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X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED JULY 4 , 1930. CHANGES IN . STATE BANK MEMBERSHIPi District Date Admitted, t o Membership: N one. Change of T i t l e : 2 The F i d e l i t y Trust Co., New York, N. Y., has changed i t s t i t l e to "The Marine Midland Trust Company of New York". 7 - 1-30 Absorption of Nonmember: 2 The Power Cifly Trust Co., Niagara F a l l s , N. Y., member, has absorbed t h e Niagara F a l l s Trust Co., Niagara F a l l s , N. Y., nonmember. 6-30-30 Closed; 6 Bank of Winter Park, Winter Park, F l a . 6-30-30 Voluntary Withdrawal: 9 Montana Trust & Savings Bank, Helena, Mont. PERMISSION GRANTED TO EXERCISE TRUST POWERS: None. 6-30-30 2 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT ,/EEK ENDED JULY 11, 1930. CHARGES IN STATE BANK MEMBERSHIP: District Date Admitted t o Membership: None. Merger of S t a t e Miembers: 2 The P a c i f i c Trust Co., New York, N. Y., a member, has merged w i t h and under the t i t l e of t h e Manufacturers Trust Co., New York, N. Y., a member. 6-28-30 Absorption of National Bank: 4 The Central Trust Co., C i n c i n n a t i , Ohio, a member, has absorbed t h e Brotherhood of Railway Clerks National Bank, C i n c i n n a t i , Ohio. 7- 2-30 Voluntary Withdrawal: 7 Royal Oak S t a t e Trust & Savings Bank, Royal Oak, Mich. 7 - 5-30 AUTHORIZED TO ACCEPT DRAFTS A D BILLS OF EXCHANGE N UP TO 100 PER CENT OF CAPITAL AND SUBPlUS":" 6 F i r s t National Bank, Laurel, Miss. 7- 8-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 2 2 3 5 7 Prospect Park National Bank, Prospect Park, N. J . ( F u l l powers) F i r s t National Bank, Rockaway, N. J . ( F u l l powers) F i r s t Nat. Bank & Trust Co., Bedford, P a . ( F u l l powers) F i r s t National Bank, Lynchburg, Va. ( F u l l powers) Terminal National Bank, Chicago, 111. ( F u l l powers) 7-10-30 7-10-30 7 - 1-30 7-10-30 7-10-30 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT W E ENDED JULY 18, 1950. EK CHANGES IN STATE BANK MEMBERSHIP: Admitted t o Membership: Pistrict 8 Capital Natural Bridge Trust Co., S t . Louis, Mo. #200,000 (Succession t o Natural Bridge Bank & Trust Co., S t . Louis, Mb., a member). Surplus Total resources $50,000 $2,471,313 Date 7-15-30 Voluntary Withdrawals: 2 7 Hudson Trust Co., Union City, N. J . Rochester Savings Bank, Rochester, Mich. 7-16-30 7-16-30 Consolidation of State Members: 7 The Bank of Michigan and t h e Peninsular S t a t e Bank, both of D e t r o i t , Mich., "both members, have c o n s o l i d a t e d with and under the c h a r t e r and t i t l e of Peoples Wayne County Bank, D e t r o i t , Mich., a member. PERMISSION GRANTED TO EXERCISE TRUST POWERS: None. 5 - 1-30 I 1-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT W E ENDED JULY 25, 1930. EK CHANGES IN STATE BANK MEMBERSHIP: District Admitted to Ifembership: Date None. Consolidation of State Members: 7 The Bank of D e t r o i t , D e t r o i t , Mich., member, has consolidated with and under the charter and t i t l e of the Guardian Detroit Bank, D e t r o i t , Mich., a member. 6-30-30 Absorption of National Bank: 12 The Commercial Bank, Spanish Fork, Utah, member, has absorbed the F i r s t National Bank of Spanish Fork. 7-14-30 AUTHORIZED TO ACCEPT DRAFTS AND BILLS OF EXCHANGE UP T 100 EBB CENT CP CAPITAL AND SURPLUS O 8 8 Mercantile-Commerce Bank & Trust Co., S t . Louis, Mo. 7-22-30 Union Planters National Bank & Trust Co.,Memphis,Tenn. 7-22-30 PERMISSION GRANTED T EXERCISE TRUST POWERS: O 2 4 4 4 9 FIRST NATIONAL BANK & TRUST CO., WOODBRIDGE, N. J . (Confirmatory) F i r s t National Bank, Georgetown, Ky. (Full powers) Butler County National Bank & Trust Co., Butler, Pa. (Confirmatory) McDowell National Bank, Sharon, Pa. (Supplemental) Lake Norden National Bank, Lake Norden, (Limited powers) 7-22-30 7-25-30 7-22-30 7-22-30 7-22-30 4 fcv X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 1, 1930. CHANGES IN STATE BANK MEMBERSHIP: * ' ' District Date Admitted t o Membership; None. Consolidation with National Bank: 1 The Beacon Trust Co., Boston, I f e s s . , member, has c o n s o l i d a t e d with and under t h e c h a r t e r and t i t l e of t h e A t l a n t i c National Bank of Boston. 7-31-30 Consolidation: 5 The Drovers & Mechanics National Bank, Baltimore, Ml., and t h e Continental Trust Co., Baltimore, 154., nonmem'ber, have merged w i t h and under t h e c h a r t e r and t i t l e of the Maryland Trust Co., Baltimore, Md., a member. 7-28-30 Voluntary Withdrawals: 7 9 Farmers S t a t e Bank, Ellsworth, Iowa S w i f t County Bank, I n c . , Benson, Minn. 7-28-30 7-25-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 9 F i r s t National Bank & Trust Co., Chamberlain, S.Dak. (Full powers) 7-29-30 5 fcj X-1530 FEDERAL RESERVE BOARD A N U C M N NONE ET W E ENDED AUGUST 6, 1930. EK CHANGES IN STATE BANK MEMBERSHIP: ' ' • Total Capital Surplus resources Pistriot Date Admitted to Membership: 3 Industrial Trust Company# Wilmington, Del. $1,250,000 #400,000 $5,130,586 8-2-30 The Columbus Exchange Bank, Providence, R. I . , has changed i t s t i t l e to Columbus Exchange Trust Company* 8 - 4-30 Change of T i t l e : 1 Voluntary Liquidation: 9 Reed Point State Bank, Reed Point, Mont. 7-25-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 3 3 6 7 8 Montgomery National Bank, Norristown, Pa. (Pull powers) Central-Penn National Bank, Philadelphia, Pa.(Confirmatory) First National Bank, Birmingham, Ala. (Confirmatory) Poweshiek County National Bank, Grinnell, l a . ( F u l l powers) Carrollton National Bank, Carrollton, %r. (Full powers) 8 - 8-30 8 - 8-30 8-8-30 8 - 8-30 8 - 5-30 6 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 15, 1930 CHANGES IN STATE BANK MEMBERSHIP; Admitted to Membership: Pistrict Capital Surplus Total resources Date 2 Peoples Banking & Trust Co., E l i z a b e t h , N. J . $300,000 #200,000 $8,684,270 8-15-30 8 Shaw Bank & Trust Co., S t . Louis, Mb. 200,000 (Succession t o Shaw Bank, a member). 80,000 1,590,190 8-12-30 Voluntary Withdrawal; 1 New B r i t a i n Trust Co., New B r i t a i n , Conn. 8-11-30 Succeeded by S t a t e Member: 8 The Shaw Bank, S t . Louis, Mo., a member, has been succeeded by the Shaw Bank & Trust Co., S t . Louis, Mo., a member. 8-12-30 Absorption of National Bank; 12 The Commercial S e c u r i t y Bank, Ogden, Utah, a member, has a b sorbed the National Bank of Commerce, Ogden, Utah. PERMISSION GRANTED TO EXERCISE TRUST POWERS: None. 6-10-30 8 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 22, 1930. CHANGES IN STATE BANK MEMBERSHIP: District Date Admitted t o Membership: None. Absorption of Nonmember: The F i f t h - T h i r d Union Trust Co., C i n c i n n a t i , Ohio, a member, has absorbed the Cosmopolitan Bank & Trust Co., C i n c i n n a t i , Ohio, a nonmember. 8-11-30 Closed: Dollar Savings Bank Co., St* C l a i r s v i l l e , Ohio. 8-21-30 Voluntary Withdrawal: 12 Farmers Commercial & Savings Bank, Oakley, Idaho. 8-22-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 2 3 6 F i r s t National Bank, Merrick, N. Y. Farmers National Bank, L i t i t 2 , Pa. Snell National Bank in Winter Haven, F l a . ( F u l l powers) (Supplemental' ( F u l l powers) 8-19*30 8-19-30 8-19-30 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED AUGUST 29, 1930 CHANGES IN STATE BANK MEMBERSHIP: District Date Admitted to Man"befship; None. Voluntary Withdrawal! 9 S t a t e Bank of Anoka, Anoka, Minn. 8-25-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 4 National Bank & Trust Co., C o n n e l l s v i l l e , Pa. ( F u l l powers) 8-26-30 I: ' X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED SEPTEMBER 5, 1930. CHANGES IN SPATE BANK MEMBERSHIP: Admitted, t o Membership: Pistrict 8 Capital S t a t e Bank of C o l l i n s v i l l e , C o l l i n s v i l l e , 111. Surplus Total resources $100,000 $50,000 #1,448,934 Date 9 - 4-30 Consolidated with Nonmem'ber: 3 The Northeast-Tacony Bank & Trust Co., P h i l a d e l p h i a , P a . , a member, has consolidated, w i t h the County Trust Co., P h i l a d e l p h i a , P a . , a nonmember . 8-30-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 2 3 6 F i r s t National Bank, Central Square, N. Y. ( F u l l powers) F i r s t National Bank, Avoca, Pa. ( F u l l powers) Andalusia National Bank, Andalusia, Ala. (Supplemental) 9 - 3-30 9 - 3-30 9 - 3-30 J-0 r X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED SEPTEMBER 12, 1980CHANGES IN STATE BANK MEMBERSHIP: Dist. No admissions. Date Voluntary Withdrawal: 7 Western State Bank, Cicero, I l l i n o i s . 9-12-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS 11 Homer National Bank, Homer, La. (Limited powers) 9-12—30 11 f : 12 X-1530 FEDHRAL R3S2RVE BOARD AMOUNC3M3NT WEEK ENDED SEPTEMBER 19, 1930. CHANGES IF STATE BANK MEMBERSHIP: District Date Admitted, to Membership: None. Closed: Farmers Savings Bank, Grant, Iowa* 9-16-30 PERMISSION GRANTED TO EX2RCISE TRUST BOXBBB 1 F i r s t National Bank, Webster, Mass. (Full Powers) 9-17-30 I • 13 X-1530 FBDI5RAL BSS2RVB BOARD AIEOUBCEBEBKT i B K EilDED SEPTEMBER 2b, 1950. VB CHANGES IN STATE BAI-:'K MEMBERSHIP: District Date Admitted to Mem"bership; None. Merged with Nonmember; The Commercial S t a t e Bank, Mediapolis, Iowa, a member, has merged with the C i t i z e n s S t a t e Bank, Mediapolis, Iowa, a nonmemher, under the t i t l e of Mediapolis S t a t e Bank, a nonmember. 9-19-30 Closed: 12 Farmers S t a t e Bank, Almira, Wash. PERMISSION GRANTED TO EXERCISE TRUST POWERS: None. 9-22-30 I' X-1530 FEDERAL RESERl/i BOARD ANNOUNCEMENT W E ENDED OCTOBER 3, 1930. EK CHANGES IN STATE BANK MEMBERSHIP: District Capital Date Admitted t o Membership? None. Merger of Member Banks: 2 Park ROT/ Trust Co., New York, N . Y . , member $ 5 0 0 , 0 0 0 Broadway National Bank & Trust Co., New York, N. Y. 2,000,000 Above "banks merged i n t o the Plaza Trus>t Co., New York, N. Y., a member, under the t i t l e of Broadway & Plaza Trust Co., Hew York, N. Y. 2,000,000 9-29-30 Absorption of Nonmember: 2 The Peoples Banking & Trust Co., E l i z a b e t h , N. J . , a member, has absorbed t h e f o l l o w i n g nonmember: Downtown Trust Co., E l i z a b e t h , N. J . 100,000 9-30-30 Consolidated w i t h National Bank: 6 Continental Trust Co., Macon, Ga. Consolidated with Macon National Bank, Macon, Ga., under t i t l e of F i r s t National Bank & Trust Co. 350,000 8-30-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 2 7 12 Sunrise National Bank, Baldwin, N. Y. ( F u l l powers) Farmers National Bank, Kingsley, Iowa (Full powers) S a l i n a s National Bank, S a l i n a s , C a l i f . ( L i m i t e d powers) 10- 3-30 10- 1-30 10- 3-30 14 PZDJRAL R.JS3RV3 BOARD AB"OUi;C31CHT V 3 K E1TED OCTOB3R 10, 1930. ZB CHANGES III STATS BANK KilMBJRSHI?: District Capital Admitted to Membership: None Absorption of National Bank: 3 The Cambridge Trust Company, Chester, P a . , a member, has absorbed the Chester National Bank, Chester, Pa. $300,000 Absorption of Nonmember: 4 The F i r s t - C i t i z e n s Trust Company, Columbus, Ohio, a member, has absorbed t h e following nonmember: J e f f r y Building & Loan Company, Columbus, Ohio, a nonmember. PERMISSION GRANTED TO 3X3RCIS3 TRUST POVERSt None I - 16 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED OCTOBER 17, 1930. CHANGES IN STATE BANK MEMBERSHIP: District Capital Date Admitted t o Membership: F l o r i d a Bank & Trust Co., West Palm Beach, F l a . §100,000 10-14-30 Change of T i t l e ; The Cambridge Trust Co., Chester, P a . , has changed i t s t i t l e t o Chester-Cambridge Bank & Trust Co. 10- 4-30 Absorbed by Nonmember: 4 The Guaranty Trust Co., B u t l e r , P«., a member, has been absorbed by the Union Trust Co., B u t l e r , P a . , a nonmember. $500,000 9-23-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 4 4 12 Fayette National Bank, Lexington, Ky. (Limited powers) S e c u r i t y Central National Bank, Portsmouth, Ohio (Limited powers) Bank of Woodland National Association, Woodland, C a l i f . (Limited powers) 10-13-30 10-17-30 10-15-30 I- 17 X-1530 FEDERAL RESERVE BOARD ANNOUNCEIvIENT WEEK ENDED OCTOBER 24, 1930 District CHANGES IF STATE BANK EEMBER3HIP: Date Admitted to Membership: None. Voluntary Withdrawals; 7 12 Farmers S t a t e Bank, Elheron, Iowa Thatcher Brothers Banking Co., Logan, Utah 10-20-30 10-20-30 FEKLIISSION GRANTED TO EXERCISE TRUST POWERS; Deuel County National Bank, Clear Lake, S. Dak. ( F u l l powers) 10-22-30 fi 1 8 X-1530 PEDESAL EBSBRVE BOARD ANNOUNCEMENT W E ENDED OCTOBER 31, 1930. EK CHANGES IN STATE BANK MEMBERSHIP: Admitted to Membership: District 10 Capital F i r s t S t a t e Bank, Newcastle, Wyo. Date $25,000 10-29-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS; 2 5 6 Central Valley National Bank, C e n t r a l Valley, N. Y. ( P a l l powers) Farmers & Mechanics National Bank, F r e d e r i c k , Ml. (Supplemental) Andalusia National Bank, Andalusia, Ala.(Supplemental) 10-29-30 10-30-30 10-29-30 19 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED -NOVEMBER 7 , 1 9 3 0 CHANGES IN SPATE BANK MEMBERSHIP; District Date Admitted to Membership; None. Merged with NatiLonal Bank; The F a y e t t e T i t l e & Trust Co., Uniontovm, P a . , member, has merged with and under the t i t l e of the National Bank of F a y e t t e County, Uniontown, Pa. 11- 1-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS; 7 F i r s t National Bank & Trust Co., Bloomington, 111. (Full powers) * 11- 1-30 20 i X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED NOVEMBER 14, 1930 CHANGES IN STATE BAM MEMBERSHIP: District Capital Date $50,000 30,000 11-13-30 11-10-30 400,000 11-10-30 50,000 250,000 11- 5-30 Admitted to Membership: None • Voluntary Withdrawals: 7 9 S t a t e Bank of Seneca, Seneca, 111. F i r s t S t a t e Bank, S t r a t f o r d , S. Dak. Merged with Nonmember: 7 C a p i t a l S t a t e Savings Bank, Chicago, 111., member. Merged w i t h Builders & Merchants S t a t e Bank, Chicago, 111., nonmember, under new c h a r t e r and t i t l e of B u i l d e r s & Merchants Bank & Trust Co., nonmember. Merger of S t a t e Members: 12 Bank of Helix, Helix, Oreg., member. Inland Empire Bank, Pendleton, Oreg., member. Merged under c h a r t e r and t i t l e of the Inland Empire Bank, Pendleton, Oreg., member. 250,000 Absorbed by National Bank: 11 11 Anson S t a t e Bank, Anson, Texas, a Absorbed by F i r s t National Bank F i r s t S t a t e Bank, Kerens, Texas, Absorbed by F i r s t National Bank member. of Anson, Texas. a member. of Kerens, Texas. PERMISSION GRANTED TO EXERCISE TRUST POWERS: None. 50,000 11- 8-30 50,000 11- 5-30 i ^ 21 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WE K ENDED NOVEMBER 21, 1930 ]E CHANGES IN STATE BANK 1 ® ® EES H I P : Pistrict Capital Date Admitted to Membership: None. Merger of State Members; 2 American Trust Co., New York, N. Y. Bank of Manhattan Trust Co., New York, N.Y. Merged under c h a r t e r and t i t l e of t h e Bank of Manhattan Trust Co., New York, N. Y. §5,000,000 22,250,000 22,250,000 11-17-30 1,000,000 1,000,000 1,750,000 11-17-30 11-15-30 11-17-30 Closed: 8 American Exchange Trust Co., L i t t l e Rock,Ark S t a t e Savings Loan & Trust Co.,Quincy, 111. L o u i s v i l l e Trust Co., L o u i s v i l l e , Ky. 8 8 Absorption of National Bank: 11 Farmers & Merchants S t a t e Bank, F e r r i s , Tex., a member, has absorbed t h e following n a t i o n a l bank: F e r r i s National Bank, F e r r i s , Texas. 50,000 65,000 11-17-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: 1 4 5 F i r s t National Bank, Farmington, Maine ( F u l l powers) Second National Bank, Uniontown, Pa. (Confirmatory) Charleston National Bank, Charleston, W. Va. (Confirmatory) 11-17-30 11-17-30 11-15-30 22 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT V/EBIC ENDED NOVEMBER 26, 1930 CHANGES IN STATE BANK MEMBERSHIP: District Capital Date Admitted to Membership; None. Merged with National Bank: 7 11 F e d e r a l Commercial & Savings Bank, Port Huron, Mich.., a member, has merged with t h e F i r s t National Bank & Trust Co., Port Huron, Mich., under t i t l e of F i r s t National Trust & Savings Bank, Port Huron, Mich. F i r s t S t a t e Bank, Savoy, Texas, a member, has merged with and under the t i t l e of the F i r s t National Bank, Bonham, Texas, $400,000 300,000 600,000 25,000 11-22-30 200,000 11-22-30 40,000 25,000 11-24-30 11-22-30 Closed: 8 8 P a o l i S t a t e Bank, P a o l i , I n d . , a member, Pike County Bank, Bowling Green, Mo., a member,. . . . PERMISSION GRANTED TO EXERCISE TRUST POWERS: 5 6 9 9 Federal-American National Bank & Trust Co., Washington, D. C. (Confirmatory) F i r s t National Bank, G r e e n v i l l e , Ala. (Supplemental) Empire National Bank, S t . Paul, Minn. ( F u l l powers) National Park Bank i n Livingston, Mont. (Full powers) 11-25-30 11-25-30 11-25-30 11-25-30 23 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT ;VE'1C ENDED DECEMBER 5, 1930 CHANCES IN STATE BANK MEMBERSHIP: District Capital Date Admitted t o Membership: None • Merged, w i t h National Bank: 2 Colonial Trust Co., Newark, N. J . , a member, . . . . has merged with and under the t i t l e of the Lincoln National Bank of Newark, N. J . , $300,000 600,000 11-29-30 Bank of Commerce & Trust Co., C i n c i n n a t i , 0 . , member, 1,000,000 has merged w i t h Provident Savings Bank & Trust Co., a member, . . . 1,700,000 under t i t l e of the Provident Savings Bank & Trust Co., a member, . . . 2,000,000 11- 1-30 Union I n d u s t r i a l Trust Co., F l i n t , Mich.,nonmember, 300,000 has merged with Union I n d u s t r i a l Bank, F l i n t , Mich., a member, . . . 2,000,000 under t i t l e of t h e Union I n d u s t r i a l Trust & Savings Bank, a member, . . 2,000,000 11- 5-30 Merger of S t a t e Banks: 4 7 Voluntary Withdraws3j 7 Grant Trust & Savings Cvnipcmy, Marion, I n d . , . . . . 240,600 12- i-30 25,000 11-28-30 Closed: 7 Farmers S t a t e Bank, Grand R i v e r , Iowa, PERMISSION GRANTED TO EXERCISE TRUST POWERS: 1 4 C i t i z e n s National Bank, Newport, N. H. Central National Bank, Cambridge, Ohio (Supplemental) ( F u l l powers) 12- 2-30 11-29-30 24 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT 13EEK ENDED DECEIC3ER 12, 1930 CHANGES IN STATE BANK I1SMBERSHIP: District Capital Date Admitted to Membership: None i Closed! 2 2 5 9 Morsemere Trust Co., P a l i s a d e s Park, Morsemere, N.J.$100,000 Bank of United S t a t e s , New York, N« Y. 25,250,000 Bank of D a r l i n g t o n , I n d . , Da rlington, S» C. 100,000 Brown County Banking Co., Groton, S. Dak. 25,000 12- 6-30 12-11-30 12- 1-30 12-11-30 Merger of S t a t e Banks: 5 6 West End*Bank, Richmond, Va., nonmember, has merged with American Bank & Trust Co., Richmond, Va., member, under c h a r t e r and t i t l e of American Bank & Trust Co., Richmond, Va., member, New Orleans Bank & Trust Co., New Orleans, La., a member, has merged with and under t i t l e of I n t e r s t a t e Trust & Banking Co., New Orleans, La., a member 100,000 3,500,000 3,500,000 12- 9-30 1,200,000 750,000 12- 2-30 Merged with National Bank: 6 Bank of Wetumpka, Wetumpka, A l a . , a member, has merged with and under the t i t l e of F i r s t National Bank, Wetumpka, A l a . , . . . 25,000 25,000 12- 3-30 PERMISSION GRANTED TO EXERCISE TRUST POWERS: National C a p i t a l Bank, Washington, D. C. (Limited powers) 12-11-30 25 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED DECEMBER 19, 1930 CHANGES IN STATE BANK MEMBERSHIP: District Capital Date $100,000 12-13-30 25,000 25,000 12-16-30 12-13-30 Admitted to Membership: 2 S t a t e Bank & Trust Co., Haokensack, N. J . , Voluntary Withdrawal: 6 7 Bank of P o r t a l , P o r t a l , Ga., Ladoga S t a t e Bank, Ladoga, I n d . , Merger of S t a t e Banks: 12 Bank of Commerce, Wasco, Oreg., nonmember, has merged with Bank of Wasco, Wasco, Oreg., a member, under c h a r t e r of Bank of Wasco and t i t l e of Bank of Commerce, Wasco, Oreg., a member, 40,000 25,000 55,000 12-13-30 200,000 12-16-30 Closed: 12 Columbia Truut Co., S a l t Lake City, Utah, member, . . PERMISSION GRANTED TO EXERCISE TRUST POWERS: 1 11 Union Market National Bank, Watertown, Mass. American National Bank, Austin, Tex. (Supplemental) (Supplemental) 12-15-30 " 12-15-30 26 X-1530 FEDERAL RESERVE BOARD ANNOUNCEMENT VJEBJf ENDED DECEMBER 26, 1930 CHANGES m STATE BANK MEMBERSHIP: District Capital Date $200,000 25,000 12-20-30 12-22-30 25,000 12-22-30 Admitted to Member s h i p : None. Closed: 8 8 Greenwood Bank & Trust Co., Greenwood, Miss. Bolivar County Bank, Rosedale, Miss. Voluntary Withdrawal: 12 W. G. Jenkins & Company, Mackay, Idaho PERMISSION GRANTED TO EXERCISE TRUST POWERS: 1 6 Home National Bank, Brockton, Mass. F i r s t National Bank, G u l f p o r t , Miss. (Supplemental) (Supplemental) 12-26-30 12-26-50 27 X-3962 BANKS REPORTED CLOSED WEEK ENDED JULY 4 , 1930. Member "banks i n d i c a t e d hy an a s t e r i s k ( • ) . Fame of Bank City- State D i s t r i c t No. 4 . Highland County Bank Greenfield 0. •Union National Bank C o n n e l l s v i l i e , P a . T i t l e & Trust Co. of Western Penna. Conne11svi1le,Pa. Sabina Bank S&hina 0. Date closed Capital Surplus <s p r o f i t s 5 Total deposits July 2 " 2 125,000 50,000 79,000 14,000 1,207,000 732,000 July 2 " X 250,000 50,000 228,000 10,000 3,806,000 339,000 200,000 2,206,000 D i s t r i c t No. 6. Orlando Bank & Trust Co. Orlando Fla. July 3 100,000 Detroit Mich. June 20 ( P r i v a t e hank). Detroit Mich. June 20 ( P r i v a t e hank). Hamtramck Gravity Mich. Iowa June 20 July 1 ( P r i v a t e hank). 40,000 8,000 Moravia Williams Iowa Iowa July " 1 1 15,000 25,000 23,000 1,000 450,000 159,000 D i s t r i c t No. 8. Crisp P r a i r i e S t a t e Bank Citizens State & Savings Bank Dadeville Mo. June 28 15,000 6,000 50,000 June 30 50,000 33,000 356,000 D i s t r i c t No. 9 . • F i r s t National Bank Bank of MbCanna Farmers & Merchants State Bank Litchville I'-c Carina N.Dak. June 30 » it July 1 25,000 10,000 6,000 2,000 265,000 93,000 Yankton S.Dak. July 3 50,000 8,000 229,000 June 27 July 3 10,000 15,000 4,000 2,000 50,000 130,000 D i s t r i c t No. 7. Kudron Exchange Bank Vonts Five Per Cent Bank Domeinik Exchange Bank Gravity S t a t e Bank Farmers & Merchants Savings Bank • F i r s t National Bank Murphyshoro 111. D i s t r i c t No. 10. D e e r f i e l d S t a t e Bank Deerfie Id Dent on S t a t e Bank Dent on Mo. Nebr. Closed Banks Reopened: D i s t r i c t No. 9. Alberta S t a t e Bank Farmers & Merchants S t a t e Bank 250,000 Date open Alberta Minn. 6-18-29 10,000 6,000 7 - 1-30 Donnelly Minn. 3-14-30 15,000 4,000 7 - 1-30 28 X-3962 BANKS REPORTED CLOSED WEEK ENDED JULY 11, 1930. Member "banks i n d i c a t e d "by an a s t e r i s k ( • ) . Name of Bank City D i s t r i c t No. 4 . Elsmere Svgs.Bank,Ino. Elsmere Farmers & Merchants Amanda Bank Co. • F i r s t N a t i o n a l Bank Bowerton D i s t r i c t No. 5. Bank of Swansea Swansea Capital Surplus e < profits 5 Total deposits 5 30,000 11,000 209,000 Ohio July 8 Jun* 11 25,000 25,000 52,000 14,000 315,000 414,000 s. July 9 50,000 15,000 217,000 July 5 June 30 July 7 July 9 June 9 May 13 15,000 60,000 15,000 50,000 600,000 30,000 8,000 25,000 5,000 20,000 565,000 12,000 210,000 584,000 97,000 815,000 6,680,000 195,000 5,000 48,000 255,000 State Date closed Ky. July tt c. D i s t r i c t No. 6. Wildwood F l a . Bank of Wildwood Winter P a r k , F l a . "Bank of Winter Park Lake B u t l e r , F l a . Lake B u t l e r Bank S t a t e Bank of Haines C i t y , F l a . • F i r s t N a t i o n a l Bank, S t . P e t e r s b u r g , F l a . Jasper • F i r s t National Bank Fla. D i s t r i c t No. 7. Hornick Commercial Bank Glennie Bank of Mores Glennie Marks & Co. Hersey Horsey Banking Co. Union S t a t e Bank Mio Comins Bank of Charles Comins D. Lewis Oilman S t a t e & Svgs.Bk .Oilman Iowa July 7 Mich. Mich. Mich. July 7 8 8 Mich. 111. July tt 5 10 5,000 25,000 15,000 28,000 150,000 D i s t r i c t No.. 8 . •City N a t i o n a l Bank Shawneetown,111. May 26 25,000 13,000 175,000 D i s t r i c t No. 9. • F i r s t National Bank Grass Ran,ge,Mont J u l y 9 30,000 4,000 173,000 D i s t r i c t No. 10. Union S t a t e Bank S t . Joseph Mb. July 7 20,000 16,000 49,000 Calif. July 7 400,000 45,000 4,819,000 D i s t r i c t No. 12. • F i r s t National Bank i n Fresno tt tt (no f i g u r e s a v a i l a b l e ) (no f i g u r e s a v a i l a b l e ) 20,000 8,000 104,000 — — • - 2 - 29 1-3962 Member "banks i n d i c a t e d "by an a s t e r i s k ( * ) . Name of Bank City State Date closed Capital Surplus & profits Date reopened Closed Banks Happened: D i s t r i c t Ho. 4 . •Brotherhood of Railway Clerks Nat. Bank C i n c i n n a t i , 0 . 6-26-30 400,000 149,000 7 - 2-30 (Restored t o solvency and sold t o Central Trust Co.* c i n o i i m a t i , 0 . , m e m b e r ) . D i s t r i c t No. 5. • F i r s t National Bank Welch W. Vs.(Reported closed 6-20-30; now going into voluntary l i q u i d a t i o n ) . Colon Nebr.4-16-30 D i s t r i c t No. 10. S t a t e Bank of Colon 20,000 15,000 7 - 3-30 11 30 X-3962 M1«CS REPORTED CLOSED WEEK ENDED JULY 18, 1930. Member "banks i n d i c a t e d by an a s t e r i s k (*) Name of Bank State City Date closed Capital Surplus & profits Total deposits D i s t r i c t No. 1. West Rutland T r . Co. W.Rutland Vt. J u l y 17 50,000 103,000 916,000 D i s t r i c t No. 6. Citizens S t a t e Bank Vincent Bank of Canal Point Canal Point Lake Worth F i r s t Bank of Reddick Roddick S t a t e Bank Ala. Fla. Fla. Fla. J u l y 12 ft 16 If 16 ft 16 10,000 25,000 175,000 15,000 2,000 6,000 29,000 2,000 64,000 62,000 941,000 98,000 D i s t r i c t No. 7. • F i r s t Nat. Bank of Lyons Lyons Savings Bank S t a t e Bank of Warrenton Clinton Clinton Iowa Iowa J u l y 12 it 12 100,000 100,000 44,000 78,000 440,000 1 ,450,000 Warren 111. J u l y 15 75,000 59,000 498,000 D i s t r i c t No. 8. Farmers & Merchants Bank Bank of De Queen Montgomery City Mo. De Qpeen Ark. J u l y 16 It 16 25,000 60,000 4,000 25,000 150,000 392,000 D i s t r i c t No. 9. F i r s t S t a t e Bank Plum City S t a t e Bank Fanners S t a t e Bank Galesburg S t a t e Bank Plummer Minn. J u l y M Plum C i t y Wis. ft Chisago City,Minn. Gales burg N. Dak . " 10,000 10,000 20,000 20,000 5,000 6,000 7,000 12,000 140,000 175,000 325,000 160,000 14 15 17 16 D i s t r i c t No, 11. Gulf Bank & Trust Co .Port Arthur Texas J u l y 18 D i s t r i c t No. 12. Harper S t a t e Bank J u l y 18 Harper Oreg. (no f i g u r e s a v a i l a b l e 15,000 Closed Banks Reopened: Hone. 2,000 ). 90,000 31 X-3962 BANKS REPORTED CLOSED WEEK ENDED JULY 25, 1930. Member "banks i n d i c a t e d "by an a s t e r i s k ( * ) . Nome of tank D i s t r i c t No. 4 . J u b i l i r e r Brothers Farmers Bank City State Date closed Brownsville Pa. Jeffersonville,0. J u l y 19 " 23 D r a k e s v i l l e Iowa Delaware " J u l y 19 Capital Surplus profits Total deposits (no f i g u r e s a v a l l a b l e ) . 20,000 35,000 324,000 D i s t r i c t No. 7. Bank of D r a k e s v i l i e Delaware Svgs.Bank Wojcik Pour Per Cents Svgs.Bank Citizens Bank Dakota S t a t a Bank 6,000 5,000 None 67,000 30,000 15,000 10,000 356,000 232,000 183,000 10,000 2,000 85,000 " 21 100,000 220,000 2,848,000 J u l y 23 100,000 35,000 2,475,000 C a l i f . J u l y 23 500,000 55,000 1,362,000 Detroit No. Adams Dakota Mich, n IfcCaskill Ark. Pine Bluff Ark. 111. " 21 10,000 " " " 22 300,000 23 5,000 25 25,000 2,000 D i s t r i c t No. 8. Bank of McCaskill •National Bank of Arkansas a t D i s t r i c t No. 10. Nebraska S t a t e Bank Norfolk Netr. J u l y 21 D i s t r i c t No. 12. C a l i f o r n i a Svgs. & Commercial Bank San Diego 32 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-3962 BANKS REPORTED CLOSED WEEK ENDED AUGUST 1, 1930. Member "banks I n d i c a t e d by an a s t e r i s k ( • ) . Name of Bank City State D i s t r i c t No, 4 . • C i t i z e n s National Bank, Gcilion , Ohio • C i t i z e n s National Bank, C o n n e l l a v i l l e , Pa. D i s t r i c t No. 7 . Central Oak Park S t a t e Bank Date closed Capital Surplus & profits Total deposits J u l y 29 100,000 112,000 1,179,000 J u l y 31 100,000 273,000 2,887,000 Oak Park 111. J u l y 28 100,000 14,000 497,000 Luck Gayl o r d Wis. Minn. J u l y 29 " 30 45,000 30,000 15,000 5,000 412,000 400,000 Ifo. Colo. J u l y 30 " 31 15,000 25,000 7,000 4,000 242,000 148,000 31 30,000 33,000 553,000 J u l y 31 100,000 4,000 1,290,000 D i s t r i c t No. 9 . Bank of Luck F i r s t S t a t e Bank D i s t r i c t No. 10. Peoples S t a t e Bank Bronou^h. • F i r s t National Bank Fountain Bailey & Bro. Banking Co. Weston Mo. " D i s t r i c t No. 12. Citizens S t a t e Bank Phoenix Ariz. Pate opened Closed Bonks Reopenedi D i s t r i c t No. 6 . Bank of Wildwood Wildwood Fir,. 7- 9-30 15,000 8,000 7—28—30 i: 83 FEDERAL RESERVE BOARD X-3962 WASHINGTON ADDR TTE BANKS BBPOBTBD CLOSED T O W E ENDED AUGUST 8, 1930. EK Member "banks indicated by an a s t e r i s k ( • ) . Name o f bank City D i s t r i c t No. 2 . Jqyne & l&son, Webster Private Bankers •Port Newark Nat t Bank Newark Total deposits Capital Surplus & profits 1 8 40*000 200,000 60,000 58,000 694,000 957,000 Aug. 2 26,000 7,000 205,000 Aug. It 7 7 50,000 145,000 19,000 75,000 1,000,000 2,137,000 July 31 Aug. 2 it 5 200,000 100,000 200,000 48,000 54,000 55,000 1,466,000 640,000 1,888,000 July 30 Aug. 4 tt 8 7,000 32,000 300,000 15,000 29,000 43,000 495,000 114,000 4 8 8 8 8 26,000 10,000 35,000 10,000 20,000 11,000 2,000 5,000 3,000 8,000 116,000 60,000 185,000 115,000 300,000 S.Dak. Aug* 4 w 7 Minn. 15,000 10,000 8,000 3,000 116,000 82,000 State Date closed N. Y» N. J i Aug. it D i s t r i c t No. 4 . •First National Bank Vanderbilt Pa. D i s t r i c t No. 5 . Citizens Bank & Tr.Co. New Bern it Eastern Bank & Tr. Co. •i N. C. it D i s t r i c t No. 7. Chicago Binga S t a t e Bank 111. II tt Roosevelt State Bank it Citizens Tr.& Svgs.Bank " Shabbona Bank of Thomas IfcConnell & Co., Shabbona,Mich. Commercial S t a t e Bank Argyle Wis. Detroit Mich. Standard Trust C6. — «• D i s t r i c t No. 8 . F i r s t State Bank Bank of Caddo Gap Bank of Horatio Bank of Cove F i r s t S t a t e Bank Br ought on 111. Caddo Gap Ark. Horatio II Cove New Hampton,MB. Aug. It II It II D i s t r i c t No. 9 . Formers State Bank F i r s t State Bank Thomas Boosevelt D i s t r i c t No. 10. Farmers & March .Bank MsPher son Kans. tl Guarantee T i t l e & Tr.Co.,Wichita H it Guarantee State Bank Aug. It It 4 6 6 20,000 200,000 50,000 2,000 105,000 14,000 140,000 1,658,000 507,000 Aug. it 7 6 14,000 50,000 40,000 119,000 ? D i s t r i c t No. 11. Farmers Improvement Bank, Waco Texas •First Nat. Bank(#3624) Farmersville " 3 4 - 2 - $-3962 Week ended Aug. 6, 1930. Nome of Bank City State Date closed Capital Surplus Date reopened Wis. Ind. 4-21—30 6—16—30 50,000 50,000 42,000 15,000 8 5—30 — 7 8—30 — Ne"br. 4-16-30 20,000 16,000 7-26-30 D i s t r i c t No* 7. Farmers & Merchants Richland Bank (Tenter Peoples Loan & Tr.Co. Decatur D i s t r i c t No. 10. Oak Creek Valley Bank Valparaiso 85 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-3962 BANKS REPORTED CLOSED WEEK ENDED AUGUST 15, 1930 Member Banks i n d i c a t e d "by an a s t e r i s k (*) Name of Bank D i s t r i c t No. 2. • F i r s t National Bank Surplus & profits. Total deposits City State Date closed Capital Argyle N. Y. Aug. 15 30,000 39,000 441,000 Gary Ind. . Aug. 11 tt 12 Ayrshire Iowa ti 12 Pleasantville,la. it 15 Bartonville ! 111. ft tt 15 Chicago 50,000 25,000 35,000 25,000 100,000 56,000 52,000 21,000 32,000 82,000 932,000 275,000 650,000 530,000 980,000 20,000 10,000 20,000 50,000 35,000 25,000 8,000 180,000 38,000 114,000 350,000 87,000 145,000 D i s t r i c t No. 7. American S t a t e Bank • F i r s t National Bank Citizens Bank B a r t o n v i l l e S t a t e Bank Millard S t a t e Bank D i s t r i c t No. 8. Mo. Laddonia Commercial Bank North View tt Bank of North View it Rush H i l l Bank of Rush H i l l Ark. Farmers & Merchants Bank, Mena Lockesburg it P l a n t e r s Bank Kane S t a t e & Svgg .Bank Kane i n . Aug. 11 it 9 tt 12 tt 15 tt 15 it 15 Closed Banks Reopened; None. — — 6,000 9,000 8,000 7,000 f ! 5 6 FEDERAL RESERVE BOARD WASHINGTON X—39 62 ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD BAMS REPORTED CLOSED WEEK ENDED AUGUST 22, 1930 Member banks i n d i c a t e d by an a s t e r i s k ( *). State Date closed Capital D i s t r i c t No. 4 . Brownsville Trust Co., Brownsville , Pa. •Dollar Svgs.Bank Co. St . C l a i r s v i l l e , 0 . *Clymer National Bank Clymer Pa. Aug. 19 tt 21 tt 22 125,000 50,000 75,000 Lawr en c e v i 11 e, Va. Aug. 20 100,000 22,000 Gary Gary Chicago Gary 55,000 690,000 20,000 187,000 42,000 1,344,000 14,000 546,000 Name of "bank D i s t r i c t No. 5. Brunswick County S t a t e Bank City Surplus & profits Total deposits 590,000 73,000 45,000 700,000 100,000 1,200,000 482,000 D i s t r i c t No. 7. Mid-City S t a t e Bank F i f t h Avenue Bank Laramie S t a t e Bank Gary Labor Bank Ind. Ind. 111. Ind. Aug. 18 tt 18 ft 16 It 19 100,000 50,000 200,000 50,000 Bank of Lockesburg Lo ekes "burg Ark. it Bank of Wickes Wickes Monroe County ExHolliday change Bank Mo. C i t i z e n s S t a t e Bank Hidalgo 111. Farmersville State Bk.Farmersville," Aug. 18 tl 18 50,000 10,000 31,000 1,000 200,000 35,000 Aug. 18 It 19 tt 21 15,000 15,000 35,000 18,000 2,000 5,000 53,000 76,000 200,000 Aug. 22 tt 22 50,000 20,000 20,000 3,000 411,000 300,000 22 10,000 1,000 30,000 Aug. 16 25,000 14,000 281,000 D i s t r i c t No. 8. D i s t r i c t No. 10. Cherokee County S t a t e Bank Farmers S t a t e Bank Farmers & Miners S t a t e Bank D i s t r i c t No. 11. • F i r s t National Bank Columbus Plymouth Kans. Nebr. Crestline Kans. Lometa Texas tt Date opened Closed Banks Reopened: D i s t r i c t No. 7. Farmers S t a t e Bank Belmont Wis. 4-23-30 20,000 31,000 8-15-30 3 7 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-3962 BANKS REPORTED CLOSED WEEK ENDED AUGUST 29, 1930 Member banks indicated, by an a s t e r i s k ( * ) . Name of Bank D i s t r i c t No. 7. Argyle Bank Peoples S t a t e Bank Farmers S t a t e Bank Northern Trust & Savings Bank Date closed. City State Argyle Lacona Albion Mich. Iowa Ind. Hammond Ind. Centralia Palmyra Mo. Mo. Aug. Wis. Aug. Aug. ft ft ft Capital Surplus & profits Total deposits 2 3 2 0 , 0 0 0 1 , 0 0 0 2 5 2 8 , 0 0 0 3 , 0 0 0 1 3 5 , 0 0 0 2 6 3 5 , 0 0 0 1 8 , 0 0 0 3 9 1 , 0 0 0 2 6 2 5 , 0 0 0 2 5 , 0 0 0 2 9 4 , 0 0 0 2 3 2 5 , 0 0 0 9 , 0 0 0 2 0 0 , 0 0 0 2 5 5 0 , 0 0 0 1 4 , 0 0 0 3 2 2 , 0 0 0 2 2 2 5 , 0 0 0 4 , 0 0 0 2 1 0 , 0 0 0 2 2 2 0 , 0 0 0 7 , 0 0 0 1 3 5 , 0 0 0 2 3 1 5 , 0 0 0 1 1 , 0 0 0 1 7 5 , 0 0 0 2 5 2 0 , 0 0 0 1 2 , 0 0 0 1 6 2 , 0 0 0 1 8 3 , 0 0 0 D i s t r i c t No. 8. Farmers & Merchants Bank Bank of Palmyra it D i s t r i c t No. 9. •Farmers N a t i o n a l Bank, Glenwood City Union Bank of P o r t a l P o r t a l N.Dak. ft D i s t r i c t No. 10. South Haven Bank South Haven Hamilton S t a t e Bank Hamilton Farmers & Merchants Bank Rich H i l l Peoples Bank Rich H i l l Kans. Kans. Mo. Mo. Aug. ft ft It 2 7 2 5 , 0 0 0 1 6 , 0 0 0 3 3 7 , 0 0 0 2 7 1 5 , 0 0 0 4 , 0 0 0 1 5 5 , 0 0 0 Aug. 2 3 2 5 , 0 0 0 — D i s t r i c t No. 12. Salmon River S t a t e Bank Whitebird Idaho Closed Banks Reopened: None. — 8 2 , 0 0 0 8 8 X-3962 BANKS REPORTED CLOSED WEEK ENDED SEPTEMBER 5, 1930 Member 'banks indicated, by an a s t e r i s k ( * ) . Name of Bank D i s t r i c t No. 4 . Farmers S t a t e Bank City State Date closed Capital Verona Ohio Aug. 30 50,000 8,000 256,000 Macon Ga. Aug. 30 25,000 17,000 150,000 Iowa M ii n Sept. II It It 2 2 3 4 50,000 20,000 16,000 40,000 32,000 25,000 6,000 13,000 443,000 601,000 165,000 394,000 Mt. Vernon Madison Mb. 111. Sept. 2 tt 3 25,000 50,000 2,000 6,000 150,000 300,000 Alexandria Basehor Nebr. S e p t . 1 tt Kans. 2 20,000 16,000 16,000 2,000 570,000 86,000 Spur Bowie Texas Sept. 2 ti tt 2 40,000 50,000 30,000 56,000 618,000 544,000 Surplus & profits Total deposits D i s t r i c t No. 6. Merchants & Mechanics Savings Bank D i s t r i c t No. 7. Warren County S t a t e Bk Indianola it Worth Savings Bank Farmers & Merchants Bk Tracy • F i r s t National Bank Burt D i s t r i c t No. 8. Farmers S t a t e Bank T r i - C i t y S t a t e Bank D i s t r i c t No. 10. S t a t e Bank of Basehor S t a t e Bank D i s t r i c t No. 11. *City National Bank •City National Bank Date opened Closed Banks Reopened; D i s t r i c t No. 6. F i r s t S e c u r i t y Bank S t . P e t e r s b u r g , F l a . 6- 9-30 50,000 14,000 8-30-30 X-3962 BANKS REPORTED CLOSED WEEK ENDED SEPTEMBER 12, 1930 39 Member tanks i n d i c a t e d "by an a s t e r i s k ( * ) . Name of Bank Surplus & profits. Total deposits State Date closed Capital Ala. City- Sept . 6 500,000 383,000 6,447,000 Ind. Sept . 6 100,000 57,000 1,784,000 6 6 20,000 75,000 2,000 28,000 142,000 1,200,000 8 8 9 50,000 25,000 25,000 10,000 7,000 5,000 288,000 275,000 273,000 9 9 9 35,000 10,000 10,000 16,000 6,000 6,000 498,000 162,000 120,000 D i s t r i c t No. 6. •Fourth N»t*l Bank Montgomery D i s t r i c t No. 7. Peoples Cooperat i v e S t a t e Bank Hammond Arnolds Park Savings Bank Arnolds Park • C i t i z e n s Nat *1 Bk. G r i n n e l l Maywood Trust & Savings Bank Hammond Citizens S t a t e Bank,Bear lham Gas C i t y S t a t e Bank,Gas C i t y F i r s t Trust & Savings Bank Nauvoo C i t i z e n s Bank Jones"boro Farmers Svgs.Bank D a l l a s D i s t r i c t No. 6 . Yell County Bank Ark. Sept . 9 25,000 5,000 261,000 Minn. n Sept . 9 II 12 15,000 10,000 4,000 2,000 69,000 46,000 Kans. Nebr. Kans. Colo. Mo. Sept . 6 it 6 ti 8 it 9 n 9 n 11 10,000 10,000 30,000 10,000 15,000 25,000 3,000 9,000 6,000 6,000 19,000 15,000 51,000 34,000 190,000 110,000 63,000 380,000 Texas Sept.10 25,000 2,000 200,000 Danville D i s t r i c t No. 9. Farmers S t a t e Bank Rosemount Oak Park S t a t e Bk Oak Park D i s t r i c t No. 10. Piper S t a t e Bank Farmers S t a t e Bank Washington Co.Bank Elmo S t a t e Bank Peoples State Bank Adrian Banking Co. Piper Stockdale Ft.Calhoun Elmo Wray Adrian D i s t r i c t No. 11. Farmer s & Merchants S t a t e Bank Lindale Iowa Iowa II Ind. Iowa Ind. II 111. Ind. Iowa It M ft 11 II ft ft Date open Closod Banks Reopened: D i s t r i c t No. 5. • F i r s t National Bank, Kimball D i s t r i c t No. 8 . Digitized for Bank of Horatio FRASER Horatio W.Va. 6-26«-30 25,000 30,000 (Restored tc solvency; l i q u i d a t i n g 8-14- Ark. 8 8"-30 — 35,000 5,000 8—30—30 X-3962 BANKS REPORTED CLOSED WEEK ENDED SEPTEMBER 19, 1930. Member banks i n d i c a t e d by an a s t e r i s k ( • ) . City D i s t r i c t No. 4 . Merchants Trust & Savings Bank State Dat e closed Capital Surplus & profits. Total deposits Cleveland Ohio Sept.15 400,000 124,000 2,182,000 Rale igh N. C. Sept.15 260,000 352,000 2,034,000 Iowa Sept.15 15,000 12,000 200,000 Iowa ii Mich. 111. Ind. it 111. Sept.15 " 16 " 16 » 18 " 18 «t 17 " 19 75,000 25,000 25,000 50,000 25,000 25,000 50,000 17,000 5,000 4,000 24,000 32,000 2,000 4,000 667,000 129,000 441,510 318,000 195,000 223,000 245,000 Vine Grove Ky. Sept.13 15,000 3,000 130,000 Lutesville Mo. Sept.16 25,000 25,000 221,000 Victor Name of bank S .Dak. Sept.18 10,000 5,000 104,000 Okla. Mo. Mb. 25,000 11,000 25,000 1,000 (no f i g u r e s given) 391,000 73,000 19 10,000 4,000 100,000 * D i s t r i c t No. 5 . Raleigh Banking & Trust Co. D i s t r i c t No. 7. Farmers Savings Bank Runnells • F i r s t National Bank Guthrie Center •Farmers Savings Bank Grant C i t i z e n s Bank Hamtramck Divernon S t a t e Bank Divernon •Farmers National Bk Wilkinson Farmers S t a t e Bank Converse Pawnee S t a t e Bank Pawnee D i s t r i c t No. 8. Vine Grove S t a t e Bk Farmers & Merchants Bank D i s t r i c t No. 9 . Bank of Victor D i s t r i c t No. 10. Security S t a t e Bank S t i l w e l l • F i r s t National Bank Fairview Commercial S t a t e Rosedale Bank Delia S t a t e Bank Delia Kans. Sept.16 " 16 " 18 " D i s t r i c t No. 11. F i r s t S t a t e Bank Carbon Texas Sept.16 25,000 10,000 321,000 D i s t r i c t No. 12. E l s i n o r e State Bank Elsinore C a l i f . Sept.13 50,000 5,000 248,000 Closed Banks Reopened: D i s t r i c t No. 10. Arnold S t a t e Bank Arnold Nebr. 6-16-30 50,000 S e c u r i t y S t a t e Bank Arnold 6-19-30 35,000 (Above banks reopened and c o n s o l i d a t e d same day under t i t l e Date open 19,000 9-15-30 9-15-30 Arnold S t a t e Bank) I • 41 X-3962 BANKS REPORTED CLOSED WEEK ENDED SEPTEMBER 26, 1930. Member "banks i n d i c a t e d "by an a s t e r i s k ( * ) . Name of Bank City State Date closed Surplus Capital & p r o f i t s Total deposits D i s t r i c t No. 2 Tomaino B r o t h e r s , P r i v a t e Bankers Utica N. Y. Sept.22 20,000 29,000 343,000 Dayton Va. Sept.20 25,000 11,000 170,000 Chicago 111. Sept.22 " 20 E.Chicago Ind. Van Wert " 24 Iowa Walled Lake Mich. ii 25 700,000 50,000 25,000 417,000 40,000 7,000 2,000 7,187,000 662,000 140,000 98,000 Sept.26 100,000 50,000 792,000 Creighton Altus Webber Nebr. Sept.22 Okla. " 22 Kans. " 24 25,000 60,000 10,000 13,000 47,000 1,000 1,081,000 567,000 51,000 Almira Wash. Sept.22 25,000 8,000 92,000 D i s t r i c t No. 5 Bank of Dayton D i s t r i c t No. 7 Lake View S t a t e Bank American S t a t e Bank Van Wert S t a t e Bank Peoples Bank 10,000 D i s t r i c t No. 8 I l l i n o i s Bank & Tr.Co. Benton 111. D i s t r i c t No. 10 Bank of Creighton • F i r s t National Bank S t a t e *Bank of Webber D i s t r i c t No. 12 •Farmers S t a t e Bank Date opened Closed Banks Reopened; D i s t r i c t No. 4 Peoples Bank Company Alliance Ohio 4-22-30 100,000 66,000 9-22-30 42 X-3962 BANKS REPORTED CLOSED W E ENDED OCTOBER 3, 1950. EK Member "banks indicated by an a s t e r i s k ( * ) . Name of Bank City D i s t r i c t No. 5 Citizens Bank Windsor Union Exchange Bank Hancock State Date closed Capital Surplus & profits Total deposits N. C. Mi. Oct. " 1 3 20,000 38,000 269,000 Sept.29 30,000 20,000 65,000 22 1,000 534,000 113,000 50,000 D i s t r i c t No. 6 Bonk of Sumter S t a t e Bank of Livingston Silverhill Ala. D i s t r i c t No. 7 Farmers Trust & Savings Bank Castana Iowa Sept.29 30,000 1,000 90,000 Mo. 111. Sept.27 " 29 20,000 50,000 12,000 21,000 163,000 360,000 111. Oct. 1 85,000 22,000 989,000 Minn. Sept.29 tt " 29 " 29 N.Dak. 30,000 15,000 25,000 9,000 5,000 6,000 258,000 81,000 139,000 D i s t r i c t No. 8 Lagrange Savings Bank Lagrange Peoples Bank Girard Farmers & Merchants S t a t e Bank Virden D i s t r i c t No. 9 Fanners & Merchants State Bank Ku.ssell State Bank of Florence • F i r s t National Bank Washburn It " D i s t r i c t No. 10 Farmers State Bank Mineral Kansas State Bank •Hartford Nat. Bank Br ornan Okla. Sept.27 20,000 3,000 107,000 W. Mineral Hartford Kans. Oct. 2 2 15,000 25,000 3,000 " 8,000 125,000 117,000 D i s t r i c t No. 11 Dorchester State Bank Dorchester Texas Sept.29 18,000 1,000 33,000 tt Closed Banks Reopened: None. I< 43 ; X-3962 BANKS REPORTED CLOSED W E ENDED OCTOBER 10, 1950 EK Member "banks i n d i c a t e d "by an a s t e r i s k ( • ) . Name of Bank D i s t r i c t No. 4 Savings & Loan Banking Co. City New London D i s t r i c t No. 7 Peoples S t a t e Bank South Bend Luverne S t a t e Bank Luverne • F i r s t National Bank M a r t i n s v i l l e State Date closed Capital Surplus & profits Total deposits 352,000 Ohio Oct. 6 30,000 33,000 Ind. Iowa 111. Oct. 8 8 10 50,000 25,000 25,000 31,000 1,200,000 300,000 17,000 403,000 14,000 Ark. Oct. 4 60,000 6,000 400,000 N.Dak. Oct. 4 3 15,000 15,000 4,000 11,000 62,000 162,000 6 7 7 10,000 . 25,000 30,000 5,000 3,000 12,000 50,000 522,000 198,000 9 10 25,000 20,000 3,000 4,000 200,000 40,000 3 30,000 12,000 197,000 M If D i s t r i c t No. 8 •Farmers National Bank Clarkesville D i s t r i c t No. 9 McGregor S t a t e Bank McGregor Tioga Tioga S t a t e Bank it ti ii D i s t r i c t No. 10 Farmers S t a t e Bank Knox County Bank C i t i z e n s S t a t e Bank Farmers & Merchants Bank Commercial S t a t e Bk Wabash Verdigre Pierce Nehr. Yale Waverly D i s t r i c t No. 11 •Farmers National Bk Howe Oct. ii ft ii It Okla. Kans . It Texas ft Oct. Date open Closed Banks Reopened D i s t r i c t No. 7 Farmers S t a t e Bank Converse Ind. 9-17--30 25,000 1,000 10- 6-30 D i s t r i c t No. 8 Peoples S t a t e Bank Loraine 111. 5-16--30 20,000 7,000 10- 2-30 D i s t r i c t No. 9 Gwinner State Bank Gwinner N.Dak. 1-11--30 20,000 5,000 10— 8—30 44 X-3962 BANKS REPORTED CLOSED W E ENDED OCTOBER 17, 1930 EK Member "banks indicated, "by an a s t e r i s k ( * ) . Name of Bank City State Date closed. Mass. Oct. 14 Capital Surplus & profits Total deposits D i s t r i c t No. 1 M i l i t a r y Svgs.Bank Millbury (A mutual savings bank) D i s t r i c t No. 7 Farmers S t a t e Bank Linden Iowa tt LeClaire Svgs. Bank LeClaire It Villisca • F i r s t National Bank tt S t a t e Bank of Jewel Jewel S t a t e Bank of Ellsworth,Ellsworth It (formerly a member ) tt Nodaway Adams County Bank ) i s t r i c t No. 8 Guaranty Bank & Trust Co. New Florence Bank D i s t r i c t No. 9 Farmers & Merchants S t a t e Bank Farmers & Merchants Bank Formers & Merchants S t a t e Bank D i s t r i c t No. 10 American S t a t e Bank • B i l l i n g s N a t ' l Bank B a t t l e Creek Valley Bank D i s t r i c t No. 11 Farmers & Merchants S t a t e Bank Oct • it tt tt tt tt Mis s . Oxford New Florence ,Mo. Oct. tt None 403,000 5,500,000 13 2 5 , 0 0 0 1 , 0 0 0 9 4 , 0 0 0 14 2 5 , 0 0 0 5 , 0 0 0 2 1 8 , 0 0 0 14 5 0 , 0 0 0 4 2 , 0 0 0 5 9 1 , 0 0 0 14 2 5 , 0 0 0 6 , 0 0 0 2 1 0 , 0 0 0 15 3 5 , 0 0 0 5 , 0 0 0 1 9 0 , 0 0 0 14 2 5 , 0 0 0 — — — — 14 2 5 , 0 0 0 5 , 0 0 0 3 0 0 , 0 0 0 16 2 0 , 0 0 0 7 , 0 0 0 1 9 3 , 0 0 0 Eureka S. Dak.Oct. 14 25,000 16,000 284,000 Hurdsfield S. Dak. " 14 10,000 10,000 51,000 Litchfield Minn. 16 35,000 10,000 698,000 Covington Billings Okla. " Oct. 13 " 13 30,000 25,000 10,000 4,000 300,000 180,000 14 40,000 2,000 395,000 B a t t l e Creek,Nebr. Conroe Texas Oct. 17 32,000 8,000 275,000 Somerton Ariz. Oct. 17 75,000 8,000 320,000 D i s t r i c t No. ,12 Farmers Commercial S t a t e Bank Closed Banks Reopened: None. 45 X-3962 BANKS REPORTED CLOSED WEEK ENDED OCTOBER 24, 1930 Member "banks i n d i c a t e d "by an a s t e r i s k ( * ) . Name of Bank D i s t r i c t No. 6 • F i r s t National Bank Total Surplus Capital & p r o f i t s d e p o s i t s City State Date closed Perry Fla. Oct. 18 50,000 Ind. Iowa Ind. Oct. 20 It 22 tl 23 10,000 25,000 250,000 52,000 551,000 D i s t r i c t No. 7 Gates Bank Gates Badger Savings Bank Badger City Trust Co. Indianapolis Postal Station S t a t e Bank Indianapolis Citizens S t a t e Bank Melrose Park II 1 1 61,000 3,000 150,000 9,000 122,000 2,452,000 24 24 25,000 200,000 18,000 94,000 376,000 839,000 Oct. 20 tt 20 25,000 50,000 8,000 18,000 608,000 370,000 Falkirk Linton Sherwood Artesian Temvik N.Dak. Oct. 18 II it it 22 it n tl 21 1 23 S .Dak. 1 II 22 N.Dak. 15,000 25,000 15,000 25,000 10,000 4,000 5,000 7,000 4,000 11,000 97,000 150,000 112,000 210,000 94,000 Mound City Center Kans. Nebr. Oct. 18 n 21 20,000 10,000 3,000 9,000 125,000 166,000 Ind. 111. D i s t r i c t No. 8 Miss. it Com'l Bank & Trust Co. Okolona Okolona Banking Co. " D i s t r i c t No. 9 F a l k i r k S t a t e Bank Peoples S t a t e Bank F i r s t I n t e r n a t *1 Bank A r t e s i a n S t a t e Bank Templeton S t a t e Bank D i s t r i c t No. 10 Union S t a t e Bank Center S t a t e Bank Date opened Closed Banks Reopened: D i s t r i c t No. 8 •Farmers National Bank 10- 4-30 60,000 5,000 10-18-30 D i s t r i c t No. 7 Peoples S t a t e Bank, P r a i r i e du Chien,Wis. 4-25-30 Old Adams County Bank Decatur Ind. 6-13-30 50,000 120,000 15,000 31,000 10-21-30 10-24-30 C l a r k s v i l l e Ark. 46 X-3962 BANKS REPORTED CLOSED WEEK ENDED OCTOBER 31, 1930 Member "banks i n d i c a t e d "by an a s t e r i s k ( • ) . Date closed Capital Pa. Oct. 27 60,000 32,000 771,000 Va. Oct. 27 50,000 6,000 450,000 I n d i a n a p o l i s Ind. Oct. 28 200,000 93,000 2,000,000 Ava Mo. Oct. 24 36,000 54,000 385,000 Camden Tenn. Oct. 25 25,000 25,000 270,000 24 25 26 28 28 30 30 25,000 20,000 20,000 15,000 20,000 15,000 20,000 8,000 1,000 5,000 6,000 7,000 8,000 12,000 130,000 67,000 112,000 130,000 219,000 47,000 72,000 Mo. Oct. 24 Kans. tt 30 15,000 50,000 3,000 12,000 138,000 259,000 City State Nanty Glo •Peoples National Bank Brookneal Name of Bank D i s t r i c t No. 3 Miners & Merchants Bank Surplus & profits Total deposits D i s t r i c t No. 5 D i s t r i c t No. 7 Washington Bank & Trust Co. D i s t r i c t No. 8 Bank of Ava Peoples Union Bank & Trust Co. D i s t r i c t No. 9 Minnewaukan S t a t e Bank Citizens S t a t e Bank S t a t e Bank of Zahl Guaranty S t a t e Bank Bank of Creshard S e c u r i t y S t a t e Bank S e c u r i t y S t a t e Bank Minnewaukan N.Dak.Oct. It It ii Cayuga ? 1 It tt Zahl tt Creshard S.Dak. it ii ft Ores "bard tt Lawton N .Dak. Wallace S.Dak. tt D i s t r i c t No. 10 Commercial S t a t e Bk Hume • F i r s t National Bank Lindsborg D i s t r i c t No. 11 .Connell & Hickman Sunset S t a t e Bank D i s t r i c t No. 12 • F i r s t National Bank L i b e r t y H i l l Texas Oct. 24 Sunset " " 30 60,000 ( c a p i t a l and s u r p l u s ) . 10,000 1,000 60,000 Auburn 75,000 Wash. Oct. 25 Closed Banks Reopened None. 20,000 947,000 f- • 47 X-3962 BANKS BSPORTED CLOSED VFSEK ENDED NOVEL.IBER 7 , 1 9 3 0 Member banks i n d i c a t e d "by an a s t e r i s k ( * ) . Surplus Total Capital & p r o f i t s deposits City State Date closed Dallas Ga * Nov. 6 2 5 , 0 0 0 9 , 0 0 0 6 5 , 0 0 0 Corning Iowa Nov. 7 2 5 , 0 0 0 3 , 0 0 0 2 1 5 , 0 0 0 D i s t r i c t No. 8 American Trust Co. Citizens Bank White County Bank Union Bank & Trust Co. Randolph S t a t e Bank Bank of Shelby Jonesboro Bradford Beebe Searcy Pocahontas Shelby Ark. Nov. 1 2 2 5 , 0 0 0 8 8 , 0 0 0 1 3 9 4 , 0 0 0 5 1 0 , 0 0 0 2 , 0 0 0 8 1 , 0 0 0 1 5 , 0 0 0 3 , 0 0 0 2 5 4 , 0 0 0 5 0 , 0 0 0 1 3 , 0 0 0 2 8 5 , 0 0 0 6 5 , 0 0 0 1 3 , 0 0 0 7 3 5 , 0 0 0 1 0 0 , 0 0 0 1 5 , 0 0 0 5 1 8 , 0 0 0 D i s t r i c t No. 9 Emmons County S t a t e Bank Farmers S t a t e Bank F i r s t & S e c u r i t y S t a t e Bk Farmers S t a t e Bank Braddock Ottertail Crosby Braddock N. Dak • Nov. tt Minn. tt N.Bak. Elgin Berwyn Nortonville Nebr. Okie.. Kans . Nov. Blum Texas Name of Bank D i s t r i c t No. 6 Commercial Bank D i s t r i c t No. 7 Hogan S t a t e Bank it tt ii tt ii tt n tt Miss. ii II tt it 5 5 5 7 1 1 5 , 0 0 0 1 , 0 0 0 5 2 , 0 0 0 1 1 5 , 0 0 0 4 , 0 0 0 1 0 0 , 0 0 0 4 2 5 , 0 0 0 1 5 , 0 0 0 2 8 2 , 0 0 0 3 2o,eoo 1 , 0 0 0 9 1 , 0 0 0 D i s t r i c t No. 10 • F i r s t National Bank • F i r s t National Bank Exchange S t a t e Bank 3 5 0 , 0 0 0 5 , 0 0 0 1 5 0 , 0 0 0 4 2 5 , 0 0 0 2 5 , 0 0 0 1 0 0 , 0 0 0 7 1 0 , 0 0 0 1 2 , 0 0 0 8 5 , 0 0 0 Oct.29 1 7 , 0 0 0 1 , 0 0 0 7 0 , 0 0 0 tt »t D i s t r i c t No. 11 Farmers S t a t e Bank Date open Closed Banks Beopened: D i s t r i c t No. 10 State Bank of Alexandria Alexandria Nebr. 9 - 1-30 20,000 16,000 11- 3-30 X-3962 BANKS REPORTED CLOSED WEEK ENDED NOVEMBER 14, 1930 CONFIDENTIAL Member "banks indicated, "by an a s t e r i s k ( * ) . Name of Bank Total Surplus Date S t a t e r. closed Capital & p r o f i t s d e p o s i t s City D i s t r i c t No. 4 Dollar T i t l e & Trust Co .Sharon Pa. Nov.13 200,000 51,000 667,000 D i s t r i c t No. 5 Bank of Kline C i t i z e n s Bank S.C. N.C. Nov.10 0dt.29 10,000 10,000 9,000 9,000 66,000 85,000 Kline Elk Park D i s t r i c t No. 6 Cityzoncs Floyd Bk & Tr. Co. Rome Bank of Tennessee Nashville •Holston-Union Nat.Bank KnoXville Cochran Banking Co. Cochran D i s t r i c t No. 7 Manilla Bank \ F i r s t S t a t e Bank Ga • Nov. 14 100,000 Tenn. Nov. 7 500,000 M " 12 750,000 Ga. " 14 75,000 29,000 477,000 378,000 12,000,000 978,000 14,338,000 83,000 237,000 Manilla Broadlands Ind. 111. Nov.10 " 12 20,000 30,000 11,000 4,000 170,000 195,000 Imboden Golden Senath Paragould West Salem Green City Ark. 111. Mb. Ark. 111. Mo. Nov.10 " 10 •• 10 " 12 " 12 " 13 21,000 50,000 15,000 100,000 25,000 20,000 6,000 10,000 19,000 61,000 8,000 2,000 109,000 300,000 160,000 598,000 275,000 128,000 Seneca Hoven Philips"burg Epping Flasher Canning S.Dak .Nov. 7 ti M " 8 Mont. " 10 N. Dak. " 10 t» »» " 10 S.Dak . " 12 10,000 25,000 25,000 15,000 20,000 15,000 4,000 9,000 21,000 4,000 22,000 2,000 142,000 372,000 594,000 169,000 280,000 55,000 D i s t r i c t No. 10 Union S t a t e Bank Rifle Dearing S t a t e Bank Dearing Grant County S t a t e Bank Ulysses Colo. Nov.13 Kans. " 13 it " 13 25,000 10,000 25,000 17,000 6,000 13,000 345,000 60,000 496,000 D i s t r i c t No. 11 *Al"ba National Bank Al"ba Texas Nov.13 40,000 15,000 185,000 D i s t r i c t No. 12 Farmers Bank Weston Oreg. Nov.10 30,000 1,000 115,000 D i s t r i c t No. 8 Peoples Bank Exchange State Bank Bank of Senath S e c u r i t y Bk & Tr. Co. • F i r s t National Bank Br-nk of Green C i t y D i s t r i c t No. 9 S t a t e Bank of Seneca Hoven S t a t e Bank Granite County Bank Citizens S t a t e Bank Flasher S t a t e Bank Farmers S t a t e Bank D i s t r i c t No. 6 Closed Banks ; Reopened i State Bank of Haines City,Haines C i t y , F l a . 7- 8-30 50,000 Date open 20,000 11-10-30 49 X-3962 BANKS REPORTED CLOSED WEEK ENDED NOVEMBER 21, 1930 CONFIDENTIAL Member banks indicated, by an a s t e r i s k ( • ) . Name of Bank D i s t r i c t No. 4 Owsley County Deposit Bk City State Booneville Ky. Date closed Capital Surplus & profits Total deposits Nov. 19 25,000 5,000 150,000 D i s t r i c t No. 5 Bank of Stokes County 62,000 1,890,000 Walnut Cove N. C. Nov. 19 60,000 with "branches a t King, Germontovm, and Danbury, N. C. Central Bank & Trust Co. Asheville N. C» Nov. 20 1 ,000,000 1,207,000 16,412,000 tt 20 •Citizens National Bank Hendersonville " 100,000 145,000 1,324,000 tt Bank of Lowell Lowell 20 20,000 157,00C 20,000 N. a . ii F i r s t Bank & Trust Co. 150,000 Hendersonville " 20 210,000 1,551,000 ii tt ft American Bank & Trust Co. 1,000 159,000 25,000 20 tt Biltmore Oteen Bank Asheville 20 50,000 680,030 N. C. 25,000 it tl Bank of Leicester Leicester 22,000 20 20,000 210,000 ft tt •American National Bank Asheville 31 200,000 65,000 2,260,000 ft tt Fitfst Bank & Trust Co. Tryon 50,000 10,000 21 206,000 D i s t r i c t No* 6 Liberty Bank & Trust Co. Nashville Campbell County Bank Jacksboro Bank of Gantt Gantt Bank of Martin Martin Farmers & Merchants Bank Toccoa Bank of Warwick Warwick D i s t r i c t No. 7 George Savings Bank Bank of Scranton Farmers S t a t e Bank • F i r s t National Bank Waynesville S t a t e Bank D i s t r i c t No. 8 •State Svgs.Loan & Tr. Co. Payson State Svgs. Bank • L o u i s v i l l e Trust Co. •National Bank of Kentucky •American Exchangs Tr. Co. Downing S t a t e Bank B a r t l e t t & Wallace St.Bk. Timewell S t a t e Bank La Belle Savings Bank Rutledge Exchange Bank Farmers & Merchants Exchange Bank Tenri. it A1& • La Grange tt tt Gta. tt tt tt T t George Iowa T t Scranton Miami Ind. Plymouth 111. Waynesville tt Quincy Payson Louisville Louisville L i t t l e Rock Downing Clayton Timewell La B e l l e Rutledge Nov. tt 111. Ky. tt Ark. Mo. 111. Nov. tt tt tt tt Nov. tt « it it tt tt tt •I Mo. t» tt Mo. ii 14 17 18 19 19 21 100,000 25,000 15,000 16,000 • 50,000 25,000 33,000 8,000 8,000 4,000 21,000 1,000 1,000,000 59,000 106,000 61,000 513,000 44,000 17 18 18 21 21 30,000 50,000 25,000 25,000 25,000 7,000 330,000 540,000 69,000 158,000 105,000 15 17 17 17 17 17 17 17 17 17 17 — — 5,000 8,000 10,000 1 ,000,000 365,000 6,780,000 25,000 8,000 134,000 1 ,750,000 1,522,000 14,547,000 4 ,000,000 2,167,000 39,342,000 1 ,000,000 547,000 15,526,000 50,000 18,000 200,000 50,000 26,000 470,000 25,000 20,000 125,000 10,000 10,000 270,000 10,000 1,000 35,000 10,000 17,000 289,000 - 2 Woek ended November 21, 1930. ten tier "banks i n d i c a t e d by an a s t e r i s k ( * ) . Dr.,te Name of Bank City S t a t e closed Capital D i s t r i c t No. 8 (continued) Arkansas Trust Co. •Arkansas National Bank Merchants & P l a n t e r s Bank State Bank of Fouke Peoples Bank Bank of S t t Helena F i r s t Standard Bank American Mutual Svgs. Bk. S e c u r i t y Bank McElwain-Meguiar Bank & Trust Co. Merchants & P l a n t e r s Bank Bank of Clarendon • F i r s t National Bank Bank of Coneyville • F i r s t National Bank • F i r s t National Bank F i r s t S t a t e Bank Bank of Altheimer North Arkansas Bank Citizens Bank Bank of Bauxite Benton Bank & Trust Co. Perry S t a t e Bank Bank of Carthage Farmer3 Bank Eudora Bank & Trust Co. Bank of Fordyce Izard County Bank Bank of Pangburn Cleburne County Bank Arkansas Banlc & Trust Co. Merchants & Farmers Bank Bank of Knobel Chicot Trust Co. Peoples Bank & Trust Co. F i r s t S t a t e Bank Merchants & P l a n t e r s Bank & Trust Co. Bank of P o l l a r d Grant County Bank Victoria Banlc F i r s t S t a t e Bank Viola S t a t e Bank Bank of Wabbaseka Bank of Branch Arkansas S t a t e Bank Farmers Bank Peoples State Bank Bank of Harrisburg Newport Ark. Heber Springs " it Humphrey It Fouke Sulphur Ky. It Shively It Louisville Tl It 11 tt Franklin Ky. Helena Ark. ft Clarendon . tt J u n c t i o n City Caneyvilie Ky. tt Horse Cave Campbell Mo. Osceola Ark. tt Altheimer tt Batesville tt Thornton tt Bauxite ft Benton tt Perry ft Carthage tt Dardanelle it Eudora •t Fordyce tt Guion ti Pangburn Heter Springs t i tt Hope Junctioh d i t y " it Knobel Lake Village tt tt Morrilton ti Pine Bluff Pollard Sheridan Strong Stuttgart Viola Wabbaseka Branch Carlisle Casa DeValls Bluff Harrisburg tt X-3962 Surplus & profits Total deposits Nov, 18 it 18 tt 18 tt 18 it 18 tt 18 tt 18 tt 18 tt 18 150,000 25,000 20,000 10,000 15,000 30,000 105,000 110,000 300,000 85,000 12,000 6,000 7,000 12,000 40,000 31,000 32,000 383,000 720,000 322,000 .186,000 61,000 154,000 432,000 371,000 345,000 1 ,989,000 Nov. 18 H 18 ii 18 tt 18 ti 19 ti 19 tt 19 it 19 it 19 tt 19 II 19 it 19 tt 19 H 19 ti 19 it 19 tt 19 tt 19 tt 19 tt 19 tt 19 it 19 ti 19 n 19 tt 19 it 19 it 19 75,000 150,000 25,000 25,000 30,000 25,000 40,000 50,000 25,000 100,000 10,000 20,000 75,000 30,000 10,000 50,000 50,000 100,000 10,000 10,000 30,000 100,000 50,000 16,000 50,000 60,000 50,000 51,000 40,000 7,000 24,000 33,000 18,000 15,000 22,000 5,000 48,000 2,000 5,000 17,000 8,000 12,000 11,000 17,000 122,000 3,000 3,000 36,000 64,000 18,000 6,000 41,000 24,000 43,000 542,000 1 ,025,000 88,000 342,000 507,000 392,000 275,000 388,000 103,000 550,000 47,000 150,000 478,000 156,000 105,000 370,000 370,000 754,000 27,000 159,000 344,000 562,000 350,000 104,000 315,000 451,000 550,000 19 19 19 19 19 19 19 19 19 19 19 19 200,000 10,000 35,000 25,000 150,000 10,000 10,000 12,000 25,000 10,000 20,000 25,000 62,000 2,000 10,000 15,000 28,000 2 ,591,000 55,000 309,000 260,000 1:,175,000 61,000 61,000 50,000 168,000 35,000 129,000 135,000 tt it tt tt it it it it tt it it tt tt it tt •I ft tt tt it tt ti tt tt — — 2,000 3,000 15,000 6,000 2,000 11,000 „ - 3 - X-3962 Week ended. November 21, 1930. Member 'banks i n d i c a t e d lay an a s t e r i s k ( * ) . Date Home of Bank City State closed Capital D i s t r i c t No. 8 (continued) Houston Ark. Bank of Houston tt Hampton Hampton S t a t e Bank tt Kingsland Cleveland County Bank ft Leachville Bank of Leachville ft Leola S t a t e Bank of Leola tt Lepanto Bank of Lepant o tt EcRae Peoples Bank M Monette C i t i z e n s S t a t e Bank tt Waldo Peoples Bank tt tt Bank of Waldo tt Exchange Bank & T r . Co. Dnrrnott tt Hermitage Bradley County Bank It Manila Bank of Manila It Oxford Bank of Oxford tt Salem Bank of Salem Naylor Mo. State Bank of Nay 1 or Stamps Ark# Bank of Stamps L o u i s v i l l e Ky. Union Central Bank tt tt Bankers Trust Co. Hannibal Ho. Hannibal Trust Co. Ark. Corning Bank & Trust Co. Corning tt Ozan Bank of Ozan tt Strawberry Bank of Strawberry tt Tyronza Bank of Tyronza tt McNeil Bank of McNeil tt Baldknob Citizens Bank it tt Baldknob S t a t e Bank tt Scotland Bank of Scotland American Bank & T r . Co. New Albany Ind. tt n tt Liberty S t a t e Bank tt .Corydon Old C a p i t a l Bank & Tr.Co tt Crawford County S t . Bk. English Ky. Crestwood Crestwood S t a t e Bank I&disonville " Hopkins County Bank Mo • Oakv/ood Farmers Bank tt Doniphan Ripley County Bank tt Edina Bank of Edina Leavenworth Ind. Leavenworth S t a t e Bank tt Lanesvilie Farmers S t a t e Bank Nov. 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 tt 19 it 20 tt 20 tt 20 ft 20 tt 20 ft 20 tt 20 tt 20 it 20 ft 20 it 21 ft 21 tt 21 tt 21 ft 21 tt 21 ft 21 tt 21 tt 21 tt 21 tt 21 ft 21 tt 21 tt 21 D i s t r i c t No. 9 South Shore S . D . Nov. 14 South Shore Dank tt tt 17 Rowena Bowena State Dank ft 15 N. D . York Bank of York ft 18 S . D. Walworth County State Bk Selby ft 18 Monango N. D. Bank of Monango tt 20 S . D. Onaka F i r s t State Bank D i s t r i c t No. 10 Kans. Nov. 21 Toronto Toronto State Bank tt H 21 Cleburne Cleburne S t http://fraser.stlouisfed.org/ a t e Bank Federal Reserve Bank of St. Louis 10,000 25,000 20,000 15,000 10,000 25,000 10,000 25,000 25,000 25,000 75,000 20,000 15,000 10,000 20,000 15,000 30,000 176,000 500,000 200,000 50,000 10,000 10,000 25,000 15,000 15,000 15,000 10,000 350,000 50,000 150,000 25,000 15,000 50,000 10,000 25,000 20,000 25,000 25,000 , L Surplus & profits 1,000 9,000 9,000 2,000 8,000 3,000 5,000 5,000 18,000 33,000 25,000 20,000 16.000 4,000 6,000 82,000 10,000 84,000 105,000 58,000 27,000 - - 3,000 4,000 13,000 2,000 22,000 4,000 1,188,000 3,000 40,000 9,000 8,000 50,000 24,000 10,000 22,000 5,000 16,000 6,000 5,000 Total deposits 50,000 176,000 108,000 222,000 90,000 156,000 135,000 412,000 188,000 342,000 646,000 250,000 80,000 36,000 103,000 21,000 179,000 864,000 966,000 1,138,000 645,000 80,000 27,000 193,000 101,000 130,000 204,000 46,000 2,850,000 280,000 810,000 695,000 156,000 785,000 135,000 318,000 420,000 205,000 326,000 25,000 15,000 15,000 30,000 10,000 15,000 4,000 5,000 5,000 120,000 80,000 250,000 220,000 101,000 70,000 15,000 20,000 7,000 7,000 54,000 91,000 6,000 52 BANKS REPORTED CLOSED WEEK ENDED NOVEMBER 28, 1930 x 3962 - CONFIDENTIAL Member br.nks i n d i c a t e d by an a s t e r i s k ( • ) . Name of Bank City D i s t r i c t No. 5. Hayesville Clay County Bank Murphy Bank of Murphy C i t i z e n s Bank & T r . Co. Waynesville Honeapath Bank of Honeapath Chadbourn Bank of Chadbourn State N. N. N. s. N. C. C. C. c. C. Nashville Lenoir C i t y Woodbury Newport D i s t r i c t No* 7. Huston Banking Co. Eaub S t a t e Bank S t a t e Bank of S c i o t a • F i r s t N a t i o n a l Bank •Farmers S t a t e Bank Blandinsville Eaub Sciota Wostfield Grand Biver 111. Ind. 111. Rector Oden Norman Mount Ida Ark. Federal Reserve Bank of St. Louis Nov. 22 tt 22 1 1 22 It 26 ft 28 Capital 10,000 230,000 50,000 50,000 20,000 Surplus & profits Total deposits 1,000 19,000 45,000 40,000 11,000 74,000 291,000 525,000 414,000 149,000 • D i s t r i c t No. 6. Peoples Bk & Tr. Co. Peoples Bank Cannon County Bkg. Co. • F i r s t N a t i o n a l B-.nlc D i s t r i c t No. 8. • F i r s t National Bank Oden S t a t e Bank Caddo Valley Bank Montgomery County Bank (reopened 11-28-30) •Pike County Bank Doniphan S t a t e Bank • P a o l i S t a t e Bank Cross County Bank Bank of Glenwood Woodbury Deposit Bank S t a t e Bank of Brashear Jackson Township Bank Bank of Fern Creek Bank of Mhynard F i r s t S t a t e Bk & Tr .Co. Merchants Bk & T r . Co. • F i r s t National Bank • F i r s t N a t i o n a l Bank C i t i z e n s S t a t e Bank Martin Bank Peoples S t a t e Bank C i t y S t a t e Bank Peoples S t a t e Bank Knox County Svgs. Bank Parma Bank • F i r s t N a t i o n a l Bank • F i r s t National Bank http://fraser.stlouisfed.org/ Dat e closed Nov. 22 tt 22 tt 22 tt 22 42,000 30,000 25,000 50,000 9,000 132,000 15,000 285,000 774,000 78,000 532,000 Nov. 24 tt 24 tt 25 tt 28 tt 28 60,000 25,000 25,000 25,000 25,000 43,000 4,000 24,000 27,000 3,000 810,000 76,000 156,000 628,000 100,000 Nov. 21 tt 22 tt 22 it 22 25,000 10,000 10,000 7,000 15,000 1,000 11,000 3,000 40,000 62,000 58,000 155,000 Nov. 22 Bowling Green Mo. ii ft 22 Doniphan n 24 Ind. Paoli ii 25 Ark. Wynn ii ft 25 Glenwood it 25 Ky. Woodbury ii 25 Mo. Brashear it 24 Corydon June . Ind. it 24 Ky. Fern Creek it 24 Ark. Maynard 24 Tenn. » Paris tt n 24 Dyersburg n 26 111. Ullin 26 C a r u t her s v i 11 e, Mo. i i it 28 Orleans Ind. it 28 Tenn. Martin it 28 111. Eockport T@tm. it 28 Martin tt ii 28 Newbern n 28 Mo. Edina ti ii 28 Parma ii 28 Benton 111. » 28 Ky. Fulton 25,000 30,000 40,000 60,000 15,000 15,000 25,000 15,000 15,000 14,000 100,000 100,000 25,000 50,000 30,000 85,000 20,000 35,000 25,000 20,000 20,000 100,000 50,000 Tenn. It tt t» tt la. it ii ft — — 234,000 11,000 391,000 12,000 363,000 12,000 563,000 26,000 169,000 18,000 62,000 11,000 275,000 4,000 80,000 1,000 175,000 10,000 85,000 4,000 905,000 6,000 559,000 43,000 148,000 7,000 567,000 45,000 273,000 13,000 531,000 15,000 191,000 10,000 240,000 5,000 311,000 56,000 272,000 12,000 78,000 12,000 130,000 1 ,969,000 215,000 10,000 r • 53' X-3962 *• 2 • Member "banks i n d i c a t e d hy an a s t e r i s k (*). Surplus & profits Minn. Nov. 22 21 S.Dak. It 24 N«Dak« It 26 S.Dak. tt tt t» »• 26 25 N.Dak. tt 25 N.Dak. 11 26 S .Dak. 11 It ii it 28 10,000 15,000 25,000 25,000 15,000 15,000 25,000 20,000 25,000 3,000 2,000 10,000 14,000 5,000 5,000 6,000 36,000 22,000 100,000 117,000 35,000 306,000 155,000 68,000 210,000 416,000 201,000 Nov. 24 ti 22 10,000 25,000 1,000 6,000 100,000 350,000 State D i s t r i c t No, 9 . Kinbrae State Bank Faimers & Merchants Bk • F i r s t National Bank Canistota S t a t e Bank Farmers S t a t e Bank Foxholm S t a t e Bank Havana S t a t e Bank Orient S t a t e Bank Farmers S t a t e Bank Kinbrae Hoven Forman Canistota Brentwood Foxholm Havana Orient Rockham D i s t r i c t No. 10. Bank of Roclcville Bank of Orleans Rockville Orleans Mo. Nehr. Date closed Date opened Closed Banks Reopened: D i s t r i c t No. 8. *Arkansas National Bank He her Springs,Ark. Farmers S t a t e Bank Lanesville Ind. Viola S t a t e Bank Viola Ark. It Bank of Knohel Knohel It Bank of Manila Manila 11 C i t i z e n s S t a t e Bank Monette IT Peoples Bank Waldo ft Bank of McNeil IfcNeil ft Bank of Ozan Ozan tt Bank of Stamps Stamps tt Bank of Waldo Waldo tt Baldknob S t a t e Bank Baldknoh II It Citizens Bank tt C i t i z e n s Bank Thornton II ^Montgomery County Bank Mount Ida Security Bank Louisville Ky. 25,000 Nov. 17 it 25,000 21 ti 19 10,000 ii 19 16,000 ii 19 15,000 ii 19 25,000 ti 19 25,000 ii 20 15,000 ii 20 10,000 ii 20 50,000 tt 19 25,000 ii 21 15,000 ii 15,000 21 ti 19 10,000 ii 22 7,000 n 17 300,000 D i s t r i c t No. 10. Faimers S t a t e B&rik Aug. 22 Plymouth Total Deposits Capital City Name of Bank Nehr. 20,000 4,000 16,000 — — 6,000 16,000 5,000 18,000 13,000 — •* 10,000 33,000 22,000 2,000 2,000 3,000 383,000 4,000 Nov. " " " " " " " " 20 21 25 25 25 26 25 25 25 " 2p " " " " " " 2b 28 28 28 28 24 Nov. 24 X-3962 BANKS REPORTED CLOSED WEEK ENDED DECEMBER 5, 1930 CONFIDENTIAL Member "banks indicated, by an a s t e r i s k ( • ) . Name of Bank City Capital Total Surplus & p r o f i t s deposits i 200,000 203,000 2,683,000 Nov. 29 tt 29 Dec. 5 25,000 50,000 25,000 30,000 36,000 22,000 285,000 826,000 223,000 State Date closed Conn. Dec. D i s t r i c t No. 2 Central F a i r f i e l d Tr.Co .Nonsralk D i s t r i c t No. 4 • F i r s t National Bank Mendon Ohio Citizens Bank & Tr. Co. Middlesboro Ky. Pleasant H i l l Bkg. Co. Pleasant Hill,Ohio D i s t r i c t No. 5 Peoples S t a t e Bank Chatham Savings Bank •Bank of D a r l i n g t o n , I n c . Colleton Banking Co. Bank of Greenbrier Polk County Bk & Tr.Co. C i t i z e n s Bank Bank of Black Mountain • F i r s t National Bank Zebulon Bkg. & T r . Co. Bank of Duplin 141,000 1,000 30,000 109,000 1,200,000 100,000 676,000 — — 100,000 715,000 35,000 100,000 355,000 25,000 25,000 119,000 12,000 15,000 276,000 13,000 30,000 (Figures not a v a i l a b l e ) 300,000 461,000 2,029,COO 350,000 15,000 56,000 526,000 58,000 25,000 Wayne W. Va. Chatham Va. Darlington S. C. Walterboro S. C. Lev/is burg W. Va. Columbus N. C. tt Bryson City Black Mount a in,N.C. Charlotte N. C. tt Zebulon tt Wallace Nov. 29 Dec. 1 tt 1 It 1 ft 2 Nov. 22 tt 21 tt 22 Dec. 4 tt 3 tt 4 Sweetwater Tenn. Nov. 29 60,000 7,000 180,000 Iowa 111. Nov. 28 Dec. 1 It 1 tt 2 tt 4 It 5 40,000 100,000 30,000 25,000 25,000 25,000 4,000 30,000 6,000 27,000 9,000 5,000 315,000 484,000 217,000 432,000 237,000 471,000 Nov. 10 tt 28 tt 29 tt 29 Dec. 1 tt 1 500,000 150,000 10,000 20,000 15,000 20,000 129,000 66,000 2,000 19,000 16,000 30,000 4,367,000 1,934,000 50,000 142,000 219,000 306,000 Dec • 90,000 100,000 20,000 25,000 100,000 22,000 850,000 1,994,000 224,000 D i s t r i c t No. 6 • F i r s t Nat ional Bank D i s t r i c t No. 7 Roland • F i r s t National Bank Carthage Marine Trust Co. Rock Grove Rock Grove S t a t e Bank Rock C i t y Rock C i t y S t a t e Bank Hamilton Peoples S t a t e Bank Capac • F i r s t National Bank D i s t r i c t No. 8 •Quincy-Ricker Nat.Bank Quincy Corinth. Bank & Trust Co.Corinth Geff S t a t e Bank of Geff Bank of Duncan Duncan New East P r a i r i e Bank East P r a i r i e P o r t a g e v i l l e Bank Portageville Faulkner County Bank & Trust Co. Conway • F i r s t National Bank Marion Farmers Bank Bethel tt it i» Mich. 111. Miss. 111. Miss. Mo. tt Ark. 111. Mo. tt tt 1 1 2 — 2 X-3962 — 5 5 Week ended December 5, 193d. Surplus Total Date Capital & p r o f i t s deposits S t a t e closed Member "banks i n d i c a t e d "by an a s t e r i s k (*) Name of Bank City D i s t r i c t No. 8 (continued) Johnston City S t a t e Bank Johnston City Stephens Peoples Bank Goreville C i t i z e n s S t a t e Bank Hardy Farmers Bank Blytheville • F i r s t National Bank • F i r s t National Bank Goreville Ridgeway • F i r s t National Bank Whiteside Whiteside Bank Harvel Harvel State Bank Bloomfield Bk & Tr. Co. BloomfieId Weakley County Bank Dresden ( t h i s hank reopened the same day) P l a n t e r s Bank & Tr.Co. N a s h v i l l e Pvccico C i t i z e n s S t a t e Bank Zeigler S t a t e Bank Be i g l e r Bank of Ashley Ashley Webster County Bank Clay Bank of Moody Moody 2 2 3 3 1 2 3 4 4 4 4 50,000 30,000 25,000 7,000 150,000 25,000 60,000 10,000 50,000 100,000 40,000 66,000 11,000 6,000 9,000 36,000 4,000 38,000 7,000 4,000 5,000 17,000 905,000 251,000 79,000 120,000 649,000 104,000 275,000 60,000 216,000 422,000 307,000 4 4 5 5 5 5 100,000 25,000 25,000 10,000 30,000 10,000 72,000 15,000 10,000 12,000 3,000 779,000 105,000 11,000 128,000 282,000 21,000 N .Dak . Nov .26 n 29 S.Dak ft 1 Doo . 1 1 ii tt 1 1 3 15,000 25,000 20,000 15,000 5,000 33,000 4,000 10,000 98,000 422,000 124,000 267,000 Okla. Oct .18 15,000 3,000 145,000 Nehr. Dec . 1 50,000 13,000 550,000 La. Nov .24 It 24 30,000 25,000 48,000 6,000 683,000 292,000 111. Dec. 1 Ark. 1 II 111. Ark. II II 1 1 111. ll Mo < II ii Mo. it Ill, ii Mo. Tenn. ii Ark. Mo. 111. Mo. Ky. Mo. ii !1 1 1 1 1 1 1 1 1 — — D i s t r i c t No. 9 F i r s t C i t i z e n s Bank Guaranty S t a t e Bank Kidder S t a t e Bank Mound City S t a t e Bank Wild Rose Eureka Kidder Mound City D i s t r i c t No. 10. Carmen S t a t e Bank Carmen (reopened Dec. 3 , 1930) Citizens Bank Stuart D i s t r i c t No. 11 Bank of Oak Grove Bank of Commerce Oak Grove Winnfie Id it Closed Banks Reopened: D i s t r i c t No. 8 Oden S t a t e Bank Oden Ark. •t Caddo Valley Bank Norman (Above banks reopened and consolidated with Leavenworth S t a t e Bank Leavenworth Ind. F i r s t State Bank Morrilton Ark. 1 1 Bank of Glenwood Glenwood tt Bank of Maynard Maynard 1 1 Cross County Bank ijpnno American Bk & T r . Co. New Albany Ind. Martin Bank Martin Tenn. II City S t a t e Bank Martin Old C a p i t a l Bk & T r . Co.Corydon Ind. Weakley County Bank Dresden Tenn. http://fraser.stlouisfed.org/ Carmen S t a t e Bank,Cannon,Okla.(Dist.10) Federal Reserve Bank of St. Louis Date open 11-22-30 10,000 1,000 11-•26-30 11,-22-30 10,000 11,000 11-•26-30 Montgomery County Bank, Mt. : Ida, Ark.) 11-21-30 25,000 5,000 11-•29-30 11-19-30 50,000 43,000 11- 29-30 11-25-30 15,000 18,000 12-• 2-30 11-24-30 14,000 4,000 12- 2-30 11-25-50 60,000 26,000 12- 2-30 11-21-30 350,000 1,188,000 12-• 2-30 11-28-30 85,000 15,000 12-• 4-30 11—28—30 35,000 5,000 12- 4-30 11-21-30 150,000 40,000 12- 4-30 12- 4-30 40,000 17,000 12-• 4—30 10—18—30 15,000 3,000 12- 3-30 X r 3962 , „ z l 3UHE3 itiPOBT^D CLOSED tf&SK. EKDSD DSC&SSR 12, 1950 6: 5 6 COHFIDiiifPLiL fcember 'banks indicated, by an a s t e r i s k ( * ) . Name of Bank City Date S t a t e closed Capital Surplus Total & p r o f i t s deposits D i s t r i c t No* 1 C i t i z e n s Battle & T r u s t Co.,New HaVen Conn. Dec. 9 1 4 0 , 0 0 0 4 6 , 0 0 0 1 , 4 1 2 , 0 0 0 D i s t r i c t No. 2 orsemere T r u s t Cot, Palisades Park, •Bank of United S t a t e s juorsemere New York N. J i Dec. Hi Y. it 6 1 0 0 , 0 0 0 2 9 , 0 0 0 11 2 5 2 5 0 , 0 0 0 1 7 , 0 2 4 , 0 0 0 D i s t r i c t Ho. 3 •Farmers & l a r c h a n t s National Bank Tyrone Penna .Dec. 12 1 5 0 , 0 0 0 1 5 5 , 0 0 0 Dec. 6 5 0 , 0 0 0 1 6 , 0 0 0 4 0 , 0 0 0 6 3 0 , 0 0 0 1 5 , 0 0 0 1 7 3 , 0 0 0 3 7 7 , 0 0 0 2 1 1 , 8 0 0 , 0 0 0 5 5 3 , 0 0 0 D i s t r i c t No. & i;. tt c . it If. c . ft Dec. ?? »t 3 , It 0 . ft 1 0 0 , 0 0 0 1 5 1 , 0 0 0 7 0 9 , 0 0 0 7 5 , 0 0 0 6 , 0 0 0 3 5 4 , 0 0 0 10 1 0 0 , 0 0 0 5 1 , 0 0 0 8 1 8 , 0 0 0 10 3 0 , 0 0 0 3 3 , 0 0 0 tt i a . Va. Ke C. 9 it £ 50,000 20,000 6 1 0 , 0 0 0 tt tt XI ft tt s# 6 10 c . ft 8 8 10 N • 0. Nov. 29 N. 0. 25,000 50,000 50,000 70,000 6 5 8 , 0 0 0 346,000 22,000 900,000 2 6 9 , 0 0 0 77,000 1 , 0 0 0 1 3 , 0 0 0 1 1 3 , 0 0 0 2 5 , 0 0 0 300,000 4 , 0 0 0 15,000 1 1 5 , 0 0 0 1 ,029,000 1 5 , 0 0 0 7,000 14,000 90,000 125,000 231,000 1 2 0 , 0 0 0 o < Bank of Robeson Laxton Farmers & Ifierchants Bank ; Stanley and branch a t Denver, N. C. Bank of Peedee Rockingham • F i r s t National .Bank Ayden •National Bank of Greenville Peoples Savings Bank Clio Chesapeake Bank Baltimore Bedford County Bank ontvale Bank of Mobgood ilobgood Bank of L i l e s v i l l e Lilesville Citizens Bank Faraville *Farmers National Bank Laurens Fanners-Atlantic Bank ahoskie and branch at Askewville, j\r. C. Bank of Bfland Bfland Citizens Bank Franklin P l a n t e r s & Merchants Bk JSveretts 12 1 0 , 0 0 0 ti it 28 1 5 , 0 0 0 if Dec. 12 7 , 0 0 0 D i s t r i c t No. 6 Houston County Bank & Trust Co. Bank of Chapel H i l l Bank of Barwick Southern Bk & T r . Co. Bank of Algood lirin Chapel H i l l Barwick Pearson good Tenn. Dec. it Ga. »? ft * Tenn. It 5 1 0 , 0 0 0 2 , 0 0 0 5 2 0 , 0 0 0 7 , 0 0 0 1 2 2 , 0 0 0 6 1 5 , 0 0 0 8,000 1 2 0 , 0 0 0 6 1 5 , 0 0 0 1 , 0 0 0 11 1 5 , 0 0 0 1 , 0 0 0 42,000 64,000 D i s t r i c t No. 7 • F i r s t n a t i o n a l Bank Sioux City 1 1 *Sioux National Bank Farmers & Merchants Bk Winchester Bailey S t a t e Bank Correctionville Leeds Bank Sioux City Turin Savings Bank Turin Murray S t a t e Bank I'urray iVartinsvilie S t a t e Bk I jar t ins vi l i e Iox/a tt Ind. Iowa Dec. ft tt Tt it ft tt ft ft 111. 1 »t 6 6 1 , 0 0 0 , 0 0 0 400,000 8 5 0 , 0 0 0 8 10 50,000 10,000 25,000 50,000 50,000 10 10 10 6 3 , 0 0 0 7,, 7 9 5 , 0 0 0 1 0 8 , 0 0 0 3,, 8 0 2 , 0 0 0 4 0 , 0 0 0 6,000 3,000 «•» — 11,000 15,000 609,000 3 0 0 , 0 0 0 175,000 187,000 566,000 375,000 i: - 2 luenbera i n d i c a t e d "by an a s t e r i s k (*) • Nacre of Bank 57 X-3962 3 bate Git;/ i/eek ended Dec. 12, 1930 ( c o n t ' d ) . Dc.be Surplus Total closed Capital & pr of i t s d e p o s i t s Iowa Dec. D i s t r i c t Ho. 7 (continued) Simmons & Co., Bankers Sutherland S t a t e Bank E l l s t o n Savings Bank R i n ^ o l d County Savings Bank Exchange Bank Osceola Sutherland Ellston 10 1 0 0 , 0 0 0 3 4 , 0 0 0 1,:JCC,000 11 4 0 , 0 0 0 5 6 , 0 0 0 5 2 5 , 0 0 0 tt 12 1 0 , 0 0 0 7 , 0 0 0 1 1 7 , 0 0 0 it tt 12 2 5 , 0 0 0 1 , 0 0 0 8 1 , 0 0 0 it It :t ft Kellerton Liarcus It 12 . (Figures not a v a i l a b l e ) D i s t r i c t No. 8 Peoples Exchange Bank • P l a n t e r s National Bank Drew County Bk & Tr .Co. Bank of Centerton 1 erch&nbs S t a t e Bank *Benton County Mat .Bank F i r s t S t a t e Bank F i r s t S t a t e Bank Sturgeon Bank Bank of Hickory F l a t Arlington Bk 6 T r . Co. Y/ilmot Bank Farmers Bank of BelIflower J..0 • Joneshoro Walnut Ridge Ark. ft l-onbicello ft Centerton Centralia 111. Bentonville ^.rk. •t Dec. Nov. Dec. ft ft tt ft ft ft Bonanza lo. Sturgeon Hickory F l a t ft Arlington Tenn. vilmot Ar k . 1 0 , 0 0 0 4 , 0 0 0 2 5 , 0 0 0 5 , 0 0 0 1 4 2 , 0 0 0 8 1 0 0 , 0 0 0 5 8 , 0 0 0 4 7 8 , 0 0 0 8 1 3 , 0 0 0 4 , 0 0 0 59,000 6 1 0 0 , 0 0 0 6 6 , 0 0 0 1 , 1 7 4 , 0 0 0 6 5 0 , 0 0 0 4 2 , 0 0 0 675,000 9 1 0 , 0 0 0 2 , 0 0 0 2 0 0 , 0 0 0 ft 9 ?t 9 9 ft ft tt 5 , 0 0 0 1 , 0 0 0 52,000 2 0 , 0 0 0 5 , 0 0 0 2 7 7 , 0 0 0 1 0 , 0 0 0 6 , 0 0 0 1 0 5 , 0 0 0 11 1 0 , 0 0 0 1 2 , 0 0 0 113,000 11 1 5 , 0 0 0 8 , 0 0 0 5 1 2 , 0 0 0 12 1 5 , 0 0 0 2 , 0 0 0 4 2 , 0 0 0 5 2 5 , 0 0 0 1 1 , 0 0 0 2 5 5 , 0 0 0 5 2 5 , 0 0 0 5 , 0 0 0 1 6 0 , 0 0 0 6 1 5 , 0 0 0 2 , 0 0 0 9 0 , 0 0 0 8 5 0 , 0 0 0 9 , 0 0 0 1 8 3 , 0 0 0 8 5 0 , 0 0 0 9 1 7 , 0 0 0 535,000 2 5 , 0 0 0 8 , 0 0 0 1 2 3 , 0 0 0 2 5 , 0 0 0 1 0 , 0 0 0 4 0 5 , 0 0 0 11 2 5 , 0 0 0 5 4 , 0 0 0 4 2 5 , 0 0 0 12 4 0 , 0 0 0 2 4 , 0 0 0 12 5 0 , 0 0 0 12 15,000 10,000 15,000 25,000 6 , 0 0 0 6 8 , 0 0 0 4 0 , 0 0 0 6 , 0 0 0 4 6 7 , 0 0 0 Liege Ko. "•First National Bank • F i r s t National Bank Bank of Alexander Janes River Bank Dakota S t a t e Bank Bank of Heckling •Brown County Bkg Co. S e c u r i t y S t a t e Bank •American National Bank C i t i z e n s S t a t e Bank Citizens S t a t e Bank 321k Point Valhalla Alexander Frankfort Madison Ivieckling Groton Gayville Redfield l:o bridge Colzoan O e D o J e * Dec. M • Dtik • ft I D i s t r i c t No. 10 • F i r s t National Bank Farmers State Bank Farmers Bank Bank of H o l l i s t e r i'faper I. a r s h a l l Amity Hollister Nebr. Dec, 5 OkX& • rt 8 tt i .O • 8 tt Okla. 11 Lilford Texas Dec, 1 0 0 , 0 0 0 6 8 D i s t r i c t No. 9 ft tt 8.Dak. it ft ft ft it it tt Tt ft tt ft ft tt ft ft Tt U !t W ft ft ft It 11 10,000 50,000 1 9 , 0 0 0 42,000 6 1 5 , 0 0 0 175,000 250,000 5 5 , 0 0 0 7 0 0 , 0 0 0 D i s t r i s t No. 11 C i t i z e n s Bank Dec. 6 10,000 8 , 0 0 0 1 3 0 , 0 0 0 - 3 Hem "hers i n d i c a t e d toy an a s t e r i s k ( * ) . Name of Bank Git;/ X-3962 Jeek ended Dec. 12, 1930 ( c o n t ' d ) . State Date closed Capital Surplus 6 profits Total deposits 325,000 25,000 22,000 8,000 3,305,000 111,000 D i s t r i c t No. 12 Bank of Hollywood Dixie Stockbrokers Bk Los Angeles tit.George C a l i f . Deo. 0 Utah " 11 Date opened Closed Banks Reopened; D i s t r i c t Hot 7 L a n i l l a Bank ianilla Ind* Nov. 10 20,000 11,000 (reorganized and opened as the C i t i z e n s Bank, 1 ' a n i l l a , I n d . , on Dec. 4, 1930) D i s t r i c t Mo. 8 Peoples Bank IVcftae Ark. Nov. 19 10,000 tt !T Bradley County Bank Hermitage la 20,000 ft Farmers Bank Hardy Dec. 2 7,000 tf Bank of Strawberry Strawberry Uov. 20 10,000 Crawford County S t a t e Bank English Ind. ilov. 22 25,000 » Hampton S t a t e Bank Hampton Ark. 19 25,000 (reorganized and opened as the Peoples Home Bank on Dec. 10, Grant County Bank Sheridan ark. Nov. 18 35,000 Home Bank Blair Wis. Kay 27 50,000 Jackson Township Bank Corydon June . Ind. IJov. 24 15,000 tt Peoples Bk & T r . Co. i orrilton Ark. 18 60,000 5,000 20,000 2,000 3,000 9,000 9,000 1930) 10,000 32,000 1,000 24,000 Dec. ft ft ft 6 6 8 9 tt 9 ?t 11 10 10 12 ft tt ft I, BAMS REPORTED Name of Bank City State West SpringMass. field New B r i t a i n Conn. D i s t r i c t No. 2 State Bank of S t a t e Bank of Binghamton Canastota N. Y. it New S t r a i t s Ohio ville Dadeville Louisville 1930 CONFIDENTIAL Ala. It Total deposits Date closed Capital Surplus & profits Dec. 11 150,000 218,000 2,550,000 tt 13 500,000 231,000 5,000,000 Dec. 15 100,000 259,000 1,300,000 19 60,000 87,000 1,122,000 17 25,000 3,000 199,000 11 25,000 17,000 135,000 » Dec. D i s t r i c t No. 5 W. Va. Dec. Hillsboro Bank of H i l l s b o r o u C l a r k s v i l l e Va. P l a n t e r s Bank it Va. Columbia State Bank of tt Cartersville with "branch a t : it Asheville N. C. Bank of Asheville tt ft Parmer s & Traders Bank Weavervilie it tt Mars H i l l Bank of Mars H i l l W. Vfu it Fairmont •Union National Bank ii Clayton N. C. Clayton Banking Co. tt tt Brevard Brevard Banking Co. tt tt Gastonia Gaston Loan & Tr. Co. tt tt ft Peoples Bank It tt tt * F i r s t National Bnhk tt n Dallas Bank of Dallas it tt Waco Peoples Bank tt it Marshall Bank of French Broad tt it Clyde Bank of Clyde it tt Clover Bank of Clover it tt Scotland Co. Sv&s.Bank Laurihburg it ft tt • F i r s t National Bank it it Aulander Bank of Aulnnder tt tt Swannanoa Bk & Tr. Co. Swannanoa it it Franklin Bank of F r a n k l i n tt tt Fletcher Bank of F l e t c h e r tt it C i t i z e n s Bank of Yancey B u r n s v i l l e tt it Lenoir • F i r s t National Bank it Savings Bank & Trust Co., E l i z a b e t h City " tt it Gibson Carolina S t a t e Bank tt it Garysburg Merch. & Farmers Bank D i s t r i c t No. 6 Sturd ivant Bank Bank of L o u i s v i l l e 19, (*). D i s t r i c t No. 1 West S p r i n g f i e l d Trust Co. Commercial Trust Co. D i s t r i c t No. 4 Martin Bank Co. X-3962 CLOSED WEEK E N D E D D E C E M B E R Member tanks i n d i c a t e d "by an a s t e r i s k 5 9 Dec. tt 12 30,000 20,000 323,000 12 20,000 14,000 498,000 12 25,000 25,000 544,000 15 18,000 27,000 77,000 15 15,000 19,000 163,000 16 420,000 86,000 3,234,000 16 100,000 32,000 479,000 16 115,000 74,000 1,229,000 16 25,000 14,000 328,000 16 25,000 3,000 97,000 16 500,000 524,000 3,353,000 16 20,000 28,000 136,000 16 5,000 4 , 0 0 0 100,000 16 25,000 54,000 608,000 16 11,000 14,000 104,000 16 30,000 33,000 658,000 17 15,000 7,000 230,000 17 25,000 17,000 106,000 18 80,000 22,000 214,000 18 20,000 9 , 0 0 0 182,000 18 50,000 55,000 417,000 18 10,000 11,000 113,000 18 50,000 60,000 400,000 19 75,000 92,000 583,000 19 100,000 175,000 939,000 19 20,000 10,000 101,000 19 15,000 13,000 53,000 17 50,000 13,000 236,000 17 4 0 , 0 0 0 17,000 88,000 ; - 2 Member "brjiks indicated "by an a s t e r i s k (*) • Fame of Bank D i s t r i c t No. 7 Bridgnan S t a t e Bank Union Loan & Trust Co. *First National Bank S t a t e Bank of Elroy Washta S t a t e Bank Cherokee Co. S t a t e Bank *Kansas National Bank Trust & Savings Bank • F i r s t National Bank Savings Bank of Alvord Bank •Farmers National Bank C i t i z e n s S t a t e Bank S t a t e Bank of Brook American Tr.