loan, as
provided i n t h e World War Adjusted Compensation Act.
(Signature of V e t e r a n . )
P l e a s e p r i n t or t y p e w r i t e
name and address of v e t e r a n
(
,
(
(Name of v e t e r a n )
here
(
( S t r e e t Address or Route Number)
(City or Town and S t a t e )
(TENTATIVE EBAIT SUBJEClTO CHAINS,-
SOT FOR PUBLICATION Of THIS FOBli)
X-4738-d
AUTHORITY FOR REDJS COUNTING *0185 SSCUHED BT ADJUSTED
SERVICE CERTIFICATE WITH 4Hf ftCEBAl RES3HVB BANK
Qi
- .
WHIB1A6, i t i s desired that the officers of this tank
should, from time to time be able to rediscount en i t * behalf veterans*<
notes secured by adjusted service certificates, Mow, therefore, " o i t
b
WmWD;
'
1st. fiiat the Prosident. Vifce President and Cashier aro,
and each or either of thdm i s , hereby authorized to rediscount with the
Federal Reserve leak of
, any such notes now
o? hereskfter held "by this tank, upon such terms and at sue* time or
times as to h$gt «r. thee may me cm desirafcle.
2nd# That tho foregoing powers shall continue and remain
in foroe until express notice of their revocation has "been duly given to
said Federal Reserve Bank of
.
I
do hereby c e r t i f y that the
foregoing i s a true extract faroa the tttimtes of a meeting of the Board
of Directors of the
_
a quorum being present, held at
day of
. 19
.
the ____________
*
In witness whereof, I have hereunto set any hand and affixed
the o f f i c i a l e#m& ef the iaid Book this
19
.
SEAL
day of
•!
359
(TESTATIVS IEAPT SUBJECT TO CHiSfflB. SOT fOR tmiCATIOH Iff IEIS FOBM)
1-4738-c
APPLICATION F R B1DISOOUST OF SOBS SECURED BY
O
ADJUSTED SERVICE CIRTiriGATES.
,
i
To the federal Reserve Bank "of
The
.
"bank ef
offers
herewith the following Veterans' notes secured "by adjusted service
certificates* duly endorsed by I t .
W agree that the Federal Reserve Bank of
e
.
•
may charge the amount ef the notes to our account at their maturity,
•r, i f not a member of the Federal Reserve System, we promise to place
acceptable funds in the hands of the Federal Reserve Bank of
•
covering the amount of each note, which funds shall be available on
^ •
>
the day each note matures.
Our endereement shall be deemed a waiver ef demand, net ice
and protest.
I hereby certify that, to the beet of my knowledge and bel i e f , the ntte or notes offered herewith arose out of a loan made in
full compliance with the provisions ef the World War Adjusted Compensation Act and the regulations of the Direct*r of tfye United
States Veterans' Bureau and i s eligible for rediscount with a'Federal
,
H
Reserve Bank under the provisions of Section 502 of the World War
Adjusted Condensation Act and <<f the regulations of the federal Re:
1
serve Board.
(^President)
( Cashier J
mo
-
2
X-4738-e
-
Please l i s t i n m a t u r i t y order
MATURITY
;
NAME OF VETERAN
i
ADDRESS
DO NOT USE
: THIS COLUMN: A O N
MUT
361
(TENTATIVE tRAJT SUBJECT TO CHA1FGE.
HOT FOE PUBLICATION IN THIS F0BM)X-4738-f
PROPOSED PROVISION OF REGULATION BY V2TERANS' BUREAU.
N» payment upon any note w i l l "be made "by the D i r e c t o r to
any "bank under Section 502, u n l e s s the note when p r e s e n t e d t o him
i s accompanied by the a f f i d a v i t or a f f i d a v i t s r e q u i r e d "below;
1.
I f such note has never been sold, discounted, or r e -
discounted by the bank which made the loan, i t s h a l l be accompanied
by an a f f i d a v i t by an o f f i c e r of such bank on form
(A)
, which
i s male a p a r t of t h i s r e g u l a t i o n .
2.
I f such note has been sold, discounted or r e d i s -
ceunted by the bank which made the loan, i t s h a l l be accompanied
by an a f f i d a v i t of an o f f i c e r #f such bank on form
(B) . which.
i s made a p a r t of t h i s r e g u l a t i o n .
3.
I f such note has been sold, discounted or r e d i s c o u n t e d
by any bank or banks e t h e r than the bank which made the loan, i t
s h a l l be accompanied by an a f f i d a v i t by an o f f i c e r of each such
other bank on form
(C)
which i s made a p a r t of t h i s r e g u l a t i o n .
(Tentative droit subject to change.
forago.
(A)
Sot for publication in this form)
-
S t a t e of
X-4738-g
)
( SS i
County of
j
*»
.
(Same of officer)
and any that I am an o f f i c e r , to wit
of the
(Nan* of b#ak or trust oo-pany)
being duly sworn depose
:
(Han. of office)
(City or torn and State)
which i s a bank inoorporated under the laws of
. and I
further depose and aay;
(1)
That the said bank or trust company ha# not
charged, or collected, or atteopted to charge, or collect, directly
or indirectly, any fee or other compensation, in respect of this loan
or m y other loan made by euoh bank to any veteran under the provisions
of Section 503 of the VoxId Itof Adjusted Co-apensation Act, except the
interest authorize* by such section at a rate not exceeding by more
than 2$ per annum the rato charged at the dato of the loan for the discount of 90-day commercial paper under Section 13 of the federal leserve
Act by the Federal Be servo Bank of
^
tAi ch
(game of federal Reserve iBank)
is the Federal Beserve Bank of She
'
'
(go. of federal Beaerv# District)
Federal Beserve District in which the said
,
( X M M of bank or t a s t
located:
company)
(2) That the person who obtained the loan evidenced by
the attached note, secured by adjusted service certificate go.
dated
further identified by go,. A
•
i s knovn to be the person named in such adjusted service certificate;
and
(3). fhat the said
'made
362
-2-
X-4738-g
the loan evidenced by the attached note to the v e t e r a n whose name i s
signed t o -such note and t h a t such note has never "been s o l d , discounted
or rodiscounted by the s a i d
(Harae of bank or t r u s t company)
(Signature of o f f i c e r )
Subscribed and sworn to b e f o r e me
this
;
d a t e of
(Notary P u b l i c , or other o f f i c e r
designated by the United S t a t e s
Veterans Bureau.)
(T15WTAIIV3 DRAFT SUBJECT TO CM&S.
Form go.
HOT FOR PUBLICATION I2T THIS FORM).
(n)
X-4738-h
Stato of
.
County of
)
) SS:
)
I»
, being duly sworn depose and say t h a t I
(Mane of o f f i c e r ) '
ar.i an o f f i c e r , to wit
of the
(Wane of o f f i c e )
(Wane of bank or t r u s t company)
Jf
which i s a bank incorporated under the laws of
(City or town and S t a t e )
, and I f u r t h e r depose and say:
1. That t h e s a i d bank or t r u s t company has not charged, or col*.
l e c t e d , or attempted to charge, a* c o l l e c t , d i r e c t l y or i n d i r e c t l y , any
f e e or other compensation, in r e s p e c t of any loan, made by such bank to
any veteran under tha p r o v i s i o n s of Section 502 of the World War Adjusted
Compensation Act, except the i n t e r e s t a u t h o r i z e d by such s e c t i o n a t a r a t e
by
not e x c e e d i n g / r a r e than 2$ per annum the r a t e charged a t the d a t e of the
loan f o r t h e discount of SO day commercial paper under Section 13 of the
Federal Reserve Act by t h e Federal Reserve Bank of
which i s t h e Federal Reserve Bank of the
(Wane of Federal r e s e r v e bank)
(Wo. of Federal Reserve D i s t r i c t )
Federal Reserve D i s t r i c t in which the said
(Warne of bank or t r u s t company)
i s located;
2* That the person who obtained the loan evidenced by the
a t t a c h e d n o t e , secured by a d j u s t e d s e r v i c e c e r t i f i c a t e Wo.
f u r t h e r i d e n t i f i e d by Wo.A
to be the person named in such a d j u s t e d s e r v i c e c e r t i f i c a t e ; and
3. That the veteran who obtained the loan evidenced by the
a t t a c h e d note secured by a d j u s t e d s e r v i c e c e r t i f i c a t e Wo.
dated
f u r t h e r i d e n t i f i e d by Wo,A
was promptly n o t i f i e d by the
.
t h a t the
(Warae of bank or t r u s t company)
dated
i s known
— —
2
X-473§-
said note i s being sent to the
of
(ITamo of tank or t r u s t company to whom the
note is transferred)
, f o r s a l e , discount or r e d i s c o u n t .
(Signature of O f f i c e r )
>
Subscribed and sworn to b e f o r e
me t h i s
day of
(Notary P u b l i c , or o t h e r o f f i c e r d e s i g n a t e d by t h e United S t a t e s Veterans'
Bureau.)
>
(TENTATIVE DRAFT SUBJECT TO CHANGE,
r o m Ho.
NOT 50R PUBLICATION IN THIS FORM.)
X 4738 1
Hi)
S t a t e of
County of
-
-
J
)SS.
)
"being duly sworn depose and
(Name of o f f i c e r )
say t h a t I am an o f f i c e r , to w i t
of the
(Name of o f f i c e )
(Name of
and I f u r t h e r depose and say t h a t the v e t e r a n who
hank or t r u s t company)
o b t a i n e d the loan evidenced by the a t t a c h e d n o t e secured by a d j u s t e d s e r v i c e
c e r t i f i c a t e No#
Bo* A
dated
f a r t h e r i d e n t i f i e d by
has been n o t i f i e d by the s a i d
(Name of Bank or t r u s t
• t h a t the s a i d n o t e i s being s e n t to t h e _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
$oapany)
(Name of bank or t r u s t
of
,
,
company to whom n o t e was t r a n s f e r r e d )
f o r s a l e , d i s c o u n t or r e d i s c o u n t .
( S i g n a t u r e of O f f i c e r . )
Subscribed and sworn to b e f o r e me
this
day of
(Notary P u b l i c , or o t h e r
o f f i c e r d e s i g n a t e d by
the United S t a t e s Veterans B u r e a u . )
X-4739
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
DECEMFCAT
1 9 2 6 *
Review of S i t u a t i o n of Member Banks in Outlying
Sections Granted Reserve Reductions.
Dear S i r :
R e f e r r i n g to the Board's l e t t e r of October 12, 1926,
X-4689, and the c o n s i d e r a t i o n of the s u b j e c t thereof a t t h e
r e c e n t Conference of Federal Reserve Agents, the Board has
voted to r e q u e s t each Federal Reserve Agent to review a t the
end of the year t h e s i t u a t i o n w i t h r e s p e c t to member banks
l o c a t e d in o u t l y i n g s e c t i o n s of r e s e r v e and c e n t r a l r e s e r v e
c i t i e s , which have been granted permission to c a r r y reduced
r e s e r v e s on demand d e p o s i t s under the p r o v i s i o n s of Section
19 of the Federal Reserve Act.
The Board would l i k e to have the f i r s t review of the
s i t u a t i o n made as of December 31, 1926, and a r e p o r t thereon
from each Federal Reserve Agent as soon a f t e r the end of t h e
year as p r a c t i c a b l e . I t i s expected t h a t the r e p o r t of each
Federal Reserve Agent w i l l deal i n d i v i d u a l l y with each bank
which has been granted the reduced r e s e r v e p r i v i l e g e , and t h a t
in each case, in a d d i t i o n to such d a t a and comment as the Agent
may deem i t d e s i r a b l e to submit, t h e r e w i l l be s e t f o r t h
(1) Total d e p o s i t s as of the d a t e of approval of
the b a n k ' s a p p l i c a t i o n .
(2) Total d e p o s i t s as of the d a t e of t h e survey.
(3) Amount due to banks as of the d a t e of approval
of the bank 1 s a p p l i c a t i o n .
(4) Amount due to banks a s of the date of the survey.
(5) Ratio of bank d e p o s i t s to t o t a l d e p o s i t s .
Very t r u l y yours,
Walter L. Eddy,
Secretary,
TO ALL F. R. AGENTS.
federal reserve board
x-4740
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 4, 1926.
SUBJECT: Acceptances by national banks against import and export b i l l s .
Dear Sir:
The Federal Reserve Board has for some time had under consideration the question whether national banks may l e g a l l y accept d r a f t s
drawn upon them by other banks against the security of import or export
b i l l s of exchange previously discounted by such other banks.
The question now a r i s e s in the following form: The Hew York
agency of a foreign bank buys export "bills to finance the shipment of
cotton to a foreign country; and, in order to refinance i t s e l f , arranges
for a national bank to accept b i l l s drawn upon such national bank by such
foreign hank and secured by a pledge of the export "bills previously purchased by the foreign bank. The question presented i s Whether the national bank may lawfully accept b i l l s drawn upon i t under stidh circumstances#
In a ruling published on page 610 of the Federal Reserve B u l l e t i n
for June 1920, the Board ruled that "no bank which has purchased a foreign
documentary draft may refinance i t s e l f by drawing a draft on a member bank
secured by the documentary draft 11 . The Board has c a r e f u l l y reconsidered
t h i s question, however, and i s of the opinion that such ruling contains
an unnecessarily s t r i c t interpretation of the law.
The Board i s now of
the opinion that such acceptances may he said to come within the broad
terms of the p r o v i s i o n of Section 13 of the Federal Reserve Act which authorizes member banks to accept drafts drawn upon them "which grow out of
transactions involving the importation or exportation of goods"; provided
that such drafts are drawn before the underlying export transaction i s completed, The same interpretation would n e c e s s a r i l y apply also to d r a f t s
drawn upon national hanks by other banks against the security of import
b i l l s . p r e v i o u s l y discounted by such other banks.
The Board r u l e s , therefore, that national banks may l e g a l l y accept drafts drawn upon them by other banks against the security of import oi* export b i l l s of exchange previously discounted by such other
banks; provided that such drafts are drawn before the underlying import
or export transactions are completed and comply as to maturity and in
a l l other respects with the provisions of the law and the Board's regul a t i o n s . Conversely, the Board rules that national banks may not l e g a l ly accept drafts drawn upon them by other banks against the security
, - M
9
of import or export b i l l s of exchange p r e v i o u s l y discounted by such other
banks when such d r a f t s a r e drawn a f t e r the u n d e r l y i n g import or export
t r a n s a c t i o n s a r e completed.
In the Board's opinion, an import or export t r a n s a c t i o n i s
completed when the goods have a r r i v e d a t the f i n a l d e s t i n a t i o n s p e c i f i e d
in the export shipping documents.
Very t r u l y yours,
D. R. Crinfringer,
Governor,
TO ALL G0VE3N0BS.
X 4741
*
THSASOBY DEPARTWT
OJPiCB 07 IH3 SfiCKETAEY
WASHINGTON
The Governor,
Federal Reserve Board.
>V7G
U
** f
December 6, 1926.
Sir:
You are hereby advised that the Department has referred to the Disbursing Clerk, Treasury Department* for paynwit, the account of the Bureau
of Engraving and Printing Cor preparing Federal reserve notes during the
period November 1, 1926, to November 30, 1926, amounting to #136,701,
as follows*
Federal Beserve Notes, Series 1914
.|5
Boston
$ 300,000
New York
250,000
Philadelphia
100,000
Cleveland
200,000
Richmond
100,000
Atlanta
150,000
Chicago
600,000
Kansas City
100,000
San Rranciaoo
300,000
2,100,000
|10
^0
200,000
160,000
75,000
150,000
100,000
600,000
60,000
60,000
'
100,000
1,375,000
|50
10,000
100,000
60,000
260,000
10,Q00
Total
$600,000
400,000
176*000
410,000
150,000
260,000
1,300,000
100,000
460,000
»,735,000
3,735,000 sheets @ $36.60 per M # . . . . #136,701.00
The charges against the several Federal Reserve Banks are as follows:
18,300.00
14,640.00
6,405*00
16,006.00
6,490.00
9,160.00
47,580.00
3,660.00
16,470.00
$l36,?01.00
The Bureau appropriations will " e reimbursed in the above amount
b
from the indefinite appropriation "Preparation and Issue, of Federal Reserve
Notes, Reimbursable", and i t i s requested that your Board cause such indefinite appropriation to be reimbursed in l i k e amount.
Respectfully,
, .
Boston
New York . . . .
Philadelphia
Cleveland . . .
Richmond . . . .
Atlanta . . . .
Chicago . . . .
Kansas City . .
Son Krancisco .
. . . . . . . .
. . . .
. . . . . . . .
. . . . . . . .
*
.
. . . . . . . .
. . . . . . . .
. . . . . . . .
(signed) S« R. Jacobs,
Deputy Commissioner.
federal reserve board
'vy-%
WASHINGTON
15 # .A.
X~4742
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
December 7, 1926
SUBJECT:
S t a n d a r d i z a t i o n of the Size and Arrangement
of Bank Checks, Notes, D r a f t s and Similar
Instruments.
Dear S i r :
A day of Wo ago the Federal Reserve Board c o n f e r red with a standing committee appointed by a general conf e r e n c e of "bankers, l i t h o g r a p h e r s and other i n t e r e s t s , held
on December 4, 1925, to consider the s u b j e c t of the s t a n d a r d i z a t i o n of the s i z e and arrangement of "bank checks,
n o t e s , d r a f t s and other i n s t r u m e n t s . This committee r e quested the co-operation of the Federal Reserve System in
promulgating the p l a n adopted "by the conference as s e t
f o r t h i n a "booklet issued by the United S t a t e s Department
of Commerce, s e v e r a l copies of which a r e being forwarded
to you under s e p a r a t e cover.
A f t e r going over the d e t a i l s of the p l a n with the
committee, the Board voted to approve the p r i n c i p l e s i n volved, and i t i s hereby submitted to your bank f o r such
c o n s i d e r a t i o n as you may deem a d v i s a b l e .
Very t r u l y yours,
Walter 1. Eddy,
Secretary,
TO ALL GOVERNORS*
3 Z 3
federal reserve board
X-4743
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
DOCOMBCR
9 ,
1 9 2 6
A u t h o r i t y of Federal Reserve Banks to Receive Sec u r i t i e s f o r Safekeeping from Federal Intermediate
Credit Banks or Federal land Banks.
Dear S i r :
The Federal Reserve Board has "been r e q u e s t e d to express
an opinion on the question whether Federal r e s e r v e "banks a r e a u t h o r i z e d to accept s e c u r i t i e s f o r safekeeping from Farm Loan Regist r a r s , from Federal Lend. Banks, or from Federal I n t e r m e d i a t e Credit
Banks* A f t e r a c a r e f u l c o n s i d e r a t i o n of t h i s question the Board
reached the conclusion t h a t Federal r e s e r v e banks may p r o p e r l y r e ceive s e c u r i t i e s f o r safekeeping from Federal Intermediate Credit
Banks "but a r e without a u t h o r i t y to do so f o r Federal Land Banks or
Farm Loan R e g i s t r a r s .
The A g r i c u l t u r a l Credits Act of 1923 provides t h a t "Federal
r e s e r v e "banks are hereby a u t h o r i z e d to a c t as d e p o s i t o r i e s f o r and
f i s c a l agents of any National A g r i c u l t u r a l Credit Corporation or
Federal Intermediate Credit Bank#" I t seems c l e a r t h a t under t h i s
p r o v i s i o n of law, Federal reserve banks are a u t h o r i z e d to accept dep o s i t s of funds or s e c u r i t i e s from Federal I n t e r m e d i a t e Credit Banks,
No p r o v i s i o n e i t h e r i n the Federal Reserve Act or the Farm
Loan Act gives Federal r e s e r v e banks a u t h o r i t y to r e c e i v e d e p o s i t s of
s e c u r i t i e s from Farm Loan R e g i s t r a r s or from Federal Land Banks.
S e c t i o n 13 of the Farm Loan Act which a u t h o r i z e s Federal Land Banks
to d e p o s i t s e c u r i t i e s and funds "with any member bank of the Federal
Reserve System" seems c l e a r l y to contemplate t h a t d e p o s i t s of Federal
Land Banks should be made i n member banks of the Federal Reserve
System r a t h e r than i n f e d e r a l r e s e r v e banks. The Board i s , t h e r e f o r e ,
of the opinion t h a t Federal r e s e r v e banks have no a u t h o r i t y to r e - *
ceive d e p o s i t s of seciiritiefe f o r safekeeping from Federal Land Banks
or from Farm Loan R e g i s t r a r s .
By d i r e c t i o n of the Federal Reserve Board.
TO GOVERNORS
Very t r u l y yours,
Walter L. Eddy,
Secretary*
OF ALL JEDEBAL RESERVE BANKS.
federal reserve board
WASHINGTON
X-4745
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 9, 1926.
SUBJECT:
Code Word to cover new i s s u e of C e r t i f i c a t e s of
Indebtedness, S e r i e s TS-1927, i n Telegraphic
Transactions.
Dear S i r :
In connection with t e l e g r a p h i c t r a n s a c t i o n s i n
Government s e c u r i t i e s between Federal r e s e r v e banks, the
code word "BSLOUITE" has been designated to cover the new
i s s u e of Treasury C e r t i f i c a t e s of Indebtedness, dated
December 15, 1926^ S e r i e s TS-1927.
This word should be i n s e r t e d i n the Federal
Reserve Telegraphic Code Book following the supplemental
code word "BELOITO-IH'G-", a t the bottom of page 25.
Very t r u l y yours,
J• C. U o e l l .
Assistant Secretary,
TO GOVERNORS OF AI& F. R. BAMS
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-4746.
December 10, 1926.
SUBJECT:
Rediscount of Notes Secured. byAdjusted Service C e r t i f i c a t e s .
Dear S i r :
I enclose f o r your information a copy of a new r e g u l a t i o n
promulgated "by the Federal Reserve Board December 9, 1926.
This
r e g u l a t i o n p e r t a i n s to the r e d i s c o u n t by Federal r e s e r v e banks of
notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s and w i l l be known
as Regulation M.
I a l s o enclose f o r your information the following:
1.
A f i n a l d r a f t of the proposed c i r c u l a r l e t t e r on the
above s u b j e c t to be s e n t by each Federal r e s e r v e bank to every
i n c o r p o r a t e d bank i n i t s d i s t r i c t .
This proposed c i r c u l a r l e t t e r
was p r e p a r e d by the Board's Counsel with the advice and a s s i s t a n c e
of a committee of o f f i c e r s of Federal r e s e r v e banks appointed p u r suant to a r e s o l u t i o n adopted a t the l a s t Governors 1 Conference,
a s more f u l l y explained i n Mr. Wyatt's l e t t e r of December 4 (X-4738);
2,
Regulation promulgated December 8, 1926* by the tJnited
S t a t e s Veterans 1 Bureau p e r t a i n i n g to loans on a d j u s t e d s e r v i c e
certificates;
Copy of form of note arid a f f i d a v i t s approved by the
United. S t a t e s V e t e r a n s ' Bureau;
4.