& Svgs. Bk. Central S t a t e Bank Selma Savings Bank City State Bridgman Union City Cher oke e Elroy Washta Meriden Kansas Renssaelaer Bock Rapids Larchwood Alvord Inwood Keithshurg Brook Richmond Whiting Selma Mich. Ind. Iowa Wise. Iowa it 111. Ind. I ov/a It 1t tt 111. Ind. D i s t r i c t No. 8 C i t i z e n s Bank Wentzvilie Christopher S t a t e Bank Christopher Farmers Exchange Bank Si lex Bank of Troy Troy Peoples Bank Okolona Union S t a t e Bank Brownfield • F i r s t National Bank,Eureka Springs • F i r s t National B&nk i n Harri son A. T. Hudspeth c h a i n : 1.Bank of Alpena Alpena Pass 2.Bank of North Arkansas ,Everton 3 . C i t i z e n s Bank Yellville with t r a n c h e s : Earion County Bank Flippin Bank of Pyatt Pyatt 4 . C i t i z e n s Bk & Tr. Co. Harrison 5.Bank of Lead H i l l Lead H i l l 6 .American Exchange Bk Leslie 7.Citizens Bank S t • J*0G 8 . F i r s t S t a t e Bank Marshall Bank of Pendleton Pendleton Ina State Bank Ina Com'l Bank & Trust Co. Aberdeen Farmers Bank Fulton Peoples Bank Berryville Farmers & Merch. Bank Green Forest Union Savings Bank Monroe City S t a t e Bank of C o l l i n s Collins Bank of Canton Cant on Farmers & Merchants Bk Cypress Clark County Bank Gurdon J e f f e r s o n S t a t e Bank l i t . Ver non Date closed 6 0 X-3962 Week ended December 19, 1930. Total Surplus Capital & p r o f i t s deposits 13 13 13 13 13 15 16 16 16 17 17 17 18 19 19 19 19 20,000 50,000 100,000 25,000 25,000 30,000 50,000 100,000 100,000 90,000 22,000 40,000 25,000 50,000 100,000 100,000 10,000 16,000 15,000 13,000 15,000 11,000 7,000 28,000 30,000 27,000 it Iowa Dec. It T t tt T t T t tt T t tt T t T t tt tt tt tt tt tt 10,000 3,000 25,000 28,000 59,000 56,000 6,000 480,000 444,000 1,092,000 647,000 170,000 177,000 343,000 739,000 430,000 200,000 310,000 254,000 300,000 481,000 563,000 732,000 186,000 Mo. 111. Mo. Ark. It 111. Ark. it Dec. tt tt tt tt tt tt tt 12 12 13 15 16 16 17 17 20,000 35,000 10,000 18,000 10,000 100,000 50,000 25,000 7,000 42,000 5,000 13,000 2,000 73,000 12,000 46,000 210,000 827,000 55,000 140,000 41,000 730,000 526,000 508,000 Ark. tt V I Dec • 17 it 17 it 17 10,000 10,000 30,000 1,000 2,000 10,000 133,000 89,000 466,000 100,000 10,000 15,000 10,000 25,000 10,000 15,000 50,000 50,000 25,000 10,000 60,000 10,000 20,000 25,000 25,000 125,000 28,000 1,000 2,000 4,000 3,000 2,000 5,000 17,000 40,000 5,000 9,000 16,000 3,000 16,000 5,000 10,000 86,000 1,323,000 79,000 180,000 60,000 493,000 54,000 75,000 337,000 470,000 200,000 127,000 385,000 86,000 376,000 129,000 273,000 908,000 » It ft tt tt tt tt tt Mo. 111. Miss. Ky. Ark. it Mo. Mo. Mo. 111. Ark. 111. tt T t Dec. T t T t tt tt T t T t tt Nov. Dec. tt tt tt tt tt it it 17 17 17 17 17 17 17 17 17 17 26 18 18 18 18 18 19 19 19 — — t! # - 3 I,ember banks i n d i c a t e d by an. a s t e r i s k ( * ) . Date closed City State D i s t r i c t No. 9 F i r s t S t a t e Bank American Exchange Bank 5 F i r s t National Bank S t a t e Bank of J u n i u s Chamberlain S t a t e Bank Security S t a t e Bank Security S t a t e Bank Merchants S t a t e Bank llaraar Pierre Goodwin Junius Chamberlain Strassburg Tad i s on Freeman H. Dale .Dec. 5 . Dak. " ft » » '* It it ft •t rt ft II. Dak. " 5 . Dak. " 5. Dak. " D i s t r i c t No. 10 Nebraska S t a t e Bank Commercial S t a t e Bank West Point Lindsborg D i s t r i c t No. 11 • F i r s t National Bank Hemphill Name of Bank 6 1 X-3962 ',,'eek ended Dec. IS, 1950 1'otal Surplus L p r o f i t s deposits Capital 13 15 17 16 16 17 19 13 10,000 50,000 25,000 15,000 25,000 10,000 30,000 30,000 5,000 32,000 25,000 2,000 12,000 19,000 11,000 40,000 534,000 320,000 88,000 247,000 162,000 717,000 407,000 Nebr. Kans. Dec. 13 15 " 30,000 40,000 25,000 54,000 246,000 463,000 lex. Dec. 18 25,000 15,000 450,000 S a l t Lake Ci t y , u t a h Dec. 16 19 Oakley Calif. " 200,000 25,000 63,000 10,000 552,000 339,000 - — D i s t r i c t No. 12 ^Columbia Trust Go. Bank of Oakley Dafce opened Closed Banks Reopened : D i s t r i c t lid. 4 Sabina Bank Sabina Ohio 7 - 1--30 50,000 10,000 12- 1-30 D i s t r i c t No. 7 Plymouth Exchange Bank Plymouth Wis. 12-14-29 100,000 62,000 12-15-20 D i s t r i c t No. 8 Farmers Bank Bank of Centerton Kerch. & Farmers Bank Ky. Fulton Ark. Center ton J u n c t i o n City " 11-26--30 12- 8--30 11-19--30 50,000 13,000 50,000 40,000 4,000 18,000 12-16-30 12-15-30 12-17-30 I • 62 X-3962 BANKS REPORTED CLOSED WEEK ENDED DECEMBER 26,"1930 CONFIDENTIAL Member banks i n d i c a t e d by an a s t e r i s k ( * ) . ' Date closed Capit al Surplus & profits Total deposits D i s t r i c t No. 1 Riverside Trust Co. Hartford P a l l o t t i , A n d r e t t a & Co. " Conn. Dec.23 " ' " 23 400,000 250,000 858,000 498,000 2,780,000 3,473,000 D i s t r i c t No. 2 Chelsea Bank & Trust Co.New York N. Y. Dec.23 2,500,000 2,358,000 21,160,000 Philadelphia Pa. Dec.22 4,877,000 2,597,000 50,384,000 Portage Pa. Dec.20 Philadelphia Pa. Dec.24 ( P r i v a t e "bank - no f i g u r e s ) N. C. Dec .20 ft 20 It 20 tt 20 tt 20 tt 15 15 tt 23 ft 19 41,000 100,000 100,000 10,000 25,000 25,000 25,000 50,000 20,000 16,000 100,000 84,000 4,000 3,000 63,000 51,000 36,000 43,000 235,000 613,000 750,000 91,000 113,000 350,000 409,000 503,000 269,000 Dec .20 tt 20 it 20 30,000 25,000 100,000 9,000 240,000 74,000 750,000 Dec.22 it 22 it 23 it 22 it 22 it 23 tt 22 tt 24 it 23 it 26 it 24 it 24 50,000 167,000 100,000 15,000 150,000 60,000 500,000 50,000 15,000 100,000 15,000 25,000 Nome of Bank D i s t r i c t No. 3 Bankers Trust Co. Miners & Merchants Deposit Bank Bank of M. L. B l i t z s t e i n & Co. City D i s t r i c t No. 5 Goldsboro Svgs. & Tr.Co.Goldsboro « ^National Bank of Vinton Peoples Bank Rural Hall Bk & Tr. Co. Rural Hall Farmers & Merch. Bank Alt a Vista Bank of WeIdon Wei don We Idem Bank & Trust Co. Peoples Bank Gretna Bank of Windsor Windsor ) i s t r i c t No. 6 Toombs County Bank Citizens Bank Union Banking Co. with "branches a t : and Bank of Camp H i l l City Svgs.Bk.& Tr. Co. City Bank of Bank of lie La in Citizens Bk & Tr. Co. Bessemer Tr. & Svgs.Bk. 'City National Bank in Bank of New Brockton Bank of Mt. Airy Union Savings Bank Bank of Dearing C i t i z e n s Bank Lyons Ray City Douglas Broxton Nicholls Camp H i l l At l a n t a Miami Beach MbLain Yazoo City Bessemer Miami New Brockton Mt. Airy Augusta Dearing Waynesboro State n Va. N. C. Va. N. C. ft Va. N. C. Ga. ft ft 50,000 85,000 — — 33,000 897,000 tt ft Ala. Ga. Fla. Miss. ft Ala. Fla. Ala. Ga. it it it 96,000 15,000 14,000 89,000 50,000 (not given 15,000 161,000 66,000 1,483,000 15,000 560,000 535,000 6,392,000 19,000 238,000 — 31,000 88,000 1,141,000 2,000 34,000 9,000 203,000 I 63j Ot F ¥ X-3962 •• 2 — Week ended Dec. 26, 1930. Member "banks indicated, "by an a s t e r i s k | • ) . Name of Bank D i s t r i c t No. 7 • F i r s t National B&nk Bank of Wheatfield F i r s t Bank & T r u s t Co. State Trust & Svgs. Bank S t a t e Bank of Wolcott • F i r s t National Bank Glen Park S t a t e Bank Peoples S t a t e Bank • F i r s t National Bank City State Augusta 111. Wheatfie Id Ind. ft Attica tt Goodland « Wolcott Connersville " tt Gary tt Titonka tt Iowa Total deposits Capital Dec .20 tt 20 Tt 23 tt 23 tt 23 tt 24 tt 26 tt 26 II 26 60,000 13,000 50,000 25,000 50,000 200,000 25,000 50,000 25,000 400,000 12,000 142,000 3,000 46,000 13,000 202,000 8,000 265,000 7,000 34,000 1,587,00399,oo: 13,000 531,000 30,000 263,000 3,000 25,000 200,000 25,000 10,000 15,000 25,000 100,000 30,000 372,000 13,000 107,000 1,183,000 516,000 23,000 134,000 8,000 172,000 21,000 221,000 16,000 42,000 1,313,000 64,000 1,182,000 75,000 10,000 25,000 50,000 10,000 250,000 15,000 10,000 779,000 24,000 38,000 5,000 22,000 308,000 9,000 263,000 6,000 44,000 221,000 2,523,000 11,000 200,000 240,000 8,000 25,000 15,000 200,000 24,000 602,000 3,000 195,000 109,000 2,833,000 D i s t r i c t No. 8 Sesser Dec .12 111. • F i r s t National Bank tt 20 Hiss. Greenwood Bank & Trust Co.Greenwood It tt 20 Drew Com'l Bank & Trust Co. tt 19 Macedonia S t a t e Bank Macedonia 111. tt 19 C i t i z e n s Bank Foreman Ark. tt 18 • F i r s t National Bank Green Forest " tt 20 Wilson Banking Co. Greenwood Miss. tt tt it 20 Greenwood Savings Bank Merchants & P l a n t e r s Arkadelphia Ark. Bank & Trust Co. Dec .20 tt tt 20 Pettigre® C i t i z e n s Bank tt •Bolivar County Bank Bosedale 22 Miss. ft tt Greenwood 22 S e c u r i t y Bk & Tr. Co. tt 22 Harr i s "burg Mo. Harris "burg Bank it 20 • F i r s t National Bank Greenwood His s • tt Bank of Osage County Linn 18 Mo. tt 26 M s s . Bank of E t h e l Ethel Peoples Bank & Trust Co. North C a r r o l l t o n I S L s s . Dec .26 it tt 26 Bank of IfcCool IfcCool tt tt 26 Peoples Bank & Trust Co. Tupelo tt Nettleton with "branches a t t tt and Rienzi tt Corinth S t a t e Bank Corinth Dec.26 it 26 Bank of Clark Clark Ho. tt tt j'uner icus 26 Bank of imericus it 26 Bank of Guntown Guntown Miss. it n 26 Saltillo Bank cf S a l t i l l o it Shannon 26 Bank of Shannon tt it 26 Verona Bank Ver ona Surplus & profits Date closed 50,000 15,000 12,000 20,000 15,000 15,000 15,000 13,000 5,000 5,000 24,000 27,000 15,000 3,000 420,000 85,000 80,000 261,000 472,000 176,000 74,000 & 6 4 — 3 X-3962 Member banks i n d i c a t e d by an a s t e r i s k ( * ) . Week ended Dec. 26, 1930. Date closed Capital Surplus & profits Total deposits 25,000 40,000 15,000 25,000 7,000 8,000 8,000 5,000 320,000 465,000 131,000 120,000 Mission State Bank • F i r s t National Bank Winfred S .Dak . Dec.22 tt It Kimball " 22 »? tl Stratford " 22 It tt Eamona " 26 Virginia City Mont. Dec.26 tt St.Ignatius " 26 Tf Hobson " 26 50,000 20,000 30,000 1,000 3,000 299,000 156,000 140,000 D i s t r i c t No. 10 Mildred S t a t e Bank Peoples S t a t e Bank F i r s t S t a t e Bank Bank of Salina Mildred Moran Warner Salina 10,000 15,000 10,000 10,000 5,000 4,000 5,000 2,000 54,000 221,000 100,000 100,000 D i s t r i c t No. 11 Bank of Webster W. T. Mumme, Bankers • F i r s t National Bank •Pecan Gap National Bank Mnden Sandia Ladonia Pecan Gap Dec.20 50,000 78,000 (date of c l o s i n g not given) Dec.23 100,000 16,000 " 23 25,000 1,000 962,000 D i s t r i c t No. 12 Sugar Banking Co. S a l t Lake City,Utah Dec.20 Name of Bank D i s t r i c t No. 9 Bank of Winfred Kimball S t a t e Bank Farmers S t a t e Bank Eamona State Bank E l l i n g S t a t e Bank City State Kans. Dec.26 " 26 " 26 " 26 tt Okla. n La. Tex. it ii 50,000 — — 30,000 406,000 114,000 960,000 Date opened Closed Banks Reopened: D i s t r i c t No. 7 Citizens S t a t e Bank Gillett Wis. 4 - 2-30 50,000 24,000 12-26-30 D i s t r i c t No. 8 Liberty S t a t e Bank Bank of Green C i t y Clark County Bank New Albany Green City Gurdon Ind. 11-21-30 Mo. 11—13—30 Ark. 12-19-30 50,000 20,000 25,000 3,000 2,000 10,000 12-22-30 12-24-30 12-24-30 D i s t r i c t No. 10 Bank of Creighton Grant County S t a t e Bank Creighton Ulysses Nebr. 9-22-30 Kans.11-13-30 25,000 25,000 13,000 13,000 12—24—30 12-24-30 & FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-6649 J u l y 1, 1930. SUBJECT: B i l l to Amend Federal Reserve Act and National Bank Act. Dear S i r : There i s enclosed herewith f o r your i n formation, copy of a memorandum from the Board's A s s i s t a n t Counsel, summarizing the p r o v i s i o n s of S-4723, a t i l l introduced "by Senator Glass to amend v a r i o u s p r o v i s i o n s of t h e National Bank Act and the Federal Reserve Act. As the supply of the p r i n t e d M i l i s s t i l l l i m i t e d , only one copy i s attached hereto. Very t r u l y yours, ii. M. McClellaild, Assistant Secretaryi Enclosures. TO ALL GOVERNORS AND AGENTS. X-6649-a COPY 66 FEDERAL RESERVE BOARD . OFFICE CORRESPONDENCE To Federal Reserve Board From Mr. W i n g f i e l d - A s s i s t a n t Counsel. Date June 23, 1930 S u b j e c t : Summary of P r o v i s i o n s of the B i l l S-4723, introduced "by Senator g l a s s . On June 17, 1930, Senator Carter Glass introduced a t i l l , S.4723, to amend the p r o v i s i o n s of the National Bank Act and the Federal Reserve Act i n a number of r e s p e c t s . When he introduced t h i s t i l l Senator Glass s t a t e d on the f l o o r of the Senate t h a t i t i s merely a t e n t a t i v e measure to which he hopes to d i r e c t the i n q u i r y i n t o the "banking system a u t h o r i z e d "by the Senate. For the information of the Board, however, I w i l l "briefly summarize "below the most important changes which Senator Glass 1 "bill would make i n the p r e s e n t law. (1) The f i r s t paragraph of the h i l l , S. 4723, s t a t e s t h a t the t i t l e of the "bill i s the "Banking Act of 1930." ( 2 ) S e c t i o n 2 of the b i l l , S. 4723, would amend the 7th paragraph of S e c t i o n 5136 of the Revised S t a t u t e s which has to do with the powers which a n a t i o n a l bank may e x e r c i s e . In a d d i t i o n to the s p e c i f i c powers of n a t i o n a l banks now contained i n the law, t h i s b i l l provides t h a t n a t i o n a l banks may g e n e r a l l y engage i n a l l forms of business t h a t commercial banks of the S t a t e i n which the n a t i o n a l bank i s s i t u a t e d a r e p e r m i t t e d to t r a n s a c t by the laws of the S t a t e , except i n so f a r as n a t i o n a l banks a r e e x p r e s s l y f o r b i d d e n to undertake such b u s i n e s s by the National Bank Act, the Federal Reserve Act, o r other laws of the United S t a t e s . Under the p r e s e n t p r o v i s i o n s of Section 5136 of the Revised S t a t u t e s , n a t i o n a l banks a r e a u t h o r i z e d to buy and s o i l invostment s e c u r i t i e s . Section 2 of the b i l l , S. 4723, would a l s o amend S e c t i o n 5136 so a s to l i m i t t h i s power of n a t i o n a l banks to only the buying and s e l l i n g of i n vestment s e c u r i t i e s s o l e l y upon order and f o r account of customers, and i n no case f o r i t s own account, except as s p e c i f i e d i n S e c t i o n 24 of the Federal Reserve Act. (3) S e c t i o n 5144 of the Revised S t a t u t e s now provides t h a t each shareholder of a n a t i o n a l bank s h a l l be e n t i t l e d to one vote on each share of stock h e l d by him. S e c t i o n 3 of the b i l l S. 4723 would amend Section 5144 so as to r e s t r i c t the r i g h t of a shareholder to v o t e only shares of stock a c t u a l l y owned by him a s a r e s u l t of bona f i d e purchase, g i f t or i n h e r i t a n c e , and the shareholder who becomes such through nominal t r a n s f e r , or ownership on behalf of another, may not vote stock so a c q u i r e d . This s e c t i o n of the b i l l would f u r t h e r amend Section 5144 so a s to provide t h a t no c o r p o r a t i o n , a s s o c i a t i o n or p a r t n e r s h i p and no o f f i c e r , employee or d i r e c t o r of any c o r p o r a t i o n , a s s o c i a t i o n o r p a r t n e r s h i p which i s the owner of stock i n any n a t i o n a l bank s h a l l vote e i t h e r the stock owned by him i n d i v i d u a l l y or the stock owned by 1 th9 c o r p o r a t i o n . The p r e s e n t p r o v i s i o n of Section 5144 a u t h o r i z i n g shareholders to vote by proxy i s r e t a i n e d i n the b i l l S. 4723. via.;. —2— X-66494a ( 4 ) Section 4 of the b i l l S. 4723, would amend paragraph ( c ) of S e c t i o n 5155 of the Revised S t a t u t e s so as t o a u t h o r i z e a n a t i o n a l bank, a f t e r the date of the approval of t h i s b i l l , to e s t a b l i s h and operate new branches w i t h i n the l i m i t s of the S t a t e i n which the n a t i o n a l bank i s s i t u a t e d r a t h e r than merely i n the c i t y , town or v i l l a g e i n which such n a t i o n a l bank i s l o c a t e d . The proposed amendment r e t a i n s the p r e s e n t p r o v i s i o n of the law t h a t new branches may only be e s t a b l i s h e d and operated i f such establishment and o p e r a t i o n a r e p e r m i t t e d to S t a t e banks by the law of the S t a t e i n which the n a t i o n a l bank i s l o c a t e d . (5) Under the p r o v i s i o n s of Section 5197 a s i t now r e a d s , a n a t i o n a l bank i s a u t h o r i z e d t o charge i n t e r e s t a t the r a t e allowed by the laws of the S t a t e , t e r r i t o r y or d i s t r i c t where the bank i s l o c a t e d and when no r a t e i s so f i x e d by S t a t e law a n a t i o n a l bank may charge a r a t e not exceeding 7 p e r centum. Section 5 of the b i l l S. 4723 would amend these p r o v i s i o n s so a s to a u t h o r i z e a n a t i o n a l bank to charge the r a t e allowed by S t a t e law or a r a t e one p e r centum i n excess of the discount r a t e of the Federal r e s e r v e bank i n the Federal r e s e r v e d i s t r i c t where the n a t i o n a l bank i s l o c a t e d , whichever may be g r e a t e r , and where no r a t e i s f i x e d by S t a t e law a n a t i o n a l bank would be a u t h o r i z e d to charge a r a t e not exceeding 7 p e r centum or one p e r centum i n excess of the discount r a t e of the Federal r e s e r v e bank i n the Federal reserve d i s t r i c t where the n a t i o n a l bank i s l o c a t e d , whichever may be g r e a t e r . (6) S e c t i o n 5200 of the Revised S t a t u t e s l i m i t s loans by a n a t i o n a l bank t o any one person to 10 per cent of the c a p i t a l and s u r p l u s of the n a t i o n a l bank. This s e c t i o n , however, c o n t a i n s a number of exceptions to the 10 p e r cent l i m i t a t i o n . S e c t i o n 6 of the b i l l S. 4723 would amend S e c t i o n 5200 by adding a p r o v i s i o n t h a t no o b l i g a t i o n of a broker or of any f i n a n c e company, s e c u r i t i e s company, investment t r u s t or o t h e r s i m i l a r i n s t i t u t i o n , o r of any a f f i l i a t e , s h a l l be e n t i t l e d to the b e n e f i t s of any of t h e exceptions contained i n Section 5200, but a l l such o b l i g a t i o n s s h a l l be s u b j e c t to the 10 p e r cent l i m i t a t i o n . This s e c t i o n would f u r t h e r amend Section 5200 so as to provide t h a t the t o t a l o b l i g a t i o n s of an a f f i l i a t e s h a l l not exceed the 10 p e r cent l i m i t a t i o n or the amount of the c a p i t a l stock of the a f f i l i a t e a c t u a l l y p a i d i n and unimpaired, whichever may be the s m a l l e r . I t i s f u r t h e r provided t h a t an a f f i l i a t e s h a l l include a f i n a n c e company, s e c u r i t i e s company, investment t r u s t , or any other corp o r a t i o n the c o n t r o l of which i s h e l d d i r e c t l y or i n d i r e c t l y through stock ownership, or i n any o t h e r manner by a n a t i o n a l bank or by the shareholders thereof who own or c o n t r o l a m a j o r i t y of the stock of the n a t i o n a l bank. (7) S e c t i o n 7 of the b i l l S. 4723 would amend Section 5211 of the Revised S t a t u t e s by adding a new paragraph which would r e q u i r e each a f f i l i a t e of a n a t i o n a l bank to f u r n i s h to the Comptroller of the Currency not l e s s than t h r e e r e p o r t s each year, s e t t i n g out i n d e t a i l the condit i o n of the a f f i l i a t e . The p r e s i d e n t of the n a t i o n a l bank i s r e q u i r e d to s a t i s f y himself a s to t h e c o r r e c t n e s s of each such r e p o r t t r a n s m i t t e d to the Comptroller. This amendment contains d e t a i l e d requirements with r e f e r ence to the f i l i n g of such r e p o r t s and the form of such r e p o r t s and a u t h o r i z e s the Comptroller of the Currency t o c a l l f o r s p e c i a l r e p o r t s whenever i n h i s judgment i t i s n e c e s s a r y . An a f f i l i a t e which f a i l s to f u r n i s h the -Si- r e p o r t s r e q u i r e d of i t s h a l l "be s u b j e c t to a p e n a l t y of $100 f o r each day during which such f a i l u r e continues. (8) S e c t i o n 8 of the b i l l S. 4723 would amend the f i r s t paragraph of Section 7 of the Federal Reserve Act so as to provide t h a t a f t e r the payment of a 6 p e r cent dividend to member "banks, o n e - f o u r t h of the remainder of the net e a r n i n g s of a Federal r e s e r v e bank s h a l l be p a i d to the United S t a t e s as a f r a n c h i s e tax, o n e - f o u r t h t o the s u r p l u s fund of the Federal r e s e r v e bank (but a f t e r the s u r p l u s equals 100 p e r cent of the subscribed c a p i t a l the remainder goes to the United S t a t e s as a f r a n c h i s e tax) and the remaining 50 per cent of the net earnings of a Federal reserve bank s h a l l be p a i d to the member bank s t o c k h o l d e r s . (9) S e c t i o n 9 of the b i l l S. 4723 would amend S e c t i o n 9 of the Federal Be serve Act by adding a new paragraph which would r e q u i r e each a f f i l i a t e of a member S t a t e bank to f u r n i s h to the Federal Reserve Board not l e s s than t h r e e r e p o r t s each year, containing d e t a i l e d information with r e f e r e n c e to the c o n d i t i o n of the a f f i l i a t e . This amendment contains d e t a i l e d requirements with r e f e r e n c e to the f i l i n g of such r e p o r t s and the form thereof and r e q u i r e s the p r e s i d e n t of the member bank to s a t i s f y hin>s e l f a s to the c o r r e c t n e s s of each such r e p o r t t r a n s m i t t e d to the Federal Reserve Board. Any a f f i l i a t e which f a i l s to make any r e p o r t r e q u i r e d s h a l l be s u b j e c t to a p e n a l t y of $100 f o r each day during which such f a i l u r e continues. This s e c t i o n of the b i l l contains s u b s t a n t i a l l y the same d e f i n i t i o n of an a f f i l i a t e as was contained i n Section 6 of the b i l l a s above n o t e d . (10) S e c t i o n 10(a) of the b i l l S. 4723 would amend the f i r s t paragraph of S e c t i o n 10 of the Federal Reserve Act so a s t o e l i m i n a t e the S e c r e t a r y of the Treasury from membership on the Federal Reserve Board and to p r o v i d e f o r a membership of only seven members i n c l u d i n g s i x members app o i n t e d by the P r e s i d e n t of the United S t a t e s and the Comptroller of the Currency a s an ex o f f i c i o member. S e c t i o n 10(b) of t h i s b i l l would amend the second paragraph of S e c t i o n 10 of the Federal Reserve Act so a s to e l i m i n a t e the S e c r e t a r y of the Treasury from the p r o v i s i o n which now renders the S e c r e t a r y or Comptroller of the Currency i n e l i g i b l e during the t i n e he i s i n o f f i c e and f o r two years t h e r e a f t e r t o h o l d any o f f i c e , p o s i t i o n or employment i n any member bank. Section 10(c) would amend the f o u r t h paragraph of S e c t i o n 10 of the Federal Reserve Act to e l i m i n a t e t h e S e c r e t a r y of the Treasury a s an ex o f f i c i o chairman of the Federal Reserve Board and to provide t h a t the oaths of o f f i c e of members of the Federal Reserve Board s h a l l be f i l e d w i t h the S e c r e t a r y of the Federal Reserve Board r a t h e r than be c e r t i f i e d to the S e c r e t a r y of the Treasury as i s now required* (11) S e c t i o n 11 of t h e b i l l S. 4723 would amend the seventh paragraph of S e c t i o n 13 of the Federal Reserve Act so as to provide t h a t during the l i f e or continuance of advances to a member bank on the 15-day promissory c o l l a t e r a l n o t e s of the member bank such member bank s h a l l not i n c r e a s e or enlarge the t o t a l loans a l r e a d y made by i t e i t h e r upon c o l l a t e r a l s e c u r i t y to any borrower or to the members of any organized stock exchange, investment I ; oy X-6649-a -4house, or d e a l e r i n s e c u r i t i e s , upon any o b l i g a t i o n , note, or b i l l secured or unsecured, except f o r the purpose of purchasing and c a r r y i n g o b l i g a t i o n s of the United S t a t e s . (12) S e c t i o n 12, which i s the l a s t s e c t i o n of the b i l l S. 4723, would amend S e c t i o n 24 of the Federal Reserve Act so a s to r e q u i r e a n a t i o n a l bank to i n v e s t i t s time and savings d e p o s i t s i n the amount of r e a l e s t a t e l o a n s a u t h o r i z e d under the p r o v i s i o n s of S e c t i o n 24 of the Federal Reserve Act o r i n p r o p e r t y and s e c u r i t i e s of the kinds and amounts r e q u i r e d by law of savings banks i n the S t a t e where the n a t i o n a l bank i s s i t u a t e d . In ease no such S t a t e savings bank law e x i s t s the savings and timo d e p o s i t s of a n a t i o n a l bank s h a l l bo i n v e s t e d i n p r o p e r t y and s e c u r i t i e s s p e c i f i e d by the Comptroller of the Currency. The r e s e r v e of 3$ of time d e p o s i t s r e q u i r e d by the Federal Reserve Act s h a l l count a s a c o r r e s ponding p a r t of such investments. QSiis s e c t i o n of the b i l l f u r t h e r p r o vides t h a t i n case a n a t i o n a l bank becomes i n s o l v e n t , a l l the p r o p e r t y a c q u i r e d under t h i s s e c t i o n s h a l l be a p p l i e d by the r e c e i v e r thereof i n the f i r s t p l a c e r a t a b l y and p r o p o r t i o n a t e l y to the payment i n f u l l of the time and savings d e p o s i t s of the n a t i o n a l bank. A copy of the b i l l S. 4723 i s a t t a c h e d h e r e t o f o r the Board's information. Respectfully, (S) Copy of b i l l a t t a c h e d . BMW-sad B. M. Wingfield A s s i s t a n t Counsel. X-6650 ! 1 | E E A1 E S S E B VE BOAED SIA.IBMBHT FOB THE PRESS For r e l e a s e a t 2)00 p . rn. J u l y 2, 1930 The Federal Eeserve Board, announces t h a t the Federal Eeserve Bank of P h i l a d e l p h i a has e s t a b l i s h e d a r e d i s c o u n t r a t e of 3b; p e r cent on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e J u l y 3, 1930. X-6651 flDEEAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 2:00 p. m. J u l y 2, 1930- The Federal Reserve Board announces t h a t the Federal Reserve Bank of Boston has e s t a b l i s h e d a rediscount r a t e of yk on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e J u l y 3» 1930. 72 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6654 J u l y 11, 1930. SUBJECT: Regulation A. Dear S i r : This i s to advise you t h a t the Federal Reserve Board has f i n a l l y adopted and promulgated Regulation A, S e r i e s of 1930, i n the form enclosed i n the Board's l e t t e r of June 3, 1930 (X-6611) and t h a t the new r e g u l a t i o n w i l l become e f f e c t i v e on August 1, 1930. The typographical e r r o r i n s u b d i v i s i o n ( a ) of Section VII (page 9) of t h e copy sent to you i n the Board's l e t t e r of June 3 was not i n the r e g u l a t i o n as adopted by t h e Board, but was a mere c l e r i c a l e r r o r which occurred while the r e g u l a t i o n s were being mimeographed. I n the copies which you have, t h e r e f o r e , the word "of" occurring imrmediately a f t e r the word "shipment" i n t h i s paragraph should be changed to " o r " . The purpose of the amendments to the r e g u l a t i o n r e c e n t l y adopted was merely to make the r e g u l a t i o n conform to the r e c e n t amendments to the law; and, t h e r e f o r e , the Board did not adopt any of the suggested amendments to other p o r t i o n s of the r e g u l a t i o n which were submitted by v a r i o u s Federal r e s e r v e banks. These suggested amendments, however, w i l l be given due c o n s i d e r a t i o n whenever the Board undertakes a complete r e v i s i o n of Regulation A. As soon as the r e g u l a t i o n can be p r i n t e d , a supply 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; and you a r e r e q u e s t e d to a d v i s e the Board how many copies your bank w i l l r e q u i r e . Very t r u l y yours, J . C. Noell, Assistant Secretary. TO THE CHAIRMEN AND GOVERNORS OF ALL FEDERAL RESERVE BAMS. X-6655 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 4iOO p . m. J u l y 11, 1930 The Federal Reserve Board announces t&at the Fede r a l Reserve Bank of A t l a n t a has e s t a b l i s h e d a rediscount r a t e of on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e J u l y 12, 1930. X-6658 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 3:00 P.M. J u l y 17, 1930. The Federal Reserve Board announces t h a t the Federal Reserve Bank of Richmond has e s t a b l i s h e d a rediscount r a t e of 3 - l / 2 $ on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e J u l y IS, 1930. FEDERAL RESERVE BOARD WASHINGTON X-6659 ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD J u l y 19, 1930. SUBJECT: Holidays during August, 1930. Bear S i r : On Friday, August 1 s t , the Denver Branch of the Federal Reserve Bank of Kansas City w i l l be closed i n observance of Colorado Day. On account of Primary E l e c t i o n i n v a r i o u s S t a t e s , the following Federal r e s e r v e banks and branches w i l l a l s o be closed: Tuesday August 5 Kansas City Thursday August 7 Nashville Memphis Tuesday August 12 Cleveland (At 1 p . m.) Cincinnati (At 1 p . m.) (Cleveland w i l l p a r t i c i p a t e i n the c l e a r i n g s . ) Oklahoma City Tuesday August 26 San Francisco Los Angeles On the d a t e s i n d i c a t e d , the banks and branches a f f e c t e d w i l l not p a r t i c i p a t e in e i t h e r the Gold Fund c l e a r i n g or the Federal r e s e r v e note c l e a r i n g . P l e a s e include . c r e d i t s f o r the banks a f f e c t e d on each of the h o l i d a y s with your c r e d i t s f o r the following b u s i n e s s day i n the Gold Fund c l e a r i n g , and make no shipment of Federal r e s e r v e n o t e s , f i t or u n f i t , f o r account of the head o f f i c e s mentioned. Kindly n o t i f y branches. Very t r u l y yours, J . C. Noell, Assistant Secretary. TO GOVERNORS OF ALL F . R. BANKS. 7 6 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-6660 J u l y 22, 1930. SUBJECT: Adoption of Amendments to Regulation J . Dear Sir* You a r e a d v i s e d t h a t , e f f e c t i v e September 1, 1930, the Federal Reserve BOard has adopted the amendments to Regulation J recommended by the Conference of Counsel of a l l Federal r e s e r v e banks with c e r t a i n s l i g h t changes i n phraseology recommended by Hen. Newton D. Baker and the Board's General Counsel, whidh Were s e t f o r t h i n a memorandum addressed to the Board by i t s General Counsel under date of June 27, 1930, a copy of which (X-6636) was t r a n s m i t t e d to you i n the Board'fe- c i r c u l a r l e t t e r of June 2?* 1930 (X-6645). For your information, t h e r e i s enclosed a copy of a r e s o l u t i o n adopted by the Federal Reserve Board oh J u l y 22, 1930, promulgating these amendments. These amendments w i l l be p u b l i s h e d i n the August number of the Federal Reserve B u l l e t i n ; and, as soon as they can be p r i n t e d , ti. supply of o f f i c i a l copies of the amended r e g u l a t i o n 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. You are r e q u e s t e d to see t h a t a copy of the amended r e g u l a t i o n i s f u r n i s h e d promptly to each member bank and to each nonmember c l e a r i n g bank i n your d i s t r i c t . P l e a s e advise the Board how many copies of the p r i n t e d r e g u l a t i o n w i l l be r e q u i r e d by your bank. By Order of the Federal Reserve Board. Very t r u l y yours, J . C. Noell, Assistant Secretary. Enclosure. TO CHAIRMEN AND GOVERNORS OF ALL F . R. BANKS. i : X-6660-a BE IT RESOLVED BY THE FEDERAL RESERVE BOARD, t h a t , e f f e c t i v e September 1, 1930, Regulation J i s hereby amended a s f o l l o w s : (1) Paragraph 1 of Section I I I i s amended "by changing the words "acceptable to the Federal Reserve Bank of the D i s t r i c t i n which such nonmember barks a r e l o c a t e d " to read "acceptable to the c o l l e c t i n g Fede r a l r e s e r v e bank." (2) Paragraph 3 of Section I I I i s amended by changing the words "acceptable to the Federal Reserve Bank of the D i s t r i c t i n which such nonmember bank i s l o c a t e d " to r e a d "acceptable to the c o l l e c t i n g Fede r a l r e s e r v e bank." (3) Paragraph 2 of S e c t i o n IV i s amended by changing the p e r i o d a t the end thereof to a comma and by adding the following words: "provided, however, t h a t the Federal r e s e r v e bank may i n i t s d i s c r e t i o n r e f u s e a t any time t o p e r mit the withdrawal or o t h e r use of c r e d i t given f o r any item f o r which the Federal r e s e r v e bank h a s not y e t r e c e i v e d payment i n a c t u a l l y and f i n a l ly collected funds." (4) Paragraph 3 of S e c t i o n IV i s amended by changing the p e r i o d a t the end thereof to a comma and by adding the following words; "provided, however, t h a t the Federal r e s e r v e bank may i n i t s d i s c r e t i o n r e f u s e a t any time to permit the withdrawal or other use of c r e d i t given f o r any item f o r which the Federal reserve bank has not y e t r e c e i v e d payment i n a c t u a l l y and f i n a l l y c o l l e c t e d funds." (5) S e c t i o n V i s amended to r e a d as f o l l o w s : "SECTION V. TERMS OF COLLECTION. "The Federal Reserve Board hereby a u t h o r i z e s the Federal r e s e r v e banks to handle such checks s u b j e c t to the f o l l o w i n g terms and c o n d i t i o n s ; and each member and nonmember c l e a r i n g bank which sends checks to any Federal r e s e r v e bank f o r deposit or c o l l e c t i o n s h a l l by such a c t i o n be deemed (a) to a u t h o r i z e the Federal r e s e r v e banks t o handle such checks s u b j e c t to the f o l l o w i n g terms and c o n d i t i o n s , (b) to warrant i t s own a u t h o r i t y to give the Federal r e s e r v e banks such a u t h o r i t y , and ( c ) t o agree to indemnify any Federal r e s e r v e bank f o r any l o s s r e s u l t i n g from the f a i l u r e of such sending bank t o have such a u t h o r i t y . 77 X-6660~a -2- " ( l ) A Federal reserve "bank w i l l act only as agent of the bank from which i t receives such checks and w i l l assume no l i a b i l i t y except for i t s own negligence and i t s guaranty of prior indorsements. "(2) A Federal reserve bank may present such checks for payment or send such checks f o r c o l l e c t i o n direct to the bank on which they are drawn or a t which they are payable, or in i t s d i s c r e t i o n may f o r ward them to another agent with authority to present them for payment or send them for c o l l e c t i o n direct to the bank on which they are drawn or at which they are payable. "(3) A Federal reserve bank may, i n i t s d i s c r e t i o n and at i t s option, e i t h e r d i r e c t l y or through or from an agent, accept in payment of or i n remittance for such checks, cash, bank drafts, transfers of funds or bank c r e d i t s , or other forms of payment or remittance, acceptable to the c o l l e c t i n g Federal reserve bank, the Federal reserve bank shall not be l i a b l e for the f a i l u r e of the drawee bank or any agent to pay or remit for such checks, nor for any l o s s r e s u l t i n g from the acceptance from the drawee bank or any c o l l e c t i n g agent, i n l i e u of cash, of any other form of payment or remittance authori z e d herein, nor f o r the nonpayment o f , or f a i l u r e to r e a l i z e upon, any bank draft or other medium of payment or remittance which may be accepted from the drawee bank or any c o l l e c t i n g agent. "(4) Checks received by a Federal reserve bank which axe payable i n i t s own d i s t r i c t w i l l ordinarily be forwarded or presented direct to the banks on which they are drawn, and such banks w i l l be required to remit or pay therefor at par i n such one or more of the forms of payment or remittance authorized under paragraph ( 3 ) hereof as may be acceptable to the Federal reserve bank. "(5) Checks received by a Federal reserve bank payable i n other d i s t r i c t s w i l l ordinarily be forwarded f o r c o l l e c t i o n to the Federal reserve bank of the d i s t r i c t i n which such checks are payable; •provided, however, that, where arrangements can be made s a t i s f a c t o r y to the c o l l e c t ing bank or agent and to the Federal reserve bank of the d i s t r i c t i n which such checks are payable, any such checks may be forwarded for c o l l e c t i o n direct to the bank on which they are drawn or at which they are payable, or may be f o r - X-666Q-& 3warded f o r c o l l e c t i o n to another agent with a u t h o r i t y to p r e s ent them f o r payment d i r e c t to the "bank on which they a r e drawn or a t which they a r e p a y a b l e . A l l such checks s h a l l he handled s u b j e c t to a l l the terms and c o n d i t i o n s of t h i s r e g u l a tion. " ( 6 ) Bank d r a f t s r e c e i v e d by a Federal r e s e r v e "bank i n payment of or i n remittance f o r checks handled under the terms of t h i s r e g u l a t i o n s h a l l l i k e w i s e he handled f o r c o l l e c t i o n s u b j e c t t o a l l the terms and c o n d i t i o n s of t h i s r e g u l a t i o n . " ( 7 ) The amount of any check f o r which payment i n a c t u a l l y and f i n a l l y c o l l e c t e d funds i s not received s h a l l be charged back to the forwarding bank, r e g a r d l e s s of whether or not the check i t s e l f can be r e t u r n e d . In such event, n e i t h e r the owner or h o l d e r of any such check, nor the bank which sent such check to t h e Federal r e s e r v e bank f o r c o l l e c t i o n s h a l l have any r i g h t of recourse upon, i n t e r e s t i n , or r i g h t of payment from, any r e s e r v e balance, c l e a r i n g account, deposit a c count, or o t h e r such fund of the drawee bank or of any bank to which such checks have been s e n t f o r c o l l e c t i o n , i n the poss e s s i o n of the Federal r e s e r v e bank. No d r a f t , a u t h o r i z a t i o n to charge, o r o t h e r o r d e r , upon any r e s e r v e balance, c l e a r i n g account, deposit account, or o t h e r such funds of a paying, r e m i t t i n g , or c o l l e c t i n g bark i n the p o s s e s s i o n of a Federal r e serve bank, i s s u e d f o r the purpose of s e t t l i n g items handled under t h e terms of t h i s r e g u l a t i o n w i l l be p a i d , a c t e d upon, or honored a f t e r r e c e i p t by such Federal r e s e r v e bank of n o t i c e of suspension or c l o s i n g of such paying, r e m i t t i n g , or c o l l e c t i n g bank." I: ' 80 FEDERAL RESERVE BOARD WASHINGTON X-6661 ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD J u l y 22, 1930. Dear Mr. This i s t o advise you t h a t the f e d e r a l Reserve Board t o day adopted the proposed amendments to Regulation J recommended by the r e c e n t Conference of Counsel with c e r t a i n s l i g h t changes i n phraseology suggested by Honorable tfewton D. Baker and the undersigned. The amended r e g u l a t i o n w i l l take e f f e c t on Septemb e r 1, 1930. I t w i l l be published i n the August number of the Federal Reserve B u l l e t i n and w i l l be p r i n t e d in pamphlet form and d i s t r i b u t e d to t h e Federal r e s e r v e banks as soon as p o s s i b l e . A f t e r c o n f e r r i n g with Governor Calkins, Chairman of the Governors' Conference, and Mr. J . S. Walden, Chairman of the Standi n g Committee on C o l l e c t i o n s , I have appointed the following subcommittee of Federal Reserve Bank Counsel to c o l l a b o r a t e with the Standing Committee on Collections i n the r e v i s i o n of the check c o l lection circulars: Mr. Walter S. Logan, Chairman, Mr. M. G. Wallace, Mr. Robert S. Parker. The above committee and the undersigned w i l l meet with the Standing Committee on Collections i n Mew York on J u l y 3 1 s t ; and i t i s hoped t h a t the p r e p a r a t i o n of the r e v i s e d check c o l l e c t i o n c i r c u l a r s can be completed i n a day or two. Mr. Walden advises me, howe v e r , that i t i s customary f o r the r e p o r t s of the Standing Committee on C o l l e c t i o n s to be submitted to the Governors' Conference, and t h i s may r e s u l t i n some delay i n the f i n a l adoption of the r e v i s e d circular. There i s enclosed f o r your f u r t h e r information a copy of a r e s o l u t i o n adopted by the Federal Reserve Board today promulgating the amendments to Regulation J . With k i n d e s t personal r e g a r d s , I am Enclosure Cordially yours, Walter Wyatt, General Counsel. X**6660o»a BE IT RESOLVED BY THE FEDERAL RESERVE BOARD, t h a t , e f f e c t i v e September 1, 1930, Regulation J i s hereby amended a s f o l l o w s : (1) Paragraph 1 of Section I I I i s amended "by changing the words "acceptable to the Federal Reserve Bank of the D i s t r i c t i n which such nonmember banks a r e l o c a t e d " to read "acceptable to the c o l l e c t i n g Fede r a l r e s e r v e bank." (2) Paragraph 3 of Section I I I i s amended by changing the words "acceptable to the Federal Reserve Bank of the D i s t r i c t i n which such nonmember bank i s l o c a t e d " to r e a d "acceptable to the c o l l e c t i n g Fede r a l r e s e r v e bank." (3) Paragraph 2 of S e c t i o n IV i s amended by changing the p e r i o d a t the end thereof to a comma and by adding the following words: "provided, however, t h a t the Federal r e s e r v e bank may i n i t s d i s c r e t i o n r e f u s e a t any time t o p e r m i t the withdrawal or o t h e r use of c r e d i t given f o r any item f o r which the Federal r e s e r v e bank has not y e t r e c e i v e d payment i n a c t u a l l y and f i n a l ly collected funds." (4) Paragraph 3 of S e c t i o n IV i s amended by changing the p e r i o d a t the end thereof to a comma and by adding the f o l l o w i n g words: "provided, however, t h a t the Federal r e s e r v e bank may i n i t s d i s c r e t i o n r e f u s e a t any time to permit the withdrawal or other use of c r e d i t given f o r any item f o r which the Federal reserve bank has not y e t r e c e i v e d payment i n a c t u a l l y and f i n a l l y c o l l e c t e d funds." (5) S e c t i o n V i s amended to r e a d as f o l l o w s : "SECTION V. TERMS OF COLLECTION. "The Federal Reserve Board hereby a u t h o r i z e s the F e d e r a l r e s e r v e barks to handle such checks s u b j e c t to the f o l l o w i n g terms and c o n d i t i o n s ; and each member and nonmember c l e a r i n g bank which sends checks to any Federal r e s e r v e bank f o r deposit or c o l l e c t i o n s h a l l by such a c t i o n be deemed ( a ) to a u t h o r i z e the Federal r e s e r v e banks t o handle such checks s u b j e c t to the f o l l o w i n g terms and c o n d i t i o n s , (b) to warrant i t s own a u t h o r i t y to give the Federal r e s e r v e banks such a u t h o r i t y , and ( c ) t o agree to indemnify any F e d e r a l r e s e r v e bank f o r any l o s s r e s u l t i n g from the f a i l u r e of such sending bank t o have such a u t h o r i t y . X-666(>-a -2- " ( l ) A Federal reserve bank w i l l act only as agent of the "bank from which i t receives such checks and w i l l assume no l i a b i l i t y except for i t s own negligence and i t s guaranty of prior indorsements. "(2) A Federal reserve bank may present such checks for payment pr send such checks f o r c o l l e c t i o n direct to the bank on which they are drawn or at which they are payable, or in i t s d i s c r e t i o n may f o r ward them to another agent with authority to present them for payment or send them for c o l l e c t i o n direct to the bank on which they are drawn or at which they are payable. "(3) A Federal reserve bank may, i n i t s d i s c r e t i o n and at i t s option, e i t h e r d i r e c t l y or through or from an agent, accept in payment of or i n remittance for such checks, cash, bank drafts, transfers of funds or bank c r e d i t s , or other forms of payment or remittance, acceptable to the c o l l e c t i n g Federal reserve bank. The Federal reserve bank shall not be l i a b l e for the f a i l u r e of the drawee bank or any agent to pay or remit for such checks, nor for any l o s s r e s u l t i n g from the acceptance from the drawee bank or any c o l l e c t i n g agent, i n l i e u of cash, of any other form of payment or remittance authori z e d herein, nor f o r the nonpayment o f , or f a i l u r e to r e a l i z e upon, any bank draft or other medium of payment or remittance which may be accepted from the drawee bank or any c o l l e c t i n g agent. "(4) Checks received by a Federal reserve bank which are payable i n i t s own d i s t r i c t w i l l ordinarily be forwarded or presented direct to the banks on which they are drawn, and such banks w i l l be required to remit or pay therefor at par i n such one or more of the forms of payment or remittance authorized under paragraph (3) hereof as may be acceptable to the Federal reserve bank. "(5) Checks received by a Federal reserve bank payable i n other d i s t r i c t s w i l l ordinarily be forwarded f o r c o l l e c t i o n to the Federal reserve bank of the d i s t r i c t i n which such checks are payable; provided, however, that, where arrangements can be made s a t i s f a c t o r y to the c o l l e c t ing bank or agent and to the Federal reserve bank of the d i s t r i c t i n which such checks are payable, any such checks may be forwarded for c o l l e c t i o n direct to the bank on which they are drawn or at which they are payable, or may be f o r - X-666§-a S 3 —— 3 warded f o r c o l l e c t i o n to another agent with a u t h o r i t y to p r e s ent them f o r payment d i r e c t to the "bank on which they a r e drawn or a t which they a r e p a y a b l e . A l l such checks s h a l l be handled s u b j e c t to a l l the terms and c o n d i t i o n s of t h i s r e g u l a tion. " ( 6 ) Bank d r a f t s r e c e i v e d by a Federal r e s e r v e bank i n payment of or i n remittance f o r checks handled under the terms of t h i s r e g u l a t i o n s h a l l l i k e w i s e be handled f o r c o l l e c t i o n s u b j e c t t o a l l the terms and c o n d i t i o n s of t h i s r e g u l a t i o n . " ( 7 ) The amount of any check f o r which payment i n a c t u a l l y and f i n a l l y c o l l e c t e d funds i s not r e c e i v e d s h a l l be charged back to the forwarding bank, r e g a r d l e s s of whether or not the check i t s e l f can be r e t u r n e d . In such event, n e i t h e r the owner or h o l d e r of any such check, nor the bank which sent such check to t h e Federal r e s e r v e bank f o r c o l l e c t i o n s h a l l have any r i g h t of recourse upon, i n t e r e s t i n , or r i g h t of payment from, any r e s e r v e balance, c l e a r i n g account, deposit a c count, or o t h e r such fund of the drawee bank cr of any bank to which such checks have been s e n t f o r c o l l e c t i o n , i n the p o s s e s s i o n of the Federal r e s e r v e bank. No d r a f t , a u t h o r i z a t i o n to charge, o r other order, upon any r e s e r v e balance, c l e a r i n g account, deposit account, or o t h e r such funds of a paying, r e m i t t i n g , or c o l l e c t i n g bank i n the p o s s e s s i o n of a Federal r e serve bank, i s s u e d f o r the purpose of s e t t l i n g items handled under t h e terms of t h i s r e g u l a t i o n w i l l be p a i d , a c t e d upon, or honored a f t e r r e c e i p t by such Federal r e s e r v e bank of n o t i c e of suspension or c l o s i n g of such paying, r e m i t t i n g , or c o l l e c t i n g bank." 1FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6S62 Jbly 23, 1930* SUBJECT: Expense, Main Line, Leased Wire System, June, 1930. Dear S i r : Enclosed herewith you w i l l f i n d two mimeograph statements, X-6662-a and X-6662-b, covering i n d e t a i l operations of the main l i n e , Leased Wire System, during the month of Juno, 1930. Please credit the amount payable by ycrur bank i n 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 Hind", Leased Wire System, sending duplicate C/D to the Federal Reserve Board. Very truly yours, Fiscal Agent. Enclosures. T GOVERNORS OF ALL F. R. BANKS EXCEPT CHICAGO O 84 HEPOBT SHOWING- CLASSIFICATION A D N M E OF TORDS TRANSMITTED OVER MAIN LINE N U BR OF THE FEDERAL RESERVE LEASED TIRE SYSTEM FOR THE FONTH OF JUNE, 1930. Business reported by banks From Boston New York Philadelphia Cleveland Richmond Atlanta Chicago S t . Louis Minneapolis Kansas City Dallas San Francisco Total Words sent by New York chargea b l e to other F. R. Banks ( l ) 30,451 140,211 33,222 89,842 56,008 69,084 2,996 - 2,180 3,089 78,922 3,290 8,940 4,324 3,192 112.477. 893,941 3.219 11,731 4.659 51,449 104,192 31,276 80,639 67,617 3,829 F. B. Board "business Net Federal Reserve Bank business 33,447 140,211 35,402 92,931 59,298 78,024 108,516 82,114 35.105 83,858 79,348 117.136 945,390 x-666a-a Percent of t o t a l bank business(*) 3.54 14.83 3-75 9-83 6.27 8.25 11.48 8.69 3.71 8.87 8.39 12.39 100.00 272,263 Treasury Department business - Incoming and Outgoing Total words t r a n s m i t t e d over main l i n e s (*) Number of words sent by New York to other 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 a t Governors' Conference November 2 - 4 , 1925. l43.2Co 1,160,859 These percentages used in c a l c u l a t i n g the pro r a t a share of l e a s e d wire expense as shown on the accompanying statement (X-6662-b) (l) 1,217,653 "rr 00 Ql REPORT OF EXPENSE MAIN LINE FEDERAL RESERVE LEASED WIRE SYSTEM, JUNE, 1930. Name of bank Boston $ 260.00 l,24o.4l New York Philadelphia 225.00 Cleveland 306.66 Richmond 190.00 Atlanta 270.00 Chicago 4.075.00(f) St. Louis 219.00 Minneapolis 290.60 Kansas City 287.50 Dallas 251.00 San Francisco 320.00 Federal Reserve Board Total (&) (#) (*) (a) (b) Operators 1 Overtime Operators' Salaries $ 7,995.17 $ 1.00 — - - 1.00 Wire Rental $ - - - $ 2.00 1,241.41 225.00 306.66 230.00(A) 420.00 270.00 4,075.00 - 15,531.70 Pro Rata Share of Total Expenses Total Expenses $ 260.00 220.00 290.60 287-50 251.00 380.00 15.631.70 1 15,861.70 $23,858.87 $ 2.510.72( 4 $21,348.15 X—6662-*b $ Credits $ 755.72 3,165.93 8OO.56 2,098-52 1.33S-53 1,761.22 2,450.77 1,855-15 792.02 1,893.53 1,791.11 2,645.04 380.00 $ 495.72 1,924.52 575.56 1,791.86 91S.53 1,491.22 1,624.23 (*) 1,635.15 501.42 1,606.08 1,540.11 2,265.04 — — $21,348.15 260.00 1,241.41 225.00 306.66 420.00 270.00 4,075.00 220.00 290.60 287-50 251.00 Payable to Federal Reserve Board $ 8,227.17 — $ 14,745.21 1.624.23(b) $ 13,120.98 Main l i n e r e n t a l , Richmond-Washington. Includes s a l a r i e s of Washington operators. Credit. Received $ 2,510.72 from Treasury Department covering business f o r the month of June, 1930. Amount reimbursable to Chicago. 00 Q : FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6665 J u l y 26, 1930. SUBJECT: Examination of Member Banks. Dear S i r : By an a c t approved "by the P r e s i d e n t under date of June 26, 1930, S e c t i o n 9 of the Federal Reserve Act was amended and the t h i r d paragraph of Section 5240 of the United State® Revised S t a t u t e s , a s amended "by Section 21 of the Federal Reserve Act, was f u r t h e r amended so as to provide t h a t the expenses of a l l examinations made by Federal r e s e r v e banks may, i n the d i s c r e t i o n of the Federal Reserve Board, be a s s e s s e d a g a i n s t the banks examined and, when so assessed, s h a l l he p a i d by t h e "banks examined. In view of t h i s amendment, the Federal Reserve Board has r e c o n s i d e r e d and r e v i s e d the r e s o l u t i o n s adopted "by i t on October 10, 1928, ( s e t out i n X-6223 dated January 26, 1929) so a s to r e a d as f o l l o w s : "BE IT RESOLVED, That the Federal Reserve Board recognizes i t s duty under the Federal Reserve Act t o keep i t s e l f informed as to the c ondition of a l l member banks; "BE IT FURTHER RESOLVED, That the Board i s of the opinion t h a t i t i s j u s t i f i e d i n r e l y i n g upon the Compt r o l l e r of the Currency f o r such information as to n a t i o n a l banks; "BE IT FURTHER RESOLVED, That whenever the r e p o r t s of examination of S t a t e member banks f u r n i s h e d by the S t a t e a u t h o r i t i e s a r e not deemed s a t i s f a c t o r y e i t h e r to the Federal r e s e r v e bank of the d i s t r i c t concerned or to the Federal Reserve Board, the Federal r e s e r v e bank o r the Board s h a l l cause to be made a t l e a s t one examination or i n v e s t i g a t i o n each year of such c h a r a c t e r a s to f u r n i s h s a t i s f a c t o r y information; "BE IT FURTHER RESOLVED, That any e n t r y of a member bank made f o r the purpose of informing t h e Federal r e s e r v e bank and the Federal Reserve Board, ( l ) whether the member bank i s complying with the terms of the Federal Reserve Act, the Regulations of the Federal Reserve Board and the c o n d i t i o n s of i t s membership i n the Federal Reserve System a n d / o r (2) a s to the loan and investment p r a c t i c e s 8 7 X-6665 -2— and p o l i c i e s of the member "bank and whether i t s uses of Federal r e s e r v e c r e d i t f a c i l i t i e s a r e c o n s i s t e n t with the purposes of the Federal Reserve Act, as these have "been or may be defined "by the Federal Reserve Board, s h a l l not be termed an examination." Die Federal r e s e r v e agents are charged with the duty of s e e i n g to i t t h a t the Board's views, a s covered i n the above r e s o l u t i o n s , a r e c a r r i e d out i n t h e i r r e s p e c t i v e d i s t r i c t s . This does not mean t h a t the Board i s attempting to r e l i e v e i t s e l f of r e s p o n s i b i l i t y and i t w i l l continue, through i t s examining f o r c e , to check c a r e f u l l y the Federal r e s e r v e a g e n t s ' examination departments. While the Board r e a l i z e s t h a t i t i s not p o s s i b l e to l a y down a uniform d e t a i l e d procedure a p p l i c a b l e to each Federal r e s e r v e d i s t r i c t , the following i n s t r u c t i o n s w i l l serve as a guide to the Federal r e s e r v e agents i n the performance of t h e i r d u t i e s : 1 . The Comptroller of the Currency i s a member of the Federal Reserve Board and under the law i s charged with the r e s p o n s i b i l i t y of e n f o r c i n g the terms of the National Bank Act and a l s o of the Federal Reserve Act. The Board t h e r e f o r e r e l i e s upon the Comptroller of the Currency to perform h i s d u t i e s and i t w i l l not be necessary f o r the Federal r e s e r v e agent to d u p l i c a t e the work. 2 . In the opinion of the Board, S t a t e r e p o r t s of examination can be r e l i e d upon in the g r e a t m a j o r i t y of cases to f u r n i s h t h e necessary information to the agents. 3 . If a S t a t e examination i s u n s a t i s f a c t o r y , and an i n v e s t i g a t i o n w i l l not provide s u f f i c i e n t i n f o r m a t i o n upon which the agents may a c t i n t e l l i g e n t l y , a complete examination should be made f o r which the member bank should be charged. I t i s r e a l i z e d , however, t h p t i n some i n s t a n c e s unusual circumstances may e x i s t which would warrant the Board's e x e r c i s i n g the d i s c r e t i o n v e s t e d i n i t under the recent amendment and waiving charges f o r s p e c i f i c examinations. Any case which, i n the opinion of the Federal r e s e r v e agent, warrants such s p e c i a l c o n s i d e r a t i o n should be submitted to the Board i n advance, with a complete statement of the reasons why i t i s considered d e s i r a b l e to have the examination charges waived by the Board. Examinations of S t a t e banks i n c i dent to t h e i r admission to membership i n the System may be made without charge. 1-6665 -34 . Any i n v e s t i g a t i o n of a member "bank made f o r the purpose mentioned i n the l a s t paragraph of the r e s o l u t i o n of the Board s e t out above may "be conducted "by the Federal reserve agent without charge and without r e f e r e n c e to the Board. 5. The Federal r e s e r v e agent w i l l continue to f u r n i s h the Board with an a n a l y s i s on F. R. B. Form 212 of each s t a t e member hank examination r e p o r t r e c e i v e d "by him whether made by S t a t e a u t h o r i t i e s or under h i s own supervision, u n l e s s i n some exceptional case i t i s d e s i r e d t h a t the Board should have b e f o r e i t the complete r e p o r t of examination. 6. I f the Federal r e s e r v e agent h a s evidence i n the form of l e t t e r s or otherwise, t h a t o f f i c e r s and d i r e c t o r s of S t a t e member banks have had t h e i r a t t e n t i o n c a l l e d to v i o l a t i o n s of the law and unsound banking p r a c t i c e s by S t a t e a u t h o r i t i e s , i t i s not necessary f o r t h e agent to d u p l i c a t e t h i s work. 7. If t h i s supervision i s not conducted by S t a t e a u t h o r i t i e s the Federal r e s e r v e agent i s d i r e c t e d to take such a c t i o n , as i n h i s opinion, w i l l discharge the r e s p o n s i b i l i t i e s of the Board. 8 . When a S t a t e member bank f a i l s t o c o r r e c t i r r e g u l a r i t i e s w i t h i n a reasonable time so as to show m a t e r i a l improvement i n i t s condition, the Federal r e s e r v e agent w i l l be expected to lay the information b e f o r e the d i r e c t o r s of h i s bank and ask them to make a formal recommendation to t h e Federal Reserve Board, with reasons, a s to whether or not the S t a t e member bank should continue as a member. This l e t t e r supersedes and r e p e a l s the l e t t e r of January 26, 1929 (X-6223) on the same s u b j e c t . Very t r u l y yours, R. A. Young, Governor. TO ALL FEDERAL RESERVE AGENTS t 90 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6667 August 1, 1930. Dear Mr. The Federal Reserve Board, has adopted the p o l i c y of p r i n t ing i t s r e g u l a t i o n s i n s e p a r a t e pamphlets and i t w i l l no longer p r i n t a s i n g l e pamphlet containing a l l of the r e g u l a t i o n s . The Board has a l s o , s in c e the issuance of the l a s t e d i t i o n of i t s r e g u l a t i o n s ( S e r i e s of 1928), amended c e r t a i n of the r e g u l a t i o n s , and the se a mended r e g u l a t i o n s have e i t h e r been p r i n t e d a s s e p a r a t e pamphlets or w i l l he p r i n t e d s e p a r a t e l y . The r e g u l a t i o n s which have not been amended since the 1928 e d i t i o n and which have been r e p r i n t e d as separate pamphlets are B, C, D, E, F, and Gr. Copies of each of these r e g u l a t i o n s a r e enclosed h e r e w i t h and you w i l l note that a l l of them except r e g u l a t i o n F were r e p r i n t e d a s of May 15, 1930. Regulation 3? was r e p r i n t e d a s a separ a t e pamphlet during 1928, and while i t r e p r e s e n t s a t the p r e s e n t time the Board's r e g u l a t i o n s on the e x e r c i s e of t r u s t powers by n a t i o n a l banks, i t w i l l be amended i n the near f u t u r e because of the amendment of June 26, 1930, to Section 11(k) of the Federal Reserve Act. Regulation J , S e r i e s of 1928, which was amended e f f e c t i v e February 1, 1929, was a l s o r e p r i n t e d as of May 15, 1930, and I am e n c l o s i n g a copy h e r e w i t h . The enclosed r e g u l a t i o n w i l l continue in e f f e c t u n t i l September 1, 1930, a t which time amendments adopted by the Board on J u l y 22, 1930, as a r e s u l t of the recommendations of the r e c e n t Conference of Federal Reserve Bank Counsel w i l l become e f f e c t i v e . The r e g u l a t i o n a s thus amended i s now i n the hands of the p r i n t e r , but I am enclosing herewith a mimeographed copy of the Board's r e s o l u t i o n of J u l y 22, 1930, which shows the n a t u r e of these r e c e n t amendments t o Regulation J . Regulations A, H, I, K and L have a l s o been amended r e c e n t l y , and a s Regulations I and L a r e a v a i l a b l e i n p r i n t e d pamphlet form, I am e n c l o s i n g copies h e r e w i t h . Regulations A and K a r e s t i l l i n the X-6667 t;: -2- hands of the p r i n t e r , and. I am f u r n i s h i n g you herewith copies of mimeographs which w i l l e x p l a i n the r e s p e c t s i n which they have t e e n amended. The Board i s s t i l l considering f u r t h e r amendments to Regulation H, "but I am enclosing herewith a mimeographed copy of a l e t t e r the Board addressed to a l l the Federal Reserve Bank Chairmen and Governors which w i l l e x p l a i n an amendment to t h i s r e g u l a t i o n which was adopted by the Board on June 9, 1930. Copies of a l l of the a v a i l a b l e p r i n t e d pamphlets of the Board's Regulations and of a l l of the mimeographs r e f e r r e d to a bove have been f u r n i s h e d to a l l the Federal Reserve Banks, but i t h a s occurred to me t h a t p o s s i b l y they may not have been brought t o your a t t e n t i o n . I am taking t h i s opportunity, t h e r e f o r e , to a p p r i s e you of the p r e s e n t s t a t u s of the Board's Regulations, and I w i l l see t h a t you a r e f u r n i s h e d with p r i n t e d copies of each of the r e g u l a t i o n s which a r e now i n the hands of the p r i n t e r a s soon as they become a v a i l a b l e . Very t r u l y yours, Walter Wyatt, General Counsel. Enclosures. TO ALL ZBIERAl RESERVE BANK COUNSEL AND ASSOCIATE COUNSEL. (COPY) FEDERAL RESERVE BAH OF RICHMOND X-6669 f. 0 & J u l y 29, 1930 Federal Reserve Board, Washington, D.C. A t t e n t i o n ; Mr. Walter Wyatt, General Counsel. Dear Mr. Wyatt: If you have not seen t h e case of Hofheimer v. Seaboard and C i t i zens National Bank of Norfolk", decided by the Supreme Court of V i r g i n i a June 12, 1930, and r e p o r t e d i n 163 S. E. Page 657, you w i l l f i n d the opinion interesting. One Hofheimer executed a w i l l nominating the C i t i z e n s Bank of Norfolk a s h i s executor. This bank was a s t a t e bank and t r u s t company. Later i t merged or consolidated with the Seaboard National Bank of Norfolk in t h e manner p r e s c r i b e d by the Act of Congress. A f t e r the c o n s o l i d a t i o n Hofheimer died, and the consolidated bank, known a s the Seaboard and Citizens National Bank of Norfolk, o f f e r e d the w i l l f o r p r o b a t e and moved to q u a l i f y a s executor. The lower court p e r m i t t e d the bank to q u a l i f y along with an i n d i v i d u a l who was named as co-executor. An appeal was taken and so much of the order a s p e r m i t t e d the bank to q u a l i f y was r e v e r s e d . The d e c i s i o n , of course, r e s t s l a r g e l y upon ex p a r t e WorChester County National Bank, 279 U. S. 347, but our court holds t h a t the V i r g i n i a s t a t u t e s by i m p l i c a t i o n sanction a c o n s o l i d a t i o n between a s t a t e bank and n a t i o n a l bank and t h a t the powers of the c o n s o l i d a t e d bank a r e c o n t r o l l e d by the Federal s t a t u t e s . The court appears to assume t h a t i f the t e s t a t o r had died and the s t a t e bank had q u a l i f i e d b e f o r e the c o n s o l i d a t i o n , the n a t i o n a l bank under t h e Federal s t a t u t e would have succeeded to the powers of the s t a t e bank a s executor, but d i s t i n g u i s h e s between the p o s i t i o n of an executor and the p o s i t i o n of one who has merely been nominated as executor in a w i l l which i s wholly without e f f e c t during the l i f e t i m e of the t e s t a t o r . In o t h e r words, the court h o l d s t h a t the t e s t a t o r nominated a s executor a person who ceased to e x i s t b e f o r e t h e w i l l became o p e r a t i v e , and the mere designation was not a l e g a l r i g h t which p a s s e d to t h e successor c o r p o r a t i o n . The V i r g i n i a case decides only the r a t h e r close p o i n t a s to the c o n s t r u c t i o n of t h e National Bank Act. I t s chief i n t e r e s t l i e s i n the f a c t t h a t the court seems to assume t h a t in t h e WorChester County National Bank case the r i g h t of the n a t i o n a l bank to continue to administer the e s t a t e was undisputed and the only question was whether or not i t would be compelled to go through t h e f o r m a l i t y of a r e q u a l i f i c a t i o n . The d e c i s i o n , however, i s a l s o i n t e r e s t i n g i f any attempt i s made to amend the n a t i o n a l banking laws so as to c o u n t e r a c t the Worchester County National Bank d e c i s i o n . If any such amendment i s made, i t might be a d v i s a b l e to cover the d i s t i n c t i o n which 9 3 Mr. Walter Wyatt, Federal Heserve Board, Washington, B.C. X-6669 -3- J u l y 29, 1930 the court has observed between a succession to an e x i s t i n g power and the succession to a mere expectancy based upon the designation of an executor in t h e w i l l of one who i s s t i l l a l i v e . I have not enclosed a copy of the opinion because I am under the impression t h a t you have t h e South Eastern Reporter in your l i b r a r y . If f o r any reason t h e opinion i s not a v a i l a b l e to you, I can e a s i l y send you a copy. Very t r u l y yours, (Signed) M. G. Wallace, Counsel. MW L O FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD T — 6 6 7 0 A ~ O O FU August 9, 1930. SUBJECT: (k)8t of Printing Federal fteeerve Notes. Dear S i r : The Federal He serve Board has been advised by the Director of t h e Bureau of fingraving and P r i n t i n g t h a t because of wage i n c r e a s e s which were granted to employees of the Bureau under the Brookhart Salary Act, approved on J u l y 3, 3.930, the cost of p r i n t i h g Federal r e s e r v e n o t e s has been i n crease d $4.25 p e r thousand s h e e t s . This increased c o s t , however, w i l l be o f f s e t in the amount of $1.30 per thousand sheets by a r e d u c t i o n in t h e c o s t of paper under the c o n t r a c t f o r the c u r r e n t f i s c a l y e a r , making a net i n c r e a s e of $2*95 f>er thousand sheets. I t was the i n t e n t i o n of t h e Bureau of Engraving and P r i n t i n g to make t h e new r a t e of $92.45 p e r thousand s h e e t s e f f e c t i v e as of J u l y 1, 1930, but through a misunderstanding a t the Bureau, J u l y d e l i v e r i e s were b i l l e d a t $92.43. The new r a t e w i l l , t h e r e f o r e , be made e f f e c t i v e a s of August 1 , 1930, and a l l d e l i v e r i e s a f t e r t h a t date w i l l be b i l l e d a t the r a t e of $92.45 p e r thousand s h e e t s i n s t e a d of a t the r a t e of $89.50 which was i n e f f e c t up to t h e beginning of t h e current f i s c a l y e a r . Very t r u l y yours, J . C. Noell, Assistant Secretary. To Governors of a l l F. R. Banks. - Copy - X-6671 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA FOURTH DIVISION. At Law No. 95 2225 John Hirning, a s Receiver of the Farmers National Bank, of Brookings, South Dakota, a c o r p o r a t i o n Plaintiff, vs. DECISION The Federal Reserve Bank of Minneapolis, Minnesota, a c o r p o r a t i o n , Defendant. This cause came on to be t r i e d b e f o r e the Cburt without a j u r y on the 15th day of March, 1930. Miss F» M; Selander, of Minneapolis, Minnesota, and Messrs. Hall & Eidea, of Brookings, South Dakota, appeared f o r the p l a i n t i f f ; and Mr. A. Ueland and Mr. Sigurd Ueland, of Minneapolis, Minnesota, f o r the defendant. This i s a s u i t to recover $21,355.82, the amount of two r e m i t t a n c e s sent by t h e Farmers National Bank,of Brookings, South Dakota, to t h e defendant on the 16th and 17th days of November, 1926, which i t i s a l l e g e d c o n s t i t u t e d an unlawful p r e f e r e n c e under Sec. 91, T i t l e 12, U.S.C.A. The Reserve Bank, a s a c l e a r i n g house and agent f o r i t s member banks, received on November 13, 1926, f o r c o l l e c t i o n , checks on t h e Farmers National Bank of Brookings to t h e amount of $22,114,22, and on November iQth s i m i l a r checks to t h e amount of $15,020.88. On those days i t mailed cash l e t t e r s , being the checks r e f e r r e d t o , to t h e Brookings Bank f o r c o l l e c t i o n and r e m i t tance. Under i t s r u l e s , the Reserve Ba&k was agent f o r t h e forwarding banks, with the r i g h t to send the checks to t h e Brookings Bank f o r c o l l e c t i o n and to r e c e i v e money or d r a f t s t h e r e f o r . The Reserve Bank granted p r o v i s i o n a l c r e d i t s to the forwarding banks on t h e i r r e s e r v e accounts f o r t h e checks, but r e t a i n e d t h e r i g h t to r e v e r s e the c r e d i t s i f the checks were not p a i d . Of t h e checks sent to the Brookings Bank, i t accepted $22,059.11 of those included i n the ' — 2 — 96 X-6671 cash l e t t e r of the 13th, and $14,880.86 of those included i n t h e cash l e t t e r of t h e 15th. The chocks were not a c t u a l l y charged to t h e accounts of i t s depositors u n t i l November 18th, when the bank was i n charge of a National Bank Examiner. On the 16th of November, the Brookings Bank sent two d r a f t s to cover the se cash l e t t e r s to the Reserve Bank, i n which the Reserve Bank was named a s drawee. The r e s e r v e account of the Brookings Bank i n th<$ Reserve Bank was not l a r g e enough to take care of t h e d r a f t s . For t h e purpose of p r o v i d i n g s u f f i c i e n t f u n d s t h e r e f o r , i t sent to the Reserve Bank, on t h e evening of the 16th, checks, f o r c o l l e c t i o n and c r e d i t , drawn by o t h e r s on o t h e r banks to the amount of $10,029.07, on which the Reserve Bank c o l l e c t e d $8,355.82, which was c r e d i t e d to the r e s e r v e account of the Brookings Bank. I t a l s o r e m i t t e d to the Reserve Bank, on November 17th, $13,000 i n currency, which was a l s o c r e d i t e d to i t s r e s e r v e account. The $13,000 i n currency was a c t u a l l y mailed a f t e r a r e s o l u t i o n of the Board of D i r e c t o r s of t h e Brookings Bank, c l o s i n g t h e bank, had been adopted on the evening of November 16th. The Brookings Bank c l o s e d i t s doors so f a r a s t h e t r a n s a c t i o n of ordinary Banking b u s i n e s s was concerned, a t 4:00 P. M. on t h e 16th. While t h e r e i s some u n c e r t a i n t y a s to t h e time of the adoption of t h e r e s o l u t i o n and t h e m a i l i n g of the checks, I f i n d t h a t the $10 , 029.07 of checks was a l s o mailed a f t e r the adoption of the r e s o l u t i o n c l o s i n g the bank, t h a t the bank was then i n s o l v e n t , and t h a t b o t h r e m i t t a n c e s were made " i n contemplation of insolvency". See B a l l v. German Bank, 187 Fed. 750. I t was determined, however, during banking hours on t h e 16th, to send the r e m i t t a n c e s . While the condition of t h e bank was s u b s t a n t i a l l y t h e same f o r s e v e r a l days p r i o r to the adoption of t h e r e s o l u t i o n , i t i s apparent t h a t the determination to c l o s e i t by those r e s p o n s i b l e f o r i t s conduct did not occur u n t i l the evening of the 16th. At t h a t time i t was e v i d e n t l y determined t h a t i t was i m p r a c t i c a l to borrow s u f f i c i e n t funds to keep the bank open and t h a t l a c k of p u b l i c confidence in t h e bank made i t a d v i s a b l e to c l o s e i t s doors. Some eighteen banks had r e c e n t l y f a i l e d i n Brookings County, t h r e e of them i n t h e City of Brookings, and a r a p i d d e c l i n e i n d e p o s i t s s h o r t l y b e f o r e the bank closed i n d i c a t e d a dark f u t u r e f o r i t even i f i t was a b l e to secure t h e necessary funds to continue i n b u s i n e s s . On the morning of the 1 7 t h , the Reserve Bank was n o t i f i e d t h a t the Brookings Bank had closed, but t h a t s u f f i c i e n t funds had been s e n t to the Reserve Bank to t a k e care of i t s cash l e t t e r s . The Reserve Bank did not charge up t h e d r a f t s drawn by the Brookings Bank to i t s r e s e r v e account, but reversed the c r e d i t s given to t h e forwarding banks, n o t i f y i n g them t h a t i f p e r m i t t e d to charge up the d r a f t s , i t would l a t e r give than c r e d i t . On January 27, 1927, r e l y i n g upon advice of counsel, a l e t t e r from t h e then r e c e i v e r , and a l e t t e r from J . E. Fouts, A s s i s t a n t Supervising Receiver, Division of Insolvent Nationa l Banks, which l e t t e r s were construed as g r a n t i n g permission to charge the d r a f t s to the r e s e r v e account, the Reserve Bank did charge them to t h a t account, and c r e d i t e d the forwarding banks with the amount of the chocks contained in t h e cash l e t t e r s of November 13th and 15th. Then followed t h i s s u i t by the p r e s e n t r e c e i v e r to recover the r e m i t t a n c e s . The r e c e i v e r claims t h a t the Reserve Bank was a c r e d i t o r ; t h a t in making the r e m i t t a n c e s the Brookings Bank intended to p r e f e r t h e Reserve Bank a s a c r e d i t o r and to prevent a r a t a b l e a p p l i c a t i o n of t h e a s s e t s of t h e Brookings Bank to the payment of i t s debts as provided by law. All of t h i s the Reserve Bank d e n i e s . . - 3 - X-6671 ' ' 91? The question p r e s e n t e d i s one about which t h e r e cam be and i s a d i f f e r e n c e of opinion, I do not f i n d t h a t t h i s exact s i t u a t i o n has ever been p r e sented to a Federal c o u r t . I t i s obvious t h a t i f t h e Reserve Bank was a c r e d i t o r of t h e Brookings Bank a t the time the se r e m i t t a n c e s were made, the r e c e i v e r should p r e v a i l . Ball v. German Bank, supra. I t i s c l e a r t h a t the Reserve Bank was not o r i g i n a l l y a c r e d i t o r of t h e Brookings Bank; t h a t i t was a mere agent f o r the forwarding banks, respons i b l e only f o r i t s own n e g l i g e n c e . Federal Reserve Bank of Richmond v. Early, 30 F. (2d) 198; Early, Receiver, v. Federal Reserve Bank of Richmond, 281, U.S. 84. The Reserve Bank did not own the checks which c o n s t i t u t e d the cash l e t t e r s and i t was a m a t t e r of i n d i f f e r e n c e to i t whether the checks were p a i d or n o t . The r e c e i v e r claims t h a t the Reserve Bank became a c r e d i t o r when i t accepted the d r a f t s o r , a t any r a t e , when i t charged them up to t h e r e s e r v e account of t h e Brookings Bank. I am unable to see t h a t t h e r e l a t i o n which i t bore to t h e Brookings Bank o r i g i n a l l y was ever changed. I t was a t a l l times a c t i n g on behalf of i t s p r i n c i p a l s , the forwarding banks, a s t h e i r agent, and, under the r u l e s which governed i t s o p e r a t i o n s , i t had the a u t h o r i t y to send the checks to t h e Brookings Bank f o r c o l l e c t i o n and take d r a f t s which were sent in payment t h e r e f o r . As agent, i t was a u t h o r i z e d to appoint the Brookings Bank as agent to c o l l e c t from i t s e l f these checks, and to r e q u i r e the Brookings Bank to account f o r the checks or t h e i r proceeds. The agreement of the Brookings Bank was to remit f o r such checks a s i t accepted or c o l l e c t e d . I t was the agent of t h e Reserve Bank f o r t h a t purpose. If i t was t o charge them to the accounts of i t s d e p o s i t o r s , i t s duty was to remit f o r them i n cash or i t s e q u i v a l e n t . I t was not t h e debtor of the Reserve Bank f o r t h e amount of those checks, b u t , i f i t accepted than, i t s p o s i t i o n was t h a t of an agent who had r e c e i v e d money or i t s equivalent f o r h i s p r i n c i p a l and which i n equity belonged to the p r i n c i p a l . I f the Brookings Bank had used t h e s e checks f o r i t s own purposes, without accounting f o r them, i t would have been g u i l t y of conversion. I f , i n s t e a d of charging the checks to t h e accounts of i t s deposit o r s , i t had c o l l e c t e d t h e checks in cash from them, t h a t cash would have belonged to the Reserve Bank, and i f i t had been mingled with t h e o t h e r cash of the bank, the r e c e i v e r could have been r e q u i r e d to pay i t over on t h e theory t h a t the cash was impressed with a t r u s t to t h e extent of the amount f o r which the Brookings Bank should have accounted. The l i a b i l i t y of t h e Brookings Bank to account became a b s o l u t e upon t h e acceptance of t h e checks. Quoting from Federal Reserve Bank of Richmond v. Early, supra, - - ( 3 0 F. (2d) 199): "The o n l y question t h a t can a r i s e i s : When does t h i s r i g h t of the owners of the checks become f i x e d , so a s to c o n s t i t u t e i t a charge upon the r e s e r v e balance? We t h i n k t h a t i t becomes so f i x e d when the drawee bank, e i t h e r unequivocally accepts the checks, as i n t h i s case, o r , by f a i l i n g to r e t u r n them promptly, becomes chargeable with them under the terms of the agreement." I t has been h e l d by t h e Supreme Court of V i r g i n i a , in Federal Reserve Bank of Richmond v. Bohaiman, 127 S.E. 161, ( f o l l o w i n g Federal Reserve Bank of Richmond v. P r i n c e Eiward-Lunenburg County Bank, 139 Va. 45, 123 S.E.379, 32 Va. Appeals 152) t h a t a Reserve Bank which has received an u n c o l l e c t i b l e d r a f t a s a remittance f o r a cash l e t t e r has a l i e n upon the cash i n t h e v a u l t s of the bank f o r t h e amount of the d r a f t , which i t can enforce a g a i n s t a r e c e i v e r . 98 - 4 - X-6671 If those d e c i s i o n s a r e c o r r e c t * the Reserve Bank could have c o l l e c t e d from the r e c e i v e r an amount s u f f i c i e n t to make the d r a f t s which i t had r e c e i v e d from the Brookings Bank good, even i f no remittances had been made. While i t i s apparent t h a t the managing o f f i c e r s of t h e Brookings Bank, during banking hours on the 16th day of November, r e a l i z e d the p r o b a b i l i t y t h a t the bank would not re-opoa the following day — which, no doubt, was the reason f o r sending d r a f t s to the Reserve Bank drawn on i t r a t h e r than on o t h e r banks — t h e bank had accepted the checks sent to i t as agent f o r c o l l e c t i o n . I t i n tended to account f o r the c o l l e c t i o n of the checks bj- sending s u f f i c i e n t cash and cash items to t h e Reserve Bank to take c a r e of the d r a f t s . P r i o r to the adoption of the r e s o l u t i o n c l o s i n g the bank, i t segregated from i t s a s s e t s the cash and cash items to be sent to the Reserve Bank. My conclusion i s t h a t t h e r e c e i v e r can not recover i n t h i s case,even though these r e m i t t a n c e s were made i n contemplation of insolvency, f i r s t , b e cause the Reserve Bank was never a c r e d i t o r of the Brookings Bank, and the only r e l a t i o n which ever e x i s t e d between the two was t h a t of p r i n c i p a l and agent; second, because the r i g h t s of the general c r e d i t o r s of t h e Brookings Bank were in no way a f f e c t e d by t h e r e m i t t a n c e s , f o r the reason t h a t the Reserve Bank, as p r i n c i p a l , could have impressed a t r u s t upon the cash and cash items segregated from the o t h e r cash of the bank, o r , i f i t should be hold t h a t t h a t was not a s u f f i c i e n t designation of the s p e c i f i c p r o p e r t y to make good the d r a f t s , then upon so much of the b a n k ' s general cash as was n e c e s s a r y to make t h e d r a f t s good. Finding t h e f a c t s and the law to be a s above s t a t e d , my conclusion i s t h a t the defendant i s e n t i t l e d to a judgment of d i s m i s s a l . Let judgment be entered a c c o r d i n g l y . The p l a i n t i f f i s allowed an exception to the denial of h i s motion f o r judgment in h i s f a v o r , made upon t h e s o l e ground t h a t t h e evidence w i l l support no other c o n c lu s i o n . Dated t h i s 28th day of J u l y , 1930. John 3. Sanborn U . S . D i s t r i c t Judge. X-66J2 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For immediate r e l e a s e August 6, 1930* The Federal Reserve Board announces t h a t the F e d e r a l Reserve Bank of S t . Louis has e s t a b l i s h e d a rediscount r a t e of 3^6 on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e August 7. 1930. 100 x-66?4 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 6:00 P . M. August 7» 1930. The Federal Reserve Board announces t h a t the Fede r a l Reserve Bank of San Francisco has e s t a b l i s h e d a rediscount r a t e of 3iH on August 8, 1930. a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e ; FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6675 August 13, 1930. SUBJECT: Expense, Main Line, Leased Wire System, J u l y , 1930. Dear S i r : Enclosed herewith you w i l l f i n d two mimeograph statements, X-6675-a and X-S675-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 J u l y , 1930. 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 Fund", Leased Wire System, sending d u p l i c a t e c/D to the Federal Reserve Board. Very t r u l y yours, F i s c a l Agent. Enclosures. TO GOVERNORS OF ALL F. R. BANKS EXCEPT CHICAGO. 101 REPORT SHOWING- CLASSIFICATION AND NUMBER OF W R S TRANSMITTED OVER MAIN LINE OD OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE M N H OF JULY, 1930. OT Business reported by banks From Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Total Words sent by New York chargeable to o t h e r F. R. Banks (1) Net Federal Reserve Bank business 29,756 126,748 32,441 2,441 32,197 126,748 33,515 92,376 58,277 69,985 90,202 56,185 62,476 106,019 80,585 35.794 79,805 65,981 109,044 875,036 — 1,074 2,174 2,092 7,509 3,072 2,484 2,881 2,189 8,739 3.396 109,091 83,069 38,675 81,994 74,720 112,440 913,087 38,051 F. R. Board "business . . . x-6675-a Percent of t o t a l bank b u s i n e s s ( * ) 3-53 13.88 3.67 10.12 6.38 7.66 11.95 9.10 4.24 8.98 8.18 12.31 100.00 289,149 Treasury Department "business Incoming and Outgoing Total words t r a n s m i t t e d over main l i n e s (*) 65.89% 1,271,130 These percentages used i n c a l c u l a t i n g the pro r a t a share of l e a s e d wire expense as shown on the accompanying statement (X-6675-b) (l) 1,202,236 Number of words sent by New York to other F. R. Banks f o r t h e i r sole "benefit charged to banks i n d i c a t e d in accordance with a c t i o n taken a t Governors 1 Conference November 2 - 4 , 1925. © 1 0 REPORT OF EXPENSE MAIN LIKE FEDERAL RESERVE LEASED WIRE SYSTEM, JULY, 1930. Name of Bank Operators' Operators' Salaries OvertimA $ 260.00 $ Boston 1,204.14 New York 225.00 Philadelphia 306.66 Cleveland 232.00 Richmond 270.00 Atlanta 4,439-3i(#) Chicago 195.00 St. Louis 258.05 Minneapolis 287.50 Kansas City 251.00 Dallas 380.00 San Francisco Federal Reserve Board Total (&) (#) (*) (a) (b) $8,308.66 $ - Wire "Rental $ Total Expenses Pro Rata Share of Total "Expenses $ $ 260.00 1,204.14 225.00 306.66 462.00 230.00(6) 270.00 4,439.31 195.00 258.05 287-50 251.00 380.00 15.611.58 15.613.58 - - $ 15.S43.58 X-66?5~b 806.37 3,170.64 838.35 2,311.73 1,457-40 1.749.79 2,729.76 2,078.73 968.55 2,051.32 1,868.57 2,812.00 — $22,843.21 $24,152.24 1.309•03( a) $22,843.21 Credits $ 260.00 1,204.14 225.00 306.66 462.00 270.00 4,439.31 195.00 258.05 287-50 251.00 38O.OO Payable to Federal Reserve "Board $ — $8,538.66 546.37 1,966.50 613.35 2,005.07 995-40 1,479.79 i.709-55(*) 1,883-73 710.50 1,763.82 1.617.57 2,432.00 - $16,014.10 1.709.55(b) $14,304.55 Main l i n e r e n t a l , Richmond-Washington. Includes s a l a r i e s of Washington o p e r a t o r s . Credit. Received $1,309-03 from Treasury Department covering business f o r the month of J u l y , 1930* Amount reimbursable to Chicago. o CC FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6677 August 14, 1930. SUBJECT: Changes i n I n t e r - D i s t r i c t Time Schedule. Dear S i r : Upon agreement between the Federal r e s e r v e "banks a f f e c t e d , the Federal Heserve Board has approved the following changes i n the i n t e r - d i s t r i c t time schedule: From From From From From From From From From From From From From From From From From Boston Dallas Dallas Dallas Dallas Dallas Dallas Dallas Dallas Houston San Antonio San Antonio Dallas Dallas Dallas Dallas Houston to to to to to to to to to to to to to to to to to Dallas Kansas City Memphis Charlotte Detroit Pittsburgh Boston Helena New Orleans Jacksonville Birmingham Nashville S a l t Lake City Portland Seattle Spokane Seattle From From From From From From From Fran From From From From From From From From From 4 2 2 3 3 3 4 4 2 3 3 3 4 5 5 5 6 days days days days days days days days days days days days days days days days days to to to to to to to to to to to to to to to to to 3 1 1 2 2 2 3 3 1 2 2 2 3 4 4 4 5 days day day days days days days days daydays days days days days days days days Very t r u l y yours, E. M. McClelland, Assistant Secretary. TO GOVERNORS OF ALL F . R. BANKS. COPY X-6678 i . 0 5 COURT OF APPEALS OF H W YORK, E (254 N.Y. 218) Decided. J u l y 8, 1930. WILLIAM A. CAES OH and Others, a s Trustees i n Bankruptcy of LEONARD S. ZARTMAN and ELLA S. ZAUOMAN, I n d i v i d u a l l y and as Copartners, Doing Business under the Firm Name of G. E. ZARTMAN & COMPANY, Appellants, v. FEDERAL RESERVE BAM of H W YORE, E Respondent. APPEAL from a judgment of the Appellate Division i n the f o u r t h j u d i c i a l department r e v e r s i n g a judgment of the T r i a l Term e n t e r e d on a v e r d i c t of a j u r y i n f a v o r of the p l a i n t i f f s and dismissing the complaint. ARTHUR E. SUTHERLAND f o r a p p e l l a n t s . COLIN McLENNAN f o r respondent. CARDOZO, Ch. J . Trustees i n "bankruptcy a r e seeking to r e c a p t u r e moneys c o l l e c t e d "by the defendant, a Federal Reserve bank, with n o t i c e t h a t a p r e f e r e n c e among c r e d i t o r s might he an e f f e c t of the c o l l e c t i o n . Or. E. Zartman & Company were engaged f o r many y e a r s i n the business of p r i v a t e bankers a t Waterloo, New York. On May 16 and 17, 1927, there came i n t o the p o s s e s s i o n of t h e defendant, the Federal Reserve Bank in the Second Federal Reserve D i s t r i c t , 157 checks drawn on the Zartman bank f o r sums amounting i n the aggregate to $15,271.56. These checks, drawn by Zartman d e p o s i t o r s i n favor of various payees, had been indorsed by the payees t o banks, t h i r t y - s e v e n i n number, members of the Federal Reserve banking system, and by these indorsed and t r a n s m i t t e d to the defendant. The indorsements by the member banks show d i v e r s i t i e s of form, some being simply to the order of the Federal Reserve Bank of New York, some to the order of any bank, banker or t r u s t company, some to the order of any bank or banker, and some to the order of any Federal Reserve bank. Accompanying the checks, when r e c e i v e d by the defendant, were l e t t e r s of r e m i t t a n c e . In t h e s e the member banks gave n o t i c e to the defendant t h a t the checks were i n c l o s e d " f o r c r e d i t , " or, more commonly, f o r " c o l l e c t i o n and c r e d i t , n " c o l l e c t i o n and r e t u r n , " or " c o l l e c t i o n and r e m i t t a n c e . " The defendant pursuant to t h i s mandate caused the checks to be p r e s e n t e d f o r payment to the Zartman bank, the drawee named t h e r e i n . 106 X-6678 —— 2 In response to t h i s demand, i t received two d r a f t s , one f o r $8,699.25, the o t h e r f o r $6,572.37, drawn by the Zartman bank i n Waterloo upon the American 3xchange I r v i n g Trust Company of New York. These d r a f t s , r e ceived by the defendant on May 18 and 19, were p r e s o r t e d to the t r u s t conpany f o r payment on May 20 and again on May 21. On each p r e s e n t a t i o n payment was r e f u s e d on the ground t h a t the d r a f t s had been drawn by Zartman a g a i n s t u n c o l l e c t e d f u n d s . Thereupon, on May 23, the defenda n t ' s manager went to Waterloo and made demand upon Zartman t h a t the d r a f t s be p a i d i n cash. There i s no occasion to r e c i t e the conversat i o n t h a t ensued. Enough f o r p r e s e n t purposes t h a t what was s a i d might reasonably be found by the t r i o r s of the f a c t s to have been n o t i c e to the manager t h a t Zartman was i n s o l v e n t . A f t e r a delay of a few hours there was p a i d to the defendant in cash the sura of $10,363.93. The following day, May 24, the doors of the Zartman bank were closed f o r business, and have never been reopened. A p e t i t i o n i n bankruptcy, f i l e d on June 27, was followed by an a d j u d i c a t i o n of bankruptcy and the appointment of t r u s t e e s . The t r u s t e e s a r e suing to recover the cash p a i d to the defendant on May 23 a s a voidable p r e f e r e n c e under the p r o v i s i o n s of the Federal s t a t u t e . " o t u r n back a t t h i s p o i n t to s t a t e the d e f e n d a n t ' s use of T the proceeds of c o l l e c t i o n s . Uach of the member banks had an account with the defendant, an account exacted by the s t a t u t e (Federal Reserve Act, 38 U. S. S t a t . pp. 251, 270, § 19) a s one of the i n c i d e n t s of membership. These accounts were c r e d i t e d on May 19 and 20 with the amount of the Zartman d r a f t s , i . e . , the d r a f t s drawn on the t r u s t company, which were supposed, when r e c e i v e d by the defendant, to be equivalent to cash. As soon as n o t i c e came t h a t these d r a f t s had been dishonored, the e n t r y was r e v e r s e d . Later, on May 31, the c r e d i t was r e - e s t a b l i s h e d to t h e extent of $10,363.93, the cash payment then i n hand, each of the t h i r t y - s e v e n banks being a l l o t t e d i t s a p p r o p r i a t e share. Before the bankruptcy p e t i t i o n , the banks had withdrawn from t h e i r deposit accounts i n the usual course of busine ss moneys equal to the balances i n t h e i r favor a t the date of the c o n t e s t e d c r e d i t s , though they had a l s o made new d e p o s i t s which kept the d a i l y balances a t a l e v e l nearly uniform. If the f i r s t payments out of the accounts be a p p r o p r i a t e d to the f i r s t r e c e i p t s , a l l moneys c o l l e c t e d from the bankrupts had been r e m i t t e d by the defendant to the t h i r t y - s e v e n member banks, i t s correspondents and d e p o s i t o r s . The t r i a l judge l e f t i t to the j u r y to say whether the c o l l e c t i o n s had been made by the defendant a s agent or as owner. The j u r y found f o r the p l a i n t i f f , thus holding by t h e i r v e r d i c t t h a t the c o l l e c t i o n was as owner. The Appellate Division h e l d a s a matter of law t h a t the c o l l e c t i o n was a s agent, basing i t s holding i n l a r g e degree upon an agreement y e t to be considered between the defendant and i t s members. The c o l l e c t i o n having been made a s agent, the conclusion was thought to follow t h a t the agent was not l i a b l e since i t had s e t t l e d with i t s p r i n c i p a l s b e f o r e the r i g h t of reclamation had been p e r f e c t e d by t h e bankruptcy. We think the defendant was an agent and not an owner i n i t s *-6678 -3r e c e i p t of the Zartman d r a f t s and the s u b s t i t u t e d moneys. How the 157 checks were i n d o r s e d by the payees when d e p o s i t e d with the member banks, the r e c o r d does not t e l l u s . The problem to be solved, however, is: not one a s to the r e l a t i o n between the member banks r n d t h e i r d e p o s i t o r s . I t i s a problem a s to the r e l a t i o n between those banks and the d e f e n d a n t . We assume t h a t the form of t h e indorsements, i f not q u a l i f i e d by a g r e e ment, would have p a s s e d to the defendant such t i t l e , i f any, a s belonged to the i n d o r s e r s (Federal Reserve Bank v. Malloy, 264 U. S. 160, 164; City of Douglas v. F e d e r a l Reserve Bank, 271 IT. S. 489; 2:editable Trust Co. v . Rochling, 275 U. S. 248; H e i n r i c h v . F i r s t Mat. Ban!:," 219 N. Y. 1 ) . An agreement, however, i s i n e x i s t e n c e , t h e terms t h e r e o f p r o s c r i b e d by r e g u l a t i o n s a d o p t e d by t h e F e d e r a l Reserve Board under a u t h o r i t y c o n f e r r e d by the p r o v i s i o n s of t h e s t a t u t e . We must look to t h i s agreement to discover t h e r e l a t i o n between the defendant and i t s members i n the p r o c e s s of c o l l e c t i o n . By the F e d e r a l Reserve Act, as f i r s t e n a c t e d i n 1913, a. r e s e r v e bank was a u t h o r i z e d to c o l l e c t only those checks which were drawn on member banks and which were d e p o s i t e d by a member bank or a n o t h e r r e s e r v e bank or t h e United S t a t e s (Farmers Bank v . Federal Reserve Bank, 262 If.- S. 649, 654). Even then, however, the r e g u l a t i o n s of the Board provided^ " I n h a n d l i n g items f o r member banks, a Federal Reserve Bank w i l l a c t as agent only" ( C i r c u l a r No. 1 of 1916, F e d e r a l Reserve Board Report of 1916, p.153, n o t e ; Federal Reserve B u l l e t i n , May, 1916, p p . 259, 2 6 0 ) . The s t a t u t e was amended i n September, 1916 ( § 13) (39 S t a t . 752), so as t o a u t h o r i z e a r e s e r v e bank to r e c e i v e f o r c o l l e c t i o n from any member checks drawn on non-member banks l o c a t e d i n the d i s t r i c t . The Board renewed i t s o r d e r t h a t the r e l a t i o n should be one of agency ( R e g u l a t i o n J , subd» 7, F e d e r a l Reserve Board, Report of 1916, p . 171). In 1917 t h e s t a t u t e was again amended, t h i s time by a p r o v i s i o n t h a t " s o l e l y f o r the purposes of exchange or of c o l l e c t i o n , " a r e s e r v e bank may r e c e i v e from a non-member bank or t r u s t company checks payable upon p r e s e n t a t i o n , upon c o n d i t i o n t h a t such non-member bank or t r u s t company m a i n t a i n an adequate balance with the r e s e r v e bank of i t s d i s t r i c t (Act of June 21, 1917, ch, 32, § 4; 40 S t a t . 232, 234; c f . 262 U. S. a t p . 655). C o l l e c t i o n s were thus p e r m i s s i b l e both f o r members and f o r non-members. • I n the s e t t i n g of t h i s s t a t u t e , R e g u l a t i o n J ( s e r i e s of 1924) was adopted by t h e Board, and i s now to be c o n s t r u e d . I t r e c i t e s ( i n terms s u b s t a n t i a l l y t h e same a s t h o s e of e a r l i e r r e g u l a t i o n s ) t h a t the Board, " d e s i r i n g to a f f o r d both t o the p u b l i c and to the v a r i o u s banks of the country a d i r e c t , e x p e d i t i o u s and economical system of check c o l l e c t i o n and s e t t l e m e n t of b a l a n c e s , h a s a r r a n g e d to have each F e d e r a l r e s e r v e bank e x e r c i s e the f u n c t i o n s of a c l e a r i n g house and c o l l e c t chocks f o r such of i t s member banks a s d e s i r e to a v a i l themselves of i t s p r i v i l e g e s , " to which i s added a r e c i t a l t h a t l i k e p r i v i l e g e s w i l l be a f f o r d e d to nonjnembor banks and t r u s t companies q u a l i f y i n g i n c e r t a i n ways. I t then proceeds to a statement of the terms and c o n d i t i o n s on which b u s i n e s s may be dene. "The F e d e r a l Reserve Board hereby a u t h o r i z e s the F e d e r a l r e s e r v e ^b&riks to h a n d l e such checks s u b j e c t t o t h e f o l l o w i n g terms and c o n d i t i o n s ; and each member and nonmember c l e a r i n g bank which sends chocks to any X-6678 -4Federal r e s e r v e bank: s h a l l "by such a c t i o n be deemed ( a ) t o a u t h o r i z e the F e d e r a l r e s e r v e "banks t o handle such checks s u b j e c t to the f o l l o w i n g terms and c o n d i t i o n s , (b) to warrant i t s own a u t h o r i t y to give the Fede r a l r e s e r v e banks such a u t h o r i t y , and ( c ) to agree to indemnify any f e d e r a l r e s e r v e bank f o r any l o s s r e s u l t i n g from the f a i l u r e of such sending bank to have such a u t h o r i t y . " Among the terms and c o n d i t i o n s thus p r o s c r i b e d a r e t h e s e : "A Federal r e s e r v e bank w i l l a c t only a s agent of the bank from which i t r e c e i v e s such checks." "A Federal r e servo bank may p r e s e n t such checks f o r payment or send such chocks f o r c o l l e c t i o n d i r e c t to the bank on which they a r e drawn," or forward them "to a n o t h e r a g e n t . " "A F e d e r a l r e s e r v e bank may * * * at- i t s o p t i o n , e i t h e r d i r e c t l y or through an a g e n t , accept * * * frank d r a f t s * * * cas k » " without being l i a b l e f o r any l o s s t h e r e b y r e s u l t i n g . The amount of any check f o r which payment i n a c t u a l l y and f i n a l l y c o l l e c t e d funds i s not r e c e i v e d s h a l l be charged back t o the forwarding bank, r e g a r d l e s s of whether or not t h e check i t s e l f can be r e t u r n e d . " F i n a l l y each F e d e r a l He serve bank may promulgate i t s own r e g u l a t i o n s , not i n c o n s i s t e n t with law o r with t h e r e g u l a t i o n s o f the Board, and such r e g u l a t i o n s s h a l l be b i n d i n g upon member and n o n - m e m b e r banks a vailing of its privileges. P u r s u a n t to t h e a u t h o r i t y thus c o n f e r r e d , the defendant made i t s own r e g u l a t i o n s ( c i r c u l a r Ho. 728, J u l y 1 , 1926), r e a f f i r m i n g the r e g u l a t i o n s adopted by the Board and supplementing them by o t h e r s . One of the supplemental r u l e s p r e s c r i b e s the p e r i o d t h a t s h a l l e l a p s e b e f o r e any c r e d i t s h a l l be allowed, e i t h e r p r o v i s i o n a l or f i n a l , f o r checks s e n t i n by members. C r e d i t may be given a t once i n what i s known a s a deferred, account, not s u b j e c t to be drawn on, but t h e r e i s to be no c r e d i t i n the r e s e r v e account u n t i l "the a p p r o p r i a t e time i n d i c a t e d on e c u r r e n t time schedule has e l a p s e d , " though even upon e n t r y i n t h a t account, " c r e d i t and a v a i l a b i l i t y a r e i n a l l i n s t a n c e s s u b j e c t t o * * * a c t u a l r e c e i p t of payment." The time schedule thus r e f e r r e d t o i s based upon the average m a i l i n g time r e q u i r e d f o r items to reach the paying bank, p l u s the time r e q u i r e d f o r the paying bank to remit to t h e d e f e n d a n t . Another supplemental r u l e g i v e s n o t i c e to member banks and o t h e r s t h a t defendant w i l l handlo chocks as cash items only i n accordance with uniform i n s t r u c t i o n t h e r e i n s e t f o r t h , and t h a t "any c o n t r a r y or s p e c i a l i n s t r u c t i o n s noted on cash l e t t e r s o r a t t a c h e d to checks w i l l be ' d i s r e g a r d e d . " Another yule p r e s c r i b e s the form of the indorsement to be adhered t o by t r a n s m i t t i n g banks, whether members or non-members. The indorsement must be "without r e s t r i c t i o n to the o r d e r of the Federal Reserve Bank of New York or to the order of any bank, banker, or t r u s t company with a l l p r i o r i n dorsements guaranteed.." This form i s necessary, as has been s t a t e d , whether the checks t r a n s m i t t e d to the defendant are from members or non-members though the s t a t u t e i s e x p l i c i t to the e f f e c t t h a t t h e r e s h a l l be no power i n a r e s e r v e bank to handle checks f o r non-members except " s o l e l y f o r the purposes of exchange or of c o l l e c t i o n " (Federal Reserve Bank Act, 6 13, amendment^of 1917, § 4) . P l a i n l y , then, the form of the indorsement was not conceived of as i n v o l v i n g a d e p a r t u r e from the mandate of the s t a t u t e * P l a i n l y , t o o , i t was not conceived of as i n c o n s i s t e n t w i t h t5je r e g u l a t i o n s X-6678^-^9 -5and the c i r c u l a r whereby checks received from any "bank a r e to "be handled by the r e s e r v e "banks i n the capacity of agents only. The same c i r c u l a r and r e g u l a t i o n s t h a t p r e s c r i b e the form of the indorsement e s t a b l i s h the p r a c t i c e and the agreement to r e c e i v e the checks a s agent, and give notice to t r a n s m i t t i n g banks t h a t the terms thus e s t a b l i s h e d s h a l l be exclusive of any o t h e r s . The i n f e r e n c e of ownership t h a t follows i n most cases from an u n q u a l i f i e d indorsement i s one dependent upon i n t e n t i o n . I t may be overborne by agreement to the contrary, whether the evidence of a g r e e ment be d i r e c t or c i r c u m s t a n t i a l (Federal Reserve Bank v. Malloy, supra, a t p . 164). Direct as well as c i r c u m s t a n t i a l i s the evidence b e f o r e u s . The r e g u l a t i o n s of the Board, r e i n f o r c e d by the defendant 4 s c i r c u l a r , and a s s e n t e d to by the t r a n s m i t t i n g banks, a r e equivalent to an express agreement t h a t a s between the defendant and the other banks the r e l a t i o n engendered by the r e c e i p t of u n c o l l e c t e d paper s h a l l be an agency and nothing more. The agreement i s confirmed by "the u n d e r l y i n g purposes and p o l i c i e s of the Federal reserve system" (per CROUCH, J . , i n the court be-low), by the p l a c e of the reserve banks i n the d i s t r i b u t i o n of banking f u n c t i o n s a s conceived and developed by the framers of the s t a t u t e . There i s no token of a purpose to burden clearance and c o l l e c t i o n with the r e s p o n s i b i l i t i e s of ownership. The argument i s made t h a t a d i s t i n c t i o n i s to be drawn between c o l l e c t i o n f o r the member banks and c o l l e c t i o n f o r the use of o t h e r s . The r e g u l a t i o n s and the c i r c u l a r do not express such a d i s t i n c t i o n ; i f i t i s to be made, i t must be i n t e r p o l a t e d by a process of c o n s t r u c t i o n . We are t o l d t h a t what i s s a i d i n the r u l e s a s to the e x i s t e n c e of an agency had i t s o r i g i n i n an attempted a d a p t a t i o n of the s t r u c t u r e of the system to the n e c e s s i t i e s of the new "business made p o s s i b l e i n 1917 through the amendment of the s t a t u t e . T i l l then, c o l l e c t i o n s by a r e s e r v e bank were always f o r the account of member banks, f o r whom i t was a l s o a t l i b e r t y to r e c e i v e checks or moneys f o r d e p o s i t . Since then, t h e r e may a l s o be c o l l e c t i o n s f o r the convenience of non-members. To these and to these only, we a r e t o l d , t h e r e g u l a t i o n and the c i r c u l a r were intended to a p p l y . The h i s t o r y , s t a t u t o r y and. a d m i n i s t r a t i v e , of the Federal Reserve system teaches a d i f f e r e n t l e s s o n . There i s no connection, temporal or causal, between the g e n e s i s of the r u l e that the r e l a t i o n s h a l l be one of agency and the enlargement of the f i e l d of business following the amendment of the s t a t u t e . Long "before t h e r e was power to make c l e a r a n c e s or c o l l e c t i o n s f o r banks not members of the system, there was a l r e a d y a statement i n the r u l e s t h a t i n the handling of checks and d r a f t s when forwarded by members., the r e s e r v e banks were to be deemed to a c t i n the c a p a c i t y of agents only. Amendments of the r u l e s have r e s t r a i n e d r e s p o n s i b i l i t y s t i l l f a r t h e r by adding a p r o v i s i o n t h a t the agency s h a l l be one f o r the forwarding bank, and not f o r any o t h e r , thereby excluding an attempt t o convert i t i n t o an agency f o r the payees of the checks, the o r i g i n a l d e p o s i t o r s (Federal Reserve Bank v . Malloy, supra; City of Douglas v . Federal Reserve Bank, s u p r a ) . From the beginning, however, the r e l a t i o n has been c l a s s i f i e d as agency, not ownership. A c l a s s i f i c a t i o n so e x p l i c i t may not be h e l d to have been X-6678 » 110 n e u t r a l i z e d by the terms of the "cash l e t t e r s , ' * vzith t h e i r varying declar a t i o n s t h a t the checks a r e inclosed f o r " c r e d i t , " or f o r " c o l l e c t i o n and c r e d i t , " or f o r " c o l l e c t i o n and remittance" ( c f . Bank of America v. Way d e l l , 187 N. Y. 115, 120). By express p r o v i s i o n of the defendant 1 s c i r c u l a r the l e t t e r s must "be disregarded i f i n c o n s i s t e n t v;ith the uniform p r a c t i c e e s t a b l i s h e d by the c i r c u l a r and by the r e g u l a t i o n s of the Board behind i t . There and novzhere e l s e , l e a s t of a l l i n a p e r f u n c t o r y notice of remittance embodied i n a p r i n t e d form, the agreement governing the r e l a t i o n has i t s f i n a l and complete expression. If the defendant was an agent i n the r e c e i p t of the Zartman d r a f t s and the s u b s t i t u t e d moneys, the ques-tion must s t i l l be met whether i t s l i a b i l i t y was enlarged by any of i t s a c t s t h e r e a f t e r . We must say whether the agent became s u b j e c t to the l i a b i l i t y of an owner when i n s t e a d of r e m i t t i n g the proceeds of c o l l e c t i o n d i r e c t l y to i t s p r i n c i p a l s , i t p u t the proceeds to t h e i r c r e d i t i n an o r d i n a r y deposit account, thereby t u r n i n g the r e l a t i o n from one of agency i n t o one of c r e d i t o r and debtor. I n e f f e c t , the s i t u a t i o n was then the same a s i f the defendant, r e c e i v i n g the money i n the capacity of agent, had handed i t over to the p r i n c i p a l s , and had r e c e i v e d i t back a t once to be r e t a i n e d a s a deposit (Commercial Bank of Penn. v. Armstrong, 148 U. S. 50, 58, 59; Marine Bank v» F u l t o n Bank, 3 Wall. (U.S.) 252: E v a n s v i l l e Bank v. German American Bank, 155 U. S. 556; National B. & D. Bank v. Hubbell, 117 N. Y. 384, 396; Langley v. Warner, 3 N. Y# 327, 329). We think t h e new r e l a t i o n did not take from the defendant the p r o t e c t i o n of the r u l e t h a t money p a i d to an agent, and l a w f u l l y accepted, may not t h e r e a f t e r be reclaimed by one who has made the payment with n o t i c e of the agency, i f b e f o r e the attempted reclamation the agent i n good f a i t h has s e t t l e d with the p r i n c i p a l (National Park Bank v. Seaboard Bank, 114 IT. Y. 28; National City Bank v . Westcott, 118 N. Ye 468, 473, 474; Hooper v . Robinson, 98 U. S. 528; Buller v. Harrison, 1 Cowper, 565). True, indeed, i t i s t h a t the settlement s u f f i c i e n t to c a l l t h i s p r e c e p t into play must be a c t u a l and not construct i v e ( B u l l e r v. Harrison, supra: Mowatt v. McLelan, 1 Wend. 173, 178; La Farge v . Knee land. 7 Cow. 456, 460). If a l l t h a t t h e agent has done i s to agree with the p r i n c i p a l t h a t the fund, s t i l l i n t a c t , s h a l l be h e l d t h e r e a f t e r a s a debtor, he i s not s u b j e c t e d to any l o s s i f d i r e c t e d to make r e s t i t u t i o n out of the moneys thus r e t a i n e d ( c f . La Far go v. Kne eland and Mowatt v. McLelan, s u p r a ) . On the other hand, when once the f u n d has been d e p l e t e d by payment of the debt, the s i t u a t i o n becomes the same as i f the payment to the p r i n c i p a l had been made a t the beginning. The agent i s no b e t t e r , o f f by reason of the new r e l a t i o n , but even if no b e t t e r , he i s e q u a l l y no worse. As t o t h i s aspect of the case, the r u l i n g i n National Park Bank v. Seaboard Bank (supra) i s a precedent so nearly i d e n t i c a l t h a t i t must be accepted as d e c i s i v e . There the Seaboard Bank r e c e i v e d a check f o r c o l l e c t i o n as agent f o r the Eldred Bank and upon r e c e i p t of t h e proceeds gave n o t i c e to i t s p r i n c i p a l i n accordance with a course of dealing t h a t the proceeds had been c r e d i t e d i n an account c u r r e n t between them on which d r a f t s from time to time were drawn as on an ordinary account between a bank and a d e p o s i t o r . There can be no question t h a t the c o l l e c t i n g bank, X-6678 • • * 4 -7- : 111 a f t e r the giving of t h i s notice, was at l i b e r t y to use the proceeds with a l l the freedom of an owner, discharged of any duty to remit i n specie to the principal ( c f . Commercial Bank of Penn. v. Armstrong, supra; Marine Bank v. Fulton Bank, supra). Even so, the ruling was that i t could no longer "be held to r e s t i t u t i o n at the s u i t of the drawee bank a f t e r the drafts on the account current had exhausted the credit balance e x i s t i n g at the time of the c o l l e c t i o n . To determine whether the balance had been used up, the court applied the rule i n Clayton's Case (1 Meriv. 572, 604, 608) whereby "the successive payments and credits" are to be appropriated "in discharge of the items of debt antecedently due in the order of time i n which they stand in the account," the f i r s t payments out extinguishing the f i r s t payments in. There are many other cases, State and Federal, enforcing a l i k e rule (Allon v. Culver, 3 Denio, 284, 293; Thompson v. St. Nicholas Hat. Bank, 113 N. Y. 325, 333; Delaware Dredging Co. v. Tucker Co., 25 Fed. Rep. (2d) 44, 46; Cory Bros. & Co. v . Ownors of S. S. Mecca, 1897 A. C. 286, 288; Deeloy v. Lloyd's Bank, l t d . , 1912 A. C. 756, 783; Matter of Stenning, (1895) 2 Ch. 433). We have no thought to suggest that t h i s or any other formula as to the application of payments to the items of an account i s of such i n f l e x i b l e v a l i d i t y as to admit of no exceptions. Whatever rule i s framed w i l l be subordinated to the broader principle that an application, usually appropriate, may be varied by the court when variance i s necessary to promote the ends of j u s t i c e (Korbly v. Springfield Inst, for Savings, 245 U. S. 330; Lichtenstein v. Grossman Constr. Corp.,- 248 N. Y. 390; Matter of H a l l e t t ' s Estate. 13 Ch. Div. 696; Cunningham v.• Brown, 365 U> S. 1, 12, 13). Hone the l e s s , the formula i s expressive of a rule that must prevail i n the absence of persuasive reasons for q u a l i f i c a t i o n or exception. We cannot f a i r l y say that j u s t i c e w i l l be thwarted i f the rule i s followed here, The p r i n c i p a l s are solvent banks, and the trustees are a t l i b e r t y to pursue the moneys i n their hands (Matter of H i l l Co.. 130 Fed. Rep. 315, 318). At l e a s t , i f there i s any obstacle, there i s nothing i n the record to t e l l us what i t i s . No obvious requirement of p o l i c y or j u s t i c e exacts the suspension or abandonment of an established rule of law to the end that c o l l e c t i o n from an agent may take the place of an e x i s t i n g and s u f f i c i e n t remedy by s u i t against the p r i n c i p a l s . Passing, then, from the question of the application of payments, we come back to the inquiry whether tho immunity of the agent i s l o s t or impaired when the proceeds of the c o l l e c t i o n , instead of being remitted to the principal at once, are retained as a deposit and remitted l a t e r on. What was h e l d on that subject i n the case of the Seaboard Bank has not been modified by anything decided since that time. National B. & D. Bank v..Hubbell (supra), with some analogies on the surface, i s e s s e n t i a l l y d i s s i m i l a r . The f a c t s i n the Hubbell case were these: Checks forwarded for c o l l e c t i o n had been placed when c o l l e c t e d to the credit of a deposit account. Upon the f a i l u r e of the bank, the depositor made claim to the proceeds i n the hands of a receiver as i f subject to a trust, though the entry i n the deposit account had been made with i t s a s s e n t . Tho court held that the claim had been turned into a debt, and that the depositor must come i n and share with the general creditors ( c f . Latzko v. Equitable Trust Co., 275 U. S. 254). The point to be determined was the l i a b i l i t y of X-6678 -8 US an agent to a p r i n c i p a l , of a bank; to i t s correspondent, a f t e r the t e r m i n a t i o n of the agency. Ho question was involved, as to i t s l i a b i l i t y to a t h i r d person, the drawee of the checks, seeking r e s t i t u t i o n a f t e r the agent and the p r i n c i p a l had made a s e t t l e m e n t between themselves. We conclude, as i n the Seaboard case, t h a t the defendant did not enlarge i t s l i a b i l i t y to the r e p r e s e n t a t i v e s of the bankrupts when, a f t e r c o l l e c t i o n was complete, i t transformed i t s r e l a t i o n to the forwarders from agency to debt, l e g a l concepts w i l l not be s t r a i n e d to r e l i e v e an agent of l i a b i l i t y by f o r c e of a s e t t l e m e n t t h a t i s merely formal or c o n s t r u c t i v e , but by the same token they w i l l not be s t r a i n e d a g a i n s t him to charge him with l i a b i l i t y . In a formal or cons t r u c t i v e sense, the defendant, a c t i n g as agent, s e t t l e d with i t s p r i n c i p a l s when by the e n t r i e s i n i t s books i n accordance with the course of d e a l i n g i t gave up the moneys r e c e i v e d by i t a s agent and took thorn back as d e b t o r . Such a settlement w i l l not h a l t the p u r s u i t and r e l i e v o from l i a b i l i t y while the fund i s s t i l l i n t a c t . I t w i l l not open the door to enable the p u r s u i t to be continued when the fund has been d i s b u r s e d . ",7e have s a i d t h a t the money was l a w f u l l y c o l l e c t e d by the agent and was p a i d by the drawee with n o t i c e of the agency. Lawful the c o l l e c t i o n was a t the moment of the making, though the agent i n c o l l e c t ing had cause to b e l i e v e t h a t the e f f e c t of the payment would be a p r e f e r ence among c r e d i t o r s . The s t a t u t e does not say t h a t one who accepts a payment from a debtor b e l i e v e d to be insolvent i s g u i l t y of a f r a u d (Van I d e r s t i n e v . National Discount Co., 227 U. S. 575, 582; Wilson v . Mitchell Woodbury Co., 214 Mass. 514, 519; Grandison v . Robertson, 231 Fed. Hep. 785, 788). A payment so made i s not even voidable t h e r e a f t e r u n l e s s a p e t i t i o n i n bankruptcy follows w i t h i n four months. If t h a t i n t e r v a l e l a p s e s with bankruptcy postponed, the p r e f e r e n c e , however dubious i n i t s making, i s proof a g a i n s t a s s a u l t , 'we may not hold i n such c o n d i t i o n s t h a t the defendant by the mere acceptance of the money was g u i l t y of a wrong, and so chargeable with l i a b i l i t y i f i t did not keep the fund i n t a c t (Mechem on Agency, v o l . 1, § § 1435, 1436). Before r e t u r n became a duty, the money was p a i d o u t . If there was need of notice to the drawee t h a t the d r a f t s were c o l l e c t e d by the defendant as agent and not as owner (Mechem, supra, § 1439; Holt v. Ross, 54 N, Y. 472; National City Bank v. T/estcott, 118 JT. Y. 468, 473; Canal Bank v. Bank of Albany, 1 H i l l , 287; c f . , however, W i l l i s t o n , on Contracts, v o l . 3, § 1595, n o t e ) , we think the n o t i c e was imparted by the r e g u l a t i o n s and the c i r c u l a r s , p u b l i c and o f f i c i a l documents, which, l i k e the l i m i t a t i o n s of a corporate c h a r t e r , were to be heeded by the world a t l a r g e . But n o t i c e was unnecessary, i f the defendant was not a c r e d i t o r , f o r the r i g h t to avoid the p r e f e r e n c e i s the c r e a t u r e of the s t a t u t e , and the f a c t , not the s u p p o s i t i o n or fancy of the debtor, must t e l l us when the r i g h t e x i s t s . 17e p a s s then to the f i n a l question, whether w i t h i n the meaning of the Act of Congress a bank c o l l e c t i n g a d r a f t as agent, and not as owner (Matter of H i l l Co., s u p r a ) , i s a c r e d i t o r s u b j e c t to a duty to make 4 £-6678 • -9- : 1 1 3 r e s t i t u t i o n of a p r e f e r e n c e , though there has "been remittance to i t s p r i n c i p a l p r i o r to the 'bankruptcy. There can he no answer without r e c a l l i n g the p r o v i s i o n s of the s t a t u t e . Bankruptcy Act, s e c t i o n 60-b (Jiason's U. S« Code, t i t l e 11, ch. 6, § 96) p r o v i d e s : " I f a "bankrupt s h a l l * * * have made a t r a n s f e r of any of h i s p r o p e r t y , and i f , a t the time of the t r a n s f e r * * * and * * * w i t h i n f o u r months before the f i l i n g of the p e t i t i o n i n bankruptcy * * *, the bankrupt be i n s o l v e n t , and * * * the t r a n s f e r then operate as a p r e f e r e n c e , and the person r e c e i v i n g i t or to be b e n e f i t e d thereby, or h i s agent a c t i n g t h e r e i n , s h a l l then have reasonable cause to b e l i e v e t h a t the enforcement of such * * * t r a n s f e r would e f f e c t a p r e f e r e n c e , i t s h a l l be voidable by the t r u s t e e and he may recover the p r o p e r t y or i t s value from such p e r s o n . " One who a c c e p t s a p r e f e r e n c e not f o r h i s own account b a t as agent f o r a p r i n c i p a l i s not "the person r e c e i v i n g i t or to be b e n e f i t e d thereby." To be sure, the p r i n c i p a l i s chargeable with n o t i c e imparted to the agent as to the f i n a n c i a l condition of t h e debtor and the t e n dency of the payment to e f f e c t a p r e f e r e n c e . To be s u r e , a l s o , the agent may be sued d i r e c t l y i f the t i t l e i s i n h i s name and t h e s u b j e c t of the t r a n s f e r i n t a c t i n h i s p o s s e s s i o n , j u s t as s u i t might be brought i n l i k e c o n d i t i o n s a g a i n s t any other t r u s t e e holding money or other p r o p e r t y the f r u i t s of an unlawful s a l e . The one who r e c e i v e s a p r e f e r ence, however, w i t h i n the meaning of the s t a t u t e , i s the one who i s p r e f e r r e d , and the one who i s p r e f e r r e d i s not the mere custodian or intermediary, but the c r e d i t o r , present or contingent, who r e c e i v e s by v i r t u e of the p r e f e r e n c e an excessive share of the e s t a t e . The s t a t u t e does not i n t e n d , of course, t h a t the f o r a of the t r a n s a c t i o n s h a l l be p e r m i t t e d to obscure r e a l i t i e s . "To c o n s t i t u t e a p r e f e r e n c e , i t i s not necessary t h a t the t r a n s f e r be made d i r e c t l y to the c r e d i t o r . I t may be made to a n o t h e r f o r h i s b e n e f i t " ( n a t i o n a l Bank of Newport v . n a t i o n a l Herkimer County Bank. 235 U. S. 178, 184). This w i l l happen, f o r example, i f bankrupts make a t r a n s f e r of t h e i r a s s e t s to a c r e d i t o r of t h e i r own c r e d i t o r , who i s t h u s p r e f e r r e d to the same extent as i f the t r a n s f e r had been made t o him d i r e c t l y (225 U. S. a t p . 184). There has been no attempt i n the d e c i s i o n s to catalogue forms of b e n e f i t and methods of evasion. No doubt t h e case supposed i s t y p i c a l of o t h e r s . One thread of u n i f o r m i t y may be looked f o r , none the l e s s , among a l l d i v e r s i t i e s of circumstance*• The person t o be charged with l i a b i l i t y , i f he has p a r t e d b e f o r e the bankruptcy with t i t l e and possession, must have been more than a mere c u s t o d i a n , an intermediary or conduit between the bankrupt and the c r e d i t o r . D i r e c t l y or i n d i r e c t l y he must have had a b e n e f i c i a l i n t e r e s t i n the p r e f e r e n c e to be avoided, the t h i n g to be reclaimed. One w i l l f i n d an a p p o s i t e i l l u s t r a t i o n of the e f f e c t and meaning of the s t a t u t e i n the h o l d i n g i n Keystone Warehouse Co. v. Bis s e l l (203 Fed. Rep. 652). • The buyer of f l o u r , i n t e n d i n g to p r e f e r the s e l l e r , made payments to a warehouseman who had n o t i c e of insolvency. The holding was t h a t the warehouseman, who had r e m i t t e d the payments t o t h e s e l l e r , was not chargeable t h e r e a f t e r a t the s u i t of the t r u s t e e s . A p o s s e s s o r y r i g h t or s p e c i a l 114 *•4"* & X-6678 -10- p r o p e r t y having i t s o r i g i n i n the bailment nay have given him capacity to m a i n t a i n a s u i t f o r f l o u r wrongfully withdrawn, but did not turn him into a c r e d i t o r r e c e i v i n g d i r e c t l y or i n d i r e c t l y the b e n e f i t of a p r e f erence. Mercantile Trust Co. v. S c h l a f l y (299 Fed. Hep. 202), much r e l i e d on by the p l a i n t i f f s , i s not a holding to the c o n t r a r y , f o r t h e r e the defendant to be charged, a t r u s t e e under a mortgage, had the moneys i n i t s p o s s e s s i o n , the s u i t being brought b e f o r e d i s t r i b u t i o n among the bondholders (299 Fed. Rep. a t p . 203). True, indeed, i t i s t h a t the phraseology of the s t a t u t e i s inexact and ambiguous. Even so, a court w i l l be c a u t i o u s i n imputing to the lawmakers a purpose to uproot the s e t t l e d p r i n c i p l e s of the common law a s to the e f f e c t of payment to an agent when followed by a s e t t l e m e n t . All t h i s i s the more p l a i n l y t r u e i n view of the a n t i t h e s i s c l e a r l y marked upon the f a c e of the enactment between the r e c i p i e n t s of b e n e f i t , d i r e c t or i n d i r e c t , who a r e the p e r sons to be sued, and t h e i r agents i n the busine ss of the t r a n s f e r , whose l i a b i l i t y , i f i t e x i s t s , i s secondary and i n c i d e n t a l to the l i a b i l i t y of o t h e r s . We f i n d nothing i n c o n s i s t e n t with these views i n Marine Trust Co. v. Lauria (213 App. Div. 64; a f f d . , 244 IT. Y. 577) and Matter of Veler (249 Fed. Rep. 633). A bank t o which a check i s t r a n s f e r r e d by a r e s t r i c t i v e indorsement f o r c o l l e c t i o n only may maintain an a c t i o n on the check i n i t s own name because s e c t i o n 67 of the Negotiable Instruments law (Cons. Laws, ch. 38) says t h a t i t may (Marine Trust Co. v. Lauria, supra; c f . Hays v . Ha.thorn. 74 N. Y. 486; Spencer v. Standard C. & M. Corp.. 237 N. Y. 479). This does not mean t h a t i t i s owner for every purpose; i n deed by the very h y p o t h e s i s i t i s not owner, but c o l l e c t o r . Whether i t i s p r i v i l e g e d i n l i k e circumstances to maintain a p e t i t i o n i n bankruptcy mast be h e l d to be s t i l l u n c e r t a i n . The opinion i n Matter of Veler (supra) deals with a case where t h e r e was more than a mere agency. The a s s i g n e e had a t i t l e a b s o l u t e on i t s f a c e , though the motive of the assignment was to f a c i l i t a t e c o l l e c t i o n f o r the b e n e f i t of a n o t h e r . Motive without more may be i n s u f f i c i e n t to derogate from t i t l e (Sheridan v . Mayor. 68 N. Y. 30; Hays v. Ha thorn, s u p r a ) . But the r i g h t to sue, i f i t e x i s t s , does not mean of n e c e s s i t y t h a t the s u i t o r i s r e c i p r o c a l l y s u b j e c t to a l i a b i l i t y to be sued (Keystone Warehouse 'Co. v. M s s e l T . ' sugraT."We^think the mnsf "be read i n conformity with common-law analogies to exempt an agent or custodian from the duty to account f o r p r o p e r t y or money, the s u b j e c t of a p r e f e r e n c e , i f oefore the coming of bankruptcy he has s e t t l e d v i t h h i s principal. The judgment should be a f f i r m e d v i t h c o s t s . POUND, CRA2I3, LEHMAN, K3LL0G-G, O'BRIEN and HUBBS, J J . , Judgment a f f i r m e d . concur. X-6679 F 2 DE R A L BE.S1H7S BOARD STATEMENT FOE THE PRESS For imr.:ed.iate r e l e a s e . August 14, 1930 The Federal Reserve Board announces t h a t the Federal Reserve Bank of Kansas City has established, a rediscount r a t e of 3 l / 2 $ on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e August 15, 1930. 11C FEDERAL RESERVE BOARD WASHINGTON X-6680 August 18, 1930. ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD Dear S i r : I am advised t h a t the Treasury Department has mailed to you a copy of the proposed r e v i s i o n of Treasury Department C i r c u l a r No. 176 f o r c r i t i c i s m and comment, and I wish to b r i n g to your a t t e n t i o n the d e s i r a b i l i t y of submitting your comments to the Treasury Department as promptly as p o s s i b l e . The check c o l l e c t i o n c i r c u l a r s of the Federal r e s e r v e banks, the uniform p r o v i s i o n s of which are now i n process of r e v i s i o n to accord with the changes i n Regulation J e f f e c t i v e September 1, c o n t a i n c e r t a i n p r o v i s i o n s which depend upon p r o v i s i o n s of Treasury Department Circular No. 176. The r e v i s i o n of the check c o l l e c t i o n c i r c u l a r s of the Federal r e s e r v e banks t h e r e f o r e mast wait u n t i l c i r c u l a r No. 176 has been d e f i n i t e l y and f i n a l l y adopted. I understand from the Treasury Department t h a t c i r c u l a r No. 176 can be adopted and promulgated as of September 1 i f the comments from the Federal r e s e r v e banks a r e r e c e i v e d promptly. You are requested, t h e r e f o r e , to submit such c r i t i c i s m and comment a s you or your counsel may have regarding the r e v i s i o n of c i r c u l a r Mo. 176 to the Treasury Department a t your e a r l i e s t convenience. R e p r e s e n t a t i v e s of the Treasury Department discussed the proposed r e v i s i o n of Treasury Department C i r c u l a r NO. 176 with the Conference of Counsel of a l l Federal r e s e r v e banks h e l d i n Washington, D. C. on June 9 and 10, 1930, a t which conference several members of the Standing Committee on C o l l e c t i o n s were p r e s e n t . No s u b s t a n t i a l d i f f e r e n c e of opinion developed between the Treasury Department and the Federal r e s e r v e bank counsel or members of the Standing Committee on C o l l e c t i o n s with r e f e r e n c e to the p r o v i s i o n s of the proposed r e v i s i o n of the c i r c u l a r , except as to Sections 35 and 37 (now Sections 33 and 3 4 ) . As to t h e s e s e c t i o n s i t was found impossible to reach an agreement and a f t e r some d i s c u s s i o n i t was decided t h a t the Federal reserve banks would merely r e s e r v e the r i g h t to address l e t t e r s to the S e c r e t a r y of the Treasury s t a t i n g t h e i r p o s i t i o n with r e l a t i o n t h e r e t o i f they should so d e s i r e . http://fraser.stlouisfed.org/ TO GOVERNORS Federal Reserve Bank of St. Louis Yours very t r u l y , R. A. Young, Governor. OF' ALL F. R. .BANKS. ? • 11 X-6681 STATEMENT OF BUREAU OF ENGRAVING AND PRINTING Federal Reserve Notes, S e r i e s 1928. J u l y 11 t o 31, :1930. Total $10 $500 $1000 $5000 $10000 Sheets #20 15 200 200 Boston 7b,000 50,000 10,000 130,400 363,600 New York 200,000 120,000 40,000 1 ,600 2,000 P h i l a d e l p h i a 70,000 40,000 10,000 200 120,400 200 Cleveland 60,000 30,000 20,000 300 200 110,500 200 200 70,400 Richmond 40,000 20,000 10,000 30,000 16,000 8,000 Atlanta 200 300 36 36 54,572 Chicago S t . Louis 20,000 10,000 4,000 34,900 100 Minneapolis 20,000 10,000 4,000 100 34,200 200 Kansas City20,000 200 8,000 4,000 32,400 Dallas 20,000 14,000 4,000 100 100 38,200 San Francisco 40,000 24,000 16,000 500 500 36 36 81,072 590,000 342,000 130,000|3 ,600 4,000 1,069,744 s h e e t s , @ $92.43 per M, 72 Amount $12,052.87 33,607.55 11,128.57 10,213.52 6,507.07 5,044.09 - 3,142.62 3,161.11 2,994.73 3,530.83 7,493.48 72 1,069,744 $98,876.44 $98,876.44 118 FOREIGN BRANCHES OF AMERICAN BANKING INSTITUTIONS American Trust Company. San Francisco. C a l i f . Branch: England: London Bankers Trust Company. New York. IT. Y. Branches: France: Paris England: London Chase National Bank. New York. N. Y. Branches: Cuba: Havana England: London (two o f f i c e s ) Panama: Panama City Canal Zone: Cristobal Empire Trust Company. Wow York. N. Y. (Non-Member') Branch: England: London F i r s t National Bank. Boston. Mass. Branches: Argentina: Buenos Aires ( f o u r o f f i c e s ) Cuba: Havana (three offices) Santiago Cienfuegos Sancti Spiritus Guaranty Trust Company. New York. N. Y. Branches: England: London ( t h r e e o f f i c e s ) Liverpool Belgium: Antwerp Brussels France: Paris Havre N a t i o n a l City Bank of New York. New York. N. Y. Buenos Aires (two o f f i c e s ) Branches: Argentina: Rosario Belgium: Antwerp Brussels Brazil: Pemambuco Rio de J a n i e r o Santos Sao Paulo Chile: Santiago Valparaiso China: Canton Dairen Hankow Harbin Hongkong X-6682 X-6682 -2- Hational City Bank of ITew York, Hew York, N. Y. (continued.) Branches: China: Mukden, Manchuria Peking Shanghai Tientsin Colombia: Bogota Medellin Call Cuba; Caibarien Camaguey Cardenas Ciego de Avila Cienfuegos Florida G-uantanamo Havana ( s i x o f f i c e s ) City Branch Belascoain Galiano Cuatro Caini no s La Lonja P l a z a de l a F r a t e r n i d a d Eolgain Manzanillo Matanzas Moron Nuevitas Palma Soriana P i n a r del Bio Remedies Sagua l a Grande Sancti S p i r i t u s Santa Clara Santiago Dominican Republic: Barahona La Vega Puerto P l a t a San Pedro de Macoris Santiago de Los Caballeros Santo Domingo City England: London - City Branch West End Branch (City Bank Farmers Trust Co., 11 Waterloo P l a c e , L t d . , a B r i t i s h Company handling t r u s t opera t i o n s only, e n t i r e stock owned by National City Bank, Hew York, i s a l s o a t t h i s address) - 3 - X-6682 N a t i o n a l City Bank of Hew York. Hew York. N. Y. (continued) Branches: India: Bombay Calcutta Rangoon (Burma) Italy; Genoa Milan Japan: Kobe Tokyo Yokohama Osaka Mexico: Mexico City Panama: Colon Panama Peru: Lima Philippine Islands: Manila Cebu Porto Rico: Arecibo Bayamon Caguas Mayaguez Ponce San Juan Santurce S t r a i t s Settlements: Singapore Uruguay: Montevideo Venezuela: Caracas -f_0- BRANCHES OF FOREIGN BANKING CORPORATIONS OPERATING UNDER AGBEEMMT WITH THE FEDERAL RESERVE BOARD OR UNDER EDGE ACT E q u i t a b l e Eastern Banking Corporation (Subsidiary of Chase National Bank, New York, N. Y.) Branches: China: Shanghai Hongkong Tientsin The Chase Bank, New York. N. Y. France: Mexico: (Edge Act Corporation s t o c k of which i s owned by the Chase National Bank of New York.) P a r i s (two o f f i c e s ) Mexico City I 121 * » - 4 - X - 6 6 8 2 I n t e r n a t i o n a l Banking Corporation (Subsidiary of National City Bank of New York, N. Y.) Branches: England: London Barcelona Spain: Madrid I n t e r n a t i o n a l Banking Corporation France: owns stock of National City Bank of New York, France, S. A . , opera t i n g branches a t ; P a r i s (two o f f i c e s ) Nice Haiti: Bank of H a i t i , I n c . , s u b s i d i a r y of the I n t e r n a t i o n a l Banking Corporation, holds stock of Banque Nationale de l a Republique d ' H a i t i , operating a t the f o l l o w ing p o i n t s i n the Republic of Haiti. P o r t au P r i n c e (Head O f f i c e ) Aux Cayes Cape Hai t i a n Gonaives Jacmel Jeremio P e t i t Goave P o r t de P a i i S t . Marc Again (Agency) Miragoane (Agency) Fort L i b e r t e (Agency) Federal Reserve Board, September 6, 1930. i 9Q FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6683 August 20, 1930. SUBJECT: Holidays During September, 1930. Dear S i r : On Monday, September 1 s t , Labor Day, t h e r e w i l l be n e i t h e r Gold. Fund nor Federal Be serve Note c l e a r i n g , and t h e books of the Board w i l l be closed. I n a d d i t i o n to the t a b o r Day holiday, the following Banks and Branches w i l l observe h o l i d a y s during the month of September: Tuesday, September Friday, " 9, San Franciscoj (Admission Los Angeles ( Day 12, Baltimore Defenders' Day Therefore, on the dates i n d i c a t e d the o f f i c e s a f f e c t e d w i l l not p a r t i c i p a t e i n e i t h e r of the clearings* P l e a s e include your c r e d i t s f o r the Banks a f f e c t e d on edch of the h o i r a a y s w i t h your c r e d i t s f o r the following b u s i n e s s day, and make no shipment of Federal He serve notes f o r account -of the Federal Reserve Bank of San Francisco on Tuesday, September 9 t h . P l e a s e n o t i f y Branches. Very t r u l y yours, E. M. McClelland, Assistant Secretary. TO GOVERNORS OF ALL F. R, BANKS. FEDERAL RESERVE BOARD ^ 3 WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-SS84 AUgUSt 2 0 , 1930 • Dear S i r ; I enclose f o r your information, (1) A copy of the o f f i c i a l p r i n t of Regulation J as amended e f f e c t i v e September 1, (2) A copy of a l e t t e r addressed by Governor Young to the Governors of a l l Federal reserve "banks on August 14, c a l l i n g a t t e n t i o n to the importance of a l l Federal r e s e r v e banks amending t h e i r check c o l l e c t i o n c i r c u l a r s so as to conform to the amended r e g u l a t i o n on September 1 or very s h o r t l y t h e r e a f t e r * and (3) A copy of a l e t t e r addressed by Governor Young to the Governors of a l l Federal reserve banks c a l l i n g a t t e n t i o n to the importance of responding promptly to l e t t e r s addressed to them by the Treasury Department submitting f o r c r i t i c i s m airi comment the proposed r e v i s i o n of Treasury Department Circular &o. 176* The Standing Committee on Collections i s now completing i t s r e p o r t on the r e v i s i o n of the uniform cash c o l l e c t i o n c i r c u l a r , and a copy of the tent a t i v e d r a f t of the Committee's r e p o r t has a l r e a d y been forwarded to the Governor of each Federal r e s e r v e bank f o r h i s advance i n f o r m a t i o n . As an ex- o f f i c i o member of the Sub-Committoo of Counsel appointed to c o l l a b o r a t e with the Standing Committee on C o l l e c t i o n s , pursuant to a r e s o l u t i o n of the Conference of Counsel, I have already approved the r e p o r t of the Standing Com* m i t t e e on C o l l e c t i o n s . As soon as i t i s approved by a l l of the members of the Standing Committee on Collections and of the Sub-Committee of Counsel, the Governors of a l l Federal reserve banks w i l l be n o t i f i e d and w i l l be requested to express t h e i r approval or disapproval. I t i s hoped t h a t a l l of - 2 - X-6S84 the Federal reserve banks w i l l promptly approve t h i s r e p o r t , i n order t h a t the new c i r c u l a r s may he issued on September 1 or very s h o r t l y t h e r e a f t e r and may he as n e a r l y uniform as p o s s i b l e * I believe, t h a t the new uniform c i r c u l a r which has been prepared by the Standing Committee on Collections i s a v a s t improvement over the old c i r c u l a r and should bo e n t i r e l y s a t i s f a c t o r y to every Federal reserve bank. I know of no reason, t h e r e f o r e , why i t should not be approved promptly by the Governor of every Federal r e s e r v e bank. I t i s conceivable,, however, t h a t the Governors of the Federal reserve banks may be unable to agree upon the now uniform c i r c u l a r without discussing i t a t a Conference of Governors; and i t now appears t h a t no Conference of Governors v d l l be h e l d u n t i l very l a t e i n the F a l l . I f the approval of the new uniform c i r c u l a r i s thus delayed u n t i l l a t e i n the F a l l , some of the Federal r e s e r v e banks may d e s i r e to bring t h e i r c i r c u l a r s i n t o conformity with the amended r e g u l a t i o r vrithout awaiting approval of the new uniform c i r cular. In t h i s event, three p o s s i b l e courses of a c t i o n have suggested them- selves t o me; and I s h a l l take the l i b e r t y of suggesting them to you i n what appears to me to be the order of t h e i r d e s i r a b i l i t y : 1. I do not know of any reason why any Federal reserve bank which d e s i r e s to do so should not i s s u e a new check c o l l e c t i o n c i r c u l a r i n the form recommended by the Standing Committee on Collections without w a i t i n g f o r t h i s form to be accepted as uniform by a l l Federal r e s e r v e banks. 2. A second a l t e r n a t i v e which could bo adopted by any Federal r e - serve bank which might not approve of the uniform c i r c u l a r would be to r e i s s u e i t s old c i r c u l a r amended so a s , (a) to quote the p r o v i s i o n s of Section V of Regulation J as amended i n l i e u of the p r o v i s i o n s of the old r e g u l a t i o n , and (b) to add t o the p r o v i s i o n s regarding a v a i l a b i l i t y of c r e d i t a proviso _s_ : 1 2 5 s i m i l a r to t h a t i n c o r p o r a t e d i n Section IV of Begulation J by the amendment. 3. I f any Federal reserve bank i s u n w i l l i n g to i s s u e a new check c o l l e c t i o n c i r c u l a r u n t i l a f t e r the uniform c i r c u l a r i s approved by a l l Federal r e s e r v e banks, then, as a l a s t a l t e r n a t i v e , I would suggest t h a t i t t r a n s m i t to every member bank and nonmeniber c l e a r i n g bank i n i t s d i s t r i c t a copy of the amended Regulation J together with a c i r c u l a r l e t t e r of t r a n s m i t t a l c a l l i n g a t t e n t i o n to the f a c t t h a t Regulation J has been amended and t h a t Section V thereof supersedes Section V of the old r e g u l a t i o n which i s quoted i n t h e Federal r e s e r v e bank's old check c o l l e c t i o n c i r c u l a r , I am taking the l i b e r t y of suggesting a l l of these a l t e r n a t i v e s because the amended r e g u l a t i o n w i l l take e f f e c t very soon, and i t seems to me to be very important f o r every Federal r e s e r v e bank to b r i n g i t s check c o l l e c t i o n c i r c u l a r i n t o conformity with t h e amended r e g u l a t i o n e i t h e r on September 1 s t or v e r y s h o r ' l y t h e r e a f t e r . I assume t h a t you w? 11 confer with the o f f i c e r s of your bank with r e gard to the proposed new uniform cash c o l l e c t i o n c i r c u l a r and a l s o with r e gard to the proposed r e v i s i o n of the Treasury Department Circular No. 176; and I very r e s p e c t f u l l y suggest t h a t you do everything i n your power to f a c i l i t a t e prompt a c t i o n by your bank with respect to both of these c i r c u l a r s . With k i n d e s t r e g a r d s , I am, Cordially yours, Walter Wyatt General Counsel Enclosures .26 Copy of l e t t e r sent to Governors of a l l Federal r e s e r v e banks. X-6684-a August 14, 1930 Dear Governor; In accordance with your r e q u e s t , copies of Regulation J as amended, e f f e c t i v e September 1, 1930, w i l l be sent to you within the next few days; and you a r e requested to see t h a t a copy thereof i s f u r n i s h e d to every member bank and nonmember c l e a r i n g bank in your d i s t r i c t p r i o r to Septemb e r 1. If p o s s i b l e , the check c o l l e c t i o n c i r c u l a r s of a l l the Federal r e s e r v e banks should be amended to conform to t h i s r e v i s e d r e g u l a t i o n by September 1. The Board i s informed t h a t the Standing Committee on C o l l e c t i o n s has prepared a r e v i s i o n of t h e uniform p r o v i s i o n s of the check c o l l e c t i o n c i r c u l a r s , but t h a t i t may be impossible to have these uniform p r o v i s i o n s adopted by a l l Federal r e s e r v e banks b e f o r e September 1. If i t i s impossible f o r your Federal r e s e r v e bank to r e v i s e i t s check c o l l e c t i o n c i r c u l a r b e f o r e September 1,. you a r e requested to a d v i s e a l l of your member banks and nonmember c l e a r i n g banks b e f o r e September 1 t h a t Regulation J has been amended, e f f e c t i v e September 1, and t h a t Section V t h e r e o f , as amended, supersedes Section V of t h e old r e g u l a t i o n , which i s quoted in your check collection circular. Very t r u l y yours, 3. A. Young, Governor. i P*y wr FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6690 August 29, 1930. CONFIDENTIAL. Bear S i r ; There i s enclosed, herewith copy of a memorandum from the Chief of the Secret Service Division, with regard to a new c o u n t e r f e i t $500 gold c e r t i f i c a t e . This i s f o r the c o n f i d e n t i a l information of the Federal r e s e r v e banks and member banks and in t r a n s m i t t i n g i t to your member banks p l e a s e caution them a g a i n s t giving the information any p u b l i c i t y whatsoever. Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure. TO GOVERNORS OF ALL FEDERAL RESERVE BANKS. X-6690-a COPY TREASURY DEPARTMENT OFFICE OF THE SECRETARY WASHINGTON S e c r e t Service Division August 29, 1930 FOR THE CONFIDENTIAL INFORMATION OF THE FEDERAL RESERVE BOARD AND MEMBER BANKS. 3EF COUNTERFEIT $500 GOLD CERTIFICATE S e r i e s of 1932; check l e t t e r "C"; face p l a t e No. 2; H. V. Speelman, R e g i s t e r of the Treasury; Frank White, Treasurer of the United S t a t e s ; p o r t r a i t of Lincoln. This i s an extremely dangerous c o u n t e r f e i t p r i n t e d from photo-etched p l a t e s of e x c e l l e n t workmanship on "bleached genuine p a p e r . The most outstanding c h a r a c t e r i s t i c i n d i c a t i n g i t s spurious q u a l i t y i s the Lincoln p o r t r a i t which i s shaded too h e a v i l y and r e f l e c t s a sooty appearance. The top p a r t of the p o r t r a i t oval r e v e a l s a rough curve where the c r o s s - h a t c h l i n e s converge. The ornate medallions upon which the s e r i a l numbers a r e impressed are executed i n a p a l e shade of orange i n s t e a d of the b r i g h t t i n t which f e a t u r e s the genuine, and the l a r g e word GOLD which blends with the legend above the Treasury seal i s l i k e w i s e p r i n t e d i n a l i g h t orange tone. The paper seems to have been s o f t e n e d as a r e s u l t of the bleaching p r o c e s s . This c o u n t e r f e i t i s b e l i e v e d to be of f o r e i g n o r i g i n , a s four notes were d e t e c t e d i n currency shipments to two New York banks on August 27th and two of the c o u n t e r f e i t s , i t has been e s t a b l i s h e d , were r e c e i v e d from t h e Bank of Athens, Athens, Greece, while the other two a r e a l s o b e l i e v e d to have come from Greece. (S) W. H. MORAN, Chief. 129 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6692 •September 4, 1930. SUBJECT! Topic f o r F a l l Conference - Revision of Membership Condition r e Purchase of Bank Stocks# Dear S i r : The r e p l i e s to the Board's l e t t e r of June 27, 1930, (X-6646) r e l a t i v e to the a d v i s a b i l i t y of a r e v i s i o n of the condition of membership regarding the purchase of stock i n other i n s t i t u t i o n s by S t a t e member banks, d i s c l o s e a considerable variance of opinion on the question and accordingly the Board has decided to r e f e r the matter to the Conferences Of Governors and Federal Reserve Agents which convene on October 6. For your information there i s enclosed copy of a memorandum prepared by the Board's A s s i s t a n t Counsel summarizing the r e p l i e s to tho c i r c u l a r l e t t e r r e f e r r e d to above. Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure. TO AM, GOVERNORS AHD FEDERAL RESERVE AGENTS. COPY i 1.30 X-6692-a August 9, 1930t The Federal Reserve Board Proposed r e v i s i o n of condition No. 3, Mr. Wingfield, A s s i s t a n t Counsel. Section IV, of B o a r d ' s , Regulation H. Under the p r e s e n t p r o v i s i o n s of condition No. 3 of S e c t i o n IV of the Board's Regulation H, a S t a t e member bank s u b j e c t to such condition may not purchase any of the stock of another bank or t r u s t company u n l e s s i t obtains i n each case the permission of the Federal Reserve Board. Recently the Board considere-1 the adv i s a b i l i t y of r e v i s i n g t h i s condition so as to p e r m fc E t a t e member banks s u b j e c t to i t to purchase a l i m i t e d percentage of: the c a p i t a l s t o c k of o t h e r banks and t r u s t companies without being under the n e c e s s i t y of obtaining the Board's permission to make such purchases. This o f f i c e was requested t o prepare a d r a f t of a r e v i s i o n of cond i t i o n No. 3 along t h i s l i n o . The following r e v i s i o n of t h i s cond i t i o n was accordingly prepared and submitted to the Board: "(3) Such bank or t r u s t company, except a f t e r applying f o r and r e c e i v i n g the permission of the Federal Reserve Board, s h a l l not acquire more than 50 p e r cent of the c a p i t a l stock of any other bank or t r u s t company; and, except with the Board's permission, i t s t o t a l investments i n the s t o c k of other banks and t r u s t companies s h a l l n o t exceed 20 p e r cent of i t s own c a p i t a l stock and s u r p l u s . " Before reaching a determination as to whether t h i s r e v i s i o n of condition No. 3 should be adopted, however, the Board decided to submit i t to the Governors and Federal Reserve Agents of a l l Federal r e s e r v e banks f o r t h e i r s u g g e s t i o n s . The Board accordingly on June 27, 1930, addressed a l e t t e r (X-6646) to a l l Governors and Federal reserve agents and requested them to advise the Board whether i n t h e i r opinion a r e v i s i o n of t h i s condition of membership Mo. 3 was advisable and as to whether the percentages contained i n the r e v i s i o n above quoted with r e f e r e n c e to the amount of stock of other banks and t r u s t companies, which might be purchased by a member bank were a p p r o p r i a t e and a d v i s a b l e . Replies to the Board's l e t t e r have now been received from a l l of the Governors and Agents and these r e p l i e s w i l l be summarized f o r the Board's i n f o r m a t i o n . I t appears t h a t s i x of the Governors and Agents are of the opinion t h a t i t i s not d e s i r a b l e f o r the Board a t t h i s time to make any change i n the condition No. 3 contained i n Section IV of the Board's Regulation H. In t h i s connection, the Board's s p e c i a l a t t e n t i o n i s c a l l e d to the l e t t e r s received from Governor Black of A t l a n t a , Governor Harrison of New York, and Mr. Heath of Chicago, which s e t out i n some d e t a i l the o b j e c t i o n s to a change i n the p r e s e n t p r o v i s i o n s of t h i s c o n d i t i o n . Theso l e t t e r s d i s c u s s the question whether i t i s advisable f o r the Board to r e t a i n any condition of membership with r e f e r e n c e to 2 * * X-6692-a 1 % the purchase of bank s t o c k s . They p o i n t o u t , however, t h a t group and branch banking i s being i n v e s t i g a t e d with a view to p o s s i b l e l e g i s l a t i o n on the s u b j e c t and t h a t the Board i t s e l f has appointed a committee t o i n v e s t i g a t e group and branch banking. Under these circumstances, they suggest t h a t any change i n condition Uo. 3 should be d e f e r r e d u n t i l a l a t e r d a t e . All of the o t h e r Governors and Federal r e s e r v e agents seem to f o o l t h a t some change i n t h i s condition i s d e s i r a b l e . Three of this l a t t e r group b e l i e v e t h a t i t i s advisable f o r the Board to eliminate from i t s Begulations e n t i r e l y the condition Ho. 3. The o t h e r s b e l i e v e i t i s d e s i r a b l e f o r the p r o v i s i o n s of t h i s condition to be r e v i s e d so as to permit a member bank to purchase l i m i t e d amounts of the stock of o t h e r banks and t r u s t companies without o b t a i n i n g spec i f i c permission from the Board. Various percentages with r e f e r e n c e to the amount of stock which should be purchased without the Board's permission a r e suggested by these Governors and Federal Reserve Agents# One Governor and two Federal Reserve Agents think t h a t the percentages contained i n the r e v i s i o n above quoted a r e a p p r o p r i a t e . The g r e a t m a j o r i t y , however, f e e l t h a t these percentages a r e too l i b e r a l and i n most cases suggest considerably lower percentages of varying amounts# In t h i s connection the p a r t i c u l a r a t t e n t i o n of the Board i s c a l l e d to the l e t t e r s of Governor Uorris of P h i l a d e l p h i a , Governor Martin of S t . Louis, and Mr. Walsh of D a l l a s . The r e p l i e s of each of the Governors and Federal Reserve Agents w i l l bo summarized f o r the Board's information i n g r e a t e r d e t a i l below: S M A Y OF REPLIES U MR BOSTOHDoputv Governor Paddock.- Deputy Governor Paddock b e l i e v e s that c o n d ition No. 3 might Well be eliminated e n t i r e l y because i t docs not provide s a t i s f a c t o r y control of group banking. I f condition i s to be r e t a i n e d , however, he suggests t h a t a member bank be not p e r m i t t e d to purchase more than 40 per cent of the c a p i t a l stock of any other bank or t r u s t company without the Board's permission and t h a t the l i m i t of i t s t o t a l investments i n bank stocks should bo 40 per cent of i t s own c a p i t a l and s u r p l u s . Mr. C u r t i s s - Mr. Curtiss b e l i e v e s t h a t i t would be d e s i r a b l e to e l i m i n a t e c o n d i t i o n No. 3 e n t i r e l y because t h i s condition i s not e f f e c t i v e i n g i v i n g the Board control over group banking. I f the cond i t i o n i s to bo r e t a i n e d , however, he suggests t h a t the purchase without the Board's permission by a member bank of stock of any other bank or t r u s t company be l i m i t e d to 40 per cent of the c a p i t a l of such other bank or t r u s t company. I t i s not c l e a r what l i m i t with r e f e r e n c e to t o t a l investments i n the stock of other banks and t r u s t companies he believes is desirable. 1-33 - 3 - X-6692—a HEW YORK. Governor H a r r i s o n . - Governor Harrison suggests the des i r a b i l i t y of e l i m i n a t i n g e n t i r e l y the condition of membership Ho. 3 . He f u r t h e r suggests, however, t h a t any amendment of t h i s cond i t i o n of membership "be d e f e r r e d u n t i l a f t e r the committee a p p o i n t ed by the Board to i n v e s t i g a t e group and chain banking has made i t s r e p o r t . Governor Harrison appears to f o o l t h a t condition of membership No. 3 would not be e f f e c t i v e i n c o n t r o l l i n g group and chain banking and t h a t investment i n bank stocks by S t a t e member banks i s not i n a d v i s a b l e , u n l e s s the aggregate amount of such i n vestments by any one member bank i s such as to i n d i c a t e t h a t the member b a n k ' s g e n e r a l investment p o l i c y i s unsound. Mr» Case,- Mr. Case has advised the Board t h a t he concurs i n Governor H a r r i s o n ' s l e t t e r . PffTT.ATffiTT.PffTA. Governor M o r r i s . - Governor Morris b e l i e v e s t h a t a r e v i s i o n of the Board's condition of membership No. 3 i s d e s i r a b l e . He sugg e s t s t h a t the purchase by a member bank of s t o c k of any o t h e r bank or t r u s t company without the Board's permission be l i m i t e d to 20 p e r cent of t h e c a p i t a l stock of such other bank or t r u s t company and t h a t the t o t a l amount of bank stock a member bank may purchase be l i m i t e d to 5 p e r cent of i t s own c a p i t a l and s u r p l u s , or a t the most to 10 p e r cont of i t s own c a p i t a l and s u r p l u s . Mr. A u s t i n . - Mr. Austin b e l i e v e s t h a t a change i n the Board's c o n d i t i o n of membership ITo. 3 i s d e s i r a b l e . He suggests t h a t the purchase by a member bank of stock i n any other bank or t r u s t con>* pany be l i m i t e d to 20 per cent of such o t h e r b a n k ' s c a p i t a l s t o c k without the Board's permission and a l s o suggests t h a t the t o t a l i n vestment by a member bank i n bank stocks be l i m i t e d to 20 p e r cent of i t s own c a p i t a l and s u r p l u s . Mr. Austin a l s o suggests t h a t i f t h i s condition i s r e v i s e d , i t be so framed t h a t i t i s a p p l i c a b l e to member banks which a r e now s u b j e c t to t h i s c o n d i t i o n i n i t s p r e s e n t form or i n the form i n which i t was a p p l i e d p r i o r to the B o a r d ' s Regulations, S e r i e s of 1928. CLEVELAND, Governor rancher and Mr. BeCamp. - Governor Fancher and Mr. DeCamp have r e p l i e d to the Board's l e t t e r (X-6646) i n a j o i n t l e t t e r . 133 — 4 — X~6692~a They seem to f e e l t h a t i f the Board's condition of membership No# 3 i s r e v i s e d as proposed, group "banks w i l l "be able to evade the s p i r i t of t h i s condition by reason of the f a c t t h a t s e v e r a l member "banks which are members of a p a r t i c u l a r group might hold the p e r m i t t e d amount of stock i n a p a r t i c u l a r "bank and the agg r e g a t e amount so h e l d "by a l l members of the group would c o n s t i t u t e control of the "bank# They suggest, however, t h a t the t o t a l amount of bank stock which a member bank might purchase should not without the Board's permission exceed 20 or 25 per cent of i t s own c a p i t a l and surplus• They seem to f e e l t h a t a r e v i s i o n of the condition so as to permit a member bank without the Board's s p e c i f i c permission to purchase up to 50 per cent of the c a p i t a l of any one bank or t r u s t company i s not inadvisable# RICHMOND. Governor Seay and Mr. Hoxton - Governor Seay and Mr. Hoxton have a l s o made a j o i n t r e p l y to the Board's l e t t e r (X-6646). They suggest t h a t the r e v i s i o n of the Board's condition of membership No. 3 contained i n t h i s l e t t e r i s extremely l i b e r a l and goes much f u r t h e r than could be reasonably expected. They suggest t h a t the amount of s t o c k of any bank which a member bank may purchase without the Board's permission be placed a t 25 p e r cent of the c a p i t a l of such other bank or t r u s t company# They f u r t h e r sugg e s t t h a t the t o t a l amount of bank stock which a member bg&k may purchase without the Board's permission be f i x e d a t 20 p e r cent of the c a p i t a l and s u r p l u s of the member bank# ATLANTA. Governor B l a c k . - Governor Black f e e l s t h a t there should be no change i n the p r e s e n t p r o v i s i o n s of the Board's condition of membership Ho# 3. He f e e l s t h a t t h i s condition should not be l i b e r a l i z e d because (1) n a t i o n a l banks a r e not p e r m i t t e d to p u r chase bank s t o c k , (2) the Board might be accused of f i x i n g i n i t s r e g u l a t i o n the wrong percentage, since what would be a proper limi t a t i o n , i n one case might be obviously improper i n another, and (3.) t h a t a change i n t h i s c o n d i t i o n , while l e g i s l a t i o n on the sugj e c t of group banking i s being considered, might bo p o l i t i c a l l y construed e i t h e r as an a i d or an obstacle to group, chain or branch banking# Mr. Hew ton. - Mr# Newton f e e l s t h a t no change i n the B o a r d ' s condition of membership No# 3 i s d e s i r a b l e because a p a r t i c u l a r bank might not be j u s t i f i e d i n purchasing any number of shares of the stock of another bank and each case should stand upon i t s own merits# X-6692~a CHICAGO. Governor McDougal. - Governor McDoagal suggests t h a t the Board.1 s c o n d i t i o n of membership Mo, 3 "be e l i m i n a t e d e n t i r e l y from the Board's conditions of membership. I t appears t h a t he does not f e e l t h a t the Board should, "by r e t a i n i n g t h i s cond i t i o n , attempt e i t h e r to r e s t r a i n or encourage group banking# Mr* H e a t h , - Mr, Heath suggests t h a t the Board's condit i o n of membership No, 3 should remain unchanged or should he e l i m i n a t e d from the Board's conditions of membership e n t i r e l y * He p o i n t s out t h a t i f a member bank i s p e r m i t t e d without the B o a r d ' s permission to purchase up to 50 per cent of the capi t a l of any one hank and purchase an aggregate amount of bank s to c k up to 20 p e r cent of i t s ovm c a p i t a l and s u r p l u s , a l a r g e member bank could a c t u a l l y control a considerable number Of smaller banks and thus become a holding company f o r a group banking system of considerable s i z e , Mr, Heath f e e l s , t h e r e f o r e , t h a t the proposed r e v i s i o n of condition of membership No. 3 with the percentages contained i n t h i s p r o v i s i o n , as s e t out i n the Board's l e t t e r (X«»6646) would c o n s t i t u t e v i r t u a l approval of the p r i n c i p l e of group banking, Mr. Heath f u r t h e r suggests t h a t the Board has appointed a committee to i n v e s t i g a t e a l l phases of group, chain and branch banking and t h a t i t would not be advisable to l i b e r a l i z e the p r o v i s i o n s of condition of membership Ho, 3 i n advance of the r e p o r t of t h i s committee, which may p o s s i b l y make an adverse r e p o r t on the p r i n c i p l e of group banking, ST. LOUIS. Governor M a r t i n . - Governor Martin suggests t h a t c o n d i t i o n of membership Uo, 3 be r e v i s e d so as to l i m i t the purchase by a member bank without the Board's permission of s t o c k i n any other bank or t r u s t company to 20 p e r cent of c a p i t a l of such other bank or t r u s t company and to l i m i t the t o t a l investments i n bank stock by a member bank, to 20 p e r cent of i t s own c a p i t a l stock and surplus # Mr, Wood. — Mr, Wood suggests t h a t the condition of membership Ho, 3 be revised so as to l i m i t the r i g h t of a memoer bank to purchase stock e i t h e r d i r e c t l y or i n d i r e c t l y through an a f f i l i a t e d corporation or otherwise i n any o t h e r bank or t r u s t company, without the Board's permission, to 20 p e r cent of the c a p i t a l of such other bank or t r u s t company* Mr, food does not suggest any l i m i t a t i o n on the aggregate amount of bank stock which a member bank may purchase w i t h out the Board's permission* - 6 - X-6692-a t MINNEAPOLIS. Governor Geery. - Governor Geery f e e l s t h a t a r e v i s i o n of the B o a r d ' s condition of membership No. 3 i s d e s i r a b l e and he suggests t h a t a member bank should be authorized to purchase without the Board's permission not more than 25 per cent of the stock of any o t h e r bank or t r u s t company and to i n v e s t not more than 20 p e r cent of i t s own c a p i t a l and s u r p l u s i n the stocks of a l l o t h e r • banks and t r u s t companies, Mr. M i t c h e l l . - Mr. Mitchell s t a t e s t h a t he thinks the amount of bank s t o c k t h a t a member bank should be p e r m i t t e d to hold should be l i m i t e d t o the s m a l l e s t p o s s i b l e amount, sinc e a n a t i o n a l bank i s not p e r m i t t e d to i n v e s t i n any bank stock, he f e e l s t h a t a S t a t e bank or t r u s t company should not bo p e r m i t t e d to do so. I t appears, t h e r e f o r e , t h a t Mr. Mitchell i s of the opinion t h a t no change should be made i n the p r e s e n t p r o v i s i o n s of the Board's condition of membership No. 3, KANSAS CITY. Governor B a i l e y . - Governor Bailey f e e l s t h a t i t i s d e s i r a b l e to l i b e r a l i z e the p r e s e n t p r o v i s i o n s of the Board's condition of membership No. 3 . He suggests t h a t a member bank be a u t h o r i z e d to purchase not more than 25 p e r cent of the c a p i t a l stock of any other bank or t r u s t company without the Board's permission and t h a t such a member bank be authorized to make aggregate investments i n the s t o c k s of a l l banks and t r u s t companies not i n excess of 25 p e r cent of i t s own c a p i t a l and s u r p l u s . Mr. McClure. - Mr. McClure f e e l s t h a t a l i b e r a l i z a t i o n of the p r e s e n t p r o v i s i o n s of the Board's condition of membership No. 3 i s a d v i s a b l e and he f e e l s t h a t the percentages of 50 per cent and 20 p e r c e n t , r e s p e c t i v e l y , contained i n the r e v i s e d condition s e t out i n the Board's l e t t e r (X-6646) are reasonable l i m i t a t i o n s on the amount of s t o c k of any one bank which may be purchased by a member bank and on the aggregate amount of bank stock which may be purchased by a member bank. DALLAS. Governor T a l l e y . - Governor Talley f e e l s t h a t a r e v i s i on of the Board 8 s c o n d i t i o n of membership No, 3 i s d e s i r a b l e , but suggests t h a t a member bank should not be p e r m i t t e d to purchase more than 20 p e r cent of the c a p i t a l stock of any one bank or t r u s t company except with the Board's permission, and t h a t the t o t a l investments i n bank stocks by a member bank should be l i m i t e d to 10 p e r cent of the c a p i t a l and s u r p l u s of the member bank. 136 7 - X-6692-a Mr. Walsh.