Proposed form of a p p l i c a t i o n f o t rediscount of such
n o t e s ; and
5.
Proposed form of r e s o l u t i o n to be adopted by banks author i z i n g the endorsement and rediscount of such n o t e s .
The Board's Regulation M i s now on the p r e s s and i t i s
hoped t h a t a supply of p r i n t e d copies can be shipped t o you on
Monday or Tuesday of next week.
The United S t a t e s Veterans' Bureau has agreed to supply
to each F e d e r a l r e s e r v e bank a s u f f i c i e n t number of copies of
the following documents to enable each Federal r e s e r v e bank to
send a copy to every i n c o r p o r a t e d bank i n i t s d i s t r i c t :
X-4746
— 2
1.
2.
3.
4.
375
The World War Adjusted Compensation Act;
The Act of July 3, 1926, amending the World War
Adjusted Compensation Act;
The r e g u l a t i o n s of the Veterans' Bureau with
r e s p e c t to loans on a d j u s t e d s e r v i c e c e r t i f i c a t e s ; and
Forms of notes and a f f i d a v i t s approved by the
V e t e r a n s ' Bureau.
A supply of each of these documents w i l l "be shipped to each
Federal r e s e r v e "bank a s soon a s they can "be p r i n t e d . A f u r t h e r supply
of the forms of notes and a f f i d a v i t s provided "by the Veterans' Bureau
f o r the u s e of l e n d i n g "banks w i l l "be f u r n i s h e d to each Federal r e s e r v e
"bank which i s w i l l i n g to d i s t r i b u t e such forms upon r e q u e s t . Most of
the Federal r e s e r v e "banks have a l r e a d y expressed t h e i r w i l l i n g n e s s to
do t h i s .
Bach Federal r e s e r v e "bank w i l l , of course, be expected to
p r i n t i t s own c i r c u l a r l e t t e r , forms of a p p l i c a t i o n f o r r e d i s c o u n t ,
and the proposed form of r e s o l u t i o n to be adopted by banks a u t h o r i z ing the endorsement and rediscount of notes secured by a d j u s t e d
service c e r t i f i c a t e s .
Very t r u l y yours,
Walter L. Eddy.
Secretary.
Enclosures.
TO GOVERNORS OF ALL FEDERAL 'RESERVE BANKS.
FEDERAL RESERVE BA2IK OF
Circular 2To.
REDISCOUNT OF 1T0TSS SECURED BY ADJUSTED SERVICE CERTIFICATES.
To a l l Incorporated Banks in the
Federal Reserve D i s t r i c t .
Under the p r o v i s i o n s of the World War Adjusted Compensation
Act, a d j u s t e d s e r v i c e c e r t i f i c a t e s s h a l l he dated as of the 1 s t day of
the month in which t h e a p p l i c a t i o n s f o r such c e r t i f i c a t e s a r e f i l e d , but
in no case b e f o r e January 1, 1925.
Banks a r e a u t h o r i z e d to make loans
on the s e c u r i t y of such a d j u s t e d s e r v i c e c e r t i f i c a t e s , but n o t b e f o r e
the e x p i r a t i o n o f ,
two years a f t e r the date of the c e r t i f i c a t e .
Only the veteran named in the c e r t i f i c a t e can l a w f u l l y o b t a i n
a loan on h i s a d j u s t e d s e r v i c e c e r t i f i c a t e and n e i t h e r the b e n e f i c i a r y
nor any o t h e r person than the v e t e r a n has any r i g h t s in t h i s r e s p e c t .
'
F ~
LOANS CiT-' ADJUSTED SERVICE CERTIFICATES.
Any n a t i o n a l bank or any bank or t r u s t company i n c o r p o r a t e d
under the laws of any S t a t e , t e r r i t o r y , p o s s e s s i o n or the D i s t r i c t of
Columbia, h e r e i n a f t e r r e f e r r e d to as any "bank", i s a u t h o r i z e d to loan
to any veteran upon h i s promissory n o t e secured by h i s a d j u s t e d s e r (with cr
vice c e r t i f i c a t e / \ w i t h o u t the consent of t h e b e n e f i c i a r y t h e r e o f ) any
amount not i n excess of the loan value of the . c e r t i f i c a t e a t the d a t e
the loan i s made.
Each c e r t i f i c a t e contains on i t s f a c e a t a b l e f o r
determining the loan v a l u e of the c e r t i f i c a t e .
— 2 —
X~ '.-7 4:6—8,
The United States Veterans* Bureau has prepared a form of
note f o r use in t h i s connection and i s p r i n t i n g a suoply of such forms
f o r d i s t r i b u t i o n to the banks.
*
The r e g u l a t i o n s of the Bureau provide
t h a t the form of notes used in making loans secured by a d j u s t e d s e r vice c e r t i f i c a t e s should s u b s t a n t i a l l y follow the form p r e p a r e d by the
Bureau.
The o f f i c i a l form provided by the Bureau should, t h e r e f o r e ,
be used whenever p o s s i b l e .
When i t i s not p o s s i b l e to use t h i s form
the bank should use a form s u b s t a n t i a l l y the same as t h a t provided by
the Veterans' Bureau, a sample copy of which i s enclosed h e r e w i t h .
Any bank making a loan on an a d j u s t e d s e r v i c e c e r t i f i c a t e
i s r e q u i r e d by the r e g u l a t i o n s of the United S t a t e s Veterans' Bureau
6
promptly to n o t i f y the Bureau of the name of t h e v e t e r a n , the A-number
shown immediately a f t e r the name, t h e number of the c e r t i f i c a t e and
the amount and d a t e of the loan..
Any bank holding a n o t e secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e may s e l l the note to any bank a u t h o r i z e d to make a loan to
a veteran and d e l i v e r the c e r t i f i c a t e to such bank.
In c a s e a n o t e secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e i s
sold, discounted or r e d i s c o u n t e d , the bank making the t r a n s f e r i s r e q u i r e d
by law to n o t i f y the veteran promptly by mail a t h i s l a s t known p o s t o f f i c e
address.
Ho a d j u s t e d s e r v i c e c e r t i f i c a t e i s n e g o t i a b l e or a s s i g n a b l e , or
may serve as s e c u r i t y f o r a loan, except as provided in Section 502 of the
World War Adjusted Compensation Act, which i s p r i n t e d on t h e f a c e of each
adjusted service c e r t i f i c a t e .
Any n e g o t i a t i o n , assignment or loan not made
in accordance w i t h the p r o v i s i o n s of Section 502 of the World War Adjusted
Compensation Act i s v o i d .
The law p r o v i d e s t h a t the r a t e of i n t e r e s t which a bank may
charge upon
such loan s h a l l not exceed by more than 2^ per annum the r a t e
charged, a t the date of the loan f o r t h e discount of 90-day commercial
paper under s e c t i o n 13 of the Federal Reserve Act by the Federal Reserve
Bank of the d i s t r i c t in which the lending bank ia l o c a t e d .
The r e g u l a -
t i o n s of t h e United S t a t e s Veterans' Bureau provide t h a t , where a loan
i s made by a bank l o c a t e d in a t e r r i t o r y or possession not embraced in
any Federal Reserve D i s t r i c t , the r a t e of i n t e r e s t charged s h a l l not exceed the l e g a l r a t e in such t e r r i t o r y or p o s s e s s i o n ; provided, however,
t h a t the i n t e r e s t charged on loans made o u t s i d e the c o n t i n e n t a l l i m i t s
of the United S t a t e s by a branch of a bank whose head o f f i c e i s in a Fed-^
e r a l Reserve D i s t r i c t w i l l be governed by the discount r a t e on 90-day
commercial paper in e f f e c t a t the Federal Reserve Bank of the d i s t r i c t
in which the p a r e n t bank i s l o c a t e d .
No charge, other than the i n t e r e s t
allowed by law, may be made by the lending bank; since the a c t p r o v i d e s ,
under p e n a l t y , t h a t such bank s h a l l not charge or c o l l e c t , or a t t o u ; t
to charge or c o l l e c t , d i r e c t l y or i n d i r e c t l y , any f e e or o t h e r onnansiation
in r e s p e c t of any loan made upon the s e c u r i t y of an a d j u s t e d s e r v i c e c e r t i f i c a t e except the i n t e r e s t a u t h o r i z e d by law.
Any v i o l a t i o n of t h i s
p r o v i s i o n w i l l make the loan void.
The D i r e c t o r of the United S t a t e s Veterans' Bureau cannot l a w f u l l y
make payment on any n o t e secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e , u n l e s s
the n o t e when p r e s e n t e d to him i s accompanied by an a f f i d a v i t made by an o f f i c e r of the bank which made the loan, b e f o r e a Notary P u b l i c or other o f f i c e r
designated f o r the purpose by r e g u l a t i o n of the D i r e c t o r of t h e Veterans' Bureau, s t a t i n g t h a t such bank has n o t charged or c o l l e c t e d , or attempted to
charge or c o l l e c t d i r e c t l y or i n d i r e c t l y , any f e e or o t h e r compensation
in r e s p e c t of any loan made upon the s e c u r i t y of an a d j u s t e d s e r v i c e c e r t i f i c a t e by the bank to a v e t e r a n , except the i n t e r e s t a u t h o r i z e d by law.
— 4
~
X-4746-a
8r
The Regulations of the United S t a t e s Veterans' Bureau a l s o
r e q u i r e t h a t such a f f i d a v i t s h a l l s t a t e :
(1)
That the person who obtained the loan evidenced "by such
note i s knov/n to be the veteran named i n the a d j u s t e d s e r v i c e c e r t i f i c a t e securing such note;
(2)
That the lending bank has n o t i f i e d the United S t a t e s
Veterans 1 Bureau t h a t i t has made a loan to the v e t e r a n named i n the c e r t i f i c a t e ; and
(3)
That the "bank has n o t i f i e d the v e t e r a n "by mail a t h i s l a s t
known p o s t o f f i c e address of any s a l e , discount, or r e d i s c o u n t of such
note.
The Regulations of the United S t a t e s Veterans' Bureau a l s o p r e - '
vide t h a t i n case t h e note was r e s o l d or r e d i s c o u n t e d by any bank other
than the l e n d i n g bank, a f f i d a v i t s h a l l be made by a duly a u t h o r i z e d o f f i c e r
of such bank t h a t proper n o t i c e of such r e s a l e or r e d i s c o u n t was promptly
mailed to the v e t e r a n a t h i s l a s t known a d d r e s s .
There i s p r i n t e d on the same p i e c e of paper a s the form of note
• h.
p r e p a r e d by the JEeterans' Bureau two forms of a f f i d a v i t s covering the
above requirements; and the Regulations of the Vetera ns' Bureau p r o v i d e
that the proper execution of the a p p r o p r i a t e a f f i d a v i t on such form w i l l
be considered as a compliance with the requirements cf the Veterans'
Bureau with r e s p e c t to a f f i d a v i t s .
REDEMPTION OF CERTIFICATES BY THE DIRECTOR
OF THE VETERANS' BUREAU
I f the v e t e r a n does not pay the loan a t i t s m a t u r i t y the bank
holding the note and a d j u s t e d s e r v i c e c e r t i f i c a t e may a t any time a f t e r
— 5
X - 4 *74:6~ a
~* :
—
380
the m a t u r i t y of the loan, "but not "before the e x p i r a t i o n of s i x months
a f t e r the loan was made, p r e s e n t them to the Director of the Veterans 1
Bureau.
The Director may i n h i s d i s c r e t i o n accept the c e r t i f i c a t e and
note and pay the "bank i n f u l l s a t i s f a c t i o n of i t s claim, the amount of
the unpaid p r i n c i p a l due i t , and the unpaid i n t e r e s t accrued a t the
r a t e f i x e d i n t h e note, up to the data of the check i s s u e d to the hank.
The Regulations of the Veterans' Bureau s t a t e t h a t i t w i l l
"be the p o l i c y of t h e Bureau to redeem a l l loans made i n accordance with
the law and r e g u l a t i o n s made pursuant t h e r e t o , when such loans a r e made
i n good f a i t h to the v e t e r a n to whom the c e r t i f i c a t e was issued, except
t h a t where the note i s h e l d "by a bank f o r a p e r i o d i n excess of s i x
months a f t e r the date of m a t u r i t y , the d i s c r e t i o n a u t h o r i z e d "by law may
"be invoked and redemption r e f u s e d .
I f the v e t e r a n dies "before the m a t u r i t y of the loan, the amount
of unpaid p r i n c i p a l and unpaid i n t e r e s t accrued up to the date of h i s
death immediately becomes due and p a y a b l e .
In such case, or i f the
v e t e r a n d i e s on the date the loan matures or w i t h i n s i x months t h e r e a f t e r , the bank h o l d i n g the note and the c e r t i f i c a t e s h a l l ,
notice
of
the
death of
the
veteran,
upon
p r e s e n t thorn to the Director of the Veterans' Bureau,who s h a l l thereupon
pay the "bank i n f u l l s a t i s f a c t i o n of i t s claim the amount of the unpaid
p r i n c i p a l and unpaid i n t e r e s t a t the r a t e f i x e d i n the note accrued up
to the date of the check issued to the bank; except t h a t i f , p r i o r to the
payment, the hank i s n o t i f i e d by the Director of the death of the veteran
and f a i l s to p r e s e n t the c e r t i f i c a t e and note to the D i r e c t o r w i t h i n 15
days a f t e r such n o t i c e , i n t e r e s t s h a l l "be p a i d only up to the 15th day
a f t e r such n o t i c e .
If the v e t e r a n has not died b e f o r e the m a t u r i t y of the c e r t i f i c a t e
and has f a i l e d to pay h i s note to the bank holding the note and c e r t i f i c a t e ,
must
such bank a t the m a t u r i t y of the c e r t i f i c a t e /
p r e s e n t the note and c e r t i f i c a t e to the D i r e c t o r of the Veterans' Bureau, who i s thereupon reouircd
by law to pay to the bank i n , f u l l s a t i s f a c t i o n of i t s claim the amotmt of
the unpaid p r i n c i p a l and unpaid i n t e r e s t a t the r a t e f i x e d in the note
accrued up to the d a t e of the m a t u r i t y of the c e r t i f i c a t e .
REDISCOUNTS WITH FEDERAL RESERVE BAMS.
Upon the indorsement of any bank, which s h a l l be deemed a waiver
of demand, n o t i c e and p r o t e s t by such bank as to i t s own indorsement exc l u s i v e l y , and s u b j e c t to r e g u l a t i o n s to be p r e s c r i b e d by the Federal Reserve Board, any such note secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e and
held by a bank i s made e l i g i b l e f o r discount or r e d i s c o u n t by the Federal
r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which such bank i s
l o c a t e d , whether or not the bank o f f e r i n g the note f o r discount
or r e d i s c o u n t i s a member of the Federal Reserve System and whether
or not i t acquired the note i n the f i r s t i n s t a n c e from the v e t e r a n
or acquired i t by t r a n s f e r upon the indorsement o£ any other
m
X-4746-a
'
r
bask; provided that at tho t i y c of discount or r g ^ ^ count such no to
3 8 2
has a maturity not in excess of nine months, exclusive of days of grace,
and complies in a l l other rogrcocts with the provisions of tho law,
regulations of the United States Veterans* Bureau, and
the regulations of the Federal Reserve Board.
the
ELIGIBILITY FOR REDISCOUNT.
-
.
•
• • • ••
'
\
•
„
In order to be e l i g i b l e f o r rediscount at a Federal reserve bank,
any such no to must}
1. Arise out of a loan made by a bank to a veteran i n f u l l compliance
' "
with
.
'
*
•
' •
the provisions of the World War Adjusted Compensation Act and the
regulations of the United States Veterans' Bureau;
2« Be secured by the adjusted service c e r t i f i c a t e issued to the maker,
which c e r t i f i c a t e must ^accompany the note;
3. Be held by the o f f e r i n g bank in i t s own r i g h t at the time i t i s
o f f e r e d f o r rediscount;
4. Be negotiable in form and otherwise in the form approved by the
United States Veterans' Bureau;
f
5.- Have a maturity at the time of rediscount not in e x c e s s of nine
months, exclusive of days of grace;
6.
J
1
Evidence a loan the amount of which does not exceed the lean value
of the adjusted service c e r t i f i c a t e f o r the year in wMicJi such loan was
made;
,
y •
7. Be payable with i n t e r e s t accruing a f t e r the date of the note at a
r a t e s t a t e d in the f a c e of the note, whfich r a t e shall not exceed by more
than 2 per cent per annum the rate charged a t the date of the loan for the
discount of 90-day commercial paper by ttye Federal reserve bank of the
lerjtding
Federal reserve d i s t r i c t in which t h e / • | * bank i s located;
8. Bear the endorsement of the baz# o f f e r i n g i t for rediscount,
J
which endorsement s h a l l be deemed a waive* of demand, n o t i c e and p r o t e s t
by such bank as to i t s own endorsement e x c l u s i v e l y ;
9. 3e accompanied by the evidence of e l i g i b i l i t y r e q u i r e d by the
Regulations of the Federal Reserve Board and by such other evidence of
e l i g i b i l i t y a s the Federal r e s e r v e bank may r e q u i r e ;
10. Be accompanied .by such a f f i d a v i t s and other evidence as would be
r e q u i r e d by the Veterans' Bureau in the event the Federal r e s e r v e bank
should apply to the Veterans' Bureau f o r payment of the n o t e ; and
11. Comply in a l l o t h e r r e s p e c t s with the requirements of the law arid
of the r e g u l a t i o n s of the Federal Reserve Board.
DiELI&IBILITY AS COLLATERAL TO A BANK'S O N NOTE.
W
i f e i t h e r a member bank nor a nonmember bank may borrow from a Federal
r e s e r v e bank on i t s own promissory note secured by n o t e s of v e t e r a n s in torn
secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s ; because n e i t h e r the Federal Reserve
Act nor the World War Adjusted Compensation Act a u t h o r i z e s the Federal r e serve banks to make such l o a n s .
That p r o v i s i o n of Section 13 of the Federal
Reserve Act which a u t h o r i z e s Federal r e s e r v e banks to make loans to memo
banks f o r p e r i o d s not in excess of 15 days on the promissory n o t e s of such
member banks
r e q u i r e s t h a t such n o t e s must be secured by paper e l i g i b l e
rediscount or f o r purchase by Federal r e s e r v e banks under the p r o v i s i o n s of
the Federal Reserve Act oi* by bonds or n o t e s of the United S t a t e s .
Section
502 of the World War Adjusted Compensation Act which a u t h o r i z e s Federal
r e s e r v e banks to r e d i s c o u n t n o t e s secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s
i s not made a p a r t of the Federal Reserve Act.
-3-
X-4746-a
3 8 4
IZ T O MP B5W3 0? 35DI300T3KT.
'EE D
P r i o r to t h e rediscount ox* any paper a c e r t i f i e d copy of a r e s o l u t i o n
passed by the board of d i r e c t o r s of the o f f e r i n g bank with the Seal of the
bank a f f i x e d , a u t h o r i z i n g the proper o f f i c i a l s to r e d i s c o u n t , mast be f i l e d
with the Federal r e s e r v e bank. I t w i l l not be necessary f o r member banks which
have f i l e d such a r e s o l u t i o n in connection with r e d i s c o u n t s to f i l e any add i t i o n a l r e s o l u t i o n in connection with n o t e s secured by a d j u s t e d s e r v i c e
certificates.
Before r e d i s c o u n t i n g any such notes f o r any nonmember bank, t h i s
bank w i l l r e q u i r e such nonmember bank to f u r n i s h to i t such information as
t h i s bank may consider necessary in order to s a t i s f y i t s e l f as to the condit i o n of such bank and the a d v i s a b i l i t y of making r e d i s c o u n t s f o r i t .
Blank
a p p l i c a t i o n s f o r r e d i s c o u n t w i l l be supplied by t h i s bank upon r e q u e s t .
All such n o t e s o f f e r e d f o r rediscount should be 1 i s t e d on the app l i c a t i o n form provided and the a p p l i c a t i o n signed by a duly a u t h o r i z e d
o f f i c e r . F u l l information must be f u r n i s h e d a s provided on t h e form.
Upon acccptance f o r r e d i s c o u n t by the Federal r e s e r v e bank the
proceeds of such n o t e s w i l l be c r e d i t e d to the r e s e r v e account of t h e bank,
in the case of a member bank, and, in the case of a nonmember bank, the
Federal r e s e r v e bank w i l l remit by check o r , upon r e q u e s t , w i l l c r e d i t
the account of a designated member bank l o c a t e d in t h i s Federal r e s e r v e
d i s t r i c t f o r the u s e and c r e d i t of the nonmember.
The r a t e of discount deducted by t h i s bank w i l l be the same
as t h a t deducted by i t in r e d i s c o u n t i n g 20 day n o t e s i s s u e d f o r commercial
purposes.
CQILSCTIor OF 3EDISCOUNTED NOTES AT MATURITY
In the cr se of member banks, the usual procedure w i l l be to forward
f o r c o l l e c t i o n a l l notes secured by a d j u s t e d service c e r t i f i c a t e s to the
banks discounting such notes, several days in advance of t h e i r m a t u r i t y .
Such notes w i l l be charged to the member b a n k ' s account when due without
n o t i c e , i t b e i n g assumed t h a t on t h e maturity date the member bank w i l l
provide funds in excess of i t s r e q u i r e d r e s e r v e to meet the n o t e s .
In the case of nonmember banks, n o t i c e of approaching m a t u r i t y
w i l l be forwarded to the discounting banks approximately ten days in
advance of the maturity of each note, and the discounting banks w i l l be
required to p l a c e funds i n the hands of the Federal reserve bank to pay
them, which funds must be a v a i l a b l e on the date of maturity of the n o t e s .
FURTHER INFORMATION ENCLOSED.
For your information t h e r e are enclosed the following:
1 . The World War Adjusted Compensation Act.
Sections 501,
502 and 504 deserve the s p e c i a l a t t e n t i o n of banks which contemplate
making loans on the s e c u r i t y of a d j u s t e d s e r v i c e c e r t i f i c a t e s .
2. The Act of J u l y 3, 1926, amending the World War Adjusted Compensation
4 (a) and Section
Act. Section/503 as amended by t h i s Act deserves special a t t e n t i o n .
3. The Regulations of the Veterans' Bureau with r e s p e c t to loans on
adjusted service c e r t i f i c a t e s .
-
X-4746-
11 -
«j o
oo
4 . The Regulations ox" the Federal Reserve Board with r e s p e c t to
the rediscount of notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s .
5. A sample copy of the form of note and a f f i d a v i t s , approved
by the United S t a t e s Veterans' Bureau.
A supply of these forms w i l l
be provided by the Veterans' Bureau and any incorporated bank may obtain
a supply from the United S t a t e s Veterans' Bureau, Washington, D.C., or
from t h i s bank, upon r e q u e s t .
6. A proposed form of r e s o l u t i o n to be adopted by banks authori z i n g the endorsement and rediscount of such n o t e s .