- Mr. Walsh b e l i e v e s t h a t the r e v i s i o n of the Board's condition of membership No. 3 i s d e s i r a b l e , but b e l i e v e s t h a t the p e r centages of 50 p e r cent and 20 per cent contained i n t h i s r e v i s i o n as s e t out i n the Board's l e t t e r (X-6646) should be reduced to 25 per cent and 10 p e r c e n t , r e s p e c t i v e l y , SAN FRANCISCO. Governor Calkins. - Governor Calkins approves the proposed r e v i s i o n contained i n the Board's l e t t e r (X-6646) i n c l u d i n g the p e r centages of 50 p e r cent and 20 per cent contained t h e r e i n . He s t a t e s t h a t he would be i n favor of a l i m i t a t i o n upon the purchase of stock of any one bank below the 60 per cent contained i n the Board's p r o posed r e v i s i o n , i f such condition was p r a c t i c a l l y e n f o r c e a b l e . He b e l i e v e s , however, t h a t i t can be evaded, and, t h e r e f o r e , approves the condition as s e t out i n the Board's l e t t e r . Mr. S a r g e n t . - In the absence of Mr. Newton, Mr. Sargent, A s s i s t a n t Federal Reserve Agent a t San Francisco, a d v i s e s t h a t a r e v i s i o n of the Board's c o n d i t i o n of membership No* 3 i s d e s i r a b l e . ' He approves the r e v i s i o n of t h i s condition contained i n the Board's l e t t e r (X-6646.) cont a i n i n g the percentages contained t h e r e i n of 50 p e r cent and 20 p e r cent, respectively. For the Board's i n f o r m a t i o n , percentages the v a r i o u s Governors and Federal Reserve Agents have suggested the proposed r e v i s i o n of condition of membership No. 3 should contain may be b r i e f l y s e t out as f o l l o w s : Per cent of stock : Per cent of capof any one bank : i t a l and s u r p l u s : of member bank may : be i n v e s t e d i n bank ; stock BOSTON N W YOEK E Deputy Governor Paddock Mr. Curtiss Governor Harrison _Mr. Case 40$ 40% isi 40$ 0$ oi 0$ PHILADELPHIZ'.«i>f)vernor Norris Mr. Austin CLEVELAND — Governor Fancher _ _ Mr. DeCamp 50$ 50& 20$ or 20# or 25$ 25# 137 - X-6692-a 8 - Per cent of stock of any one "bank EI CHMOiro ATLANTA 20$ - Governor Seay Mr. Hoxton 25$ 25i - Governor Black Mr. Newton 0$ 0# 0i - Governor McDougal Mr. Heath O i 0 i 2 0 i 0$ 20$ ST. LOUIS - Governor Martin Mr. Wood MINNEAPOLIS - Governor Geery Mr. Mitchell 25$ - Governor B a i l e y Mr. McClure 25$ DALLAS - Governor Talley Mr. Walsh 20$ 25 i oo CHICAGO Per cent of capi t a l and. surplus of member bank may be i n v e s t e d i n bank SAN IRAN CI SCO - Governor Calkins Mr. Sargent 50$ 50$ 20$ 20$ KANSAS CITY 2 0 $ 20# 0i 5 0 i Respectfully, B. M. Wingfield, A s s i s t a n t Counsel. BMW: vbr - omc * 20$ O i 25$ 20i FEDERAL RESERVE BOARD WASHINGTON A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL RESERVE BOARD X-6695 September 5, 1930. SUBJECT: E l e c t i o n s of Class "A" and "B" D i r e c t o r s . Dear S i r : This i s to c a l l a t t e n t i o n to the Board's l e t t e r of February 12, 1930, (X-6507) under which November 1 s t i s f i x e d as the date f o r the opening of the p o l l s i n the annual e l e c t i o n s of Class "A" and "B" d i r e c t o r s of the Federal r e s e r v e banks. There w i l l be no change i n the .group c l a s s i f i c a t i o n s which governed i n these e l e c t i o n s l a s t year. Very t r u l y yours, 3 . M. McClelland Assistant Secretary. TO CHAIR;M OF ALL F . E. BASKS. FEDERAL RESERVE BOARD WASHINGTON A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL RESERVE BOARD X-6697 September 6, 1930& SUBJECT: E l i g i b i l i t y f o r rediscount of acceptances f o r Grain S t a b i l i z a t i o n Corporation. Dear S i r ; There i s enclosed f o r your information a copy of a l e t t e r addressed by the Federal Reserve Board to Hon. Alexander Legge, Chairman of the Federal Farm Board with respect to the e l i g i b i l i t y f o r r e d i s c o u n t by Federal r e s e r v e banks of c e r t a i n b a n k e r s ' acceptances proposed to be i s s u e d under acceptance c r e d i t s to be granted to the Grain S t a b i l i z a t i o n Corporation by a number of a c c e p t i n g banks i n accordance with the terms of an agreement between the Grain S t a b i l i z a t i o n Corporation, the Continental I l l i n o i s Bank and Trust Company of Chicagoi as corporate t h i s t e e , Mr. William P . fcopf, of Chicago, I l l i n o i s , a s i n d i v i d u a l t r u s t e e * various a c c e p t i n g banks, and' the Federal Farih Board, which agreement i s aunmari z e d i n the l e t t e r . By Order of the Federal Be serve Boai*d. Very t r u l y yours, E. M. McClelland, Assistant Secretary. •* Enclosures. TO GOVERNORS AHD CHAIRMEH OF ALL FEDERAL RESERVE BANKS. X-6697-a COPY September 5, 1930. Hon. Alexander Legge, Chairman, Federal Farm Board, Washington, D. C. Sir: I have the honor to advise you t h a t bankers' a c c e p t ances drawn by The Grain S t a b i l i z a t i o n Corporation with m a t u r i t i e s not i n excess of n i n e t y days, secured by warehouse r e c e i p t s , shipping documents and o t h e r s i m i l a r documents of t i t l e f o r r e a d i l y marketable s t a p l e s , and accepted by r e s p o n s i b l e banks or bankers i n accordance with the Federal Reserve Board's understanding of the terms of the t e n t a t i v e agreement enclosed i n your l e t t e r of August 29, 1930, are e l i g i b l e f o r rediscount by Federal r e s e r v e banks when p r e s e n t e d f o r rediscount i n the usual manner with the endorsement of a member bank of the Federal Reserve System other than the a c c e p t i n g bank. The B o a r d ' s understanding of the agreement under which these acceptances a r e to be i s s u e d and the other r e l e v a n t f a c t s p e r t a i n i n g t h e r e t o a r e s t a t e d i n a more d e t a i l e d memorandum enclosed h e r e w i t h . By Order of the Federal Reserve Board. Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure. 141 I COPY X - 6 6 9 7-15 September 4 , 1930# Hon. Alexander Legge, Chairman, Federal Farm Board, Washington, D. C. The Federal Reserve Board has received your l e t t e r of August 29th i n q u i r i n g whether c e r t a i n bankers' acceptances proposed to he i s s u e d under acceptance c r e d i t s to he granted to The Grain S t a b i l i z a t i o n Corporation by a number of a c c e p t i n g hanks i n accordance with the terms of a t e n t a t i v e d r a f t of an agreement between The Grain S t a b i l i z a t i o n Corporation, the Continental I l l i n o i s Bank and Trust Company of Chicago, I l l i n o i s , a s cor-: p o r a t e t r u s t e e , Mr. William P. Kopf of Chicago, I l l i n o i s , as i n d i v i d u a l t r u s t e e , various a c c e p t i n g banks, and the Federal Farm Board, w i l l be e l i g i b l e f o r r e d i s c o u n t by Federal reserve banks. From the t e n t a t i v e d r a f t of t h i s proposed agreement enclosed i n your l e t t e r , i t appears t h a t : 1. The Grain S t a b i l i z a t i o n Corporation w i l l r e q u e s t a number of d i f f e r e n t accepting banks to e s t a b l i s h i n i t s favor acceptance c r e d i t s which s h a l l not exceed i n the aggregate the sum of $30,000,000 a t any one time o u t s t a n d i n g , such c r e d i t s t o be a v a i l e d of by d r a f t s payable not more than n i n e t y days a f t e r s i g h t drawn from time to time by The Grain S t a b i l i z a t i o n Corporation upon the r e s p e c t i v e accepting banks and accepted by such accepting banks, no d r a f t to mature l a t e r than J u l y 31, 1931. 2 . I n order to secure the accepting banks a g a i n s t l o s s , the S t a b i l i z a t i o n Corporation w i l l d e l i v e r to the t r u s t e e s only the following documents of t i t l e f o r wheat: (a) (b) n e g o t i a b l e domestic or f o r e i g n steamship b i l l s of lading; (c) Negotiable warehouse r e c e i p t s i s s u e d by warehouses i n terminal markets which a r e bonded and under Federal or S t a t e l i c e n s e ; (d) 3. Negotiable domestic r a i l r o a d b i l l s of l a d i n g ; Custodian c e r t i f i c a t e s i s s u e d by the Board of Trade of the City of Chicago. The S t a b i l i z a t i o n Corporation w i l l a t a l l times have i n 1 4 2 - 2 - X-6697-b the possession of the t r u s t e e s as s e c u r i t y documents of t i t l e f o r wheat having a market value equal to 125$ of the t o t a l face amount of acceptances outstanding ( i n c l u d i n g those forwarded f o r a c c e p t a n c e ) , l e s s the amount of any cash deposited "by the S t a b i l i z a t i o n Corporation with the t r u s t e e s . 4 . A l l d r a f t s drawn by the S t a b i l i z a t i o n Corporation f o r acceptance by any of the accepting banks w i l l be payable i n d o l l a r s a c e r t a i n number of days a f t e r date to the order of the S t a b i l i z a t i o n Corporation a t the Continental I l l i n o i s Bank and Trust Company and w i l l be duly endorsed i n blank by the S t a b i l i z a t i o n Corporation. 5. A l l such d r a f t s w i l l be d e l i v e r e d by the S t a b i l i z a t i o n Corporation with w r i t t e n forwarding d i r e c t i o n s to the t r u s t e e s , which*. a f t e r r e g i s t e r i n g them and p l a c i n g an i d e n t i f y i n g number on them, w i l l forward them to t h e r e s p e c t i v e accepting banks f o r acceptance; and a l l banks a c c e p t i n g d r a f t s so i d e n t i f i e d and r e g i s t e r e d by the t r u s t e e s w i l l be e n t i t l e d to the s e c u r i t y a f f o r d e d by the agreement and by the pledge from time t o time of documents of t i t l e f o r wheat, money, or o t h e r things pursuant to the agreement. 6 . The h o l d e r s of t h e d r a f t s accepted under t h i s agreement ( o t h e r than the bank which has accepted the same) must look s o l e l y to the g e n e r a l c r e d i t of the p a r t i c u l a r bank which accepted such d r a f t s and w i l l have no r i g h t s whatsoever i n or to the c o l l a t e r a l deposited pursuant to t h i s agreement, such c o l l a t e r a l being deposited s o l e l y f o r the b e n e f i t and p r o t e c t i o n of the a c c e p t i n g banks. 7. The S t a b i l i z a t i o n Corporation agrees to deposit with the corporate t r u s t e e f o r the account of t h e r e s p e c t i v e accepting banks Chicago funds i n cash equal to the face amount of d r a f t s accepted by the r e s p e c t i v e a c c e p t i n g banks on the date of the r e s p e c t i v e m a t u r i t i e s of such d r a f t s , t o g e t h e r with any charges and expenses which s h a l l have accrued thereon; and t h e corporate t r u s t e e w i l l n o t i f y the r e s p e c t i v e accepting banks of the r e c e i p t of such d e p o s i t and r e q u e s t forwarding i n s t r u c t i o n s * 8. Each accepting bank, r e g a r d l e s s of p r i o r i t y and time of acceptance, w i l l be secured equally and r a t a b l y i n p r o p o r t i o n t o i t s acceptances executed under t h i s agreement, except as to acceptances f o r which cash has been d e p o s i t e d as provided in the agreement. 9» The Federal Farm Board has loaned and/or w i l l loan f u r t h e r sums to t h e S t a b i l i z a t i o n Corporation to bo secured by a l i e n on s a i d securi t y subordinate i n a l l r e s p e c t s to the l i o n of the accepting banks. 10. The S t a b i l i z a t i o n Corporation warrants and a g r e e s t h a t a l l wheat pledged under t h i s agreement and a l l documents of t i t l e t h e r e f o r s h a l l be f r e e of a l l l i e n s , claims and encumbrances whatsoever, and t h a t , except f o r the l i e n c r e a t e d by the agreement, i t w i l l a t a l l times have f u l l and a b s o l u t e t i t l e to such wheat and the documents of t i t l e t h e r e f o r and w i l l maintain f u l l insurance covering a l l wheat so pledged a g a i n s t a l l customary r i s k s , including f i r e , l i g h t n i n g and tornado. 11. The S t a b i l i z a t i o n Corporation w i l l have the r i g h t (a) to «» % * " 3 * X-6697M) i o b t a i n the r e l e a s e of any documents of t i t l e pledged under t h i s agreement by d e p o s i t i n g with the t r u s t e e s cash equal to 80$ of the then market value t h e r e o f , (b) to regain p o s s e s s i o n of any cash so deposited rrith the t r u s t e e s (except cash deposited to pay maturing acceptances) by d e p o s i t i n g with the t r u s t e e s documents of t i t l e having a market value equal to 125$ of the amount of cash to be withdrawn, and (c) to s u b s t i t u t e f o r documents of t i t l e h e l d by the t r u s t e e s other documents of t i t l e r e p r e s e n t i n g wheat of a value equal to t h a t represented by the documents of t i t l e withdrawn. 12. Whenever the value of the wheat pledged f a l l s below 125$ of t h e t o t a l face value of outstanding acceptances ( l o s s the amount of cash d e p o s i t e d ) , the t r u s t e e s may demand a d d i t i o n a l c o l l a t e r a l ; and whenever t h e current market value of the wheat pledged exceeds such amount, the S t a b i l i z a t i o n Corporation with t h e concurrence of t h e Federal Farm Board, may obtain the r e l e a s e of such excess. 13. Upon the f a i l u r e of the S t a b i l i z a t i o n Corporation to deposit with the corporate t r u s t e e f o r the account of any accepting bank cash equal to the f a c e amount of any d r a f t s accepted on the m a t u r i t y date t h e r e o f , or upon o t h e r d e f a u l t on the p a r t of t h e S t a b i l i z a t i o n Corporation, the t r u s t e e s i n t h e i r d i s c r e t i o n may, and upon the request of a c c e p t i n g banks which have accepted 25$ or more of the t o t a l f a c e amount of outstanding acceptances shall., a c c e l e r a t e and mature immediately the o b l i g a t i o n s of the S t a b i l i z a t i o n Corporation to pay to the accepting banks the f u l l f a c e value of a l l o u t standing d r a f t s , and thereupon the t r u s t e e s a r e a u t h o r i z e d to s e l l any or a l l of the pledged p r o p e r t y a t p u b l i c or p r i v a t e s a l e and t o apply the n e t proceeds of such s a l e pro r a t a toward the payment of the o b l i g a t i o n s of the S t a b i l i z a t i o n Corporation to the accepting banks, whether the acceptances a r e due or n o t , and to pay any s u r p l u s thereover f i r s t to the Federal Farm Board and then to the S t a b i l i z a t i o n Corporation as t h e i r r e s p e c t i v e i n t e r e s t s may appear. 14. The accepting banks w i l l have the r i g h t t o proceed d i r e c t l y a g a i n s t the S t a b i l i z a t i o n Corporation by s u i t or otherwise f o r any f a i l u r e to p l a c e them i n funds to meet the payment of acceptances, but s h a l l have no r i g h t to enforce t h e i r r i g h t s a g a i n s t the c o l l a t e r a l except through the t r u s t e e s as provided i n the agreement. 15. The t r u s t e e s s h a l l hold a l l c o l l a t e r a l pledged with them f i r s t f o r the s e c u r i t y and p r o t e c t i o n of the accepting banks and then f o r the s e c u r i t y and p r o t e c t i o n of the Federal Farm Board* t 16# Hie agreement i s s u b j e c t to amendment "by the concurrence of the t r u s t e e s , the S t a b i l i z a t i o n Corporation, the Federal Farm Board, and the accepting banks which a t the time of such amendment have accepted a m a j o r i t y or more i n f a c e value of the acceptances then outstanding f o r which funds have not been f u r n i s h e d to such accepting banks by the S t a b i l i z a t i o n Corporation* above i s not intended as a complete statement of the p r o v i s i o n s of the t e n t a t i v e d r a f t of the agreement enclosed i n your l e t t e r ; but i t i n d i c a t e s the Federal Reserve Board's understanding as to the i - 4— 144 X-6697-1 e s s e n t i a l f e a t u r e s of the plan under which proposed acceptances a r e to be issued. While i t i s not so s t a t e d i n the agreement, i t i s assumed f o r the purpose of t h i s r u l i n g t h a t (a) a l l warehouse r e c e i p t s pledged with the t r u s t e e s pursuant to t h i s agreement w i l l "be i s s u e d by warehouses i n dependent of t h e Grain S t a b i l i z a t i o n Corporation w i t h i n the meaning and i n t e n t of the Regulations and r u l i n g s of the Federal Reserve Board, and (b) t h a t the custodian c e r t i f i c a t e s i s s u e d by the Board of Trade of the City of Chicago which a r e pledged with the t r u s t e e s e i t h e r a r e i n l e g a l e f f e c t warehouse r e c e i p t s issued by independent warehousemen or a r e otherwise s u f f i c i e n t to v e s t i n the holders v a l i d t i t l e to the g r a i n f o r which they a r e i s s u e d or a v a l i d l i e n thereon good and e n f o r c e a b l e as a g a i n s t a l l other p a r t i e s . I n the f i r s t clause of the preamble of the agreement i t i s s t a t e d t h a t the d r a f t s w i l l be payable not more than n i n e t y days a f t e r s i g h t ; but i n A r t i c l e 1 i t i s s t a t e d t h a t the d r a f t s so accepted s h a l l have m a t u r i t i e s not exceeding s i x months a f t e r s i g h t . The Federal Reserve Board u n d e r s t a n d s , however, and assumes f o r the purpose of t h i s r u l i n g , t h a t no d r a f t s w i l l be accepted with m a t u r i t i e s i n excess of n i n e t y days. This i s not intended as a r u l i n g to the e f f e c t t h a t d r a f t s with m a t u r i t i e s i n excess of n i n e t y days would be i n e l i g i b l e f o r r e d i s c o u n t by Federal r e s e r v e banks, but i s intended only to avoid for the p r e s e n t the n e c e s s i t y of making any r u l i n g on the a p p a r e n t l y academic question whether d r a f t s having a m a t u r i t y i n excess of n i n e t y days would be e l i g i b l e f o r rediscount. One purpose of the requirement of the Federal Reserve Act t h a t , i n order to be e l i g i b l e f o r acceptance by member banks or f o r r e d i s c o u n t by Federal r e s e r v e banks, d r a f t s growing out of t h e storage of r e a d i l y marketable s t a p l e s must be secured a t the time of acceptance by warehouse r e c e i p t s or other such documents conveying or s e c u r i n g t i t l e i s to enable the a c c e p t i n g banks e f f e c t i v e l y to r e q u i r e t h a t they be provided with funds with which to pay the acceptances on or b e f o r e t h e i r m a t u r i t y ; and the Board's r e g u l a t i o n s r e q u i r e t h a t the acceptor remain secured throughout the l i f e of the acceptance. The p r o v i s i o n contained i n A r t i c l e 13 of t h e t e n t a t i v e d r a f t of the agreement s u b s t a n t i a l l y to the e f f e c t t h a t the t r u s t e e s cannot be r e q u i r e d to s e l l any of the c o l l a t e r a l i n order to provide funds to pay maturing acceptances except a t the r e q u e s t of banks which have accepted 25$ or more of the t o t a l volume of acceptances i s s u e d pursuant to the agreement, i s i n c o n s i s t e n t with these p r o v i s i o n s of the law and of the B o a r d ' s r e g u l a t i o n s . The Board i s of the opinion, t h e r e f o r e , t h a t th e s e acceptances should not be considered e l i g i b l e for r e d i s c o u n t by Federal r e s e r v e banks u n l e s s t h i s p r o v i s i o n of the agreement i s modified so as to provide i n substance t h a t , upon the f a i l u r e of the S t a b i l i z a t i o n Corporation to d e p o s i t with the corporate t r u s t e e funds s u f f i c i e n t to pay maturing acceptances a t m a t u r i t y , the accepting bank s h a l l have the r i g h t , without the concurrence of any other bank, to r e q u i r e t h a t s u f f i c i e n t coll a t e r a l be s o l d to provide funds adequate f o r t h i s purpose and t h a t i t shall bo the duty of the corporate t r u s t e e immediately to s e l l s u f f i c i e n t c o l l a t e r a l and to pay over to the bank r e q u e s t i n g i t a s u f f i c i e n t amount of X-6697-b - 5 — the proceeds thereof to enable i t to meet any and a l l matured acceptances Issued "by i t pursuant to t h i s agreement. The Board understands t h a t i t w i l l "be p o s s i b l e to modify the agreement to t h i s e x t e n t and i s r u l i n g upon the question p r e s e n t e d with the understanding t h a t the agreement w i l l be so modified. I f the agreement i s modified i n the manner suggested i n tho preceding paragraph, and i f bankers' acceptances a r c i s s u e d , secured, and drawn i n f u l l compliance with the Federal Reserve Board's understanding of the proposed p l a n and the f a c t s p e r t a i n i n g t h e r e t o as s t a t e d i n t h i s l e t t e r , the Federal Reserve Board i s of the opinion t h a t such acceptances w i l l be e l i g i b l e f o r rediscount by Federal r e s e r v e banks when they have m a t u r i t i e s not i n excess of n i n e t y days and when they a r e o f f e r e d f o r r e d i s c o u n t i n the u s u a l manner with the endorsement of a member bank of the Federal Reserve System other than the accepting bank. While such acceptances w i l l be deemed e l i g i b l e f o r r e d i s c o u n t by Federal r e s e r v e banks, i t should be c l e a r l y understood t h a t the Fede r a l r e s e r v e banks a r e not required to rediscount them but may d e c l i n e to do so i n the e x e r c i s e of t h e i r banking d i s c r e t i o n . In view of the l a r g e volume of acceptances proposed to be i s s u e d , t h e r e f o r e , i t i s suggested t h a t i t would be advisable to consult w i t h , and a s c e r t a i n the a t t i t u d e o f , the Federal reserve banks to which i t i s expected t h a t these acceptances w i l l be o f f e r e d f o r r e d i s c o u n t , b e f o r e the proposed p l a n i s d e f i n i t e l y adopted. In your l e t t e r of August 29th i t i s s t a t e d t h a t an i d e n t i c a l arrangement, except a s to c e r t a i n p r o v i s i o n s as to hedging wheat, w i l l be entered i n t o by the Farmers National Grain Corporation; but you do not s p e c i f i c a l l y r e q u e s t a r u l i n g a t t h i s time with r e f e r e n c e to a c c e p t ances growing out of t h a t arrangement. The Federal Reserve Board, howe v e r , w i l l be g l a d to r u l e upon the e l i g i b i l i t y of such acceptances upon being informed as to the n a t u r e of the p r o v i s i o n s regarding the hedging of wheat and as to any o t h e r r e s p e c t s i n which t h a t agreement as f i n a l l y prepared may d i f f e r from tho agreement prepared on b e h a l f of the Grain S t a b i l i z a t i o n Corporation. By Order of tho Federal Reserve Board. Very t r u l y yours, E. M. McClelland, A s s i s t a n t Secretary, FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE T O T H E FEDERAL RESERVE BOARD X-6698 September 9, 1930. SUBJECT: Code word to cover 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 new i s s u e of Treasury C e r t i f i c a t e s of Indebtedness, S e r i e s TS-1931. Dear S i r : I n 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 "HOWHIDDEN" 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, S e r i e s TS-1931, dated September 15, 1930, duo September 15, 1931. This word should be i n s e r t e d i n the Federal Reserve Telegraph Code Book, following the supplemental code word "HOWHID" on page 172. Very t r u l y yours, J . C. N o e l l , Assistant Secretary, TO GOVERNORS OF ALL F. R. BAMS. 1 4 7 X-6699 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 4:00 p.m. September 8, 1930. The Federal Reserve Board, announces t h a t the Federal Reserve Bank of Dallas has e s t a b l i s h e d a r e d i s c o u n t r a t e of 3 l / 2 p e r cent on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e September 9, 1930. 1 4 8 X-6700 STATEMENT OF BUREAU OP ENGRAVING AND PRINTING Federal Reserve Notes, S e r i e s 1988. August 2 to 29, 1930. |5 Boston New York Philadelphia Cleveland Richmond Atlanta S t . Louis Minneapolis Kansas City Dallas San Francisco *10 |20 Total sheets 140,000 360,000 120,000 110,000 70,000 62,000 38,000 38,000 36,000 42,000 84,000 70,000 200,000 70,000 60,000 40,000 30,000 20,000 20,000 20,000 20,000 40,000 60,000 120,000 40,000 30,000 20,000 16,000 10,000 10,000 8,000 14,000 24,000 10,000 40,000 10,000 20,000 10,000 16,000 §,000 8,000 8,000 8,000 20,000 590,000 352,000 158,000 1,100,000 s h e e t s , $92.45 per 1, 100,000 Amount $12,943.00 33,282.00 11j094*00 10;169.50 6,471.50 5,731.90 3,513.10 3,513.10 3,328.20 3,882.90 7,765.80 101,695.00 #101,695.00 .1/3:9 FEDERAL RESERVE BOARD WASHINGTON X~6703 A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL RESERVE BOARD September 13, 1930. SUBJECT: Audit of incomplete Federal Reserve States on hand in Bureau of Engraving and P r i n t i n g a s of c l o s e of b u s i n e s s June 30, 1930. Dear S i r : There i s enclosed herewith copy of a l e t t e r addressed to the S e c r e t a r y of t h e Treasury by the Chief of the Division of p u b l i c Debt Accounts and Audit, c e r t i f y i n g a p i e c e count of t h e e n t i r e stock of Federal reserve n o t e f a c e s and uniform backs a l l o c a t e d to Federal r e s e r v e notes on hand in the Bureau of Engraving and P r i n t i n g as of the c l o s e of b u s i n e s s June 30, 1930. The Board h a s been provided with a d e t a i l e d r e p o r t of t h i s a u d i t , a r e c a p i t u l a t i o n of which i s a l s o enclosed f o r your information. Very t r u l y yours, E. M. McClelland, A s s i s t a n t Secretary. TO GOVEHHOBS OF ALL F.H.BANKS. Enclosures, c o p y X-6703-a Audit l'o. 433 J u l y 17, 1930. The Honorable, The S e c r e t a r y of the Treasury: Sir: There i s submitted f o r your information a r e p o r t of a u d i t of incomplete Federal Reserve ITotes of a l l denominations on hand i n the Bureau of Engraving and P r i n t i n g as of the close of "business June 30, 1930. In accordance with arrange- ments made between the Federal Reserve Board and t h i s o f f i c e , a r e p r e s e n t a t i v e of the Board was p r e s e n t during the process of the a u d i t . A p i e c e count was made from J u l y 1 to 3 i n c l u s i v e of the e n t i r e stock of Federal Reserve Hote Faces and of the Uniform Backs a l l o c a t e d to Federal Reserve Kotes. The r e q u i r e d reserve of 4,250,000 s h e e t s of incomplete n o t e s , Faces and Backs, as a u t h o r i z e d i n the l e t t e r of the Governor of the Federal Reserve Board to the Undersecretary of the Treasury under date of December 2, 1929, was found to be on hand, and i n a d d i t i o n there were a l s o found 444,505-l/£> s h e e t s of Federal Reserve Hote Faces i n p r o c e s s of work. The r e s u l t s of the a u d i t are shown i n d e t a i l i n the a t t a c h e d r e p o r t . During the process of the a u d i t the courtesy, cooperation and a s s i s t ance of the o f f i c i a l s and employees of the Bureau were a p p r e c i a t e d . R e s p e c t f u l l y submitted, (Signed) M. R. loafman Chief, Division of P u b l i c Debt Accounts and Audit. 1 5 1 X-6704 FEDERAL EES E R VE BOARD STATEMENT FOR -THE PRESS For r e l e a s e a t 4:00 p.m. September 11, 1930. The Federal Reserve Board announces t h a t the Federal Reserve Bank of Minneapolis has e s t a b l i s h e d a r e d i s c o u n t r a t e of 3 per cent on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c - t i v e September 12, 1930. 153 FEDERAL RESERVE BOARD WASHINGTON X ADDRESS OFFICIAL CORRESPONDENCE T O T H E FEDERAL RESERVE BOARD SUBJECT: _SV06 September 13, 1930. U. S. Casualty Company v, Nashville Branch of Federal Reserve Bank of A t l a n t a , e t a l . Dear S i r : I enclose f o r your information a copy of a B i l l i n Chancery f i l e d i n the above e n t i t l e d case. You w i l l note t h a t i t a l l e g e s t h a t the check i n question was deposited i n a Mew York t a n k , forwarded to the Federal Reserve Bazik of How York, and then to the N a s h v i l l e Branch of the Federal Reserve Bank of A t l a n t a . A decree a g a i n s t the Federal Reserve Bank of A t l a n t a i s sought on the ground t h a t i t was n e g l i g e n t i n sending the chock d i r e c t to the drawee "bank, I am c a l l i n g t h i s to your a t t e n t i o n because Mr. Edward J . Smith, Counsel f o r the N a s h v i l l e Branch of the Federal Reserve Bank of A t l a n t a , with the acquiescence of Mr, Robert S. Parker and the undersigned, has decided to f i l e a demurrer i n t h i s case; and I do not know of any case i n which a b i l l of t h i s kind has been demurred t o . Mr, Smith's theory i s t h a t the b i l l shows on i t s f a c e t h a t the New York r u l e i s a p p l i c a b l e ; and there i s no p r i v i t y of c o n t r a c t between the complainant and the Federal Reserve Bank of A t l a n t a ; and t h a t , t h e r e f o r e , the b i l l should be dismissed on demurrer. .As an a l t e r n a t i v e , ho a l s o contends t h a t the Court should take j u d i c i a l n o t i c e of Regulation J ; t h a t the r e g u l a t i o n has the f o r c e and e f f e c t of law; t h a t , under the r e g u l a t i o n , there i s no p r i v i t y of c o n t r a c t ; and t h a t the b i l l should bo dismissed* While we a r e not e n t i r e l y sure t h a t the Court w i l l s u s t a i n such a demurrer, Mr. Parker and I f e e l t h a t i t can do no harm to t r y i t and t h a t the f i l i n g of a demurrer i n t h i s case suggests i n t e r e s t i n g p o s s i b i l i t i e s , I f i t i s s u c c e s s f u l i t w i l l e s t a b l i s h an easy and e x p e d i t i o u s means of disposing of many of those check c o l l c c t i o n cases. This i s merely f o r your information, but I s h a l l be i n t e r e s t e d i n any views which you may care to express on t h i s s u b j e c t . With a l l b e s t r e g a r d s , I am Cordially yours, Walter Wyatt, General Conns c l , Enclosure. To Counsel f o r a l l F. R, Banks (Except A t l a n t a ) X-6706-a COPY MO. 42315 O.B F i l e d June 23, J.930 TO THE HONORABLE JAMES B. NEWMAN, CHANCELLOR, ETC HOLDING THE CHANCERY COURT OF DAVIDSON COUNTY TENNESSEE : UNITED STATES CASUALTY COMPANY, a n o n - r e s i d e n t corporation r e s i d e n t of the s t a t e of Now York, "being q u a l i f i e d and doing "business i n the s t a t e of Tennessee Complainant VS; FOURTH & FIRST NATIONAL BANK a n a t i o n a l banking i n s t i t u t i o n of Davidson County, Tennessee, NASHVILLE BRANCH FEDERAL RESERVE BANK, a "branch of the A t l a n t a Federal Reserve Bank, a n a t i o n a l "banking i n s t i t u t i o n , with i t s o f f i c e i n Davidson County, Tennessee, COLUMBIA BANK & TRUST COMPANY, a s t a t e "banking i n s t i t u t i o n r e s i d e n t of Maury County, Tennessee, and D. D. ROBERTS C T U, an a d u l t r e s i d e n t of Davidson County, Columbia, Tennessee, Receiver f o r t h e Bank & Trust Company, Defendants Complainant would r e s p e c t f u l l y show to the Court: That on J u l y 15, 1929, the Columbia Insurance Agency, a duly l i c e n s e d insurance agency r e p r e s e n t i n g the complainant a t Columbia, Tennessee, drew i t s check on the Columbia Bank & Trust Company f o r $277.83, payable to the complainant f o r the amount of the agency's account due complainant. The chock was i n due season forwarded to the complainant's home o f f i c e i n New York and was thon endorsed by i t and d e p o s i t e d i n the Continental Bank of New York f o r X-6706-e •m collection. 2 - That Bank forwarded tho check f o r c o l l e c t i o n through the Federal Reserve Bank of Now York. On J u l y 20, 1929 the Federal Reserve Bank of New York forwarded i t s cash l e t t e r to the N a s h v i l l e Branch Federal Reserve Bank i n t h e sum of $21,503.48, which included the check above mentioned. This l e t t e r was received "by the Nashville Branch Federal Reserve Bank, J u l y 22, 1929, and on tho same day, the s a i d N a s h v i l l e Branch Federal Reserve Bank s e n t to tho Columbia Bank & Trust Company i t s cash l e t t e r i n the sum of $4,376.62, which included the above mentioned check and which chock was t h e r e f o r e s e n t by the N a s h v i l l e Branch Federal Reserve Bank d i r e c t to the bank on which drawn f o r presentment and payment. At the time there were two other r e g u l a r banking i n s t i t u t i o n s , i n c l u d i n g a n a t i o n a l bank, doing business i n Columbia, Tennessee, which was known to the Nashville Branch Federal Reserve Bank.' On J u l y 24th, the Nashville Branch Federal Reserve Bank received from tho Columbia Bank & Trust Company a check drawn on the defendant Fourth & F i r s t National Bank of Nashv i l l e , f o r $4,362.52, being i n payment of s a i d cdah l e t t e r of tho Nashville Branch Federal Reserve Bank s e n t to tho Columbia Bank & Trust Company, l e s s r e t u r n e d items, and on s a i d day, J u l y 24th, 1929, tho Nashville Branch Federal Reserve Bank p r e s e n t e d s a i d check drawn by the Columbia Bank & Trust Company t o cthe Fourth & F i r s t National Bank f o r payment which was r e fused. p a i d by In the meantime the s a i d chock of $277.83 was marked !fche Columbia Bank & Trust Company and p l a c e d with i t s . JL - 3 - X-6706~a p a i d cancelled, checks and was returned to the Columbia Insurance Agency marked "paid" along with i t s other cancelled checks and i n "balancing i t s account. The check drawn on the Fourth & F i r s t National Bank was p a s s e d through the c l e a r i n g house of Naflhville and payment was not r e f u s e d when i t was f i r s t p r e s e n t e d to the Fourth & F i r s t n a t i o n a l Bank coming through c l e a r i n g s , but during the day, and probably 'bef o r e any e n t r y thereof a g a i n s t the account of the Columbia Bank & Trust Company, t h i s bank closed i t s doors and the defendant Fourth & F i r s t National Bank was a p p r i s e d thereof* At the time the Columbia Bank & Trust Company was indebted f o r borrowed money or r e d i s c o u n t s to the Fourth ifc F i r s t National Bank and t h a t bank then r e t u r n e d s a i d check f o r $4,362.52 to the N a s h v i l l e Branch Federal Reserve Bank, r e f u s i n g payment, and a p p l i e d the deposit with the Columbia Bank & Trust Company i n s a i d Fourth & F i r s t National Bank t o the amount due the l a t t o r by the former. II Wherefore, complainant i s advised and charges t h a t i t i s e n t i t l e d to recover s a i d amount of $277.83 from tho Nashville Branch Federal Reserve Bank f o r the reason t h a t s a i d bank was n e g l i g e n t i n the c o l l e c t i o n of s a i d check i n sending i t d i r o c t to tho Columbia Bank & Trust Company on whom i t was drawn, knowing t h a t t h e r e were o t h e r banks i n the same c i t y . That l i k e w i s e , or i f taken i n t h i s view, i n e i t h e r event, the defendant Fourth & F i r s t National Bank of Nashville i s l i a b l e «to complainant f o r the reason t h a t i t had no r i g h t or a u t h o r i t y to apply j^iea&eposit of the Columbia Bank & Trust Company as abs%g^ — 4 — X-6706-a s t a t e d without paying s a i d check s e n t to the Nashville Branch Federal Reserve Bank and "by i t c l e a r e d to the Fourth & F i r s t Hational Bank, the payment on the check not "being r e f u s e d when i t was p r e s e n t e d . That s a t i s f a c t i o n from o i t h o r of s a i d defendants would of course s a t i s f y the complainant's demand a g a i n s t a l l , l e a v i n g the o t h e r defendants to l i t i g a t e and a d j u s t the matter among thenw selves. That i f mistaken i n the foregoing views, complainant i s a t l e a s t e n t i t l e d to have and s o t up s a i d check as a claim a g a i n s t the a s s e t s of tho d e f u n c t Columbia Bank & T r a s t Company i n tho hands of i t s r e c e i v e r and r e c e i v e i t s dividend thereon. Ill The p a r t i e s r e s i d e as s t a t e d i n the caption and aro sui j u r i s PREMISES CONSIDERED, COMPLAINANT PRAYS: 1. That those named as defendants i n tho caption hereof bo made such by tho issuance and s e r v i c e of process upon them r e q u i r i n g them to appear and answor t h i s b i l l a t the e a r l i e s t p r a c t i c a l r u l e day of the Court; b u t t h e i r oaths to t h e i r answers aro waived. 2. That tho complainant bo g r a n t e d a decree a g a i n s t the N a s h v i l l e Branch Federal Reserve Bank and/or Fourth & F i r s t National Bank of Nashville f o r tho amount of s a i d chock, i n t e r e s t and c o s t s . 3. I f denied tho r e l i e f sought i n the foregoing p r a y e r , ^ - 5 - jt-6706-a then t h a t s a i d chock "be s e t up and e s t a b l i s h e d as a v a l i d claim and demand a g a i n s t t h e a s s e t s of the Columbia Bank & Trust Conn pany i n the hands of the r e c e i v e r and t h a t ho bo ordered to pay pro r a t a dividend thereon. 4. That complainant have a l l such f u r t h e r and g e n e r a l r e l i e f as i t may be e n t i t l e d to a t the h e a r i n g . Wo a r e s u r e t y f o r the costs of t h i s cause. McGugin & Evans. McGugin & Evans S o l i c i t o r s f o r Complainant. : 158 X-6707 BY-LA^S CP nigs RTS^BVE BOARD s m s c r i v i i s i p r n v m i s , 1930. A r t i c l e 1. The Chairman. The Secretary of the Treasury, as Chairman of the Board, s h a l l preside a t a l l meetings when p r e s e n t . In the absence of the Chairman, the Governor s h a l l a c t a s p r e s i d i n g o f f i c e r . In the absence of "both the Chairman and the Governor, the Vice-Governor s h a l l p r e s i d e , and in the absence of a l l three such o f f i c e r s , the remaining member of the "^xocutivc Committee s h a l l p r e s i d e . A r t i c l e 11. The Governor. Sec. 1. The Governor of the Federal Reserve Board s h a l l be the a c t i v e executive o f f i c e r t h e r e o f ; s u b j e c t , however, to the supervision of the Board and to such r u l e s and r e g u l a t i o n s a s may be incorporated h e r e i n or may from time to time, by r e s o l u t i o n , be e s t a b l i s h e d . Sec. 2. The Governor s h a l l have general charge of the executive and r o u t i n e b u s i n e s s of the Board not s p e c i f i c a l l y assigned under the bylaws or by r e s o l u t i o n of the Board to any individual member or committee t h e r e o f , and s h a l l have supervision of the Board's s t a f f . Sec. 3 . The Governor s h a l l "be an e x - o f f i c i o member of a l l Standing Committees of the Board. A r t i c l e 111. The Vice-Govornor. Sec. 1. In the absence or d i s a b i l i t y of the Governor, h i s powers s h a l l be e x e r c i s e d and h i s d u t i e s discharged by the Vice- Governor, and in the absence or d i s a b i l i t y of both of these o f f i c e r s , such powers s h a l l be exercised and such d u t i e s discharged by the remaining member of the Executive Committee; in the absence or d i s a b i l i t y of a l l members of the Executive Committee the powers and d u t i e s of the Governor s h a l l be e x e r cised by the s e n i o r member of the Board p r e s e n t . Sec. 2. I t s h a l l be the duty of the Vice-Governor to cooperate with the Governor in t h e a d m i n i s t r a t i o n of the executive b u s i n e s s of the Board. — 2 — A r t i c l e IV. X-6707 1 5 9 Secretary and A s s i s t a n t S e c r e t a r i e s . Sec. 1. The Board s h a l l appoint a Secretary and one or more a s sistant secretaries. Sec. 2. The Secretary s h a l l keep an accurate record of the p r o ceedings of the Board and s h a l l conduct such correspondence and perform such o t h e r d u t i e s as may "be assigned to him "by the Governor or "by the Board. In the absence or d i s a b i l i t y of the Secretary, the d u t i e s of t h a t o f f i c e may, "by. d i r e c t i o n of the Board, "be performed by an a s s i s t a n t s e c r e t a r y . Sec. 3 . The Secretary s h a l l have custody of the s e a l and, a c t i n g under the a u t h o r i t y of the Board, s h a l l have power to a f f i x same to a l l i n struments r e q u i r i n g i t . Such instruments s h a l l be a t t e s t e d by the Secretary. Sec. 4. The a s s i s t a n t s e c r e t a r i e s s h a l l each perform such d u t i e s as may be assigned to them from time to time by the Board or by the Secretary. A r t i c l e V. A s s i s t a n t to the Governor. Sec. 1. The Board may authorize appointment of an A s s i s t a n t to the Governor. Sec. 2. The A s s i s t a n t t o the Governor s h a l l perform such d u t i e s as s h a l l be assigned t o him by the Governor. A r t i c l e VI. The Executive Committee. Sec. 1. There s h a l l be an Executive Committee of the Board cons i s t i n g of three members, which s h a l l include the Governor, Vice-Governor and one of the appointive members of the Board. The appointive member of the Committee s h a l l be nominated and e l e c t e d a t a r e g u l a r meeting of the Board. Members of the Board s h a l l serve a s f a r as p r a c t i c a b l e in r o t a t i o n and f o r approximately equal terms. The presence of three members s h a l l be r e q u i s i t e f o r the t r a n s a c t i o n of business by the Executive Committee, and action s h a l l be taken only on unanimous vote of the Committee. Sec. 2. In the' absence of the Governor and Vice-Governor the app o i n t i v e member of the Executive Committee s h a l l a c t a s Chairman and s h a l l , with two o t h e r appointive members of the Board p r e s e n t in Washington t o be chosen by him in the order of t h e i r s e n i o r i t y , e x e r c i s e the powers and d i s charge the d u t i e s of the Executive Committee. In the absence of a l l three r e g u l a r members of the Executive Committee the three remaining appointive members of the Board, provided there be three in Washington, s h a l l a c t as an i n t e r i m committee and e x e r c i s e the powers and d i s c h a r g e the d u t i e s of the Executive Committee,, the senior member a c t i n g as Chairman. — 3 — x-5707 J -60 Provided, however, that if only t™o of the appointive members of the Board are in Washington such two members may a c t a s an i n t e r i m committee and ezorcise the powers and discharge the d u t i e s of the Executive Committee. Any a c t i o n taken t r such i n t e r i m committee of two members, however, s h a l l not he f i n a l l y e f f e c t i v e u n l e s s and u n t i l r a t i f i e d "by the Board. At the next r e g u l a r meeting of the Board there s h a l l he reported to i t f o r r a t i f i c a t i o n a l l a c t i o n s taken by such i n t e r i m committee of two members s i n c e the l a s t r e g u l a r meeting of the Board. Upon r a t i f i c a t i o n "by the Board, a l l a c t i o n s taken "by such i n t e r i m committee of two members s h a l l have the same f o r c e and e f f e c t as a c t i o n s taken by the Board i t s e l f and s h a l l be e f f e c t i v e as of the date such a c t i o n was taken bv the i n t e r im committee of two members u n l e s s otherwise s p e c i f i c a U " provided b^ the Board. Sec. 3 . I t s h a l l be the duty of the Executive Committee to r e view and submit d r a f t s of important correspondence involving the expression of opinions or d e c i s i o n s of the Board, and to prepare and make recommendations governing the conduct of the Board's b u s i n e s s . See. 4. The Executive Committee s h a l l a l s o have charge of a l l matters a p p e r t a i n i n g t o the i n t e r n a l organization of the Board, and s h a l l make recommendations from time to time on t h i s m a t t e r . I t s h a l l a l s o p r e pare annually a budget of proposed e x p e n d i t u r e s . Sec. 5 . In the absence of a quorum of the Federal Reserve Board and f o r the t r a n s a c t i o n of business r e q u i r i n g a c t i o n during the absence of such quorum, the Executive Committee i s authorized to t r a n s a c t business # i i c h can be t r a n s a c t e d in accordance ^ i t h e s t a b l i s h e d p r i n c i p l e s and p o l i c i e s of t h e Board and to perform such a d d i t i o n a l d u t i e s as may be spec i f i c a l l y delegated to i t from time t o time by i n s t r u c t i o n of the Federal Reserve Board. The Secretary of the Board s h a l l serve as Secretary of the Executive Committee. A r t i c l e VII. Standing Committees. In a d d i t i o n to the Executive Committee there s h a l l be the f o l lowing Standing Coiymittees, appointments to vfoich s h a l l be made by the Governor, s u b j e c t to the approval of the Board. Sec. 1. Law. To the Law Committee s h a l l be r e f e r r e d f o r study and r e port a l l q u e s t i o n s of a l e g a l n a t u r e . To t h i s Committee s h a l l a l s o be a s signed the p r e p a r a t i o n or r e v i s i o n of the Board's r e g u l a t i o n s , contemplated amendments to the Federal Reserve Act, a p p l i c a t i o n s under the Kern amendment to the Clayton Act, and a p p l i c a t i o n s f o r the e x e r c i s e by n a t i o n a l banks of t r u s t powers. The General Counsel s h a l l serve as S e c r e t a r y of the Committee. Sec. 2 . Examination. To t h i s Committee s h a l l be r e f e r r e d a l l questions r e l a t i n g to the examination of Federal Reserve or member banks including — 4 ** " X-6707 161 admission of s t a t e "banks a.ncl permission to e s t a b l i s h and operate "branches. The Chief Examiner s h a l l serve as Secretary of t h i s Committee. Sec. 3 . Research and S t a t i s t i c s . This Committee s h a l l have charge of a l l i n v e s t i g a t i o n s of an economic and s t a t i s t i c a l c h a r a c t e r authorized! "by the Board a.nd s h a l l supervise the work of the Division of Research and S t a t i s t i c s and the p r e p a r a t i o n and p u b l i c a t i o n of the Federal Reserve B u l l e t i n . This Committee s h a l l a l s o have s u p e r v i s i o n of the s t a t i s t i c a l and p u b l i c a t i o n work of the Federal Beserve Banks. The D i r e c t o r of the Division of Besearch and S t a t i s t i c s s h a l l serve as Secretary of t h i s Committee, or i n h i s absence the A s s i s t a n t Director s h a l l so serve. Sec. 4. S a l a r i e s and "Sxpenditures of Federal Reserve Banks. To t h i s Committee s h a l l "be assigned a l l recommendations from Federal Reserve Banks f o r changes of s a l a r i e s and o t h e r e x p e n d i t u r e s . This Committee s h a l l make r e p o r t s with r e s p e c t t o c h a r g e - o f f s and f r a n c h i s e tax of Federal Reserve Banks. The Secretary of the Board s h a l l serve as Secretary of t h i s Committee, Sec. 5. D i s t r i c t Committees. To each Federal Reserve Bank and D i s t r i c t s h a l l "be assigned a Committee of not l e s s than two members of the Federal Reserve Board. I t s h a l l be the duty of each Committee to keep i t s e l f informed "by correspondence and v i s i t of the a f f a i r s of the Bank and the condition of the D i s t r i c t , and make i n v e s t i g a t i o n and r e p o r t on a l l questions a p p e r t a i n i n g to the opera t i o n of any Federal Reserve Bank or the condition of any Federal Reserve D i s t r i c t t h a t may "be r e f e r r e d to i t "by the Board. These Committees s h a l l a l s o aid the Committee on S a l a r i e s and Expenditures with information r e garding personnel of the r e s p e c t i v e Federal Reserve Banks of which they have charge. These Committees s h a l l a l s o make recommendations to the Board f o r the appointment of D i r e c t o r s a t Federal Reserve Banks and Branches. Article VIII. * The F i s c a l Agent and Deputy F i s c a l Agent, Sec. 1. The Board s h a l l appoint a F i s c a l Agent and a Deputy F i s c a l Agent. The duty of the F i s c a l Agent s h a l l be to c o l l e c t and deposit a l l moneys r e c e i v a b l e by the Board with the Treasurer of the United S t a t e s , to be p l a c e d i n a s p e c i a l fund e s t a b l i s h e d on the books of the Treasurer f o r the Federal Reserve Board. The Deputy F i s c a l Agent s h a l l perform the d u t i e s of the F i s c a l Agent during h i s absence or d i s a b i l i t y . Sec. 2. The F i s c a l Agent and Deputy F i s c a l Agent s h a l l each execute a s e p a r a t e bond with surety s a t i s f a c t o r y to the Board. Sec. 3 . Payments of expenses and other disbursements of the Board s h a l l bo made by the F i s c a l Agent upon proper vouchers out of moneys - 5 - x 6707 - 162 advanced to him b" r e q u i s i t i o n and warrant out of the s p e c i a l fund and placed t o h i s o f f i c i a l c r e d i t with the Treasurer of the United S t a t e s a s provided "by Section 5 of t h i s A r t i c l e . In t h e absence of the F i s c a l Agent payment of expenses and other disbursements s h a l l he made "by the Deputy F i s c a l Agent upon proper vouchers out of moneys advanced t o the F i s c a l Agent "by r e q u i s i t i o n and warrant out of the s p e c i a l fund and placed to h i s o f f i c i a l c r e d i t with the Treasurer of the United S t a t e s a s provided "by Sections 5 and 6 of t h i s a r t i c l e . Sec. 4. The F i s c a l Agent s h a l l prepare a q u a r t e r l y account in such form as s h a l l he approved "by the Comptroller General of the United S t a t e s and, a f t e r approval by the Governor, such q u a r t e r l y account s h a l l he submitted t o the General Accounting O f f i c e , Such account s h a l l cover payments of expenses and o t h e r disbursements made "by "both the F i s c a l Agent and the Deputy F i s c a l Agent. Sec. 5. The Governor s h a l l , when necessary, make r e q u i s i t i o n on the t r e a s u r e r of the United S t a t e s f o r the advance of such sums to the F i s c a l Agent as may he necessary from the Federal Reserve Board f u n d . Sec. 6. The Deputy F i s c a l Agent in making disbursements of the Board upon proper vouchers out of the moneys advanced to the F i s c a l Agent s h a l l sign a g a i n s t f u n d s t o the o f f i c i a l c r e d i t of the F i s c a l Agent with the Treasurer of the United S t a t e s in the name of the F i s c a l Agent by himself as Deputy F i s c a l Agent. A r t i c l e IX. Gold Settlement Fund and Federal Beserve Agents' Fund. All funds d e p o s i t e d by or f o r account of the r e s p e c t i v e Federal Reserve Agents in the Federal Reserve Agents' fuiid of the Federal Reserve Board and a l l funds d e p o s i t e d by or f o r account of the r e s p e c t i v e Federal Reserve Banks in the Gold Settlement Fund of the Federal Reserve Board s h a l l be h e l d on d e p o s i t with the Treasurer of the United S t a t e s and s h a l l be s u b j e c t to withdrawal only by check of the Federal Reserve Board signed by the Secretary or an A s s i s t a n t Secretary and countersigned by the Governor or a c t i n g executive o f f i c e r of the Board. A r t i c l e X. R e q u i s i t i o n f o r Delivery of Federal Reserve 3Totes. R e q u i s i t i o n s upon the Comptroller of the Currency f o r the d e l i v e r y » 6 •• X-670? 163 of Federal Bo serve notes to the r e s p e c t i v e Federal Reserve .Agents s h a l l "be made "by the Secretary or A s s i s t a n t Secretary in response only to r e quests made "by the Federal Peserve Agents to the Board f o r such n o t e s . The S e c r e t a r y or A s s i s t a n t Secretary s h a l l submit d a i l y f o r approval to the governor or a c t i n g executive o f f i c e r of the Board a schedule showing the amount of each denomine.tion of Tederal Reserve ITotes r e q u i s i t i o n e d by him f o r the account of each Federal Pgserve Agent, A r t i c l e XI. The Seal. The f o l l o w i n g i s an impression of the s e a l adopted by the Board. SEAL. A r t i c l e XII. Counsel. Sec. 1. The Board s h a l l appoint a General Counsel whose duty i t s h a l l be to advise with the Board, or any member t h e r e o f , as to such l e g a l questions as may a r i s e in the oonduct of i t s b u s i n e s s ; to p r e p a r e , a t the B o a r d ' s request opinions, r e g u l a t i o n s , r u l i n g s , forms and other l e g a l papers and t o perform g e n e r a l l y such l e g a l s e r v i c e s as he may be c a l l e d upon by the Board t o perform. Sec. 2. Subject to the d i r e c t i o n of the Governor, the General Counsel s h a l l have a u t h o r i t y to correspond d i r e c t l y with the Counsel of the various Federal Reserve Banks and to request t h e i r opinions as to the i n t e r p r e t a t i o n of the l o c a l laws of the S t a t e s included in t h e i r r e s p e c t i v e Federal Reserve D i s t r i c t s . Copies of a l l such correspondence s h a l l be f u r n ished to the Board f o r i t s information. See. 3. Whenever i t may be deemed advisable, the Board may appoint one or more Associate or A s s i s t a n t Counsel, or one or more A s s i s t a n t s to Counsel. The duty of such Associate or A s s i s t a n t Counsel s h a l l be to a s s i s t the General Counsel in the performance of h i s d u t i e s and to perform the duty of the General Counsel in h i e absence. The duty of such A s s i s t a n t to Counsel or A s s i s t a n t s t o Counsel s h a l l be to a s s i s t t h e General Counsel in the performance of h i s d u t i e s . Sec. 4. The Board may appoint from time to time Consulting Counsel, who may be a t t o r n e y s a t law engaged in outside p r a c t i c e . ' - 7 - X-6707> 1 6 4 Article XIII. Meetings. Sec. 1. Five members of the Board s h a l l c o n s t i t u t e a ouorum f o r the t r a n s a c t i o n of "business. Sec. 2. Stated meetings of the Board s h a l l he held on such days of the week and a t such hours as the Board "by a m a j o r i t y vote may f i x from time to time. One meeting day each week s h a l l be s e t a p a r t f o r c o n s i d e r a t i o n of the following m a t t e r s , advance n o t i c e of not l e s s than two days being sent to members of important questions to be taken up a t the meeting: Discount and open market m a t t e r s ; Approval of expenditures and s a l a r i e s ; Establishment of Federal Reserve Branches, Agencies, Currency S t a t i o n s ; Permission f o r establishment of member bank branches; Amendment of B o a r d ' s r u l e s and r e g u l a t i o n s ; New p o l i c i e s or changes of p o l i c y ; Such other major m a t t e r s as may be reserved f o r c o n s i d e r a t i o n a t the weekly meeting. Sec. 3 . Special meetings of the Board may be c a l l e d by the Chairman or Governor or upon the w r i t t e n r e q u e s t of three members of the Board. Sec. 4. At a l l meetings of the Board the f o l l o w i n g s h a l l be the order of b u s i n e s s ; (1) Heading or i n s p e c t i o n of the Minutes of the l a s t r e g u l a r meeting and Minutes of meetings of the Executive Committee. (2) Report of the Governor. (3) Report of the S e c r e t a r y . (4) Reports of the committees or members on assigned business. (5) Unfinished b u s i n e s s , (S) New b u s i n e s s . Sec. 5. No vote s h a l l be taken or motion made by the Board a t a meeting or conference when others than the members of the Board and i t s Secr e t a r i a l s t a f f are present. A r t i c l e XIV. Absences. Sec. 1. Absences of appointive members of the Board s h a l l a s f a r as p r a c t i c a b l e be arranged so as not to i n t e r f e r e with the expeditious conduct of the Board's b u s i n e s s in Washington. 165 - 8 - X-6707 A r t i c l e XV. Information and P u b l i c a t i o n . Sec. 1. All persons employed b-" the Board s h a l l keep i n v i o l a t e i t s "business, a f f a i r s , and concerns, and s h a l l not d i s c l o s e or divulge the same to any unauthorized person whomsoever, and any employee who s h a l l give information contrary to t h i s by-law s h a l l "be l i a b l e to immediate d i s m i s s a l . Except upon vote of the Board, no one other than a Member of the Board, or the S e c r e t a r y . A s s i s t a n t S e c r e t a r i e s . A s s i s t a n t to the Governor, and General Counsel, s h a l l "be permitted to inspect any of the Board's minutes. Sec. 2. Uo statements s h a l l "be made to the p r e s s expressive of the B o a r d ' s policy or d e s c r i p t i v e of i t s a c t i o n except as authorized and approved "by the Board. Such statements s h a l l be issued only in w r i t t e n form and when a u t h o r i z e d and approved they s h a l l he issued through the o f f i c e of the Governor or such other o f f i c e r or member of the Board a s may he s p e c i f i c a l l y d e s i g n a t e d . While each member of the Board must determine f o r himself the p r o p r i e t y or n e c e s s i t y of expressing p u b l i c l y h i s i n d i v i d u a l opinion on any question, members s h a l l not quote p u b l i c l y the opinion of other members on m a t t e r s which have not formally been passed upon by the Board. Sec. 3 . There s h a l l be published monthly, a b u l l e t i n to be known as "The Federal Reserve B u l l e t i n " , which s h a l l be the o f f i c i a l p e r i o d i c a l organ or p u b l i c a t i o n of the Federal Reserve Board. Sec. 4. Uo r e s o l u t i o n s of a personal c h a r a c t e r , except upon the death of a member of the Federal Reserve Board while s e r v i n g as such, s h a l l appear in any p u b l i c a t i o n of the Federal Reserve Board, A r t i c l e XVI. Amendments. These by-laws may be amended a t any r e g u l a r meeting of the Board by a m a j o r i t y vote of the e n t i r e Board, provided t h a t a copy of such amendments s h a l l have been d e l i v e r e d to each member a t l e a s t seven days p r i o r to such meeting. 1GG X-6708 FEDERAL RESERVE BOARD STATEMENT FOB THE PBESS For immediate r e l e a s e . September 16, 1930. The Federal Advisory Council a t i t s meeting today made c e r t a i n changes i n i t s o r g a n i z a t i o n as p, r e s u l t of the r e c e n t death of Mr. Frank 0. Wetmore of Chicago, and the r e s i g n a t i o n from the Council of Mr. Levi 1 . Rue of P h i l a d e l p h i a . Mr. Melvin A. Traylor of the F i r s t National Bank of Chicago succeeds Mr. Wetmore as r e p r e s e n t a t i v e of the Seventh D i s t r i c t , and Mr. Howard A. Loeb of the Tradesmens National Bank and Trust Company of P h i l a d e l p h i a , succeeds Mr. Hue. Mr. B. A. McKinney of D a l l a s , former Vice P r e s i d e n t of the Council, has been e l e c t e d P r e s i d e n t to f i l l the vacancy caused by Mr, Wetmore's death, and Mr. Walter W, Smith of S t . Louis has been e l e c t e d Vice P r e s i d e n t . These o f f i c e r s as e x - o f f i c i o members, and Mr. William C. P o t t e r of New York, Mr, Harris Creech of Cleveland, Mr. Loeb and Mr. Traylor w i l l comprise the Executive Committee of the Council. L i c h t e n s t e i n , of Chicago, w i l l continue as S e c r e t a r y . Mr. Walter X-6710 1 1 D B B A$, ADVISORY COUNCIL 1G7 1930 Executive Committee: Officers: B. A. McKinney Howard A. Loeb Walter W, Smith H a r r i s Creech Wm. C. P o t t e r Melvin A. Traylor B. A. McKinney, P r e s i d e n t Walter W. Smith, Vice P r e s i d e n t Walter L i c h t e n s t e i n , S e c r e t a r y MEMBERS District. Mo. 1 Herbert K. H a l l e t t A t l a n t i c National Bank, Boston, Mass. No. 2 William C. P o t t e r Guaranty Trust Company of New York, N» Y. No. 3 Howard A. Loeb Tradesmens National Bank & Trust Company, P h i l a d e l p h i a , Pa. No. 4 H a r r i s Creech Cleveland Trust Company, Cleveland, Ohio. No. 5. John Poole Federal American National Bank, Washington, D. C. No. 6 J . P. Butler, J r . Canal Bank & Trust Company, New Orleans, La. No. 7 Melvin A. Traylor F i r s t National Bank, Chicago, 111. No. 8 Walter W. Smith F i r s t National Bank, S t . Louis, Mo. No. 9 George H. P r i n c e F i r s t National Bank, S t . P a u l , Minn. No. 10 Walter S. McLucas Commerce Trust Company, Kansas City, Mo. No. 11 B. A. McKinney F i r s t National Bank i n D a l l a s , D a l l a s , Texas. No. 12 P. L. Lipman Wells Fargo Bank & Union Trust Co., San Francisco, C a l i f . Address of Mr. L i c h t o n s t e i n , 38 South Dearborn S t . , Chicago, I l l i n o i s . . September 16, 1930, 168 FEDERAL RESERVE BOARD WASHINGTON 36-6711 ADDRESS OFFICIAL CORRESPONDENCE T O THE FEDERAL RESERVE BOARD SUBJECT: September 17, 1930. Holidays during October, 1930. Dear S i r : On Monday, October I 3 t h , i n observance of Columbus Day, t h e r e w i l l be n e i t h e r Gold Settlement Fund nor Federal r e serve n o t e c l e a r i n g , and the books of the Board's Gold Settlement Fund w i l l be closed* The o f f i c e s of the Board, and the following Federal Reserve Banks and Branches w i l l "be open f o r business as u s u a l : Cleveland Cincinnati S t . Louis L i t t l e Rock Memphis Ri chmond Charlotte Minneapolis Atlanta Birmingham Nashville Jacksonville Kansas City Denver Oklahoma City Detroit In a d d i t i o n to the h o l i d a y mentioned above, the following Branches of the Federal Reserve Bank of A t l a n t a w i l l be closed on the d a t e s i n d i c a t e d : Friday October 10 Havana Agency Revolution of Yara Friday October 10 Jacksonville Farmers' Day Tuesday October 14 Birmingham F r a t e r n a l Day P l e a s e n o t i f y branches. http://fraser.stlouisfed.org/ TO GOVERNORS Federal Reserve Bank of St. Louis Very t r u l y yours, J . C. Noell, Assistant Secretary, OF ALL F. R. BAMS. I f FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-6712 September 18, 1930. Dear S i r ; I n view of the very i n t e r e s t i n g j u r i s d i c t i o n a l question involved, I r e s p e c t f u l l y i n v i t e your a t t e n t i o n to the d e c i s i o n of the United S t a t e s C i r c u i t Court of Appeals i n the case of Omaha n a t i o n a l Bank v . Federal Reserve Bank of Kansas City e t a l , 26 Federal (2nd) 884. Mr. Leedy has w r i t t e n me as follows with r e f e r e n c e to t h i s case: "In t h i s case the Federal Reserve Bank of Kansas City i s v i r t u a l l y i n the p o s i t i o n of a s t a k e h o l d e r . The Omaha National Bank i s seeking to recover the sum of $60,000.00 from the Wyoming n a t i o n a l Bank of Casper, Wyoming, and to e s t a b l i s h an e q u i t a b l e t i t l e to, or l i e n upon, a c r e d i t on the books of our Omaha Branch i n favor of the Wyoming n a t i o n a l Bank i n t h a t amount. The s u i t a r i s e s out of the following f a c t s : On J u l y 7, 1924, the F i r s t National Bank of Cheyenne was i n a f a i l i n g c o n d i t i o n . I t had a dep o s i t balance with the Omaha National Bank i n excess of $60,000.00, but the same l a r g e l y r e p r e s e n t e d u n c o l l e c t e d funds. On t h a t day the F i r s t National Bank of Cheyenne telegraphed the Omaha National Bank to charge i t s account with $60,000.00, and to t r a n s f e r t h a t amount t o the c r c d i t of the Wyoming National Bank of Casper on the books of our Omaha Branch. This wire was r e ceived too l a t e f o r handling on J u l y 7, but a t the opening of b u s i n e s s on J u l y 8, the Omaha National Bank charged the account of the F i r s t National Bank of Casper a s r e q u e s t e d , and d i r e c t e d our Omah% Branch to charge i t s account with a l i k e sum, and to c r e d i t the amount $o the Wyoming National Bank. This was done. On J u l y 9, 1924, the F i r s t National Bank of Cheyenne suspended b u s i n e s s , and i t s a f f a i r s were l a t e r p l a c e d i n the p o s s e s s i o n of a r e c e i v e r . Certain stockholders of the F i r s t National Bank of Cheyenne were a l s o stockholders of the Wyoming National Bank, and up to a s h o r t time b e f o r e i t s suspension the F i r s t National Bank was l a r g e l y indebted to the Wyoming National Bank. During a p e r i o d of t h i r t y days immediately p r i o r to the f a i l u r e , the F i r s t National Bank p a i d l a r g e amounts to the Wyoming National Bank, making withdrawals from i t s other correspondents f o r the p u r pose , and a t the time of the suspension the indebtedness was almost, i f not e n t i r e l y p a i d , i f the $60,000.00 t r a n s f e r i s allowed to s t a n d , " I t i s the contention of the Omaha National Bank t h a t a conspiracy e x i s t e d between the o f f i c e r s of the F i r s t National Bank and the Wyoming Nat i o n a l Bank to l i q u i d a t e the indebtedness due the Wyoming National Bank a t the expense of the Omaha National Bank. As the m a t t e r stands the Omaha Nat i o n a l Bank has a c t u a l l y s u f f e r e d a l o s s , f o r the u n c o l l e c t e d items a g a i n s t 170 - 2 - X-6712 which the t r a n s f e r was made were never c o l l e c t e d by i t . On account of the a l l e g e d conspiracy and f r a u d the r i g h t i s claimed to r e s c i n d the t r a n s a c t i o n and to recover the amount of the c r e d i t . "Pending the outcome of the l i t i g a t i o n an i n j u n c t i o n was i s s u e d a g a i n s t our Omaha Branch r e s t r a i n i n g any d i s p o s i t i o n of the c r e d i t , and of course i t has since been h e l d i n t a c t . "The s o l e question i n the case, so f a r as we are concerned, i s whether the United S t a t e s D i s t r i c t Court for the D i s t r i c t of Nebraska has j u r i s d i c t i o n of the a c t i o n . J u r i s d i c t i o n , i f i t e x i s t s , i s founded on Sect i o n 57 of the J u d i c i a l Code. I f the c r e d i t balance on the books of the Omaha Branch c o n s t i t u t e s a r e s w i t h i n the meaning of t h a t Section, and i f tho Federal Reserve Bank of Kansas City i s not such a p a r t y to the l i t i g a t i o n as to r e q u i r e the oxistenco of some one of the s t a t u t o r y grounds of j u r i s d i c t i o n as between i t and the complainant, the a c t i o n i s p r o p e r l y maint a i n a b l e i n the D i s t r i c t Court f o r Nebraska; otherwise n o t . I f the court . has j u r i s d i c t i o n we can s u f f e r no p o s s i b l e l o s s , b u t i f i t i s without j u r i s d i c t i o n and the funds should be awarded to the Omaha National Bank, and we should pay the same t o t h a t bank under the c o u r t ' s decree, I am not s a t i s f i e d t h a t i f the Wyoming National Bank should a f t e r w a r d s b r i n g a s u i t a g a i n s t u s f o r the amount so p a i d , t h a t the decree would operate as a bar to such a s u i t . "The D i s t r i c t Court i n 1928 s u s t a i n e d a motion of the Wyoming Nati o n a l Bank to dismiss the b i l l f o r want of j u r i s d i c t i o n . An appeal was taken from t h a t r u l i n g , and i t was reversed by the United S t a t e s C i r c u i t Court of Appeals. The opinion on t h a t appeal i s r e p o r t e d i n 26 Fed. (2nd) 884, and f o r your ready r e f e r e n c e I am sending you a copy of the same herewith* "Die case was t r i e d on i t s merits in J u l y of l a s t year and r e s u l t ed i n a judgment f o r the Omaha National Bank, but f o r a l e s s amount than i t sought to recover. Both of the r e a l p a r t i e s p e r f e c t e d an appeal, and i n order to p r e s e r v e the j u r i s d i c t i o n a l question we a l s o appealed. The case i s now s e t f o r h e a r i n g i n the United S t a t e s C i r c u i t Court of Appeals a t Omaha f o r October 1 3 t h . "The records and b r i e f s have been prepared and f i l e d , and I am sending you a copy of each of them." I have requested Mr. leedy to f u r n i s h me with enough copies of h i s b r i e f i n t h i s ease to enable me to f u r n i s h copies to Counsel f o r a l l Federal r e s e r v e banks i f Mr. Leedy has s u f f i c i e n t copies a v a i l a b l e . Very t r u l y y o u r s , Walter Wyatt, General Counsel FEDERAL RESERVE BOARD 171 WASHINGTON X-6714 ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD SUBJECT: September 19, 1930. Expense, Main Line, Leased Wire System, August, 1930. 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-6714-a and X-6714-b, covering i n d e t a i l operations of the main l i n e , Leased Wire System, during the month of August, 1930. Please 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, National Banks, for account of " S a l a r i e s and Expenses, Federal Reserve Board, Special Fund", Leased Wire System, sending d u p l i c a t e C/D to the Federal Reserve Board. Very t r u l y y o u r s , F i s c a l Agent. Enclosures. TO GOVERNORS OF ALL F. R. BASKS EXCEPT CHICAGO. REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1930. From Business reported "by banks Boston New York Philadelphia Cleveland Richmond Atlanta Chicago S t , Louis Minneapolis Kansas City Dallas San Francisco Total Words sent "byNew York chargera b l e to o t h e r F. R. Banks ( l ) 26,542 123,591 32,609 82,621 60,532 57,115 98,632 75,230 30,370 76,794 65,015 103,563 832,614 Net Federal Reserve Bank Business 2,932 29,474 123,591 34,362 85,123 63,179 64,94s 102,302 77,865 33,739 79,195 73,501 107,361 874,700 - 1,753 2,562 2,647 7,833 3,670 2,635 3.369 2,401 8,486 3,79% 42,086 F. R. Board business . . . . . X-6?lU-a Percent of t o t a l "bank b u s i n e s s ^ ) 3-37 14.13 3-93 9.74 7.22 7.43 11.70 8.90 3-86 9.05 8.40 12.27 100.00 285,810 Treasury Department b u s i n e s s Incoming and Outgoii^ Total words t r a n s m i t t e d over main l i n e s (*) Number of words s e n t by New York to other 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 a t Governors' Conference November 2 - 4 , 1925. 58,792 1,219,302 These percentages used in c a l c u l a t i n g the pro r a t a share of l e a s e d wire expense as shown on the accompanying statement (3^-6jl4-b) (l) 1,160,510 ^ 1 0 X-67l4-b REPORT OF EXPENSE MAIN LINE FEDERAL RESERVE LEASED TIRE SYSTEM, AUGUST, 1530. Name of Bank Operators' Salaries $ 260.00 Boston 1,216.64 New York Philadelphia 225.00 Cleveland 306.66 Richmond 190.00 Atlanta 270.00 Chicago 4,172.15(#) St. Louis 195.00 200.00 Minneapolis Kansas City 227.50 Dallas 251.00 San Francisco 380.00 Federal Reserve Board Total $ 7,953.95 Operators' r Overtime $ 1.00 Wire Rental $ Total Expenses $ 261.00 1,216.64 225.00 306.66 420.00 270.00 4,174.15 195.00 200.00 287-50 251.00 380.00 15,703.37 $ - - - - — — 230.00C&) — 2.00 - - - - - - - - - $ 3.00 — 15.703.37 $15,933.37 $ $ (&) (#) (*) (a) (b) Pro Rata Share of Total Expenses $ 766.28 3,212.93 893.62 2,214.72 1,641.71 1,689.46 2,660.39 2,023.72 877.70 2,057.82 1,910.03 2,790.00 — 23,890.32 : $22,738-38 1.151.94(a) 22,73S-38 Credits $ Payable to Federal Reserve Board 261.00 1,216.64 225.00 306.66 420.00 270.00 4,174.15 195.00 200.00 287.50 251.00 380.00 $ 505.28 1,996.29 668.62 1,908.06 1,221.71 1,419.46 1,513,76(*> 1,828-72 677.70 1,770.32 1,659.03 2,410.00 — — $ 8,186.95 $ $ 16,065.19 1.513.76(b) 14,551.43 Main l i n e r e n t a l , Richmond-Washington. Includes s a l a r i e s of Washington operators. Credit. Received $1,151-94 from Treasury Department covering "business f o r the month of August, 1930. Amount reimbursable to Chicago. X-6715 "THE IEDERAL RESERVE SYSTEM." By Paul M. iWafrbuxg. Chapter XI. "The Redis t r i e t i n g Intermezzo." Review. , By C. S. Hamlin, September, 1930. (References, when not otherwise i n d i c a t e d , are to Mr. Warburg's book.) -IThe e s s e n t i a l f a c t s i n the controversy, as a l l e g e d by Mr. Warburg, were as f o l l o w s : 1. On October 20., 1915, a R e d i s t r i c t i n g Committee was appointed by the Federal Reserve Board. 2. On November 12, 1915, t h i s Committee f i l e d a p r e l i m i n a r y r e p o r t to the e f f e c t t h a t a r e d u c t i o n i n the number of Federal reserve banks was i m p e r a t i v e l y demanded f o r the b e s t i n t e r e s t s of the Federal Reserve System and of the country. 3. In t h i s r e p o r t the Committee asked i n s t r u c t i o n s from the Board whether i t should prepare a s p e c i f i c p l a n of r e duction. 4. This p r e l i m i n a r y r e p o r t was s e t down by the Board f o r d i s cussion on November 13th and again on November 15, 1915, b u t the meetings were postponed because of the absence of S e c r e t a r y McAdoo. , 5. The Board f i n a l l y s e t down November 22, 1915 f o r the d i s cussion of the m e r i t s of the r e p o r t and a f i n a l vote thereon, . 6. At the meeting on November 22nd, d i s c u s s i o n of the m e r i t s was prevented by reason of the d e l i v e r y to the Board of an opinion of the Attorney General advising the Board t h a t i t had no power under the Federal Reserve Act to reduce the number of Federal reserve d i s t r i c t s or Federal r e s e r v e banks..... 7. The opinion of the Attorney General was obtained by the Governor of the Board without the a u t h o r i t y or knowledge of the Board, , I 175 - 2 8. X-6715 The opinion prevented any d i s c u s s i o n of the m e r i t s of the Committee r e p o r t , arid n e c e s s i t a t e d an abandonment of the whole m a t t e r , although a m a j o r i t y of the Board favored the Committee r e p o r t and would have voted a c c o r d i n g l y had a vote been taken on the m e r i t s . 1 - 427, 430, 436. -II- Mr. Warburg s t a t e s as h i s reason f o r w r i t i n g t h i s Chapter, t h a t a f t e r Senator Glass, i n 1923, and Dr. H. P. W i l l i s , i n 1926, had l i f t ed a corner of the v e i l regarding the controversy, i t hecame imperative f o r him to "break the s i l e n c e of t h i r t e e n years and r a i s e the v e i l f u r t h e r so t h a t the r e a l f a c t s might be known and the s t o r y f r e e d from the " h a l f t r u t h s and p e r v e r s i o n s " by which i t had been clouded. 1 - 454. -IllMr. Warburg's l i f t i n g of the v e i l r e v e a l s , - as he a l l e g e s , - a s i n i s t e r combination or conspiracy on the p a r t of the P r e s i d e n t of the United S t a t e s , the Attorney General of the United S t a t e s , the S e c r e t a r y of t h e Treasury, and the Governor of the Federal Reserve Board, to f o r e s t a l l d i s c u s s i o n on the merits of the r e p o r t of the E e d i s t r i c t i n g Con>» m i t t e e by means of an opinion of the Attorney General, obtained by the Governor of the Federal Reserve Board, without a u t h o r i t y from or knowledge of the Board, a d v i s i n g the Board t h a t i t had no a u t h o r i t y , under the Federal Reserve Act, to reduce the number of Federal r e s e r v e d i s t r i c t s or Federal r e s e r v e banks. 1 - 430. 176 - 3 - X-6715 -IVMr. Warburg's charge i s a very grave one, and to avoid any p o s s i b i l i t y of e r r o r , I s h a l l quote h i s v e r y words: "Thus while the Board had d e f e r r e d the d e c i s i o n out of courtesy t o Mr. McAdoo, the l a t t e r , together with the Board's Governor and the P r e s i d e n t , had combined, without the knowledge of the f o u r appointive members of the Board, to f o r e s t a l l any debate by securing the opinion of the Attorney General." 1 - 430. "The P r e s i d e n t and the Attorney General formed t h e i r judgment Solely upon the evidence 6f the S e c r e t a r y of the Treasury, whose a c t i o n was to be reviewed and who had Studiously avoided hearing the views of the Committee, and upon the evidence of the Governor devoted to Mr. McAdoo and a c t i n g i n accordance with h i s instructions." 1 - 430. -VMr. Warburg draws a sharp l i n e of cleavage between the sheep and the g o a t s i n t h i s controversy, - between those who favored r e d i s t r i c t i n g , Called by him the "Majority", - and those who were opposed to r e d i s t r i c t i n g , - to whom he r e f e r s as the "Minority." He charges t h a t the Minority were guided s o l e l y by p o l i t i c a l c o n s i d e r a t i o n s , while the "Majority" acted as n o n - p a r t i s a n t r u s t e e s of the country a t l a r g e . The following quotations from the Chapter b r i n g out t h i s l i n e of cleavage d i s t i n c t l y : " I t was c e r t a i n , t h e r e f o r e , t h a t three of the Members of the Board of seven would t r y to block any d r a s t i c r e a d j u s t m e n t . 1 - 427. "The remaining four,, however, had seen enough of the p e t t y p o i n t of view r e s u l t i n g from a twelve-headed system, and of the d i f f i c u l t i e s of i t s a d m i n i s t r a t i o n , to convince them t h a t with - 4 - X-5715 I regard to tanking standards and e f f i c i e n c y of s e r v i c e i t would c l e a r l y "be f o r the b e n e f i t of the country i f the numbers of the r e s e r v e banks should be reduced." d 1 - 427. "The determined i n s i s t e n c e on the c r e a t i o n and p r e s e r v a t i o n of "one crop" d i s t r i c t s , . . could h a r d l y be j u s t i f i e d excfept on p o l i t i c a l grounds." ( I t a l i c s mine.) 1 - 429. "The four of us considered ourselves the n o n - p a r t i s a n t r u s t e e s of the i n t e r e s t s of the country a t l a r g e . " 1 - 4 4 0 , 441,. "The o t h e r three d e a l t with the question from the p o i n t of view of the i n t e r e s t s of t h e i r P a r t y . " ( I t a l i c s mine) 1 - 4 4 0 , 441. He even b r i n g s a s i m i l a r charge a g a i n s t the P r e s i d e n t of the United States: " I t was n a t u r a l that the P r e s i d e n t , on t h i s question, could not d i s r e g a r d the p o l i t i c a l c o n s i d e r a t i o n s , " ( I t a l i c s mine) 1 - 452 , 453. Mr. Warburg then p o r t r a y s the r o l e he played i n the controversy: " I t was my duty to approach the problem from a n o n - p a r t i s a n and n o n - p o l i t i c a l p o i n t of view, - with the sole thought i n mind of what the b e s t i n t e r e s t s of the country, as a whole, r e q u i r e d . " 1 - 4 5 2 , 453. This calm, j u d i c i a l j u x t a p o s i t i o n of the a t t i t u d e of the P r e s i d e n t , the Attorney General, the S e c r e t a r y of the Treasury and the Governor of the Board, a s e a g a i n s t the pure a l t r u i s m of Mr. Warburg, i s c e r t a i n l y worthy of a Shakespeare! -VIThe w r i t e r proposes to " l i f t the v e i l " - to use Mr. Warburg's metaphor, - even f u r t h e r than he has done, and to show how g r o t e s q u e l y absurd are the charges of conspiracy h u r l e d a g a i n s t the P r e s i d e n t , the i - 5 - 178 X-6715 Attorney General* the Secretary of the Treasury, and the Governor of the Fede r a l Reserve Board. -VIIMr. Warburg r e f e r s "briefly t o the p r e l i m i n a r y r e p o r t of the Comm i t t e e f i l e d November 12, 1915, and of two meetings h e l d on November 13th and November 15th "by the Board to discuss i t . He coht&iits himself with the hare statement t h a t these two meetings were postponed u n t i l November 22nd because of Mr. McAdoo's absence. 