7. Copies of form of a p p l i c a t i o n to t h i s Federal r e s e r v e bank
f o r rediscount of such no.tes.
Additional copies of t h i s form w i l l be
supplied by t h i s bank, upon r e q u e s t .
Very t r u l y yours,
X-4?46-b
3
PE'DIRAL RESERVE BOARD
REGULATION M, SSRIEo 0? 1926
mDISCOWT 0? NOTES SECURED BY ADJUSTED SERVICE CERTIFICATES
SECTION I . STATUTORY PROVISIONS.
Under the terms of the World War Adjusted Compensation Act as
amended loans nay l a w f u l l y be made to veterans upon t h e i r a d j u s t e d s e r v i c e
c e r t i f i c a t e s only i n accordance with the p r o v i s i o n s of Section 502 t h e r e o f . .
Any n a t i o n a l hank, or any bank or t r u s t company i n c o r p o r a t e d
under the laws of any S t a t e , T e r r i t o r y , p o s s e s s i o n , or the D i s t r i c t ef
Columbia i s a u t h o r i z e d , a f t e r the e x p i r a t i o n of two y e a r s a f t e r the date
af the c e r t i f i c a t e , to l e a n to any v e t e r a n upon h i s promissory note
secured by h i s a d j u s t e d s e r v i c e c e r t i f i c a t e , any amount not i n excess of
the loan value of the c e r t i f i c a t e , which i s s t a t e d on the f a c e of the
certificate.
The law provides t h a t the r a t e of i n t e r e s t charged upon
the loan by the lending bank s h a l l not exceed by more than 2 p e r cent per
annum the r a t e charged a t the date of the loan f o r the discount of SO day$
commercial paper by the Federal r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which the l e n d i n g bank i s l o c a t e d .
Upon the indorsement of any bank, which s h a l l be deemed a
waiver of demand, n o t i c e and p r o t e s t by such bank a s to i t s ewn i n d o r s e ment e x c l u s i v e l y , and s u b j e c t to r e g u l a t i o n s to be p r e s c r i b e d by the
Federal Reserve Board, any such note secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e and h e l d by a bank i s made e l i g i b l e f o r r e d i s c o u n t with the
Federal r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which such bank
X-4746-Td
-
2
-
i s l o c a t c d , whether or not the "bank o f f e r i n g the note f o r rediscount
i s a member of the Federal Reserve System and whether or not i t acquired
the note i n the f i r s t i n s t a n c e from the v e t e r a n or a c q u i r e d i t "by t r a n s f e r
upon the indorsement of any other tank; provided t h a t a t the time of r e discount such note has a maturity not i n excess of nine months, e x c l u s i v e
of days of grace, and complies i n a l l other r e s p e c t s with the p r o v i s i o n s
of the law, the r e g u l a t i o n s of the United S t a t e s Veterans' Bureau and the
r e g u l a t i o n s of the Federal Reserve Board.
SECTION I I .
DEFINITIONS.
Within the meaning of t h i s Regulation:
(a)
The term "the Act" s h a l l mean t h e World War Adjusted Com-
p e n s a t i o n Act as amended;
("b)
The term "Director" s h a l l mean the Director of the United
S t a t e s Veterans' Bureau;
(c)
The term " c e r t i f i c a t e " s h a l l mean an a d j u s t e d s e r v i c e c e r -
t i f i c a t e i s s u e d under t h e p r o v i s i o n s of Section 501 of the World War
Adjusted Compensation Act as amended;
(d)
The term "veteran" s h a l l mean any person to whom an ad-
j u s t e d s e r v i c e c e r t i f i c a t e has "been i s s u e d "by the Director under the
p r o v i s i o n s of the World War Adjusted Compensation Act as amended;
(e)
The term "hank" s h a l l mean any n a t i o n a l "bank or any "bank
or t r u s t company i n c o r p o r a t e d under the laws of any S t a t e , T e r r i t o r y ,
p o s s e s s i o n or t h e D i s t r i c t of Columbia;
(f)
The term "note" s h a l l mean a promissory n o t e , n e g o t i -
a b l e i n form, secured "by an a d j u s t e d s e r v i c e c e r t i f i c a t e , and
3
389
X-4746-b
evidencing a loan made "by a tank on the s e c u r i t y of such c e r t i f i c a t e i n
f u l l compliance with the p r o v i s i o n s of the World War Adjusted Compensation
Act as amended and the r e g u l a t i o n s of the United S t a t e s Veterans' Bureau.
SECTION I I I .
ELIGIBILITY.
In order to be e l i g i b l e f o r rediscount a t a Federal r e s e r v e
"bank, any such note must:
(a)
A r i s e out of a loan made "by a "bank to a v e t e r a n i n f u l l
compliance with the p r o v i s i o n s of the Act and of any r e g u l a t i o n which the
Director may p r o s c r i b e ;
(b)
Be secured by the c e r t i f i c a t e i s s u e d to t h e maker, which
c e r t i f i c a t e must accompany the n o t e ;
(c)
Be h e l d by t h e o f f e r i n g bank i n i t s own r i g h t a t the time
i t i s offered f o r rediscount;
(d)
Be negotiable^ i n form and otherwise i n the form approved
by the D i r e c t o r ;
(e)
Have a m a t u r i t y a t the time of r e d i s c o u n t not i n excess
of nine months, e x c l u s i v e of days of grace;
(f)
Evidence a l e a n the amount of which does not exceed the
loan value of t h e c e r t i f i c a t e f o r t h e year i n which such l e a n was made;
(g)
Be payable with i n t e r e s t accruing a f t e r the date of the
note a t a r a t e s t a t e d i n the f a c e of the note, which r a t e mast not exceed
by more than 2 p e r cent p e r annum the r a t e charged a t the date of the loan
f o r the discount of 90-day commercial paper by the Federal r e s e r v e bank
of the Federal r e s e r v e d i s t r i c t i n which the lending bank i s l o c a t e d ;
** 4 - 7 6*
(h)
390
Bear the endorsement of the bank o f f e r i n g i t for r e d i s -
count, which endorsement shall "be deemed a waiver of demand, n o t i c e ,
and protest "by such bank as to i t s own endorsement exclusively;
(i)
3e accompanied by the evidence of e l i g i b i l i t y r e q u i r e d by
t h i s Regulation and such other evidence of e l i g i b i l i t y as may be r e quired by the Federal r e s e r v e bank to which i t i s o f f e r e d f o r r e d i s count; and
(j)
Comply in a l l other r e s p e c t s with the requirements of the
law and of t h i s Regulation.
SECTION IV.
(a)
EVIDMCB OF ELIGIBILITY.
General. - The Federal r e s e r v e bank to which a n o t e i s o f f e r e d
f o r rediscount must be s a t i s f i e d e i t h e r by r e f e r e n c e to the note i t s e l f
or otherwise t h a t the loan evidenced by the note or any s a l e , d i s c o u n t , o r
rediscount thereof complies in a l l r e s p e c t s with the p r o v i s i o n s of section
502 of the Act and t h a t the note i s e l i g i b l e f o r rediscount by a Federa l r e s e r v e bank under the terms of the law and the p r o v i s i o n s of t h i s
Regulation.
(b) A f f i d a v i t of Lending Bank. - Any n o t e o f f e r e d to a Fede r a l r e s e r v e bank f o r rediscount must be accompanied by the a f f i d a v i t r e q u i r e d by Section 502 (h) of the Act and the r e g u l a t i o n s of the
D i r e c t o r , in form approved by the D i r e c t o r , made by an o f f i c e r of the
bank which made the loan, b e f o r e a n o t a r y p u b l i c or o t h e r o f f i c e r
designated f o r the purpose by r e g u l a t i o n of the D i r e c t o r s t a t i n g t h a t :
391
5
1.
"*
X-474S-1;
Such "bank has not char god. or c o l l c c t e d , or attempted to
chargc or c o l l e c t , d i r e c t l y or i n d i r e c t l y , any fee or other compensation
in respect
of any loan, made "by such hank to any v e t e r a n under Section
502 of the Act, except the i n t e r e s t a u t h o r i z e d by such s e c t i o n ;
2.
The person who obtained the loan evidenced by such note i s
known to be the v e t e r a n named i n the c e r t i f i c a t e s e c u r i n g such n o t e ;
3.
Such bank has n o t i f i e d the Director t h a t i t has made a
loan to the v e t e r a n named i n the c e r t i f i c a t e , as r e q u i r e d by the Regulat i o n of the D i r e c t o r ; and
4.
Such bank has n o t i f i e d the v e t e r a n by mail a t h i s l a s t
known p o s t o f f i c e address of any s a l e , discount, or rediscount of such
note by such bank, as r e q u i r e d by Section 502(b) of t h e Act.
(c)
A f f i d a v i t of Other Banks. — If such note i s o f f e r e d f o r
r e d i s c o u n t by a bank o t h e r than the bank which made the loan thereon,
i t must a l s o bo accompanied by an a f f i d a v i t of an o f f i c e r of the
o f f e r i n g bank and an a f f i d a v i t of an o f f i c e r of each other bank
which
has sold, discounted or r e d i s c o u n t e d such note, which a f f i d a v i t s h a l l
be i n form approved by the Director and s h a l l s t a t e t h a t the bank ef
which the a f f i a n t i s an o f f i c e r has promptly n o t i f i e d the v e t e r a n by
mail a t h i s l a s t kabwn p o s t o f f i c e address of the s a l e , discount or
m-.r
r e d i s c o u n t of such note by such bank, as r e q u i r e d by S e c t i o n 502(b) of
the Act.
SECTION V.
APPLICATION FOE REDISCOUNT.
Every a p p l i c a t i o n f o r the rediscount of such notes s h a l l be
made on & form approved by the Federal r e s e r v e bank to which such
noto i s o f f e r e d and s h a l l contain a c e r t i f i c a t e of the o f f e r i n g bank
to the e f f e c t th&t, to the 'best of i t s knowledge and b e l i e f , such
note a r o s e out of a loan mad® i n f u l l compliance with the p r o v i s i o n s
of the Act and the r e g u l a t i o n s of the D i r e c t o r and i s f e l i g i b l e f o r
r e d i s c o u n t under the p r o v i s i o n s of Section 502 of the Act and of t h i s
Regulation.
SECTION VI.
PEPPER BANK FOR REDISCOUNT.
No such note s h a l l he r e d i s c o u n t e d by aiyr Federal r e s e r v e
bank f o r any bank not l o c a t e d i n i t s own Federal r e s e r v e d i s t r i c t ,
except t h a t such notes may be rediscounted by any Federal r e s e r v e bank
f o r any other Federal r e s e r v e bank.
SECTION VII.
RATE OF REDISCOUNT.
The r a t e of i n t e r e s t charged by amy Federal r e s e r v e bank en
any such note r e d i s c o u n t e d by i t s h a l l be the same as t h a t charged by
i t f o r the r e d i s c o u n t of 90-day notes drawn f o r a commercial purpose,
except t h a t when such notes are rediscounted f o r another Federal r e s e r v e
bank the r a t e s h a l l be t h a t f i x e d by the Federal Reserve Board.
SECTION V I I I .
REDISCOUNTS FOR NONMEMBER BANKS.
No Federal r e s e r v e bank s h a l l r e d i s c o u n t such notes f o r any
nornneniber bank u n t i l such bank has f u r n i s h e d to t h e Federal r e s e r v e
bank such i n f o r m a t i o n a s i t may r e q u e s t i n order to s a t i s f y i t s e l f as
to the condition of such bank and the a d v i s a b i l i t y of making the r e d i s count f o r i t .
December
1926.
X-4"46-o
3 9 3
AUTHORITY FOB 2 E D I S C O U H T I K G FOTFS
S E C U R E D BY A D J U S T E D
S E R V I C E C E R T I F I C A T E S W I T H THE F E D 3 P A L R E S E R V E B A H
OF
.
WHEREAS, i t i s d e s i r e d t h a t the o f f i c e r s of t h i s 'bank
should from time to time bo a b l e to rediscount 'on i t s "behalf veterans'?
notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s , Now, t h e r e f o r e , be i t
RESOLVED:
1 s t . That the P r e s i d e n t , Vice P r e s i d e n t and Cashier a r e ,
and each or e i t h e r of them i s , hereby a u t h o r i z e d to r e d i s c o u n t with the
Federal Reserve Bank of
, any such notes now
or h e r e a f t e r h e l d by t h i s bank, upon such terms and a t such time or
times as to him or them may seem d e s i r a b l e .
2nd. That the foregoing powers s h a l l continue and remain
i n f o r c e u n t i l express n o t i c e vf t h e i r revocation has been duly given to
s a i d Federal Reserve Bank of
.
I
do hereby c e r t i f y t h a t the
foregoing i s a t r u e e x t r a c t from the minutes of a meeting of the Board
of D i r e c t o r s of the
a quorum being p r e s e n t , h e l d a t
day c f
19
the
.
In witness whereof, I have hereunto s e t my hand and a f f i x e d
the o f f i c i a l s e a l of the s a i d Bank t h i s
19
.
SEAL
day of
X-4746-d
894
APPLICATION FOR REDISCOUNT OF NOTES SECURED BY
ADJUSTED SERVICE CERTIFICATES.
To the Federal Reserve Batik of
, The
»
, "bank of
.
offers
herewith the f o l l o w i n g Vetetans 1 notes secured "by a d j u s t e d s e r v i c e
c e r t i f i c a t e s , duly endorsed by i t .
We agree t h a t the f e d e r a l Reserve Batik df
.
may charge the amount ef the notes t« our account a t t h e i r m a t u r i t y ,
e r , i f not a member cf the Federal Reserve System, we promise to p l a c e
a c c e p t a b l e funds i n the hauds of the Federal Reserve Bank of
cfcvering the amount t f each nrte$ which funds s h a l l he a v a i l a b l e on
the day each note matures.
Our endorsement s h a l l be deemed a waiver ef demand, n e t i c e
and p r o t e s t *
I hereby c e r t i f y t h a t , to the best of my knowledge and bel i e f , the r-s»te or n c t a s o f f e r e d herewith arose out of a l o a n made i n
f u l l compliance with the p r o v i s i o n s @f the World War Adjusted Comp e n s a t i o n Act and the r e g u l a t i o n s of the D i r e c t o r of the United;
S t a t e s Veterans' Bureau and i s e l i g i b l e f o r r e d i s c o u n t with a Federal
Reserve Bank under the p r o v i s i o n s of S e c t i a n 502 t f the World War
Adjusted Compensation Act and %f the r e g u l a t i o n s of the Federal Reserve Board.
President
( Cashier ]
395
- 2 Please l i s t i n m a t u r i t y order
—
MATURITY
».,...«••*
HAMS OF fSTERAU
:
.1,,
, » * » . .
.
...
ADDRESS
.
.
'
•
DO HOT USE
: THIS COLUMN: A O N
MUT
X-4746-e
?.
(Place)
(Date)
a f t e r d a t e , I promise to
pay to the order of
of
(ITame of Bank or Trust Company)
(City or Town and. S t a t e )
f o r value r e c e i v e d , with i n t e r e s t a f t e r date a t
p a i d . This n o t e i s payable a t the bank named above.
Do l i a r s
p e r cent u n t i l
As c o l l a t e r a l s e c u r i t y f o r the prompt payment of t h i s note I
have d e l i v e r e d to and do hereby pledge with the h o l d e r of t h i s note my
a d j u s t e d s e r v i c e c e r t i f i c a t e Ho.
dated
f u r t h e r i d e n t i f i e d by No. A
. This note may be s o l d ,
discounted or rediscountecL and the c e r t i f i c a t e pledged herewith may be
t r a n s f e r r e d in accordance with the p r o v i s i o n s of the World War Adjusted
Compensation Act, a s amendedi If the p r i n c i p a l and i n t e r e s t of t h i s note
are not p a i d a t i t s m a t u r i t y any bank holding t h i s note and c e r t i f i c a t e
may, a t any time a f t e r m a t u r i t y of the loan, but not b e f o r e the e x p i r a t i o n of s i x months a f t e r the loan was made, p r e s e n t t h i s n o t e and c e r t i f i c a t e to the Director of the United S t a t e s Veterans' Bureau in order to
secure payment of t h i s l o a n , as provided in the World War Adjusted Compensation Act,
(Signature of V e t e r a n ) .
(
(
(
(
Please p r i n t or typewrite
name and address of v e t e r a n
here.
(ITame of Veteran)
( __
(
(
S t a t e of
(City or Town and S t a t e )
)SS:
County of
( S t r e e t Address or Route JTumber)
)
)
I,
say t h a t I am
, being duly sworn depose and
(Name of O f f i c e r )
.
( T i t l e of Office? )
of
.
(Bank or Trust Company)
X-4746-e
, which i s a bank incorporated
-A.'-*
of
•
T~
(City or Town and S t a t e )
•under the laws of
;
; t h a t the person who obtained
the loan evidenced by the above note i s known to be the v e t e r a n named in
the a d j u s t e d s e r v i c e c e r t i f i c a t e r e f e r r e d to t h e r e i n ; t h a t the s a i d bank
or t r u s t cormany has not charged or c o l l e c t e d or attempted to charge or
c o l l e c t , d i r e c t l y or i n d i r e c t l y , any f e e or o t h e r compensation (except
i n t e r e s t as a u t h o r i z e d by Section 502 of the World War Adjusted Compensat i o n Act as amended) in r e s p e c t of any loan made under t h i s s e c t i o n by the
bank to a veteran; t h a t the United S t a t e s Veterans' Bureau was promptly
n o t i f i e d of the making of the o r i g i n a l loan as r e q u i r e d by paragraph 3
of Regulation
of the United S t a t e s Veterans' Bureau; t h a t in any neg o t i a t i o n of t h i s note by s a l e , discount or r e d i s c o u n t subsequent to the
o r i g i n a l loan, proper l e g a l n o t i c e was given to the veteran a s r e q u i r e d
by Section 502 (b) of the Act, and t h a t t h i s a f f i d a v i t i s made pursuant
to a u t h o r i t y given by the Board of D i r e c t o r s .
Subscribed and sworn to b e f o r e me t h i s
day of •
(Signature of O f f i c e r )
(Notary P u b l i c , or o t h e r o f f i c e r d e s i g nated by the United S t a t e s Veterans' Bureau).
S t a t e of
) S3:
)
County of
)
I,
(Fame of O f f i c e r )
being sworn deoose and say t h a t I am
, thereunto duly a u t h o r i z e d ,
„ °f the
( T i t l e of O f f i c e " )
of
(Hams of Bank or Trust Company)
(City or Town and S t a t e )
and t h a t the v e t e r a n who obtairted the loan evidenced by the above n o t e ,
which was t r a n s f e r r e d to t h i s bank by '
(Name of Bank or T r u s t Company)
has been n o t i f i e d by the
(Name of Bank or Trust Company)
t h a t the s a i d n o t 3 i s being -retrrjasfer-red to the
(Name of Bank or Trust
for sale, discount,or rediscount.
Company)
(Signature of O f f i c e r )
Subscribed and sworn to b e f o r e me t h i s
'
day of
.
(Notary P u b l i c , or o t h e r o f f i c e r d e s i g n a t e d by the United S t a t e s Veterans'
Bureau. See Regulation
U.S.V.B.)
mk7
FEDERAL BSSEEVS AGENT.
1.
Number of examiners
Total s a l a r i e s p a i d
2.
Number of a s s i s t a n t s
Total s a l a r i e s p a i d
3.
Number of other employees a t headquarters
Total s a l a r i e s p a i d
4.
How a r e examiners s e l e c t e d and organized?
I s the personnel of the examining f o r c e made up of men q u a l i f i e d and t r a i n e d f o r t h e i r work?
5.
I s examining f o r c e capable of conducting an examination, independent of
s t a t e f o r c e , of the l a r g e hanks i n your d i s t r i c t ?
6.
When a d d i t i o n a l a s s i s t a n c e i s needed f o r examination of l a r g e hanks or
f o r o t h e r p u r p o s e s , how s e l e c t e d and from what source obtained - q u a l i fications?
7.
S a l a r i e s and expenses p a i d f o r such a s s i s t a n c e ?
8#
Bow many examiners do you have capable of making independent c r e d i t i n v e s t i g a t i o n s ? Of t h i s number how many a r e not r e g u l a r l y engaged in
t h i s work?
Give t h e information a s i n d i c a t e d by the s i x questions below a s to each
examiner, a s s i s t a n t and o t h e r employees in t h e department;
1.
Name
Age
2.
Salary
3.
Length of s e r v i c e a s examiner
4.
Previous experience
5.
Any s p e c i a l p e r s o n a l q u a l i f i c a t i o n s
6.
General a b i l i t y and p r o f e s s i o n a l judgment
399
-
2
-
X-4747
MEMBER STATS BANKS
Give the information i n d i c a t e d by the n i n e questions below, by s t a t e s ,
as to each bank in the d i s t r i c t , making s e p a r a t e l i s t s f o r each c l a s s of banks:
1.
Commercial banks
Trust companies
Savings banks
2.
tUaaie and l o c a t i o n
3.
Capital
4.
Surplus
5.
Profits
6.
Deposits
7.
Loans
8.
Fixed a s s e t s
9.
Commercial & t r u s t companies
Trust and savings banks
Total a s s e t s
In a d d i t i o n to the foregoing information, p l e a s e give s e p a r a t e l y
the information c a l l e d f o r under questions below:
1.
ITumber of member s t a t e banks closed in 1925
<?-.
Uumber of member s t a t e banks closed in 1926
3.
Number of non-member banks
400
- 3 -
X-4747
EXPENSES
Separate by y e a r s - 1925-1926
1.
Number of s t a t e member banks
2.
Combined r e s o u r c e s
3.
Cost of and charge made f o r examinations
4.
Method of a s s i s t i n g banks
5.
Traveling expenses
6.
O f f i c e s u p p l i e s , p r i n t i n g and s t a t i o n e r y
7.
Tehephone, t e l e g r a p h
8.
Stenographic
9.
Additional h e l p , d t c .
10i
All other expenses
11.
Has the cost of a l l examinations made been charged?
banks not charged and reasons t h e r e f o r ,
12.
Has cost of a l l c r e d i t i n v e s t i g a t i o n s made been absorbed by t h e r e s e r v e
banks?
If n o t , give names of banks charged and reasons t h e r e f o r .
If n o t , give l i s t of
A-
X-4-747
J/Mim'TOHi
1.
Scope - Do the examinations now made give the ne cessary information to
enable t h e Federal Recerve Board to determine whether or not the member
banks a r e o p e r a t i n g within the requirements of the Federal Reserve Act,
tho r e g u l a t i o n s of the Board and the conditions of membership?
Do examinations include complete i n s p e c t i o n of a l l a s s e t s and l i a b i l i t i e s ?
2.
Procedure - Do examiners upon
p l a c e a l l books, r e c o r d s and
maintain custody and c o n t r o l
groups of a s s e t s or accounts
3.
Frequency
4.