1 - 4 3 0 , 431,436# He f u r t h e r quotes the R e d i s t r i c t i n g Committee, which s t a t e d i n i t s r e p o r t of December 2, 1915: "Your Committee d e s i r e s to r e p e a t t h a t a t no time had there been a d i s c u s s i o n of the Committee's o r i g i n a l r e p o r t of November 13th, or of the r e v i s e d r e p o r t of November 17, 1915." 1 - 430 From the above one would n a t u r a l l y be led t o b e l i e v e t h a t , a t the above meetings, the Board had convened but had immediately adjourned to November 22nd, because of the absence of Mr. McAdoo. Why, i t may be asked, does Mr. Warburg thus g r a c e f u l l y g l i d e over the meeting of November 15th? Was there no "discussion" a t t h a t meeting, of the p r e l i m i n a r y r e p o r t of November 12th? The f a c t i s t h a t a t t h a t meeting of November 15th the p r e l i m i n a r y r e p o r t was d i s c u s s e d , b r i e f l y perhaps as to i t s m e r i t s , but a t g r e a t l e n g t h as to i t s d e m e r i t s , and moreover i t was one of the most e a r n e s t and vehement d i s c u s s i o n s ever h e l d i n the Board. - 6 - X-6715 k 1 ' The d i s c u s s i o n occupied a whole day, - "From morn t i l l noon, frcm noon t i l l dewey e v e , " - the Board s i t t i n g both i n the morning and i n the afternoon. Ho f i n a l vote was taken, however, because of the absence of S e c r e t a r y McAdoo, and because a t the end of the day t h e r e was no r e p o r t l e f t to be a c t e d upon, - a s w i l l appear l a t e r . I t was p o i n t e d out by the m i n o r i t y , during the d i s c u s s i o n , t h a t the Committee r e p o r t i n e f f e c t s t a t e d t h a t because of the weakness of oneh a l f of the Federal reserve banks the System would prove a f a i l u r e and t h a t a r e d u c t i o n of the number of Federal reserve banks from twelve to e i g h t or nine was imperative f o r the good of the System and of the country The minority f u r t h e r s t a t e d t h a t such a s t a r t l i n g conclusion would cause u n e a s i n e s s and lack of confidence i n the System throughout the country; t h a t t h i s conclusion should have been supported by a statement of the f a c t s and f i g u r e s on which the conclusion was based; t h a t no such f a c t s or f i g u r e s were contained i n the r e p o r t . The minority then requested the Committee to f i l e a supplemental r e p o r t giving these f a c t s and f i g u r e s and t h a t one week be allowed the minority to study the r e p o r t a s thus supplemented. A formal motion or r e s o l u t i o n was made to t h i s e f f e c t , b u t was s t r o n g l y opposed by the Committee, which opposition was l a t e r explained by the Committee i n i t s r e p o r t of December 2, 1915, as f o l l o w s : "The f a c t t h a t the r e q u e s t of two members of the Board f o r another p r e l i m i n a r y r e p o r t i n w r i t i n g as to the reasons f o r i t s recommendations was opposed by the Committee, was, as explained by the Committee, s o l e l y because i t d e s i r e d to have the r e p o r t d i s c u s s e d on i t s merits without delay and a t t h a t time l a y b e f o r e the Board a l l the f a c t s and f i g u r e s i t had c o l l e c t e d . Such a course was i n consonance with our u s u a l practice." 1 - 435. : 180 - 7 - X-6715 The w r i t e r knows of no such p r a c t i c e of the Federal Reserve Board and i s very confident t h a t the attempt of a Committee to withhold the f a c t s and f i g u r e s on which i t s r e p o r t i s "based from the r e p o r t i t s e l f , and to p r e s e n t them only when the r e p o r t i s before the main body f o r immediate v o t e , would not "be s u s t a i n e d by any d e l i b e r a t i v e body known to Anglo-saxon procedure. The charge was f r e e l y made during the d i s c u s s i o n t h a t the minority was - t r y i n g to o b s t r u c t the proceedings and delay a f i n a l v o t e . The m i n o r i t y , how- e v e r , p o i n t e d out t h a t a delay of one week i n which to study the f a c t s and f i g u r e s on which the r e p o r t was based, was not an unreasonable r e q u e s t i n view of the r a d i c a l changes i n the Federal Reserve Act recommended by the Committee. The motion t h a t the Committee r e p o r t the f a c t s and f i g u r e s upon which i t s conclusions were based and t h a t one week's time be allowed the "minority" to study the r e p o r t thus supplemented, was f i n a l l y put to the vote and was def e a t e d by a vote of f o u r to two. 3 Diary, p . 102, 103, 107. The w r i t e r b e l i e v e s i t apparent from the above t h a t any l a c k of d i s c u s sion of the m e r i t s of the Committee's r e p o r t a t t h i s meeting was due not to the minority but to the a c t i o n of the m a j o r i t y i n d e f e a t i n g t h i s motion. F i n a l l y , as a climax of a weary day of d i s c u s s i o n , the Committee i t s e l f announced t h a t i t would withdraw i t s r e p o r t and would l a t e r f i l e a n o t h e r , to which the Board consented. 3 Diary, p . 112, 113. At the next meeting of the Board, on November 17, 1915, one of the "majority" s t a t e d t h a t he was s a t i s f i e d t h a t the p r e l i m i n a r y r e p o r t contained statements which might give a f a l s e impression, and t h a t the c r i t i c i s m of the m i n o r i t y was, to a c e r t a i n e x t e n t , j u s t i f i e d . 3 Diary, p . 112. - 8 - X-6715 - * - 8 1 Evidently the d i s c u s s i o n h e l d on November 15th had made a decided imp r e s s i o n on the Committee! On t h a t day, - November 17, 1915, the Committee prepared a supplementary r e p o r t e l i m i n a t i n g some hut not a l l of the matters c r i t i c i s e d by the minority. This r e p o r t a l s o , however, was s i l e n t as to the e s s e n t i a l f a c t s and f i g u r e s upon which i t s conclusion was based. The Committee j u s t i f i e d t h i s omission as follows; "The problem i s preeminently one f o r the e x e r c i s e of g e n e r a l judgment as to what w i l l make f o r the most e f f e c t i v e o r g a n i z a t i o n of the Federal Reserve Banking System, and your Committee does n o t , t h e r e f o r e , t h i n k i t necessary to develop a t length or i n d e t a i l the reasons which have weighed with i t s i n d i v i d u a l members, each of whom has reached h i s conclusion i n h i s own way." ( I t a l i c s mine) Would i t not have been f a i r e r to the minority to have the Committee's f a c t s and f i g u r e s so t h a t they a l s o could reach t h e i r conclusion i n t h e i r own way? 1 - 771. The Committee r e p o r t of November 17, 1915 c o n t i n u e d ; " A t t e n t i o n may, however, be c a l l e d to some of the c o n s i d e r a t i o n s i n favor of a r e d u c t i o n i n the number of d i s t r i c t s . " 1 - 771. The Committee then enumerates the general c o n s i d e r a t i o n s of economy of o p e r a t i o n , embarrassment i n dealing with weak u n i t s , s i m p l i c i t y i n check c l e a r i n g and c o l l e c t i o n and g r e a t e r a b i l i t y to meet severe t e s t s which may come when the war i s over. 1 - 767. I t i s very s i g n i f i c a n t , however, as above s t a t e d , t h a t no mention i s made by Mr. Warburg of the d i s c u s s i o n or of the contents of the f i r s t p r e liminary r e p o r t which was discussed i n the Board, a s above s t a t e d , on November 15, 1915. - 9 - X-6715 The supplemental r e p o r t of Nov. 17, 1915, i s r e f e r r e d to by him ' merely i n a f o o t note on page 440 although i t i s p r i n t e d i n f u l l i n appendix 29 a t page 767. Throughout the chapter, ignoring the p r e l i m i n a r y r e p o r t s , excepting as to the f o o t note above mentioned, Mr. Warburg quotes as a j u s t i f i c a t i o n of the Committee's p o s i t i o n the Committee r e p o r t made on Dec. 2, 1915, long a f t e r the r e d i s t r i c t i n g d i s p u t e had been d i s posed of by the Board. page 431. A copy of t h i s l a t t e r r e p o r t i s p r i n t e d on • -VIII- One r e s u l t of the discussion i n the Board on November 15th, not h e r e t o f o r e p o i n t e d out, should here "be mentioned. I t w i l l be remembered t h a t i n i t s p r e l i m i n a r y r e p o r t , the Comm i t t e e had i n e f f e c t expressed the conviction t h a t one y e a r ' s operation of the System had convinced i t t h a t a reduction i n the number of Fede r a l reserve hanks was imperative, and t h a t i f not reduced, the System might prove t o be a f a i l u r e . In rendering t h e f i n a l r e p o r t of December 2, 1915, however, the Committee r e v e r s e d i t s e l f and s t a t e d t h a t the System had a l r e a d y brought immeasurable b e n e f i t s t o the country, and " . . . . . whether with twelve hanks or e i g h t banks w i l l prove of inestimable v a l u e . " ( I t a l i c s mine) 1 — 434. —X I— Before considering the f i n a l meeting of the Board held on - 10 - X-6715 ^ November 22, 1915, a t which the Governor p r e s e n t e d the l e t t e r of the P r e s i d e n t and the opinion of the Attorney General, i t may not be out of p l a c e to r e f e r b r i e f l y to c e r t a i n i n t e r e s t i n g and s i g n i f i c a n t events which t r a n s p i r e d J u s t b e f o r e t h a t meeting. -X~ In i t s f i n a l r e p o r t of December 2, 1915, the Committee s t a t e d t h a t i t delayed f i l i n g i t s p r e l i m i n a r y r e p o r t , - which was d i s c u s s e d , as above shown on November 15th, - i n order to g i v e Mr. Harding an o p p o r t u n i t y to show i t to S e c r e t a r y McAdoo to o b t a i n any s u g g e s t i o n s he might care to make, b u t t h a t as Mr. Harding could not confer with him, because of i l l n e s s , the Committee f i n a l l y f i l e d i t s p r e l i m i n a r y r e p o r t on Saturday, November 13, and i t was s e t down f o r d i s c u s s i o n by the Board on November 15, 1915. 1 - 435, 436. Although Mr. Harding did not have a p e r s o n a l interview with S e c r e t a r y McAdoo, he did communicate with him through Mr. Williams, as w i l l l a t e r appear* Let u s " l i f t the v e i l " a l i t t l e f u r t h e r and see what I s disclosed* Mr. Williams, the Comptroller of the Currency, and an e x - o f f i c i o member of the Board, t o l d the w r i t e r t h a t on Friday, November 12th, Mr. Harding c a l l e d on him and had a t a l k with him, l a t e r reduced to w r i t i n g and approved by Mr. Harding; t h a t Mr, Harding t o l d him t h a t the Committee would r e p o r t i n f a v o r of r e d i s t r i c t i n g and d e s i r e d t h e i r r e p o r t to be sent to the P r e s i d e n t , and t h a t u n l e s s the P r e s i d e n t p e r s o n a l l y r e q u e s t e d the Committee t o withhold i t s r e p o r t , the Committee - 11 - X-6715 would, vote to p u t i t through, "but t h a t i f the P r e s i d e n t did so r e q u e s t , the Committee would l a y i t on the t a b l e f o r the p r e s e n t . 3 Diairy, p . 95. This was c e r t a i n l y a somewhat e x t r a o r d i n a r y ultimatum to d e l i v e r to the P r e s i d e n t of the United S t a t e s I The w r i t e r has a l s o a copy of a l e t t e r from Mr. Williams to S e c r e t a r y McAdoo e n c l o s i n g the memorandum, above r e f e r r e d t o , of h i s conversation with Mr. Harding, which memorandum, Mr. Williams s a i d was duly examined and approved by Mr. Harding. 3 Diary, p . 96. I n t h i s l e t t e r , Mr. Williams t o l d S e c r e t a r y McAdoo t h a t Mr. Harding asked him to say t h a t on the occasion of h i s c a l l on the S e c r e t a r y two or t h r e e evenings b e f o r e , he c a r r i e d with him a copy of the Committee r e p o r t together with a map showing the proposed r e d i s t r i c t i n g , with p e r mission from the Committee to leave i t with him, - S e c r e t a r y McAdoo f o r h i s i n f o r m a t i o n ; t h a t he, - Mr. Harding, - says he now has i t on h i s desk, and w i l l send i t to S e c r e t a r y McAdoo should he care t o see i t b e f o r e i t i s submitted to the Board next week. Mr. Williams a l s o t o l d the w r i t e r t h a t Governor Harding t o l d him t h a t the plan and map r e f e r r e d t o i n the memorandum, abolished the Fede r a l Eeserve D i s t r i c t of Boston, merging i t with the Federal Reserve D i s t r i c t of New York. 3 Diary, p . 121, 139. The above statement i s confirmed by Dr. W i l l i s who t o l d the w r i t e r t h a t , a t Mr. Warburg's r e q u e s t , he had d e l i m i t e d the d i s t r i c t s i n a d r a f t of r e p o r t given him by Mr. Warburg, and t h a t t h i s d r a f t merged X-6715 l g Boston with New York. 3 Diary, p . 1&7% Mr* Williams a l s o s a i d l a t e r t h a t Mr. Harding t o l d him he had r e p o r t e d h i s t a l k with him to the Committee and t h a t none of them had dissented. L a t e r , Mr. Harding repeated t h i s to the Board. 3 Diary, p . 108, 138, 139. The above statements of Mr. Harding seem completely i n c o n s i s t e n t with what Mr. Warburg s t a t e s i n h i s book, - t h a t the Committee agreed t h a t no plan should be considered which might i n c r e a s e the power of the Federal Reserve Bank of Hew York, and h i s f u r t h e r statement t h a t no s p e c i f i c p l a n of r e d u c t i o n was formulated by any Committee. 1 - 427, 438. These l a t t e r statements of Mr. Warburg are p l a i n and unequivocal, yet i t i s i n t e r e s t i n g to note t h a t on December 15, 1915, i n response to a r e q u e s t of the Board, the Committee f i l e d a memorandum g i v i n g a general review of i t s work, and annexed to t h i s memorandum or produced a t the same time with i t , s e v e r a l p l a n s and maps, one of which cons o l i d a t e d the Boston with the Hew York S i s t r i c t ! The Committee s t a t e d , i n the memorandum, t h a t while the p l a n which merged Boston with Hew York was the most a d v i s a b l e , yet i n view of the sentiment of the country i t did not contemplate merging Boston and Hew York, and expressed the hope t h a t Boston may succeed i n proving i t s a b i l i t y to a c t as an independent and s e l f - s u p p o r t i n g c e n t r e . 3 Diary, p . 154-A (Loose leaf.) - 13 ~ X-6715 1 8 6 Clearly everyone today w i l l admit t h a t Boston has proved i t s a b i l i t y to a c t as a Federal reserve centre,, h u t t h a t i s not the reason f o r quoting the above. The reason i s t h a t although Mr. Warburg, a s above quoted, s a i d the Committee had agreed not to i n c r e a s e f u r t h e r the power of New York, yet i t had one p l a n b e f o r e i t which would m a t e r i a l l y i n c r e a s e i t s power and, as shown by Mr. Williams, a s quoted above, Mr. Harding admitted t h a t the p l a n which he was holding f o r S e c r e t a r y McAdoo's i n s p e c t i o n a s the p l a n of the Committee - ( I t a l i c s mine) - was the plan which abolished Boston as a Federal reserve d i s t r i c t and Federal reserve bank, and merged i t with Hew York! I t i s evident t h a t such a merger would have enormously i n c r e a s e d the power of the Federal Reserve Bank of New York. I t should a l s o be remembered t h a t Mr. Harding t o l d Mr. Williams t h a t he had r e p o r t e d to h i s colleagues on the Committee h i s conversation with Mr. Williams i n which he s t a t e d t h a t the Committee's p l a n i n f a c t merged the Federal Reserve D i s t r i c t of Boston i n t h a t of New York. . 3 Diary, p . 108, 121, 139' While i t may well be t h a t the Committee had not formally voted a t t h i s time to adopt the p l a n a b o l i s h i n g Boston, yet the f a c t t h a t Mr. Harding t o l d Mr. Williams t h a t the Committee p l a n did a b o l i s h Boston would c e r t a i n l y warrant a n x i e t y and apprehension a t even the p o s s i b i l i t y t h a t New York's power might be i n c r e a s e d , i n s p i t e of Mr. Warburg's statement to the contrary, above quoted. -XIThe w r i t e r furthermore was informed by Dr. W i l l i s , the then S e c r e t a r y of the Board, t h a t Mr. Harding, on Saturday, November 20, 1915, - two - 14 - X-6715 days b e f o r e the f i n a l meeting of the Board on November 22, 1915, came to him and asked him to a c t a s an intermediary between the Committee and S e c r e t a r y McAdoo, t e l l i n g him,, from man to man, t h a t he was w i l l ing to compromise as follows: - The Committee to l a y on the t a b l e the r e d i s t r i c t i n g r e p o r t and Secretary McAdoo to y i e l d on c e r t a i n disputed questions as to open market powers and c l e a r i n g s ; the S e c r e t a r y f u r t h e r to d i r e c t Comptroller Williams to remove Mr. S t a r e k , the National Bank Examiner a t New York, and a l s o to order him to f u r n i s h , hence f o r t h , copies of the "yellow sheets" a t t a c h e d to the Bank Examiner's r e p o r t s to the Federal Reserve Agents, which the Comptroller up to t h i s time had declined to f u r n i s h , 3 Diary, 106, 116. Dr. W i l l i s r e p o r t e d t h i s conversation to S e c r e t a r y McAdoo immediatel y , and he agreed to meet Governor Harding on Sunday the following day# 3 Diary, p . 116. P r i o r to t h i s meeting, S e c r e t a r y McAdoo t o l d the w r i t e r he should never agree to compromise on those or any other l i n e s , and l a t e r , on Sunday, a f t e r the i n t e r v i e w , t o l d the w r i t e r t h a t Mr. Harding did not ask him t o compromise, but t o l d him unequivocally t h a t he should vote to dismiss the whole matter a t the meeting of the Board on Monday, - a s will l a t e r appear. 3 Diary, 116, 117, Whether or not Mr. Warburg knew of t h i s conversation between Mr. Harding, Dr. W i l l i s and S e c r e t a r y McAdoo, i n which a compromise was suggested, the w r i t e r does not claim to be informed, but i f ho knew of - 15 - X-6715 | gg the ultimatum to the P r e s i d e n t , above mentioned, or of the suggestion of Mr. Harding, or e i t h e r of them, i t c e r t a i n l y p l a c e d him, - the "nonp a r t i s a n t r u s t e e of the c o u n t r y l s i n t e r e s t s , " a s he f e l i c i t o u s l y c a l l e d h i m s e l f , - i n a decidedly anomalous p o s i t i o n . Perhaps, however, he may have reached the conclusion t h a t the other m a t t e r s , quoted above, r e p r e s e n t e d the " g r e a t e r good" and j u s t i f i e d dropping the r e d i s t r i e t i n g plan! -XIIWe can now take up the question of the submission to the Board "by the Governor of the opinion of the Attorney General, which Mr. Warburg charges was brought about by a combination to f o r e s t a l l debate, oi> the p a r t of the P r e s i d e n t of the United S t a t e s , the S e c r e t a r y of the Treasury, the Attorney General, and the Governor of the Federal Reserve Board. The events l e a d i n g up to the request by the Governor f o r t h e Attorney General 1 s opinion were as follows: J u s t p r i o r to the meeting of November 15, 1915, the Governor heard i n d i r e c t l y t h a t the Committee was consulting with J . P. Cotton, E s q . , who had acted i n s e v e r a l m a t t e r s as s p e c i a l Counsel of the Board, - as to the Board's power. I n the d i s c u s s i o n of the p r e l i m i n a r y r e p o r t , as the w r i t e r r e c a l l s , the Committee made some r e f e r e n c e to t h i s f a c t * 3 Diary, p . 89, 92. On November 1 5 t h , j u s t p r i o r to the meeting, the Governor prepared a formal r e s o l u t i o n asking the Committee whether i t had sought an opinion from any one o t h e r than from Mr. E l l i o t t , the General Counsel of the Board, with r e l a t i o n to i t s power to reduce the number of the Federal reserve banks. 3 Diary, p . 100, 101. - 16 - X-6715 On November 16, 1915, Mr. Williams wrote to the Committee asking i t to produce Mr. Cotton's opinion. 3 Diary, p . 109. Late on Saturday a f t e r n o o n , November 20, 1915, the Committee gave the w r i t e r a copy of Mr. Cotton's opinion, dated November 19, 1915, i n which he advised the Committee t h a t the Board had power to reduce the number of the Federal reserve banks. Mr. E l l i o t t , i t should "be remembered, had p r e v i o u s l y advised the Board t h a t i t had no such power. According to the w r i t e r ' s r e c o l l e c t i o n , no a u t h o r i t y from t h e Board had been obtained by the Committee to secure t h i s opinion from Mr. Cotton. In any e v e n t , the f a c t remained t h a t a t the meeting of the Board s e t f o r November 22, Monday, - only a few hours d i s t a n t , - when i t was expected t h a t a f i n a l vote would be taken, t h e r e would have been b e f o r e the Board two r a d i c a l l y c o n f l i c t i n g opinions as to the power of the Board, - t h a t of Mr. E l l i o t t , the General Counsel, and t h a t of Mr. Cotton, the s p e c i a l Counsel, Such c o n f l i c t of opinion, i t must be e v i d e n t , would have plunged the Board i n t o hopeless confusion, and an opinion from the Attorney General was a b s o l u t e l y necessary to s e t t l e the question of power once for a l l . The Governor would have called a s p e c i a l meeting of the Board to o b t a i n a formal vote r e q u e s t i n g such an opinion, but i t was l a t e Saturday a f t e r n o o n and the Board members had s e p a r a t e d so t h a t a 190 - 17 meeting on Sunday would n o t have been p r a c t i c a b l e . X-6715 The Governor f e l t t h a t i t was the i n t e n t i o n of what Mr. Warburg d e s c r i b e s as " t h e m a j o r i t y " to f o r c e a v o t e on Monday, and i t t h e r e f o r e , seemed i m p e r a t i v e t o ask the A t t o r n e y General f o r an o p i n i o n . O r d i n a r i l y , u n d e r the p r a c t i c e of t h e Board, a r e q u e s t of t h r e e members f o r an o p i n i o n of t h e A t t o r n e y General upon any i m p o r t a n t quest i o n would b e a c t e d upon f a v o r a b l y by the Board almost a s a m a t t e r of course, without question. Had t h e Board v o t e d a d v e r s e l y upon such a r e q u e s t , the S e c r e t a r y of the T r e a s u r y , as Chairman of the F e d e r a l Res e r v e Board, under e x i s t i n g law and p r a c t i c e , could h a v e , of h i s own v o l i t i o n , c a l l e d upon t h e A t t o r n e y General f o r an o p i n i o n ; or any member of t h e Board could a t any time r e q u e s t t h e P r e s i d e n t t o c a l l f o r such an o p i n i o n . Under those c i r c u m s t a n c e s , t h e Governor, l a t e on t h a t S a t u r d a y evening e x p l a i n e d t h e s i t u a t i o n over the t e l e p h o n e to S e c r e t a r y Mc~ Adoo, who t o l d him t h a t he had a copy of Mr. C o t t o n ' s o p i n i o n and f u r t h e r , - what he d i d n o t know b e f o r e , - t h a t t h e A t t o r n e y General % * had been engaged i n s t u d y i n g the q u e s t i o n of the B o a r d ' s power f o r some t i m e , a t h i s r e q u e s t . S e c r e t a r y McAdoo f u r t h e r s a i d t h a t t h e P r e s i d e n t wished the Governor t o w r i t e him a l e t t e r r e q u e s t i n g him to o b t a i n and f o r w a r d an o p i n i o n of t h e A t t o r n e y G e n e r a l . The Governor a c c o r d i n g l y , a d d r e s s e d a l e t t e r to the P r e s i d e n t s t a t i n g t h a t , b o t h i n h i s c a p a c i t y a s Governor and as a member of t h e Board, he would be g r e a t l y h e l p e d i f an o p i n i o n of the A t t o r n e y Gene r a l could be s e c u r e d . i - 18 - 191 X-6715 The l e t t e r was s e a t t o t h e P r e s i d e n t on Sunday, November 21, 1915, and on Monday, November 2 i n d , j u s t "before the Board meeting, a l e t t e r from t h e P r e s i d e n t was r e c e i v e d "by the Governor, t o g e t h e r w i t h a copy of t h e A t t o r n e y G e n e r a l ' s o p i n i o n , which the Governor a t once l a i d b e f o r e t h e Board. This o p i n i o n n e g a t i v e d any power i n the Board and thus s e t t l e d t h e c o n f l i c t between t h e o p i n i o n s of t h e General and s p e c i a l Counsel of t h e Board. To sum u p : - The Board had s e c u r e d an o p i n i o n from i t s General Counsel; the R e d i s t r i c t i n g Committee, w i t h o u t any a u t h o r i t y from the B o a r d , had s e c u r e d an opinion from t h e S p e c i a l Counsel; and t h e Secr e t a r y of the T r e a s u r y , of h i s own v o l i t i o n , had c a l l e d f o r an o p i n i o n from t h e A t t o r n e y G e n e r a l . The two former c o n f l i c t i n g o p i n i o n s would have been b e f o r e the Board a t i t s meeting of November 22nd. I t was a b s o l u t e l y n e c e s s a r y f o r t h e Board t o have a l s o the opinion of the A t t o r n e y General upon the same s u b j e c t , asked f o r i n f o r m a l l y by t h e S e c r e t a r y of the T r e a s u r y , and i n a s k i n g f o r t h i s o p i n i o n , a t t h e sugg e s t i o n of the P r e s i d e n t , on Sunday, the 2 1 s t of November, t h e Gove r n o r merely a n t i c i p a t e d by one day what t h e Board as a m a t t e r of c o u r s e , or the S e c r e t a r y of the Treasury i n h i s own r i g h t , would have done on t h e n e x t day. This a n t i c i p a t o r y a c t i o n of the Governor, moreover, a s i t t u r n e d o u t , made i t p o s s i b l e f o r the Board t o have the A t t o r n e y G e n e r a l ' s opinion b e f o r e i t when i t met the n e x t day and thus saved t h e n e c e s s i t y of f u r t h e r postponement of the meeting to await i t s r e c e i p t . - 19 - X-6715 The R e d i s t r i c t i n g Committee seemed to f e e l t h a t t h e r e s h o u l d have "been a formal h e a r i n g a t which each s i d e could have p r e s e n t e d i t s case b e f o r e the A t t o r n e y G e n e r a l . Ho such o p p o r t u n i t y , however, was a f f o r d e d the M i n o r i t y when t h e Committee asked f o r Mr. C o t t o n ' s o p i n i o n . 1 - 436. The Committee, however, f o r g o t t h a t the only q u e s t i o n "before the A t t o r n e y General was one of law, and t h a t the l a t t e r had b e f o r e him the o p i n i o n of Mr. E l l i o t t , and a l s o t h a t of Mr. Cotton, - presumably s e n t w i t h the o t h e r p a p e r s by Mr. E l l i o t t . 5 D i a r y , p . 146. The Committee s t a t e d t h a t i f the A t t o r n e y General had known t h a t b r a n c h e s would have been s u b s t i t u t e d f o r a l l F e d e r a l r e s e r v e banks a b o l i s h e d , h i s o p i n i o n might have been d i f f e r e n t , b u t the w r i t e r r e c a l l s no r e f e r e n c e i n Mr. C o t t o n ' s opinion or i n t h e p r e l i m i n a r y r e p o r t of t h e Committee t o t h i s argument. I f i t was i n Mr. C o t t o n ' s mind, he e v i d e n t l y a t t a c h e d no importance t o i t . Mr. Warburg, however, i n e f f e c t claims t h a t t h e a d d i t i o n to t h e B o a r d ' s f i l e s of t h e A t t o r n e y G e n e r a l ' s o p i n i o n b e s i d e t h o s e of t h e General and S p e c i a l Counsel of the Board, c o n s t i t u t e d a combination or conspiracy to suppress discussion! As w e l l might one claim t h a t a de- c i s i o n of the Supreme Court of the United S t a t e s t h a t a claimant had i n law no cause of a c t i o n should b e c h a r a c t e r i z e d a s a combination or c o n s p i r a c y of the J u s t i c e s of t h a t Court to f o r e s t a l l d i s c u s s i o n ! The w r i t e r b e l i e v e s t h a t the above s t a t e m e n t of f a c t s w i l l effect** u a l l y d i s p o s e of Mr. Warburg's charges of combination or c o n s p i r a c y to - 20 * X-6715 s u p p r e s s d i s c u s s i o n and t h a t t h i s myth w i l l v a n i s h i n t o t h i n a i r . -xniAs a m a t t e r of f a c t , however, the whole q u e s t i o n of r e d i s t r i c t i n g had i n e f f e c t been d i s p o s e d of p r i o r t o t h e r e c e i p t of t h e A t t o r n e y G e n e r a l ' s opinioii. Mr. Warburg, over and over a g a i n , s t a t e s t h a t a m a j o r i t y of f o u r members of t h e Board f a v o r e d c u t t i n g down the number of F e d e r a l r e s e r v e b a n k s , and p l a i n l y seeks to have i t i m p l i e d t h a t t h e y would have so voted but for the Attorney General's opinion. 1 - 438. This s t a t e m e n t may have been t r u e a t one t i m e , b u t i t was n o t t r u e on the morning of November 22nd, the d a t e of t h e f i n a l m e e t i n g . On Sunday, November 2 l s t , a s above s t a t e d , S e c r e t a r y McAdoo t o l d t h e w r i t e r t h a t Mr. Harding had t o l d him e a r l i e r i n t h e day t h a t he had become s a t i s f i e d t h a t any a t t e m p t to c u t down t h e number of F e d e r a l r e s e r v e banks would be r e s i s t e d i n t h e c o u r t s and l e a d t o long drawn out l i t i g a t i o n which would be most i n j u r i o u s t o t h e Federal Deserve System, and t h a t he had determined t o v o t e to d i s m i s s the '-hole m a t t e r . 3 Diary', p . 117, S e n a t o r Hoke Smith had p r e v i o u s l y t o l d t h e w r i t e r of a s i m i l a r c o n v e r s a t i o n w i t h Mr. Harding. 3 Diary, p. M5. Thus Mr, Warburg's m a j o r i t y of f o u r had dwindled to a m i n o r i t y of three. - 33, - X-6715 The w r i t e r was f a r t h e r i n f o r m e d , on t h e v e r y "best a u t h o r i t y , t h a t one o t h e r member of Mr* Warburg * s " M a j o r i t y " had r e a c h e d the same conclusion. Perhaps t h e s e members had l e a r n e d of the i n f o r m a l a c t i o n of the Federal A d r i s o r y Council i n unanimous o p p o s i t i o n t o any c u t t i n g down of F e d e r a l r e s e r v e "banks a t t h e p r e s e n t t i m e . 3 D i a r y , p . 114. Thus, i f a f i n a l , v o t e had "been taken on November 22nd, - wholly a p a r t from t h e A t t o r n e y General 1 s o p i n i o n , - t h e Committee r e p o r t would have been d e f e a t e d "by a v o t e of f i v e to two and the whole matt e r would have p a s s e d i n t o o b l i v i o n . -XIVI t s h o u l d f u r t h e r be p o i n t e d out t h a t a l t h o u g h Mr. Warburg, i n h i s book, over and over a g a i n e x p r e s s e s h i s c o n v i c t i o n t h a t t h e number of F e d e r a l r e s e r v e banks s h o u l d be reduced f o r t h e good of t h e System and of t h e c o u n t r y , y e t he took a v e r y d i f f e r e n t p o s i t i o n i n a d d r e s s e s made by him a t about t h a t time and l a t e r , a s t h e f o l l o w i n g q u o t a t i o n s w i l l show: I n an a d d r e s s d e l i v e r e d a t C h a r l o t t e , North C a r o l i n a , on November 23, 1915, - only one day a f t e r t h e f i n a l d i s p o s i t i o n by the Board of the r e d i s t r i c t i n g r e p o r t , i n r e v i e w i n g t h e f i r s t y e a r ' s o p e r a t i o n of t h e F e d e r a l Reserve System, Mr. Warburg s a i d : " I am l o o k i n g back upon the f i r s t y e a r w i t h f u l l s a t i s f a c t i o n . " ( I t a l i c s mine) Again, i n the same a d d r e s s he s a i d : . - 22 - X-6715 " I t was a d i f f i c u l t problem to w r i t e so i n t r i c a t e a law as the F e d e r a l Eeserve Act* I t i s a v e r y remarkable achievement to have p u t upon the books a s t a t u t e which has brought i n t o l i f e a system which has proved i t s e l f e n t i r e l y workable and s u c c e s s f u l * " ( I t a l i c s mine) 2 - 350, 351. As one of the Committee, he a l s o r e p o r t e d to t h e Board on December 2, 1915, t h a t " t h e Federal Reserve System whether w i t h twelve "banks or e i g h t "banks w i l l prove of i n e s t i m a b l e v a l u e . " ( I t a l i c s mine) 1 - 434. I t has a l s o been claimed t h a t Mr. Warburg's demand f o r r e d u c i n g t h e number of F e d e r a l r e s e r v e banks i s i n c o n s i s t e n t with h i s o f t r e p e a t e d recommendation t h a t a p o r t i o n of the p a i d - i n c a p i t a l be r e t u r n e d by the F e d e r a l r e s e r v e banks to the member bank s t o c k h o l d e r s * . I f s t r o n g enough t o be a b l e to r e t u r n p a r t of t h e i r p a i d - i n c a p i t a l , s u r e l y they were s t r o n g enough to e x i s t without the n e c e s s i t y of merging some of them w i t h r e l a t i v e l y s t r o n g e r banks. Mr. Warburg makes t h i s recommendation u n e q u i v o c a l l y i n h i s a d d r e s s a t S t . P a u l , Minn., on October 22, 1915, - j u s t one month b e f o r e the Board meeting of November 22, 1915 ( 2 - 3 1 0 ) ; and a l s o i n h i s a d d r e s s a t A t l a n t i c City on June 9, 1916 (2 - 432). In a l e t t e r to Senator G l a s s , however, d a t e d February 29, 1915, he q u a l i f i e d t h i s recommendation, f a v o r i n g a temporary r e t u r n of the p a i d - i n c a p i t a l of some of t h e Federal r e s e r v e b a n k s . This recommendation was based on the f e a r t h a t f a i l u r e t o p a y d i v i d e n d s might h u r t the p r e s t i g e of t h e Federal r e s e r v e b a n k s , and 196 - 23 - X-6715 a c c o r d i n g l y he f a v o r e d paying back a p a r t of the p a i d - i n c a p i t a l , thus r e d u c i n g the n e c e s s i t y f o r e a r n i n g s . I n connection with the above l e t t e r to Senator Glass, i t i s s i g n i f i c a n t to p o i n t out t h a t , up to June 30, 1916, the only hanks which had d e c l a r e d d i v i d e n d s were the Federal Reserve Banks of A t l a n t a , D a l l a s , and Richmond, - f o l l o w e d "by Kansas City i n J u l y - while the r e l a t i v e l y s t r o n g banks, e x c e p t i n g only Chicago, d i d not b e g i n to d e c l a r e dividends u n t i l much l a t e r , almost a t the end of the year 1916. Thus the p r e s t i g e of t h e Federal Reserve System which Mr. Warburg was t r y i n g t o p r o t e c t by r e t u r n i n g p a r t of t h e p a i d - i n c a p i t a l of the F e d e r a l r e s e r v e banks, was b e i n g i n f a c t maintained by some of t h e r e l a t i v e l y weak banks which Mr. Warburg wished to e l i m i n a t e . Another i n t e r e s t i n g f a c t to n o t e i s t h a t t h e Federal Advisory Council, on ITovember 18, 1915, - t h e day a f t e r the d i s c u s s i o n i n t h e Board on the Committee's p r e l i m i n a r y r e p o r t , - voted i n f a v o r of r e t u r n i n g t w o - t h i r d s of the p a i d - i n c a p i t a l of a l l of the Federal r e s e r v e banks to the member bank s t o c k h o l d e r s . 3 D i a r y , p . 110. The Federal Advisory Council c o n s i s t s of bankers r e p r e s e n t i n g the twelve F e d e r a l r e s e r v e d i s t r i c t s , and the above v o t e was an i m p r e s s i v e t r i b u t e t o t h e soundness and s u c c e s s f u l o p e r a t i o n of the twelve F e d e r a l r e s e r v e banks, and u t t e r l y i n c o n s i s t e n t w i t h Mr. Warburg 1 s claim t h a t the number of Federal r e s e r v e banks should be reduced. -24 - X-6715 To cap t h e c l i m a x , the F e d e r a l Advisory Council, on t h e same d a t e , - November 16, 1915, i n f o r m a l l y c o n s i d e r e d the q u e s t i o n of r e ducing the number of F e d e r a l r e s e r v e "banks, and w h i l e many t h o u g h t i t could w i s e l y be done, y e t i t unanimously was of t h e o p i n i o n t h a t i t s h o u l d n o t be u n d e r t a k e n a t t h e p r e s e n t t i m e . 3 D i a r y , p . 114. -XVMr. Warburg goes out of h i s way to drag i n t h e q u e s t i o n of r o t a t i o n of the o f f i c e of Governor. He charges t h e then Governor w i t h s u b s e r v i e n c y t o S e c r e t a r y McAdoo, and s t a t e s t h a t t h e i n d e p e n d ence and p r e s t i g e of t h e Board make i t i m p e r a t i v e t h a t one of t h e o t h e r f o u r a p p o i n t i v e members s h o u l d be the n e x t Governor. 1 - 445. A p p a r e n t l y t h e b a r e s u s p i c i o n t h a t the Governor was i n harmony w i t h the views of t h e P r e s i d e n t of the U n i t e d S t a t e s and the S e c r e t a r y of t h e T r e a s u r y was a s u f f i c i e n t b a s i s f o r the demand t h a t he s h o u l d be d i s p l a c e d and h i s p l a c e f i l l e d by one of t h e " M a j o r i t y . " The f a c t a l s o t h a t any member of t h e Board should be e i t h e r a p r e s e n t or former o f f i c e r of t h e United S t a t e s , seems t o have a l m o s t i n f u r i a t e d Mr. Warburg; and y e t , n o t long b e f o r e , i n o u t l i n i n g t h e p r i n c i p l e s of a m o d i f i e d C e n t r a l Bank of I s s u e , he f a v o r e d a c e n t r a l body a t Washington ( c o r r e s p o n d i n g t o the F e d e r a l Reserve Board) to c o n s i s t , i n p a r t , of t h e S e c r e t a r y of the T r e a s u r y , the Comptroller of t h e Currency, the T r e a s u r e r of t h e United S t a t e s , and ( i t a l i c s - 25 - X-6715 1 9 o8 w mine) s i x members of Congress1 2 - 77. Mr. Warburg o u t l i n e s the e f f o r t s he made t o f o r c e t h e P r e s i d e n t t o p r o v i d e f o r r o t a t i o n i n the o f f i c e of Governor, and e v i d e n t l y b e l i e v e s i t was through h i s i n s i s t e n c y t h a t the t h e n Governor was n o t r e d e s i g n a t e d , a l t h o u g h r e a p p o i n t e d f o r a t e n - y e a r term. The w r i t e r t a k e s a l a n g u i d i n t e r e s t only i n t h i s m a t t e r * b u t would p r e s e n t t h e f o l l o w i n g b r i e f s t a t e m e n t of t h e f a c t s . Mr. Warburg s t a t e s t h a t two a p p o i n t i v e members of the Board had an i n t e r v i e w w i t h t h e P r e s i d e n t and s t r o n g l y u r g e d t h e n e c e s s i t y of r o t a t i o n i n the o f f i c e of Governor. 1 - 445. This meeting took p l a c e d u r i n g t h e week p r i o r t o June 19, 1916. 3 D i a r y , p . 233. Mr. Warburg a l s o s t a t e s t h a t he i n t e r v i e w e d S e c r e t a r y McAdoo and gave him a memorandum on t h e same s u b j e c t on August 3 , 1916, 1 — 445. The w r i t e r w i l l n o t u n d e r t a k e to e x p r e s s any o p i n i o n a s t o t h e e f f e c t on the P r e s i d e n t and S e c r e t a r y McAdoo of Mr. Warburg's a t t e m p t to f o r c e r o t a t i o n i n t h e o f f i c e of Governor, b u t w i l l merely p o i n t o u t one r e a s o n , s u f f i c i e n t a t l e a s t f o r h i m s e l f , why he was n o t r e d e s i g n a t e d a s Governor, v i z . - t h a t on Monday, June 1 9 t h , and a g a i n on June 3 0 t h , he informed S e c r e t a r y McAdoo t h a t w h i l e he would be g l a d t o be r e a p p o i n t e d f o r a new t e n - y e a r term, he p e r s o n a l l y had no d e s i r e t o be r e d e s i g n a t e d a s Governor, and begged him n o t to h e s i t a t e to drop h i s name i n t h a t c o n n e c t i o n , and even s u g g e s t e d a n o t h e r member f o r Governor, 199 - 26 - X-6715 i n response to Mr. McA&oo's q u e s t i o n . 3 Diary, p . 235, 240. On J u l y 21, 1916, the w r i t e r informed one member of the Committee who had seen t h e P r e s i d e n t , of t h i s conclusion, adding t h a t he was now merely a d i s i n t e r e s t e d s p e c t a t o r and would l o y a l l y support whomsoever the P r e s i d e n t might designate* 3 D i a r y , p . 246. Some l i g h t on t h i s m a t t e r may a l s o "be thrown by a q u o t a t i o n from a l e t t e r s e n t to the w r i t e r by P r e s i d e n t Wilson on August 10, 1916; " . . . I can not send you a note a t t h i s p a r t i c u l a r time w i t h o u t e x p r e s s i n g my g r a t i t u d e and a p p r e c i a t i o n f o r the generous and p u b l i c - s p i r i t e d a t t i t u d e you have taken i n the m a t t e r of the Governorship of the F e d e r a l Reserve Board, as r e p o r t e d to me by Mr. McAdoo...." (Signed) Woodrow Wilson. Mr. Warburg makes a n o t h e r i n t e r e s t i n g s t a t e m e n t , - t h a t Mr. Delano was not r e d e s i g n a t e d as Vice Governor b u t "was s a c r i f i c e d i n o r d e r to save appearances f o r t h e Governor." 1 - 453. That the w r i t e r d i d not consider "appearances saved" f o r himself by the f a i l u r e to r e d e s i g n a t e Mr. Delano as Vice Governor would seem to appear from the f a c t t h a t on June 19, 1916 (3 D i a r y , p . 235), on June 30, 1916 (3 Diary, p . 2 4 0 ) , and even as l a t e as August 9, 1916 (3 D i a r y , p . 270) he suggested to S e c r e t a r y McAdoo the a d v i s a b i l i t y of d e s i g n a t i n g Mr. Delano as Governor of the Board! As to why Mr. Warburg was d e s i g n a t e d as Vice Governor i n p l a c e of Mr. : 200 X-6715 mm 2 7 Delano, the w r i t e r has no r e c o l l e c t i o n , tout he i s s a t i s f i e d t h a t the d e s i g n a t i o n of Mr. Warburg as Vice Governor sprang from no d e s i r e t o " s a v e appearances" f o r the w r i t e r . • -XVI- I n summing up t h i s u n f o r t u n a t e c o n t r o v e r s y , t h e w r i t e r would p o i n t out t h a t the t h r e e members r e f e r r e d t o toy Mr. Warburg a s the "Minority" had a l l had much to do with the p r e p a r a t i o n and f i n a l d r a f t of the F e d e r a l Reserve Act, - the w r i t e r having "been charged ' toy S e c r e t a r y McAdoo w i t h the duty of examining c r i t i c a l l y a l l changes i n the "bill as p a s s e d toy the House, suggested toy the Senate Committee. N a t u r a l l y t h e s e t h r e e members of the Board would r e q u i r e cogent reasons f o r such a r a d i c a l change i n the Federal Reserve Act as was demanded toy the R e d i s t r i c t i n g Committee of t h e Board, e s p e c i a l l y a f t e r the e x p e r i e n c e of only one y e a r ' s o p e r a t i o n of the System. These t h r e e members were p e r f e c t l y f a m i l i a r w i t h Mr. Warburg 1 s determined b u t f r u i t l e s s e f f o r t s , while the Act was pending i n Congress, t o l i m i t the number of Federal r e s e r v e banks to f o u r , or to s i x as a maximum. They c o r d i a l l y accepted the w i l l of Congress i n f i x i n g the number a t between e i g h t and twelve. While t h e w r i t e r would have p r e - f e r r e d beginning w i t h a s m a l l e r number than twelve, Federal r e s e r v e banks, he l o y a l l y a c c e p t e d the d e c i s i o n of the Reserve Bank Organization Committee, c o n s i s t i n g of the S e c r e t a r y of the Treasury, the Comptroller of t h e Currency, and the S e c r e t a r y of A g r i c u l t u r e , Mr. Houston, i n f i x i n g the number a t twelve. The t h r e e of us were f i r m i n t h e ; 201 X-6715 28 c o n v i c t i o n , however, t h a t 110 r e d u c t i o n i n the number should be made, - even assuming the Board had the n e c e s s a r y power, - u n l e s s and u n t i l the r e s u l t of experience i n the workings of the System c l e a r l y demo n s t r a t e d t h a t a r e d u c t i o n i n number was a b s o l u t e l y n e c e s s a r y f o r the good of the System and of the c o u n t r y . They f e l t t h a t the r e p o r t of the R e d i s t r i c t i n g Committee r e v e a l e d no such n e c e s s i t y . They f e l t t h a t any a t t e m p t to reduce the number of Federal r e s e r v e "banks would "be r e s i s t e d i n t h e c o u r t s and would cause c o n f u s i o n , u n c e r t a i n t y , and l a c k of confidence i n the F e d e r a l Reserve System, - a r e s u l t s p e c i a l l y to he avoided a t t h a t time when the world war was r a g i n g i n Europe. Their f e e l i n g i n the m a t t e r was a l s o confirmed by the knowledge t h a t t h e members of t h e Federal Advisory Council, - on November 16, t h e day f o l l o w i n g the d i s c u s s i o n i n the Board a l r e a d y r e f e r r e d t o , - a f t e r i n formal d i s c u s s i o n , were unanimously a g a i n s t any a t t e m p t to reduce the number of F e d e r a l r e s e r v e banks a t the p r e s e n t time. F i n a l l y * one member of the Committee and one o t h e r member of the Board, whatever t h e i r former views may have been, reached the conc l u s i o n t h a t a r e d u c t i o n of the number of Federal r e s e r v e banks should n o t be u n d e r t a k e n a t t h a t time. Thus, as once b e f o r e s t a t e d , i f a f i n a l v o t e had been taken a t the meeting of t h e Board on November 22, 1915, wholly a p a r t from the a d v e r s e opinion of the Attorney General, the R e d i s t r i c t i n g Committee's r e p o r t i n f a v o r of r e d u c t i o n i n t h e number of Federal r e s e r v e banks would have been d e f e a t e d by the d e c i s i v e v o t e of f i v e to two, and 202 - 29 - X-6715 Mr. Warburg's " M a j o r i t y " of f o u r wo I d have dwindled i n t o a f e e b l e • M i n o r i t y " of two* -XVIIThe w r i t e r b e l i e v e s t h a t by thus " l i f t i n g the v e i l * a t the p o i n t where Mr. Warburg ceased t o l i f t i t , he has exploded the myth of a combination or c o n s p i r a c y on the p a r t of the P r e s i d e n t and o t h e r o f f i c e r s of the United S t a t e s t o suppress debate i n the Board; and he i s f i r m l y of t h e opinion t h a t the subsequent marvellous work of the twelve Federal r e s e r v e banks i n b e a r i n g on t h e i r s h o u l d e r s , l i k e A t l a s , the c r e d i t burdens of the whole world d a t i n g and s i n c e the war, w i l l have convinced the most s k e p t i c a l t h a t the f a i l u r e of the a t t e m p t t o reduce the numbet of t h e Federal r e s e r v e banks has enured to the b e n e f i t not only of the System b u t , a s w e l l , to the b e n e f i t of t h e e n t i r e people of t h e United States. 203 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6716 September 22, 1930* Dear S i r ) I t i s noted t h a t communications d i r e c t e d to t h e Governor of the Board by some of the F e d e r a l r e s e r v e "banks a r e being a d d r e s s e d t o : "Eugene Meyer, J r . " This i s to a d v i s e you t h a t i n a d d r e s s i n g Mr. Moyer the word " J u n i o r " should be o m i t t e d . Very t r u l y y o u r s , E< M. McClelland, Assistant Secretary. To the Governors and Agents of a l l F e d e r a l Reserve Banks. X-6718 COPY September 20, 1930# The F e d e r a l Reserve Board. Mr. Wyatt - General Counsel. P u b l i c a t i o n of Notice t h a t Member Bank i n t e n d s to Withdraw from Federal Reserve System. Mr. McClelland a d v i s e s me t h a t the Board d e s i r e my opinion as to any questions of law which may be involved i n the p r o p o s a l t h a t , whenever a S t a t e member bank f i l e s w r i t t e n n o t i c e of i t s i n t e n t i o n to withdraw from membership i n t h e Federal Reserve System a t the e x p i r a t i o n of s i x months, the Board p u b l i s h t h i s f a c t i n the Federal Reserve B u l l e t i n , i n order t h a t the d e p o s i t o r s and the p u b l i c g e n e r a l l y may have advance i n f o r m a t i o n of the member b a n k ' s i n t e n t i o n to withdraw. I a l s o u n d e r s t a n d t h a t the Board d e s i r e s my views a s to t h e i n t e n t i o n of Congress i n r e q u i r i n g such s i x months' w r i t t e n n o t i c e . S M A Y OF OPINION. U MR 1. The law does n o t e x p r e s s l y r e q u i r e the Board t o p u b l i s h t h e f a c t whenever a member bank f i l e s w r i t t e n n o t i c e of i t s i n t e n t i o n to withdraw from membership i n the F e d e r a l Reserve System, and no such requirement can be i m p l i e d ; b u t t h e r e i s no l e g a l reason why the Board should n o t publ i s h such i n f o r m a t i o n i f in the B o a r d ' s judgment i t would be i n t h e p u b l i c i n t e r e s t t o do s o . 2 . The purpose of the requirement t h a t s i x . m o n t h s ' w r i t t e n n o t i c e s h a l l be f i l e d with the Board b e f o r e a S t a t e bank withdraws from membership was n o t to p r o t e c t the d e p o s i t o r s of such member banks b u t t o p r o t e c t the Federal r e s e r v e banks a g a i n s t the too sudden r e d a c t i o n of t h e i r own c a p i t a l . 3. I t a l s o a f f o r d s such member banks an o p p o r t u n i t y to t h i n k the m a t t e r over and p o s s i b l y to change t h e i r minds b e f o r e they a c t u a l l y withdraw from t h e System. 4. I f the p u b l i c i s e n t i t l e d to n o t i c e when a S t a t e member bank v o l u n t a r i l y d e c i d e s to withdraw from membership i n t h e Federal Reserve System a t the e x p i r a t i o n of s i x months, then i t would seem t h a t the p u b l i c i s a l s o e n t i t l e d to n o t i c e whenever the Federal Reserve Board n o t i f i e s a S t a t e member bank to appear b e f o r e i t and show cause why i t s membership i n the Federal Reserve System should not be f o r f e i t e d f o r v i o l a t i o n of law; b u t , to p u b l i s h such n o t i c e i n t h e l a t t e r case probably would c l o s e the bank b e f o r e i t had the h e a r i n g to which i t i s e n t i t l e d under s e c t i o n 9 of the Federal Reserve A c t . 5. I f the Board should adopt the p r a c t i c e of g i v i n g p u b l i c i t y to n o t i c e s of withdrawal from t h e System f o r the purpose of g i v i n g t h e p u b l i c advance i n f o r m a t i o n , i t might a l s o be expected to p u b l i s h o t h e r i n f o r m a t i o n a f f e c t i n g the w e l f a r e of d e p o s i t o r s ; and I r e s p e c t f u l l y suggest t h a t the Board give c a r e f u l c o n s i d e r a t i o n to the p o s s i b l e r a m i f i c a t i o n s of t h i s p r i n c i p l e b e f o r e d e c i d i n g whether to adopt i t i n t h i s c a s e . 205 - 2 - X-6718 THE STATUTE. The e n t i r e law w i t h r e f e r e n c e t o t h e withdrawal of S t a t e hanks from the F e d e r a l Reserve System i s c o n t a i n e d i n t h e f o l l o w i n g p a r a g r a p h of Sect i o n 9 of the F e d e r a l Reserve Act as amended: "Any S t a t e bank or t r u s t company d e s i r i n g t o withdraw from membership i n a F e d e r a l r e s e r v e "bank may do s o , a f t e r s i x months' w r i t t e n n o t i c e s h a l l have "been f i l e d w i t h the F e d e r a l Reserve Board, upon t h e s u r r e n d e r and c a n c e l l a t i o n of a l l of i t s h o l d i n g s of c a p i t a l s t o c k i n t h e F e d e r a l r e s e r v e bank: PROVIDED, THAT THE FEDEEAL RESERVE BOARD, IN ITS DISCRETION AND SUBJECT TO SUCH CONDITIONS AS IT MY PRESCRIBE, M Y WAIVE SUCH SIX MONTHS1 NOTICE IN INDIVIDUAL A CASES AND M Y PERMIT ANY SUCH STATE BANK OR TRUST COMPANY A TO WITHDRAW FROM MEMBERSHIP IN A FEDERAL RESERVE BANK PRIOR TO THE EXPIRATION OF SIX LiONTHS FROM THE DATE OF THE WRITTEN NOTICE OF ITS INTENTION TO WITHDRAW: P r o v i d e d , however, That no F e d e r a l r e s e r v e bank s h a l l , except under e x p r e s s a u t h o r i t y of t h e F e d e r a l Reserve Board, c a n c e l w i t h i n t h e same c a l e n d a r y e a r more than t w e n t y - f i v e p e r centum of i t s c a p i t a l s t o c k f o r t h e purpose of e f f e c t i n g v o l u n t a r y w i t h drawals d u r i n g t h a t y e a r . A l l such a p p l i c a t i o n s s h a l l be d e a l t w i t h i n t h e o r d e r i n which they a r e f i l e d w i t h the Board. Whenever a member bank s h a l l s u r r e n d e r i t s s t o c k h o l d i n g s i n a F e d e r a l r e s e r v e bank, or s h a l l be o r d e r e d t o do so by the F e d e r a l Reserve Board, u n d e r a u t h o r i t y of law, a l l of i t s r i g h t s and p r i v i l e g e s a s a member bank s h a l l thereupon c e a s e and d e t e r m i n e , and a f t e r due p r o v i s i o n has been made f o r any i n d e b t e d n e s s due or to become due t o the F e d e r a l r e s e r v e bank i t s h a l l be e n t i t l e d to a r e f u n d of i t s cash p a i d s u b s c r i p t i o n w i t h i n t e r e s t a t the r a t e of o n e - h a l f of one p e r centum p e r month from d a t e of l a s t d i v i d e n d , i f e a r n e d , the amount r e f u n d e d i n no event to exceed t h e book v a l u e of the s t o c k a t t h a t time, and s h a l l l i k e w i s e be e n t i t l e d t o r e p a y ment of d e p o s i t s and of any o t h e r b a l a n c e due from t h e F e d e r a l reserve bank." The o r i g i n a l F e d e r a l Reserve Act c o n t a i n e d no p r o v i s i o n a u t h o r i z i n g S t a t e banks t o withdraw from membership i n the F e d e r a l Reserve System; a l l of the above p a r a g r a p h , except the p a r t p r i n t e d i n c a p i t a l l e t t e r s , was i n s e r t e d by the Act of June 2 1 , 1917; and the words i n c a p i t a l l e t t e r s were i n s e r t e d by t h e Act of A p r i l 17, 1930. 206 - 3 - X-6718 HJRP0S2 OF iTOTICE. The Act of June 2 1 , 1917, amended and r e e n a c t e d a l l of S e c t i o n 9 of the F e d e r a l Reserve Act f o r t h e purpose of making membership i n the F e d e r a l Res e r v e System more a t t r a c t i v e to S t a t e "banks. I n a r e p o r t s u b m i t t e d "by the Banking and Currency Committee of t h e Senate on May 9 , 1917, the f o l l o w i n g s t a t e m e n t was made w i t h r e f e r e n c e t o t h i s amendment. (Cong. Record, Vol. 55, p . 1981) s "This s e c t i o n makes more convenient and d e s i r a b l e t o the S t a t e banks and t r u s t companies membership i n the Fede r a l Reserve System and throws r e a s o n a b l e s a f e g u a r d s around t h e admission of S t a t e b a n k s , r e q u i r i n g them to comply w i t h the o r d i n a r y s a f e g u a r d s of the n a t i o n a l b a n k s , b u t e n a b l e s t h e S t a t e banks or t r u s t companies which become members to withdraw w i t h o u t l o s s i n case they f i n d the membership u n d e s i r a b l e . These w i t h d r a w a l s , however, a r e n o t t o be p e r m i t t e d i n such a way as t o cause any sudden d i s t u r b a n c e of t h e r e s e r v e bank t o which the withdrawing S t a t e banks or t r u s t companies a r e a t t a c h e d . " The words u n d e r l i n e d c l e a r l y i n d i c a t e t h a t t h e p u r p o s e of the requirement of s i x months' w r i t t e n n o t i c e b e f o r e withdrawing from the F e d e r a l Reserve System i s t o p r o t e c t t h e F e d e r a l r e s e r v e banks r a t h e r than the d e p o s i t o r s of such member b a n k s . This purpose i s f u r t h e r e f f e c t e d by the p r o v i s i o n t h a t , except under exp r e s s a u t h o r i t y of t h e F e d e r a l Reserve Board, no F e d e r a l r e s e r v e bank s h a l l cancel w i t h i n the same c a l e n d a r year more than 25 p e r c e n t of i t s c a p i t a l s t o c k f o r t h e p u r p o s e of e f f e c t i n g v o l u n t a r y w i t h d r a w a l s . PUBLICATION NOT REQUIRED OR FORBIDDEN. The s t a t u t e s does n o t r e q u i r e any p u b l i c a t i o n of the n o t i c e of a member b a n k ' s i n t e n t i o n t o withdraw from t h e F e d e r a l Reserve System, and t h e r e i s n o t h i n g i n t h e s t a t u t e from which a r e q u i r e m e n t t h a t t h e F e d e r a l Reserve Board p u b l i s h such a n o t i c e could be i m p l i e d . On the c o n t r a r y , the f a i l u r e to r e q u i r e such p u b l i c a t i o n i n d i c a t e s t h a t Congress d i d n o t e x p e c t such n o t i c e to be published. When Congress d e s i r e s i n f o r m a t i o n t o be p u b l i s h e d f o r t h e b e n e f i t of the p u b l i c i t u s u a l l y p r o v i d e s e x p r e s s l y f o r t h e p u b l i c a t i o n of such i n f o r m a t i o n and s p e c i f i e s the manner and d u r a t i o n of such p u b l i c a t i o n . Thus, S e c t i o n 11(a) of the F e d e r a l Reserve Act r e q u i r e s t h e F e d e r a l Reserve Board to p u b l i s h each week a s t a t e m e n t showing the c o n d i t i o n of each F e d e r a l r e s e r v e bank and a cons o l i d a t e d s t a t e m e n t f o r a l l F e d e r a l r e s e r v e banks; S e c t i o n 5211 of t h e Revised S t a t u t e s r e q u i r e s r e p o r t s of the c o n d i t i o n of n a t i o n a l banks t o be p u b l i s h e d im a newspaper i n the p l a c e where the n a t i o n a l bank i s l o c a t e d ; S e c t i o n 5170 of t h e Revised S t a t u t e s r e q u i r e s a newly o r g a n i z e d n a t i o n a l bank to p u b l i s h i t s c e r t i f i c a t e of a u t h o r i t y t o commence b u s i n e s s i n a newspaper p r i n t e d i n t h e c i t y o r 307 - 4 - X-6718 county where t h e "bank i s l o c a t e d f o r a t l e a s t s i x t y days; S e c t i o n 5221 of the Revised S t a t u t e s r e q u i r e s n o t i c e of the v o l u n t a r y l i q u i d a t i o n of a n a t i o n a l bank t o be p u b l i s h e d f o r two months i n a newspaper p u b l i s h e d i n t h e City of Hew York and a l s o i n a newspaper p u b l i s h e d i n the c i t y or town i n which t h e bank i s l o c a t e d ; and S e c t i o n 5235 of t h e Revised S t a t u t e s r e q u i r e s t h e Comptroller t o p u b l i s h n o t i c e of t h e appointment of a r e c e i v e r f o r a n a t i o n a l bank f o r t h r e e c o n s e c u t i v e months. The f a i l u r e t o r e q u i r e p u b l i c a t i o n of n o t i c e of i n t e n t i o n of a S t a t e bank to withdraw from t h e F e d e r a l Reserve System i s s t r o n g e v i d e n c e t h a t Congress d i d n o t e x p e c t or i n t e n d such n o t i c e t o be p u b l i s h e d . On t h e o t h e r hand, the law does n o t f o r b i d the F e d e r a l Reserve Board to p u b l i s h such n o t i c e and I know of no l e g a l r e a s o n why the Board s h o u l d n o t do so i f i n the B o a r d ' s judgment i t would be i n the p u b l i c i n t e r e s t . POSSIBLE RAMIFICATION. I u n d e r s t a n d from Mr. McClelland's memorandum t h a t i t i s p r o p o s e d t o give p u b l i c i t y t o t h e f i l i n g of a n o t i c e by a member bank of i t s i n t e n t i o n to withdraw from the F e d e r a l Reserve System, " i n o r d e r t h a t t h e d e p o s i t o r s and t h e p u b l i c g e n e r a l l y may have advance i n f o r m a t i o n of t h e member b a n k ' s i n t e n t i o n t o w i t h d r a w " . I assume t h a t t h i s i s f o r the purpose of e n a b l i n g d e p o s i t o r s to t r a n s f e r t h e i r a c c o u n t s to o t h e r banks b e f o r e the withdrawal becomes e f » f e c t i v e , i f t h e y a r e u n w i l l i n g to do b u s i n e s s w i t h a nonmember bank; and, viewing the m a t t e r from t h i s s t a n d p o i n t a l o n e , i t would seem e n t i r e l y p r o p e r t o g i v e the d e p o s i t o r s such i n f o r m a t i o n and a f f o r d them such an o p p o r t u n i t y . I f such i n f o r m a t i o n i s p u b l i s h e d on t h i s p r i n c i p l e , however, t h e Board might be e x p e c t e d t o p u b l i s h o t h e r i n f o r m a t i o n a f f e c t i n g the w e l f a r e of dep o s i t o r s , and I r e s p e c t f u l l y s u g g e s t t h a t the Board g i v e c a r e f u l c o n s i d e r a t i o n t o t h e p o s s i b l e r a m i f i c a t i o n s of t h i s p r i n c i p l e b e f o r e d e c i d i n g whether to adopt i t i n t h i s c a s e . I f t h e p u b l i c i s e n t i t l e d t o n o t i c e when a S t a t e member bank f i l e s n o t i c e of i t s i n t e n t i o n t o withdraw from membership i n the F e d e r a l Reserve System a t the e x p i r a t i o n of s i x months, then on t h e same t h e o r y i t would seem t h a t the p u b l i c i s e n t i t l e d t o n o t i c e whenever t h e F e d e r a l Reserve Board n o t i f i e s a member bank to a p p e a r b e f o r e i t t o show cause why i t s membership s h o u l d not be f o r f e i t e d f o r v i o l a t i o n of law. To p u b l i s h such i n f o r m a t i o n i n t h e l a t t e r c l a s s of c a s e s , however, would s e r i o u s l y i n j u r e the b u s i n e s s of t h e bank p r o b a b l y would cause a r u n r e s u l t i n g i n the c l o s i n g of the bank. S e c t i o n 9 of the F e d e r a l Reserve Act r e q u i r e s t h e Board to a f f o r d a bank a h e a r i n g b e f o r e f o r f e i t i n g i t s membership i n t h e F e d e r a l Reserve System f o r v i o l a t i o n of law; and, i f n o t i c e of such h e a r i n g were made p u b l i c , the bank p r o b a b l y would be d e p r i v e d of the b e n e f i t of any h e a r i n g by b e i n g f o r c e d i n t o the hands of a r e c e i v e r b e f o r e the h e a r i n g could take p l a c e . I f t h e p u b l i c i s e n t i t l e d to n o t i c e t h a t a member bank i s a b o u t t o w i t h draw from t h e Federal Reserve System then i t would seem t h a t i t i s a l s o ent i t l e d to n o t i c e when a member b a n k ' s c a p i t a l i s i m p a i r e d , when i t i s c o n t i n u a l l y d e f i c i e n t i n r e s e r v e s , or when t h e r e i s any o t h e r s i t u a t i o n a f f e c t i n g 208 X-6718 the i n t e r e s t s of i t s d e p o s i t o r s . Such n o t i c e h a s never "been p u b l i s h e d , howe v e r , and i t i s obvious t h a t the p u b l i c a t i o n of such n o t i c e s would produce runs on b a n k s , p r e c i p i t a t e t h e i r i n s o l v e n c y , and i n the long run do more harm than good. Other methods have been p r o v i d e d f o r meeting such s i t u a t i o n s . When a n a t i o n a l b a n k ' s c a p i t a l i s impaired the Comptroller of the Currency i s a u t h o r i z e d to l e v y an a s s e s s m e n t , and when i t i s i n s o l v e n t he i s a u t h o r i z e d t o a p p o i n t a r e c e i v e r . When a member bank f a i l s t o comply w i t h the r e s e r v e r e q u i r e m e n t s the F e d e r a l Reserve Board i s a u t h o r i z e d to a s s e s s p e n a l t i e s ; when a S t a t e member bank f a i l s t o comply w i t h t h e p r o v i s i o n s of t h e F e d e r a l Reserve Act arid t h e B o a r d ' s r e g u l a t i o n s t h e Board i s a u t h o r i z e d t o f o r f e i t i t s membership i n t h e F e d e r a l Reserve System; and when a n a t i o n a l bank f a i l s to comply w i t h the p r o v i s i o n s of the F e d e r a l Reserve Act or the N a t i o n a l Bank Act the Comptroller of t h e Currency i s a u t h o r i z e d to i n s t i t u t e s u i t f o r t h e f o r f e i t u r e of i t s c h a r t e r . I n d e c i d i n g whether or n o t to g i v e p u b l i c i t y to t h e f i l i n g of n o t i c e by a S t a t e bank of i t s i n t e n t i o n to withdraw from membership, however, I do n o t f e e l t h a t t h e Board needs to be s t r o n g l y i n f l u e n c e d by the p o s s i b i l i t y of f i n d i n g i t n e c e s s a r y to apply t h a t p r i n c i p l e to o t h e r cases i n o r d e r to be c o n s i s t e n t . I n o t h e r words, I t h i n k the Board could a f f o r d t o be i n c o n r s i s t e n t i f i t b e l i e v e s t h a t the p u b l i c a t i o n of n o t i c e of i n t e n t i o n t o w i t h draw v o l u n t a r i l y would be i n the p u b l i c i n t e r e s t b u t t h a t p r a c t i c a l cons i d e r a t i o n s would p r e v e n t the p u b l i c a t i o n of i n f o r m a t i o n p e r t a i n i n g to p r o ceedings t o f o r f e i t the membership of a S t a t e member bank o r to the o t h e r f a c t s and c i r c u m s t a n c e s t o which I have a l l u d e d above. OTHER PRACTICAL CONSIDERATIONS. The r e q u i r e m e n t t h a t S t a t e member banks f i l e w r i t t e n n o t i c e of t h e i r i n t e n t i o n s i x months b e f o r e withdrawing from the F e d e r a l Reserve System h a s the e f f e c t of a f f o r d i n g them a " c o o l i n g o f f p e r i o d " d u r i n g which t h e y have an o p p o r t u n i t y t o t h i n k the m a t t e r over and p o s s i b l y d e c i d e n o t t o withdraw from t h e F e d e r a l Reserve System. There have been a number of c a s e s where member b a n k s , because of some f r i c t i o n w i t h the F e d e r a l r e s e r v e banks or f o r o t h e r temporary c a u s e , have f i l e d n o t i c e of i n t e n t i o n t o withdraw and have changed t h e i r minds b e f o r e the e x p i r a t i o n of t h e s i x months' p e r i o d . To p u b l i s h the f a c t t h a t a S t a t e bank has f i l e d n o t i c e of i t s i n t e n t i o n to withdraw might have the e f f e c t of p r e v e n t i n g i t from l a t e r changing i t s mind; b u t , on t h e o t h e r hand, i t might a l s o have the e f f e c t of causing i t s d e p o s i t o r s t o b r i n g p r e s s u r e on the bank to remain i n t h e System. I t i s i m p o s s i b l e t o prophesy what the e f f e c t might b e , and might not o p e r a t e u n i f o r m l y i n a l l c a s e s . I p e r s o n a l l y b e l i e v e t h a t t h e e f f e c t of p u b l i s h i n g such n o t i c e w i l l depend upon the amount of p u b l i c i t y g i v e n / ' t h e newspapers of t h e p l a c e i n which t h e bank i s l o c a t e d , upon the a t t i t u d e of t h e p u b l i c a t the time toward t h e bank and toward the Federal Reserve System, and upon numerous o t h e r f a c t o r s which w i l l v a r y i n each i n d i v i d u a l c a s e . I f t h e r e have been rumors r e s p e c t i n g the b a n k ' s solvency, the p u b l i c a t i o n of such a n o t i c e might c o n c e i v a b l y cause a run on the bank. I f t h e people i n t h e l o c a l i t y s h o u l d have a h i g h r e g a r d f o r the F e d e r a l Reserve System and p l a c e g r e a t importance on membership i n the System, the p u b l i c a t i o n of such a n o t i c e 209 - 6 • X-6718 might r e a a l t i n t h e t r a n s f e r of t h e i r a c c o u n t s t o o t h e r banks i n an o r d e r l y manner, and. t h i s might cause the member bank t o d e c i d e n o t to withdraw from the System. I f the member bank were h i g h l y r e g a r d e d by t h e p u b l i c and i f the p u b l i c were h o s t i l e or i n d i f f e r e n t to t h e F e d e r a l Reserve System, the p u b l i c a t i o n of such n o t i c e p r o b a b l y would have no e f f e c t w h a t e v e r , e x c e p t p o s s i b l y t o reduce t h e chances of t h e b a n k ' s o f f i c e r s and d i r e c t o r s changing t h e i r minds about withdrawing from the. System. CONCLUSION. I n t h e l a s t a n a l y s i s , the q u e s t i o n whether t h e Board should a d o p t the p r a c t i c e of g i v i n g p u b l i c i t y to t h e f i l i n g of n o t i c e by a member bank of i t s i n t e n t i o n to withdraw from the F e d e r a l Reserve System i s a q u e s t i o n of p o l i c y f o r the Board t o d e c i d e i n accordance with the d i c t a t e s of i t s own judgment. The above memorandum i s n o t i n t e n d e d as an argument i n f a v o r of or a g a i n s t t h e a d o p t i o n of such p o l i c y , but i s i n t e n d e d t o c a l l t o t h e B o a r d ' s a t t e n t i o n t h e v a r i o u s d i f f e r e n t f a c t o r s which t h e Board may d e s i r e t o c o n s i d e r b e f o r e r e a c h i n g a d e c i s i o n on t h i s q u e s t i o n . Respectfully, Walter Wyatt, General Counsel* W -omc~sad W X-6719 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 3 : 0 0 p.m. September 24, 1930. At a p r e l i m i n a r y c o n f e r e n c e h e l d "by the F e d e r a l Reserve Board i n c o n n e c t i o n w i t h t h e r e g u l a r f a l l m e e t i n g of the g o v e r n o r s and chairmen of the twelve F e d e r a l r e s e r v e banks, a comprehensive review was made of the a g r i c u l t u r a l , g e n e r a l economic and c r e d i t s i t u a t i o n throughout the country. Being t h e season of u s u a l m a r k e t i n g of the c o u n t r y ' s c r o p s , r e p o r t s were made w i t h p a r t i c u l a r r e f e r e n c e t o the s t a t u s of a g r i c u l t u r a l s t a p l e s i n each of t h e F e d e r a l r e s e r v e d i s t r i c t s and t h e r e was s p e c i a l d i s c u s s i o n of t h e c o n d i t i o n s a f f e c t i n g t h e i r m a r k e t i n g and financing. The Board was a s s u r e d and s a t i s f i e d t h a t i n each of the twelve Fede r a l r e s e r v e d i s t r i c t s ample c r e d i t f a c i l i t i e s a r e a v a i l a b l e f o r f i n a n c i n g t h e m a r k e t i n g of t h e c r o p s , and t h a t such f a c i l i t i e s a r e "being p r o v i d e d "by the "banks and o t h e r a g e n c i e s concerned i n t h e o r d e r l y marketi n g of a g r i c u l t u r a l commodities. The twelve F e d e r a l r e s e r v e "banks through r e d i s c o u n t s f o r t h e i r member "banks, l o a n s t o F e d e r a l I n t e r m e d i a t e C r e d i t Banks on a g r i c u l t u r a l p a p e r of c o o p e r a t i v e a s s o c i a t i o n s and p u r c h a s e s of "bankers' a c c e p t a n c e s c o v e r i n g a g r i c u l t u r a l commodities, a r e making t h e i r r e s o u r c e s a v a i l a b l e f o r the m a r k e t i n g of t h e c o u n t r y ' s crops a t t h e lowest r a t e s i n t h e h i s t o r y of the System. I t was the view of the c o n f e r e n c e t h a t the e x t e n s i o n of c r e d i t to s u p p o r t t h e o r d e r l y m a r k e t i n g of c r o p s - a t a l l times an i m p o r t a n t f u n c t i o n of t h e F e d e r a l r e s e r v e "banks - i s of s p e c i a l importance a t the p r e s e n t 211 X+6719 -2- time; To t h a t end, the F e d e r a l Reserve Board was a s s u r e d t h a t t h e F e d e r a l r e s e r v e "banks w i l l continue t h e i r e f f o r t s to a c q u a i n t t h e i r communities w i t h the f a c i l i t i e s of t h e System and the d i s p o s i t i o n of the management of t h o s e hanks to meet the problems connected w i t h the m a r k e t i n g of t h e c r o p s . X-6720 For r e l e a s e , morning p a p e r s , S e p t . 24, 1930. The F e d e r a l I n t e r m e d i a t e C r e d i t Banks of Columbia, South C a r o l i n a , New O r l e a n s , Louisiana, Houston, Texas, Wichita, Kansas, S t . Louis, M i s s o u r i , and L o u i s v i l l e , Kentucky, a r e m a i l i n g to a l l "banks and a g r i c u l t u r a l c r e d i t c o r p o r a t i o n s i n the c o t t o n b e l t l e t t e r s i n t h e form quoted below. Copies of t h e s e l e t t e r s a r e being g i v e n out l o c a l l y by the r e s p e c t i v e banks f o r p u b l i c a t i o n Wednesday morning. "TO ALL BANKS AND AGRICULTURAL CREDIT CORPORATIONS IN : "The marketing of t h e c o t t o n crop of the p r e s e n t s e a s o n i s now under way and t h e F e d e r a l I n t e r m e d i a t e c r e d i t banks a r e not only ready but eager to make a v a i l a b l e t h e i r f a c i l i t i e s f o r f i n a n c i n g f a r m e r s ' n o t e s secured by p r o p e r l y s t o r e d c o t t o n , and thus a i d i n c a r r y i n g i t u n t i l i t can be marketed i n an o r d e r l y manner. " I n a d d i t i o n to t h e i r a b i l i t y under t h e law to make l o a n s t o c o o p e r a t i v e marketing a s s o c i a t i o n s secured by warehouse r e c e i p t s , the F e d e r a l I n t e r m e d i a t e c r e d i t banks have power to discount f a r m e r s ' notes f o r banks, a g r i c u l t u r a l c r e d i t c o r p o r a t i o n s , and o t h e r f i n a n c i n g i n s t i t u t i o n s . Moreover, by amendments r e c e n t l y e n a c t e d by Congress, the banks a r e p e r m i t t e d to make d i r e c t l o a n s to such i n s t i t u t i o n s s e c u r e d by the same c l a s s of paper which may be discounted, and the minimum m a t u r i t y requirement i s removed. In t h i s way the p r o c e d u r e f o r c a r r y i n g f a r m e r s ' paper by the F e d e r a l i n t e r m e d i a t e c r e d i t banks h a s been s i m p l i f i e d . "Any S t a t e or N a t i o n a l bank, t r u s t company, savings bank o r s i m i l a r i n s t i t u t i o n , and any p r o p e r l y o r g a n i z e d c r e d i t c o r p o r a t i o n w i t h adequate c a p i t a l and competent management, which h a n d l e s e l i g i b l e a g r i c u l t u r a l p a p e r and meets t h e r e q u i r e m e n t s of t h e Federal i n t e r m e d i a t e c r e d i t bank, may be g r a n t e d the p r i v i l e g e of d i s c o u n t i n g w i t h or o b t a i n i n g l o a n s from the F e d e r a l i n t e r m e d i a t e c r e d i t bank. WITH SUCH RELATIONS ESTABLISHED, THE FEDERAL INTERMEDIATE CREDIT BANK WILL ACCEPT FROM SUCH INSTITUTIONS, AND CARRY, NOTES BEARING INTEREST RATES PERMITTED BY THE L W AND REGULATIONS AND REA PRESENTING LOAMS TO COTTON GROWERS ON THE BASIS OF NINE CENTS PER POUND, OR SEVENTY-FIVE PER CENT OF THE MARKET VALUE IF X-6730 - 2 - SUCH PERCENTAGE EXCEEDS NINE CENTS, FOR MIDDLING WHITE COTTON Of S2VM EIGHTHS INCH STAPLE, SUCH COTTON BEING OP TENIERABLE GRADE AND STAPLE, PROPERLY STORED AND INSURED, AND PLEDGED AS SECURITY FOR THE LOANS. Cotton f a r m e r s who d e s i r e t o a v a i l themselves of t h i s o p p o r t u n i t y s h o u l d a p p l y t o a "banking i n s t i t u t i o n or a g r i c u l t u r a l c r e d i t c o r p o r a t i o n i n t h e i r l o c a l i t y which h a s or o b t a i n s t h e p r i v i l e g e of doing "business w i t h the F e d e r a l i n t e r m e d i a t e c r e d i t "bank. "The F e d e r a l I n t e r m e d i a t e C r e d i t Bank of l i k e each of t h e o t h e r e l e v e n F e d e r a l i n t e r m e d i a t e c r e d i t "banks, h a s ample l e n d i n g c a p a c i t y and t h e r e f o r e i s i n a p o s i t i o n promptly to r e n d e r a l a r g e amount of a s s i s t a n c e i n f i n a n c i n g t h e s t o r a g e and o r d e r l y m a r k e t i n g of the p r e s e n t crop. PWe hope to have t h e a c t i v e c o o p e r a t i o n of "banks and a g r i c u l t u r a l c r e d i t c o r p o r a t i o n s i n r e n d e r i n g t h i s s e r v i c e t o t h e c o t t o n growers of every community i n the c o t t o n growing s e c t i o n s of t h i s d i s t r i c t . FEDERAL INTERMEDIATE CREDIT BANK OF By President." FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X- 6722 September 25, 1930. SUBJECT: Insurance. Dear S i r : On March 30, 1929 the Board a d d r e s s e d a l e t t e r , X-6279, to t h e S e c r e t a r y of the Governors' Conference a s k i n g t h a t t h e f o l l o w i n g t o p i c be p l a c e d on the program f o r the Governors* spring conference: "Should s e l f - i n s u r a n c e r e s e r v e s he c a r r i e d by t h e F e d e r a l r e s e r v e banks and i f so when and f o r what p u r p o s e s should they be used and what e f f e c t i f any should they have on the c o s t of f i d e l i t y or o t h e r i n surance c a r r i e d by the banks." The Governors' Conference c o n s i d e r e d t h i s q u e s t i o n and a d o p t e d the f o l l o w i n g r e s o l u t i o n : "Resolved, t h a t i t i s d e s i r a b l e t h a t a l l Fede r a l r e s e r v e banks should s e t up s e l f - i n s u r a n c e r e s e r v e s f o r the purpose of meeting any l o s s e s of whatever n a t u r e not covered o t h e r w i s e , and t h a t the e f f e c t should be a v e r y m a t e r i a l r e d u c t i o n i n the c o s t of a l l t y p e s of insurance." At t h e p r e s e n t time, e i g h t of the Federal r e s e r v e banks have s e l f - i n s u r a n c e r e s e r v e f u n d s and i t i s assumed t h a t the s e t t i n g up of t h e s e r e s e r v e s h a s r e s u l t e d i n a m a t e r i a l r e d u c t i o n i n annual cost of i n s u r a n c e . The Board expects to a g a i n review the q u e s t i o n of s e l f - i n s u r a n c e r e s e r v e s , however, w i t h t h e o b j e c t of f i x i n g some-limits on the amount of such r e s e r v e s . Before doing t h i s , i t wou\d l i k e to have b e f o r e i t a complete statement of ( l ) the amount and annual c o s t of t h e v a r i o u s c l a s s e s of i n s u r a n c e c a r r i e d by each F e d e r a l r e s e r v e bank and (2) t h e e x t e n t t h a t those r e s e r v e banks which have s e l f - i n s u r a n c e funds have u s e d them to r e p l a c e i n s u r a n c e which would otherwise X-6722 •2— have t e e n c a r r i e d . The Board would l i k e a l s o to have you s t a t e the views of your d i r e c t o r s and o f f i c e r s with r e f e r ence to t h e s e f u n d s , e s p e c i a l l y with r e g a r d to the amount and t h e k i n d s of i n s u r a n c e , i f any, they should t a k e the p l a c e o f , the a g g r e g a t e amount which should he accumulated i n such f u n d and whether such amount should he determined "by some f i x e d r u l e . 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 have t h i s i n f o r m a t i o n forwarded to the Board a t your e a r l y convenience. Very t r u l y yours, E. M. McClelland, Assistant Secretary. T GOVERNORS OF AH, F. R. BAMS O 216 FEDERAL RESERVE BOARD WASHINGTON Y ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6723 ^ September 30, 1930. 4< 4- ^ * Dear S i r ; Under date of March 11, 1929, the F e d e r a l Reserve Board t r a n s m i t t e d to the F e d e r a l r e s e r v e "banks, with a r e q u e s t f o r t h e i r cooperation, l e t t e r s a d d r e s s e d to t h e Board "by the Treasury Department on February 14th and March 8 t h , w i t h r e g a r d to arrangements which had been made by the Department w i t h Mr. George H. Blake f o r the p r e p a r a t i o n of a complete c o l l e c t i o n of currency s p e c i mens . For your i n f o r m a t i o n , a communication r e a d i n g as f o l l o w s h a s now been r e c e i v e d from the U n d e r s e c r e t a r y of the Treasury: A "Reference i s made to Department's l e t t e r of February 14 j 1929, i n which the F e d e r a l Reserve Board was r e q u e s t e d t o i n s t r u c t the F e d e r a l ReServe Banks to forward to the T r e a s u r e r of t h e U n i t e d S t a t e s uncanceled any Specimens of u n c u r r e n t United S t a t e s currency. Any i n s t r u c t i o n s i n such respect given the Federal Reserve Banks may now be revoked." i • > Very t r u l y y o u r s , > E. M. McClelland, Assistant Secretary. r TO GOVERNORS OF ALL F . R. BAMS. 217 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-6725 October 2, 1930. SUBJECT: Amendment to Regulation D p e r m i t t i n g computation of d e f i c i e n c i e s i n reserves on the o a s i s of member "banks d e p o s i t s a t opening of business i n s t e a d of close of business. Dear S i r : The Federal Reserve Board has amended subsection (a) of Section IV of i t s Regulation D so as to provide t h a t , i n computing p e n a l t i e s f o r d e f i c i e n c i e s i n r e s e r v e s , the r e q u i r e d r e s e r v e balance of each member bank a t the close of business each day s h a l l be based upon i t s net d e p o s i t balances a t the Opening of b u s i n e s s , i n s t e a d of the close of b u s i n e s s , on the same day* Mo change, however, was made i n t h e e x i s t i n g p r a c t i c e of computing such d e f i c i e n c i e s on the b a s i s of average d a i l y net deposit balances covering semiweekly, weekly or semimonthly p e r i o d s ; The amendment becomes e f f e c t i v e as to each member bank a t the beginning of the f i r s t reserve computation p e r i o d of such member bank commcncing a f t o r midnight on October 31, 1930. Section IV(a) of the Regulation, as amended, reads as f o l lows: "SECTION IV. PENALTIES FOR DEFICIENCIES IN RESERVES "Inasmuch as i t i s e s s e n t i a l that the law with respect to the maintenance by member banks of the required minimum reserve balances be s t r i c t l y complied with, the Federal Reserve Board, under a u t h o r i t y v e s t e d in i t by s e c t i o n 19 of the Federal r e s e r v e a c t , hereby p r e s c r i b e s the following r u l e s governing p e n a l t i e s f o r d e f i c i e n c i e s in reserves: " ( a ) Basic p e n a l t y . " ( l ) D e f i c i e n c i e s i n reserve balances of member banks i n c i t i e s where Federal r e s e r v e banks or branches thereof a r e located and i n such other r e s e r v e c i t i e s as the Federal Reserve Board may d e s i g n a t e from time to time w i l l be computed on the b a s i s of average d a i l y net d e p o s i t balances covering semiweekly p e r i o d s . D e f i c i e n c i e s i n r e serve balances of member banks i n a l l other r e s e r v e c i t i e s w i l l be computed on the b a s i s of average d a i l y net d e p o s i t balances covering weekly p e r i o d s . D e f i c i e n c i e s i n reserve balances of other member banks w i l l be computed on the b a s i s of average d a i l y net d e p o s i t b a l ances covering semimonthly p e r i o d s . "(2) In computing such d e f i c i e n c i e s the r e q u i r e d reserve b a l ance of each member bank a t the close of business each day s h a l l be based upon i t s net deposit balances a t the opening of business on the same day; and the semi weekly, weekly and semimonthly p e r i o d s 2. < *-• 2 X-6725 r e f e r r e d to i n paragraph ( l ) hereof s h a l l end a t the close of b u s i n e s s on days to "be f i x e d by the Federal reserve "banks with the approval of the Federal Reserve Board. "(3) P e n a l t i e s f o r such d e f i c i e n c i e s w i l l "be assessed monthly on the "basis of average d a i l y d e f i c i e n c i e s during each of the r e s e r v e can* p u t a t i o n p e r i o d s ending i n the preceding calendar month. 