Are a l l examinations so conducted as to develop as to each c l a s s of
a s s e t s and accounts examined the e s s e n t i a l f a c t s ?
(Information in
response to t h i s question involves an i n q u i r y as to how an i n d i v i d u a l
examiner conducts every s t e p in an examination)
5.
What examination of l i a b i l i t i e s i s made by Federal r e s e r v e examiners when
making examinations?
6.
What examination of l i a b i l i t i e s i s made by Federal r e s e r v e examiners when
making c r e d i t a n a l y s i s ?
7.
Are p r o o f s of C/D - c a s h i e r s checks, e t c . , c a r r i e d forward from one exami n a t i o n to another (a continuous p r o o f ) by e i t h e r s t a t e department or
Federal r e s e r v e examiners-?
8.
Any a t t e n t i o n given to bank accounts, e t c . , - r e c o n c i l e d or inspected?
9.
Do examiners,during the examination and while a t the
and examine t h e f o l l o w i n g :
e n t e r i n g bank promptly and immediately
t a n g i b l e a s s e t s under s e a l and do they
u n t i l work of i n s p e c t i o n as to p a r t i c u l a r
has been completed?
bank, i n q u i r e into
a.
Whether the law with r e f e r e n c e to t h e stock ownership of Federal
r e s e r v e bank has been complied with?
b.
Whether the bank has had any withdrawal or impairment of capi t a l s i n c e l a s t examination?
c.
Whether the bank has unimpaired c a p i t a l s u f f i c i e n t to e n t i t l e
i t to be n a t i o n a l bank in same s i t u a t i o n or equal to 60$
with p r o v i s i o n s f o r paying a d d i t i o n a l 40$ out of n e t income?
d.
Whether the bank r e d i s c o u n t s with Federal r e s e r v e bank paper
of a borrower who i s l i a b l e to bank in excess of p r o v i s i o n s
of Federal Reserve Act?
e.
Whether bank c e r t i f i e s any checks a g a i n s t funds which a r e n o t
• a c t u a l l y on d e p o s i t a t the time of c e r t i f i c a t i o n ?
f.
Whether bank has rediscounted with Federal r e s e r v e bank f o r
X-4747
EXAMINATIONS (Cont'd)
402
any p e r s o n , company, f i r m . o r corporation any n o t e s , d r a f t s or
b i l l s t e a r i n g the s i g n a t u r e or endorsement of any one borrower
in excess of 10fo of the unimpaired c a p i t a l and s u r p l u s of the
bank, excepting b i l l s of exchange drawn in good f a i t h a g a i n s t
actual existing values,
g.
Whether bank has accepted f o r any one p e r s o n , company, f i r m
or c o r p o r a t i o n an amount in excess of 10$ of i t s p a i d up
and unimpaired c a p i t a l and surplus?
If so, whether excess l i a b i l i t y i s secured by documents or by some o t h e r
a c t u a l s e c u r i t y growing out of the same t r a n s a c t i o n as
the acceptance?
Whether any such acceptances have more
than s i x months to run?
h.
Whether the bank has l i a b i l i t y f o r accepted b i l l s to an
amount equal in the aggregate more than one-half of i t s
p a i d up and unimpaired c a p i t a l and surplus? If so,
whether Federal Reserve Board has given permission to
accept such excess?
i.
Whether bank has accepted in domestic t r a n s a c t i o n s b i l l s
drawn in excess of 50$ of i t s p a i d up and unimpaired capi t a l and surplus?
j.
Whether bank has accepted d r a f t s or b i l l s of exchange f o r
the purpose of f u r n i s h i n g d o l l a r exchange?
If so, whether
Section 13 of the Federal Reserve Act has been complied with?
k.
Whether the bank has r e c e i v e d s p e c i a l permission of t h e Fed-*
e r a l Reserve Board to accept d o l l a r exchange b i l l s ?
1.
Whether a l l of the acceptances made by bank drawn in l a w f u l
t r a n s a c t i o n s a r e w i t h i n the l i m i t a t i o n a s s t a t e d in Regulat i o n C of the Federal Reserve Board?
m.
Whether the bank a c t s as a medium or as an agent of a nonmember bank in applying f o r discounts from the Federal
r e s e r v e banks?
n.
Whether the bank makes new loans or pays any dividends
when r e q u i r e d r e s e r v e s a r e d e f i c i e n t ,
o.
Whether the bank or any o f f i c e r , d i r e c t o r or employee
thereof has made any loan or granted any g r a t u i t y to any
bank examiner?
p.
Whether any o f f i c e r , d i r e c t o r or employee or a t t o r n e y of
t h e bank has accepted f a v o r f o r p r o c u r i n g c r e d i t ?
q.
Whether bank has c o n t r a c t e d f o r the purchase from any of
i t s d i r e c t o r s or d i r e c t o r s ' f i r m s , s e c u r i t i e s or o t h e r
p r o p e r t y , on terms l e s s f a v o r a b l e to bank than those o f f e r e d to o t h e r s ? If so, whether account was a u t h o r i z e d
by m a j o r i t y of the board of d i r e c t o r s not i n t e r e s t e d in
the t r a n s a c t i o n ?
408
— 6
—
X-4747'
EXAMINATIONS (Cont'd)
r.
s.
^
t.
Whether bank has sold s e c u r i t i e s or p r o p e r t y to any d i r e c t o r
in r e g u l a r course of business on terms more f a v o r a b l e to
such d i r e c t o r than o f f e r e d to others?
officers
Whether bank has p a i d to any d i r e c t o r , / a t t o r n e y or employee
a g r e a t e r r a t e of i n t e r e s t on d e p o s i t s of such person than
t h a t p a i d to o t h e r d e p o s i t o r s on s i m i l a r d e p o s i t s ?
Whether bank has n o t i f i e d Federal Reserve Board of any i n c r e a s e of c a p i t a l or s u r p l u s or a d d i t i o n a l stock i s s u e s .
Do examiners, during the examination and while a t t h e bank, i n q u i r e into
Regulation H - Ten c o n d i t i o n s of membership?
a.
Whether bank has made any change in general c h a r a c t e r of
a s s e t s or in scope of f u n c t i o n s such as tend t o a f f e c t
m a t e r i a l l y i t s standard maintained a t time of admission
to Federal Reserve System?
b.
Whether bank gives due regard to s a f e t y of customers?
c.
Whether bank has reduced c a p i t a l without permission of
Federal Reserve Board?
d.
Whether bank has e s t a b l i s h e d branches, agencies or a d d i t i o n a l o f f i c e without permission of Federal Reserve Board?
e.
Whether bank has c o n s o l i d a t e d or absorbed, purchased or acquired i n t e r e s t in excess of 20$ in another bank, or d i r e c t l y
or i n d i r e c t l y promoted a new bank without permission of the
F e d e r a l Reserve Board?
f.
Whether bank has any excess loans?
g.
Whether bank has d e p o s i t s with non-members in excess of 10$
of i t s c a p i t a l and surplus?
h.
Whether bank has accepted in excess of 50$ of c a p i t a l and
s u r p l u s f o r d o l l a r exchange, or i s gross acceptance g r e a t e r
than 50$ of c a p i t a l and s u r p l u s , without permission of the
Federal Reserve Board?
i.
Whether board of d i r e c t o r s have passed r e s o l u t i o n a u t h o r i z i n g
interchange of r e p o r t s and information between Federal r e s e r v e
bank and banking a u t h o r i t i e s of s t a t e in which bank i s located?
j.
Whether bank has complied with any o t h e r s p e c i a l c o n d i t i o n s
which Federal Reserve Board imposed upon i t a t time of admission to System?
X-4747
- 7 4
*
SXAI,1IHATI0HS( Cont' d)
404
11.
When making examinations do Federal r e s e r v e examiners examine t r u s t de^partments and safekeeping departments - Procedure?
Are c o n t r o l l i n g
t r u s t documents s t u d i e d and understood s u f f i c i e n t l y by examiners to
give them a p r a c t i c a l knowledge of the purposes of the v a r i o u s t r u s t s ?
( S e e , n a t i o n a l bank form on t r u s t s ) .
13.
When c r e d i t a n a l y s i s i s made do examiners i n s p e c t and p a s s judgment on
p r o o f s of l i a b i l i t i e s passed them by the s t a t e examiners?
13.
When making j o i n t examinations, do s t a t e examiners ask f o r or expect
a s s i s t a n c e from Federal r e s e r v e examiners when a n a l y s i n g loans or
other assets?
14.
How f a r do Federal r e s e r v e examiners r e l y on s t a t e examinations? By
what means do the Federal r e s e r v e banks determine whether s t a t e exami n a t i o n s a r e adequate f o r t h e i r purposes and a r e the methods by which
they determine whether s t a t e examinations should be accepted adequate?
15.
Where Federal r e s e r v e examiners p a r t i c i p a t e with s t a t e examiners in
t h e i r examinations of s t a t e member banks does such p a r t i c i p a t i o n
tend to r a i s e the standard of s t a t e examinations?
16.
How soon a f t e r examinations a r e r e p o r t s forwarded to Federal Reserve Agent?
How soon a f t e r examinations a r e r e p o r t s forwarded to the Federal Reserve
Board?
Includes s t a t e r e p o s t s ?
17.
When the Federal deserve bank r e c e i v e s r e p o r t s of examinations or makes
c r e d i t i n v e s t i g a t i o n s or otherwise o b t a i n s information with r e l a t i o n
to the condition of a member bank, i s the information p r o p e r l y analyzed
and f i l e d so t h a t i t can be r e a d i l y obtained?
18.
Who analyzes r e p o r t s when received? What r e c o r d s a r e kept?
t h i s i n f o r m a t i o n used?
How o f t e n reviewed?
19.
What r e c o r d s a r e h e l d by Federal Reserve Agent of banks examined?
they s u f f i c i e n t ?
20.
What information i s in the Federal r e s e r v e bank a s r e g a r d s permission
to e x e r c i s e t r u s t powers? To accept up to 100$ of c a p i t a l and surplus?
21.
Are the examining f o r c e s making adequate c r e d i t i n v e s t i g a t i o n , which i n volve the l o a n p o l i c i e s , personnel and o r g a n i z a t i o n , as well as an
a p p r a i s a l of the a s s e t s of a bank?
22.
When c r e d i t a n a l y s i s i s made do examiners value and p a s s on any or a l l
a s s e t s in a d d i t i o n to loans and discounts?
23.
Describe general determining f a c t o r t h a t prompts you to i n s t i t u t e c r e d i t
investigations?
24.
Are c r e d i t i n v e s t i g a t i o n s conducted r e g u l a r l y of a l l s t a t e member banks
whether or n o t s u b s t a n t i a l borrowers?
When i s
Are
m. *
s
v4< »
25.
W 7 #
mUMBATIOm (Cont'd)
4.Q5
Where i s credit information obtained other than from statements - this
includes a l l assets?
26* i r e the Federal Reserve "banks receiving adequate information as to the
Conditions of the state member "banks upon which they may safely act
in extending credit?
V
. '
.
27.
Do examiners hold directors meetings in connection with each examination
and credit analysis for the purpose of discussing matters subject to
criticism and informing directors of the general condition of the bank?
28.
Do examiners make a study and embody in report a brief economic survey
of each place or section?
Does Fetteral Reserve Agent and bank have
knowledge of the economic conditions under which the member bank Is ,
operating?
29.
To what extent are Federal reserve banks aware of -the development of
unfavorable conditions in member "banks, through their dally contacts cash letters - loans, etc?
30.
Are a l l reports called for by the federal Reserve Board verified
at time of next examination or credit investigation?
31.
Does the Federal Reserve Agent and bank receive a copy?
inspected at time of receipt?
32.
Who makes examination when bank i s applying for membership?
of examination?
33.
W o in Federal reserve bank passes upon applications?
h
34.
Conditions imposed at time of application for admission - How followed
up?
Aire they
Nature
38* What records are held pertaining to conditions imposed?
Is Federal
Reserve Board advised whether conditions are being followed up?
36.
Are examiners aware of these conditions when making examinations?
37.
When state authorities accept Federal reserve examinations and reports
in lieu of their own,do they, when making own examinations, see that
conditions imposed by Federal Reserve Board are being followed up?
38* practice of Federal Reserve Agent with respect to making examinations
and dealing with unsatisfactory practices and conditions in state
banks?
In national banks?
39.
i
Does Federal Reserve Agent receive copies of reports of examination
of state bank members from each State Bank Superintendent in the
district?
Does the Federal Reserve Agent and bank get copies of disciplinary
letters written to banks,by state authorities,not la satisfactory
condition* and the answers received from them.
40.
: ;:
- 9 -
u m To (cont«a)
m A im
X-4747
, 406
How does your treatment of •unsatisfactory conditions differ as between
borrowing and non-borrowing banks?
Do both state and federal examiners make specific recommendations in
their reports as to the action which, in their opinion, the bank should
or mast take to correct conditions?
What steps are taken by Federal
reserve banks to secure the correction of unsatisfactory conditions
in member banks? How far are suggestions and criticisms followed up?
In general, what can the federal Reserve Board do to improve examinations
in districts or in states where they are most in need of Improvement?
Obtain information by states or parts of states in each Federal reserve
district that will give an economic picture of the territories referred
to.
'
•
X-4748
STATE DEPARTMENT
407
Supervisor;
1.
Name - Age - Previous p r o f e s s i o n a l and executive experience*
2»
I n t e r g r i t y and a b i l i t y .
3.
Powers of t h e supervisor - Are h i s general s t a t u t o r y powers
s u f f i c i e n t to enable.him to o b t a i n compliance with sound
banking p r a c t i c e s ?
S t a t e i n d e t a i l p a r t i c u l a r s i n which S t a t e
law i s d e f e c t i v e .
4,.
Extent to which he e x e r c i s e s them.
5.
Are s u f f i c i e n t funds a v a i l a b l e or obtainable to p r o p e r l y operate
h i s department?
6.
Has he a u t h o r i t y to a s s e s s stockholders under double or other
liability?
7.
Give by S t a t e s synopsis of s t a t u t o r y p r o v i s i o n s r e l a t i n g to
double or o t h e r l i a b i l i t y of s t o c k h o l d e r s .
8.
Has he a u t h o r i t y to take p o s s e s s i o n of and administer i n s o l v e n t
banks?
9.
Are c h a r t e r s i s s u e d s u b j e c t to h i s f i n d i n g s and h a s he a u t h o r i t y
complete or l i m i t e d to deny a p p l i c a t i o n s f o r c h a r t e r s ?
10.
What s p e c i f i c l e g a l a c t i o n or what a c t i o n n e c e s s a r i l y implied fro%
general s t a t u t o r y a u t h o r i t y may he take to c o r r e c t i l l e g a l or
otherwise unsound and u n s a t i s f a c t o r y conditions?
Does he e x e r c i s e
f u l l y t h e foregoing powers - i f n o t , s e t f o r t h the p a r t i c u l a r s
i n which he f a i l s to do so?
PagS
2'
1-1V43
408
STATE DEPARTMENT
Examiners:
1.
Number of examiners.
Total s a l a r i e s paid.
2.
Number of a s s i s t a n t s .
Total s a l a r i e s paid,
3.
Number of other employees at headquarters
and other o f f i c e d ;
Total s a l a r i e s paid,
4.
How are examiners selected?
5.
Is examining force capable of conducting an examination of the
larger "banks i n t h e i r d i s t r i c t ?
6.
When additional a s s i s t a n c e i s needed for examinations of large
"banks or f o r other purposes, how s e l e c t e d and from what source
obtained.
GIVE AS TO EACH EXAMINER, ASSISTANT. O OTHER EMPLOYEES THE
R
>
DATA INDICATED BELOW.
1.
Name - Age - Headquarters.
2.
Salary.
3.
Previous experience.
4.
Any s p e c i a l personal q u a l i f i c a t i o n s .
5.
Length of s e r v i c e i n department.
6.
General a b i l i t y and p r o f e s s i o n a l jud^nent.
*
7-4748
Page 3.
409
STATE HEPABTpra
Examinations:
1.
Scope - Do examinations include complete inspection of a l l a s s e t s
and l i a b i l i t i e s ?
2.
Procedure - Do examiners upon entering tank promptly and immediately
place a l l books, records and tangible a s s e t s under seal and do the}
maintain custody and control u n t i l work of inspection as to p a r t i c ular groups of a s s e t s or accounts has "been completed?
3.
Frequency.
4.
Are a l l examinations so conducted as to develop as to each c l a s s
of a s s e t s and accounts examined the e s s e n t i a l facts?
(Information
i n response to t h i s question involves an inquiry as to how an individual examiner conducts every step i n an examination.)
5.
Are trust departments and safekeeping departments of "banks examined?
Are controlling trust documents studied and understood s u f f i c i e n t l y
by examiners to give them a p r a c t i c a l knowledge of the purposes of
the various trusts?
6.
(See national bank form on t r u s t s . )
Do examiners embody i n reports a brief economic survey of each
place or section?
7.
Do examiners hold directors meetings i n connection with each examination for the purpose of discussing matters subject to c r i t i c i s m
and informing directors of the general condition of the bank?
8.
Are their examining forces making adequate i n v e s t i g a t i o n s of individual c r e d i t s , other a s s e t s , loan p o l i c i e s , personnel and organization?
Pago 4 .
X-4748
410
Examinations (Cont'd)
9.
Describe b r i e f l y c h a r a c t e r and e x t e n t of a p p r a i s a l of l o a n s and
discounts and other a s s e t s .
Are "banks g e n e r a l l y r e q u i r e d to main-
t a i n adequate c r e d i t f i l e s i n c l u d i n g statements of individual
rowers?
"bor-
Are S t a t e examiners i n s t r u c t e d and Required t o i n s i s t upon
t h e p r o d u c t i o n of statements?
Do they f u r n i s h c r e d i t information to
the Federal r e s e r v e Agent or Federal r e s e r v e "bank?
Does Federal
r e s e r v e a g e n t , Federal r e s e r v e baric or Federal r e s e r v e examiner,
f u r n i s h c r e d i t information to S t a t e department of member banks?
10*
Describe b r i e f l y c h a r a c t e r and e x t e n t of examination of l i a b i l i t i e s .
11.
Generally, i s s u f f i c i e n t time spent on examinations, i f n o t , i s
t h i s due to i n s u f f i c i e n t examining f o r c e or i s i t due t o s l i g h t i n g
of work by c a r e l e s s , i r r e s p o n s i b l e and i n e f f i c i e n t examiners?
12.
In general what can the a u t h o r i t i e s of t h i s S t a t e do t o improve
examinations?
13.
Charges f o r examination.
The method of a s s e s s i n g charges. By
whom a s s e s s e d and collected?
14.
Are examining f o r c e s allowed a f l a t p e r diem r a t e f o r l i v i n g expenses w i t h a c t u a l c o s t of t r a n s p o r t a t i o n - i f so, what i s the
p e r diem?
Are they allowed a c t u a l l i v i n g expenses with d e t a i l e d
accounting, or a c t u a l l i v i n g expenses with the maximum p e r diem
f i x e d , or i s the maximum allowance f o r p a r t i c u l a r expenses limited?
15.
Are S t a t e examiners r e q u i r e d to make s p e c i f i c recommendations to
t h e banks under examination or to the supervisor as to t h e a c t i o n
which i n t h e i r opinion banks should or must t a k e to c o r r e c t uns a t i s f a c t o r y c o n d i t i o n s or c r i t i c i s m s and a r e t h e i r recommendations
embodied i n the r e p o r t ?
}y~4V4, "
J
? a f e 6 E.
4 1 1
Examinations (Cont 1 d)
16.
Do S t a t e examiners, when making t h e i r examinations, f o l l o w up or
r e p o r t on c o n d i t i o n s imposed a t time of a p p l i c a t i o n f o r membership
"by Federal Reserve Board?
17.
Do S t a t e .examiners when making examinations j o i n t l y with Federal
r e s e r v e examiners consult the l a t t e r f r e e l y a s t o c r c d i t s , s o l vency, e t c . , and do they g e n e r a l l y accept the conclusions of the
Federal r e s e r v e examiners and adopt them a s t h e i r own?
18.
Are j o i n t examinations hy S t a t e examiners and Federal r e s e r v e
examiners "being made i n t h i s State?
a.
Are t h e r e l a t i o n s "between the S t a t e Supervisor and t h e Federal
Reserve Agent and "between the S t a t e examiners and the Federal
r e s e r v e examiners harmonious, and i s t h e r e e f f e c t i v e cooperartion.in a l l relations?
"b.
In j o i n t examinations what work i s done independently "by the
S t a t e examiners and what "by t h e Federal r e s e r v e examiners, or
do they perform a l l work j o i n t l y ?
c.
Are j o i n t examinations i n t h i s S t a t e considered e n t i r e l y satis-,
f a c t o r y or would you recommend a t l e a s t one independent examination a year of a l l S t a t e member "banks "by Federal r e s e r v e
examiners with p r o v i s i o n f o r more f r e q u e n t examinations of "barikg
whose dangerous or u n s a t i s f a c t o r y condition seems to warrant
unusual a t t e n t i o n ?
X-± r, 43 4 1 - ^ 2
8a
iiExarainations ( C o n t ' d )
19.
Do S t a t e examinations now made give t h e noceesary i n f o m a t ion to
enable t h e F e d e r a l Reserve Board to determine whether or n o t t h e
member "banks a r e o p e r a t i n g w i t h i n the requirements of the Federal
Reserve A c t , t h e Regulations of t h e Board, and t h e c o n d i t i o n s of
membership?
20.
Do s u p e r v i s o r s themselves or through competent a s s i s t a n t s make a n a l y s i s of r e p o r t s independently of examiners who made examinations - i f
so, i s t h i s done promptly f o l l o w i n g an examination - i s t h e a n a l y s i s
made the "basis of c o r r e c t e d measures?
Does Federal r e s e r v e agent
r e c e i v e "benefit of t h e i r a n a l y s i s ?
21.
How soon a f t e r examinations a r e r e p o r t s forwarded t o t h e F e d e r a l
r e s e r v e hank?
How soon a f t e r r e c e i p t of r e p o r t from S t a t e Department
does Federal r e s e r v e "bank forward copy to Federal Reserve Board!
22.
Does s u p e r v i s o r of t h i s S t a t e make c r e d i t i n v e s t i g a t i o n s i n l i e u o f ,
complete examinations covering l i a b i l i t i e s a s well a s a s s e t s ?
23.
Do a u t h o r i t i e s i n t h i s S t a t e accept Federal r e s e r v e examinations i n
lieru. of S t a t e examinations?
24.
Has t h i s s u p e r v i s o r cooperated or i s h e i n c l i n e d t o cooperate with
t h e F e d e r a l r e s e r v e agent i n adopting a r e p o r t form f o r h i s examinat i o n s t h a t meet the requirements of the F e d e r a l Reserve Board, objections, etc.?
Give i n d e t a i l what i s being done by Federal r e s e r v e
a g e n t s to o b t a i n cooperation?
( COPY)
THOMAS B.. PATON
110 East 42nd S t r e e t
New york
General Counsel
American Bankers Association
X-4749
December 8, 1936.
Benj. Stroig., Governor,
Federal Reserve Bank,
New York C i t y
My dear S i r :
The Committee on Commercial Law of the
Commissioners on Uniform State Laws w i l l have a
meeting e a r l y in January. P r o f e s s o r W i l l i s t o n
of Harvard U n i v e r s i t y , who i s a member, wishes
t o p r e s e n t t o the committee f o r i t s c o n s i d e r a t i o n a d r a f t of proposed amendments t o the Negot i a b l e Instruments Law. ye has j u s t w r i t t e n the
General Counsel asking if he has any suggestions
and i f so t o submit them w i t h i n a f o r t n i g h t .
For the past t e n years attempts have
been made to have the Commissioners recommend
v a r i o u s amendments and such attempts have f a i l e d .
This i n v i t a t i o n comes as a welcome s u r p r i s e .
Accordingly we a r e passing t h i s communic a t i o n along to you with the request t h a t you and
your a t t o r n e y p l e a s e submit within t h e next week
any proposed amendments t o the N. I . Act which
you may have in mind. We a r e enclosing s e v e r a l
amendments t h a t have been suggested t o t h i s o f f i c e .
These suggestions are only t e n t a t i v e , but we would
l i k e t o have your c r i t i c i s m .
Knowing how important t h i s matter i s , we
hope i t w i l l have your e a r l y a t t e n t i o n .
Very t r u l y yours,
TBPJr/S
Enclosures.
^
Thomas B. Pat on, J r .
( COPY)
From O f f i c e of General Counsel,
American Bankers A s s o c i a t i o n ,
110 East 42nd S t . , New York, N. Y.
X_4749_a
^
December 8 t h , 1936.
SUGGESTED AMENDMENTS TO NEGOTIABLE
INSTRUMENTS ACT.
Fu.ll t e x t of a c t , pages 797 t o 887,
Vol. 1, P a t o n ' a D i g e s t .
1. Payor bank as e q u i t a b l e purchaser of stopped check or other
instrument payable a t bank: Should the Negotiable Instruments Act
be amended t o p r o t e c t a payor bank where i t pays a check or other
instrument i n v i o l a t i o n of a s t o p payment order t o a holder i n due
course?
Consider t h e a d v i s a b i l i t y of i n s e r t i n g an amendment t o the
Negotiable Instruments Act t o the e f f e c t t h a t a bank v i o l a t i n g a
stop order becomes subrogated as e q u i t a b l e purchaser t o t h e r i g h t s
of the h o l d e r .
This s u b j e c t i s discussed in opinions 4519a, 4530B,
and 4521a of P a t o n ' s Digest. Where a stopped check or other i n s t r u ment has boon paid by a bank, payment i s regarded as f i n a l and r e c o v e r y from the p a r t y r e c e i v i n g the money i s not allowed. The account
of the drawer or maker on the other hand cannot be charged by t h e
bank which v i o l a t e d the stop order. Under these circumstances i t
would seem e q u i t a b l e t h a t the payor bank should be subrogated #.s
e q u i t a b l e purchaser t o the r i g h t s of the h o l d e r . See Hiroshima, v.
Bank of I t a l y , 348 P&c. (Cal. App. 1936) 947.
2. C e r t i f i c a t i o n of a l t e r e d checks: This s u b j e c t i s d i s c u s s e d
f u l l y in opinion 111a of P a t o n ' s Digest* It i s suggested t h a t Sec. 63
be amended t o read a s follows ( t h e u n d e r l i n e d words a r e new m a t t e r ) :
Sec. 63. "The acceptor by a c c e p t i n g t h e instrument engages t h a t he
w i l l pay i t according t o the tenor (of h i s acceptance) tha i n s t m ment as drawn by t h e m^kar or drawer and admits:
ts'^irorast&iii
;
•tea®-
("3) The e x i s t e n c e of the payee named by the maker or drawer and
h i s then c a p a c i t y t o i n d o r s e . "
The p r a c t i c a l reasons f o r suggesting t h i s amendment are s e t f o r t h
in opinion 111a of P a t o n ' s Digest and i t i s suggested that* t h i s
amendment be provided f o r in order t h a t c e r t i f y i n g banks be p r o t e c t ed a g a i n s t being held l i a b l e upon a l t e r e d or r a i s e d checks.
3. Payee a s h o l d e r in due course: There i s a c o n f l i c t of a u t h o r i t y in the d e c i s i o n s b e f o r e and a f t e r the Negotiable Instruments Act
as t o whether or not a payee can be a holder in due course. I t may
be d e s i r a b l e t o amend the n e g o t i a b l e Instruments Act by a p r o v i s i o n
-2—
X-4749-&415
t o t h e o f f o c t t h a t t h s payee coming within the q u a l i f i c a t i o n s which
c o n s t i t u t e a holder in due course cannot "bo deprived of t h a t s t a t u s
"by reason of the f a c t t h a t ho i s payee. For d i s c u s s i o n of t h i s subj e c t see opinions 3436 at seq. in Paton 1 s D i g e s t .
4. Extension of warranty "by indorser "by having i t run not o n l r
t o h o l d e r s i n due course but a l s o t o the drawee hank: I t has been
suggested t h a t Sac. 66 of the N. I . Act be amended providing t h a t £he
i n d o r s e r ' s warranty run t o the drawee, such warranty, however, not
t o include d r a w e r ' s s i g n a t u r e . See opinion 3674a of P a t o n ' s Digest.
In the case where the drawee bank i s allowed to recover from the
indorser of money p a i d on a f o r g e d indorsement, the d i f f e r e n t c o u r t s
adjudge recovery upon two grounds, ( l ) t h a t the bank r e c e i v i n g pay?ment warrants the genuineness of the p r i o r indorsements, (3) t h a t
the bank r e c e i v i n g payment has received money under a mistake of
f a c t without c o n s i d e r a t i o n which the law implies a c o n t r a c t t o r e pay. An amendment extending the warranty t o the drawee i s suggested
- as the b e t t e r r u l e of recovery. This subject i s discussed in opinrions 3676, 3191, 3741 of Paton»s Digest. See a l s o S t a t e v. Broadway
National Bank, 282 S.W. (Tann. 1926) 194.
5. Instrument -payable at bank presented a f t e r m a t u r i t y : Attenrt i o n i s c a l l e d t o the d e s i r a b i l i t y of f i x i n g a d e f i n i t e r u l e a u t h o r i z i n g a bank t o pay or r e f u s e t o pay an instrument payable a t a bank
when p r e s e n t e d a f t e r m a t u r i t y . The s e c t i o n in t h e N. I . Act r e f e r r e d
t o i s Sec. 87. For d i s c u s s i o n see opinion 315a, 218a and 3739 of
Patonis Digest.
6. "Pay any bank or
a s an u n r e s t r i c t i v e indorsement, i .
e . t i t l e - c o n v e y i n g : I s i t d e s i r a b l e t h a t the N. I . Act be amended
making i t c l e a r t h a t t h i s form of indorsement in use by banks i s
t i t l e - c o n v e y i n g r a t h e r than agent c r e a t i n g ? I t i s suggested f o r
c o n s i d e r a t i o n t h a t t h i s indorsemant be s p e c i f i c a l l y designated as p.
- n o n r e s t r i c t i v e one u n l e s s coupled with words making i t otherwise.
There i s a c o n f l i c t of a u t h o r i t y on t h i s p o i n t . For d i s c u s s i o n see
2771a and 2193a of Pat o n ' s Digest. See p a r t i c u l a r l y Sands v. Parker
e t a l . , 384 S.W. (Tern. 1936) 903. See a l s o F i r s t Nat. Bank of Fort
Smith v. Brurik, 380 S.W. (Ark. 1936) 373.
7. S t a l e checks: I t might be well t o consider the a d v i s a b i l i t y
of i n s e r t i n g a p r o v i s i o n i n the N. I . Act not only l i m i t i n g t h e time
of n e g o t i a t i o n of checks but a l s o the time a f t e r which a bank can
s a f e l y r e f u s e t o pay same. See p a t o n ' s D i g e s t , opinion 1303 e t
seq.. , p a r t i c u l a r l y 1304a.
8. Reasonable time l i m i t f o r n e g o t i a t i o n of Instruments: The
suggestion has been made t h a t i t might be a d v i s a b l e t o f i x or recommend. a d e f i n i t e period of time as a reasonable time l i m i t f o r negot i a t i o n of instruments in conformity with a c t u a l experience end p r a c t i c e , in l i n e with l e g i s l a t i o n a s passed in New Hampshire and South
Dakota. For r e f e r e n c e s on t h i s subject see Sec. 53 N. I . Act on p. 805
Patonis D i g e s t . See a l s o Sees. 71 and 193 of the N . I . Act on pp. 808
-3end 823 r e s p e c t i v e l y of B a t o n ' s Digest.
X-4749-f.
416
See f.lso opinion 3443a.
9. P r o t e c t i o n of r i g h t s of holder in due course of n e g o t i a b l e
4yietrnmmnt based on gambling -nd u s u r i o u s c o n s i d e r a t i o n : This subj e c t i s d i s c u s s e d in 1161a of Pmton,s D i g e s t , a quotation from
which reads a s f o l l o w s : "The needed p r o t e c t i o n would be a f f o r d e d
by a. simple amendment of tho Negotiable Instruments Act to t h e
a f f e c t t h a t where a n e g o t i a b l e instrument i s d e c l a r e d void by any
s t a t u t e because based on a earning or u s u r i o u s c o n s i d e r a t i o n or
otherwise in v i o l a t i o n of s t a t u t e , i t s h a l l n e v e r t h e l e s s in t h e
hands of a holder in due course be e n f o r c e a b l e against a l l p a r t i e s
l i a b l e t h e r e o n . Or, a s , m a l t e r n a t i v e , tho s p e c i f i c s t a t u t e s of
d i f f e r e n t s t a t e s which avoid instruments f o r usury or gaming might
be s e p a r a t e l y amended by the i n s e r t i o n of p r o v i s i o n s excepting; from
t h e i r a p p l i c a t i o n , n e g o t i a b l e instruments in t h e hands of h o l d e r s
in due c o u r s e . "
10. Instruments payable i n " c u r r e n t f u n d s " : Amend Sec. 3 of the
N. I . Act by including as n e g o t i a b l e instruments those payable i n
" c u r r e n t f u n d s . " For d i s c u s s i o n see opinions 438, 1048a and 1316
of P a t o n ' s D i g e s t .
11. Exchange as medium of payment of n e g o t i a b l e irfit.rmmgnt.g;
The Negotiable Instruments
r e q u i r e s as a c o n d i t i o n of n e g o t i a b i l i t y t h a t instruments be payable in money. C e r t a i n s t a t e s have passed
a c t s giving t h e drawee bank the option under c e r t a i n s p e c i f i e d condit i o n s of paying i n money or in exchange. Map 36, and opinion 1385a
of Pe-ton's D i g a s t . The instruments consequently are not t e c h n i c a l l y
payable i n money since the drawee has the o p t i o n t o pay in something
else*
I t i s u n l i k e l y t h a t the l e g i s l a t u r e s in passing such a c t s hod
any i n t e n t i o n of rendering checks nonnogotiablo. I t might be well
t o c l a r i f y tho s i t u a t i o n so f a r as checks payable in those s t a t e s
r r e concerned by e x p r e s s l y providing t h a t an instrument payable at
the p a y o r ' s option in cash or exchange s h a l l be considered n e g o t i a b l e
whether t h e o p t i o n be given by s t a t u t e or in tho instrument i t s e l f .
13. Waiver of presentment, p r o t e s t , and n o t i c e of dishonor: Attent i o n i s c a l l e d t o t h e ambiguity in tho moaning of t h s word "waiver"
i n Sec. 110 of the N. I. Act. Should not t h i s ambiguity be c l e a r e d up
by proper amendment e x p r e s s l y s t a t i n g t h a t the waiver i n c l u d e s not only
waiver of n o t i c e but a l s o waiver of presentment end p r o t e s t ? I t might
a l s o be "amended by s t a t i n g t h a t if the waiver i s on tho f a c e of the
instrument i t i s binding on a l l p a r t i e s but where i t i s w r i t t e n on
t h e back above the signature of the indorser i t binds such indorser
onlv. I t mieht a l s o be w e l l , i f p o s s i b l e , t o give a d e f i n i t e l e g a l
e f f e c t t o n waiver an the back of on instrument i n s e r t e d i n a box.
Suppose on indorsement w r i t t e n above t h e s i ^ n a t u r e of t h e i n d o r s e r
by i t s terms e x p r e s s e s t o bind a l l the i n d o r s e r s . Should t h i s s i t u a t i o n be c l a r i f i e d ?
,
-4«
x-4749-a
417
13. Payment of chock once dishonored upon secbnd presentment:
This subje&t i s discussed in opinion 4083 et seq. of Baton's Digest,
wherein i t appears that i t i s the custom of "banks t o pay checks once
dishonored upon second presentment. Apparently the point has nave?
been decided "by the courts. I t i s suggested ths t t h i s matter "be considered. Should the rule he d e f i n i t e l y f i x e d "by amendment t o the
Negotiable instruments Law?
14. Post-dated checks: There i s no provision in the Negotiable
Instruments Act providing for the n e g o t i a b i l i t y of post-dated checks
before due date. It i s suggested that Sec. 1 of subdiv. 3 of the N.I.
Act be amended by including the case of a post-dated chedf%&ich i s
neither payable on demand or at a f i x e d determinable future time.
See Mollin, J . , Kuflik v. Vaccaro, 170 N.Y. Suppl. 14; see a l s o 31
A.L.R. p. 339, Wilson v. Midwest State Bank (bottom f i r s t column, p.
333, to the e f f e c t that a post-dated check i s irregular and c a r r i e s
notice of the d e f e c t upon i t s f a c e ) .
15. Interest on instrument f a l l i n g due on Saturday. Sunday or
holiday and not paid u n t i l next business day: The question has been
raised as t o whether an instrument draws.interest for the two added
days. An opinion has been rendered, 3913a of Paton's D i g e s t , to the
e f f e c t that the i n t e r e s t i s c o l l e c t i b l e . This subject i s mentioned
here for d i s c u s s i o n as t o whether or not i t i s necessary to have the
N.I. Act amended t o make the point certain. See a l s o opinions 3497
and 3498a of Paton's Digest.
16. Presentment and protest of l e s t note; The Negotiable Instruments Act, Sec. 160, under t i t l e I I , covering b i l l s of exchange makes
provision f o r protest covering the s i t u a t i o n where a b i l l i s l o s t .
There i s no express provision covering the s i t u a t i o n where a note i s
1*|*. Should en amendment be made providing f o r the presentment end
protest upon copy of the l o s t note or the written particulars thereof? Questions of this nature have been submitted to the Office of
the General Counsel. See opinion 4139 of Paton's Digest.
Unusual s i t u a t i o n s which have come UP
under the Negotiable Instruments Act.
The following cases are submitted for information as showing unusual decisions handed down by the courts which have a bearing upon
the Negotiable Instruments Act. NO state-wide recommendation has
been suggested.
1. Interim r e c e i p t s : In the case of Manhattan Company v. Morgan,
150 N.E. 594, the New York Court of Appeals pointed out that amendment of the Negotiable Instruments Act was the proper remedy to make
interim c e r t i f i c a t e s e n t i t l i n g the bearer t o bonds of the Kingdom of
Belgium negotiable. Following t h i s d e c i s i o n the New York Legislature
X-4749-a
418
pas aad a law known as tha H o f s t a d t e r S e c u r i t i e s Receipts Law p r o v i d ing f o r t h e n e g o t i a b i l i t y not only of i n t e r i m r e c e i p t s but of a v a r i e t y of o t h e r instruments such as equipment t r u s t c e r t i f i c a t e s end
other forma which the banking world rnd i n v e s t o r s have always t r e a t e d
as n e g o t i a b l e . Would i t be d e s i r a b l e t o amend t h e Negotiable I n s t r u ments Act t o cover s i t u a t i o n s suggested by t h i s New York s t a t u t e .
See Lecral Service B u l l e t i n , of the American Bonkers a s s o c i a t i o n , No,
3, P» 8.
3. Unauthorized c e r t i f i c a t e of d e p o s i t : The d e c i s i o n of the
Supreme Court of west V i r g i n i a in Merchants Bank and Trust Company
v. Peoples Bank of Keysar, 130 S.E. 142, would have a s e r i o u s e f f e c t ,
i f followed, upon the n e g o t i a b i l i t y of c e r t i f i c a t e s of d e p o s i t . Bead
the note t o the d i g e s t of t h i s case i n 3311a of Baton's D i g e s t . As
f a r as West V i r g i n i a i s concerned i t i s questioned whether the N. I.
Act, Sec. 33, needs an amendment on t h i s p o i n t .
3. Trade Acceptance: N e g o t i a b i l i t y of a t r a d e acceptance under
the N . I . Act has been denied by the Supreme Court of Florida i n
C i t i z e n s ' s t a t e Bank of Marianna v. Carmichael, 103 So. 111. This
d e c i s i o n i s c r i t i c i s e d in opinion 168a of P a t o n i a Digest. I t i s
submitted t h a t the N. I . Act needs no amendment on t h i s p o i n t , i t b e ing c l e a r l y set f o r t h . The problem i s a s e r i o u s one f o r Florida
bankers and a s s t a t e d in opinion 168a "the e f f e c t of such a d e c i s i o n
i s t o give n o t i c e t o the commercial world t h a t so f a r a s t h e s t a t e
of Florida i s concerned, the standard form of t r a d e acceptance cont a i n e d i n t h i s c l a u s e i s not n e g o t i a b l e but i s s u b j e c t to d e f e n s e s . "
A remedy for the s i t u a t i o n i s needed.
COPY
419
TREASURE DEEARmUT .
X~»750
mSHINGTOU
December 9 , 1926.
Federal Reserve Board,
Washington, D. C,
t
Gentlemen:
For the purpose of informing n a t i o n a l Bank Examiners wnat are
lawful investments f o r t r u s t f u n d s , under the S t a t e laws, to be used
when tuey examine t r u s t departments, and i n order t h a t we may
i n t e l l i g e n t l y take up v i o l a t i o n s with any n a t i o n a l banks t h a t may not
be complying with the law i n connection with Section 6 of the
Regulations of the Federal Reserve Board * i t i s r e s p e c t f u l l y requested
t h a t we be f u r n i s h e d , through the Law Departments of the Federal
Reserve Banks, a memorandum s e t t i n g out the p r o v i s i o n s of the laws
of the various S t a t e s s e p c i f y i n g the kind of investments i n which
corporate f i d u c i a r i e s may l a w f u l l y i n v e s t .
End.
S e c t i o n 11 (k) of the F e d e r a l Reserve Act provides in p a r t :
"Whenever'the laws of a S t a t e r e q u i r e c o r p o r a t i o n s in a
f i d u c i a r y c a p a c i t y , to d e p o s i t s e c u r i t i e s with the S t a t e a u t h o r i t i e s
f o r the p r o t e c t i o n of p r i v a t e or court t r u s t s , n a t i o n a l banks so
a c t i n g s h a l l be r e q u i r e d to make s i m i l a r d e p o s i t s and s e c u r i t i e s so
deposited s h a l l be held f o r the p r o t e c t i o n of p r i v a t e or court t r u s t s ,
as provided by S t a t e law."
In connection with the above, a s i m i l a r statement s e t t i n g f o r t h
the requirements of the various S t a t e s f o r the deposit by n a t i o n a l
banks of s e c u r i t i e s with Stiite a u t h o r i t i e s b e f o r e they may e x e r c i s e
f i d u c i a r y powers , i s desired»
Respectfully,
(Sgd.)
E. W. STEARKS
Deputy Comptroller.
420
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4751
December 15, 1926
SUBJECT:
Expense, Main Line, Leased Wire System,
November, 1926.
Dear S i r :
Enclosed herewith you w i l l f i n d two mimeograph s t a t e m e n t s , X-4751-a: jfiad X-4751-b, covering i n
d e t a i l o p e r a t i o n s of the main l i n e , Leased Wire System, during the month of November, 1926.
P l e a s e c r e d i t the amount payable by your
bank i n the general account, Treasurer, U. S . , on
your books, and i s s u e C/D Form 1, n a t i o n a l Banks,
f o r account of " S a l a r i e s and Expenses, Federal Reserve Board, Special Fond", Leased Wire System, sending d u p l i c a t e C/D to the Federal Reserve Board.
Yours very t r u l y ,
F i s c a l Agent.
Enclosures
TO GOVERNORS OF ALL F.R. BANKS EXCEPT CHICAGO.
REPORT SHOWING CLASSIFICATION AND N M E OF WORDS TRANSMITTED OVER MAIN LINE
U BR
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE M N H OF NOVEMBER# 1926
OT
Business
reported
by banks
From
Boston
33,694
New York
132,104
Philadelphia
37,773
Cleveland
71,361
Richmond
42,581
Atlanta
54,672
Chicago
99,968
S t . Louis
68,807
Minneapolis
36,876 •
Kansas City
70,720
Dallas
58,393
San Francisco
94,308
Total
801,257
F. R. Board
Total
Percent of T o t a l
Words sent
by New York
chargeable
to other
F.R. Banks ( l )
516
-
638
1,631
3,042
3,355
2,825
2,633
2,354
2,404
4,672
2,345
26,415
Total
34,210
132,104
38,411
72,992
45,623
58,027
102,793
71,440
39,230
73,124
63,065
96,653
827,672
276,088
1,103,760
100.00#
Treasury
Department
Business
3,5^6
4,377
3,064
3,495
2,777
3,417
4,312
3,262
1,558
2,979
1,408
4,499
38,694
25,895
64,589
5-85#
War Finance
Corporation
Business
„
-
-
—
-
-
Net Federal
Reserve Bank
Business
30,664
127,727
35,347
69,497
42,846
54,610
98,481
68,178
37,672
70,145
61,657
92,154
788,978
250,193
1,039,171
94.15#
X-4751-a
Percent of
t o t a l bank
Business (*)
3-89
16.19
4.48
8.81
5.43
6.92
12.48
8.64
4.77
8.89
7.82
11.68
100.00#
(*)
These p e r c e n t a g e s used in c a l c u l a t i n g the pro r a t a share of leased wire expense as shown on the
accompanying statement (X-4751-b)
(l)
Number of words sent by New York to o t h e r F. R. Banks f o r t h e i r sole b e n e f i t charged t o banks i n d i c a t e d ,
i n accordance with action taken a t Governors' Conference November 2 - 4 , 1925*
REPORT OF EXPENSE MAIN LINE
FEDERAL- RESERVE LEASED WIRE SYSTEM, NOVEMBER, 1926.