11 (4) Such p e n a l t i e s s h a l l be a s s e s s e d a t a b a s i c r a t e of 2 per cent p e r annum above the Federal r e s e r v e bank discount r a t e on 90 day commercial p a p e r , i n e f f e c t on the f i r s t day of the calendar month i n which the d e f i c i e n c i e s occurred." By Order of the Federal Reserve Board. Very t r u l y yours, E. M. McClelland, Assistant Secretary. TO GOVERNORS A D CHAIRMEN OF ALL F. R. BANKS. M > : COPY 219 X-6726-a October 2, 1 9 3 0. > Mr. James G. McConkey, Coxitis e l , Federal Reserve Bank of S t . Louis, S t . Louis, Missouri. A'' Dear Mr. McConkey : ^ 4 -* > I have r e c e i v e d your l e t t e r of September 26th and have read with much i n t e r e s t your comments on the question whether the Federal Courts w i l l take j u d i c i a l n o t i c e of the r u l e s and r e g u l a t i o n s of the Federal Reserve Board without t h e i r being pleaded and introduced i n evidence. I can see considerable l o g i c i n the views expressed i n Judge Lacombe1 s opinion i n the case of Nagel v. United S t a t e s , 140 Fed. 302; "but, i n order to remove the b a s i s f o r t h a t view as f a r as p o s s i b l e , i n . so f a r as the r e g u l a t i o n s of the Federal Reserve Board a r e concerned, the Board p u b l i s h e s amendments to i t s r e g u l a t i o n s very promptly i n i t s o f f i c i a l p u b l i c a t i o n , the Federal Reserve B u l l e t i n , and p u b l i s h e s a l l new r e g u l a t i o n s i n i t s Annual Report which i s submitted t o Congress pursuant to a s p e c i f i c requirement of the Federal Reserve Act. This a f f o r d s Federal r e s e r v e banks o f f i c i a l p u b l i c a t i o n s to which r e f e r e n c e can be made f o r a r e c o r d of the Board's r e g u l a t i o n s and the amendments t h e r e t o and I b e l i e v e should be of considerable a s s i s t a n c e i n inducing the courts to take j u d i c i a l n o t i c e of such r e g u l a t i o n s . I understand t h a t i f Mr. Smith l o s e s out on the demurrer i n the case of United S t a t e s Casualty Company v. KTashville Branch of the Federal Reserve Bank of A t l a n t a , he does not i n t e n d to stand on the demurrer but w i l l p l e a d the r e g u l a t i o n s i n h i s answer. I n view of the f a c t t h a t the question involved i s of i n t e r e s t to a l l the Federal r e s e r v e banks, I am taking the l i b e r t y of f u r n i s h i n g a copy of your l e t t e r to Counsel f o r a l l other banks. With k i n d e s t r e g a r d s , I am, Very t r u l y yours, W O C W M Walter Wyatt, General Counsel. 220 Mr» '.Vyatt. — 2 — X**6726—b In the case of ROBINSOH v s . BALTIMORE & OHIO R. R. CO., 222 U. S. 506, I-vir. J u s t i c e Vandeventer, i n speaking of the n e c e s s i t y of p l e a d ing a r u l i n g of the I n t e r s t a t e Commerce Commission under a S t a t u t e which permits the r u l i n g to he admitted as evidence without o t h e r p r o o f , s a y s , a t L. C. 512: "Undoubtedly t h i s p r o v i s i o n makes the d e c i s i o n s of the Commissioner, as so published, admissable i n evidence without o t h e r proof of t h e i r genuineness, b u t , i t does not r e q u i r e t h a t they be j u d i c i a l l y n o t i c e d or r e l i e v e l i t i g a n t s from o f f e r i n g them i n evidence as they would any other competent evidence intended to be r e l i e d upon. I t s purpose i s to r e l i e v e l i t i g a n t s from t h e inconvenience and expense of obtaining c e r t i f i e d copies of the d e c i s i o n s , by a u t h o r i z i n g the use of the published copies, b u t i t does not change the r u l e s of evidence." The Tennessee Supreme Court s i d e - s t e p p i n g the force of the Regulations pleaded i n the LOUISVILLE & NASHVILLE R. R. CO. v s . the NASHVILLE BRANCH of the FEDERAL RESERVE BANK OF ATLANTA case was q u i t e d i s appointing to me, s i n c e I had p l e a d the Regulations i n the case of BANK OF WILLISTON v s . FEDERAL RESERVE BANK OF ST. LOUIS, and, the opinion handed down by the T r i a l Court had so d i s h e a r t e n e d the P l a i n t i f f ' s Attorneys as to d e t e r them i n pushing the case f a r t h e r . The r a i l r o a d case was handled admirably. I have g r e a t r e s p e c t f o r Mr. Smith's a b i l i t y , and, i f the l i t i g a t i o n was not i n Tennessee, I would f e e l g r e a t e r f a i t h i n h i s winning out on demurrer. I hope t h a t i f Mr. Smith l o s e s out on the demurrer, he w i l l p l e a d the Regulations r a t h e r than s t a n d on the demurrer; f o r , I b e l i e v e t h a t when the matter a g a i n reaches the Tennessee Supreme Court we should have the pleadings i n such shape as to have the Court pass upon the Regu l a t i o n s under the most favorable c o n d i t i o n s . With k i n d e s t r e g a r d s , Very t r u l y yours, (Signed) J a s . G. Mc Conkey, Counsel. 231 COPY X-6726-b FEDERAL RESERVE EASE OF ST. LOUIS September 25, 1930. Mr. Walter Wyatt, General Connse1, Federal Reserve Board, Washington, D. C. Bear Mr. Wyatt: RE:- U. S. CASUALTY CO. VB H a s h v i l l e Branch of the FEDERAL RESERVE BAM OF ATLANTA. e t a l . Mr. Smith's proposed demurrer to the s u i t brought "by the U. S. Casualty Co. a g a i n s t the Nashville Branch of the Federal Reserve Bank of A t l a n t a p r e s e n t s a novel way to g e t r i d of these troublesome c o l l e c t i o n cases. While the U. S. Courts u s u a l l y take j u d i c i a l n o t i c e of the Rules and Regulations promulgated under a u t h o r i t y of Federal S t a t u t e s and t r e a t them as i f included i n the Act i t s e l f U.S. v s . GREMAUD, 220 U. S. 506, CH AA v s . U. S . , 152 U. S. 211, FIRST NAT'L v s . FELLOWS 244 U. S. 416 Judge Lacombe of the 2nd U. S. C i r c u i t i n a case involving an a c t i o n on a P o s t m a s t e r ' s bond, and, where a P o s t a l Department c i r c u l a r was r e l i e d on, but not pleaded, s a y s : "When t h e r e i s some question of S t a t u t e law the Court can i t s e l f , by r e f e r e n c e to books with which i t i s f a m i l i a r and which such Judge p o s s e s s e s , determine j u s t what s t a t u t o r y p r o v i s i o n s were i n f o r c e a t a given time, there i s no n e c e s s i t y of encumbering the record with them. But, i t i s d i f f e r e n t with Departmental Regulations. No department ever sends i t s compilation of r e g u l a t i o n s to the Judge. They a r e f r e q u e n t l y amended, and, without s p e c i a l i n formation from the Department. Ho one can t e l l whether a p a r t i c u l a r r e g u l a t i o n i n some p r i n t e d compilation was i n f o r c e a year l a t e r . I t i s g r o s s l y u n f a i r to a T r i a l Judge to c i t e some regul a t i o n upon a b r i e f or appeal which was not l a i d b e f o r e him i n the t r i a l . We have no doubt t h a t i t i s f a r b e t t e r p r a c t i c e to read any r e g u l a t i o n which may be r e l i e d upon i n t o the record b e f o r e the T r i a l Court." NAGEL v s . TOUTED STATES, Feb, 1906., 140 Fed. 302. ppo COPY FEDERAL ..B2SERVE BANK X-6727 OF RICHMOND October 2, 1930. Federal Reserve Board, Washington, D. C. A t t e n t i o n : Mr. Walter Wyatt; General Counsel. Dear Mr. Wyatti This "bank "brought s u i t a g a i n s t G. S. Attmore to recover the amount of two n o t e s , one f o r $5,000.00 and one f o r $2,000.00, which had been t r a n s f e r r e d to us by the F i r s t National Bank of Hew Bern. The maker of the notes had a dep o s i t of $1,500.00 i n the F i r s t National Bank of New Bern a t the time of i t s f a i l u r e and claimed the r i g h t to apply t h i s sum as a c r e d i t upon the notes i n our hands. The p o i n t p r e s e n t e d by such contention i s n o t , of course, novel,' and has a l r e a d y been decided by the Supreme Court of the United S t a t e s , but i n the a f f i r m a t i v e and f u r t h e r defense the a t t o r n e y f o r the defendant appears to d e s i r e to e n t e r i n t o a g e n e r a l i n v e s t i g a t i o n of the Federal Reserve System i n general and of the h i s t o r y of the F i r s t National Bank of New Bern and i t s predecessors i n particular. Because of the sweeping n a t u r e of the c h a r g e s and the apparent aniraas with which they were made, I am sending you a copy of the answer. I did not i n clude a copy of the complaint because t h a t contains merely the necessary formal a l l e g a t i o n s and the a l l e g a t i o n of the making and endorsement and t r a n s f e r of the notes i n s u i t and t h a t they have not been p a i d . You w i l l n o t i c e t h a t we are r e q u i r e d to produce a t a p r e l i m i n a r y h e a r ing the r e p o r t s of examination of the National Bank of New Be m e and of the F i r s t National Bank of New Bern. Technically speaking, no such r e p o r t s a r e i n the hands of the Federal Reserve Bank. Copies of the r e p o r t s a r e , as you know, f u r nished by the Comptroller of the Currency to the Federal Reserve Agent as a repr e s e n t a t i v e of the Federal Reserve Board, and he i s p e r m i t t e d to f u r n i s h to the Governor of the bank or h i s proper r e p r e s e n t a t i v e s such information as he cons i d e r s p r o p e r . Of course, i n p r a c t i c e the Agent allows any o f f i c e r of the Fede r a l Reserve Bank to examine these r e p o r t s when he has any proper occasion to do i t , but the r e p o r t s a r e never allowed to go out of the custody of the Agent or h i s a s s i s t a n t s . We w i l l s e t t h i s f a c t up a t the p r e l i m i n a r y h e a r i n g . So f a r as the i n t e r e s t s of t h i s bank a r e concerned, I should have no o b j e c t i o n to the exh i b i t i o n of the r e p o r t s . Of course, I should o b j e c t to having them o f f e r e d i n evidence a t a t r i a l b e f o r e a j u r y as they could only serve to becloud the i s s u e and encumber the r e c o r d . We w i l l , however, r e s i s t to the f u l l e s t the e f f o r t to compel e x h i b i t i o n of them i n order t o maintain the p r i n c i p l e , 00<! * ~ 2 ~ 1 X-6727 Mr* "."falter Wyatt, Federal Eeservo Board, Washington, D. C. Wo a r e planning to make a motion to s t r i k e out the a f f i r m a t i v e defense upon the ground t h a t the matter s e t up i n i t i s i r r e l e v a n t and immaterial to the i s s u e . As soon as t h e r e i s a hearing upon t h i s l a s t motion and on the motion to produce documents made "by the defendant, I w i l l advise you of the r e s u l t . I , p e r s o n a l l y , do not consider t h a t the l i t i g a t i o n i n t h i s s u i t w i l l be of any p a r t i c u l a r importance, but I am sending you a copy of the answer, and, of course, i n t h i s , as i n other cases, would a p p r e c i a t e any suggestions which you might care to make. Very t r u l y yours, (Signed) M. Gr. Wallace, Counsel. MW L G The defendant by i n f e r e n c e r a i s e s the p o i n t t h a t Federal Reserve Banks have no power to take marginal or s u r p l u s c o l l a t e r a l . This would be important i f i t was m a t e r i a l : but both notes sued on a r e rediscounted notes, hence the p o i n t can never become material. 224 X-6727-a COPY NORTH CAROLINA IN THE SUPERIOR COURT G A E T COUNTY R VS FEDERAL RESERVE BANK OF RICHMOND, VIRGINIA, a Banking Corporation, ANSWER vs. G. S. ATTMORE, TRADING AS NEUSE M T R COMPANY and G. S. ATTMORE, OO INDIVIDUALLY. The defendant, answering the complaint, s a y s : 1. A l l e g a t i o n 1 i s denied; save i t i s admitted that t h e defend- ant G. S. Attmore i s a r e s i d e n t of Craven County, North Carolina, a t a l l times h e r e i n mentioned. I t i s denied t h a t p l a i n t i f f i s a Banking Corporation. I t is admitted, however, t h a t the e f f o r t has "been made by the p l a i n t i f f to p e r v e r t t h i s Federal Reserve Bank, c r e a t i o n of the Democratic Administration, and to abrogate, d e s t r o y and d i s r e g a r d the b e n e f i c e n t and wise purposes and l i m i t a t i o n s of the c r e a t i o n , as s e t f o r t h i n the t i t l e of an a c t , t o - w i t : "An a c t to provide f o r the establishment of Federal Reserve Banks, to f u r n i s h e l a s t i c currency, to a f f o r d a means of r e d i s c o u n t i n g commercial paper, to e s t a b l i s h a more e f f e c t i v e supervision of banking i n the United S t a t e s a n d f o r o t h e r purposes." (Federal Reserve Act, December 23, 1913). 2. In answer to a l l e g a t i o n 2, t h i s defendant admits t h a t he i s the sole owner of the Neuse Motor Company; t h a t the same i s a t r a d e name, duly r e g i s t e r e d , as provided by law of the S t a t e of North Carolina; and t h a t he i s engaged i n the s a l e of the Chevrolet automobile and the e x e r c i s e of the f r a n c h i s e of Chevrolet Motor Company. 225 - 2 3. A l l e g a t i o n 3 i s denied. X-6727-a I t i s e s p e c i a l l y denied t h a t the paper w r i t i n g described i n the a l l e g a t i o n was executed or d e l i v e r e d f o r value. 4. A l l e g a t i o n 4 i s denied; and i t i s e s p e c i a l l y denied t h a t the defendant G. S. Attmore, f o r value received, endorsed, e t c . , and t h a t The F i r s t National Bank of New Bern became the h o l d e r , e t c . , i n due course and for value. 5. A l l e g a t i o n 5 i s denied; and t h i s defendant demands t h a t the p l a i n t i f f produce the s e c r e t w r i t t e n agreements and c o n t r a c t s which i t compelled the i n s o l v e n t F i r s t n a t i o n a l Bank of Hew Bern to execute to i t r e l e v a n t to marginal c o l l a t e r a l ; and to the papers r e f e r r e d to i n t h e complaint; t h a t the p l a i n t i f f be r e q u i r e d to s e t f o r t h the f a c t s i n d e t a i l concerning i t s p o s s e s s ion of the paper w r i t i n g described i n a l l e g a t i o n 3 of the complaint. Hie t r u t h of the m a t t e r s and things s e t f o r t h i n a l l e g a t i o n 5 i s h e r e i n a f t e r s t a t e d , upon the i n f o r m a t i o n and b e l i e f of t h i s defendant, 6. A l l e g a t i o n 6 i s admitted. 7. A l l e g a t i o n 7 i s admitted. 8. I n answer to a l l e g a t i o n 8, the a l l e g a t i o n i s denied; and t h i s defendant demands t h a t the p l a i n t i f f produce the s e c r e t w r i t t e n agreements and c o n t r a c t s which i s compelled the i n s o l v e n t F i r s t National Bank of New Bern to execute to i s r e l e v a n t to marginal c o l l a t e r a l ; t h a t the p l a i n t i f f be required to s e t f o r t h the f a c t s i n d e t a i l concerning i t s p o s s e s s i o n of the paper w r i t i n g described i n a l l e g a t i o n 3 of the complaint. The t r u t h of the matters and things s e t f o r t h i n a l l e g a t i o n .8 i s h e r e i n a f t e r s t a t e d , upon the information and b e l i e f of t h i s defendant. 226 - 3 9. X-6727-a I n answer to a l l e g a t i o n 9, i t i s admitted t h a t the maturity dates of the paper w r i t i n g s r e f e r r e d to i n a l l e g a t i o n 3 and a l l e g a t i o n 6 have passed; and i t i s admitted t h a t t h i s defendant has not p a i d to the p l a i n t i f f e i t h e r the sum of $5,000.00 or the sum of $2,000.00. A l l other m a t t e r s a l - leged i n t h i s a l l e g a t i o n are denied; save i t i s admitted t h a t t h i s defendant r e f u s e s to make payment to the p l a i n t i f f as demanded i n t h i s complaint. 10. A l l e g a t i o n 10 i s denied. This defendant, FURTHER PLEADI1TG- TO THE COMPLAINT, a v e r s : That the F i r s t National Bank of New Bern, "being i n s o l v e n t , was p l a c e d i n the hands of Raymond S. Schumacher, Receiver, appointed "by the Comptroller of the Currency f o r the purpose of l i q u i d a t i o n , and The l a t i o n a l Bank of New Berne, being i n s o l v e n t , appointed a l i q u i d a t i n g agent, t o - w i t , W. W. G r i f f i n . That Schumacher, Receiver, i s a proper and necessary p a r t y and should toe brought i n t o court and p e r m i t t e d to plead to the a f f i r m a t i v e defense and c r o s s - p l e a s e t up by the defendant, and t h i s defendant now so moves. FOR FURTHER ANSWER, AND DEFENSE AIID AS A COUNTER-CLAIM, defendant says: 1. That the p l a i n t i f f should sue under i t s proper t i t l e , which i s "Federal Reserve Bank of Richmond, Va.", see s e c t i o n 225, chapter 3, t i t l e 12, United S t a t e s Code Annotated, and as such only has power to sue ( s e c t i o n 341, chapter 3, e t c . ) ; and i t i s not a banking c o r p o r a t i o n , b u t i s a Federal Reserve Bank, c r e a t e d , e x i s t i n g and organized under chapter 3, t i t l e 12, United S t a t e s Code Annotated, the Act of December 23, 1913, under t i t l e "Federal Reserve Act n ( s e c t i o n 226, chapter 3, e t c . ) ; and possesses such p6wers only as by s a i d a c t a r e p e r m i t t e d to i t and as are enumerated under s e c t i o n 341 to 361 i n c l u s i v e , chapter 3 above mentioned. 227 - 4 2. X-6727-a That on the 18th day of August, 1928, and. p r i o r t h e r e t o , The National Bank of New Berne was, as such, a going concern, and "a member bank" of the Federal Reserve Bank of Richmond, t h i s p l a i n t i f f , agreeable to s e c t i o n s 281 and 282, chapter 3 a f o r e s a i d ; and a t said date and time, and a t a l l times t h e r e a f t e r , up to and i n c l u d i n g the 19th day of March, 1929, the value of the shares of the c a p i t a l stock of the s a i d Federal Reserve Bank of Richmond, owned by the s a i d The n a t i o n a l Bank of New Berne, under s e c t i o n 287, chapter 3 of the a c t a f o r e s a i d , was i n value i n excess of the sum of $7,500,00. That p r i o r to the 19th day of March, 1929, the value of s a i d stock became a v a i l a b l e i n cash ( s e c t i o n 288, chapter 3 a f o r e s a i d ) f o r a p p l i c a t i o n to the indebtedness of the s a i d n a t i o n a l Bank to the p l a i n t i f f . That on the 18th day of August, 1928, up to and i n c l u d i n g the 19th day of March, 1929, the said The National Bank of ITew Berne had a deposit with the p l a i n t i f f of a sum i n excess of $7,500.00 ( s e c t i o n s 461 and 462, chapter 3 a f o r e s a i d ) . 3. That p r i o r to 1920, t h e r e was i n e x i s t e n c e i n Hew Bern, North Carolina, the Peoples Bank, a s t a t e c o r p o r a t i o n , a member of the p l a i n t i f f Federal Reserve Bank. That s a i d bank was l a r g e l y indebted to the p l a i n t i f f , and, because of the requirements applied by the p l a i n t i f f , unable to p r o p e r l y f u n c t i o n . That p l a i n t i f f , i n i t s e x e r c i s e of power a r r o g a n t l y assumed, caused The National Bank of New Berne to absorb the s a i d Peoples Bank and t o assume i t s o b l i g a t i o n s . That The National Bank of New Berne became i n s o l v e n t , and such f a c t became known to the p l a i n t i f f , and the p l a i n t i f f , i n f a c t and i n law, then knew The National Bank of Hew Berne t o be i n s o l v e n t , ( s e c t i o n 481, chapter 3 aforesaid). And the s a i d The National Bank of Now Berne continued i n s o l v e n t on 228 - 5 - X-6727-a through the 18th of August, 1922, and. through the 20th day of March, 1929, and such f a c t continued t o be known to the p l a i n t i f f , and with the f u l l knowledge of the p l a i n t i f f s a i d The n a t i o n a l Bank of New Berne executed and e n t e r e d i n t o a paper w r i t i n g , h e r e t o a t t a c h e d and marked Exhibit A, which same was kept s e c r e t and did not obtain p u b l i c knowledge u n t i l about A p r i l , 1930, a l l as defendant i s advised, informed and b e l i e v e s . 4. That on the 20th day of March, 1929, the F i r s t National Bank of Hew Berne was organized and put i n t o e x i s t e n c e , with a l l of the component and surrounding f a c t s and circumstances and c o n d i t i o n s , h e r e i n b e f o r e s e t out, f u l l y known to the p l a i n t i f f ; and, as t h i s defendant i s advised, informed and b e l i e v e s and so a v e r s , took over c e r t a i n of the a s s e t s of the s a i d The n a t i o n a l Bank of New Berne and assumed a l l of the l i a b i l i t i e s of The National Bank of New Berne, save the c a p i t a l stock. That the c a p i t a l and surplus of the s a i d F i r s t National Bank was provided, as t h i s defendant i s advised, informed and b e l i e v e s , i l l e g a l l y and i n f r a u d from the County of Craven and from the p u b l i c funds of the County of Craven, which s a i d f a c t was f u l l y known a t the time, and p r i o r t h e r e t o , to the p l a i n t i f f , and every d e t a i l , as a f o r e s a i d , f u l l y known to said p l a i n t i f f . That s a i d F i r s t National Bank of New Bern, i n March, 1929, became a member bank and a stockholder and owned stock i n the Federal Reserve Bank of Richmond, of the then and now value i n excess of $7,500.00, which sane was owned s u b j e c t to the p r o v i s i o n s of s a i d chapter 3 of the Act a f o r e s a i d ; and, i n a d d i t i o n t h e r e t o , i t maintained i t s r e s e r v e balance with the s a i d p l a i n t i f f i n excess of the sum of $7,500.0Q as by s e c t i o n 462 i t was r e q u i r e d to do. i - 6 5. 229 X-6727-a That, as t h i s defendant i s advised, informed and v e r i l y "be- l i e v e s , the s a i d %irst National Bank of Hew Bern was, a t the time of i t s c r e a t i o n , i n s o l v e n t , and i t s condition of insolvency continued from the 20th day of March, 1929, to the 25th day of October, 1929, when i t ceased to f u n c t i o n . That the l a s t published statement of the s a i d i n s o l v e n t The National Bank of ITew Berne, showing i t s condition as of December ,31, 1928, i s i n round f i g u r e s as s e t f o r t h i n Exhibit B hereto a t t a c h e d ; and the f i r s t s t a t e ment of the s a i d F i r s t National Bank of Hew Bern, as of March 27th, 1929, i s as s e t f o r t h i n Exhibit C h e r e t o a t t a c h e d . That Exhibit A h e r e t o a t t a c h e d has r e f e r e n c e , i n paragraph 1 (c) to the same choses i n a c t i o n included under the f i r s t item of the f i r s t statement of the F i r s t National Bank, Loans and Discounts, and the same item E x h i b i t B l a s t statement of the National Bank of New Berne, with the exception only of those choses i n a c t i o n withdrawn as i n s o l v e n t under the d i r e c t i o n of the examiners, and grouped as c o l l a t e r a l to the note of The National Bank of Mew Berne to the F i r s t National Bank, r e f e r r e d to i n a l l e g a t i o n 3, page 1, a l l e g a t i o n 3, page 2, and elsewhere, of the c o n t r a c t between the said two banks, which c o n t r a c t i a Exhibit A, h e r e t o a t t a c h e d . And the p l a i n t i f f , a t the time t h e r e o f , was f u l l y advertent to the f a c t s h e r e i n s t a t e d , and the s a i d $250,000. n o t e , with the c o l l a t e r a l t h e r e t o a t t a c h e d , was u t t e r l y i n s o l v e n t and, under no c o n d i t i o n s , worth more than the sum of $20,000., or some such small amount, and the same has never been c o l l e c t e d and can never be c o l l e c t e d , as t h i s defendant i s advised, informed and b e l i e v e s . 6. That, as h e r e i n b e f o r e s e t f o r t h , s a i d Peoples Bank was a member of the Federal Reserve Bank and, as such, was f u l l y and r e g u l a r l y and c a r e f u l l y examined and a l l knowledge derived therefrom h e l d by the p l a i n t i f f . 230 - 7 - X-6727-a That, as a f o r e s a i d , the p l a i n t i f f r e q u i r e d and "brought about the amalgamation of the two "banks, to w i t : Peoples Bank and The National Bank of New Berne. That about 1937 or 1928, the n a t i o n a l Bank of New Berne was r e quired to make good $225,000. worth of l o s e s , and the same was done by the use of $225,000. of the money of Craven County. That a t or about t h a t time, p l a i n t i f f , dominating s a i d bank, n o t i f i e d the o f f i c i a l s of the s a i d bank t h a t i t d e s i r e d the.bank to employ Mr. Hugh P. Beal to take charge of s a i d bank, and n e g o t i a t i o n s were thereupon entered i n t o with the s a i d Mr. Hugh P. Beal, then one of the bank examiners of the p l a i n t i f f . That a t t h a t time, Mr. Beal accepted a p o s i t i o n with a member bank i n E l i z a b e t h City, and remained with i t about f i v e months, or u n t i l i t closed; but thereupon, a t the i n s t a n c e of the p l a i n t i f f , came to New Bern and examined each and every of the a s s e t s of The National Bank of New Berne. That, a t the time of s a i d examination, there was i n the s a i d bank, as a p a r t of i t s current a s s e t s , a l a r g e p a r t of the a s s e t s acquired from the Peoples Bank above mentioned, which the s a i d r e p r e s e n t a t i v e of the p l a i n t i f f had a l r e a d y i n v e s t i gated while examining the Peoples Bank and bringing about the amalgamation a f o r e said. ' That Mr. Beal became the v i c e - p r e s i d e n t of the s a i d National Bank, under the mandate of the p l a i n t i f f , and remained with the s a i d bank f o r a period of about s i x months. That on or about the 7th day of March 1929, there was deposited i n the 7th National City Bank, under the control of the s a i d Beal, to the account of The National Bank of New Berne, the sum of $200,000., proceeds from - 8 - X-6727-a the s a l e of an i s s u e of $600,000. Craven County n o t e s , which s a i d notes were issued u n l a w f u l l y "by the Commissioners of Craven County, under a s p e c i a l Act of the L e g i s l a t u r e , a l l done u n l a w f u l l y . That from s a i d $200,000., $180,000. t h e r e - of was p l a c e d , under the o r d e r s , d i r e c t i o n and management of the s a i d S e a l , i n the P l a n t e r s Bank of Richmond; and, t h e r e a f t e r , on or about the 18th, 19th or 20 th of March, i n the Federal He serve Bank of Richmond, a l l by and under the d i r e c t i o n and c o n t r o l of the s a i d Beal, by means known to the p l a i n t i f f , but unknown to t h i s d e f e n d a n t . That on or about the 19th or 20th of March, the Comptroller of the Currency l i c e n s e d , and there came i n t o e x i s t e n c e , a National Bank to be operated by the City of Hew Bern, which opened i t s doors on the 20th of March, under f e d e r a l c h a r t e r No. 13298, i n r e s e r v e d i s t r i c t ITo. 5, t h a t i s , d i s t r i c t of the Federal Reserve Bank of Richmond. That the s a i d Hugh P. Beal was the v i c e - p r e s i d e n t and executive o f f i c e r of the s a i d bank, who had organized and created the same, under the advice and counsel of the p l a i n t i f f and of the Comptroller of the Currency, as t h i s defendant i s advised and informed and verily believes. That on or about the 19th or 20th of March, 1929, the s a i d sum was p l a c e d to the c r e d i t of the F i r s t National Bank of New Bern as i t s p a i d i n c a p i t a l stock and s u r p l u s . That, i n a d d i t i o n t h e r e t o , another sum of $50,000. or $80,000., or some such amount, was l i k e w i s e , i n some s i m i l a r manner, handled and made a v a i l a o l e f o r the use of the s a i d F i r s t National Bank, through the agency above mentioned. - 9 - X-6727-a That paper w r i t i n g , E x h i b i t A, was then made and executed, copy thereof f i l e d with the p l a i n t i f f , and a t a l l times h e r o i n mentioned i n t h e records of the p l a i n t i f f , i n c l u d i n g the e x h i b i t s r e f e r r e d to i n s a i d paper w r i t i n g . That a t a l l times h e r e i n mentioned, the s a i d The National Bank of New Berne was i n s o l v e n t , and i t s condition f u l l y r e p o r t e d to and f u l l y known by the p l a i n t i f f . That a l l of i t s a s s e t s were, from time to ti^ne, a p p r a i s e d , and the value thereof determined, and information and r e p o r t provided to the plaintiff. That, p r i o r to the s a i d 20th or March, 1929, p l a i n t i f f had maintained, a t Mew Bern, i t s agent and r e p r e s e n t a t i v e , to whom i t s e n t items f o r c o l l e c t i o n i n cash a c r o s s the counter of s a i d The n a t i o n a l Bank of Hew Berne* 7. That, on the s a i d 20th or March, 1929, the s a i d a s s e t s of The Hational Bank of Hew Berne became the a s s e t s of the new National Bank, t h a t i s to say, the F i r s t National Bank of New Bern. That the county money, above mentioned, obtained u n l a w f u l l y and through f r a u d , never became the p r o p e r t y of the F i r s t National Bank of New Bern, but always remained the p r o p e r t y of the County of Craven, and the s a i d F i r s t National Bank of New Bern, with a l l these m a t t e r s and and things f u l l y known to the p l a i n t i f f , was i n s o l v e n t when i t opened on the 20th day of Mr.rch, 1929, and continued and remained i n s o l v e n t throughout i t s s h o r t c a r e e r , t h a t i s , to the 26th day of October, 1929, when i t closed. That u n l a w f u l l y , contrary to the power granted to the p l a i n t i f f , wholly u l t r a v i r e s and i n f r a u d upon the d e p o s i t o r s and c r e d i t o r s of The National Bank of New Berne and the F i r s t National Bank of New Bern, p l a i n t i f f h e l d i n i t s p o s s e s s i o n some $600,000. or $700,000. face value of the a s s e t s of the s a i d two , - 10 i- 333 X-6727-a National Banks a t a l l times h e r e i n mentioned, including the paper w r i t i n g s r e f e r r e d to i n a l l e g a t i o n s 3 and 6 of the complaint. That, from i t s very "begin- ning, twelve of i t s c r e d i t o r s , including the p l a i n t i f f , h e l d about s i x t y - f o u r per cent of a l l of i t s a s s e t s to cover about t h i r t y - f o u r p e r cent of the t o t a l general l i a b i l i t y of the said new Nati onal Bank, leaving about t h i r t y - s i x per cent of the a s s e t s , composed of the " l e f t overs", which s a i d " l e f t o v e r s " , as t h i s defendant i s advised, informed and b e l i e v e s , a r e and were of p r a c t i c a l l y no e a r t h l y value. That t h i s defendant i s advised, informed and b e l i e v e s t h a t the Receiver appointed by the Comptroller of the Currency, under the adviee and guidance of the Comptroller of the Currency and with the knowledge and consent of the p l a i n t i f f , has brought a c t i o n s to reduce to p o s s e s s i o n a l l of the s a i d s i x t y - f o u r p e r cent of a s s e t s , save prime $600,000, or $700,000. choses and c a r e f u l l y s e l e c t e d by the p l a i n t i f f , and as to those, s a i d Receiver has conv e n i e n t l y s e l e c t e d and designated c e r t a i n thereof f o r use f o r the purposes: f i r s t , of embarrassment to the community and, second, the d e s t r u c t i o n of the business l i f e of the community. That under the law, p l a i n t i f f can n e i t h e r hold nor own the a s s e t s above mentioned, but i s l i m i t e d by the p r o v i s i o n s of Chapter 3, T i t l e 12 U. S. 0. A. That i n law, p l a i n t i f f ought to be required to account to R. E. Schumacher, Receiver of the F i r s t National Bank of New Bern f o r a l l of the a s s e t s of s a i d bank i n i t s hands and to account to W. W. G r i f f i n , L i q u i d a t i n g Agent, f o r a l l of the a s s e t s of The National Bank of New Bern, and e s p e c i a l l y should be r e quired to account to the County of Craven f o r the f o u r hundred twenty—five odd thousand d o l l a r s of i t s moneys u n l a w f u l l y , f r a u d u l e n t l y had and obtained# 234 X-5727-a - 11 - That the debt, i f any debt there was, owed "by the F i r s t r a t i o n a l Bank of ITew Bern to the p l a i n t i f f , on the 26th of October, 1929, was $208,000., more or l e s s . That s a i d indebtedness, p l a i n t i f f has undertaken to r e p r e s e n t as $208,000. of the r e c e i v a b l e s of s a i d F i r s t National Bank, discounted with $400,000. to $500,000. of the b i l l s r e c e i v a b l e of s a i d bank as marginal c o l l a t e r a l , under # some s o r t of w r i t t e n agreement. 8. That on the 18th day of August, 1929, t h i s defendant executed a paper w r i t i n g , as f o l l o w s , to w i t : No. 63732 Hew Bern, N. C. Aug. 18, 1928. Ninety Days a f t e r date we promise to pay to the order "of Ourselves at The National Bank of New Berne Five Thousand Dollars $5,000.00 With i n t e r e s t a f t e r m a t u r i t y ; and we, the makers and endorsers h e r e o f , hereby agree to continue and remain hound f o r the payment of t h i s note and a l l i n t e r e s t thereon, notwithstanding any extension of time granted to the p r i n c i p a l , and notwithstanding any f a i l u r e or omission to p r o t e s t t h i s note f o r nonpayment or to give notice of non-payment or dishonor or p r o t e s t or to make a presentment or demand f o r payment expressly waiving any p r o t e s t and any and a l l n o t i c e of any extension of time or of non-payment or dishonor or p r o t e s t i n any form, or any presentment or demand f o r payment, or any n o t i c e whatsoever. For value received* Dae 11/16/28 Neuse Motor Co., By 0. S. Attmore, P a r t n e r , And d e l i v e r e d the same to the above mentioned The National Bank of New Berne and a t the time no c o n s i d e r a t i o n passed from s a i d The National Bank of New Berne to t h i s defendant, and the same was wholly an accomodation obligation* That such f a c t was known to the p l a i n t i f f , the p l a i n t i f f , being i n law chargeable with such knowledge i n view of the p r o v i s i o n s of chapter 3 h e r e i n b e f o r e r e f e r r e d to, and i n view, e s p e c i a l l y , of s e c t i o n s 481 and 484, and of i t s examinations made and supervision e x e r c i s e d . - 12 ~ X~6737~a That the p l a i n t i f f had caused, an examination of the s a i d The National Bank of Hew Berne to he made s h o r t l y a f t e r August 18, 1928, and a t several i n t e r v a l s t h e r e a f t e r , and from a proper examination i t was "bound to appear t h a t ho thing of value passed from the s a i d The National Bank of New Berne to t h i s defendant, a l l as t h i s defendant i s advised, informed and "believes. That i n s a i d t r a n s a c t i o n , the said The National Bank of Mew Berne was and became the agent of the p l a i n t i f f , s a i d paper w r i t i n g hearing i t s endorsements a c r o s s i t s "back as f o l l o w s ; 1 1 The National Bank of ITew Berne, New Bern, N. C. Nov. Renewed Pay to the order of any bank or banker or pay to 26451 order of Federal Reserve Agent Federal Reserve Bank of Richmond. Pay to the order of Federal Reserve Bank of Richmond, Va. Sep- 1 1928 Demand, n o t i c e & P r o t e s t waived National Bank of New Berne W. J . Caroon Cashier. Pay to the order of Federal Reserve Bank of Richmond f o r c o l l e c t i o n f o r the account of Federal Reserve Agent. Sep 4 - 1928". That, t h e r e a f t e r , on December 16, 1928, the s a i d accommodation note was renewed, i n e q u i v a l e n t words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f i n the i d e n t i c a l or equivalent words, form and f i g u r e s . That t h e r e a f t e r , on January 4, 1929, the s a i d accommodation note was renewed, i n e q u i v a l e n t words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f i n the i d e n t i c a l or equivalent words, form and f i g u r e s . That t h e r e a f t e r , on February 4, 1929, the s a i d accommodation note was renewed i n e q u i v a l e n t words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f i n the i d e n t i c a l or equivalent words, 236 - 13 r- X-6727-a forms and f i g u r e s . 9. That s a i d The National Bank of New Berne and t h e p l a i n t i f f Federal Reserve Bank and the F i r s t National Bank of Mew Bern wrongfully converted and undertook by t h e i r c o l l u s i v e a c t s , and e s p e c i a l l y by paper w r i t i n g Exhibit A h e r e t o a t t a c h e d , to convert the same; and the p l a i n t i f f then h e l d the same as t r u s t e e , by v i r t u e of the wrong, f o r t h i s defendant. That s a i d accommodation instrument was i n the a c t u a l possession of the p l a i n t i f f , h e l d as h e r e i n b e f o r e s e t f o r t h , wrongfully and i l l e g a l l y , and with knowledge of i t s conversion and with knowledge of the matters and things h e r e i n b e f o r e a v e r r e d , c o n t r a r y to the power of p l a i n t i f f , a l l as defendant i s advised and b e l i e v e s . 10. That on June 1, 1929, the s a i d accommodation note was renewed, i n equivalent words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f i n the i d e n t i c a l or equivalent words, forms and f i g u r e s . That on J u l y 1, 1929, the s a i d accommodation note was renewed, i n equivalent words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f i n the i d e n t i c a l or e q u i v a l e n t words, form and figures. That on J u l y 30, 1929, the said accommodation note was renewed, i n equivalent words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f in the i d e n t i c a l or equivalent words, form and f i g u r e s . That on August 30, 1929, the s a i d accommodation note was renewed, i n e q u i v a l e n t words, form, f i g u r e s and with the endorsements by the p l a i n t i f f 237 — 14 — X—6727—a. and. "by the agent of the p l a i n t i f f i n the i d e n t i c a l or equivalent words, form and f i g u r e s • That on September 28, 1929, the s a i d accommodation note was r e newed, i n equivalent words, form, f i g u r e s and with the endorsements by the p l a i n t i f f and by the agent of the p l a i n t i f f i n the i d e n t i c a l or e q u i v a l e n t words, form and f i g u r e s . That each and every of the foregoing instruments a r e and were renewal accommodations. That t h i s defendant i s not indebted to the p l a i n t i f f on account thereof i n any sum. 11. That the paper w r i t i n g described i n a l l e g a t i o n 6 i s the o b l i g a t i o n of t h i s defendant and r e p r e s e n t s an a c t u a l loan made to t h i s defenda n t , but the s a i d paper w r i t i n g i s not the p r o p e r t y of the p l a i n t i f f , nor i s the p l a i n t i f f the holder thereof i n due course. That t h i s defendant had on deposit with the F i r s t National Bank of New Bern, a t the time i t closed i t s doors, the sum of $1,585.62, and t h i s defendant i s e n t i t l e d to apply i t s s a i d deposit as an o f f s e t and has o f f e r e d to pay to the Receiver of the F i r s t National Bank of New Bern the d i f f e r e n c e between the amount of s a i d d e p o s i t and the amount of s a i d demand, t h a t the same has been r e f u s e d . Defendant now stands ready, able and w i l l i n g to pay, and here tenders and p r o f f e r s to pay, the s a i d sum i n s a t i s f a c t i o n of s a i d demand. That t h i s defendant i s advised, informed and b e l i e v e s t h a t said note was i n the a c t u a l possession of s a i d F i r s t National Bank of New Born and i s now i n the p o s s e s s i o n of E. E. Schumacher, Receiver of the F i r s t National Bank of New Bern, and bears u n r e s t r i c t e d endorsement. 12. This defendant i s advised, informed and b e l i e v e s and eo a v e r s , t h a t the p l a i n t i f f has not p a i d value nor any sum whatever f o r e i t h e r of the 2,38 „ 3.5 - X—6727—a notes d e s c r i b e d i n the complaint. 13. That i f the p l a i n t i f f was the h o l d e r of s a i d note or of t h a t paper d e s c r i b e d i n a l l e g a t i o n 3 on the 26th day of October, 1929, then t h i s defendant avers t h a t the same was held under and upon terms and conditions s e t f o r t h i n a w r i t t e n i n s t r u m e n t , the productions whereof i s demanded, and a t the time the p l a i n t i f f had i n i t s p o s s e s s i o n funds of the F i r s t n a t i o n a l Bank i n excess of $7,500.00 and the s a i d F i r s t National Bank a t the time was a s t o c k holder holding stock i n the p l a i n t i f f i n excess of the amount of $7,500.00. That the defendant had on deposit with, and the F i r s t National Bank was indebted to the defendant i n the sum of $1,585.62. Then t h i s defendant i s e n t i t l e d to be subrogated to the r i g h t s of the F i r s t National Bank of New Bern i n and to and a g a i n s t s a i d fund and the value of said stock and i s e n t i t l e d to have s a i d dep o s i t a p p l i e d as a s e t off upon the s a i d n o t e . 14. That t h i s defendant i s e n t i t l e d : F i r s t , to have the p l a i n t i f f surrender to B. E. Schumacher and/ or W. W. G r i f f i n , Receiver and Liquidating Agent, r e s p e c t i v e l y , of the F i r s t National Bank of New Bern and The National Bank of New Bern, a l l of the a s s e t s i n i t s hands or p o s s e s s i o n , the p r o p e r t y of the F i r s t National Bank of New Bern and The National Bank of New Berne; Second, to e l e c t , designate and p o i n t out such p a r t , a t f a c e value, of said p r o p e r t y and choses i n a c t i o n as i s equal to the indebtedness e x i s t i n g by s a i d F i r s t National Bank of New Bern and the former indebtedness of The National Bank of New Berne to the s a i d p l a i n t i f f and to r e t u r n and r e s t o r e to the s a i d Schumacher and the s a i d G r i f f i n a l l the excess of choses i n a c t i o n a f o r e s a i d ; i n c l u d i n g items described i n complaint. 239 - 16 - X-6727-a Third., to have the paper w r i t i n g s described i n a l l e g a t i o n 3 and 6 returned and r e s t o r e d , and the paper w r i t i n g described i n a l l e g a t i o n 3 surrendered back to t h i s defendant, and the paper w r i t i n g described i n a l l e g a t i o n 6 c r e d i t e d with t h i s d e f e n d a n t ' s d e p o s i t and, upon the payment of the debt, surrendered up to t h i s defendant; Fourth, to have s a i d R. E. Schumacher, Receiver c o l l e c t f o r the p r o p o r t i o n a t e use and b e n e f i t of t h i s defendant a l l such choses i n a c t i o n so held by the p l a i n t i f f to which i t i s i n law not e n t i t l e d , and which i t i s undertaking and attempting to convert, c o n t r a r y to law, c o n t r a r y to the Act, chapter 3 h e r e i n b e f o r e r e f e r r e d t o , and contrary to good morals. F i f t h , to have appointed by t h i s Court some f i t , competent, d i s c r e e t and d i s i n t e r e s t e d person to have and receive and hold and c o l l e c t and preserve a l l the said $600,000. or $700,000. of a s s e t s , under appointment as a Receiver of t h i s c o u r t , pending the orders of t h i s Court i n the d i s p o s i t i o n of t h i s cause by t h i s Court, to the end t h a t the judgment of t h i s Court be made e f f e c t i v e . WHEREFORE, t h i s defendant pray t h a t p l a i n t i f f take nothing on account of the $5,000. note described i n the complaint; t h a t the same be s u r rendered up to t h i s Court and marked n u l l and void. That the p l a i n t i f f be r e - quired and d i r e c t e d to s u r r e n d e r the $2,000. note described i n the complaint to R. E. Schumacher, Receiver, and t h a t the same be c r e d i t e d i n the sum of $1,585.62, as of the 25th day of October, 1929. That a copy of t h i s answer be served upon R. E. Schumacher, Receiver of the F i r s t National Bank of Hew Bern, and t h a t s a i d Receiver be r e q u i r e d to e l e c t to make himself p a r t y defendant or r e q u i r e d to answer the a f f i r m a t i v e matter s e t up by t h i s defendant; 240 - 17 - X-6727-a and f o r such general and f u r t h e r r e l i e f as defendant may "be e n t i t l e d . That the p l a i n t i f f "be r e q u i r e d to show cause b e f o r e h i s Honor Small, Judge, a t Hew Bern, on October 4, 1930, a t 10 o*clock A.M., or such time t h e r e a f t e r as counsel may be heard, why the paper w r i t i n g described i n the complaint should not be impounded i n court; and why a competent and f i t person should not be appointed by t h i s Court to have p o s s e s s i o n o f , c o l l e c t and p r e s e r v e the choses i n a c t i o n r e f e r r e d t o i n the f u r t h e r answer of the defendant. That p l a i n t i f f be required to produce the following documents and w r i t i n g s , t o - w i t : 1. D e t a i l e d r e p o r t of the examination of the Peoples Bank of Ne?/ Bern, made and f i l e d with the p l a i n t i f f j u s t p r i o r to i t s a b s o r p t i o n by The n a t i o n a l Bank of ITew Berne# 2. A d e t a i l e d r e p o r t of the examination of 2he National Bank made immediately b e f o r e and immediately a f t e r the a b s o r p t i o n of the Peoples Bank. 3. Each d e t a i l e d r e p o r t of the National Bank of Mew Berne 4. The f i r s t and a l l d e t a i l e d r e p o r t s of examination of the thereafter. F i r s t National Bank of New Bern. 5. The s p e c i a l r e p o r t of examination, showing the u s e by the s a i d bank of t h e p u b l i c funds of Craven County. 6. The w r i t t e n documentary information and r e p o r t s from the Comptroller of the Currency, from the s e v e r a l examiners concerning the organi z a t i o n of tne F i r s t National Bank of Mew Bern, having e s p e c i a l r e f e r e n c e to; (a) the c a p i t a l and surplus fund and i t s source; (b) the a s s e t s ; — 18 •* X-S727-a (c) the l i a b i l i t i e s ; (d) the choses i n a c t i o n of The National Bank of Hew Berne i n the p o s s e s s i o n of the p l a i n t i f f on the 19th day of March, 1929. (e) the choses i n a c t i o n remaining i n hand on the 2 1 s t day of March, 1929. Attorney f o r Defendant KQSTH CAR0LI2TA CHAVES COUITTY Gr. S. Attmore, being duly sworn, deposes and says; That he has read the foregoing answer and t h a t the same i s t r u e of h i s own knowledge except as to those matters and things s t a t e d t h e r e i n on information and b e l i e f and as to those he b e l i e v e s i t to "be t r u e . Sworn to and subscribed "before me this day of September, 1930. notary P u b l i c My commission e x p i r e s : . "Exhibit "A" COPY 242 X—6727—a THIS COj.7Tr_A.CT, made and entered i n t o t h i s ISth day of March, A.D., 1929, "by and between The n a t i o n a l Bank of ITorr Berne, liew Bern, IT. C., a n a t i o n a l "banking a s s o c i a t i o n having i t s p r i n c i p a l place of "business i n the City of New Bern, 5F. C., h e r e i n a f t e r c a l l e d the F i r s t Bank, p a r t y of the f i r s t p a r t , and the F i r s t National Bank of llev Bern, Hew Bern, IT. C», a n a t i o n a l banking a s s o c i a t i o n having i t s p r i n c i p a l p l a c e of business i n the s a i d City of Hew Bern, h e r e a f t e r c a l l e d the Second Bank, p a r t y of the second p a r t , WIT33SSETH: '^HLRZAS, the c a p i t a l stock of the F i r s t Bank i s impaired and such bank i s i n an embarrassed condition, and, ITHISIiAS, the Second Bank has o f f e r e d to assume and pay a l l l i a b i l i t i e s to d e p o s i t o r s of the F i r s t Bank, i n consideration of the t r a n s f e r by the F i r s t Bank to the Second Bank of c e r t a i n a s s e t s s e l e c t e d by the l a t t e r , c o n s i s t i n g of d o l l a r s ($1,926,756.08) worth of a s s e t s , and f o r tne f u r t h e r c o n s i d e r a t i o n of the i s s u e and d e l i v e r y by the F i r s t Bank to the Second Bank of i t s promissory note payable on demand f o r an amount s u f f i c i e n t to cover the d i f f e r e n c e between the a s s e t s as shown by the books of the F i r s t Bank and the a s s e t s as s e l e c t e d and accepted by the Second Bank, amounting to Dollars ($250,000.00) as above s t a t e d , l e s s the amount of the c a p i t a l , p r o f i t s and reserves of the F i r s t Bank a t the time of the t r a n s f e r , the payment of such promissory note to be secured by pledge of a l l the a s s e t s of the F i r s t Bank not t r a n s f e r r e d to the Second Bank; i'iOw, THEREFORE, THIS A&iuEEivIS!TI '.71TSJESSEIH: That the n a r t i c s h e r e t o i n con- s i d e r a t i o n of the promises and of One Dollar by each of the p a r t i e s h e r e t o to the other i n hand p a i d , and r e c e i p t thereof i s hereby acknowledged, do agree as follows: 243 (2) 1. X-6727-a The F i r s t Bank does hereby g r a n t , b a r g a i n , s e l l , a s s i g n , t r a n s f e r and s e t over u n t o the Second Bank and i t s successors and a s s i g n s the following p r o p e r t y of the F i r s t Bank: (a) The Banking House and r e a l e s t a t e s i t u a t e i n the City of Hew Bern, North Carolina, together w i l l a l l f i x t u r e s , appurtenances, equipment, v a u l t s , o f f i c e f u r n i t u r e and s u p p l i e s now contained i n s a i d "banking house, or elsewhere. (b) A l l other r e a l e s t a t e s i t u a t e i n Craven, J o n e s , C a r t e r e t and Pamlico Counties. (c) A l l B i l l s r e c e i v a b l e , n o t e s , "bills of exchange, d r a f t s and o t h e r evidences of indebtedness, a l l "bonds, s e c u r i t i e s , judgments, claims and choses i n a c t i o n , a l l cash on hand and due from "banks, cash items and revenue stamps, a l l r i g h t , t i t l e and i n t e r e s t i n and to the stock i n the Federal Reserve Bank of Richmond, V i r g i n i a , and accrued dividends thereon, and a l l o v e r d r a f t s . 2. The F i r s t Bank agrees to execute and d e l i v e r to the Second Bank a good and s u f f i c i e n t deed to s a i d r e a l e s t a t e and a l s o a l l proper assignments, conveyances , b i l l s of s a l e , assurances and a l l other instruments and documents which may a t any time and from time to time be necessary or d e s i r a b l e to t r a n s f e r the t i t l e of s a i d p r o p e r t y to and e f f e c t u a l l y vest the same i n the Second Bank. 3. 1 The F i r s t Bank agrees to execute and d e l i v e r to the Second Bank i t s promissory note payable on demand a t s i x per cent i n t e r e s t f o r an amount equal to the d i f f e r e n c e between t h e a s s e t s of the F i r s t Bank as shown by i t s books and the a s s e t s as accepted by the Second Bank of Dollars ($250,000.00), l e s s the amount of c a p i t a l p r o f i t s and r e s e r v e s of the F i r s t Bank, these amounts a r e not a b s o l u t e and may be changed. 4. The F i r s t Bank does hereby g r a n t , b a r g a i n , s e l l , convey, a s s i g n , t r a n s f e r (3) X-6727-a 344 and s e t over u n t o the Second Bank a l l of the a s s e t s s e t out i n Exhibit "A" attached h e r e t o , aggregating Dollars ($1,926,756.08) and the F i r s t Bank f u r t h e r g r a n t s , b a r g a i n s , s e l l s , conveys, a s s i g n s , t r a n s f e r s and s e t s over unto the Second Bank a l l other a s s e t s of s a i d bank, i n c l u d i n g i t s f u r n i t u r e , f i x t u r e s , equipment, a l l items charges to p r o f i t and l o s s , a l l other notes of every d e s c r i p t i o n , choses i n a c t i o n , judgments, deeds of t r u s t s , claims and l e a s e s , as c o l l a t e r a l s e c u r i t y f o r s a i d note of Dollars ($250,000.00) h e r e t o f o r e mentioned to be given by the F i r s t Bank to the Second Bank. The P a r t i e s h e r e t o agree t h a t the s a i d a s s e t s so h e l d as col- l a t e r a l by the Second Bank s h a l l be c o l l e c t e d and converted by said bank i n t o money a t such time and i n such manner and f o r such c o n s i d e r a t i o n as the Second Bank s h a l l deem b e s t , and the proceeds of such c o l l e c t i o n s h a l l be applied by the Second Bank towards the payment of the note a f o r e s a i d . The F i r s t Bank f u r t h e r agrees t h a t i t w i l l from time to time on demand Of the Second Bank execute and del i v e r to the Second Bank a l l necessary assignments, t r a n s f e r s , deeds and i n s t r u * ments which may be n e c e s s a r y or d e s i r a b l e to more f u l l y e f f e c t the t r a n s f e r of s a i d a s s e t s to the Second Bank and the proper c o l l e c t i o n t h e r e o f . The Second Bank agrees to keep a c c u r a t e books of account showing a l l t r a n s a c t i o n s i n respect to the c o l l e c t i o n of the a s s e t s of the F i r s t Bank, and i t i s understood by the Second Bank t h a t i t w i l l c o l l e c t a l l a s s e t s of the F i r s t Bank, with the l e a s t expense p o s s i b l e , but s h a l l bo allowed a reasonable charge for any c o s t s t h a t may be expended to pay a t t o r n e y ' s fees and necessary c o s t s . 5. The Second Bank agrees t h a t i t w i l l proceed t o c o l l e c t and l i q u i d a t e the notes and other a s s e t s d e l i v e r e d to i t as c o l l a t e r a l s e c u r i t y i n such manner and f o r such p r i c e s a s , i n the judgment of the Second Bank, w i l l be f o r the b e s t i n t e r e s t of both banks, and a f t e r a l l of s a i d notes and a s s e t s have been c o l l e c t e d (4) x-6727-a or l i q u i d a t e d , the Second Bank agrees t h a t i f the aggregate amount received therefrom s h a l l exceed the aggregate amount of the note of the F i r s t Bank and a l l l e g a l expenses and c o s t s , i t w i l l pay over the balance to the stockholders of the F i r s t Bank, i n accordance with t h e i r r e s p e c t i v e r i g h t s and i n t e r e s t s , "but i t i s understood and agreed by the p a r t i e s of t h i s agreement t h a t the Second Bank s h a l l have the r i g h t a t any and a l l times during a period of three years from date of the execution of t h i s agreement to s u b s t i t u t e for any a s s e t s which are g r a n t e d , b a r gained, s o l d , conveyed, assigned, t r a n s f e r r e d or s e t over unto the Second Bank any of the notes or other a s s e t s d e l i v e r e d t o i t as c o l l a t e r a l s e c u r i t y f o r the payments of the note of Dollars ($250,000.00) described h e r e i n a t face value or with i n t e r e s t a d j u s t e d to the date on which i n t e r e s t has been paid on the item f o r which i t i s s u b s t i t u t e d , or to s u b s t i t u t e cash received i n l i q u i d a t i o n of any of the c o l l a t e r a l s e c u r i t y to the above mentioned note f o r any items sold to the said Second Bank. 6. The Second Bank hereby assumes and agrees to pay a l l l i a b i l i t i e s f o r the F i r s t Bank which aopear on the general ledger statement of the F i r s t Bank as of close of business of March 19th, 1929, with the exception of the stockholders l i a b i l i t y of the F i r s t Bank under the law, which i s not assumed, a copy of which i s hereto a t t a c h e d and marked Exhibit f, Bu and made a p a r t h e r e o f . The Second Bank does not assume or agree to pay l i a b i l i t i e s of the stockholders of the F i r s t Bank# 7. I t i s also understood t h a t the Second Bank assumes none of the running expenses or l i a b i l i t i e s of the F i r s t Bank beyond March 19th, 1929, except those employees i t may decide to take over. 8. I t i s understood and agreed t h a t a l l moneys received by the F i r s t Bank from any source s h a l l be applied on i t s note a f o r e s a i d i s s u e d to the Second Bank 246 X-6727-a (5) u n t i l the same i s p a i d . 9. A l l instruments r e q u i r e d to be given by e i t h e r "bank i n order to carry out the terms, conditions and covenants of t h i s agreement s h a l l "be executed and d e l i v e r e d by the p r e s i d e n t and cashier of each bank u n l e s s t h e i r r e s p e c t i v e Boards of D i r e c t o r s s h a l l otherwise d i r e c t . Ill TESTIMONY WHEBEOF the p a r t i e s h e r e t o have caused these p r e s e n t s to be signed by i t s P r e s i d e n t , a t t e s t e d by i t s Cashiers, and i t s corporate s e a l s a f f i x e d , i n d u p l i c a t e , on the day and year f i r s t h e r e i n b e f o r e w r i t t e n . THE M T I OiTAL B 2 K OF H W BEHKB, A AT E By (SIGInED) W. W. Griffin President. Attest: (SIGHED) ¥ . J . Caroon Cashier. F I R S T NATIONAL BA21K By Attest (SIGHED) W. J . Caroon Cashier J . V. Blades President. BL5S, H.C X-6727-a STATE OF 1 O T CAROLINA, ) T RH COUNTY OF CRAVEN )SS; On the 20th day of March, 1929, b e f o r e me, p e r s o n a l l y came ¥ . 1 . G r i f f i n to me known, who being by me duly sworn, did depose and say: That he r e s i d e s i n the c i t y of Hew Bern, t h a t he i s P r e s i d e n t of The n a t i o n a l Bank of Hew Berne of Hew Bern, N. C., the corporation described i n and -?hich executed the above instrument; t h a t he knows the s e a l of the s a i d corporation; t h a t the s e a l a f f i x e d to the s a i d instrument i s such corporate s e a l ; t h a t i t was so a f f i x e d by order of the Board of D i r e c t o r s of s a i d corporation and t h a t he signed h i s name t h e r e t o by l i k e order. (Signed) L i z z i e McG-owan. Notary P u b l i c . (SEAL) My Com. e x p i r e s : 1 0 - 2 3 - f 3 0 . STATE OF KORTH GAHOLIITA, ) COUNTY OF CRAVEN }SS: On the 20th day of March, 1929, b e f o r e me, p e r s o n a l l y came J . V. Blades to me known, who being by me duly sworn, did depose and say: That he r e s i d e s i n the c i t y of New Bern, t h a t he i s P r e s i d e n t of The F i r s t National Bank of New Bern, C., the corporation described i n and which executed the above instrument; t h a t he knows the s e a l of the s a i d corporation; t h a t the s e a l a f f i x e d to the s a i d i n s t r u ment i s such corporate s e a l ; t h a t i t was a f f i x e d by order of the Board of D i r e c t o r s of s a i d c o r p o r a t i o n and t h a t he signed h i s name t h e r e t o by l i k e order. (Signed) L i z z i e McG-owan. Notary P u b l i c (SEAL) 248 X-6727-a My Com. e x p i r e s : 1 0 - 2 3 - ' 3 0 . 1T0RTH CAEOLIKA, Craven County, The foregoing c e r t i f i c a t e s of L i z z i e McGowan (a Notary P u b l i c of Craven County, are adjudged to "be c o r r e c t . Let the instrument vdth the c e r t i f i c a t e s be r e g i s t e r e d ; (Signed) Copies J5¥« Witness my hand, t h i s 19th day of Feby. 1930. L. S. L a n c a s t e r , Clerk Superior Court. X-6727-a THE NATIONAL BAM OF NEW BERNE to FIRST NATIONAL 3AW OF NEW BEEN CONTRACT F i l e d f o r r e g i s t r a t i o n a t 10:50 o'clock A.M., Feb. 19, 1930, in the o f f i c e of R e g i s t e r of Deeds of Craven County, N. C., and Recorded i n Book No. 297. Page 22. (Signed) J . S. Holland Register of Deeds. X-6727EXHIBIT B $2,220,116.53 Loans Overdrafts 1,417.01 U. S. Bonds 28,000.00 N. C. Bonds 17,000.00 9,000.00 Stock Federal Reserve 75,000.00 Banking House 1,250.00 Dae from United S t a t e s 176,207.56 Cash and Due from Banks 877.00 Other $2,528,858.00 Liahill ties C a p i t a l Stock Surplus Dividends Circulation B i l l s Bediscounted I n d i v i d u a l Deposits $ 250,000.00 56,454.00 75.00 24,650.00 155,285.00 1,929,228.00 Dae to S t a t e Banks 28,968.00 Dae to Banks 84,209.00 $2,528,868.00 251 X-5727-a EXHIBIT C Reserve D i s t r i c t 2!o. 5 Charter Mo. 13298 Report of Condition of The F i r s t National Bank of New Bern In the S t a t e of North Carolina, a t the close of Business on March 27, 1929 RESOURCES Loans and. discounts $1,909,255.50 Overdrafts 1,477.04 United S t a t e s Government s e c u r i t i e s owned 28,000.00 Other "bonds, s t o c k s and s e c u r i t i e s owned 54,900.00 Banking house, $65,000.00; Furniture and f i x t u r e s , $10,000.00 75,000.00 Reserve with Federal Reserve Bank 59,109.50 Cash and due from Banks 146,404.02 Outside checks and o t h e r cash items 7,650.24 Redemption fund with U. S. Treasurer and due from U. S. Treasurer 1,250.00 TOTAL $2,283,046.50 LIABILITIES Capital stock p a i d i n surplus Undivided p r o f i t s - n e t $ 150,000.00 30,000.00 1,192.55 Reserves f o r i n t e r e s t , t a x e s , and other expenses accrued and unpaid 38,324.89 C i r c u l a t i n g notes outstanding 25,000.00 ; 252 X-6727-a EXHIBIT C continued Duo to "banks, i n c l u d i n g c e r t i f i e d and c a s h i e r ' s checks outstanding $ 104,420.47 Demand d e p o s i t s 514,527.07 Time d e p o s i t s 1,246,371.92 B i l l s payable and r e d i s c o u n t s 173,409.60 TOTAL $2,283,046.50 S t a t e of Forth Carolina; County of Craven, s s : I , W. J . Caroon, Cashier of the above-named bank, do solemnly swear t h a t the above statement i s true to the be'st of my knowledge and belief. W. J . Caroon, Cashier. Correct - A t t e s t ; Subscribed and sworn to b e - C. W. Hodges, f o r e me t h i s 2 day of A p r i l , J . V. Blades, 1929. W. F. Dowdy, Thomas J . M i t c h e l l , ilotary P u b l i c My com, expires March 11-31. W. f . G r i f f i n , J . H. Whitty, Hugh P. Beal, Directors. 258 COPY x-6727-13 FEDERAL RESERVE BASE 01 RC M N IH OD October 5, 1930. Federal Reserve Board, Washington, D. C. Attention: Mr. Walter Wyatt, General Counsel. My dear Mr. Wyatt: I received your l e t t e r of October 23rd and your telegram of the same date and enclose herewith a copy of the complaint f i l e d "by t h i s "bank a g a i n s t G. S. Attmore, t r a d i n g as the ITeuse Motor Company. I understand from my a s s o c i a t e i n North Carolina t h a t a r u l i n g on a motion to s t r i k e out i f made b e f o r e answer i s f i l e d i s a p p e a l a b l e to the Supreme Court. I have some doubt as to whether or not we should take an appeal i n t h i s case i f the court r e f u s e s to s t r i k e out the a f f i r m a t i v e d e f e n s e . You w i l l notice t h a t upon any theory the defendant i s indebted to us i n approximately $5,500.00, and I am convinced t h a t h i s motive i n f i l i n g t h i s defense i s c h i e f l y to c r e a t e a s much delay as p o s s i b l e . The a t t o r n e y who r e p r e s e n t s the defendant i n t h i s case r e p r e s e n t e d a l s o the maker of other notes held by u s , a corporation which was r e c e n t l y a d j u d i c a t e d a bankrupt upon an i n v o l u n t a r y p e t i t i o n i n which we j o i n e d . At the examination of the o f f i c e r s of the bankrupt b e f o r e the r e f e r e e we brought out t h a t a few months b e f o r e bankruptcy the only a c t i v e o f f i c e r and chief stockholder of the bankrupt corporation had made very s u b s t a n t i a l t r a n s f e r s and payments i n s e t t l e m e n t of debts s a i d to have been due by the corporation to h i m s e l f , h i s w i f e , h i s f a t h e r , and s i s t e r . We cross-examined him r a t h e r s h a r p l y about these t r a n s a c t i o n s and a r e now p r e p a r i n g t o i n s t i t u t e proceedings to recover the property so t r a n s f e r r e d and the amount of the payments as f r a u d u l e n t , and a l s o upon the ground t h a t many of them were made w i t h i n four months p r i o r to the p e t i t i o n . I think t h a t the a t t o r n e y f e l t some decided animus growing out of t h i s bankruptcy proceeding and i s endeavoring to c r e a t e as much trouble f o r the Federal Reserve Bank and the Receiver of the f a i l e d bank as he can. I f we do not appeal our motion to s t r i k e out, we would be r e q u i r e d t o f i l e a r e p l y admitting or denying the a l l e g a t i o n s of the a f f i r m a t i v e d e f e n s e , but I r e g r e t to say t h a t there i s no danger of our being forced i n t o t r i a l on the merits i n the reasonably immediate f u t u r e , as the docket i n Craven County i s very much congested. I t has a l s o occurred to me t h a t the a f f i r m a t i v e defense might c o n s t i t u t e a cause of a c t i o n a r i s i n g under the laws of t h e United S t a t e s a p a r t from the mere f a c t of our i n c o r p o r a t i o n under those laws. As well as I can i n t e r p r e t the a f f i r m a t i v e defense the thought i n the p l e a d e r ' s mind i s t h a t we have c e r t a i n c o l l a t e r a l to secure our rediscounted n o t e s , which c o l l a t e r a l we had no power to take and which t h e r e f o r e belongs to the Receiver. He, as a d e p o s i t o r of the f a i l e d bank, has an e q u i t a b l e i n t e r e s t i n i t s a s s e t s , and, t h e r e f o r e , i s e n t i t l e d to demand t h a t the c o l l a t e r a l i n our hands be administered to produce the maximum b e n e f i t to the Receiver. We might t h e r e f o r e contend t h a t the a l l e g a t i o n i n Paragraph 7 of the 254 - 2 Mr. '.'falter Wyatt, Federal Reserve Board, Washington, D. C. X-6727-b October 6, 1930. answer s e t up a cause of a c t i o n under the laws of the United S t a t e s which was d i s t i n c t and d i f f e r e n t from the cause of a c t i o n a l l e g e d i n our complaint, and, t h e r e f o r e , made the controversy a removal c a s e . » I do not s e e , however, how i t could be p o s s i b l e f o r any court to grant any r e l i e f on t h i s a l l e g a t i o n u n l e s s the Receiver was a p a r t y , and i f the Receiver i s a p a r t y the case i s of course removable on t h a t ground. Consequently, I am d e f e r r i n g a l l c o n s i d e r a t i o n of our r i g h t to the removal of t h i s case to a f e d e r a l court u n t i l i t i s decided whether or not the Receiver w i l l be made a p a r t y . The d e c i s i o n of the Supreme Court to which I a l l u d e d was Sowell v . Fede r a l Reserve Bank, 294 Fed. 798, 268 U. S. 449. In w r i t i n g to you I r e l i e d upon my memory of the p o i n t s decided i n the case mentioned. Upon a f u r t h e r examination of i t i t appears t h a t the court s t r o n g l y suggests t h a t some r e l i e f might be granted on account of the o f f s e t t i n g balance i f the Receiver were a p a r t y . I * think: that we should be able to convince the court t h a t the remedy should not be a s t a y of the s u i t by the Federal Reserve Bank because i f the Federal Reserve Bank holds some 75 or 100 rediscounted notes and an equal number as marginal c o l l a t e r a l , and the makers of many of these notes have d e p o s i t b a l a n c e s , and some of them claim defenses good a g a i n s t the Receiver but not a g a i n s t the Federal Reserve Bank, the t a s k of determining j u s t how long or upon what terms the s u i t s should be s t a i d becomes i m p o s s i b l e . I f the court i s of opinion that the s i t u a t i o n demands an e q u i t a b l e remedy, the remedy can be given with comparative ease and c e r t a i n t y by giving judgment i n favor of the Federal Reserve Bank a g a i n s t the maker but r i t h o u t p r e j u d i c e to the r i g h t of the maker when he has p a i d the judgment to a s s e r t an e q u i t a b l e l i e n or claim upon any a s s e t s which might be r e t u r n e d to t h e Receiver by the Federal Reserve Bank a f t e r i t had been p a i d i n f u l l . In other words, the claim of the d e p o s i t o r i s i n the n a t u r e of a claim to subrogation to such l i e n as the Federal Reserve Bank had on the a s s e t s t r a n s f e r r e d to i t , and a r i g h t of subrogation does not a r i s e u n t i l the person claiming subrogation has s a t i s f i e d the claim of the person to whose r i g h t s he claims subrogation. Under common law p r a c t i c e the remedy of the defendant would probably be by a s u i t i n chancery. Under code p r a c t i c e i t might be obtained i n the same p r o ceeding. I t might be of some i n t e r e s t to you i n connection with t h i s s u i t to know of the general s i t u a t i o n i n New Bern. The National Bank of Hew Berne was i n a more or l e s s shaky c o n d i t i o n f o r many y e a r s . Once a t l e a s t the bank examiner r e quired i t to charge o f f a l a r g e amount of doubtful a s s e t s . I think t h a t cash to replace the a s s e t s thus charged off was obtained by advancing county funds to a holding company, which took the bad a s s e t s . Several of the d i r e c t o r s of the National Bank of New Berne were i n f l u e n t i a l i n l o c a l p o l i t i c s , l a t e r on t h e National Bank of New Berne was again i n d i f f i c u l t i e s and a new bank was organized to take over i t s b u s i n e s s . I think t h a t the c a p i t a l f o r t h i s new bank likewise came by an i n d i r e c t route from the county t r e a s u r y . P r a c t i c a l l y a l l of the stock of the 255 - Mr* Walter : 7yatt, Federal Reserve .Board, Washington, D. C. 3 - X-5727-Td October 6, 1930. new "bank "as i s s u e d to Mr. J . V. Blades, who i n a s u i t "brought to enforce h i s l i a b i l i t y as stockholder i s now contending t h a t he did not i n r e a l i t y own the stock but acted f o r a s y n d i c a t e . The collapse of the F i r s t National Bank of Hew Bern has t e e n followed by the f a i l u r e of the two s t a t e "banks i n the town, leaving only a Morris Plan Bank operating. The d i s t r e s s has "been a c u t e , and as o f t e n happens i n such c a s e s , those "borrowers who might "be a b l e to pay are disposed to take the p o s i t i o n t h a t they w i l l not pay i f they can avoid i t . tie have "been compelled to b r i n g a g r e a t many s u i t s and i n nine of them answers have been f i l e d denying that we are holders i n due course of the notes sued on and s e t t i n g up o f f s e t s and defenses which would bo good'against the Receiver. The above o u t l i n e of the s i t u a t i o n i n Ilew Bern which I gave you i s based c h i e f l y upon conversations m th the Receiver and with my a s s o c i a t e i n STow I e m . This i s p a r t i c u l a r l y t r u e of the a l l e g e d use made of the county f u n d s . I n o t i c e t h a t i n your l e t t e r you appear to be c h i e f l y i n t e r e s t e d i n tie question concerning our t i t l e to marginal c o l l a t e r a l . To me the e f f o r t to r e q u i r e the production of the r e p o r t s of examination i s e q u a l l y i n t e r e s t i n g . As I s t a t e d , i f these r e p o r t s were produced and o f f e r e d i n evidence I should have no p a r t i c u l a r o b j e c t i o n except t h a t they were u t t e r l y immaterial; b u t i t occurs t o me t h a t the r e a l o b j e c t of attempting to r e q u i r e the production of these r e p o r t s i s to allow the a t t o r n e y to obtain information which he might use i n other l i t i g a t i o n which he has with the Receiver of the F i r s t National Bank of Hew Bern; and a l s o i t seems to me to be very important not to allow the establishment of a precedent under which these r e p o r t s can be demanded upon s l i g h t occasion. I f the t r i a l judge i s f a m i l i a r , or i f I can r i g h t l y e x p l a i n to him the r e l a t i o n between the Federal Reserve Agent as a r e p r e s e n t a t i v e of the Federal Reserve Board and the Federal r e s e r v e banks as c o r p o r a t i o n s , we should have no trouble upon t h i s p o i n t , but i f , by any chance, the t r i a l judge orders the production of these r e p o r t s a s i t u a t i o n w i l l a r i s e which w i l l d i r e c t l y concern the Federal Reserve Board and the Comptroller of the Currency. I would be obliged, t h e r e f o r e , i f you would consider c a r e f u l l y t h i s phase of the l i t i g a t i o n . I f i n d i n the s t a t u t e s no d i r e c t r e f e r e n c e to the r e p o r t s of exami n a t i o n , and the s t a t u t e which f o r b i d s an examiner to d i s c l o s e information appears to contain an express exception p e r m i t t i n g d i s c l o s u r e s under order of a court of competent j u r i s d i c t i o n , which appears t o include a s t a t e c o u r t . P l e a s e pardon the length of t h i s l e t t e r , but as you appeared to consider the l i t i g a t i o n of some importance, i t occurred to me t h a t you might wish to have a f u l l d e s c r i p t i o n of the s i t u a t i o n . Very t r u l y yours, (Signed) IviG-W L M. G-. Wallace, Counsel. 256 X-5727-c COPY NORTH CAHOLI2JA. Ill THZ G2 COUPS. CRAV3K COUITTY. Federal Reserve Bank of Richmond, V i r g i n i a , a "banking c o r p o r a t i o n , vs C0MFLAI1TT. G. S. Attmore, t r a d i n g as ITeuse Motor Company and G. S. Attmore, individually. The p l a i n t i f f , complaining of the defendants, a l l e g e s : 1. That the p l a i n t i f f i s a banking corporation duly c r e a t e d and e x i s t - ing under and by v i r t u e of the banking laws of the United S t a t e s of America, with p r i n c i p a l o f f i c e s i n the City of Richmond, V i r g i n i a , and the defendants are r e s i d e n t s of Craven County, 17orth Carolina. 2. That as p l a i n t i f f i s informed and b e l i e v e s , the defendant, G> S. Attmore, i s the s o l e owner of the Heuse Motor Company and i s conducting a general automobile b u s ine s s i n the City of Hew Bern, said County and S t a t e , and trading under the f i r m name of Heuse Motor Company and as such i s engaged i n the sale of Chevrolet automobiles and other motor driven cars and trucks and p a r t s and equipment. 3. That on September 28, 1929, the said defendant, G. S. Attmore, trading as Keuse Motor Company, f o r value received, executed and d e l i v e r e d h i s promissory note f o r the sum of $5,000.00 and in words and f i g u r e s as f o l l o w s , to-wit: "ITo. Hew Bern, IT. C. Sept. 28, 1929. Oct. 29, 1929, a f t e r date we promise to oay to the order of Ourselves Five Thousand D o l l a r s , $5,000.00. ; - 2 257 X-6727-c - Negotiable and payable a t The F i r s t n a t i o n a l Bank, ITew Bern, IT. C., with i n t e r e s t a f t e r m a t u r i t y , and we, the malcers and e n d o r s e r s hereby agree to continue and remain "bound f o r the payment of t h i s note and a l l i n t e r e s t thereon, n o t w i t h s t a n d i n g any f a i l u r e and omission to p r o t e s t t h i s note f o r non-payment, or to give n o t i c e of non-payment or dishonor or p r o t e s t or to make presentment or demand f o r payment, e x p r e s s l y waiving any p r o t e s t and a l l n o t i c e of non-payment or dishonor or p r o t e s t i n any form, or any p r e sentment or demand f o r payment, or any n o t i c e whatsoever. For value r e c e i v e d . Due Ueuse Motor Co. (S2AL) By G. S. A t t m o r e . IFE.nac;er, (SjAL) " Partner. 4. That t h e r e a f t e r on or about September 28, 1929, the s a i d defendant, G. S. Attmore, t r a d i n g as ITeuse Motor Company, f o r value r e c e i v e d , endorsed, t r a n s f e r r e d and a s s i g n e d u n t o the F i r s t n a t i o n a l Bank of Hew Bern the s a i d promi s s o r y note and the F i r s t N a t i o n a l Bank of Hew Bern became the h o l d e r of s a i d note i n due course and f o r v a l u e . 5. That t h e r e a f t e r on or about September 28, 1929, the F i r s t National Bank of ITew Bern, f o r v a l u a b l e c o n s i d e r a t i o n , t r a n s f e r r e d and a s s i g n e d the s a i d note to the p l a i n t i f f and t h e p l a i n t i f f thereby became the h o l d e r of s a i d note i n due course and f o r value and i s now the owner and h o l d e r of s a i d note i n due course and f o r v a l u e . 5. That on October 8, 1929, the defendant, G. S. Attmore, t r a d i n g as ITeuse Motor Company, f o r value r e c e i v e d , executed and d e l i v e r e d to t h e F i r s t National Bank of ITew Bern h i s promissory note i n the sum of $2,000.00 and i n words and f i g u r e s as f o l l o w s , t o - w i t : "Ho. 08065 ITew Bern, IT. C. Oct. 8, 1929. T h i r t y days a f t e r dat6 we promise to pay to t h e order of The F i r s t n a t i o n a l Bank, Hew Bern, 2T. C. Two Thousand D o l l a r s , $2000.00. * 258 3 X-6727-c n e g o t i a b l e and payable a t The F i r s t n a t i o n a l Bank, Mew Bern, H. C., with i n t e r e s t a f t e r m a t u r i t y . And ^e, the makers and endorsers , hereby agree t o continue and remain "bound f o r the payment of t h i s note and a l l i n t e r e s t thereon, notwithstanding any f a i l u r e and omission to p r o t e s t t h i s note f o r non-payment, or to give n o t i c e of non-payment or dishonor or p r o t e s t or t o make presentment or demand for payment, e x p r e s s l y waiving any p r o t e s t and a l l n o t i c e of non-payment or dishonor or p r o t e s t i n any form, or any presentment or demand f o r payment, or any notice whatsoever. For value r e c e i v e d . Due Nov. 7. (S2AL) By G. S . Attmore. Iter. 17ew Bern, IT. C. Partner. 7. Ifeuse Motor Co.. (SIlAL) n That a t the time of the execution and d e l i v e r y of said note as a f o r e s a i d "by the defendant, G. S. Attmore, trading as Neuse Motor Company, the defendant, G. S. Attmore, i n d i v i d u a l l y , endorsed s a i d note and thereby became l i a b l e thereon as such endorser and guaranteed the payment of same. 8,. That t h e r e a f t e r on or about October 8, 1929, the s a i d F i r s t National Bank of Uew Bern, f o r v a l u a b l e c o n s i d e r a t i o n , endorsed, t r a n s f e r r e d and assigned the s a i d note to p l a i n t i f f and p l a i n t i f f thereby became the holder of s a i d note i n due course and f o r value and i s now the owner and holder of s a i d note i n due course and f o r v a l u e . 9. That the s a i d notes are p a s t due and unpaid and demands have been made upon the defendants and each of them f o r payment but the defendants have f a i l e d and r e f u s e d to make payment of said notes or e i t h e r of them or any p a r t thereof or the i n t e r e s t accrued thereon and do s t i l l f a i l and r e f u s e to make payment of s a i d n o t e s . 10. That the defendants are due and owing the p l a i n t i f f the f u l l sum of $7,000.00 with i n t e r e s t on $5,000.00 from October 29, 1929, u n t i l p a i d , and i n t e r e s t on $2,000.00 from November 7, 1929, u n t i l p a i d . - 4 - X-5727-c WHjjBEFOEE p l a i n t i f f demands judgment a g a i n s t the defendants and each of them, j o i n t l y and s e v e r a l l y : 1. In the f u l l sum of $7,000.00 with i n t e r e s t on $5,000.00 from October 29, 1929, u n t i l p a i d , and i n t e r e s t on $2,000.00 from November 7, 1929, until paid. 2. For c o s t s of t h i s a c t i o n and such other and f u r t h e r g e n e r a l r e l i e f as p l a i n t i f f may bo e n t i t l e d to r e c e i v e . Attorney f o r P l a i n t i f f , COPY X-6727-d 9 ao FEDERAL RESERVE BANK OF RICHMOND Federal Reserve Board, Washington, D. C. My dear Mr. Wyatt: October 13, 1930. A t t e n t i o n : Mr. Walter Wyatt. General CounseL I attended the argument on the motion concerning whidi I have w r i t t e n you i n the case of Federal Reserve Bank of Richmond v s . G. Attmore. The court took under advisement our motion to s t r i k e out the f u r t h e r defense and c e r t a i n other paragraphs of the p l a i n t i f f ' s answer, and we a r e f i l i n g a w r i t t e n memorandum of argument. We found the court a t the end of a r a t h e r busy day and the Judge s t a t e d f r a n k l y t h a t he d i d not have time or l e i s u r e to consider lengthy or o r a l arguments, consequently the o r a l arguments were very "brief, and as no stenographer was i n the room I did not have them taken down. The defendant d i d not p r e s s h i s motion f o r the production of the r e p o r t s of examination. This motion may be renewed a t any time, but my a s s o c i a t e i n the case thinks t h a t the motion was not made with the i d e a of r e q u i r i n g or compelling the production of the r e p o r t s , but merely i n an attempt to suggest to the j u r y who might t r y the case t h a t we possess valuable information which we were u n w i l l i n g to d i s c l o s e . The code i n North Carolina provides f o r a s p e c i a l motion t o r e q u i r e the p r o d u c t i o n of papers or documents i n t h e p o s s e s s i o n of an adverse p a r t y , and my opponent says t h a t the i n s e r t i o n of such a demand i n an answer i s i r r e g u l a r and I think t h a t i t was i n s e r t e d f o r the reasons s t a t e d above, because under t h e i r p r a c t i c e the p l e a d i n g s are read aloud to the j u r y i n l i e u of opening s t a t e ments by the p a r t i e s . As I s t a t e d above, our motion to s t r i k e out the f u r t h e r defense i s under advisement by the t r i a l c o u r t . I f the court r u l e s a g a i n s t u s my a s s o c i a t e thinks t h a t we should a p p e a l . He f e e l s very hopeful t h a t the Supreme Court of the S t a t e w i l l s t r i k e out the f u r t h e r defense and thinks t h a t such a c t i o n by the Supreme Court would d e t e r other p a r t i e s from o f f e r i n g s i m i l a r defense i n the many cases which we now have pending in t h a t c o u r t . I f the court s t r i k e s out the f u r t h e r defense our opponent i s very l i k e l y to a p p e a l , as any delay i s in his favor. There i s a p o i n t which I should l i k e you t o consider i n connection with the a d v i s a b i l i t y of allowing t h i s question t o go t o the Supreme Court of the S t a t e i n i t s p r e s e n t form. On a motion to s t r i k e out any p o r t i o n of a pleading upon the ground t h a t the a l l e g a t i o n s a r e i r r e l e v a n t and immaterial, the court must of n e c e s s i t y consider t h a t the a l l e g a t i o n s a r e true or r a t h e r must assume t h a t evidence can be produced s u f f i c i e n t to s u s t a i n them. The r e s u l t i s t h a t an opinion rendered i n such a proceeding by an a p p e l l a t e court based upon the assumption t h a t the a l l e g a t i o n s are t r u e i s l i k e l y to be i n t e r p r e t e d by the g e n e r a l p u b l i c as an a d j u d i c a t i o n by the court t h a t the a l l e gations a r e t r u e . You w i l l r e c a l l t h a t i n the A t l a n t a p a r clearance s u i t the 2G1 Federal Reserve Board, Washington, D. C. X-6727-d — 2 " October 13, 1930. Federal Reserve Bank of A t l a n t a demurred and the case reached the Supreme Court of the United S t a t e s on the demurment, and the r e s u l t was t h a t the c o u r t ' s opinion d e a l i n g with a p u r e l y h y p o t h e t i c a l question was t r e a t e d as a solemn a d j u d i c a t i o n t h a t the a l l e g a t i o n s were true and so the opinion produced a very unpleasant e f f e c t on the p u b l i c mind. For the reasons pointed out above, there i s some p o s s i b i l i t y t h a t the same s i t u a t i o n might a r i s e i n the proceedings i n the p r e s e n t case. I f I were considering a matter of t a c t i c s i n the p a r t i c u l a r case or even i n the s i t u a t i o n growing out of the f a i l u r e of t h i s p a r t i c u l a r bank, I should without h e s i t a t i o n decide to appeal from a r u l i n g of the lower court r e f u s i n g to s t r i k e out the f u r t h e r d e f e n s e , but the p o s s i b i l i t y of some unpleasant r e s u l t to the Federal Reserve System as a whole has made me h e s i t a t e a l i t t l e and consider whether or not i t would not be advisable to answer and r e f u t e the a l l e g a t i o n s i n the f u r t h e r d e f e n s e , even though t h a t course would involve a g r e a t deal of t r o u b l e , and would c e r t a i n l y tend to confuse the i s s u e as f a r as the case a t bar was concerned, because i t would involve the i n t r o d u c t i o n of a g r e a t deal of t e s t i mony tending to e x p l a i n and j u s t i f y our conduct i n a t r a n s a c t i o n which was i n no way r e l a t e d to t h e simple i s s u e upon which the p a r t i c u l a r case depends. There w i l l probably be no d e c i s i o n on our motion to s t r i k e out u n t i l November, and so t h i s l e t t e r may be premature, but I thought t h a t I would put the s i t u a t i o n b e f o r e you i n order t h a t you might be turning i t over i n your mind and be prepared to a s s i s t me with your suggestions when the question of an appeal a r i s e s . While I was i n New Bern the Receiver of the f a i l e d bank showed me a r a t h e r le n g th y n o t i c e served on him by a depositor of the f a i l e d bank, a cting through the same a t t o r n e y who r e p r e s e n t s Mr. Attmore. This n o t i c e i n e f f e c t c a l l e d on the Receiver to i n s t i t u t e proceedings a g a i n s t us to recover a l l the marginal c o l l a t e r a l upon the ground t h a t the taking of marginal c o l l a t e r a l was u l t r a v i r e s , and upon the f u r t h e r ground t h a t we knew of the insolvency of the F i r s t National Bank of New Bern from i t s organization and t h a t the giving of c o l l a t e r a l by i t amounted to a fraudulence p r e f e r a b l y i n which we p a r t i c i p a t e d . The Receiver t o l d me t h a t he would ignore the notice but he r a t h e r thought t h a t the a t t o r n e y would i n s t i t u t e the s u i t . This s u i t would, of course, r a i s e the same questions as those involved i n the s u i t a g a i n s t Attmore, but would r a i s e them as a d i r e c t question f o r d e c i s i o n , and p e r s o n a l l y , i f the question mast be fought out, I should r a t h e r have i t i n the d i r e c t s u i t , e s p e c i a l l y a s t h a t s u i t could be removed i n the Federal c o u r t . I remain, Very t r u l y yours, MGW:D (Signed) M. &. Wallace, Counsel. 2G2 X-6731 1 STATEMENT OF BUREAU OF ENGRAVING AND PRINTING. Federal Reserve Notes, Series 1928. September 3 t o 30, 1930. 15 Boston New York Philadelphia Cleveland Richmond Atlanta S t . Louis Minneapolis Kansas City Dallas San Francisco 110 Total Sheets $20 Amount $12,943.00 33,282.00 12,018.50 10,169.50 6,471.50 4,252.70 2,773.50 2,773.50 2,588.60 3,143.50 7,765.80 598,181.90 70,000 200,000 70,000 60,000 4a,ooo 30,000 20,000 20,000 20,000 20,000 40,000 60,000 120,000 50,000 30,000 20,000 16,000 10,000 10,000 8,000 14,000 24,000 10,000 40,000 10,000 20,000 10,000 20,000 140,000 360,000 130,000 110,000 70,000 46,000 30,000 30,000 28,000 34,000 84,000 590,000 362,000 110,000 1,062,000 1,062,000 sheets - - — — - - - — — — $92.45 per M . . .$98,181.90 I 263 X-67'35 EY-LA^S CT fnH3 TEPB^AL TCS^VE BOAPD E F r t C T m OCTOBER 13, 1930. , A r t i c l e 1. The Chairman* The Secretary of the Treasury, as Chairman of the Board, s h a l l preside a t a l l meetings when present* In the absence of the Chairman; the Governor s h a l l a c t a s p r e s i d i n g o f f i c e r . In the absence of "both the Chairman and the Governor, the Vice-Governor s h a l l preside, and in the absence of a l l three such o f f i c e r s , the remaining member of the Executive Committee s h a l l p r e s i d e . A r t i c l e 11. The Governor. Sec. 1. The Governor of the Federal Reserve Board s h a l l he the a c t i v e executive o f f i c e r t h e r e o f ; s u b j e c t , however, to the supervision of the Board and to such r u l e s and r e g u l a t i o n s as may ho incorporated h e r e i n or may from time to time, by r e s o l u t i o n , be e s t a b l i s h e d . Sect 2* The Governor s h a l l have general charge of the executive and r o u t i n e b u s i n e s s of the Board not s p e c i f i c a l l y assigned under the bylaws or by r e s o l u t i o n of the Board to any individual member or committee t h e r e o f , and s h a l l have supervision of the Board's s t a f f . Sec. 3 . The Governor s h a l l 1:e an e x - o f f i c i o member of a l l Standing Committees of the Board, A r t i c l e 111, The Vice-Governor. Sec. 1. In the absence or d i s a b i l i t y of the Governor, h i s powers s h a l l be e x o r c i s e d and h i s d u t i e s discharged by the Vice- Governor, and in the absence or d i s a b i l i t y of both of these o f f i c e r s , such powers s h a l l bo exercised and such d u t i e s discharged by the remaining member of the Executive Committee; in the absence or d i s a b i l i t y of a l l members of the Executive Committee the powers and d u t i e s of the Governor s h a l l be e x e r cised by the s e n i o r member of the Board p r e s e n t . Sec, 2. I t s h a l l be the duty of the Vice-Governor to cooperate with the Governor in t h e a d m i n i s t r a t i o n of the executive b u s i n e s s of the Board, X-673S A r t i c l e IT. gfra S e c r e t a r y and A s s i s t a n t S e c r e t a r i e s , Sec. 1» The Board s h a l l appoint a Secretary and one or more a s sistant secretaries. Sec. 2, The Secretary s h a l l keep an a c c u r a t e record of the p r o ceedings of the Board and s h a l l conduct such correspondence and perform such o t h e r d u t i e s as may "be assigned t o him "by the Governor or by the Board. In the absence or d i s a b i l i t y of the Secretary, the d u t i e s of t h a t o f f i c e may, by d i r e c t i o n of the Board, be performed by an a s s i s t a n t s e c r e t a r y . Sec. 3 . The Secretary s h a l l have custody of the s e a l and, a c t i n g under the a u t h o r i t y of the Board, s h a l l have power to a f f i x same to a l l i n struments r e q u i r i n g i t . Such instruments s h a l l be a t t e s t e d by the Secretary. Sec. 4. The a s s i s t a n t s e c r e t a r i e s s h a l l each perform such d u t i e s as may be assigned t o them from time to time by the Board or by the Secretary, A r t i c l e V. A s s i s t a n t to the Governor. Sec. 1. The Board may a u t h o r i z e appointment of an A s s i s t a n t t o the Governor, Sec. 2. The A s s i s t a n t t o the Governor s h a l l perform such d u t i e s as s h a l l be assigned t o him by the Governor. A r t i c l e VI. The Executive Committee. Sec. 1, There s h a l l be an Executive Committee of the Board cons i s t i n g of t h r e e members, which s h a l l include the Governor, Vice-Governor and one of the a p p o i n t i v e members of the Board. The appointive member of the Committee s h a l l be nominated and e l e c t e d a t a r e g u l a r meeting of the Board. Members of the Board s h a l l serve as f a r as p r a c t i c a b l e in r o t a t i o n and f o r approximately equal terms. The presence of t h r e e members s h a l l be r e q u i s i t e f o r the t r a n s a c t i o n of business by the Executive Committee, and action s h a l l be taken only on unanimous vote of the Committee. Sec. 2 . In the absence of the Governor and Vice-Governor the app o i n t i v e member of the Executive Committee s h a l l a c t as Chairman and s h a l l , with two o t h e r a p p o i n t i v e members of the Board p r e s e n t in Washington t o be chosen by him in the order of t h e i r s e n i o r i t y , e x e r c i s e the powers and d i s charge the d u t i e s of the Executive Committee. In the absence of a l l three r e g u l a r members of the Executive Committee the three remaining appointive members of the Board, provided there be t h r e e in Washington, s h a l l a c t as an i n t e r i m committee and e x e r c i s e the powers and d i s c h a r g e the d u t i e s of the Executive Committee, the senior member a c t i n g a s Chairman. 285 — 3 — • X-6733 Provided, however, that if only t^o of the appointive members of the Board are in Washington such two members may e c t a s an interim committee and e z e r c i s e the powers and discharge the d u t i e s of the Executive Committee. Any a c t i o n taken br such interim committee of two members, however, s h a l l not be f i n a l l y e f f e c t i v e u n l e s s and u n t i l r a t i f i e d "by the Board. At the next r e g u l a r meeting of the Board there s h a l l be reported to i t f o r r a t i f i c a t i o n a l l actions taken by such interim committee of two members since the l a s t r e g u l a r meeting of the Board. Upon r a t i f i c a t i o n by the Board, a l l a c t i o n s taken by such i n t e r i m committee of two members s h a l l have the same f o r c e and e f f e c t as a c t i o n s taken by the Board i t s e l f and s h a l l be e f f e c t i v e as of the date such a c t i o n was taken b,_ the i n t e r im committee of two members unless otherwise s p e c i f i c a l l y provided b*- the Board. Sec. 3. I t s h a l l be the duty of the Executive Committee to r e view and submit d r a f t s of important correspondence involving the expression of opinions or d e c i s i o n s of the Board, and to prepare and make recommendations governing the conduct of the Board's b u s i n e s s . Sec. 4. The Executive Committee s h a l l a l s o have charge of a l l matters a p p e r t a i n i n g t o the i n t e r n a l organization of the Board, and s h a l l make recommendations from time to time on t h i s m a t t e r . I t s h a l l a l s o p r e pare annually a budget of proposed e x p e n d i t u r e s . Sec. 5 . In the absence of a quorum of the Federal Reserve Board and f o r the t r a n s a c t i o n of business r e q u i r i n g action during the absence of such quorum, the Executive Committee i s authorized to t r a n s a c t business which can be t r a n s a c t e d in accordance v i t h e s t a b l i s h e d p r i n c i p l e s and p o l i c i e s of t h e Board and to perform such a d d i t i o n a l d u t i e s as may be spec i f i c a l l y delegated to i t from time to time br i n s t r u c t i o n of the Federal Reserve Board. The Secretary of the Board s h a l l serve as Secretary of the Executive Committee. A r t i c l e VII. Standing Committees. In a d d i t i o n to the Executive Committee there s h a l l bo the f o l lowing Standing Committees, appointments to which s h a l l be made by the Governor, s u b j e c t to the approval of the Board. Se c. 1. Ija^jv* To the Law Committee s h a l l be r e f e r r e d f o r study and r e * port a l l questions of a. l e g a l n a t u r e . To t h i s Committee s h a l l a l s o be a s signed the p r e p a r a t i o n or r e v i s i o n of the Board's r e g u l a t i o n s , contemplated amendments to the Federal Reserve Act, a p p l i c a t i o n s under the Kern amendment to the Clayton Act, and a p p l i c a t i o n s f o r the e x e r c i s e bir n a t i o n a l banks of t r u s t powers. The General Counsel s h a l l serve .-as S e c r e t a r y of the Committee. Sec. 2. Examination. To t h i s Committee s h a l l be r e f e r r e d a l l questions r e l a t i n g to the examination of Federal Reserve or member banks including 366 - 4 - X-6763 admission of s t a t e "banks and permission to e s t a b l i s h and operate branches. The Chief Examiner s h a l l serve as Secretary of t h i s Committee. Sec. 3. Research and S t a t i s t i c s . This Committee s h a l l have charge of a l l i n v e s t i g a t i o n s of an economic and s t a t i s t i c a l c h a r a c t e r authorized "by the Board and s h a l l supervise the work of the Division of Research and S t a t i s t i c s and the p r e p a r a t i o n and p u b l i c a t i o n of the Federal Reserve B u l l e t i n . This Committee s h a l l a l s o have s u p e r v i s i o n of the s t a t i s t i c a l and p u b l i c a t i o n work of the Federal "Reserve Banks. Tho D i r e c t o r of the Division of Research and S t a t i s t i c s s h a l l serve as Secretary of t h i s Committee, or i n h i s absence the A s s i s t a n t Director s h a l l so serve. Sec. 4. S a l a r i e s and "Expenditures of Federal Reserve Banks. To t h i s Committee s h a l l be assigned a l l recommendations from Federal Reserve Banks f o r changes of s a l a r i e s and o t h e r e x p e n d i t u r e s . This Committee s h a l l make r e p o r t s with respect t o c h a r g e - o f f s and f r a n c h i s e tax of Federal Reserve Banks. The Secretary of the Board s h a l l serve as Secretary of t h i s Committee. Sec. 5. D i s t r i c t Committees. To each Federal Reserve Bank and D i s t r i c t s h a l l be assigned a Committee of not l e s s than two members of the f e d e r a l Reserve Board. I t s h a l l be the duty of each Committee to keep i t s e l f informed by correspondence and v i s i t of the a f f a i r s of the Bank and the condition of the D i s t r i c t , and make i n v e s t i g a t i o n and r e p o r t on a l l questions a p p e r t a i n i n g to the opeiv a t i o n of any Federal Reserve Bank or the condition of any Federal Reserve D i s t r i c t t h a t may be r e f e r r e d to i t by the Board. These Committees s h a l l a l s o aid the Committee on S a l a r i e s and Expenditures with information r e garding personnel of the r e s p e c t i v e Federal Reserve Banks of which they have charge. These Committees s h a l l a l s o make recommendations to the Board f o r the appointment of D i r e c t o r s a t Federal Reserve Banks and Branches, Article VIII. The F i s c a l Agent and Deputy F i s c a l Agent. Sec. 1. The Board s h a l l appoint a F i s c a l Agent and a Deputy F i s c a l Agent. The duty of the F i s c a l Agent s h a l l be to c o l l e c t and deposit a l l moneys r e c e i v a b l e by the Board with the Treasurer of the United S t a t e s , to be placed i n a s p e c i a l fund e s t a b l i s h e d on the books of the Treasurer f o r the Federal Reserve Board. The Deputy F i s c a l Agent s h a l l perform the d u t i e s of the F i s c a l Agent during h i s absence or d i s a b i l i t y . Sec. 2. The F i s c a l Agent and Deputy F i s c a l Agent s h a l l each execute a s e p a r a t e bond with surety s a t i s f a c t o r y to the Board. Sec. 3. Payments of expenses and other disbursements of the Board s h a l l be made b^r the F i s c a l Agent upon proper vouchers out of moneys - 5 - X-6733 advanced to him by r e q u i s i t i o n and warrant out of the s p e c i a l fund and placed to h i s o f f i c i a l c r e d i t with the Treasurer of the United S t a t e s as provided "by Section 5 of t h i s A r t i c l e . In the absence of the F i s c a l Agent payment of expenses and o t h e r disbursements s h a l l be made by the Deputy F i s c a l Agent upon proper vouchers out of moneys advanced t o the F i s c a l Agent by r e q u i s i t i o n and warrant out of the s p e c i a l fund and placed to h i s o f f i c i a l c r e d i t with the Treasurer of the United S t a t e s as provided by Sect i o n s 5 and 6 of t h i s a r t i c l e . Sec. 4. The F i s c a l Agent s h a l l prepare a q u a r t e r l y account in such form as s h a l l be approved by the Comptroller General of the United S t a t e s and, a f t e r approval by the Governor, such q u a r t e r l y account s h a l l be submitted to the General Accounting O f f i c e . Such account s h a l l cover payments of expenses and other disbursements made by both the F i s c a l Agent and the Deputy F i s c a l Agent. Sec. 5. The Governor s h a l l , when necessary, make r e q u i s i t i o n on the Treasurer of the United S t a t e s f o r the advance of such sums to the F i s c a l Agent as may be necessary from the Federal Reserve Board fund. Sec. 6. The Deputy F i s c a l Agent in making disbursements of the Board upon proper vouchers out of the moneys advanced to the F i s c a l Agent s h a l l sign a g a i n s t funds to the o f f i c i a l c r e d i t of the F i s c a l Agent with the Treasurer of the United S t a t e s in the name of the F i s c a l Agent by himself a s Deputy F i s c a l Agent. A r t i c l e IX. Gold Settlement Fund and Federal Reserve Agents' Fund. All funds d e p o s i t e d by or f o r account of the r e s p e c t i v e Federal Reserve Agents in the Federal Reserve Agents' fund of the Federal Reserve Board and a l l funds d e p o s i t e d by or f o r account of the r e s p e c t i v e Federal Reserve Banks in the Gold Settlement Fund of the Federal Reserve .Board s h a l l be h e l d on deposit with the Treasurer of the United S t a t e s and s h a l l be s u b j e c t to withdrawal only by check of the Federal Reserve Board signed by the Secretary or an A s s i s t a n t Secretary and countersigned by the Governor or a c t i n g executive o f f i c e r of the Board. A r t i c l e X. R e q u i s i t i o n f o r Delivery of Federal Reserve ffotes. R e q u i s i t i o n s upon the Comptroller of the Currency f o r the d e l i v e r y •» 6 w X-673S 268 of Federal Pcserve notes to the r e s p e c t i v e Federal 'Reserve .Agents s h a l l he made by the Secretary or A s s i s t a n t Secretary in response only to r e quests made by the Federal Peserve Agents to the Board f o r such n o t e s . The Secretary or A s s i s t a n t Secretary s h a l l submit d a i l y f o r approval to the Governor or a c t i n g executive o f f i c e r of the Board a schedule showing the amount of each denomination of I n d e r a l Reserve ITotes r e q u i s i t i o n e d "by him f o r the account of each Federal r e s e r v e Agent, A r t i c l e XI. The Seal. The f o l l o w i n g i s an impression of the s e a l adopted by the Board. SEAL. A r t i c l e XII. Counsel. Sec. 1. The Board s h a l l appoint a General Counsel whose duty i t s h a l l "be to advise with the Board, or any member t h e r e o f , as to such l e g a l questions as may a r i s e in the conduct of i t s b u s i n e s s ; to prepare, a t the Board's request opinions, r e g u l a t i o n s , r u l i n g s , forms and other l e g a l papers and to perform g e n e r a l l y such l e g a l s e r v i c e s as he may be c a l l e d upon by the Board t o perform. Sec. 2. Subject to the d i r e c t i o n of the Governor, the General Counsel s h a l l have a u t h o r i t y to correspond d i r e c t l y with the Counsel of the various Federal Reserve Banks and to request t h e i r opinions as to the i n t e r p r e t a t i o n of the l o c a l laws of the S t a t e s included in t h e i r r e s p e c t i v e Federal Reserve D i s t r i c t s . Copies of a l l such correspondence s h a l l be f u r n ished to the Board f o r i t s information. Sec. 3. Whenever i t may bo deemed advisable, the Board may appoint one or more Associate or A s s i s t a n t Counsel, or m e or more A s s i s t a n t s to Counsel. The duty of such Associate or A s s i s t a n t Counsel s h a l l be to a s s i s t the General Counsel in the performance of h i s d u t i e s and to perform the duty of the General Counsel in h i s absence. "The duty of such A s s i s t a n t to Counsel or A s s i s t a n t s t o Counsel s h a l l be to a s s i s t the General Counsel in the performance of h i s d u t i e s . Sec. 4. The Board may appoint from time to time Consulting Counsel, who may be a t t o r n e y s a t law engaged in outside p r a c t i c e . 269 - 7 - X-6733 Article XIII. Meetings, Sec. 1. Five members of the Board, s h a l l c o n s t i t u t e a ouorum f o r the t r a n s a c t i o n of "business. Sec. 2. Stated meetings of the Board s h a l l he held on such days of the week and a t such hours as the Board "by a m a j o r i t y vote may f i x from time to time. One meeting day each week s h a l l "be s e t a p a r t f o r c o n s i d e r a t i o n of the following m a t t e r s , advance n o t i c e of not l e s s than two days being sent to members of important questions to he taken up a t the meeting: Discount and open market m a t t e r s ; Approval of expenditures and s a l a r i e s ; Establishment of Federal Reserve Branches, Agencies, Currency S t a t i o n s ; Permission f o r establishment of member bank branches; Amendment of Board's r u l e s and r e g u l a t i o n s ; New p o l i c i e s or changes of p o l i c y ; Such other major matters as may be reserved f o r c o n s i d e r a t i o n a t the weekly meeting. Sec. 3 . Special meetings of the Board may be c a l l e d by the Chairman or Governor or upon the w r i t t e n request of three members of the Board. Sec. 4. At a l l meetings of the Board the f o l l o w i n g s h a l l be the order of b u s i n e s s ; (1) Reading or inspection of the Minutes of the l a s t r e g u l a r meeting and Minutes of meetings of the Executive Committee. (2) Report of the Governor. (3) Report of the S e c r e t a r y . (4) Reports of the committees or members on assigned business, (5) Unfinished b u s i n e s s . (6) New b u s i n e s s . Sec. 5. No vote s h a l l be taken or motion made by the Board a t a meeting or conference when others than the members of the Board and i t s Secr e t a r i a l s t a f f are present. A r t i c l e XIV. Absences. Sec. 1. Absences of appointive members of the Board s h a l l a s f a r as p r a c t i c a b l e be arranged so as not to i n t e r f e r e with the expeditious conduct of the Board's b u s i n e s s in Washington. - 8 w A r t i c l e XV. X-6733 ^ Information and Pub11cation. Sec. 1. A l l persons employed by the Board s h a l l keep i n v i o l a t e i t s "business, a f f a i r s , and concerns, and s h a l l not d i s c l o s e or divulge the same to any unauthorized person whomsoever, and any employee who s h a l l give i n f o r m a t i o n c o n t r a r y to t h i s by-law s h a l l be l i a b l e to immediate d i s m i s s a l . Except uoon vote of t h e Board, no one other than a Member of t h e Board, or the S e c r e t a r y . A s s i s t a n t S e c r e t a r i e s . A s s i s t a n t to the Governor, and General Counsel, s h a l l be p e r m i t t e d to i n s p e c t any of the .Board's minutes. Sec. 2 . 2?o statements s h a l l be made to the p r e s s e x p r e s s i v e of the Board's p o l i c y or d e s c r i p t i v e of i t s a c t i o n except as a u t h o r i z e d and approved by the Board. Such statements s h a l l be i s s u e d only i n w r i t t e n form and when a u t h o r i z e d and approved they s h a l l be issued through the o f f i c e of the Governor or such other o f f i c e r or member of the Board as may be s p e c i f i c a l l y d e s i g n a t e d . While each member of the Board nnist determine f o r himself the p r o p r i e t y or n e c e s s i t y of expressing p u b l i c l y h i s i n d i v i d u a l opinion on any q u e s t i o n , members s h a l l not quote p u b l i c l y the opinion of other members on m a t t e r s which have not f o r m a l l y been passed upon by the Board. Sec. 3 . There s h a l l be published monthly, a b u l l e t i n to be known as "The Federal Reserve B u l l e t i n " , which s h a l l be the o f f i c i a l p e r i o d i c a l organ or p u b l i c a t i o n of the Federal Reserve Board. Sec. 4 . No r e s o l u t i o n s of a personal c h a r a c t e r s h a l l be passed by the Board on the termination of the membership of a member of t h e Board. A r t i c l e XVI. Amendments. These by-laws may be amended a t any r e g u l a r meeting of the Board by a m a j o r i t y vote of the e n t i r e Board, provided t h a t a copy of such amendments s h a l l have been d e l i v e r e d to each member a t l e a s t seven days p r i o r to such meeting. r 271 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X~6734 October 17, 1930. SUBJECT: Holidays during November, 1930. Dear S i r : On Saturday, November 1 s t , the New Orleans Branch of the Federal Reserve Bank of A t l a n t a w i l l be closed i n observance of All S a i n t s ' Day, and the Havana Agency on account of E l e c t i o n Day. Please include c r e d i t s f o r New Orleans Branch f o r November 1 s t i n the Gold Fund Clearing of November 3 r d . On Tuesday, November 4 t h , General E l e c t i o n Day, t h e r e w i l l be n e i t h e r Gold Settlement Fund nor Federal r e s e r v e note c l e a r i n g , and the books of the Board's Gold Settlement Fund w i l l be closed. For your i n f o r m a t i o n , the o f f i c e s of the Federal Reserve Board and the following banks and branches w i l l be open for b u s i n e s s on t h a t day: Boston Cleveland ) u n t i l 1 p.m. C i n c i n n a t i ) E a s t e r n Standard time Atlanta New Orleans Birmingham Jacksonville L i t t l e Rock Louisville Omaha S a l t Lake City On Tuesday, November 11th, i n observance of Armistice Day, and on Thursday, November 27th, Thanksgiving Day, there w i l l be n e i t h e r Gold Settlement Fund nor Federal reserve note c l e a r i n g , and the books of the Board's Gold S e t t l e ment Fund w i l l be c l o s e d . The o f f i c e s of the Federal Reserve Board and the following banks and branches w i l l be open f o r b u s i n e s s on Tuesday, November 11th: New York Buffalo Detroit P l e a s e n o t i f y branches. Very t r u l y yours, J• C. Noell, Assistant Secretary. TO GOVERNORS OF ALL F. R. BASKS. FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD X-6735 October 17, 1930. SUBJECT: Expense, Main Line, Leased Wire System, September, 1930. 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-6735-1 a and X~S73E~b, Covering i n d e t a i l operations of the main l i n e , Leased Tire System, during the month of September, 1930. 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 Fund", Leased ITire System, sending d u p l i c a t e C/D to the Federal Reserve Board. Very t r u l y yours, F i s c a l Agent. Enclosures. TO GOVERNORS OF ALL F. R. BAITKS EXCEPT CHICAGO. x - 6 7 35- 3BEPOBT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINE OF TBE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF SEPTEMBER, 1930. Business reported ty "banks 7rom Boston New York Philadelphia Cleveland Richmond Atlanta Chicago S t . Louis Minneapolis Kansas City Dallas San F r a n c i s c o Total Words sent "by New York chargea b l e to other F. R. Banks (1) 27,573 129,376 31,664 82,495 52,715 58,748 98,941 72,730 32,130 51,978 65,036 89,928 823,369 3,527 — 1,645 2,804 3,141 7,978 4,213 3,009 3,78f 2,837 7,247 4,084 44,273 F. R. Board "business Net F e d e r a l Reserve Bank "business 31,105 129,376 33,309 85,299 55,856 66,726 103,154 75,7%9 35,918 84,815 72,283 94,012 867,642 P e r c e n t of t o t a l "bank "business (*) 3-58 14.91 3-84 9-83 6.44 7.69 11.89 3.73 4.14 9.73 S.33 10.84 100.00 286,526 1,154,168 Treasury Department "business Incoming and Outgoing T ot a l words t r a n s m i t t e d over main l i n e s . (•) These p e r c e n t a g e s u s e d in c a l c u l a t i n g t h e pro r a t a share of l e a s e d wire expense as shown on the accompanying statement (X-6735-t)• (l) Number of words s e n t by New York to other 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 i n accordance w i t h a c t i o n t a k e n a t Governors' Conference November 2 - 4 , 1925. 152,318 . 1,286,486 REPORT OP EXPENSE MAIN LIKE FEDERAL RESERVE LEASED WIRE SYSTEM, SEPTEMBER, I93O; Operators* Overtime Boston $ 260.00 $ New York 1,129-14 Philadelphia 225.00 Cleveland 306.66 Richmond 211.00 Atlanta 270.00 Chicago 3,357.57(f) S t . Louis 195.00 Minneapolis 200.00 Kansas City 257.50 Dallas 251.00 San F r a n c i s c o 350.00 Federal Reserve Board ; Total (&) (#) (*) (a) (b) $ 7,572.87 - Wire Rental $ - - - - - - 1.00 1.00 - - - - - - 15,736.19 $ 2.00 $ 15,966.19 Pro Rata Share of Total Expenses Total Expenses $ ro 0 o 0 Operators' Salaries VJ Name of Bank &) 260.00 1,129.14 225.00 306.66 441.00 270.00 3,555.57 196.00 200.00 257.50 251.00 350.00 15,736.19 X-6735-"b $ Credits $ 756.09 3,145.96 811.00 2,076.05 1,360.12 1,624.11 2,bll.l4 1,543.76 274.36 2,065.52 1,759-25 2,259.39 260.00 1,129.14 225.00 306.66 44l.00 270.00 3.25S-57 196.00 200.00 227-50 251.00 350.00 $ $ 7,504.57 $ l 4 . 6 6 2 . 3 7 1,3^7.43(b) $ 13,31^.94 Main Line r e n t a l , Richmond-Washington. 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 $2,421.25 from Treasury Department covering b u s i n e s s f o r the month of September 1930. Amount reimbursable to Chicago. 496.09 2,019.52 556.00 1,769.42 919.12 1,354.11 1,347.43(*) 1,647.76 674.36 1,773.02 1,508.25 1,909.39 — — $ 23,541.06 $21,119.51 2,421.25(a) $ 21,119.gl Payable 10 Federal Reserve Board FEDERAL RESERVE BOARD WASHINGTON X-6736 ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD October 17, 1930. SUBJECT: Surrender of Trust Powers by National Banks. Dear S i r : Section l l ( k ) of the Federal Reserve Act with r e f e r e n c e to t r u s t powers of n a t i o n a l banks was amended by Act of Congress approved June 26, 1930, so as to provide t h a t such banks might v o l u n t a r i l y s u r r e n d e r the r i g h t to a c t i n t r u s t c a p a c i t i e s . The Federal Reserve Board on October 17, 1930 amended i t s Regulation F so as to provide a procedure f o r the surrender of t r u s t powers by a n a t i o n a l bank p u r suant to the r e c e n t amendment to t h e s t a t u t e . The only important change made i n the r e g u l a t i o n was the adoption of a new Section XIV which i s s e t f o r t h below. The adoption of t h i s s e c t i o n made i t nece s s a r y to renumber subsequent s e c t i o n s of the r e g u l a t i o n accordingly; and S e c t i o n I of the r e g u l a t i o n , which s e t s f o r t h the p r o v i s i o n s of Section l l ( k ) o f . t h e Federal Reserve Act, was amended so as to s e t f o r t h th e s e p r o v i s i o n s of the s t a t u t e i n the form as amended by the Act of June 26, 1930* The r e g u l a t i o n i n i t s amended form iti d e s i g n a t e d Regulation F, Series of 1930. The new s e c t i o n numbered XIV i s as f o l l o w s : "SECTION XlVi SURRENDER OF TRUST POWERS. "(a) P r o c e d u r e . - Any n a t i o n a l bank which has been g r a n t e d the r i g h t by the Federal Reserve Board, pursuant to Section l l ( k ) of the Federal Reserve Act, to a c t i n any f i d u c i a r y c a p a c i t y or c a p a c i t i e s and which d e s i r e s t o s u r render such r i g h t , s h a l l s i g n i f y such d e s i r e through a r e s o l u t i o n adopted by i t s board of d i r e c t o r s . A p r o p e r l y c e r t i f i e d copy of such r e s o l u t i o n of i t s board of d i r e c t o r s should be f i l e d with the Federal Reserve Agent of the d i s t r i c t i n which such n a t i o n a l bank i s l o c a t e d and should be accompanied by (1) a l e t t e r s t a t i n g the reason why, or the purpose f o r which, such n a t i o n a l bank wishes to surrender i t s r i g h t to e x e r c i s e t r u s t powers, u n l e s s such reason or purpose s h a l l have been amply s t a t S d i n the r e s o l u t i o n i t s e l f ; and (2) the permit or p e r m i t s p r e v i o u s l y granted by the Federal Reserve Board to such n a t i o n a l bank g r a n t i n g i t the r i g h t to a c t i n any f i d u c i a r y c a p a c i t y , except t h a t i n case any such permit s h a l l have been l o s t or destroyed an a f f i d a v i t by any o f f i c e r of such n a t i o n a l bank as to such l o s s or d e s t r u c t i o n may be f i l e d i n l i e u of such l o s t or destroyed p e r m i t . A l l such documents f i l e d with the ^ 7 6 •• 2 •" X-6736 Federal Reserve Agent s h a l l "be promptly forwarded, by him to the Federal Reserve Board with a recommendation as to the a c t i o n to be taken by the Federal Reserve Board. "(b) Examination. Upon r e c e i p t of such documents, the Federal Reserve Board w i l l r e q u e s t the Comptroller of the Currency, upon the occasion of the next regular examination of such n a t i o n a l bank, to have the examiner make a s p e c i a l i n v e s t i g a t i o n of the t r u s t department of the bank i n order t o determine whether the bank has a c t u a l l y accepted or undertaken the e x e r c i s e of any t r u s t , whether under c o u r t , p r i v a t e or other appointment, pui>suant to a u t h o r i t y granted under Section l l ( k ) of the Federal Reserve Act; and i f so, whether i t appears from the records of the t r u s t department i n the case of each t r u s t so accepted or undertaken: " ( l ) That the d u t i e s of the bank a s f i d u c i a r y have been completely performed or t h a t a s u b s t i t u t e f i d u c i a r y has been appointed i n accordance with the S t a t e law; u ( 2 ) That a f i n a l account has been f i l e d by the bank, and t h a t such account has been approved by the court or other proper a u t h o r i t y where t h i s i s r e q u i r e d by State law; "(3) That a l l a s s e t s and papers belonging to the t r u s t e s t a t e have been d e l i v e r e d by the bank to the p e r s o n or persons e n t i t l e d to receive them/ and n ( 4 ) That the bank has been discharged or o t h e r wise p r o p e r l y r e l i e v e d of i t s d u t i e s as fiduciary# I n exceptional c a s e s , the Federal Reserve Board may make a s p e c i a l examination or may request the Comptroller of the Currency to make a s p e c i a l examination of such n a t i o n a l bank i n order to o b t a i n the information above s e t f o r t h . ,f (c) C e r t i f i c a t e of Federal Reserve Board. I f upon r e c e i v i n g a copy of the r e p o r t of such examination of such n a t i o n a l bank the Federal Resenre Board s h a l l be s a t i s f i e d . t h a t such bank has been r e l i e v e d i n accordance with S t a t e law of a l l i t s d u t i e s as t r u s t e e , executor, a d m i n i s t r a t o r , r e g i s t r a r of stocks and bonds, guardian of e s t a t e s , a s s i g n e e , r e c e i v e r , committee of e s t a t e s of l u n a t i c s , or other f i d u c i a r y , under c o u r t , p r i v a t e or other appointments p r e v i o u s l y accepted by such bank under a permit granted by the Federal Reserve Board pursuant to the p r o v i s i o n s of Section l l ( k ) of the Federal Reserve Act, the Board may i n i t s d i s c r e t i o n i s s u e to such n a t i o n a l bank a c e r t i f i c a t e c e r t i f y i n g t h a t such bank i s no longer a u t h o r i z e d to e x e r c i s e the powers conferred upon i t by such permit of the Federal Reserve Board. Such bank thereupon ( l ) s h a l l no longer be s u b j e c t to the p r o v i s i o n s of Section 11 (k) of the Federal Reserve Act or the Regulations of the Federal Reserve Board made pursuant t h e r e t o , (2) s h a l l be e n t i t l e d to have returned to i t any s e c u r i t i e s which i t may have d e p o s i t e d with the S t a t e a u t h o r i t i e s or with the Federal Reserve Agent 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 , and (3) s h a l l not e x e r c i s e t h e r e a f t e r any of the powers granted by Section l l ( k ) of the Federal Reserve Act without f i r s t applying f o r and o b t a i n i n g a new permit from the Federal Reserve Board to e x e r c i s e such powers." By Order of the Federal Reserve Board. Very t r u l y yours, E. M. McClelland, Assistant Secretary. TO ALL F. R. AG-EITIS AITD GOVERNORS OF ALL F. R. BAMS. X-6737 2 7 8 TE13 DISCOUNT BATE CONTROVERSY BETWEEN THE FEDERAL ±C2ERVE BOARD and S THEffSEEBALRESERVE BANK OF N W YORK — M o v e nib e r , 1930. The Federal Reserve Bank of New York, i n i t s Annual Report f o r the year 1929, s t a t e d : "For a number of weeks from February to May, 1929, the D i r e c t o r s of the Federal Reserve Bank of New York voted an i n c r e a s e i n the discount r a t e from 5$ to 6$. This i n c r e a s e was not approved by the Board,/' Annual Report, Page 6. -2- The above statement makes c l e a r the e r r o r of the p r e v a i l i n g view t h a t the discount r a t e controversy l a s t e d from February 14, 1929, - the date of the f i r s t a p p l i c a t i o n for i n c r e a s e i n discount r a t e s , to August 9, 1929, the d a t e of the Board's approval of the i n c r e a s e from 5$ to 6 f o . The controversy began on February 14, 1929, b u t p r a c t i c a l l y ended on May 31, 1929. On May 22, 1929, Governor Harrison and Chairman McGarrah t o l d the Board t h a t while they s t i l l d e s i r e d an i n c r e a s e to 6$, they found t h a t / the member banks, under d i r e c t p r e s s u r e , feared to i n c r e a s e t h e i r borrowings, and t h a t they wanted to encourage them to borrow to meet the growing demand f o r commercial l o a n s . 16 Diary 76 ( 6 9 ) . Furthermore, on May 31, 1929, Chairman McGarrah wrote to the Federal Reserve Board t h a t the control of c r e d i t without i n c r e a s i n g discount r a t e s X-6737 — 2 " ~ ( d i r e c t p r e s s u r e ) had created u n c e r t a i n t y ; t h a t agreement upon a program t o remove u n c e r t a i n t y was f a r more important than the discount r a t e ; t h a t i n view of recent changes i n the "business and c r e d i t s i t u a t i o n , h i s d i r e c t o r s b e l i e v e d t h a t a r a t e change now without a mutually s a t i s f a c t o r y program, might only aggravate e x i s t i n g tendencies; t h a t i t may soon he necessary to e s t a b l i s h a l e s s r e s t r i c t e d discount p o l i c y i n order t h a t the member banks may more f r e e l y borrow f o r the proper conduct of t h e i r b u s i n e s s ; t h a t the Federal r e s e r v e bank should be prepared to i n c r e a s e i t s p o r t f o l i o i f and when any r e a l need of doing so becomes a p p a r e n t . 195 - 65. On June 5, 1929, Mr. Mitchell came b e f o r e the Board and urged a more l i b e r a l discount p o l i c y and an easing of c o n d i t i o n s by purchase of b i l l s and Government s e c u r i t i e s , leaving the discount r a t e a t 5$, to be i n c r e a s e d only i f s p e c u l a t i o n should r e v i v e , 16 Diary 99, 100 (198). The Federal Reserve Board, as h e r e i n a f t e r pointed out, on June 12, 1929, expressed a w i l l i n g n e s s to suspend d i r e c t a c t i o n i n view of t h e need of more Federal r e s e r v e c r e d i t , t h e 5$ r a t e , however, to be continued for the p r e s e n t , a t l e a s t . 16 Diary 108, 109 (76). -3I t i s the purpose of t h i s a r t i c l e to examine i n t o the f a c t s connected with t h i s controversy, and the divergence of opinion between t h e Board and the Federal Reserve Bank, of Hew York as to the proper Federal r e s e r v e policy* X-6737 -4- - 3 -i The annexed t a b l e shows the discount and acceptance "buying r a t e s of the Federal Reserve Bank of Hew York p r i o r to and since the controversy: Discount Rates 1927 August 5 Acceptance Buying Bates 60 to 90 days 1927 August 5 3J1 1928 May 18 J u l y 13 1929 3-3/8% H 33-?/44 4H S/°. 1929 November 1 November 15 January 4 January 21 February 15 March 21 March 25 July 12 August 9 October 25 November 1 November 15 November 22 6% W> February 11 February 24 March 5 March 6 March 11 March 14 March 19 March 20 May 1 • May 2 — 3-gi& 3o 1 i—1 CO CD 2hi 11 l June 20 5-l7W 5# June 5 June 20 J u l y 21 3fi 3-5/8i 3l-< 3-3/8^ 31< H May 2 5-] 5-3/8% 5M 1930 February 7 March 14 jJJL <2 August 9 1930 M- 1928 January 27 February 3 March 30 A p r i l 13 May 18 J u l y 13 J u l y 20 February 3 2 8 0 3i 2-7/8$ — 2-5/8# 2¥k m 2I 1 - 7 / 8 to X-6737 -5- 2 8 1 4: The following shows the important dates i n connection with the controversy: 1928. September 28: The Federal Advisory Council opposed any i n c r e a s e in rates. November 22; The Federal Advisory Council opposed any i n c r e a s e i n r a t e s because of i n j u r y to business* 1929. January 19: Dr. Miller t o l d Board the Federal Reserve System was d r i f t i n g and t h a t r a t e i n c r e a s e was necessary to e f f e c t a curbing of s p e c u l a t i o n ; t h a t the r e a l l y courageous way would be a p u b l i c announcement t h a t c r e d i t i n the f u t u r e would be a v a i l a b l e a t reasonable r a t e s for a g r i c u l t u r e and business* but t h a t the Board would watch the r i s e i n discounts and prevent seepage i n t o Wall S t r e e t . 15 Diary 129, 130 (152). January 21: Dr» M i l l e r introduced a d r a f t of a l e t t e r to a l l Federal r e s e r v e banks suggesting d i r e c t p r e s s u r e on the member banks* 15 Diary 150 (152). January 25: Chairman McG-arrah informed the Board t h a t h i s d i r e c t o r s were considering i s s u i n g a p u b l i c warning to corporations which were loaning i n Wall S t r e e t t h a t they were i n j u r i n g the Federal Reserve System, and i n t h i s warning to i n clude an i n t i m a t i o n that the c o l l a t e r a l behind these loans might prove not to be l i q u i d . 15 Diary 134 (152). January 25: Chairman McG-arrah o b j e c t e d to the proposed l e t t e r to the Federal reserve banks on ground t h a t i t would be cons t r u e d as a blow a t the stock market. 15 Diary 134 (153). February 2; Dr. M i l l e r ' s motion was passed, some changes having been made in the l e t t e r . 15 Diary 143, 144 (154). X-5737 - 5 - 1929 ( C o n t ' d . ) . February 2: The executive o f f i c e r s of the Federal Reserve Bank of ITew York favored an i n c r e a s e i n discount r a t e s but t h e r e was o b j e c t i o n i n the Board of D i r e c t o r s . 15 Diary 143 (44). February 5: The Board sent l e t t e r s to a l l Federal r e s e r v e banks p o i n t ing out the seepage of Federal r e s e r v e c r e d i t i n t o s p e c u l a t i v e channels and asked how they kept informed of the use made of the proceeds of r e d i s c o u n t s , the methods employed to r e g u l a t e the abuse and how e f f e c t i v e the methods had been. . 187 107. February 5: : Governor Harrison informs the Board t h a t an i n c r e a s e i n discount r a t e s i a necessary; t h a t d i r e c t a c t i o n as to banks "out of l i n e " had proved a f a i l u r e . 15 Diary 149, 150, 151, 154 (46) February 7: P u b l i c warning of Federal Reserve Board r e l e a s e d to p r e s s . , This w i l l be r e f e r r e d to in some d e t a i l l a t e r . 187 - 113. Governor Harrison informs Board t h a t h i s d i r e c t o r s a r e considering an i n c r e a s e i n discount r a t e s . 15 Diary ISO (47). February 11: The New York d i r e c t o r s met but took no a c t i o n as to i n c r e a s i n g discount r a t e s . 15 Diary 165 ( 4 8 ) . February 14: The Federal Reserve Bank of Mew York a p p l i e d f o r approval of an i n c r e a s e t o 6$ on condition t h a t the Board immediately a c t on t h e same. This was the f i r s t a p p l i c a t i o n f o r an increase,. I t was disapproved by the Board, as a l s o were s i m i l a r a p p l i c a t i o n s made March 3, March 21, March 28, A p r i l 4, A p r i l 18, April 25, May 9, May 16, and May 23. 2 8 3 X-3737 1929. ( C o n t ' d . ) February 15: The Federal Advisory Council met and approved the Board's warning published February 7, but advised the Board to go f u r t h e r and obtain the cooperation of member banks to prevent the d i v e r s i o n of Federal r e s e r v e c r e d i t to "loans on s e c u r i t i e s " g e n e r a l l y , - meaning customers security loans. 15 Diary 173, 174 (51). The Federal Advisory Council f u r t h e r advised the Board not to approve any i n c r e a s e of discount r a t e s u n t i l the Board's e f f o r t s along the l i n e s of d i r e c t p r e s s u r e had been exhausted. The Council, when making i t s recommendations, did not know of the a c t i o n of the Federal Reserve Bank of Hew York i n recommending an i n c r e a s e i n discount r a t e s the day b e f o r e . 15 Diary 175, 176 (52). March 21: Governor Young suggests a conference as to discount r a t e s with t h e Hew York d i r e c t o r s . Governor Harrison r e p l i e d Yes but discount r a t e s must f i r s t be i n c r e a s e d . A p r i l 4: The Governors Conference, accepting the d e s i r e of Boston, New York, and Chicago f o r an i n c r e a s e to &fo, favored a r a t e not l e s s than bf> f o r the other Federal reserve banks. 16 Diary 15 (58). April 19: The Federal Advisory Council reverses i i s recommendation of February 15 and advises an i n c r e a s e a t Mew York to 6$. May 1: Report of Committee on r e c e n t economic changes. Rather " b u l l i s h " i n i t s optimism. Fothing much to worry about. The degree of progress in recent years i n s p i r e s us with high hope. May 17: The Federal Reserve Bank of Cleveland passes a r e s o l u t i o n favoring an i n c r e a s e i n the Hew York discount r a t e to 6$ to curb s p e c u l a t i o n . 16 Diary 64 (97)'. 1929. ( C o n t ' d . ) May 21: The Federal Advisory Council re commends an i n crease to Sfo. 16 Diary 15 (58). 16 Diary 25 (91). May 22: May 29: Governor Young p o i n t s out t h a t Federal Reserve Bank of Hew York has not mentioned an i n c r e a s e i n buying r a t e s for acceptances i n connection •with an i n c r e a s e of discount r a t e s ; t h a t with a 5fo discount r a t e , acceptance r a t e s remaining a t 5 a c c e p t a n c e s would flow i n t o the Fede r a l Reserve Bank. New York suggests a conference of a l l Federal r e s e r v e hanks as n a t i o n a l questions a r e i n volved. x6 Diary 91 (92). May 31: Chairman McGarrah w r i t e s Board asking i t to take up a program f o r encouraging member "banks to i n c r e a s e t h e i r borrowings. 195 - 81. June 3: D i r e c t o r Mitchell of Hew York t o l d the Board t h a t the market should he eased by buying b i l l s or Government s e c u r i t i e s ; t h a t the discount r a t e should remain a t 5$ and t h a t a more l i b e r a l discount p o l i c y should be adopted. 16 Diary 100 (74). June 12: The Federal Reserve Board, a f t e r a conference between i t s Committee and the d i r e c t o r s of the Federal Reserve Bank of Hew York, s e n t a l e t t e r to Chairman McGarrah i n d i c a t i n g a w i l l i n g ness to suspend d i r e c t p r e s s u r e , except as to a few f l a g r a n t cases of continuous borrowing, X-6757 1929. ( C o n t ' d . ) June 12: ( C o n t ' d ) . the 5jo r a t e , however, to continue f o r the p r e s e n t . 16 Diary 108, 109 ( 5 4 ) . J u l y 16: D i r e c t o r Mitchell t o l d Dr. Miller t h a t an easing p o l i c y was a b s o l u t e l y necessary, although he s a i d t h a t Governor Harrison s t i l l favored an i n c r e a s e i n the discount r a t e * 1C Diary 132 (199). August 2i Governor Harrison came "before the Board and favored an easing p o l i c y through purchases of M i l ? , Government s e c u r i t i e s , or "both i f necessary. While he a l s o asked f o r an i n c r e a s e i n discount r a t e s to 6fo, he s t a t e d t h a t t h i s would merely a c t as a "barrage which would make the acceptance "buying r a t e (then 5 ^ ) lower than the discount r a t e , thus i n c r e a s i n g the flow of acceptances i n t o the Federal r e s e r v e "bank and would, a t t h e same time* induce the member banks to use p a r t , a t l e a s t , of the money received from the s a l e of acceptances f o r r e d u c t i o n of t h e i r r e d i s c o u n t s . 16 Diary 149 (80). August 7: The Governors, i n conference, favored an easing p o l i c y as recommended by Governor Harrison, but through purchase of acceptances r a t h e r than Government s e c u r i t i e s , and approved h i s suggestion of an i n c r e a s e to a t Hew York but on the unders t a n d i n g and t h e i r assurance t h a t the 5'jo r a t e would be maintained a t the other Federal r e s e r v e banks. 16 Diary 152, 155 (81). August 8; The Board approved the p o l i c y as o u t l i n e d by the Governors. 16 Diary 153 ( 8 1 ) . August 8: The Board approved a r e d u c t i o n of the buying r a t e on acceptances from 5^ to 5-1/8$; X-6737 -5— — 9 — Having o u t l i n e d the important dates involved, v/e can now consider the d i f f e r e n c e as to discount p o l i c y which arose between the Federal Reserve Board and the Federal Be serve Bank of Hew York, The Board had anxiously observed the wave of s e c u r j t y s p e c u l a t i o n sweeping ever t h e country, and during the year 1928 three i n c r e a s e s of discount r a t e s and three i n c r e a s e s of acceptance buying r a t e s had been approved, v i z : - i n discount r a t e s , to 4$ on February 3, to 4 o n May 18, and 5$ on J u l y 13, while acceptance buying r a t e s had been s e v e r a l times i n c r e a s e d , being 4 o n J u l y 25, 1928. In 1929 acceptance buying r a t e s were incre ase d from 4 o n 4 , to January fa on March 25. Between February 15, 1928 and February 13, 1929, the System had sold 231 m i l l i o n s , n e t , of Government s e c u r i t i e s , and money i n c i r c u l a t i o n had been reduced 16 m i l l i o n s . -7~ Between J u l y 13, 1928, - the date of the e s t a b l i s h m e n t of the 5$ r a t e a t New York, - and February 14, 1929, - the date of the f i r s t a p p l i c a t i o n of New York f o r an i n c r e a s e to 6$, a p e r i o d of seven months, no change i n the discount r a t e was suggested by the Federal Reserve Bank of Mew York. I t w i l l be i n t e r e s t i n g to consider the course of Federal r e s e r v e c r e d i t during t h i s p e r i o d of seven months. X-S7C7 - f 2 8 10 - As above p o i n t e d out, "between January 1 and J u l y IS, 1929, t h e r e had been t h r e e i n c r e a s e s i n discount r a t e s , and the System had sold about 400 m i l l i o n s of Government s e c u r i t i e s , under a Federal r e s e r v e p o l i c y of firming conditions, approved by the Federal Advisory Council, the Open Market Committee, and by the Beard# On August IS, 1929, the Federal Reserve Bank of How York r e p r e s e n t e d to the Board t h a t seasonal requirements might produce some c r e d i t s t r a i n which might r e a c t on business and commerce, and the Board s t a t e d t h a t i n such event i t would permit easing of the market by b i l l purchases, and t h a t i t would f u r t h e r , i f a b s o l u t e l y necessary, permit the purchase of Government s e c u r i t i e s up to the l i m i t of 100 m i l l i o n s . The Federal Reserve Bank of Hew York net the seasonal c r e d i t demand, as a u t h o r i z e d by the Federal Reserve Board, by the purchase of acceptances, s u b s t a n t i a l l y no Government s e c u r i t i e s being bought. I t was c l e a r l y under- s t o o d , however, t h a t Federal r e s e r v e p o l i c y p e r m i t t e d these acceptance purchases merely f o r the purpose of meeting c r e d i t s t r a i n , should such strain arise. As a f a c t , however, the Federal Reserve Bank of Hew York a c t i n g f o r the other banks as w e l l , between J u l y and November, 1928, i n c r e a s e d t h e i r holdings of acceptances by 286 m i l l i o n d o l l a r s . That t h i s amount was f a r beyond any p o s s i o l e need of increased c r e d i t , i s shown by the f a c t t h a t l a r g e l y out of the proceeds of these s a l e s the member banks not only met a l l seasonal c r e d i t demands, but a c t u a l l y paid off about 193 m i l l i o n s of t h e i r r e d i s c o u n t s • As a r e s u l t of these purchases, helped i n small X-6737 ^ — 11 — degree "by gold imports r a t e s on "bills and on commercial paper, as well as customers r a t e s , a c t u a l l y declined, c o n t r a r y to the u s u a l seasonal trend# Member "bank reserve "balances i n c r e a s e d 28 m i l l i o n s , and loans on s e c u r i t i e s of reporting member ba;:ks i n c r e a s e d 127 millions* There -rould seem to be no p o s s i b l e doubt "but t h a t t h i s l i b e r a l p u r chase of t i l l s i n excess of c r e d i t needs wv,s a f a c t o r ' n the r e v i v a l of s p e c u l a t i o n and i n the growth of "brokers l o a n s . JLs a f a c t , the p u r - chase of acceptances had been on such a l i b e r a l s c a l e t h a t the Federal r e s e r v e banks h e l d f o r t h e i r own account. and f o r account of t h e i r f o r e i g n correspondents, about two-thirds of the t o t a l volume of outstanding acceptances. The above f a c t s are brought out c l e a r l y i n the Annual Heport of the Board f o r 1928* F u r t h e r , during t h i s period from June to November. 1928, s t o c k p r i c e s increased from an average based on 1926 f i g u r e s , of 150.5 to 192,1; stock s a l e s i n c r e a s e d from 11,6 m i l l i o n s to 23.3 m i l l i o n s ; brokers loans of the New York banks i n c r e a s e d : (a) f o r own account 176 m i l l i o n s , (b) f o r other banks 205 m i l l i o n s ; (c) "for others" i n c r e a s e d 488 m i l l i o n s the t o t a l i n c r e a s e of a l l these loans being 870 m i l l i o n s . There i s annexed hereto a t a b l e showing the course of Federal r e serve c r e d i t from J u l y to November, 1928, giving both i t s composition and the r e l a t i v e f a c t o r s f o r i n c r e a s e and decrease; X-S737 - 12 - Federal Reserve Credit. J u l y to November, 1928. Composition Discounts Acceptances U. S. -Securities Other F.H. c r e d i t Total I n c r e a s e - 193 285 4. 25 + 4 315 * + 193 122 Factors For i n c r e a s e Money i n c i r c u l a t i o n Unemployed c a p i t a l funds Non-member "bank d e p o s i t s Member "bank r e s e r v e s For decrease + 114 + 21 + 28 165 + 5 •* 38 2 j. J- Treasury funds Monetary gold .+ 43 » 122 Increases F. B. c r e d i t i n c r e a s e Monetary gold " Treasury currency 122 38 5 Deductions Member bank r e s e r v e balancus_ Money i n c i r c u l a t i o n Unemployed c a p i t a l funds ITon-member bank d e p o s i t s 28 137 114 23 21 2 2 The e f f e c t of t h e s e acceptance purchases was to n u l l i f y the e f f e c t of the i n c r e a s e of the discount r a t e to 5$ made on J u l y 13, 1928, and to change Federal reserve p o l i c y from one of firming to one of easing the market. X-5737 - I S - The above i s confirmed by Deputy Governor Burgess of the Fede r a l Reserve Bank of iIe-7 York, who s t a t e d i n an address b e f o r e the American Acceptance Council, December 11, 1928: "The Talcing by the Federal ..-•••serve banks of b i l l s o f f e r e d involved p u t t i n g i n t o the money market something l i k e 100 nr.llions of d o l l a r s more than s e a sonal c r e d i t needs r e q u i r e d , which was used by the member banks to l i q u i d a t e p a r t of t h e i r indebtedness, and t h i s tended, i n conjunction with gold imports, to ease s l i g h t l y the money s i t u a t i o n . " I t i s i n t e r e s t i n g to note t h a t on December 15, 1928, Dr. Miller introduced a r e s o l u t i o n favoring higher acceptance buying r a t e s . This r e s o l u t i o n , however, f a i l e d , but was voted f o r by Dr. M i l l e r , P i a t t , and C.S.H. 15 Diary 115 (149). Such was the s i t u a t i o n c o n f r o n t i n g the Federal Reserve Board a t the beginning of January, 1929, I t found t h a t i t s f i r m i n g p o l i c y , agreed upon by the Federal Advisory Council and the Open Market Committee, had i n f a c t been changed by the Federal Reserve Bank of Hew York i n t o an easing p o l i c y . Federal r e s e r v e c r e d i t outstanding i n January, 1929, was some 226 m i l l i o n s g r e a t e r than i n January, 1928. There was danger t h a t the customary l i q u i d a t i o n a f t e r the f i r s t of the year might not take p l a c e and t h a t Federal reserve c r e d i t outstanding would X-6737 - 14 i n c r e a s e i n 1929 r a t h e r than decrease, j u s t as i t i n c r e a s e d •between January and May, 1928. In t h i s connection i t should "be j o i n t e d out t h a t f o r the year ending June 30, 1929, 1,114 ba^ks were "borrowing f o r 80fo or more of the time. 135 - 143. The problem confronting the Board was how to b ring ah out a reasonable l i q u i d a t i o n of Federal r e s e r v e c r e d i t s i t h o u t , a t the same time, i n j u r i n g a g r i c u l t u r e and "business. A f t e r most c a r e f u l c o n s i d e r a t i o n , the Federal Reserve Board determined to keep the p r e s e n t 5^ r a t e unchanged Vat to t r y to reduce outstanding Federal r e s e r v e c r e d i t "by b r i n g i n g d i r e c t p r e s s u r e , through the Federal r e s e r v e banks, upon the member banks to b r i n g about a reasonable l i q u i d a t i o n of t h e i r s p e c u l a t i v e l o a n s , or a t l e a s t not to i n c r e a s e them, and to t h i s end reduce, or a t l e a s t not i n c r e a s e , t h e i r borrowings from the Federal r e s e r v e bank to support t h e i r r e q u i r e d r e s e r v e s a g a i n s t d e p o s i t s a r i s i n g out of these s p e c u l a t i v e l o a n s . On February 2, 1929, the Board sent a l e t t e r to a l l Federal r e serve banks c a l l i n g a t t e n t i o n to the seepage of Federal r e s e r v e c r e d i t i n t o the s e c u r i t y markets and a l s o r e l e a s e d f o r February 7, 1929, a p u b l i c statement k n o w as the Board's "warning", which w i l l be considered in d e t a i l l a t e r . -8- Before considering the r e s u l t s obtained from the e x e r c i s e of d i r e c t - 15p r e s s u r e , with a s t a b l e 5fo discount r a t e , i t w i l l "be advisable to consider the grounds upon which the Federal Reserve Bank of New York based i t s r e p e a t e d r e q u e s t s f o r an increase of the discount r a t e , and the reasons prompting the Board to disapprove the i n c r e a s e . The Federal Reserve Bank of New York, as above shown, f i r s t asked f o r an i n c r e a s e to &j> on February 14, 1929, and the Board disapproved the i n c r e a s e a s a l s o nine other a p p l i c a t i o n s f o r a s i m i l a r i n c r e a s e , the l a s t r e f u s a l being on May 23, 1929. I n considering the f i r s t a p p l i c a t i o n , the Board, was hampered by the f a c t t h a t the Federal Reserve Bank had given the Board no o f f i c i a l explanation of the reasons prompting i t to ask the i n c r e a s e . I t should be remembered t h a t , on October 5, 1928, the Board asked the Federal r e s e r v e banks when forwarding a p p l i c a t i o n s f o r changes i n r a t e s , to give the reasons f o r such changes, b u t t h a t on October 25, 1928, Chairman McGarrah r e p l i e d t h a t the Bank would be g l a d to f u r n i s h the Board with the main f a c t s p r e s e n t e d to the d i r e c t o r s a t t h e time of a change in the r e d i s c o u n t r a t e , but beyond t h i s i t would be i m p r a c t i c a b l e to go, owing to the d i f f i c u l t i e s of attempting to express the reasons which have a c t u a t e d the d i f f e r e n t d i r e c t o r s i n voting t o change the r a t e . the a p p l i c a t i o n of February 14, 1929, was made over the telephone by Governor H a r r i s o n , and the Board voted to t a b l e i t pending an answer of the Bank to the Board's warning l e t t e r r e l e a s e d February 7* F i n a l l y the Board reconsidered i t s vote and advised Governor Harrison t h a t i t would take the a p p l i c a t i o n under review and take no a c t i o n on t h a t day. X-6737 2 9 3 •m l £ w Governor Harrison then t o l d Governor Young t h a t he had not given him the a c t u a l v o t e ; t h a t i t was i n f a c t c o n d i t i o n a l on a c t i o n "by the Board on t h a t day; and that h i s d i r e c t s . " , could not leave u n t i l the Board rendered i t s d e c i s i o n . F i n a l l y the Board unanimously voted to disapprove the a p p l i c a t i o n . 15 Diary 168 to 170 ( 5 0 ) . The disapproval was based a s well on the condition imposed by the Federal Reserve Bank of immediate d e c i s i o n by the Board as upon the m e r i t s of the a p p l i c a t i o n . The Board f e l t t h a t i t would not be p o s s i b l e to e x e r c i s e i t s duty of review and determination unon a telephonic r e q u e s t , giving no o f f i c i a l reasons f o r the change and conditioned on immediate d e c i s i o n of the Board. Governor Young, however, explained to Governor Harrison t h a t the a p p l i c a t i o n involved n a t i o n a l as well as l o c a l c o n s i d e r a t i o n s ; t h a t i f the New York r a t e was increased to 6$, every Federal r e s e r v e bank e a s t of t h e M i s s i s s i p p i River and very p o s s i b l y the o t h e r Federal r e s e r v e banks a l s o would have to make a s i m i l a r i n c r e a s e , and t h a t a m a j o r i t y of the Board f e l t t h a t such a c t i o n might s e r i o u s l y a f f c c t a g r i c u l t u r e and commerce, and f u r t h e r , t h a t the Board could not decide t h i s important question o f f hand, on the day of the a p p l i c a t i o n , i n the absence of any o f f i c i a l statement of reasons. 15 Diary 158 (248). On February 27, 1929, Governor Young i n response to a request of the Board on February 14th f i l e d with the Board a memorandum s t a t i n g the reasons given by the Board to the Federal Reserve Bank of Hew York, f o r d i s a p p r o v a l of the a p p l i c a t i o n , which memorandum was given by him to D i r e c t o r Mitchell of the Federal Reserve Bank of Hew York. X-5757 - 17 - 3 9 4 These reasons i n substance r/ere: 1. S u f f i c i e n t time lias not elapsed to determine the e f f e c t of the Board's warning published Feb. 7, 1929. 2. The r e p l i e s received from nearby Federal reserve banks i n d i c a t e t h a t r a t e i n c r e a s e s should not be begun now. 3. The danger of increased r a t e s encouraging gold imports. 4. The Federal Reserve Bank of Hew York has f u r n i s h e d the Board with s t a t i s t i c s , but has given i t no reasons f o r wishing the i n c r e a s e , and the Board d e s i r e s reasons. 5. Before consenting to an i n c r e a s e , the Board d e s i r e s to know to what l i m i t s the Federal r e s e r v e banks are p r e p a r e d to go i n the event of the i n c r e a s e to not being e f f e c t i v e , 5. The Board d e s i r e s the advice of the Federal Advisory Council now i n s e s s i o n , b e f o r e proceeding on a r a t e i n c r e a s e program. This memorandum was placed i n the Minutes of February 14th, which were not approved u n t i l February 27th. The second a p p l i c a t i o n f o r i n c r e a s e was an informal one, Governor Young advising the w r i t e r on Sunday, March 3rd, t h a t Governor Harrison had t o l d him t h a t h i s d i r e c t o r s e a r n e s t l y hoped f o r a u t h o r i t y to i n c r e a s e to 6sfi the next day, as they f e a r e d a runaway market. This a p p l i c a t i o n a l s o f a i l e d but the "runaway market" did not appear. 1 15 Diary 184, 185 ( 5 4 ) , The t h i r d a p p l i c a t i o n was f i l e d on March 21, 1929. I t imposed the same c o n d i t i o n of ininediate a c t i o n by the Board. I t was p o i n t e d out in the Board t h a t the f i g u r e s r e v e a l e d a general d e c l i n e of Federal reserve c r e d i t , which, a p a r t from the p r e v a i l i n g s p e c u l a t i o n would p o i n t to the d e s i r a b i l i t y of lower r a t h e r than h i g h e r discount r a t e s . $-6737 .<295 «• 18 «* The Board disapproved the a p p l i c a t i o n with only one d i s s e n t i n g v o t e . 15 Diary 196, 197* (56) . The fourtii a p p l i c a t i o n f o r i n c r e a s e was made on March 28, 1929. Board disapproved by a vote of 7 to 1. The 16 Diary 4 (57). The f i f t h a p p l i c a t i o n was made on April 4, 1929, and was disapproved by the Board. On A p r i l 9, 1929, Governor Harrison i n a l e t t e r to the Board, gave f o r the f i r s t time an o f f i c i a l statement of the reasons of h i s Bank f o r d e s i r i n g an i n c r e a s e . The reasons given i n substance were t h a t s p e c u l a t i v e a c t i v i t y had i n c r e a s e d i n t e r e s t r a t e s g e n e r a l l y i n the United S t a t e s to the i n j u r y of b u s i n e s s and e s p e c i a l l y of b u i l d i n g c o n s t r u c t i o n ; t h a t these high r a t e s had prevented the f l o t a t i o n of f o r e i g n s e c u r i t i e s i n t h i s country; t h a t they were reducing the purchasing power of Europe and t h r e a t e n i n g our export t r a d e , and t h a t the high c a l l loan r a t e s were drawing gold from Europe to be i n v e s t e d i n the c a l l loan market. The s i x t h a p p l i c a t i o n was made on A p r i l 18, 1929. I t was p o i n t e d out i n the Board t h a t some of the reasons given f o r the i n c r e a s e , - n e c e s s i t y f o r the easing of i n t e r e s t r a t e s , d i f f i c u l t y of p l a c i n g f o r e i g n loans i n the United S t a t e s , the consequent f a l l i n g o f f i n our export t r a d e , e t c . , were the very reasons advanced i n 1917 f o r lowering discount r a t e s . I t was a l s o p o i n t e d out t h a t the Hew York Bank a p p a r e n t l y f e l t that h i g h e r discount r a t e s would b r i n g about lower c a l l loan r a t e s , but the opinion was expressed t h a t higher discount r a t e s would c o n s t i t u t e a f i r m %-6737 % 9 G - ia foundation f o r h i g h e r r a t h e r than lower c a l l loan r a t e s . The Board disapproved the application.. 15 Diary 22, 23 ( 6 0 ) . The seventh a p p l i c a t i o n was made on April 25, 1929, and tnc Board disapproved. 15 Diary 38 ( 6 3 ) . The eighth a p p l i c a t i o n was made on May 9, 1929, the chief reason given by the Itew York Bank "being a d e s i r e to b r i n g the Federal r e s e r v e r a t e s i n t o proper r e l a t i o n with market r a t e s . I t was p o i n t e d out t h a t a 6fo r a t e was not needed to r e s t o r e the former r e l a t i o n of r a t e s , — t h a t a r a t e of 5^fo would accomplish t h i s . The Board disapproved. IS Diary 51 (63). The n i n t h a p p l i c a t i o n was made on May 16, 1929. I t was p o i n t e d out i n the Board t h a t Federal r e s e r v e c r e d i t o u t s t a n d i n g was r a p i d l y f a l l i n g ; t h a t a r a t e of 5|-^ would be s u f f i c i e n t to r e s t o r e the old r e l a t i o n of r a t e s . The Board disapproved. 15 Diary 56 (54). The t e n t h and l a s t a p p l i c a t i o n f o r increased r a t e s was made on May 23, 1929. Federal r e s e r v e c r e d i t outstanding had been reduced so m a t e r i a l l y t h a t t h e r e was some evidence that an a d d i t i o n a l amount, perhaps a hundred m i l l i o n d o l l a r s , was needed f o r the purposes of a g r i c u l t u r e and b u s i n e s s . While the Board disapproved the a p p l i c a t i o n , t h e r e was some discussion of a p o s s i b l e c o m p r o m i s e , a lowering of acceptance r a t e s coupled with a 6$ discount r a t e to act as a kind of "Lombard" r a t e . 15 Diary 78 ( 6 9 ) . X-6737 — 20 — From t h i s time on, the n e c e s s i t y of an i n c r e a s e d rate was p r a c t i c a l l y dropped from c o n s i d e r a t i o n , and on May 51, 1929, Chairman McGarrah, as above p o i n t e d out, advised the Board t h a t h i s d i r e c t o r s d e s i r e d to take up a program of encouraging the "banks to borrow. 195 - 85. The advance i n the discount r a t e to 6$ on August 9, was, as already p o i n t e d out, a p a r t of a program f o r easing the money market through lower acceptance r a t e s . 16 Diary 149 (80). During the d i s c u s s i o n s above o u t l i n e d , in which Governor Harrison gave reasons f o r i n c r e a s i n g discount r a t e s , the c o n d i t i o n s were r a p i d l y changing. Federal reserve c r e d i t outstanding, as shown by t o t a l b i l l s and s e c u r i t i e s of the New York Bank were s t e a d i l y decreasing, while i t s r e s e r v e r a t i o was a s s t e a d i l y i n c r e a s i n g , as shown in the following t a b l e : Federal Reserve Bank of New York. Total B i l l s and S e c u r i t i e s He serve Ratio 1929. 1929. * January 2. 709.8 January 70.4$ February. 6 325 February 78.6 March 6 349.9 March 79. April 3 238 April 79.2 May 1 328.3 May 81.1 June 5 253.6 June 79.1 The Board was thus asked to i n c r e a s e discount r a t e s under conditions of f a l l i n g Federal r e s e r v e c r e d i t and i n c r e a s i n g r e s e r v e r a t i o s which, according to the canons of banking p r a c t i c e c a l l e d f o r lower r a t h e r than higher rates! . 298 V 1-6737 -9- SI •* I t h a s "been g e n e r a l l y s u p p o s e d b y t h e p u b l i c t h a t t h e i s s u e "between the Federal Reserve Board and the Federal Reserve Bank of New York was simply whether the discount r a t e should or should not he i n c r e a s e d from 5$ to 6 fom This s u p p o s i t i o n i s a b s o l u t e l y erroneous. Ho one was hold enough to p r e d i c t with any confidence t h a t a mere i n c r e a s e to 6fo would s u f f i c e . The r e a l i s s u e was whether t h e 5$ r a t e should he maintained coupled with d i r e c t p r e s s u r e on the member banks to l i q u i d a t e reasonably, or a t l e a s t not to i n c r e a s e t h e i r s p e c u l a t i v e loans, o r , on the other hand, as claimed by the New York Bank, whether the Board should approve a p o l i c y of r e p e a t e d i n c r e a s e of r a t e s , beginning only a t 6$ and continuing to i n c r e a s e u n t i l the " s i t u a t i o n should be c o r r e c t e d " , t h a t i s , u n t i l the New York Stock market should be r a d i c a l l y d e f l a t e d . An a p p r e c i a t i o n of t h i s f a c t i s necessary to a complete understanding of the r e a l i s s u e between the Board and the Federal Reserve Bank of New York. That such was the r e a l i s s u e w i l l be apparent from reading the l e t t e r s e n t by Governor Harrison to the Federal Reserve Board dated A p r i l 9, 1929, i n which he used the following language i n j u s t i f y i n g the d e s i r e of h i s d i r e c t o r s f o r i n c r e ase d rates; "The r a t e i n c r e a s e would have the f u r t h e r r e s u l t of giving d e f i n i t e p u b l i c n o t i c e to the country t h a t the Reserve System i s ready to supplement and support a l l i t s other e f f o r t s by an a f f i r m a t i v e r a t e p o l i c y . "Public r e a l i z a t i o n t h a t the discount r a t e would be employed i n c i s i v e l y and r e p e a t e d l y , i f n e c e s s a r y , would x 6737 - 299 - 22g r e a t l y s t r e n g t h e n the e f f e c t i v e n e s s of the System's p o l i c y , and. i n i t s e l f h a s t e n the time when the System might lend i t s i n f l u e n c e towards e a s i e r money c o n d i t i o n s , " ( I t a l i c s mine). 195 - 45. Governor Harrison s e v e r a l times t o l d the Board t h a t i f the &fo r a t e did not " c o r r e c t the s i t u a t i o n " recourse mast be had to f u r t h e r i n c r e a s e s . February 5, 1929. 15 Diary 149 to 151 ( 4 5 ) . May 22, 1929. 16 Diary 74, 75 (68). Chairman McGarrah a l s o t o l d the Board t h a t i f 6fo did not " c o r r e c t the s i t u a t i o n " he would favor an i n c r e a s e to 7$, 8'jo or even h i g h e r . April 24, 1929, 16 Diary 37 (62). May 23, 1929, 16 Diary 74, 75 (68). Mr. Warburg, i n h i s book, "The Federal Reserve System," e n t e r t a i n e d the same views. . 1 - 513. 16 Diary 66 to 70 (257). I t i s i n t e r e s t i n g i n t h i s connection to note the e d i t o r i a l i n the Manchester Guardian Commercial on March 4, 1929: "There appeared to be some slender hope t h a t the Federal Reserve a u t h o r i t i e s were meditating a c t i o n d r a s t i c enough to p r e c i p i t a t e the c r i s i s i n Wall S t r e e t , which, i n the opinion of most monetary s t u d e n t s , must come sooner or later." 189 - 155 ( 5 ) . -10- Such was the i s s u e between the Federal Reserve Board and the Federal Reserve Bank of Hew York. The ilew York Bank wanted quick, r a d i c a l d e f l a t i o n of the stock market, through r a p i d i n c r e a s e s i n discount r a t e s . Chairman McGarrah admitted t h a t i f the p o l i c y of i n c i s i v e , repeated i n c r e a s e s did not quickly " c o r r e c t the s i t u a t i o n " the r e s u l t would be ~ 23 f r a u g h t with s e r i o u s danger to a g r i c u l t u r e and commerce# The Federal Reserve Board f e l t t h a t the way to solve the problem was to keep the discount r a t e s t a b l e a t bfo as a p r o t e c t i o n to b u s i n e s s , but to cut off Federal r e s e r v e c r e d i t from seeping i n t o Wall S t r e e t by d i r e c t p r e s s u r e upon the member banks to reduce, or a t l e a s t not i n c r e a s e , speculative loans. I f the Board had yielded to the d e s i r e of the Few York d i r e c t o r s and had entered upon a p o l i c y of repeated i n c r e a s e s of discount r a t e s , the crash i n the Hew York stock market which took p l a c e i n October, 1929, might have taken place i n May or June, 1929, but the r e s u l t a n t i n j u r y to bus in e s s would have been, i n a l l p r o b a b i l i t y , d i s a s t r o u s in the extreme* The m a j o r i t y of the Board f e l t , however, as above s t a t e d , t h a t the p r e s e n t f e v e r of s p e c u l a t i o n could not be curbed through the discount r a t e by any i n c r e a s e s h o r t of such extremes as would produce a cataclysm i n the market ,• which, as above s t a t e d , would i n j u r e business as much as or even more than i t would i n j u r e the stock market,, -*11-* That the discount r a t e i s i n e f f e c t i v e in curbing a s p e c u l a t i v e mania when once u n d e r l a y , i s the opinion of many bankers and economists. For example Mr. James Alexander, a t a meeting of the Federal Advisory Council on September 28, 1928, s t a t e d t h a t s p e c u l a t i o n could not e f f e c t i v e l y be c o n t r o l l e d by discount r a t e s , and favored a r e d u c t i o n of r a t e s to 4 15 Diary 33, 34, 35 ( 5 ) . - 24 P r o f e s s o r Hawtry, of London, t o l d the w r i t e r the same, adding t h a t i n h i s opinion our discount r a t e s vrere too high, and were merely i n j u r i n g b u s i n e s s . January 22, 1929, 15 Diary 131 (43). Mr. Harry A. Wheeler, a prominent Chicago "banker, t e l e g r a p h ed the Board on A p r i l 2, 1929, opposing f u r t h e r increase i n d i s count r a t e s , and s t a t i n g t h a t any i n c r e a s e would add to the heavy burden imposed on the commercial loan group whose r a t e s have been i n c r e a s e d i n f u l l p r o p o r t i o n to rediscount i n c r e a s e s , without e x e r c i s i n g any permanent r e s t r a i n i n g i n f l u e n c e upon market o p e r a t i o n s . 190 - 31. On March 23, 1929, the London S t a t i s t c r i t i c i s e d Governor Young's address b e f o r e the Commercial Club, C i n c i n n a t i , on March 16, 1929, s t a t i n g t h a t i t revealed a complete bankruptcy of i d e a s on the s u b j e c t of c r e d i t c o n t r o l ; t h a t the obvious remedy f o r t h e unhealthy c r e d i t s i t u a t i o n i n the United S t a t e s would be to lower money r a t e s so a s to cause a r e f l e x i n the i n t e r n a t i o n a l movement of short—term funds and to encourage lending abroad on the l a r g e s t s c a l e compatible with s a f e t y and profit. On May 3, 1929, the United S t a t e s Chamber of Commerce opposed an i n c r e a s e of discount r a t e s s o l e l y f o r the purpose of curbing s p e c u l a t i o n . 191 - 32. X-6737 - 25 On May 11, 1929, the London Economist s t a t e d : "The f i n a l l e s s o n i s perhaps the most imp o r t a n t . I t i s t h a t when stock p r i c e s are r a p i d l y r i s i n g , high money r a t e s are only an i n e f f e c t i v e d e t e r r e n t which p e n a l i z e s the innocent without t r o u b l i n g the g u i l t y . "The only remedy a g a i n s t rampant speculat i o n i s to cut off funds a l t o g e t h e r . " 193 - 79 (3) (221). On May 14, 1929, the New York Journal of Commerce s t a t e d t h a t the Federal Reserve System has no r i g h t to t r y to curb s p e c u l a t i o n through d r a s t i c i n c r e a s e s of discount r a t e s ; t h a t a l l t h a t has been r e q u i r e d of i t a t any time has been t h a t i t should keep i t s own funds, the r e s e r v e s of the deposit banks, out of the s p e c u l a t i v e market. 191 - 113. On May 23, 1929, the Manchester Guardian Commercial exp r e s s e d the b e l i e f t h a t i n c r e a s e d discount r a t e s would not curb s p e c u l a t i o n . 