Name of Bank
Operators'
Salaries
Boston
$ 260.00
New York
944.16
Philadelphia
216.66
Cleveland
284.50
Richmond
199.00
Atlanta
255.00
Chicago
3,923.62(f)
S t . Louis
200.00
Minneapolis
IS3.34
Kansas City
275-64
Dallas
251.OO
San Franc iaco
370.00
F e d e r a l Reserve Board
Total
(&)
(#)
(*)
(a)
(b)
$7,362.92
Operators'
Overtime
$
1.00
-
-
-
-
-
-
-
—
-
-
-
-
-
-
-
-
—
-
$
3.00
$15,337*36
$15,337.36
Total
Expenses
Pro R a t a
Share of
To t a l
Expenses
Credits
$
Wire
Rental
-
2.00
X-l+751-b
$
$
260.00
945.16
216.66
284.50
199.00
255.00
3.925.62
200.00
1&3.34
275-64
251.00
370.00
15,337.36
831.48
3,460.57
957.59
1,883.12
1,160.65
1,479.13
2,667.57
1,846.78
1,019.58
1,900.21
1,671.50
2,496.57
-
$22,703.28
$21,374.75
1.128.53(a)
$21,374.75
260.00
945.16
216,66
284,50
199=00
255,00
3,923.62
200.00
183.34
275,64
251.OO
370.00
Payable to
F e d e r a l Reserve
Board
$
571.48
2,515.41
740,93
1,598.62
1,166,32 (&)
1,224-13
1,255.05(*)
1,646.78
-836-24
1,624,57
1,420.50
2,126.57
-
$7,365.92
$15,471,55
_L258^(b)
$14,213-50
I n c l u d e s $204.67 f o r branch l i n e b u s i n e s s t r a n s m i t t e d over main l i n e c i r c u i t .
I n c l u d e s s a l a r i e s of Washington o p e r a t o r s .
Credit.
Received $1,328..53 from Treasury Department c o v e r i n g b u s i n e s s f o r t h e month of November, 1926
Amount r e i m b u r s a b l e to Chicago
&
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4753
December 18, 1926
SUBJECT: Stocks of Unissued F. R. Nates.
Dear S i r :
You are requested to p r e p a r e and submit to
the Federal Reserve Board, a t your e a r l y convenience,
an e s t i m a t e of the amount of each denomination of the
Federal Reserve notes of your bank you may he c a l l e d
upon to i s s u e during the calendar year 1927, This
information i s d e s i r e d f o r the purpose of r e g u l a t i n g
the production of Federal Reserve notes during the
coming y e a r .
For your guidance, I would s t a t e t h a t the
Board i s of the opinion t h a t i t s stock of unissued Fede r a l Reserve notes should a t a l l times include a p p r o x i mately a twelve months' supply of each denomination of
the notes of each bank* and t h a t not more than a s i x
months' supply of each denomination of unissued notes
should be i n the custody of the Federal Reserve Agents.
By d i r e c t i o n of the Federal Reserve Board.
Yours very truly,
Walter L. Eddy,
Secretary.
T AIL F. R. AGENTS.
O
X-4754
424
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 21, 1926.
SUBJECT:
Holidays during January, 1927.
Dear4 Sir:
On Saturday, January 1, 1927, New Year's Day, there
w i l l be no Gold Settlement Fund jor Federal Reserve Note Clearing, and the o f f i c e s of the Federal Reserve Board w i l l be
closed.
The Federal Reserve Banks and Branches indicated below w i l l also be closed in observance of holidays during January.
Saturday, January 8, New Orleans
)Anniversary of
)Battle of New
)Orleans.
Wednesday,January 19,Richmond
Atlanta
Birmingham
Nashville
Jacksonville
Memphis
)Anniversary of
)birthday of
)General Robert
)E. Lee.
I
Please include your c r e d i t s of January 8th f o r New Orleans, and January 19th f o r Richmond, Atlanta and Memphis, in the
Gold Fund Clearings of the following business days, and make no
shipment of Richmond or Atlanta Federal Reserve notes, ' to Head
O f f i c e or to Washington, on January 19th.
Very truly yours,
J. C. Noell,
Assistant Secretary.
T GOVERNORS OF ALL F.R.BANKS.
O
federal reserve board
425
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-4755
December 23, 1926.
SUBJECT:
ASSESSMENT FOR GENERAL EXPENSES OF THE FEDERAL RESERVE
BOARD, JANUARY 1 TO JUICE 30, 1927.
Dear S i r :
Confirming t e l e g r a p h i c advice, t h e r e i s enclosed
herewith copy of a r e s o l u t i o n adopted "by the Federal Reserve
Board levying an assessment upon the s e v e r a l Federal r e s e r v e
"banks sf an amount equal t o one hundred s i x t e e n thousandths
of one per cent (.00116) of the t o t a l paid i n c a p i t a l stock
and s u r p l u s of such "banks a t close of "business December 31,
1926, t o d e f r a y t h e estimated general expenses of t h e Board
from January 1 t o June 30, 1927.
Kindly d e p o s i t one-half of t h e amount of your a s s e s s ment i n the General Account, T r e a s u r e r , U. S . , on your ""rooks
January 1, 1927, and one-half March 1, 1927, i n each i n s t a n c e
i s s u i n g a c/D f o r c r e d i t of " S a l a r i e s and Expenses, Federal
Reserve Board, Special Fund", assessment f o r general expenses,
and sending d u p l i c a t e c/D to t h e Federal Reserve Board. Also
please f u r n i s h a statement of your c a p i t a l and s u r p l u s used as
a "basis f o r the assessment.
Very t r u l y yours,
Enclosure.
F i s c a l Agent.
(Sent t o Chairman of each Federal Reserve Bank)
X-4755
RESOLUTION LEVYING ASSESSMENT
Whereas, under Section 10 of t h e a c t approved
December 83, 1913, and known as the Federal Reserve Act,
t h e Federal Reserve Board i s empowered t o levy semiannually upon t h e Federal reserve hanks in p r o p o r t i o n to
t h e i r c a p i t a l stock and surplus an assessment s u f f i c i e n t
t o pay i t s estimated expenses, i n c l u d i n g the s a l a r i e s of
i t s members, a s s i s t a n t s , a t t o r n e y s , experts and employees
for the h a l f - y e a r succeeding t h e levying of such a s s e s s ment, t o g e t h e r w i t h any d e f i c i t c a r r i e d forward from t h e
preceding h a l f - y e a r ; and
Where as, i t appears from estimates submitted
and considered t h a t i t i s necessary t h a t a fund equal t o
one hundred s i x t e e n thousandths of one per cent of t h e
t o t a l p a i d - i n c a p i t a l stock and surplus of t h e Federal
r e s e r v e "banks "be c r e a t e d f o r the purpose h e r e i n b e f o r e
d e s c r i b e d , exclusive of the c o s t of engraving and p r i n t i n g of Federal reserve n o t e s ; Now, t h e r e f o r e ,
Be i t r e s o l v e d , That pursuant to the a u t h o r i t y
vested i n i t by law, t h e Federal Reserve Board hereby
l e v i e s an assessment upon t h e s e v e r a l Federal r e s e r v e banks
of an amount equal to one hundred s i x t e e n thousandths of
one per cent of the t o t a l p a i d - i n c a p i t a l and s u r p l u s of
such banks as of December 31, 1926, and the F i s c a l Agent
of t h e Board i s hereby a u t h o r i z e d to c o l l e c t from said
banks such assessment and execute, i n the name of t h e
Board, r e c e i p t s f o r payments made. Such assessments w i l l
be c o l l e c t e d in two i n s t a l l m e n t s of one-half each; the
f i r s t i n s t a l l m e n t to be paid on January 1, 1927, and t h e
second h a l f on March 1, 1927.
4 2 7
X-4757
FEDERAL
RESERVE
BOARD.
STATEMENT FOR THE PRESS
For immediate r e l e a s e
December 23, 1926.
CONDITION OF ACCEPTANCE MARKET
November 17, 1926 to December 13, 1926.
Acceptances:
An i n c r e a s e d volume of new b i l l s appeared i n the New York market
during the l a s t h a l f of November and the f i r s t h a l f of December, based c h i e f l y on cotton exports and storage, sugar storage and c o f f e e and s i l k imports.
In the Boston market b i l l s were l e s s p l e n t i f u l .
The demand f e l l off i n
both markets during the f i r s t weeks of the p e r i o d and d e a l e r s ' p o r t f o l i o s
reached l a r g e p r o p o r t i o n s .
As a consequence, r a t e s on 60 and 90 day b i l l s
were advanced about December 7 by l / 8 p e r cent to the quotations of the
f i r s t cf November.
The change was r e f l e c t e d i n a b e t t e r demand f o r b i l l s ,
but d e a l e r s ' p o r t f o l i o s on December 15 were s t i l l l a r g e r than on any p r e vious r e p o r t i n g date since l a s t May.
Sales to the r e s e r v e banks were un-
u s u a l l y l a r g e i n l a t e November and e a r l y December.
The f o l l o w i n g t a b l e
shows the market r a t e s which p r e v a i l e d a t the beginning and end of the
reporting period.
*
Acceptance Rates i n t h e New York Market.
Maturity
30 days
60 "
90 "
120 "
150 "
180 "
November 17, 1926
Bid
Offered
3-3/4
3-3/4
3-7/8
4
4-1/8
4-1/8
3-5/8
3-5/3
3-3/4
3-7/8
4
4
December 13, 1526
Bid
Offered
3-3/4
3-7/8
4
4
4-1/8
4-1/8
3-5/8
3-3/4
3-7/8
3-7/8
4
4
federal reserve board
428
X-4758
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 23, 1926.
Gentlemen:
You axe advised t h a t i n compliance with
the p r o v i s i o n of Section 21 of the Federal Eeserve
Act t h a t "The Federal Reserve Board s h a l l , a t l e a s t
once each y e a r , order an examination of each Federal
r e s e r v e "bank * *
the Federal Ee serve Board has
ordered i t s Chief Examiner, through, i t s Division of
Examination, to make an examination of each Federal
lip serve bank a t l e a s t once during the calendar y e a r .
In accordance with t h i s a c t i o n , the Board
has d i r e c t e d Mr. J . F. Herson, i t s Chief Examiner, to
make a t l e a s t one examination of the Federal Beserve
Bank of
during the year 1927.
The Board has a l s o empowered i t s Chief Examiner to s e l e c t the dates on which a l l examinations
w i l l be begun.
You a r e r e q u e s t e d to give him and h i s f o r c e
a l l proper a s s i s t a n c e i n making the examinations.
Very t r u l y yours,
D. E. C r i s s i n g e r ,
Governor.
To a l l F. E. Banks.
X-'*759
FEDERAL
RESERVE
BOARD
STATEMSNT FOR THE PRESS
For release in Morning Papers,
Monday, December 27, 1926.
The following i s a summary of general "business and
f i n a n c i a l conditions throughout the several Federal
Reserve D i s t r i c t s , based upon s t a t i s t i c s for the
months of November and December, as contained i n the
forthcoming issue of the Federal Reserve B u l l e t i n .
A c t i v i t y i n manufacturing industries decreased, in November and December,
while production of important minerals continued at a high l e v e l .
p r i c e s declined to the lowest l e v e l i n more than two years.
Wholesale
Firmer money
conditions i n December reflected, the usual seasonal requirements i n connection with holiday and end-of-year a c t i v i t y .
Production:
Factory employment and pay r o l l s declined i n November, r e f l e c t i n g decreased a c t i v i t y i n many inq^ortmt incbistries, but owing to the large output of minerals, the Federal Reserve Board's index of production i n basic
industries advanced somewhat during the month.
Production of bituminous
coal and petroleum in recent weeks has exceeded a l l previous records, and
output of copper and zinc during the month of November was i n unusually
large volume,..
Pig iron production also increased s l i g h t l y i n November, but
s t e e l m i l l Operations i n that month and i n December were considerably r e duced.
Automobile productions which i s not included i n the index of pro-
duction i n basic industries, declined
sharply i n November for the second
consecutive month and was smaller than i n any month since August, 1925.
T e x t i l e - m i l l a c t i v i t y was maintained during November at approximately the
same rate as in October.
The value of building contracts awarded showed
X-4789
.
.
•
•
-
2
-
430
lea* than the usual seasonal decline In Hovember and was s l i g i t l y l a r g e r than i n
Hovember, 1925.
Awards for the f i r s t h a l f o f December l i k e w i s e exceeded those
reported i n the corresponding period of l a s t year,
Agriculture:
The Department of Agriculture estimates the value o f 55 p r i n c i p a l crops
r a i s e d i n 1926, on the b a s i s of December 1 farm p r i c e s , a t $7,802,000,000* compared with $8,950,000,000 i n 1925*
Of the decrease i n the value of crops the
decline i a the value of the cotton crop accounts f o r $580,000,000, and that of
the c o m crop f o r about $860,000,600, While the t o t a l value of the wheat crop
increased by nearly $40,000,000.
Trade:
In Hovember d i s t r i b u t i o h of merchandise a t wholesale and r e t a i l showed
the usual d e c l i n e from the a c t i v i t y e a r l i e r i n the autumn*
Compared with a
year ago, however, wholesale trade was i n about the same volume and r e t a i l trade
larger.
S a l e s of department s t o r e s were about 7 per cent l a r g e r than l a s t year
and those of l e a d i n g mail order houses were 6 per cent l a r g e r .
Stocks of
merchandise c a r r i e d by wholesale firms declined f u r t h e r i n Hovember and were
smaller a t the end of the month than a year ago.
Inventories of department
s t o r e s , however, increased s l i g h t l y more than i s usual i n November.
Freight
car loadings d e c l i n e d considerably i n Hovember and December from the record high
l e v e l s of October, although the movement of coal continued heavy.
Mcos:
The general l e v e l of wholesale p r i c e s declined i n Hovember and p r i c e s of
many importiint b a s i c commodities decreased f a r t h e r i n the f i r s t h a l f of December.
She Bir#au of Labor S t a t i s t i c s index of wholesale commodity p r i c e s f o r Hovember
** 3
«•
X-4759
en c July, 1924. Bituminous c a prices i c e s A j
io
ol
n r a e 3L
a d the early p r o November, h t in r c n we s
n
at f
a
e e t ek
was 148, tho lowest level
s a py (a i g
h r l t rn
October
have declined by about two-thirds of the previous r i s e .
1
:
'
'
*
Petroleum prices have
'
been reduced since early in November* and there have also been declines in pig
iron, copper, zinc, lead, and s i l v e r .
$he f a l l in prices of agricultural com-
modities, which has lasted with few interruptions for over a year, continued ia
November.
month.
Grains, however, have risen somewhat since the latter part cf that
The clothing-materials and house-furnishings groups have declined
steadily in price (hiring recent months to the lowest levels of the post-war
period.
credit:
Loans and investments of member banks in leading c i t i e s increased by over
$100,000,000 during the four weeks ending December 15, reflecting im part the
growth in the demand for credit and currency that usually occurs in December.
The increase was in loans en securities, while commercial loans declined scpewhat from their seasonal high point in November.
Hie volume of reserve bank credit showed the usual seasonal increase
after the middle of November but was lower than in the corresponding period of
1925, partly because there was a smaller increase this year in the amount of
money in circulation*
Money market conditions became slightly firmer in December than at the end
cf Bovetaber,
Commercial paper rates were unchanged but open-meurket rates on
bankers' acceptances advanced by one-eighth of one per cent and call rates on
security loans averaged higher for the month.
4 3 2
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X ~ 4 7 6 0
December 28, 1926.
SUBJECT:
Additional Holiday during January, 1927.
Dear Sir•
R e f e r r i n g to l e t t e r X-4754, December 20,
1926, s u b j e c t "Holidays during January, 1927" , the
Board i s now advised t h a t the L o u i s v i l l e Branch
of t h e Federal Reserve Bank of S t . Louis w i l l a l s o
be closed on Wednesday, January 19th, in observance
of a h o l i d a y in the S t a t e of Kentucky.
P l e a s e include your c r e d i t s of January
19th f o r L o u i s v i l l e Branch in your Gold Fund
Clearing telegrams of January 20th.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F.R.BANKS.
federal reserve board
WASHINGTON
433
J u l y 12, 1Q26.
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
^ RQ2.G „
J
SUBJECT:
Bank Suspensions and I n s o l v e n c i e s .
Dear S i r :
There i s enclosed herewith a l i s t of member
and nonmeaaber banks r e p o r t e d t o the Board as having
suspended o p e r a t i o n s during the month of June and of
b-mks previously closed which resumed "business during
the same month. The statement a l s o i n c l u d e s any c o r r e c t i o n s made i n the l i s t s p r e v i o u s l y sent t o you.
I t w i l l he a p p r e c i a t e d i f you w i l l k i n d l y
check the d a t a p e r t a i n i n g to your d i s t r i c t a g a i n s t
your r e c o r d s and advise the Board on or b e f o r e J u l y
26, by t e l e g r a p h i f necessary, whether or not any
c o r r e c t i o n s or a d d i t i o n s are necessary t h e r e i n , i n
order t h a t c o r r e c t summaries by d i s t r i c t s may be publ i s h e d i n the Federal Reserve B u l l e t i n .
Very t r u l y yours,
Walter L. Eddy,
Secretary.
j
Enclosure.
LETTER TO EACH FEDERAL HE SERVE AGENT*
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J u l y 16, 1926
tft. 5025.
SUBJECT:
Reports of Condition of S t a t e
Banks and Trust Companies.
Dear S i r :
I t w i l l be g r e a t l y a p p r e c i a t e d i f i n a c cordance w i t h your usual p r a c t i c e you w i l l kindly
f u r n i s h the Federal ^es^rve Board, a s soon as
a v a i l a b l e , w i t h a copy of the a b s t r a c t of r e p o r t s
of c o n d i t i o n of s t a t e banks and t r u s t companies i n
your s t a t e on June 30, 1926, or other r e c e n t
date in case you did not issue a c a l l f o r r e p o r t s
of condition a s of June 30.
In submitting thQ above mentioned d a t a
i t i s requested t h a t the number of banks be s t a t e d
and t h a t s e p a r a t e f i g u r e s be f u r n i s h e d f o r mutual
savings banks providing t h e r e are any such banks
operating in your s t a t e .
A franked and s e l f - a d d r e s s e d envelope*
r e q u i r i n g no postage, i s enclosed f o r use in
t r a n s m i t t i n g the d a t a requeste d.
Very t r u l y y o u r s ,
J• C• N os111
Assistant Secretary.
Enclosure.
-0 „
434
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
July 16, 1926
S t . 5026.
SUBJECT:
Reports of Condition of S t a t e
Banks and Trust Companies.
Dear S i r :
I t w i l l be g r e a t l y appreciated if i n a c cordance with your usual p r a c t i c e you w i l l k i n d l y
f u r n i s h the Federal Heserve Board, as soon as
a v a i l a b l e , w i t h a copy of the a b s t r o t of r e p o r t s
of c o n d i t i o n of State banks and t r u s t companies in
your s t a t e on June 30, 1926, or other rc-cent date
in case you did not issue a c a l l f o r r e p o r t s of
c o n d i t i o n as of June 30.
In submitting the above mentioned d a t a i t
i s requested t h a t the number of banks be s t a t e d and
t h a t separate f i g u r e s be f u r n i s h e d f o r mutual savings
banks providing there are any such banks operating
in your s t a t e , a l s o t h a t the f i g u r e s be segregated by
Federal r e s e r v e d i s t r i c t s .
A franked and s e l f - a d d r e s s e d envelope, r e q u i r i n g no p o s t a g e , i s enclosed f o r use in t r a n s m i t t i n g the d a t a r e q u e s t e d .
Very t r u l y yours,
J . C. Koell,
Assistant Secretary.
Enc1o sure.
485
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J u l y 24, 1926
s t . 5032.
SUBJECT:
Expenses of Federal Reserve Banks.
Dear S i r :
The Board b e l i e v e s t h a t you and the d i r e c t o r s
and o f f i c e r s of your "bank w i l l be i n t e r e s t e d i n t h e
enclosed statement, prepared p r i m a r i l y f o r i t s i n f o r mation, which b r i n g s out the t r e n d of expenses chargeable t o f u n c t i o n s e s s e n t i a l to the o p e r a t i o n of the
System, a s d i s t i n g u i s h e d from expenses absorbed as a
matter of p o l i c y or of operations c a r r i e d on as a
matter of p o l i c y . The statement, a s you w i l l n o t e ,
i s s i m i l a r i n form t o t h a t prepared i n November 1923,
a copy of which was enclosed with t h e Board's l e t t e r
St. 4450 of March 11, 1925.
Very t r u l y y o u r s ,
D. R. C r i s s i n g e r ,
Governor,
Enclosure.
LET TEE TO CHAIRMEN OF ALL F. R. BANKS*
436
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 11, 1926
s t . 50249
SUBJECT:
Bank Suspensions and I n s o l v e n c i e s .
Dear S i r :
There i s enclosed herewith a l i s t of member
and nonmember "banks r e p o r t e d t o the Board a s having
suspended o p e r a t i o n s during the month of J u l y , and
of banks p r e v i o u s l y closed which resumed "business
during the same month. The statement a l s o i n c l u d e s
any c o r r e c t i o n s made i n the l i s t s p r e v i o u s l y sent to
you.
I t w i l l "be a p p r e c i a t e d i f you w i l l kindly
check the d a t a p e r t a i n i n g t o your d i s t r i c t a g a i n s t
your r e c o r d s and advise the Board on or b e f o r e
August 26, by t e l e g r a p h i f n e c e s s a r y , whether or not
any c o r r e c t i o n s or a d d i t i o n s a r e necessary t h e r e i n ,
i n order t h a t c o r r e c t summaries by d i s t r i c t s may be
published i n the Federal Reserve B u l l e t i n .
Very t r u l y y o u r s ,
Walter L.- Eddy,
Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS*
437
August 24, 1926.
s t . 5059
SUBJECT:
Condition of Member Banks
as of June 30, 1926.
Dear S i r :
For your information t h e r e i s enclosed
herewith a preliminary statement r e g a r d i n g the
c o n d i t i o n of a l l member banks combined a s of
June 30, 1926.
The B o a r d ' s a b s t r a c t (Ho. 33)
showing the d e t a i l e d f i g u r e s f o r S t a t e bank and
Trust Company members and the combined f i g u r e s
f o r a l l member banks w i l l be ready f o r d i s t r i b u t i o n i n the near f u t u r e .
Very t r u l y yours,
J . C; N o e l l ,
Assistant Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS*
4 3 9
CONDITION OF M M E BANKS AS OF JUNE 3O, 1920
E BR
S t . 5°59 a
Loans and investments of a l l member banks on June; 3O aggregated
$31,391,000,000, a n a i n c r e a s e of $321,000,000 since April 12, the p r e c e d i n g c a l l date,
Of t h i s i n c r e a s e $253,000,000 was r e p o r t e d b} the c e n t r a l r e s e r v e c i t y banks i n New
York City and £59,000,000 by those of Cnicago., wnile a l l o t h e r r e s e r v e c i t y banks
show a decline of about 415,000,000 and country banks an i n c r e a s e of $-23,000,000.
Loans and d i s c o u n t s , i n c l u d i n g o v e r d r a f t s , aggregated $22,267,000,000, an i n c r e a s e
of | 2 b l , 0 0 0 , 0 0 0 since April 12 and of $1,453,000,000 since J m e 30, 1925p r i n c i p a l changes i n t h i s item s i n c e April 12 were i n c r e a s e s of <187,000,000 and
$21,000,000 i n the New York and Chicago d i s t r i c t s , r e s p e c t i v e l y , and a decrease of
$53,000,000 in the A t l a n t a d i s t r i c t , smaller decreases being shown by banks i n t h e
Richmond, S t . Louis, Minneapolis and Dallas d i s t r i c t s . Investments i n United
S t a t e s s e c u r i t i e s were £86,000,000 l e s s than on April 12. About $25,000,000 of
t h i s decrease was due t o t h e s e t t i n g up s e p a r a t e l y i n the s t a t e m e n t of s e c u r i t i e s
borrowed by n a t i o n a l banks which h e r e t o f o r e were reported among s e c u r i t i e s owned.
Holdings of other s e c u r i t i e s were 1:1 U6,000, 000 g r e a t e r than on April 12.*
Total d e p o s i t s aggregated $33,72^,000,000, an increase of cc5^,0u0,000, sinci
April 12 and of $1, }Ck ,000,000 since June 30, 1925. Demand deposits increased
$568,000,000 during the year and time deposits #792,000,000, increases being reported by all d i s t r i c t s except Minneapolis f o r demand d e p o s i t s and Dallas for time
deposits. Amounts due to banks and bankers were ;37,000,000 l e s s tnan on June 30,
1925. Of the increase of $1,304,000,000 i n t o t a l deposits during the year,
$139>000,000 was reported by central reserve c i t y banks i n New York and Chicago,
$597,000,000 by other reserve c i t y banks, and ^'567,000,000 by country ^ banks. The
increase of $854,000,000 i n total deposits since April 12, of which $659,000,000
was reported by central reserve c i t y banks i n New York and v 79,000,000 by those i n
Chicago, i s a t t r i b u t a b l e l a r g e l y to an increase in the amount of f l o a t carried
by the member banks, uncollected items having increased $322,000,000, of which
$312,000,000 was in exchanges f o r c l e a r i n g house and checks on other banks in
same place.
In the attached t a b l e s are f igures oy Federal reserve d i s t r i c t s for a l l member banks and System f i g u r e s f o r s t a t e bank and t r u s t company members and for
national banks.
Changes i n the p r i n c i p a l r e s o u r c e s and l i a b i l i t i e s as compared witft f i g u r e s
f o r April 12, 1926, and June 30, 19 25, were as f o l l o w s :
I n c r e a s e (+) or decrease ( - )
since
April 12, 1926 June 10, 1925
Loans and discounts ( i n c l u d i n g o v e r d r a f t s )
. . . . +$261,000,000 + $1,453,000,000
United S t a t e s s e c u r i t i e s .
. . . . - 86,000,000 57,000,000
Other bonds, stocks and s e c u r i t i e s . .
+ 146,000,000 +
293,000,00V
Total l o a n s and investments
. • + 321,000,000 + 1,689,000, OOu
Demand deposits
+*557,000,000 +
968,000,001Time d e p o s i t s .
.. . . + 218,000,000 +
79^,000,001
Government d e p o s i t s
• • • - 152,000,000 +
pi ,000,000
Due tc banks and bankers
• + 131,000,000 37,000,00=
C e r t i f i e d and c a s h i e r s 1 checks
. • • . • + 99,000,000 7O,000,OOu
Acceptances o u t s t a n d i n g
• • • - 57,000,000 +
60,000,000
B i l l s payable and r e d i s c o u n t s * . . . • . . . . . . .
22,000,000 +
1 Ol,000,OOu
•Demand d e p o s i t s p l u s c e r t i f i e d and c a s h i e r s 1 checks o u t s t a n d i n g
and l e s s exchanges and o t h e r u n c o l l e c t e d items i n c r e a s e d
$334,000,000.
RESOURCES A D LIABILITIES OF M M E DAWS ON JUNE 30, 1926 A D APRIL 12, 192o
N
E BR
N
State Bank & Trust Company members
June 30, 1926
| April 12, 1926
Loans and discounts (including
overdrafts)
U. S. s e c u r i t i e s
Other bonds, stocks and s e c u r i t i e s
Total loans and investments
s t . 5059b
1
National Banks
| June 30, 1926 I April 12, 1926
|
$2,844,923,000
1,275,632,000
2,007,616,000
12,131,171,000
$8,698,506,000
1,293,409,000
1,965,470,000
11,957,385,000
113,422,556,000
2,466,297,000
3,370,863,000
19,259,716,000
$13,307,802,000
2,537,669,000
3,267,147,0:0
19,112,618,000
175,183,000
855,001,000
173,^6,000
•,847,284,000
1,581,171,000
355,937,000
366,715,000
1,288, 6o4, „0v
1,449,278,vOO
Cash in vault
Reserve witn F. R. Banks
Items with Federal Reserve Banks i n
process of c o l l e c t i o n
Due from banks and bankers
Exchanges f o r c l e a r i n g house, and
checks on other banks i n same place
All other resources
Total resources
230,752,000
499,778,000
234,710,000
484,223,000
501,409,000
1,480,273,000
7b5,846,000
864,850,000
15,542,581,000
592,441,000
905,737,000
15,195,326,000
l,324,a2,000
*5,302, 608,000
1,317,478,000
d+,880,114,000
Demand deposits
Time deposits
U. S. deposits
C e r t i f i e d and c a s n i e r s 1 checks
Di^e to banks and bankers
Total deposits
6,607,373,000
4,860,690,000
84,918,000
457,140,000
1,05 2,015,000
13,092,136,000
6,371,736,000
4,756,886,000
147,587,000
381,050,000
1,047,836,000
12,705,695,000
10,772,ob8,000
6,312,173,000
142,729,000
505,554,000
2, 898, 312,000
20,631,436,000
. 10,451,412,000
0,197,861,000
231,863,000
481,816,000
2,301,570,000
20,164,522,000
296,303,000
316,555,000
239,602,000
752,800,000
692,652,000
488,022,000
522,608,000
250,932,000
1,412,072,000
1,198,061,000
1,287,499,000
524,303,000
285,692,000
1,409,634,000
1,187,968,000
B i l l s payable and rediscounts
Acceptances outstanding
Capital stock paid in
Surplus fund
All other l i a b i l i t i e s
216,873,000
757,412,000
701,504,000
478,353,000
996,890,000
43 7,345,0008 5 8 , 0 1 fa,000
1,307,995,000
O
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 21, 1926.
s t . 5061.
SUBJECT:
Functional Expenses,
F i r s t H a l f , 1926.
Dear S i r :
There i s enclosed herewith one copy of
the c o n s o l i d a t e d Functional Expense e x h i b i t f o r
the h a l f year ending June 30, 1926.
Copies of the e x h i b i t a r e a l s o being
mailed t o the Governor of the Bank and to the
Chairman of the Procedure Committee.
Very t r u l y yours,
E. L. Smead, C h i e f ,
Division of Bank Operations.
Enclosure.
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BAM*
44.1
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 24, 1926.
S t . 5063.
Bear S i r :
The head o f f i c e s of a l l the Federal r e s e r v e banks
having now been i n t h e i r own b u i l d i n g s f o r a year or more,
the Board's Committee on S a l a r i e s and Expenditures has had
a t a b l e prepared showing t h e cost of maintaining the P r o v i s i o n
of Space f u n c t i o n a t the head o f f i c e of each F e d e r a l r e s e r v e
bank f o r the year ending June 30, 1926. This statement has
been prepared in more d e t a i l than i s shown i n the semi-annual
f u n c t i o n a l expense e x h i b i t i n order t h a t t h e Board could have
a b e t t e r comparison between the Federal r e s e r v e banks of the
cost of maintaining the f u n c t i o n .
As i t occurs to us t h a t you and the o f f i c e r s and
d i r e c t o r s of your bank might be i n t e r e s t e d in comparing the
d e t a i l e d c o s t s shown f o r your bank w i t h those shown f o r other
Federal r e s e r v e banks, we a r e e n c l o s i n g herewith t h r e e copies
of the s t a t e m e n t . I t should be understood, of course, t h a t
t h i s statement does not include such expenses a s d e p r e c i a t i o n
or i n t e r e s t on money invested in land and b u i l d i n g s .
Very t r u l y yours,
Geo. R. James, Chairman,
Committee on S a l a r i e s
and Expenditures.
LETTER TO ALL CHAIRMEN.
4 4 2
federal reserve board
WASHINGTON
August 24, 1926.
S t . 5064.
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Debits t o Individual Accounts.
Dear S i r :
The B o a r d s weekly statement of d e b i t s to individual accounts by banks
in s e l e c t e d c i t i e s i s now extensively used as a measurement of the volume of
business t r a n s a c t e d c u r r e n t l y in each r e p o r t i n g c e n t e r and i n a l l r e p o r t i n g cent e r s , and as an index of the volume of these t r a n s a c t i o n s over an extended
p e r i o d . I t i s t h e r e f o r e d e s i r a b l e to make the published f i z u r e s as r e p r e s e n t a t i v e as p o s s i b l e and t o be extremely c a r e f u l to see t h a t they a r e kept cn a
comparable b a s i s .
Under the p r e s e n t system of r e p o r t i n g i t i s d i f f i c u l t t o maintain the
r e p r e s e n t a t i v e c h a r a c t e r and comparability of f i g u r e s ever a considerable
period of time because of the changes t h a t f r e q u e n t l y occur i n t h e r e l a t i v e
volume of d e p o s i t l i a b i l i t i e s of r e p o r t i n g and of n o n - r e p o r t i n g banks. At
p r e s e n t the r e p o r t s f o r mazny of the c i t i e s r e p r e s e n t d e b i t s of only those
banks which a r e members of t h e l o c a l c l e a r i n g house a s s o c i a t i o n or which c l e a r
through members of t h e a s s o c i a t i o n , and changes i n such membership n e c e s s a r i l y
a f f e c t the number of r e p o r t i n g banks and consequently tne comparability of tne
f i g u r e s . Requests have a l s o bodn received from time to time f o r permission t o
include f i g u r e s f o r a d d i t i o n a l banks both f o r c i t i e s i n which c l e a r i n g house
a s s o c i a t i o n s e x i s t and c i t i e s vvnere d e b i t f i g u r e s are compiled by other agencies.
The Board f e e l s t h a t tne statement would be much improved i f a l l banks i n each
r e p o r t i n g c e n t e r t h a t r e c e i v e checking d e p o s i t s could be induced t o f u r n i s h
debit f i g u r e s r e g u l a r l y each week, and i t would-like t o have an expression of
your views as t o the p r a c t i c a b i l i t y of obtaining r e g u l a r r e p o r t s from a l l banks
in each of t h e r e p o r t i n g c i t i e s in your d i s t r i c t . To accomplish t h i s i t migiit
be necessary to g e t r e p o r t s d i r e c t from some of t h e bank* not now r e p o r t i n g ,
but arrangements could perhaps be made i n most cases f o r tnese banks t o r e p o r t
through the e x i s t i n g r e p o r t i n g agencies.
With the view of determining how s e r i o u s l y the f i g u r e s are a f f e c t e d by
the f a c t that r e p o r t s cov^r only a p o r t i o n of the banks i n some c e n t e r s , i t
w i l l be appreciated if you w i l l kindly prepare and send t o the Board a s t a t e ment showing f o r each r e p o r t i n g c e n t e r : (a) the names of c l e a r i n g nouse banks;
(b) the names of a l l s o - c a l l e d c l e a r i n g nonmember banks, the name of each
c l e a r ins? nonmember bank to follow, s l i g h t l y indented, tne name of the c l e a r i n g house bank through which i t s checks are handled; and (c) the names of a l l
-
2
444
-
S t . 5064a
other banks which c a r r y d e p o s i t s subject to check. The words "no r e p o r t "
should be shown a f t e r the name of each bank for which no r e p o r t s a r e now
received. The l i s t of banks should be accompanied with a t a b l e showing
s e p a r a t e l y f o r each r e p o r t i n g center the t o t a l demand d e p o s i t s of r e p o r t i n g
banks and of n o n - r e p o r t i n g banks.
The p r e s e n t i n q u i r y i s intended to f u r n i s h the Board w i t h information
regarding the completeness of the debit f i g u r e s f o r the v a r i o u s c e n t e r s and
to obtain the views of t h e Federal reserve agents w i t h r e s p e c t t o the suggested changes i n the statement and i t i s requested that f o r t h e p r e s e n t no
arrangements, even in a t e n t a t i v e way, be entered i n t o f o r o b t a i n i n g f i g u r e s
from banks not now r e p o r t i n g .
Very t r u l y yours,
B. R. C r i s s i n g e r ,
Governor.
LETTER TO ALL FEDERAL RESERVE AGENTS*
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
September 9, 1926
St. 5083
SUBJECT:
Abstract of Condition Reports of
State Bank and Trust Company members and of a l l Member banks as
of June 30, 1926.
Dear Sir:
W are forwarding to you under separate
e
cover
copies of the Board's Abstract Ho. 33
showing the condition of State Bank and Trust Company
members and of a l l member banks a s at c l o s e of b u s i ness on June 30, 1926.
Consolidated f i g u r e s for a l l
member banks, both National and State, are shown on
pages 1 and 12.
Please forward one copy of the abstract to
each State Bank and Trust Company member i n your d i s t r i c t that has expressed a desire to receive copies
of abstracts as issued.
http://fraser.stlouisfed.org/
LETTER
Federal Reserve Bank of St. Louis
Very t r u l y yours,
J. C. Noell,
Assistant Secretary.
T ALL F. R. AGENTS*
O
federal reserve board
446
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
September 14, 1^26
st.
SUBJECT:
5090.
Bank Suspensions and. I n s o l v e n c i e s .
Dear S i r :
There i s enclosed herewith a l i s t of member and
nonmember banks reported to the Board as having suspended
o p e r a t i o n s during the month of August, and of banks p r e v i o u s l y closed which resumed business during the same
month; The statement a l s o includes any c o r r e c t i o n s made
in the l i s t s p r e v i o u s l y sent to you.
I t w i l l be appreciated if you w i l l kindly check
the data p e r t a i n i n g to your d i s t r i c t a g a i n s t your records
and advise the Board on or before September 25, by t e l e graph i f necessary, whether or not any c o r r e c t i o n s or
a d d i t i o n s are necessary t h e r e i n , i n order t h a t c o r r e c t
summaries by d i s t r i c t s may be published in the Federal
Reserve B u l l e t i n .
Very t r u l y yours,
J . C. Neel1,
Assistant Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS*
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 13, 19^6.
s t . 5119.
SUBJECT:
Bank Suspensions and I n s o l v e n c i e s .
Dear S i r :
There i s e n c l o s e d herewith a l i s t vf member
and nonmember banks reported to the Board a s having
suspended operations during the month of September,
and of banks p r e v i o u s l y closed which resumed b u s i ness during the same month. The statement also i n cludes any c o r r e c t i o n s made in the l i s t s p r e v i o u s l y
sent t o you.
I t w i l l be appreciated i f you w i l l kindly
check the data p e r t a i n i n g t o your d i s t r i c t a g a i n s t
your records and advise the Board on or b e f o r e
October 25, by t e l e g r a p h i f necessary, whether or
not any c o r r e c t i o n s or a d d i t i o n s are necessary
t h e r e i n , i n order t h a t c o r r e c t summaries by d i s t r i c t s
may be published i n t h e Federal Reserve B u l l e t i n .
Very t r u l y yours,
Walter L. Eddy,
Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS*
447
federal reserve board
448
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 14, 1926.
s t . 5120.
SUBJECT:
Branches of Member and Nonmember banks.
Dear S i r :
There a r e enclosed herewith two copies of l i s t s of banks operating
branches, as f o l l o w s :
1.
1926, based
information
the Bankers
National banks i n your d i s t r i c t operating branches as of June 30,
on r e p o r t s submitted by you as of June 1924, supplemented by
received from the Comptroller of the Currency or obtained from
Directory.
2. State member banks i n your d i s t r i c t o p e r a t i n g branches as of
June 30, 1926, based on r e p o r t s submitted by you as of June 1924, supplemented
by data shown on the June 30, 1926, c o n d i t i o n r e p o r t s , form 105, o r obtained
v from the Bankers D i r e c t o r y .
3• All nonmember banks operating branches a s of December 31, 1925,
i n the f o l l o w i n g s t a t e s whose c a p i t a l s l i e w i t h i n your d i s t r i c t , except
banks which became members during the f i r s t s i x months of t h i s y e a r , based
on r e p o r t s submitted by you as of June 1924 and December 1925, supplemented
by d a t a obtained from the Bankers Directory:
I t w i l l be noted t h a t the l i s t s show or c a l l f o r the l o c a t i o n and
name of the p a r e n t bank; the l o c a t i o n , name or s t r e e t a d d r e s s , t y p e , and
date and method of establishment of each branch; and whether the nonmember
banks a r e stock, mutual savings, or p r i v a t e banks. Much of the d a t a c a l l e d
f o r i s not shown, not being a v a i l a b l e at the Board's o f f i c e s . I t w i l l be
a p p r e c i a t e d i f jtou w i l l kindly have a l l of the d a t a v e r i f i e d or c o r r e c t e d
and brought up to date a s of June 30, 1926, supplying such i n f o r m a t i o n r e garding each branch as i s c a l l e d f o r but not shown, and i n s e r t i n g any banks
which operate branches but which are not l i s t e d . When completed the statement
should, so f a r a s d a t a are a v a i l a b l e , conform t o the s t y l e of the enclosed
sample s h e e t . The o r i g i n a l copy of the statement with a l l c o r r e c t i o n s and
a d d i t i o n s noted thereon should be returned t o the Board.
449
The n o t e s a t the bottom of the form i n d i c a t e how the information
c a l l e d f o r i n column 2 i s to "be r e p o r t e d . In the t h i r d column are to "be
shown the year i n which the branch was opened f o r b u s i n e s s , t o g e t h e r with the
month and date where r e a d i l y a v a i l a b l e , a l s o the manner i n which the branch
was e s t a b l i s h e d - whether "de novo" (by the present o p e r a t i n g bank) or o t h e r wise. If not e s t a b l i s h e d "de novo" by the p r e s e n t bank, the date should
represent t h a t on which i t became a branch of such bank, and the name, c a p i t a l
and d e p o s i t s of the bank which was converted i n t o a branch should be given,
or so much of the d a t a as i s r e a d i l y a v a i l a b l e . If the branch was formerly
operated by*another bank, t h i s f a c t should be shown i n the manner i n d i c a t e d
on the sample s h e e t , and i t should a l s o be s t a t e d whether the branch was
o r i g i n a l l y e s t a b l i s h e d "de novo" ( a s a branch), or whether i t was o r i g i n a l l y
an independent bank. In case a bank or branch i s l o c a t e d i n an o u t l y i n g
section of a c i t y , care should be taken t o see t h a t the name of the c i t y or
town i s given as the l o c a t i o n , followed by the name of the subdivision i n
p a r e n t h e s i s i f p r a c t i c a b l e , a s , f o r example, Los Angeles (Hollywood) or
Mow York (Brooklyn).
In .order to enable the Board to maintain a complete u p - t o - d a t e record
of branch banks i n o p e r a t i o n i n the United S t a t e s , i t w i l l be a p p r e c i a t e d i f
you w i l l k i n d l y f u r n i s h u s , as soon a s p r a c t i c a b l e a f t e r June 30 and December
31 of each y e a r , with a r e p o r t , i n accordance with the enclosed sample form,
covering a l l branches e s t a b l i s h e d during the six-month p e r i o d ( i n c l u d i n g
branches taken over by one bank from another) by n a t i o n a l and s t a t e member
banks i n your d i s t r i c t , and by a l l nonmember banks i n the above-mentioned
s t a t e s ; a l i s t of branches discontinued, showing the date and method of d i s continuance i n each c a s e ; and a l i s t of f u l l - f l e d g e d branches changed t o
t e l l e r ' s windows, and v i c e v e r s a .
The Board a l s o wishes to b r i n g up to date the i n f o r m a t i o n r e g a r d i n g
chain banking received i n 1922 i n response t o i t s l e t t e r X-35^9
October 31,
1922. I t w i l l accordingly be a p p r e c i a t e d i f you w i l l accompany your r e p o r t
on branch banks with as complete a statement a s p r a c t i c a b l e on chain banking
i n your d i s t r i c t , g i v i n g the name by which each chain i s g e n e r a l l y known, by
whom the c o n t r o l l i n g i n t e r e s t i s h e l d , the c h a r a c t e r and degree of c o n t r o l
e x e r c i s e d , the name and l o c a t i o n of each bank belonging t o the chain, and such
other information regarding the f u n c t i o n s of the chain groups a s you now have
a v a i l a b l e or may be able t o obtain r e a d i l y .
Very t r u l y y o u r s ,
Walter 1. Eddy,
Secretary.
Enclosure.
LETTER TO ALL FEDERAL RESERVE AGENTS EXCEPT SM FRAHCIECO*
f
(sample sheet)
4 5 0
MMEMBER BAMS* WITH BBMCHES OE ADDITIONAL OFFICES, DBG. 31, 1925.
(To be brought up t o date a s of June 30, 1926)
Location and name
of parent bank
Location, name or s t r e e t
a d d r e s s , and type of branch**
g^.
Date and method of estab11shment of branch***
(state)
*
Oakville
F i r s t State Bank
ditto
Oakville
Uptown o f f i c e
Centerville
C e n t e r v i l l e Branch
Dec. 1, 1920, de novo
C
B
1908. Formerly Second
State Bank, c a p i t a l $50,000
d e p o s i t s $500,000.
Feb. 1912. Formerly branch
of Third State Bank.
O r i g i n a l l y de novo branch.
Yale
Empire Trust Co.
York
158 Front St.
HC
A
Jonesville
C i t i z e n s State Bank
Jonesville
95 Market St.
B
March 1923% Formerly
branch of F i r s t National
Bank. O r i g i n a l l y independent bank.
*A11 banks a r e stock savings or commercial banks or t r u s t companies, except
those marked "Mutual savings" or "private bank."
**If the branch or o f f i c e i s l o c a t e d i n t e r r i t o r y contiguous a t some point to
the corporate l i m i t s of the home c i t y , i n d i c a t e t h i s f a c t by "C" a f t e r the
name of the town; i f l o c a t e d i n non-contiguous t e r r i t o r y , i n d i c a t e by "NC".
Also designate an a d d i t i o n a l o f f i c e or t e l l e r ' s window, i . e . , an o f f i c e not
authorized t o make l o a n s , by "A", and a f u l l - f l e d g e d branch by "B".
***See accompanying l e t t e r of i n s t r u c t i o n s .
federal reserve board
October 26, 1926.
WASHINGTON
,
ADDRESS OFFICIAL CORRESPONDENCE
THE FEDERAL RESERVE BOARD
S t . 5137 •
Forms f o r use during 1927.
Dear S i r :
I t w i l l be a p p r e c i a t e d i f you w i l l kindly advise the
Board at your e a r l y convenience the number of copies of the
forms l i s t e d below t h a t R i l l be r e q u i r e d by your bank ( i n c l u d i n g
branches, i f any) during the calendar year 1927Form ITumber
34
F. B. A. - 5
1
Title
Daily balance s h e e t . Please s t a t e the number
r e q u i r e d f o r the head o f f i c e and each branch
s e p a r a t e l y and a l s o give any s p e c i a l punching
t h a t may be d e s i r e d .
Daily statement of Federal r e s e r v e agent.
Semi-annual f u n c t i o n a l expense r e p o r t .
38
C l a s s i f i c a t i o n of discounted and purchased
b i l l s held at the end of the month.
95
Monthly r e p o r t of e a r n i n g s .
96
Monthly r e p o r t of current expenses.
97
Monthly r e p o r t of income and expense Other r e a l e s t a t e .
171
Monthly r e p o r t of average d a i l y holdings of
b i l l s and s e c u r i t i e s , e a r n i n g s thereon, and
annual r a t e s of e a r n i n g s .
Please show s e p a r a t e l y the number of copies of each form
r e q u i r e d i f i t i s r e v i s e d and the number i f not r e v i s e d .
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
LETI'EH TO ALL F.SBEBAL E5SEBVE AGENTS*
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 30, 1926
St. 5142.
SUBJECT:
1927 E d i t i o n of Federal Reserve
Bank Balance Sheet, Form ]>b.
Dear S i r :
There i s enclosed herewith a copy of the p r e s e n t
Federal r e s e r v e bank balance s h e e t , form 3^, on which are
shown changes which are being made i n the 1927 e d i t i o n ,
a l l of which i t i s b e l i e v e d are s e l f - e x p l a n a t o r y .
The y e a r ' s supply of the form w i l l be mailed a s
soon as r e c e i v e d from the p r i n t e r , which should be about
the middle of December.
Very t r u l y yours,
3. L. Smead, Chief,
Division of Bank Operations.
Enclosure.
LETTER TO 60VISITORS* OF ALL FEDERAL RESERVE BANKS*
452
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
November l p , 1926,
S t . 5158.
SUBJECT: Bank Suspensions.
Dear S i r :
There i s enclosed herewith a l i s t of member
and no member banks reported t o the Board as having
suspjnd-d operations during the month of October, and
oi bankti previously suspended which resumed 'business
during tne same month. Thti statement a l s o includes
ary c o r r e c t i o n s made i n the l i s t s p r e v i o u s l y sent to
ycu.
I t w i l l be appreciated if you w i l l kindly
check tne data, p e r t a i n i n g to your d i s t r i c t a g a i n s t
your records and advise the Board on or before November 2.6, by t e l e g r a p h if necessary, whether or not any
c o r r e c t i o n s or a d d i t i o n s are necessary t h e r e i n , i n
o r d e r t h a t c o r r e c t summaries by d i s t r i c t s may be publ i s h e d i n the Federal Reserve B u l l e t i n .
Very t r u l y yours,
Walter L. Eddy,
Secretary.
Enclosure.
COPY TO EACH FEDERAL RESERVE AGENT*
453
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
November 19, 1926
s t . 5163.
SUBJECT:
Earnings, Expenses, and Dividends
Reports of State Bank and Trust
Company Members.
Dear S i r :
. There are being forwarded to you today under separate cover
copies of form 107. r e v i s e d i n October 1926, f o r the use of
s t a t e bank and t r u s t company members i n submitting t h e i r r e p o r t s of
e a r n i n g s , expenses, and dividends f o r the s i x months ending December
31, 1926.
The r e v i s e d form c a l l s f o r more d e t a i l e d information r e garding e a r n i n g s and expenses, which w i l l , i t i s b e l i e v e d , "be of
m a t e r i a l help to the banks themselves i n analyzing t h e i r own income
and expense accounts and i n comparing t h e i r f i n a n c i a l r e s u l t s of
o p e r a t i o n s w i t h those of other banks as shown i n published r e p o r t s .
The p r i n c i p a l change, as you w i l l n o t e , i s the d i v i s i o n of the i n t e r e s t items so t h a t separate f i g u r e s w i l l be r e p o r t e d of i n t e r e s t
p a i d on demand, time, and bank d e p o s i t s , and of i n t e r e s t r e c e i v e d
on loans and d i s c o u n t s , investments, and balances with other banks.
The item " P r o f i t s on s e c u r i t i e s sold" has a l s o been added i n the
e a r n i n g s group, i n order t o insure a l l "banks r e p o r t i n g such income
uniformly. Section 2 c a l l s f o r separate f i g u r e s of d e p r e c i a t i o n on
"banking house, f u r n i t u r e and f i x t u r e s , i n order t h a t t h e r e may "be
no doubt as t o where such amounts are charged and t h a t a l l r e p o r t s
may be on a comparable b a s i s .
A new s e c t i o n has been added t o show t o t a l c r e d i t s t o
p r o f i t account since o r g a n i z a t i o n and d i s p o s i t i o n of p r o f i t s , p r i marily t o provide a check on the t h r e e preceding s e c t i o n s . While
i t i s r e a l i z e d t h a t some banks may have d i f f i c u l t y i n f i l l i n g out
s e c t i o n 4 the f i r s t tirrbj i t i s thought t h a t t h i s may be l a r g e l y
overcome i f the s i g n i f i c a n c e of the s e c t i o n i s f u l l y a p p r e c i a t e d .
The d a t a r e q u i r e d i n t h i s s e c t i o n may be explained as f o l l o w s ;
454.
-
2
455
-
Item 19. "Total surplus fund a t date of t h i s r e p o r t , " itom 21.
"Hot amount reserved, f o r
, " and item 2.2, "Amount of net p r o f i t s or l o s s . " The amounts r e p o r t e d a g a i n s t each of t h e s e items should
correspond with the amounts shown by the books of the "bank on December
31, 192b, t h a t i s , item 19 should agree with the "Surplus fund a t date
of t h i s r e p o r t " as shown a t the top of the form; item 22 should agree
with item 15, "Amount of net p r o f i t s undivided or l o s s t o "be c a r r i e d
forward t o item J of next r e p o r t ; " while item 21 should r e p r e s e n t the
amounts set aside a s a reserve and not a c t u a l l y paid oujb or charged o f f ,
as shown "by the books of the bank a f t e r close of b u s i n e s s on December
31, 1926.
Item 20. "Total dividends since o r g a n i z a t i o n . " Some of the
banks may have d i f f i c u l t y i n determining t h i s amount, but i t i s assumed
t h a t i n most c a s e s i t can be obtained from t h e i r r e c o r d s . If the exact
amount i s not known i t i s suggested t h a t the banks f u r n i s h an estimate
of the amount of dividends p a i d , based on the b e s t sources of information
available.
Itom 17. " P r o f i t s and surplus of old o r g a n i z a t i o n a t date of
conversion r e t a i n e d by p r e s e n t o r g a n i z a t i o n . 11 This item, of course,
w i l l apply to only such banks as have been reorganized, or converted
from a p r i v a t e , n a t i o n a l or, other c l a s s of bank, and have r e t a i n e d
p r o f i t s of the old o r g a n i z a t i o n .
Item 18, "Total obtained by r e d u c t i o n of c a p i t a l not repaid
to s h a r e h o l d e r s , by assessment on shareholders and by v o l u n t a r y cont r i b u t i o n s since o r g a n i z a t i o n . " This item a l s o probably w i l l be used by
r e l a t i v e l y few banks, o r d i n a r i l y only where a bank has s u s t a i n e d l o s s e s
i n such amount a s t o impair i t s c a p i t a l account.
Item 16. "Total net p r o f i t s since o r g a n i z a t i o n , " w i l l r e p r e s e n t the d i f f e r e n c e between the t o t a l of items 19, 20, 21, and 22 and
the t o t a l of items 17 and 18.
In sending out these forms to the banks f o r use a t the end
of t h i s y e a r , i t i s suggested t h a t you enclose a statement embodying
s u b s t a n t i a l l y the above i n f o r m a t i o n , i n order to make i t as c l e a r as
possible to the banks j u s t how the r e p o r t s should be prepared.
Very t r u l y yours,
Walter L. Eddy,
Secretary.
TO ALL FEDERAL BE SERVE AGENTS
federal reserve board
456
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
November 20, 1$2S
St.5164.
SUBJECT:
Closing of Books on December 31. 1926.
Dear S i r :
In accordance with the usual custom, i t w i l l "be appreciated*
i f the r e s o l u t i o n of your board of d i r e c t o r s f o r the payment of the
semi-annual dividend, and r e q u e s t s f o r a u t h o r i t y t o charge earnings
with d e p r e c i a t i o n allowances, r e s e r v e s f o r probable l o s s e s , e t c . , are
received a t the B o a r d ' s o f f i c e s not l a t e r than December 10, 1926, and
are accompanied with the f o l l o w i n g information: (1) e s t i m a t e d gross
e a r n i n g s , c u r r e n t expenses, proposed a d d i t i o n s to and deductions from
current net e a r n i n g s , and net earnings a v a i l a b l e f o r s u r p l u s and
f r a n c h i s e tax f o r t h e calendar year 1$26, (2) unpaid indebtedness of
f a i l e d banks t o Federal reserve bank, giving the names of the banks,
indebtedness of each on November 30, c h a r a c t e r of s e c u r i t y , i f any,
and the probable l o s s i n the case of each bank, and (3) indebtedness
to Federal r e s e r v e bank of member banks considered to be i n an unsafe
c o n d i t i o n , giving the names of the banks, indebtedness of each on
November 30, c h a r a c t e r of s e c u r i t y , i f any, and e s t i m a t e d l o s s i n the
case of each bank.
The procedure l a i d down i n the Board's l e t t e r St. 4333 of
November 26, 1924, s u b j e c t "Closing of Books on December 31, 1924,"
r e l a t i n g t o c h a r g e - o f f s and d e p r e c i a t i o n r e s e r v e s on bank premises,
f u r n i t u r e and equipment, d e p r e c i a t i o n on United S t a t e s s e c u r i t i e s ,
and s u r p l u s and f r a n c h i s e t a x , i s s t i l l i n e f f e c t and should be f o l lowed i n submitting your r e q u e s t s a t the end of the y e a r , except t h a t
i t w i l l be unnecessary to f u r n i s h an itemized l i s t of f u r n i t u r e and
equipment c a r r i e d on the books a t the date of your r e q u e s t and which
i t i s proposed t o purchase during the remainder of the y e a r .
With regard to d e p r e c i a t i o n r e s e r v e s and c h a r g e - o f f s on bank
premises, the 1927 e d i t i o n of d a i l y balance s h e e t , - f o r m 34, w i l l show
the book value of Bank Premises divided i n t o (a) Land, (b) B u i l d i n g s ,
i n c l u d i n g v a u l t s , ( c ) Fixed machinery and equipment, and (d) Other r e a l
e s t a t e and New b u i l d i n g account, i n s t e a d of Banking houses ( i n c l u d i n g
l a n d ) , New b u i l d i n g account, and Other r e a l e s t a t e , as a t p r e s e n t . By
r e f e r e n c e t o paragraphs (b) and (c) under Bank Premises on page 2 of
the B o a r d ' s l e t t e r St. 4333 of November l 6 , 1924, you w i l l note t h a t
i t has been the purpose of the Board t o a u t h o r i z e the banks t o charge
off a s u f f i c i e n t amount of the cost of each bank b u i l d i n g to reduce the
book value thereof to estimated replacement c o s t , and t h e r e a f t e r t o
~ 2 -
457
a u t h o r i z e the s e t t i n g up of a d e p r e c i a t i o n reserve of not t o exceed
2 per cent per annum of the replacement c o s t , a l s o to a u t h o r i z e a r e serve to "be set a s i d e each year t o cover d e p r e c i a t i o n on f i x e d machinery
and equipment, the annual a d d i t i o n to such reserve not t o exceed 10 per
cent of c o s t . In accordance with the p r i n c i p l e s l a i d down i n t h a t
l e t t e r , t h e Board would p r e f e r t h a t beginning with January 1, 1927, a l l
Federal reserve "banks c a r r y t h e i r "bank premises accounts on form 3^- as
f o l l o w s : (a) Land on which a "banking house i s l o c a t e d - a t "book v a l u e ,
i . e . , a c t u a l cost l e s s amounts charged o f f ; ("b) Completed "buildings a t replacement c o s t , i . e . , a c t u a l cost l e s s amounts charged off t o r e duce hook value t o e s t i m a t e d replacement c o s t , determined i n accordance
with t h e formula l a i d down i n paragraph (d) of t h e B o a r d ' s l e t t e r
St. 1+333; (c) Fixed machinery and equipment i n completed b u i l d i n g s at a c t u a l c o s t ; and (d) Other r e a l e s t a t e and new "building account (unf i n i s h e d "buildings) at book value, i . e . , a c t u a l cost l e s s amounts
charged o f f . If t h i s i s done, the d e p r e c i a t i o n r e s e r v e s to be set aside
at the end of each year w i l l be based on the ' replacement cost of the
b u i l d i n g s and the a c t u a l cost of f i x e d machinery and equipment, a s
shown on form Jk. The t o t a l of such r e s e r v e s which i s t o be deducted
from the book value of bank premises w i l l then r e p r e s e n t only the annual
d e p r e c i a t i o n charges on b u i l d i n g s and f i x e d machinery and equipment,
i . e . , they w i l l not include charges t o earnings made f o r the purpose
of b r i n g i n g the book value of b u i l d i n g s down to replacement cost nor
any amounts charged off on land.
In order t h a t the bank premises r e c o r d s of the Board may
be checked a g a i n s t those of t h e banks and any d i f f e r e n c e s r e c o n c i l e d
b e f o r e the new accounts are set up on form 3^ beginning with 1927, we
are e n c l o s i n g herewith a statement covering each s e p a r a t e b u i l d i n g
owned by your bank, showing on the f a c e side of the form the cost of
the b u i l d i n g i n d e t a i l , and on the reverse side the amounts charged off
and the d e p r e c i a t i o n r e s e r v e s set aside t o the end of 1925« The r e serves as shown on these statements may aot agree with d e p r e c i a t i o n
r e s e r v e s now shown on form 3^» as we have endeavored i n a l l cases to
follow the plan o u t l i n e d above i n determining whether each amount
should be t r e a t e d as a charge-off or as a d e p r e c i a t i o n r e s e r v e . I t
w i l l be a p p r e c i a t e d i f you w i l l have these statements checked and r e turned, i f p r a c t i c a b l e , with your b a n k ' s request f o r a u t h o r i t y to close
your books, pay the semi-annual dividend, e t c . , at the end of 1926.
Very t r u l y yours,
Walter L. Eddy,
Secretary.
Enclosure.
TO CHAIRMEN OF ALL FEDERAL RESERVE BAMS.
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 17, 1926,
St. 5193.
bUBJ.uCT:
Ban3c suspensions.
Bear air-.
There i s enclosed herewith a l i s t of member
and nonmember banks reported to the aoard as having
suspended operations during the month of November,
and of banks previously suspended which resumed
business during the same month. The statement also
includes any corrections made in the l i s t s previously
sent to you.
It w i l l be appreciated if you w i l l kindly
check the data pertaining t(5 your d i s t r i c t against
your records and advise the Board on or before December 27, by telegraph i f necessary, whether or not
any corrections or auditions are necessary therein,
in order that correct." summaries by d i s t r i c t s may be
published in the Federal heserve Bulletin*
Very truly yours,
waiter L. Lady,
secretary.
Enclosure.
COPY T LACE FEDERAL RLL&RVL AGrRIT*
O
458
4^
i
federal reserve board
WASHINGTON
459
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 18, 1926.
s t . 5195.
SUBJECT:
Reports of Earnings, Expenses,
Dividends, and Franchise Tax
payments f o r 1926.
Dear S i r :
In order t h a t the Board may have information regarding
the f i n a n c i a l r e s u l t s of o p e r a t i o n s of Federal r e s e r v e hanks d u r ing the p r e s e n t calendar year as soon as p r a c t i c a b l e a f t e r January 1, i t i s requested t h a t a statement be telegraphed or mailed
i n time to reach the Board's o f f i c e s on Monday morning, January
3, 1927, showing the following i n f o r m a t i o n :
(Code)
EACH - Gross e a r n i n g s
* . . . . . . . . . i „. $_
EADS - Current expenses
EARN Current net earnings
ELBA - Additions t o Current net earnings
ENID - Deductions from Current Net earnings
Net a d d i t i o n s to or deductions
from c u r r e n t net earnings
EAST - Net e a r n i n g s a v a i l a b l e f o r dividends,
f r a n c h i s e t a x , and surplus
EYRE
Dividends paid
EMET - Paid t o Government as f r a n c h i s e t a x
EVEN - T r a n s f e r r e d t o surplus account
Total ( t o agree with item EAST)
CAPP - Subscribed c a p i t a l January 1, 1927 .
CEDE - Surplus January 1, 1927
$
\
i
460
- 2 I t i s a l s o requested t h a t the r e g u l a r monthly r e p o r t s
of e a r n i n g s and expenses on forms -95» 96 and 97 t e accompanied
with an itemized statement showing i n d e t a i l a l l a d d i t i o n s to
and deductions from current net earnings ( P r o f i t and Loss account)
during the y e a r , and t h a t i n a d d i t i o n t o the r e g u l a r "balance sheet
form 3^ f o r the l a s t day of the year r e p r e s e n t i n g the c o n d i t i o n
of the bank a f t e r f i n a l c l o s i n g of the books, a form 3^ be subm i t t e d showing the condition of the bank at close of b u s i n e s s but
p r i o r t o the making of any a d j u s t i n g or c l o s i n g e n t r i e s .
Very t r u l y yours,
E.L.Smead, Chief,
Division of Bank Operations.
TO GOVERNORS OF ALL FE3ERAL EE SERVE BAMS*
federal reserve board
WASHINGTON
December 22, 1925,
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
s t . 5197.
SUBJECT:
Condition r e p o r t s of State Bank and.
Trust Company Members, Form 105-
Dear S i r :
There are being forwarded t o you today under separ a t e cover
copies of form 105 r e v i s e d as of August
23, 1926- Please mail three copies of the form t o each State
Bank and Trust Company member i n your d i s t r i c t with i n s t r u c t i o n s t o hold the blank forms pending r e c e i p t of a c a l l f o r
condition r e p o r t s .
Upon r e c e i p t of n o t i c e from the Board of the c a l l
f o r c o n d i t i o n r e p o r t s , kindly n o t i f y the "banks thereof "by
mail and request them t o f i l l out the r e p o r t s and mail them
to you promptly - i n no case l a t e r than 10 days a f t e r r e c e i p t of the c a l l .
In order t h a t the compilation of the B o a r d ' s abs t r a c t showing the condition of a l l s t a t e bank ana t r u s t
company members combined as of the date of the next c a l l
may not be unduly delayed, i t i s requested t h a t the r e p o r t s
be forwarded to the Board as soon as p r a c t i c a b l e a f t e r they
are r e c e i v e d by the Federal reserve bank. If i t i s necessary
t o communicate with a bank regarding apparent e r r o r s i n i t s
r e p o r t , a note to t h a t e f f e c t should be made on the report
i t s e l f b e f o r e i t i s mailed to the Board, and the Board should
be advised of the necessary c o r r e c t i o n s when the d e s i r e d i n formation i s received from the member bank.
Kindly acknowledge r e c e i p t .
Yours very t r u l y ,
Walter L. Eddy,
Secretary.
LETTER TO ALL F2DERAL HE SERVE AGEJTS*
federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 24, 192o.
s t . 5201.
SUBJECT:
Form P.S.A.-5, Daily Statement
of Federal Reserve Agent.
Dear S i r :
There i s enclosed herewith a copy of
the 1927 e d i t i o n of form F.R.A.-5, Daily S t a t e ment of Federal Reserve Agent, a supply of which
i s b e i n g sent t o you today under s e p a r a t e cover
by r e g i s t e r e d mail.
I t w i l l be noted t h a t the item "Gold
and Gold C e r t i f i c a t e s on hand" i n the present
e d i t i o n of the form has been divided i n t o "Gold
c e r t i f i c a t e s " and "Gold b u l l i o n and c o i n " ; a l s o
t h a t the c a p t i o n s of the second and t h i r d columns
have been changed to "Additions" and "Deductions"
i n order to insure u n i f o r m i t y i n p r e p a r a t i o n of
the- r e p o r t s by a l l Federal reserve a g e n t s .
Very t r u l y yours,
E. L. Smead, C h i e f ,
Division of Bank Operations.
Enclosure.
T ALL FEDERAL EESERVE AGENTS*
O
462
federal reserve board
463
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
D C C 6 " 3 1 ) 6 I"
3 0 ,
1 9 2 B
s t . 5207
SUBJECT:
C e r t i f i c a t i o n of Franchise Taxes
paid on December 31, 1926.
Dear S i r :
Following the usual p r a c t i c e , the Board r e q u e s t s
t h a t you have the Auditor of your bank prepare and forward
to t h e Under-Secretary of the Treasury, Washington, D. C.,
c e r t i f i e d statements r e f l e c t i n g the f i n a n c i a l r e s u l t s of
o p e r a t i o n of your bank during the calendar year 1926,
s i m i l a r i n form t o the statements o u t l i n e d i n the B o a r d ' s
l e t t e r St. 4388 of January 5, 1925Kindly f u r n i s h the Board with a d u p l i c a t e copy
of the c e r t i f i e d statements forwarded t o the Treasury
Department.
Very t r u l y y o u r s ,
Walter L. Eddy,
Secretary.
TO CHAIHMEN OF ALL FED3B.41 HE SERVE BASKS*
federal reserve board
WASHINGTON
December 30, 1926.
St. 5208
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECT:
Data f o r 1926 Annual Report of
the Federal Reserve Board.
Dear S i r :
For use i n the forthcoming annual r e p o r t of the
Federal Reserve Board, w i l l you kindly f u r n i s h u s a s soon
as p r a c t i c a b l e with the following d a t a :
1. C l a s s i f i c a t i o n of U. S. s e c u r i t i e s held
by your bank ( l ) under repurchase agreement,
and (2) i n investment account, as a t close of
b u s i n e s s December 31. 1926, g i v i n g the c h a r a c t e r
of s e c u r i t i e s , i n t e r e s t r a t e , m a t u r i t y d a t e , and
par v a l u e . The t o t a l only need be shown f o r
s e c u r i t i e s bought through the Open Market I n v e s t ment Committee and h e l d i n Special Investment
Account.
2. Statement showing the number of member
banks i n each State (or p a r t of State i n the
d i s t r i c t ) accommodated through the discount of
paper during the calendar year 1926.
Very t r u l y yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO GOVERNORS 0? ALL FEDERAL RESERVE BANKS*
464
@FedFRASER