192 - 147 ( 2 ) . On May 25, 1929, the London S t a t i s t s t a t e d t h a t the banking a u t h o r i t i e s i n the United S t a t e s apparently want a business depression to curb s p e c u l a t i o n . 192 - 147. The w r i t e r b e l i e v e s t h a t the s p e c u l a t o r s would have heaved a s i g h of r e l i e f a t an i n c r e a s e in the discount r a t e to 6$, i n the hope t h a t then the d i r e c t p r e s s u r e , so embarrass- X-6737 — 26 — • ing to t h e i r movements, would be removed, and t h a t they would be enabled to obtain a l l the money they d e s i r e d under the 6$ Federal r e s e r v e r a t e . a 6rate, To these s p e c u l a t o r s the w r i t e r b e l i e v e s , would have been "easy money" as compared with the 5$ r a t e and i t s s t r i n g e n t d i r ect pressure. The Board a c t e d on the above theory with the o b j e c t of c u t t i n g o f f , by d i r e c t p r e s s u r e , the seepage of Federal r e s e r v e funds i n t o the s e c u r i t i e s market, as w i l l be shown later. That the s p e c u l a t i v e mania, i n s p i t e of the Board 1 s e f f o r t s , was fed from "loans f o r others" was a f a c t over which the Federal Reserve Board had no e f f e c t i v e c o n t r o l . I t must not be f o r g o t t e n t h a t the Federal Reserve System in t r y i n g to curb s p e c u l a t i o n through discount r a t e s , can a c t only by i n c r e a s i n g discount r a t e s on comrmercial paper; i t can not discount paper secured by stock collateral. Suppose the a u t h o r i t i e s of a town were to announce t h a t they had determined to put an end to the l o s s of l i f e by r e c k l e s s automobile d r i v i n g by i n c i s i v e and r a p i d i n c r e a s e s i n the p r i c e of g a s o l i n e ! X-6737 - 2V - Or suppose a Father were to c h a s t i s e h i s only son teecause an i n t o x i c a t e d man was carousing i n the s t r e e t ! The reply would c e r t a i n l y tee made t h a t nothing s h o r t of d i r e c t a c t i o n a g a i n s t the automobiles or a g a i n s t the i n t o x i c a t e d man i n the s t r e e t would s u f f i c e to c o r r e c t the e v i l ! The m a j o r i t y of the Board took the p o s i t i o n t h a t a g r i c u l t u r e and b u s i n e s s were e n t i t l e d to lower r a t h e r than higher r a t e s ; t h a t the r a t e s p a i d tey them had been m a t e r i a l l y i ncre ase d a l r e a d y by d i v e r s i o n of funds i n t o s p e c u l a t i v e channels, and t h a t to impose upon a g r i c u l t u r a l and commercial paper f u r t h e r crushing blows i n the shape of r a p i d i n c r e a s e s of discount r a t e s would be a serious i n j u r y to them and a f r u i t l e s s method of attempting to curb s p e c u l a t i v e loans, and e s p e c i a l l y the bank loans " f o r o t h e r s " , - which had become the chief cause of t h e trouble. —12— The Board having reached the conclusion t h a t the 5% r a t e should be kept s t a b l e f o r the p r o t e c t i o n of b u s i n e s s , and t h a t seepage of Federal r e s e r v e c r e d i t i n t o s p e c u l a t i v e channels should be prevented by other means, on February 7, 1929 i s s u e d a p u b l i c statement which came t o be known as the Board's "warning" and a c t i o n taken under i t as " d i r e c t a c t i on". This warning and the use of d i r e c t p r e s s u r e was by no means a new idea. I t was discussed i n the Board i n October 1922 when Chairman P e r r i n of the Federal Reserve Bank of San Francisco explained how the X-6737 305 - 28 - Federal Reserve Banks of Cleveland and San Francisco daring the war p e r i o d had s u c c e s s f u l l y employed i t , keeping the discount r a t e s t a b l e at < 6f > while the Federal Reserve Bank of New York had a 7$ r a t e . 194 - 97. I t was used a l s o "by the Federal Reserve Bank of New York i n October, 1925 b u t i n a d i f f e r e n t manner, as w i l l l a t e r be shown, frtira t h a t now advocated by the Federal Reserve Board. 194 - 97 ( 2 ) . The Federal Reserve Bank of P h i l a d e l p h i a used i t a l s o i n 1925. 194 - 97 ( 2 ) . Dr. Miller p o i n t e d out the danger from t h e seepage of Federal r e serve c r e d i t i n t o s p e c u l a t i v e channels i n an address a t Boston i n November, 1925. 194 - 103. On J u l y 27, 1927, the Governors Conference recommended d i r e c t a c t i o n to p r e v e n t s p e c u l a t i v e excess following the r a t e reduction to 3 | 14 Diary 16, 17 ( 5 9 ) . The danger was f r e q u e n t l y p o i n t e d out by the Board i n i t s Annual Reports from 1925 to 1928, and i n the Federal Reserve B u l l e t i n s . 194 - 103. The n e c e s s i t y f o r i t s p r e s e n t use was emphasized by the f a c t t h a t , e a r l y i n 1928, c e r t a i n ITew York member banks had borrowed from the Fede r a l Reserve Bank, on t h e i r c o l l a t e r a l n o t e s , many m i l l i o n s of d o l l a r s which they loaned on the stock exchange vdth g r e a t p r o f i t to themselves. 194 - 97 ( 3 ) . On ITovemeer 22, 1928, the Federal Advisory Council recommended i t to p r e v e n t seepage of Federal r e s e r v e c r e d i t i n t o the c a l l loan market. 186 - 2 1 X—6737 - 29- - • On February 14, 1929, the Federal Advisory Council advised i t s ext e n s i o n to loans of member banks to t h e i r customers. 188 - 60, 67, 70, 78. I t i s true t h a t on April 5, 1929, and again on May 21, 1929, the Federal Advisory Council reversed i t s recommendation of February 14, 1929, and advised an i n c r e a s e of discount r a t e s to 6 f as asked f o r by *> Hew York, on the ground t h a t d i r e c t p r e s s u r e had not succeeded i n curbing s p e c u l a t i v e l o a n s . 15 Diary 15 (58). 15 Diary 25 (91). As a f a c t , however, on May 31, 1929, j u s t ten days a f t e r t h i s l a s t recommendation of the Federal Advisory Council, Chairman McG-arrah adv i s e d the Federal Reserve Board t h a t the Sew York d i r e c t o r s wished to consider a program f o r easing money conditions and encouraging banks to borrow! 195 - 85. I f the Federal Advisory Council had delayed i t s recommendation f o r a 6lo r a t e f o r t e n days, i t i n a l l human p r o b a b i l i t y would never have made i t l -15!The Board, i n i t s p u b l i c warning of February 7, 1929, p o i n t e d out t h a t during the year 1928 the System had encountered i n t e r f e r e n c e b e cause of the a b s o r p t i o n of Federal reserve c r e d i t i n s p e c u l a t i v e s e c u r i t y loans; t h a t the volume of s p e c u l a t i v e c r e d i t was s t i l l growing and t h a t t h i s e f f e c t , coupled with gold e x p o r t s , had brought about an advance of from Vp to l-g-yo i n the cost of commercial c r e d i t ; t h a t i t became the duty of the Board to i n q u i r e i n t o t h e s e conditions and to take s u i t a b l e f\ X-6737 ^ j -w - SO measures to c o r r e c t them* which i n the immediate s i t u a t i o n meant to r e s t r a i n the u s e , e i t h e r d i r e c t l y or i n d i r e c t l y * of Federal r e s e r v e c r e d i t f a c i l i t i e s i n a i d of the growth of s p e c u l a t i v e c r e d i t . The r e f e r e n c e i n t h i s warning to the Board's l e t t e r of February 2, 1929, to the Federal reserve "banks, led many to b e l i e v e , i n c l u d i n g the Federal Reserve Bank of New York (16 Diary 93 ( 7 2 ) ) , <- t h a t the Board 1 s warning meant t h a t as a matter of law, under the Federal Re*, serve Act, no member bank a t any time could l a w f u l l y rediscount e l i g i b l e paper i n order to r e p l e n i s h i t s r e s e r v e s to s u s t a i n d e p o s i t s a r i s i n g out of s p e c u l a t i v e l o a n s . The w r i t e r b e l i e v e s no such r u l i n g of law was intended but merely a r u l e of sound banking p r a c t i c e under the rabid s p e c u l a t i o n then rampant. This would seem t o be c l e a r from the following quotation from the warning: " • • • • which, i n the immediate s i t u a t i o n , means to r e s t r a i n the u s e , d i r e c t l y or i n d i r e c t l y , of Federal r e s e r v e c r e d i t f a c i l i t i e s i n a i d of the growth of s p e c u l a t i v e c r e d i t . n ( I t a l i c s mine) • -14We can now consider the e f f e c t of d i r e c t p r e s s u r e , which l a s t e d , as above p o i n t e d out, from February 7, 1929, to about June 9, 1929, To understand i t s e f f e c t i t w i l l be advisable to consider the periods j u s t b e f o r e i t went i n t o e f f e c t , and the l a t e r p e r i o d s ending with the stock market c o l l a p s e of October, 1929. These p e r i o d s may be divided as follows: 1. January, 1928 to January, 1929• 2. February, 1928 to February, 1929* 308 X-6737 * 31 — » 3. February 9, 1929, to June 8, 1929. (This i s the period of direct pressure.) June 8, 1929 to Au™ast 9, 1929. 4. 5. August, 1929 to October, 1529. This includes the increase i n discount r a t e s to 6fa, approved August S, 1929, FEDERAL RESERVE SYSTEM The Federal Reserve f i g u r e s a r e weekly averages. The Member bank f i g u r e s a r e f o r weekly statement d a t e s . 1. January. 1928 ~ January. 1929. Gold F.R. :Dis- :Accep-:U.S. se-:Mem. b k . j S e c . : Comm. ; I n v e s t - : I m - :Ex- : Curr, i n credit:counts:tances:curities:reserves:loans:loans:ments :ports:ports: circulation 4239 -37 : f503 : 4104 : -364 )ruary. 4245 4391 442 -208 : 251 : - -12 4924 i i'ecrua]ry. 482 -19 S, : 246 : : : ; ^796:^333 : - 2 4 -33 i -45 3. Direjet Actio:i . F e b n iary 9,. 1929 - June 8. 1929. -193 4140 -361 4444 - 68 -300 -262 173 429 42 465 31 453 S* jgust ]10. 1929, le 8. 19%5. — Ai 4 62 4 81 - 24 4 5 5. 4 41 -186 4234 - 20 4518:4189 4 31 Aw?ust. 192<3. 4 io - -242 0ctob<3r. 1929, - 2 8 i 253 -134 (From f i g u r e s f u r n i s h e d by Dr. Goldenweiser) 199 - 57. Let us now comment on these periods and examine the course of Federal reserve c r e d i t f o r the Federal Reserve System. Period 1. January 1928 to January 1929. Federal r e s e r v e c r e d i t outstanding i n c r e a s e d 239 m i l l i o n s caused l a r g e l y "by gold exports of 250 m i l l i o n s n e t . During t h i s period s e c u r i t y loans i n c r e a s e d 796 m i l l i o n s of d o l l a r s , i n s p i t e of the gold exports and the d e c l i n e of 19 m i l l i o n s i n money i n c i r c u l a t i o n . Period 2. February, 1928 to February, 1929. Federal r e s e r v e c r e d i t i n c r e a s e d 245 m i l l i o n s l a r g e l y through gold e x p o r t s , while s e c u r i t y loans i n c r e a s e d 924 m i l l i o n s . Period 3. February 9, 1929 to June 8, 1929. This was the p e r i o d of d i r e c t a c t i o n , a l s o of a s e r i e s of i n c r e a s e s i n buying r a t e s on acceptances a t the Federal Reserve Bank of ITew York, and of i n c r e a s e s in discount r a t e s by f o u r Western Federal reserve banks to bring them i n t o l i n e with the 5fo r a t e a t the other banks. During t h i s period there was a f a l l i n g - o f f of $300,000,000 i n the acceptance holdings of Federal reserve, banks and of $44,000,000 i n holdings of United S t a t e s s e c u r i t i e s , while discounts of member banks i n c r e a s e d $144,000,000, so t h a t t o t a l reserve bank c r e d i t outstanding declined by $193,000,000. This decrease i n reserve bank c r e d i t , d e s p i t e an i n c r e a s e of $29,000,000 i n the amount of money i n c i r c u l a t i o n , accompanied an importation of $173,000,000 of gold and a decline of $68*000,000 i n member bank r e s e r v e balances. During t h i s p e r i o d there was a r e duction of $361,000,000 i n s e c u r i t y loans and of $262,000,000 i n investments of r e p o r t i n g member banks accompanied by an i n c r e a s e of $444,000,000 i n a l l o t h e r , l a r g e l y commercial, loans. During t h i s p e r i o d , however, loans " f o r others" incre ase d 313 millions. I t may be contended t h a t these decreases in r e s e r v e bank c r e d i t were brought about more l a r g e l y by the decrease in acceptance holdings of 300 m i l l i o n s which more than o f f s e t the i n c r e a s e in gold imports of 173 m i l l i o n s . X-67S7 - 33 I t should be remembered, however, t h a t the s h u t t i n g o f f of the flow of acceptances by increased purchasing r a t e s had been in e f f e c t b e f o r e d i r e c t p r e s s u r e was put i n e f f e c t by the Federal Reserve Board# On January 4, 1929, the Federal Reserve Bank of New York i n c r e a s e d i t s buying r a t e s on acceptances from 4|-fo to 4^$ wi thout even a s k i n g a u t h o r i t y from the Federal Reserve Board, and on January 21st i t i n creased these r a t e s to 5fo. This a c t i o n i n s h u t t i n g off the flow of acceptances threw a g r e a t l y i n c r e a s e d s t r a i n f o r rediscounts on the Federal r e s e r v e banks. The Federal Reserve Board, by d i r e c t p r e s s u r e , headed off t h i s i n c r e a s e d demand f o r r e d i s c o u n t s and kept i t down to 140 m i l l i o n s , notwithstanding a 344 m i l l i o n decline i n the System's holdings of a c ceptances and Government s e c u r i t i e s . Had i t not been f o r the d i r e c t p r e s s u r e , i t i s f a i r to assume t h a t under the rampant s p e c u l a t i v e mania, the member banks would have redis— counted very much more than t h i s i n c r e a s e of 140 m i l l i o n s , and t h a t the gold imports of 173 m i l l i o n s would have a l s o served i n m a t e r i a l degree to support f u r t h e r expansion. I t should be remembered a l s o t h a t while member bank r e s e r v e s decreased 68 m i l l i o n s , commercial loans increased 444 m i l l i o n s a g a i n s t an i n c r e a s e of only 82 m i l l i o n s in the preceding p e r i o d . Period 4. June 8, 1929 to August 9, 1929. Early i n June the a p p l i c a t i o n of d i r e c t a c t i o n was suspended, l a r g e l y because i t was f e l t that the heavy c r e d i t and currency requirements around the end of the f i s c a l year should be met by the banks m thout h e s i t a t i o n and without a f e e l i n g t h a t they were going c o n t r a r y to Federal r e s e r v e X-6737 - 34 p o l i c y . That the System had decided upon a p o l i c y of r e l a t i v e ease became g e n e r a l l y known, and t h i s l e d to a r e v i v a l of s p e c u l a t i v e a c t i v i t y . Between June 5 and August 7 there was a growth of $518,000,000 i n s e c u r i t y loans of r e p o r t i n g member "banks, and of $736,000,000 i n b r o k e r s 1 l o a n s . S e c u r i t y p r i c e s advanced about 14 per c e n t . The growth i n Federal r e s e r v e bank c r e d i t , however, during the p e r i o d was l i m i t e d to $62,000,000,. owing i n p a r t to the f a c t t h a t there was an inflow of $42,000,000 of gold from abroad. A p a r t of t h i s i n c r e a s e i n r e serve funds was i n c i d e n t to the issuance of the new-size currency, money i n c i r c u l a t i o n i n c r e a s i n g by $65,000,000 during the p e r i o d . Member bank r e serve balances a l s o showed a growth of $31,000,000* P e r i o d 5. August 10, 1929, to October 12, 1S29. On August 9 the discount r a t e a t the Federal Reserve Bank of Hew York was i n c r e ase d from 5 to 6 p e r cent and a t the same time the buying r a t e on acceptances was reduced from 5 - 1 / 4 to 5 - 1 / 8 p e r c e n t . This r e s u l t e d i n a r e v e r s a l of e a r l i e r conditions by making i t cheaper f o r the banks to obtain r e s e r v e bank c r e d i t by the s a l e of acceptances r a t h e r than by the d i s count of e l i g i b l e p a p e r . By the second week i n October borrowings of the Federal r e s e r v e banks had d e c l i n e d $186,000,000, while acceptance holdings of the Federal r e s e r v e banks had i n c r e a s e d $234,000,000, the net change i n Federal reserve bank c r e d i t o u t standing being an i n c r e a s e of $41,000,000. The d e c l i n e i n member bank indebtedness r e s u l t e d i n a d i s t i n c t easing of conditions i n the money market. S e c u r i t y loans of member banks d e c l i n e d somewhat during t h i s p e r i o d , but there was a very r a p i d i n crease i n s p e c u l a t i v e a c t i v i t y and i n b r o k e r s ' l o a n s , supplied mostly by non-banking l e n d e r s . ... X-673? 3 1 2 — 35 * • * A s i m i l a r comparison f o r the Federal Reserve Bank of New York follows; ( i n m i l l i o n s of d o l l a r s ) Federal r e s e r v e f i g u r e s are weekly averages. Member bank f i g u r e s a r e f o r weekly statement d a t e s . F. R. bank credit Bills | d i s - | Accepcounted \ tances \ U. S. securities Reporting member banks i n New Member York City bank r e Investserve b a l - i S e c u r i t y Commercial ments loans ances | loans p e r i o d 1 . January 7. 1928 to January 5. 1929. 4 226 4 243 4 64 - 80 - 23 4 344 4 90 4 37 16 4 21 Period 2 . February 11. 1928 to February 9. 1929. i 39 4 78 4 10 - 51 4 2 4 320 4 Period 3 . Direct Action, February 9, 1929 to June 8, 1929. - 78 4 1 - 89 4 2 - Period 4 . June 8, 1929 + 193 4 168 4 19 7 - 179 4 257 - 78 4 82 - 90 4 108 - 29 to August 10, 1929. 4 12 9 4 283 Period 5. August 10, 1929 to October 12, 1929. - 161 - 216 4 60 - 19 4 15 - 125 An i n s p e c t i o n of the above t a b l e s s a t i s f i e s the w r i t e r t h a t the d i r e c t p r e s s u r e imposed during the 3rd p e r i o d was s u c c e s s f u l i n p r e v e n t ing the seepage of Federal reserve c r e d i t i n t o s p e c u l a t i v e channels. This i s borne out by the f a c t t h a t on May 22, 1929, Chairman MoG-arrah and Governor Harrison t o l d the Board t h a t d i r e c t p r e s s u r e had made the banks a f r a i d to borrow a t a l l and t h a t they wanted to encourage X-6737 «• 3 6 *" the "banks to borrow to meet the necessary demand soon to come f o r comm e r c i a l needs. 16 Diary 75, 76, 77 (179). The Manchester Guardian, on May 215, 1929, s t a t e d t h a t d i r e c t a c t i o n had reduced Federal reserve c r e d i t used f o r s p e c u l a t i o n , hut not the amount of c r e d i t absorbed i n s p e c u l a t i v e loans, the l a t t e r e v i d e n t l y r e f e r r i n g to loans " f o r o t h e r s " . 192 - 147 ( 2 ) . I t would appear a l s o t h a t even i n the two succeeding periods ending i n the collapse of October, 1929, the cause of the rampant s p e c u l a t i v e a c t i v i t y was l a r g e l y a t t r i b u t a b l e to the flow of funds i n t o the c a l l loan market from c o r p o r a t i o n s u s i n g the banks to p l a c e t h e i r l o a n s . The following t a b l e " a l l b r i n g t h i s out g r a p h i c a l l y : Brokers 1 Loans Reporting Member Banks, New York City. Chm Account and Out of Town Banks 1929 February June August October 5 5 14 9 3048 2350 2775 2772 "For Others" 2621 2934 3178 3941 Total 5669 5284 5952 6713 Comparing February 5 with October 9, we f i n d t h a t the loans by New York banks f o r t h e i r own account and t h a t of out of town banks declined 270 m i l l i o n s , while the New York banks loans " f o r others" i n c r e a s e d 1320 millions. -15While during the p e r i o d of d i r e c t p r e s s u r e there was a v e r y s a t i s f a c t o r y decrease i n t o t a l s p e c u l a t i v e (including brokers) l o a n s , yet 814 X-6737 - £7t h e s e c u r i t y l o a n s to customers a s d i s t i n c t f r o m "brokers d i d n o t d e c r e a s e , "but on t h e c o n t r a r y i n c r e a s e d , a s t h e f o l l o w i n g t a b l e w i l l show? A l l Weekly Reporting Member Banks. Loans on S e c u r i t i e s . To Brokers and Dealers In New York City 1929 February 6 June 5 To Customers Outside of Hew York City 1771 1122 -649 816 808 - 8 4971 52 57 -*296 -16- Out of t h i s i n c r e a s e i n customers loans, there arose another d i f f e r e n c e between the Federal Reserve Board and the Federal Reserve Bank of New York, - wholly a p a r t from the d i f f e r e n c e as t o discount r a t e s . 16 Diary p . 1. On May 1, 1929, the Federal Reserve Board wrote Chairman McGarrah e n c l o s i n g a l i s t of c e r t a i n banks i n New York City which had been f r e q u e n t or continuous borrowers and which were s t i l l c a r r y i n g a considerable volume of s e c u r i t y l o a n s , and asked him to i n q u i r e of these banks why they had not a d j u s t e d t h e i r p o s i t i o n . 195 - 67 ( 5 ) . On May 10, Mr. McGarrah r e p l i e d s t a t i n g that the Board was l a y i n g down a new t e s t of abuse of. Federal r e s e r v e c r e d i t by t h i s l e t t e r ; t h a t the Federal r e s e r v e bank can not determine whether member banks s e c u r i t y loans to customers a r e s p e c u l a t i v e or not; t h a t the Federal r e s e r v e bank has no lawful r i g h t to r e f u s e to discount e l i g i b l e paper on the ground t h a t the proceeds a r e to be used to s u s t a i n such s e c u r i t y loans; t h a t X-6737 315 *»3S: - such r e f u s a l would be a r a t i o n i n g of c r e d i t and b r i n g about a condition the Federal reserve bank could not a f f o r d to r i s k , and i n conclusion he r e i t e r a t e d h i s b e l i e f t h a t such loans could be t r e a t e d only through the use of the discount r a t e . 195 - 63. Governor Harrison had p r e v i o u s l y , on February 6, 1929, taken the same p o s i t i o n . 15 Diary 158 (115). This p o s i t i o n of the Federal Reserve Bank of Hew York was not i n accord with the recommendation of the Federal Advisory Council on FeT>. r u a r y 15, 1929, as shown above. Nor does i t accord with the p o s i t i o n taken by Mr. George M. Reynolds, a prominent banker of Chicago, who, i n a l e t t e r to Governor McDougal dated March 2, 1929, s a i d : 11 1 s h a l l i n s i s t upon our people doing more than t r y i n g to s i t on the l i d to prevent f u r t h e r expansion, because I am now of the opinion t h a t nothing s h o r t of a vigorous e f f o r t f o r c i n g l i q u i d a t i o n of many l a r g e l i n e s of c r e d i t w i l l accomplish our purpose "The people seem to have l o s t t h e i r heads over stock gambling, and the time has come when those who are i n r e s p o n i b l e p o s i t i o n s w i l l have to take the b u l l by the horns and f o r c e them to do something which they w i l l not l i k e . With s a l e s of over s i x m i l l i o n shares of stock yesterday, i t i s c l e a r l y shown t h a t the p u b l i c has not p r o f i t e d by the advice of the Federal Reserve Board, and I think we have now reached the p o i n t where i t i s a m a t t e r f o r each i n d i v i d u a l bank to get i n t o the game v i g o r o u s l y and do whatever i s necessary to a t l e a s t f o r c e a reduction i n the amount of money t h a t i s borrowed a g a i n s t s t o c k exchange collateral." As opposed to t h e above views of the Federal Advisory Council and Mr. Reynolds, the Federal Reserve Bank of Few York from the f i r s t took the p o s i t i o n not only t h a t d i r e c t p r e s s u r e should be s t r i c t l y confined X-673? i o O. ™ 39 — to banks which were "borrowing more than the mass of "banks of t h e i r gene r a l c l a s s , "but a l s o t h a t customers loans could not "be considered "by Federal r e s e r v e "banks i n passing upon 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 s . On February 5, 1929, Governor Harrison squarely made such a s t a t e ment. 15 Diary 154 (114). On February 21, 1929, Chairman McGarrah r e p e a t e d the s t a t e m e n t . 195 - 67. On.May 29, 1929, both Governor Harrison and Chairman McGarrah took the p o s i t i o n t h a t d i r e c t p r e s s u r e should not be used to curb customers speculative loans. 16 Diary 76 (55). On June 5, 1929, Governor Harrison repeated the statement, c o r r e c t ing Mr. M i t c h e l l , one of h i s d i r e c t o r s , who went f u r t h e r i n h i s view of the power of the Federal reserve bank. 16 Diary 101, 102 (155). I t i s unnecessary to s t a t e t h a t the Board never advised the d i r e c t r e f u s a l of r e d i s c o u n t s to any bank, although i t c l e a r l y i s within the power of the Federal reserve bank to do so, as our General Counsel, Mr. Wyatt, and Hon. Newton Baker, our Special Counsel, have advised the Board. What the Board intended was t o have the Federal reserve bank examine i n t o the s e c u r i t y loans being made by a member bank which i s a f r e q u e n t or continuous borrower from the Federal r e s e r v e bank, and i f i t considered such loans out of l i n e with i t s commercial loans or excessive g e n e r a l l y under p r e s e n t c o n d i t i o n s , to warn the bank t h a t i t mast p r o t e c t the i n t e r e s t s of i t s depositors and of the p u b l i c by e x e r c i s i n g a more X-6K7 31 - '40 - reasonable use of Federal reserve c r e d i t obtained by r e d i a c o u n t i n g . The m a j o r i t y of the Board b e l i e v e d t h a t a mere suggestion along these l i n e s would, i n the v a s t m a j o r i t y of c a s e s , be s u f f i c i e n t with«» oat the n e c e s s i t y of the Federal r e s e r v e bank u s i n g i t s r e s e r v e d power of r e f u s i n g r e d i s c o u n t s a l t o g e t h e r . The p o s i t i o n of the Federal Reserve Bank of New York i n the matter i s i n accord with the f e e l i n g of many bankers t h a t a good customer, keep* ing a good balance, i s e n t i t l e d to a l l the money he may d e s i r e i f he i s w i l l i n g to pay the discount r a t e f i x e d by the bank, and t h a t the use of the discount r a t e i s the only method of curbing the good customers des i r e f o r money. In ordinary times the above r u l e of p r a c t i c e might pass without c r i t i c i s m , but i n e x t r a o r d i n a r y times of s p e c u l a t i v e mania i t must be p o i n t e d out t h a t the r u l e i s not c o n s i s t e n t with sound Federal r e s e r v e banking p r i n c i p l e s . The r e p l y i s c o n s t a n t l y made t h a t i f a bank r e f u s e d a loan under such circumstances the customer w i l l withdraw h i s account and g e t the money he d e s i r e s from some competing bank not so s o l i c i t o u s f o r the i n t e r e s t of i t s d e p o s i t o r s or of the p u b l i c . This may ce t r u e i n i n d i v i d u a l cases but could be guarded a g a i n s t by agreement among the p r i n c i p a l banks of the c i t y , or of the country, to j o i n i n curbing wild s p e c u l a t i o n , and then the customer would f i n d t h a t a l l the competing banks are following the same r u l e and t h a t he can g a i n nothing by withdrawing h i s account. X-6737 3 1 8 - 41Such a conference was repeatedly urged upon the o f f i c e r s of t h e Federal Reserve Bank of ITew York "by the w r i t e r . The suggestion was l a t e r approved by Mr. P o t t e r , of the Guaranty Trust Company of ITew York, "but so f a r as the w r i t e r knows, was never carried out, Feb. 14, 1929, 15 Diary 172 ( 9 7 ) . -17— An i n t e r e s t i n g l i g h t was thrown on the r e s p o n s i b i l i t y of bankers i n times of s p e c u l a t i v e manias, by Governor Young, i n an address del i v e r e d a t Old Point Comfort, Va., on May 7, 1930, in which the Governor said: "We bankers have a r e s p o n s i b i l i t y beyond our own balance s h e e t s f o r the general course o f . e v e n t s . " "We must look beyond the s a f e t y of the c o l l a t e r a l o f f e r e d us f o r a loan to the s a f e t y of the aggregate volume of c o l l a t e r a l t h a t we know i s being o f f e r e d f o r loans a t a l l the banks." "When we see an unhealthy development g e t t i n g under way we mast not only p r o t e c t our own immediate i n s t i t u t i o n , but must take a broader view with r e f e r e n c e to the i n t e r e s t s of the e n t i r e community." "In other c o u n t r i e s , where banking development has been l o n g e r , and banking concentration has proceeded f a r t h e r , c e r t a i n methods of c o n t r o l have been developed." "A customer i n England i s not granted u n l i m i t e d c r e d i t on the b a s i s of s e c u r i t y o f f e r e d as c o l l a t e r a l ; he i s granted a l i n e of c r e d i t i n accordance with h i s c r e d i t standing and the requirements of h i s b u s i n e s s , and he can not e a s i l y exceed t h a t l i n e no matter how much c o l l a t e r a l he may be able to o f f e r . " "I am not prepared to recommend to you t h i s or any other s p e c i f i c course of a c t i o n , but I do f e e l j u s t i f i e d i n c a l l i n g your a t t e n t i o n ^ t o our j o i n t r e s p o n s i b i l i t i e s and to suggest t h a t what we need i s cooperative a c t i o n in the development of sound banking t r a d i t i o n s , which alone w i l l give assurance to the country of a l a s t i n g s t a b i l i t y of i t s f i n a n c i a l organization.% X-6737 ~ 48 ~ 11 To such cooperation I pledge my wholehearted support• n -18- The w r i t e r b e l i e v e s t h a t the a c t i o n of the Federal Reserve Board i n re cues t i n g the Federal reserve hanks during t h i s p e r i o d of mad s p e c u l a t i o n to take up with member hanks applying f o r r e d i s c o u n t s the matter of t h e i r customers s p e c u l a t i v e s e c u r i t y l o a n s , i s not only i n accordance with law, but a l s o i s i n accord with the p r i n c i p l e s of sound banking, and t h a t i f t h i s i n qui ry had been more g e n e r a l l y made, conditions might not have been as bad i n the F a l l of 1929 as they i n f a c t were. Although Chairman McGarrah and Governor Harrison c h a r a c t e r i z e d such a procedure as 11 c r e d i t r a t i o n i n g " l i k e l y to r e s u l t i n a p p a l l i n g con- sequences, the w r i t e r b e l i e v e s t h a t s u f f i c i e n t evidence has a l r e a d y been d i s c l o s e d of the a p p a l l i n g consequences of l a c k of such i n q u i r y as would warrant the conclusion that such i n q u i r y , whether c h a r a c t e r i z e d as c r e d i t r a t i o n i n g or by some other name, would have been f o r the g r e a t e s t good of the g r e a t e s t number of our people. -19Before c l o s i n g t h i s a r t i c l e i t may be well to consider the a t t i t u d e of bankers, economists, and the p r e s s , towards the Board 1 s warning and the operations conducted under i t from time to time as i t p r o g r e s s e d . The following are among those who expressed approval: American Bankers Association April 29, 1929. Anderson, B. M. Feb. 13, 1929. Mar. 22, 1929. 193 - 67 ( 3 ) . 188 - 48. 190 - 69. o^O *•6737 - 43 - The following a r e among those who expressed approval (Cont'd#) Ayres, Leonard Feb. 1 5 , 1 9 2 9 . 188 - 68. Becker and Co. Feb. 13, 1929. 1 8 8 - 5 1 (2). Bendell, E. C. Feb. 13, 1929. 1 8 8 - 5 1 (2). Feb. 7, 1929. A p r i l 5, 1929. May 16, May 23, June 28, 187 190 191 192 193 Boston T r a n s c r i p t F i n a n c i a l column - 125. 50. 144. 34. 65, 70. On May.23, i t s t a t e d t h a t d i r e c t p r e s s u r e had proved as e f f e c t i v e as discount ratfe i n c r e a s e s . Brookmeyer Economic Service Dulles, John Foster Equitable Trust Co. J u l y 9, 1929. 193 - 120. April 30, 1929, 191 - 20. Mr. Austin Dec. 13, 1929. 199 - 25. Lawrence, David D i r e c t p r e s s u r e has succeeded and Federal Reserve Board w i l l now suspend i t . June 3, 1929. 192 - 92. Explains warning. June 5, 1929. 192 - 102. Lisman Digest P o i n t s out t h a t low discount r a t e s do not n e c e s s a r i l y mean e a s i l y a v a i l a b l e money. J u l y , 1930. 205 - 65. London Economist The events of the p a s t year have seen the beginnings of a new technique, which, i f maintained and developed, may succeed i n r a t i o n i n g the s p e c u l a t o r without i n j u r i n g the t r a d e r . May 11, 1929. 193 - 77. New R e p u b l i c Feb. 20, 1929. April 9, 1929. 198 - 112. 190 - 63. 321 ; > 44 • The following a r e among those who expressed approval (0o»t*4») New York Post Feb. 8, 1929. 188 - 5. Hew York Herald-Tribune Feb. 8, 1929. 187 - 134. 188 - 5 ( 2 ) , New York Telegram Nov. 25, 1929. 198 - 88. Hew York Times New York World Feb. 8, 1929. 187 - 152, Feb. 11, 1929. 188 - 10 F i n a n c i a l column. Mar. 20, 1929. 189 - 88. Mar. 28, 1929. 189 - 142. Apr. 6, 1929. 190 - 48. May 20, 1929. 192 - 12 F i n a n c i a l column. Sept. 13, 1929. The 6$ r a t e has f a i l e d to d i r e c t funds from the stock market-. The Board may have to resume d i r e c t p r e s s u r e . 195 - 118. See a l s o i n f r a - C r i t i c i s m s Feb. 7, 1929. 187 - 118, 129, 130. Feb. 8, 1929. 188 - 5 ( 5 ) . Feb. 9, 1929. 188 - 1. Apr. 13, 1929; Publishes i n t e r v i e w s mostly approving. 190 - 80. May 23, 1929: The Board h e s i t a t e s to p e n a l i z e business but seeks to check d i v e r s i o n of c r e d i t i n t o s p e c u l a t i v e channels. 192 - 36. May 26, 1929: People who once a t t a c k e d the Board f o r i t s t i g h t money p o l i c y , now a t t a c k i t f o r i t s disapproval of i n c r e a s e d d i s count r a t e s . 192 - 70. J u l y 31, 1929. 194 - 14. Aug. 12, 1929. 194 - 98. Nov. 19, 1929. 198 - 56. See a l s o - Criticisms Newark News Nov. 24, 1929. 198 - 46. P h i l a d e l p h i a Evening B u l l e t i n A g r e a t v i c t o r y f o r the Federal Reserve Board. June 7, 1929. 192 - 122. X-6737 3 2 3 - 45 •« The following are among those who expressed approval (Cont'd*) > • Rogers, Will Suggests t h a t the people may discover t h a t the Federal Reserve Board ;oay be working in the i n t e r e s t of the millions. May 24, 1929. 192 - 34. Rukeyser (Mew York Ameri can) Feb. 11, 1929. 188 - 37 ( 2 ) . Oct. 7, 1929; Board nas m i t i g a t e d violence of trade c y c l e . 196 - 100. J u l y 31, 1950: P r a i s e s Gov. Young's address a t Old Point Comfort, Va., p o i n t i n g cut to member "banks t h e i r duty and respons i b i l i t y for controlling speculative loans. 206 - 30. Sprague, F. K. Approves but d i l a t o r y . Feb.. 15, 1929. 138 - 51 ( 2 ) . 87. Stern Feb. 18, 1929. 183 — Temple, A. K. Mar. 27, 1929. 190 Apr. 24, 1929. 190 - 69. 27. 189 - 69. United S t a t e s Chamber of Commerce May 4, 1929. 191 - 59, 91 Yanderpoel May 16, 1929. 191 - 150. Walmseley April 7, 1929. 190 - 52. Washington Post Feb. 9, 1929. 188 April 6, 1929. 190 Trust Companies Washington S t a r Feb. 1929. Feb. 16, 1929. 168 — — 4. 47. - 76. — Whaley^-Saton Service Mar. 25, 1929. 189 — 130. S u c c e s s f u l i n most d i s t r i c t s but not i n a l l . 10 (3) June 29, 1929. 193 Wheeler, H. A. A p r i l 2, 1929. 190 — 31. 5-6737! i -20- . UiW'j - 46 » There follow some c r i t i c a l comments or a r t i c l e s which appeared from time to t i m e ; JLyres, Leonard Board d e f e a t e d i n i t s s t r u g g l e to c o n t r o l ^he c r e d i t situation. J u l y 16, 1929. 193 - 145. Boston. Herald Board f a i l e d . Boston >?ews Bureau Adve r s e coninen t . Aug. 10, 1929. 194 - 55. A p r i l 6, 1929. 190 - 56. Commons, P r o f . Federal Reserve Board may have gp ne a f t e r the s t o c k market too h a r d . Feb. 14, 1929. 188 - 57. Dorant, W. C. Attacks Federal Reserve Board. Feb. 28, 1929. Apr. 2, 1929. Aug. 10, 1929. 189 - 4. 190 - 30. 194 - 68. Harvard Economic Service P r e d i c t s the warning vrill f a i l u n l e s s coupled with h i g h e r discount r a t e s , which, however, i t admits w i l l i n j u r e business. Feb. 19, 1929. 188 - 105. Lawrence, David U n c e r t a i n t y of Board's p o l i c y c r i t i c i s e d "by many. June 11, 1929. 192 - 141. London Times Adverse comment. Savors of p o l i t i c s . May 25, 1929. .Manchester Guardian Commercial Adverse comment. Mar. 28, 1929. 192 - 147. 193 - 5 7 . Hew York Herald-Tribune The cfo r a t e s u b s t i t u t e d f o r v a c i l l a t i o n , t h r e a t s , and cajollery. Aug. 9, 1929. 194 - 90. X-6737 •w 47 W C r i t i c a l a r t i c l e s which appeared from time t o time ( C o n t ' d . ) New York Herald-Tribune ( C o n t ' d . ) Defense "by Federal Reserve Board i n i t s Annual Report f o r 1929 agreed to by few. April 24, 1930. 202 - 130. Gov. Young not r e s p o n s i b l e f o r d i r e c t p r e s s u r e . Aug. 28, 1930. 206 - 88, Hew York J o u r n a l of Commerce Adverse c r i t i c i s m Feb. 8, 1929. Feb. 9, 1929. Apr. 6, 1929. 187 - 140. 188 - 3, 5. 190 - 44. See - W i l l i s , H. P. Board guided by p o l i t i c a l f e a r s . May 24, 1929. May 25, 1929. 192 - 45. 192 - 147. By approving 6$ r a t e the Board has changed i t s p o l i c y . Aug. 5, 1929. 194 - 30. The Board's defense of d i r e c t a c t i o n p u t s i t i n a ridiculous position. April 28, 1929. 202 - 140. The Board's c r e d i t c o n t r o l i n 1929 was a mockery. Aug. 29, 1930. 206 - 90. New York Post The p r e - p a n i c a c t i o n of the Board was i n e f f e c t i v e because of the Board's p e r s o n n e l . Sept. 5, 1 9 3 0 c 2 0 6 - 1 1 4 . New York Sun Charges p o l i t i c s . Feb. 14, 1929. 188 - 87. Criticises. Aug. 29, 1929. 195 - 19. Board t r i e d to shut off c r e d i t a l t o g e t h e r . The Federal Reserve Bank of New York saved the country from p a n i c . April 24, 1930. 202 - 130. The Board has learned from experience the importance of following sound banking p r i n c i p l e and the need of r e s p e c t i n g the d e c i s i o n s of the r e g i o n a l banks. Sept. 2, 1930. 206 - 104. 33: X-673f C r i t i c a l a r t i c l e s which appeared from time to time (Cont'd.) See - Schneider, F New York Times C r i t i c i s e s Board f o r not following advice of Federal Advisory Council to approve i n c r e a s e t o 6$. May 23, 1929. 192 - 31. C r i t i c i s e s Board's r e l u c t a n c e to p e n a l i z e "business, which, i t says, has a l r e a d y been p e n a l i z e d . June 6, 1929. 192 - 110. F i n a n c i a l column says t h a t Board's approval of the 6$ r a t e r e p r e s e n t s a change of p o l i c y . Aug. 12, 1929. 192 - 110. A matter of dispute how f a r Board f e l l s h o r t of the neo.ds of the occasion. Purpose and a c t i o n to safeguard the c r e d i t s t r u c t u r e was c o r r e c t . Board did not a c t with s u f f i c i e n t promptness or decisiveness. Allowed i n t e r n a l d i v i s i o n to b e t r a y i t s e l f . R e l i e d on persuasion or reasoning when p a s t experience i n d i c a t e d that the time had passed f o r anything b u t peremptory a c t i o n or, a t l e a s t , d e f i n i t e warning which could not be misunderstood. Lack of e f f e c t i v e l e a d e r s h i p . Sept. 6, 1950. Hew York World. Right but tardy Feb. 8, 1929. 206 - 110. 188 - 5 Delayed firming p o l i c y too long. Board has l o s t control of money market. April 3, 1929. 190 - 32. E i g h t , but not determined enough. April 15, 1929. 190 - 72. P r e s t i g e of Board i n j u r e d by i t s v a c i l l a t i n g course. Aug. 12, 1929. 194 - 98. Richmond P r e s s Criticizes. 187 - 151. * 3 - 46- C r i t i c a l a r t i c l e s which appeared from time t o time (Cont'd.) Rulceyser (New York American) Has proved f r u i t l e s s * Feb. 11, 1929. 188 - 37 ( 2 ) . Schneider, F. J r . (New York Sun) In J u l y , 1929, Mr. Schneider, a f t e r p r a i s i n g the easy money p o l i c y of t h e System i n 1927, c r i t i c i z e d s e v e r e l y the f i r m i n g p o l i c y of 1928 and 1929, s t a t i n g t h a t the e x t e n t of the s e c u r i t y s p e c u l a t i o n had been exaggerated, and t h a t the System should not be unduly d i s t r a c t e d by emotional r e a c t i o n s r a i s e d by the stock market and b r o k e r s loans controversies. 194 - 73. On December 31, 1929, Mr. Schneider took the p o s i t i o n t h a t the F e d e r a l Reserve Bank of New York was r i g h t , and the Federal Reserve Board wrong in the discount c o n t r o v e r s y . He e v i d e n t l y assumed t h a t the i s s u e was between a 5 or a 6$ d i s c o u n t r a t e , f o r i n the a r t i c l e above mentioned he s p e c i f i c a l l y condemned any attempt t o b r e a k the s t o c k market by r a p i d i n c r e a s e s i n d i s c o u n t r a t e s , not knowing e v i d e n t l y t h a t t h a t was the then p o l i c y of the Federal Reserve Bank of New York. 199 - 70. Seligman, P r o f . Holds Board p a r t l y r e s p o n s i b l e f o r the crash of October, 1929, because of r e f u s a l to approve i n c r e a s e of d i s c o u n t rates. Nov. 26, 1929. 198 - 96. S h i v e l e y , E. A. Criticizes. Feb. 8, 1929, Simmons, E. W. W. Criticizes Address. Chicago Stock Exchange. . , May 14, 1929, Sprague, F. K. Dilatory. Feb. 13, 1929. 188 - 51 ( 2 ) . 191 - 112. 188 - 51 ( 2 ) . Rates should have been i n c r e a s e d long ago. Mar. 12, 1929. 189 - 79. . , X-6737 - p 50 - C r i t i c a l a r t i c l e s which appeared from time to time (Cont'd*) Sprague, P r o f . 0. M W, » Warning had "but l i t t l e e f f e c t . May, 1929. Stem Board has f a i l e d . Stokes, 3 . C. Attacks. 193 - 3 1 . Feb. 28, 1929. Mar. 1, 1929. 189 - 6. 189 - 19. Mar. 23, 1929. June 18, 1929. 189 — 104. 193 - 32. S u l l i v a n , Mark Washington 'believes Board has not succeeded. Aug. 16, 1929. 194 - 102. Truth Criticises. Wall S t r e e t Journal Criticises. Williams, Langbourne Attacks W i l l i s , H. P . Criticises North American Review April 17, 1929. 193 - 41. May £, 1929. Aug. 29, 1930. 191 - 58. 206 - 90. A p r i l , 1929. May 10, 1929. 190 - 28. 191 - 118 A p r i l , 1929. 190 - 107 192 - 49. Withers, H a r t l e y Mr. Withers "believes t h a t discount r a t e s should have been i n c r e a s e d and quotes from Mr. B u r g e s s ' s book to the e f f e c t t h a t the Federal Reserve System d e a l s with c r e d i t q u a n t i t a t i v e l y and not q u a l i t a t i v e l y ; t h a t i t s i n f l u e n c e i s upon the t o t a l amount of c r e d i t i n u s e , . not i n i t s employment, and that i t can not r e s t r i c t l o a n s on the Stock Exchange. Let u s examine the above quotation from Mr. B u r g e s s ' s book. Is i t t r u e t h a t the Federal Reserve System's power over discounts i s q u a n t i t a t i v e only and not q u a l i t a t i v e ? I s i t f u r t h e r true t h a t the X-67S7 - 61 q u a n t i t a t i v e power can be e x e r c i s e d only through changes i n d i s c o u n t rates? In one s e n s e , c e r t a i n l y , the Federal Reserve System i s . the most q u a l i t a t i v e system i n the world, f o r the reason t h a t u n t i l a t l e a s t the amendment of 1917, the Federal r e s e r v e banks could d i s c o u n t only a c e r t a i n q u a l i t y of p a p e r , - t h a t i s , s e l f - l i q u i d a t i n g a g r i c u l t u r a l and • commercial p a p e r . So a l s o the amendment of 1917 was a q u a l i t a t i v e amendment f o r i t p e r m i t t e d advances to member banks on t h e i r n o t e s c o l l a t e r a l s by Government bonds. Mr. Burgess, i n h i s book, however, mast mean t h a t once the p a p e r o f f e r e d has p a s s e d the q u a l i t a t i v e t e s t , the Federal Reserve System can only c o n t r o l the amount, and t h a t only through changes i n the d i s c o u n t r a t e , no m a t t e r to what uses the bank may apnly the proceeds of the r e discount. I f t h i s p o s i t i o n i s c o r r e c t , i t must follow t h a t i n a time of ramp a n t s p e c u l a t i o n , whether i n commodities, r e a l e s t a t e , or s e c u r i t i e s , the Federal r e s e r v e bank can e x e r c i s e no c o n t r o l i n the p u b l i c i n t e r e s t except through changes i n the d i s c o u n t r a t e , and t h a t a bank o f f e r i n g e l i g i b l e paper has an a b s o l u t e r i g h t to discount i t , r e g a r d l e s s of the amount or of t h e use which i t expects to make of the p r o c e e d s , p r o v i d i n g i t i s w i l l i n g to pay the o f f i c i a l d i s c o u n t r a t e . To take such a p o s i t i o n , however, i s to i g n o r e the Federal Reserve A c t , which s t a t e s t h a t a Federal r e s e r v e bank may d i s c o u n t , and n o t X-6737 — > 82 — that i t shall discount. I t i s c l e a r t h a t a Federal r e s e r v e hank i n i t s d i s c r e t i o n may d e c l i n e to discount a l t o g e t h e r . Such a p o s i t i o n , moreover, would "be a t variance with the p r a c t i c e of the Federal Reserve Bank of Hew York which has always claimed and e x e r c i s e d the r i g h t of i n q u i r y i n t o the loan p r a c t i c e s of tanks "borrowing more than o t h e r "banks of t h e i r c l a s s , and of warning them t h a t a c o n t i n u a t i o n of such p r a c t i c e may r e s u l t i n a r e f u s a l to rediscount t h e i r paper. (See l e t t e r of Chairman McGarrah to the Board dated February 21, 1929. 195 - 67.) While the Federal r e s e r v e "bank, to "bo s u r e , e x e r c i s e s here a q u a n t i t a t i v e power, i t i s c e r t a i n l y "based on q u a l i t a t i v e c o n s i d e r a t i o n s . The "bank i s d i r e c t e d to reduce the amount of i t s borrowings, and i n order t o do t h i s , i t may determine the p a r t i c u l a r means by which t h i s r e d u c t i o n i s brought about, whether by reduction of investments, or s e c u r i t y or other l o a n s . Can i t be, however, t h a t when a l l banks of a given class are engaged i n feeding the s p e c u l a t i v e movement to the i n j u r y of a g r i c u l t u r e and b u s i n e s s , the Federal reserve bank has no power to examine i n t o t h e i r loan p r a c t i c e s and d i r e c t a r e d u c t i o n of t h e i r borrowings? I f the answer i s i n the n e g a t i v e , i t w i l l p l a c e the Federal r e s e r v e banks i n a p o s i t i o n of impotence never intended by the framers of the Federal Reserve Act. Let us suppose t h a t a town were to e r e c t a r e s e r v o i r to h o l d water f o r i r r i g a t i o n purposes, with a r i g h t granted by the l e g i s l a t u r e to X-6737 3 - 53 s e l l the water a t i t s d i s c r e t i o n and to f i x the p r i c e , l e t us further suppose t h a t the owners of farms talcing t h i s water were d i v e r t i n g i t f o r w a s t e f u l purposes other than i r r i g a t i o n . Let us f u r t h e r suppose t h a t the town has n o t i f i e d these owners t h a t t h i s p r a c t i c e mast "be stopped, and t h a t the r e p l y r a s made t h a t i n the case of one owner d i v e r t i n g more water f o r such w a s t e f u l p u r poses than the general c l a s s of owners, the town would have power as regards t h a t one owner, hut i n a case where a l l the owners a r e inkp r o p e r l y d i v e r t i n g the water, the town would "be powerless. Certainly- scant a t t e n t i o n would he given to such a claim, and s i m i l a r l y scant c o n s i d e r a t i o n should he given to a s i m i l a r claim of impotence i n the Federal reserve hanks. I t would not be necessary f o r the Federal reserve "banks to p i c k out any p a r t i c u l a r s p e c u l a t i v e loan and order i t to "be l i q u i d a t e d . The Federal r e s e r v e "bank could simply -yarn the bank t h a t the amount of i t s borrowing was excessive because of i t s loan p r a c t i c e s , leaving to the bank the t a s k of a d j u s t i n g i t s p o s i t i o n . Altho"ugh t h i s power of the Federal reserve bank p r i m a r i l y i s a q u a n t i t a t i v e power, yet the d e c i s i o n may be based l a r g e l y on q u a l i t a t i v e c o n s i d e r a t i o n s , and t h i s would seem to be c l e a r l y w i t h i n the power of the Federal Reserve System. -21- 2he g i s t of the above c r i t i c i s m s seems to be t h a t the Board p e r s i s t e d i n i t s p o l i c y of d i r e c t p r e s s u r e not only from February 7, 1929, X-6737 ' 54- to June, 1929, b u t f a r t h e r u n t i l August 9, 1929, when i t r e v e r s e d i t s e l f and. approved a 6$ discount r a t e asked f o r by the Federal Reserve . Bank of New York) t h a t t h i s r e v e r s a l of p o l i c y Was reached only aftdfr long delay and i n d e c i s i o n ; and f i n a l l y t h a t the f a i l u r e to approve the i n c r e a s e d r a t e s asked f o r by the Federal Reserve Bank of Hew York e a r l i e r , p l a c e s upon the Board some r e s p o n s i b i l i t y , a t l e a s t , f o r the market crash of October, 1929. The answer to these c r i t i c i s m s has already been p o i n t e d out b u t can be r e p e a t e d ; 1. The d i r e c t p r e s s u r e p o l i c y was suspended e a r l y i n June, 1929, when the Board and the Federal Reserve Benk of Hew York agreed t h a t b e cause of changes i n the business and c r e d i t s i t u a t i o n the problem had been changed i n t o one providing f o r an i n c r e a s e of Federal r e s e r v e c r e d i t , and i n c r e a s e d borrowings by the banks. This change of p o l i c y was not p u b l i c l y announced e i t h e r by the Board or by the Federal Reserve Bank of New York for f e a r of i t s e f f e c t on the stock market. I t did, however, leak out and was mentioned by Mr. David Lawrence i n an a r t i c l e published on June 5, 1929. From what source Mr. Lawrence derived t h i s information, the w r i t e r has no knowledge 2. The i n c r e a s e in discount r a t e s to 6% approved by the Board on August 9, 1929, had nothing to do with the Board's p o l i c y of d i r e c t p r e s s u r e , which, a s above s t a t e d , had been suspended e a r l y i n June. On the c o n t r a r y , t h i s i n c r e a s e , as explained by Governor H a r r i s o n , and p o i n t e d out e a r l i e r i n t h i s a r t i c l e , was merely a " b a r r a g e " , t o use X 3 3 2 X-6737 - 65 Governor H a r r i s o n ' s exact language, i n connection with a program f o r easing money c o n d i t i o n s . 3. So f a r from being timid and v a c i l l a t i n g i n i t s p o l i c y of d i r e c t a c t i o n , the Board on February 7, 1929, acted d e c i s i v e l y and "boldly and kept d i r e c t a c t i o n i n force u n t i l the object sought by i t , - p r e v e n t i o n of d i v e r s i o n of Federal reserve c r e d i t i n t o s p e c u l a t i v e channels, - had been accomplished, Federal r e s e r v e c r e d i t outstanding having been reduced under d i r e c t p r e s s u r e , about 193 m i l l i o n s of d o l l a r s . 4. So s u c c e s s f u l was t h i s p o l i c y t h a t , as b e f o r e pointed o u t , Governor Harrison and Chairman McGarrah informed the Board on May 22, 1929, t h a t under the i n f l u e n c e of d i r e c t p r e s s u r e the member banks were a f r a i d to i n c r e a s e t h e i r borrowings and t h a t i t had become neoe s s a r y to encourage then; to borrow from the Federal reserve banks to sup-oly the growing demand f o r commercial c r e d i t s J 15 Diary 75 (69). 5. The f u r t h e r charge of r e s p o n s i b i l i t y f o r tho crash i n the stock market i n October. 1929, because of r e f u s a l to approve i n c r e a s e s i n discount r a t e s asked f o r by the Federal Reserve Bank between February 14 and May 23, 1929, seems to me, as h e r e i n a f t e r s t a t e d , tantamount to a s t a t e m e n t t h a t t h e s t o c k m a r k e t c r a s h w h i c h came i n O c t o b e r c o u l d h a v e b e e n a v e r t e d b y a n i n c i s i v e d i s c o u n t r a t e p o l i c y i n A j p r i l o r May, w h i c h , / . i however, would hayb produced the c r a s h a t t h a t e a r l i e r period# Looking back to the period between February 4 and kay <*<-•, 19x9, the Board had b e f o r e i t the demonstrated f a c t t h a t i t s p o l i c y of d i r e c t a c t i o n had k e p t Federal r e s e r v e c r e d i t away from the s p e c u l a t i v e market; t h a t 8% X-6737 ~ 56 — commercial loans were i n c r e a s i n g , while s e c u r i t y loans were d e c r e a s i n g . I t a l s o had "before-it the r e p o r t of the Committee on r e c e n t economic changes which was g e n e r a l l y i n t e r p r e t e d as a " b u l l i s h " r e p o r t . I t stated g e n e r a l l y t h a t there was nothing much to worry ahout, and t h a t i n a t t a c k i n g the problems b e f o r e the Committee the degree of progre ss i n r e c e n t years i n s p i r e d i t with high hope. Can i t be contended t h a t under such conditions a p u b l i c Board would d e l i b e r a t e l y have attempted to smash the stock market by cataclysmic i n c r e a s e s of r a t e s on commercial paper? I do not b e l i e v e any p u b l i c board i n the United S t a t e s , whether composed of bankers or economists would, under these circumstances, whatever i t s courage and wisdom, have made such an attempt. Mr. Edie has p o i n t e d out i n an address b e f o r e the Academy of P o l i t i c a l Science January, 1930, t h a t the ordinary law of supply and demand does not apply i n time of rampant s p e c u l a t i o n ; t h a t i n such times higher p r i c e s do not check demand b u t a c t as an a l c o h o l i c s t i m u l a n t to f u r t h e r extremes of demand. The w r i t e r b e l i e v e s t h i s i s as true of money or c r e d i t as of cornmodi t i e s , and t h a t i n c r e a s e i n discount r a t e s during such p e r i o d s l o s e s i t s f o r c e as a r e g u l a t o r of demand f o r money; t h a t the only way to r e g u l a t e demand i n such cases would be such i n c i s i v e and extreme advances i n discount r a t e s t h a t money or c r e d i t would p r a c t i c a l l y cease to be obtainable a t any p r i c e . X-6737 - 57 Mr. Edie admits t h a t a gradual slow process of i n c r e a s i n g r a t e s would have a s t u n t i n g e f f e c t on business, but t h a t a sharp and s v / i f t advance i n r a t e s would check f a l s e i n f l a t i o n i n s e c u r i t y markets without p a r a l y z i n g b u s i n e s s . This i s tantamount to saying t h a t i f t h e Federal Reserve System, i n May or June, had suddenly and i n c i s i v e l y and r e p e a t e d l y r a i s e d r a t e s high enough to smash the stock market, business would not have been i n j u r e d . know the e f f e c t on b u s i n e s s of the crash i n October. We a l l I f the Federal Reserve System had d e l i b e r a t e l y brought about t h i s crash i n May or June, by s t a r t l i n g i n c r e a s e s i n discount r a t e s , there would seem to be l i t t l e ground, i n the w r i t e r ' s opinion, f o r b e l i e f t h a t business would have taken i t any d i f f e r e n t l y i n May or June than i t did i n f a c t i n October. -•22— Mr. Warburg, i n h i s book e n t i t l e d "The Federal Reserve System" gives a review of the discount r a t e controversy. Vol. 1, pages 500 to 517. He says t h a t the Board's warning was bravely expressed i n the beginning, but t h a t i t had only a temporary e f f e c t , as the Board b e came i n a r t i c u l a t e ; t h a t the Board agreed to advance r a t e s to &f> only i n August, a t l e a s t h a l f a year, i f not a y e a r , too l a t e ; t h a t the Board's attempt a t loan contraction without adequate i n c r e a s e of d i s count r a t e ^ proved an impracticable and w a s t e f u l experiment. X-6737 - 58 Mr. Warburg s t a t e s t h a t loans " f o r other" a r e "beyond the d i r e c t c o n t r o l of the Federal Reserve System, but s t a t e s t h a t he made a suggestion which would tend to b r i n g down these l o a n s , namely; The How York Clearing House Committee, a c t i n g under the auspices of the Federal Reserve System, could have sent f o r a stock exchange Comr- m i t t e e , and have i n v i t e d them to aslc every stock exchange firm w i t h i n a given time to reduce i t s borrowings , - whatever they might be, - by a given small percentage; t h a t i f t h i s had been done, the top of the market would have been reached then and t h e r e , and l i q u i d a t i o n g r a d u a l l y would have s e t i n ; t h a t i f the Federal Reserve System and the Clearing House banks had d e f i n i t e l y agreed on such a p l a n , the stock exchanges would have been f o r c e d to f a l l i n t o l i n e , f o r no matter how l a r g e a volume of funds stock exchange firms were r e c e i v i n g from "others" they would have r e a l i z e d t h a t , i n the f i n a l a n a l y s i s , they were depending upon the s t r e n g t h and good w i l l of the Hew York banks. Mr. Warburg says he d e f i n i t e l y urged t h i s i n the f i r s t days of A p r i l , 1929, but t h a t while everybody seemed to agree on i t s d e s i r a b i l i t y and p r a c t i c a b i l i t y , i t proved impossible to carry i t into e f f e c t ; t h a t the X-673? *. 5S ~ Reserve System f e a r e d to expose i t s e l f to the charge of d e a l i n g , even i n d i r e c t l y , with the stock exchanges, and the c l e a r i n g house banks were l o a t h to undertake so unpopular a s t e p , so long as Federal reserve d i s count r a t e s were not i n c r e a s e d to 6^« Mr. Warburg f u r t h e r s t a t e s t h a t with the Board u n w i l l i n g a t that time to permit the i n c r e a s e to which four months l a t e r i t agreed, i t i s not s u r p r i s i n g t h a t the proposal f e l l through. No such suggestion r a s ever made to the Federal Reserve Board, and i t mast have been made, i f a t a l l , to the Federal Reserve Bank of Hew York. Governor Harrison once r e f e r r e d t o such a suggestion without r e - v e a l i n g i t s source and he s t a t e d t h a t he p e r s o n a l l y was opposed to i t . March 22, 1929. 15 Diary 199 (57). Mr. Warburg c r i t i c i z e s the Board f o r i t s d i s i n c l i n a t i o n to i n j u r e bus in e s s by i n c r e a s i n g discount r a t e s , and adds t h a t with quick and determined i n c r e a s e s , i n c i s i v e enough to bring about l i q u i d a t i o n , the period of high money r a t e s would probably have been so b r i e f t h a t b u s i n e s s might h a r d l y have been a f f e c t e d by i t . Mr. Warburg concludes by t h i s i n t e r e s t i n g s t a t e m e n t : "This does not mean, however, t h a t a Federal Reserve bank should not be f r e e to a c t according to i t s own d i s c r e t i o n i f a member bank were to use Federal reserve c r e d i t excessively or too continuously, or i n a manner harmful to the c o u n t r y ' s i n t e r e s t . " Mr. Warburg f a l l s i n t o the p r e v a i l i n g e r r o r by assuming t h a t t h i s controversy l a s t e d from February 7th, the date of the i s s u e of the warning, to August 9 t h , the d a t e of the approval of the 6$ discount r a t e . As above X-6737 - •, 60 • shown, from the e a r l y days of June to August 9, the problem "before the Board and the Hew York Bank was how to induce the member "banks to increase t h e i r "borrowings, and not "by means of discount r a t e s to reduce these "borrowings. He f u r t h e r approves the p o s i t i o n of the New York Bank that i n c i s i v e , r e p e a t e d i n c r e a s e s of discount r a t e s should "be used to " c o r r e c t the s i t u a t i o n " , t h a t i s , to l i q u i d a t e r a d i c a l l y the Hew York stock exchange loans. This, as "before s t : t e d , i s tantamount to saying t h a t the stock market crash which came i n October could have been a v e r t e d by an i n c i s i v e discount r a t e p o l i c y i n April or May which would have produced the crash a t t h a t e a r l i e r p e r i o d , - as p o i n t e d out above by the Manchester Guardian. The Federal Eeserve Board, however, f e l t t h a t under d i r e c t p r e s s u r e a gradual l i q u i d a t i o n cculd have been secured without the n e c e s s i t y of the Board's going out of i t s way to smash the stock im r k e t . Such gradual l i q u i d a t i o n took p l a c e during the p e r i o d of d i r e c t p r e s s u r e , but was i n t e r f e r e d with by an i n c r e a s i n g demand f o r commercial c r e d i t . The w r i t e r b e l i e v e s t h a t i f the Federal Reserve Board had smashed the s t o c k market by i n c i s i v e discount r a t e i n c r e a s e s , i t would c e r t a i n l y have p u t an end to any i n c r e a s e d demand f o r commercial c r e d i t , and t h a t such a c t i o n would have been an impetus to the slow d e c l i n e even then apparent i n commerce and b u s i n e s s , terminating i n the p r e s e n t b u s i n e s s d e p r e s s i o n . Mr. Warburg's statement t h a t d i r e c t a c t i o n was a w a s t e f u l experiment, would seem to be answered by the course of Federal reserve c r e d i t during the p e r i o d when d i r e c t p r e s s u r e was b e i n g a p p l i e d . His suggestion of co~ X«6737 o p e r a t i o n b e t w e e n t h e Mew York S t o c k Exchange a n d t h e F e d e r a l E e s e r v e System was, as above s t a t e d , never p r e s e n t e d to the Federal Reserve Board. Assuming, however, t h a t he p r e s e n t e d i t to the Federal Reserve Bank of Hew York, and the reference» above quoted, to Governor Harrison's s t a t e m e n t would seem to i n d i c a t e t h a t he may have, i t i s easy to see how the o f f i c i a l s would have regarded i t as c r e d i t r a t i o n i n g , to which, as above shown, they were a b s o l u t e l y opposed. I t should be remembered t h a t Mr. P o t t e r of the Guaranty Trust Company, and a l s o t h e w r i t e r , suggested cooperation between the Federal r e serve bank and the l e a d i n g banks, with a view to e x e r c i s i n g c o n t r o l over the s p e c u l a t i v e customers' loans of these banks. I t i s believed that such cooperation might have brought about the r e s u l t s Mr. Warburg hoped f o r from a conference between tne System and the iTevr York Stock Exchange. His f i n a l statement of approval of a c t i o n by the Federal r e s e r v e bank i n the case of banks u s i n g Federal r e s e r v e c r e d i t e x c e s s i v e l y or too cont i n u o u s l y , or i n a manner harmful to the cotintry's i n t e r e s t , can only be accepted as an approval of the Board's p o s i t i o n taken i n i t s warning a g a i n s t f r e q u e n t or continuous borrowing. Hon. R u s s e l l l ^ f f i n g w e l l , f o r m e r l y A s s i s t a n t S e c r e t a r y of the Treasury, i n a r e c e n t review of Mr. Warburg 1 s book, c r i t i c i s e s the Federal Reserve Board f o r attempting by d i r e c t a c t i o n GO make money dear f o r t h e s p e c u l a t o r , and, a t t h e same time, cheap f o r the b u s i n e s s man. He r e p e a t s the statement i n Mr. B u r g e s s ' s book t h a t the Federal Reserve System can c o n t r o l the amount but not the d i s t r i b u t i o n of X-S737 62 — Federal r e s e r v e c r e d i t . 'This statement I have a l r e a d y answered i n this article. Mr. L e f f i n g w e l l f u r t h e r holds the Board r e s p o n s i b l e f o r the f r e n z i e d "bull" market i n the f i r s t e i g h t or nine months of 1929, and a l s o f o r the stock market crash i n October, 1929. Here he f a l l s i n t o the p r e v a i l i n g e r r o r t h a t the Board's controversy with the ITew York Bank l a s t e d from February to August, while, as a matter of f a c t , as above shown, the Federal Beserve Board p o l i c y a f t e r June 1 s t was a common p o l i c y subscribed to both by the Federal Eeserve Board and the Federal Eeserve Bank of New York. He s t a t e s t h a t d i r e c t a c t i o n was a f a i l u r e , but I f e e l t h a t he has not c r i t i c a l l y examined the f a c t s , and has not discovered t h a t during the s h o r t p e r i o d of fro;:i February 14 to June 1, i n which d i r e c t a c t i o n was i n f o r c e , commercial loans g r e a t l y i n c r e a s e d , while s e c u r i t y loans g r e a t l y diminished, and i o d e r a l r e s e r v e c r e d i t was reduced about 193 m i l l i o n s of d o l l a r s . He holds the Board r e s p o n s i b l e f o r the f r e n z i e d "bull" market during t h i s p e r i o d . D i r e c t a c t i o n unquestionably did have a profound e f f e c t on the c a l l loan market, but what would have been the e f f e c t on t h i s market i f the Board in February had entered upon a cataclysmic i n c r e a s e i n discount r a t e s which r o u l d have p r a c t i c a l l y made i t impossible to obtain money or c r e d i t a t any r a t e , and which would have smashed the stock market? Mr. L e f f i n g w e l l presumably would have favored smashing the stock market : 340 X-S737 — 63 — i n February, 1924, as he i s on record i n t h i s a r t i c l e a s f a v o r i n g t h e Hew York Bank's p o l i c y , but the e f f e c t on the c a l l loan market of such an o p e r a t i o n , a s I have s a i d , he f a i l s to p o i n t o u t . -23In conclusion, i t may he asked whether the m a j o r i t y of the Board, i n supporting a s t a b l e 5^ r a t e with d i r e c t p r e s s u r e , intended to l a y down t h i s as a permanent p o l i c y to the exclusion of incre ase d discount r a t e s h e r e a f t e r to curb s p e c u l a t i v e a c t i v i t y . To such an i n q u i r y , an u n q u a l i f i e d l y negative answer mast be given. The Board always has aiiu always w i l l f o o l f r e e to use the discount r a t e to p r o t e c t a g r i c u l t u r e rnd commerce from i n j u r y from any s p e c u l a t i v e exc e s s , e i t h e r i n the stock market or i n the commodity or r e a l e s t a t e market. For example, discount r a t e s -jere i n c r e a s e d to curb s p e c u l a t i v e a c t i v i t y in the e a r l y months of 192", i n the f a l l of 1924, in the beginning of 1925, i n the autumn of 1925, in the summer and f a l l of 1926, i n the f a l l of 1927, and i n 1923, 189 - 127 191 - S3. When, however, i t appears, as in the concrete case, t h a t a s p e c u l a t i v e orgy has s e t i n , i t may t o necessary to revive d i r e c t a c t i o n and p r e s s u r e upon a l l s p e c u l a t i v e l o m s , with or without i n c r e a s e s of discount r a t e s , whether to brokers or customers, or b o t h . Direct a c t i o n or p r e s s u r e , i n s h o r t , i s a means and not an end i n i t s e l f , to be used i n connection with or independently of i n c r e a s e d discount r a t e s , as the b e s t judgment of the Federal Reserve System s h a l l determine. 3 4 0 X-6740 COPY October 22, 1930 To Federal Reserve Board From Mr. Wyatt-General Counsel Subject: Federal Reserve Bank of Richmond v. Attmore Because of the grave charges made a g a i n s t the Federal Reserve Bank of Richmond by the defendant, because of the p o l i t i c a l f l a v o r i n j e c t e d i n to the l i t i g a t i o n by the defendant, and because of the f a c t t h a t i t may develop i n t o a case involving l e g a l questions of importance to the e n t i r e Federal Reserve System, I r e s p e c t f u l l y submit herewith for the Board 1 s i n formation copies of c e r t a i n l e t t e r s addressed to me by Counsel to the Fede r a l Reserve Bank of Richmond with r e f e r e n c e to the above case, copies of the complaint and answer f i l e d i n the case, and copies of c e r t a i n c o r r e s pondence with the Receiver of the F i r s t National Bank of Hew Bern, Forth Carolina, p e r t a i n i n g to a demand of the Counsel f o r the defendant i n the above case t h a t the Receiver b r i n g s u i t a g a i n s t the Federal Reserve Bank to recover c e r t a i n a s s e t s of the F i r s t n a t i o n a l Bank of Hew Bern pledged to the Federal Reserve Bank as marginal c o l l a t e r a l to i t s indebtedness, and c e r t a i n other a s s e t s a l l e g e d to be held u n l a w f u l l y by the Federal Reserve Bank. Pending f u r t h e r developments, I beg leave to withhold any recommenda t i o n as to what s t e p s , i f any, the Board should take with r e f e r e n c e to the handling of t h i s l i t i g a t i o n * I f the case developes i n such a manner as to involve l e g a l questions of importance to the e n t i r e Federal Reserve System, i t may become advisable to employ s p e c i a l counsel to r e p r e s e n t the i n t e r e s t s of a l l Federal reserve banks, as has been customary i n cases i n v o l v i n g questions of importance to the e n t i r e Federal Reserve System. This, however, depends upon f u t u r e developments and e s p e c i a l l y upon the c o u r t ' s r u l i n g upon a motion now pending, which probably w i l l be handed down sometime during the month of November, S M A Y OF THE CASE U MR I t appears from the complaint f i l e d i n t h i s case t h a t the Federal Reserve Bank of Richmond rediscounted for the F i r s t National Bank of New Bern, North Carolina, two notes made by G. S. Attmore. The F i r s t National Bank of New Bern having f a i l e d and a r e c e i v e r having been appointed f o r i t , the Federal Reserve Bank brought t h i s s u i t a g a i n s t G. S. Attmore, as maker, to c o l l e c t the two notes above r e f e r r e d t o . In answer t o the comp l a i n t the defendant denies t h a t the F i r s t National Bank was a holder of one of these notes i n due course f o r value and t h a t the Federal Reserve Bank holds e i t h e r of such notes i n due course and f o r value, and demands t h a t the Federal Reserve Bank "produce the s e c r e t w r i t t e n agreements and c o n t r a c t s which i t compelled the i n s o l v e n t F i r s t National Bank of New Bern to execute to i t r e l e v a n t to marginal c o l l a t e r a l . The defendant f u r t h e r avers t h a t the r e c e i v e r of the F i r s t National Bank of New Bern i s a necessary p a r t y to t h i s a c t i o n and moves t h a t he - 2 - X-6740 "be made a p a r t y to the a c t i o n in order t h a t he may p l e a d to the affirriga t i v e defense and c r o s s - p l e a s e t up "by the defendant. As an a f f i r m a t i v e defense, the defendant makes a number of a l l e g a t i o n s v i t h r e f e r e n c e to knowledge "by the Federal Reserve Bank of the insolvency of the F i r s t n a t i o n a l Bank of Hew Bern; with r e f e r e n c e to the p a r t taken by the Federal Reserve Bank in the formation of the F i r s t Nati o n a l Bank of New Bern "by the absorption of a S t a t e "bank "by the National Bank of New Bern and the assumption of the l i a b i l i t i e s of the National Bank of New Bern by the F i r s t National Bank; with r e f e r e n c e to the knowledge of the Federal Reserve Bank of the improper use i n the o r g a n i z a t i o n of the F i r s t National Bank of New Bern of c e r t a i n funds of Craven County, North Carolina; and with r e f e r e n c e to the taking "by the Federal Reserve Bank of marginal c o l l a t e r a l from the F i r s t National Bank of New Bern to secure r e d i s c o u n t s with the Federal Reserve Bank. Hie defendant a l l e g e s t h a t he i s e n t i t l e d to a s e t off a g a i n s t a deposit balance i n the F i r s t National Bank of New Bern and that he i s e n t i t l e d to have the Federal Reserve Bank r e t u r n to the r e c e i v e r of the F i r s t National Bank of New Bern marginal c o l l a t e r a l taken from t h i s bank by the Federal Reserve Bank. The defendant asks the court to require the Federal Reserve Bank to s u r r e n d e r one of h i s notes to him 'and surrender the other to the r e c e i v e r of the F i r s t National Bank of New Bern i n order t h a t i t may be s e t o f f a g a i n s t h i s d e p o s i t i n t h i s bank. He f u r t h e r asks t h a t the Federal Reserve Bank be r e q u i r e d to produce i n court r e p o r t s of examinations of the F i r s t Nati o n a l Bank and i t s p r e d e c e s s o r s , the National Bank of New Bern and the Peoples Bank of New Bern. I t appears t h a t the a l l e g a t i o n s contained in the d e f e n d a n t ' s a f f i r m a t i v e defense above r e f e r r e d to are not m a t e r i a l to the i s s u e involved i n t h i s case and I am advised by the Counsel f o r the Federal Reserve Bank of Richmond t h a t he has made a motion to s t r i k e out the d e f e n d a n t ' s a f f i r m a t i v e defense on the ground that the matter s e t up i s i r r e l e v a n t and in>m a t e r i a l to the i s s u e . The court has taken t h i s motion under advisement and probably w i l l r u l e upon i t sometime i n November. I f the c o u r t s u s t a i n s t h i s motion and i f the defendant does not appeal on the r u l i n g , the case w i l l involve no question of importance or i n t e r e s t to the e n t i r e Federal Reserve System. I f , however, the court should overrule the motion to s t r i k e out the d e f e n d a n t ' s a f f i r m a t i v e defense, or i f the court should s u s t a i n such motion and the defendant should appeal from such r u l i n g , the case may involve questions of importance to the e n t i r e Federal Reserve System, depending upon whether the appeal turns upon questions of procedure or upon questions of s u b s t a n t i v e law. Counsel f o r the defendant i n t h i s case, a c t i n g as counsel f o r c e r t a i n stockholders and d e p o s i t o r s in the F i r s t National Bank of New Bern and i t s p r e d e c e s s o r , the National Bank of New Bern, has demanded t h a t the r e c e i v e r i n s t i t u t e proceedings a g a i n s t the Federal Reserve Bank f o r the r e t u r n of a s s e t s of such banks pledged to the Federal Reserve Bank as s e c u r i t y f o r the indebtedness of such banks to the Federal Reserve Bank ( o t h e r than paper rediscounted with the Federal Reserve Bank without c o l l a t e r a l s e c u r i t y ) and a l s o f o r the r e t u r n of a s s e t s of such banks "not held i n accordance 3 4 2 - 3 - X-6740 with the Federal Reserve Act," i n order t h a t the r e c e i v e r may obtain f o r c o l l e c t i o n and d i s t r i b u t i o n among the c r e d i t o r s of the F i r s t National Bank of Hew Bern "items u n l a w f u l l y obtained and h e l d by the Federal Reserve Bank of Richmond". The t h r e a t i s made t h a t , i f the r e c e i v e r does not i n s t i t u t e such proceedings the stockholders and d e p o s i t o r s w i l l do s o . I am informed t h a t the Comptroller of the Currency lias i n s t r u c t e d the r e c e i v e r not to i n s t i t u t e such proceedings; but d e p o s i t o r s and stockh o l d e r s probably w i l l do s o . I f they do, t h a t case almost c e r t a i n l y w i l l involve questions of System-wide importance. QUESTIONS WHICH M Y BE INVOLVED A This l i t i g a t i o n probably w i l l produce p u b l i c i t y unfavorable to the Federal Reserve System and may r e s u l t i n r u l i n g s by the Appellate Courts e s t a b l i s h i n g important precedents on the following questions, and p o s s i b l y o t h e r s , which a r e of importance to a l l Federal reserve banks and some of which axe of importance to the Federal Reserve Board and the Compt r o l l e r of the Currency: 1. Whether a Federal r e s e r v e bank may be r e q u i r e d to produce i n court copies of r e p o r t s of examinations of n a t i o n a l banks e n t r u s t e d by the Comptroller of the Currency to the Fede r a l Reserve Agent f o r h i s c o n f i d e n t i a l information i n h i s o f f i c i a l capacity. 2 . Whether i t i s l a w f u l f o r Federal r e s e r v e banks to r e q u i r e or accept pledges of marginal c o l l a t e r a l when making r e discounts f o r , or loans to, member banks. 3. Whether the makers of notes rediscounted by member banks with Federal reserve banks may o f f s e t a g a i n s t t h e i r i n d e b t edness on such notes the amounts of t h e i r d e p o s i t s i n such member banks a f t e r the insolvency of the l a t t e r . 4. To what e x t e n t are Federal r e s e r v e banks chargeable with n o t i c e of the insolvency of member banks? 5. To what extent are the r i g h t s of Federal r e s e r v e banks in g r a n t i n g c r e d i t accommodations t o member banks a f f e c t ed by knowledge on the p a r t of the Federal r e s e r v e banks of the insolvency of such member banks or of f r a u d u l e n t and unlawful t r a n s a c t i o n s of such member banks? Somewhat s i m i l a r questions were involved i n the cases of Federal Reserve Bank of San Francisco v . Grimm A l f a l f a Seed Growers* A s s o c i a t i o n , 8 Fed. (2nd) 922, c e r t i o r a r i denied 46 Sup. Ct. 347, and Neoga National Bank v. Federal Reserve Bank of Chicago (unreported); and i n both of those cases Honorable Newton D. Baker was employed as Special Counsel to r e p r e s e n t the i n t e r e s t s of a l l Federal reserve banks i n t h e l i t i g a t i o n . He was a l s o r e t a i n e d by the Governors' Conference to make a s p e c i a l study of a l l such questions with a view of a d v i s i n g the Federal r e s e r v e banks how - .4 X-6740 348 t h e i r c r e d i t p r a c t i c e s might be modified to minimize r i s k of l o s s to the Federal r e s e r v e "banks, "but has not yet rendered a r e p o r t . In view of h i s p a s t experience and h i s s p e c i a l knowledge of t h i s s u b j e c t , he would be e s p e c i a l l y well q u a l i f i e d to r e p r e s e n t the i n t e r e s t s of a l l Federal r e serve "banks i f i t should 'become necessary to employ Special Counsel f o r t h i s purpose. I am keeping i n close touch with a l l developments i n t h i s l i t i g a t i o n through correspondence and telephone conversations with Counsel f o r the Federal Beserve Bank of Richmond; and I am keeping a l l Federal r e s e r v e "banks advised of developments through l e t t e r s to t h e i r Counsel* ' I s h a l l , of course, advise the Board of a l l important developments and s h a l l recommend the employment of Special Counsel should f u t u r e developments appear to make t h a t a d v i s a b l e . EXTRAORDINARY CHARGES AGAINST FEDERAL RESERVE BANK. For the Board's f u r t h e r i n f o r m a t i o n , there i s r e s p e c t f u l l y subm i t t e d herewith an a n a l y s i s of the e x t r a o r d i n a r y charges made a g a i n s t the Federal Reserve Bank by the defendant i n t h i s c a s e . I b e l i e v e t h a t these charges are i r r e l e v a n t and immaterial i n t h i s case and t h a t they should be s t r i c k e n o u t . They may, however, be m a t e r i a l i f repeated i n a s u i t brought a g a i n s t the Federal Reserve Bank on behalf of the dep o s i t o r s and other c r e d i t o r s of the F i r s t National Bank of New Bern f o r the purpose of r e q u i r i n g the r e t u r n to the r e c e i v e r of c e r t a i n a s s e t s of the bank f o r the b e n e f i t of i t s d e p o s i t o r s and c r e d i t o r s on the ground t h a t i n obtaining such a s s e t s the Federal Reserve Bank knowingly p a r t i c i p a t e d i n a f r a u d on the depositors and other c r e d i t o r s . In the e x e r c i s e of i t s power of general supervision over the Federal r e serve banks, the Board a l s o may d e s i r e to enquire i n t o the t r u t h of these charges. I doubt t h a t they are t r u e ; b u t , to have such charges a i r e d i n court and p o s s i b l y passed upon by a p r e j u d i c e d j u r y , might r e s u l t i n much u n f a v o r a b l e p u b l i c i t y f o r the Federal Reserve System. CONCLUSION This memorandum i s merely f o r the Board 1 s information and r e q u i r e s no a c t i o n a t t h i s time. Because the a t t a c h e d documents are quite voluminous, I am f u r n i s h i n g copies to each i n d i v i d u a l member of the Board, i n order t h a t he may consider them a t h i s l e i s u r e . Respectfully, Walter Wyatt, General Counsel. Co r r e s p ondence, etc; attached. W-sad. 0><: X-8741 (COPY) THE FIRST NATICEAL BA1JK Hew Bern, If. C. Oct. 9, 1930. Comptroller of the Currency, Treasury Department, Division of I n s o l v e n t n a t i o n a l Banks, Washington, D. C. Subject: Request of Creditors f o r Receiver to Bring S u i t a g a i n s t Federal Reserve Bank of Richmond. Dear S i r : Your Receiver i s enclosing a copy of a document which was served upon him today, asking f o r a r e p l y i n ten days time. This i s demand made by J . Lucas, J r . , and J . W. Lucas, a d m i n i s t r a t o r s of the E s t a t e of W. J . Lucas, deceased, and Mrs. Kate S. Lucas, wife of W. J . Lucas, deceased, brought by Attorneys Whi t e h u r s t and Barden and W. B. R. Qui on. The document speaks f o r i t s e l f and your Receiver asks f o r i n s t r u c t i o n s i f he should r e p l y w i t h i n ten days. Respectfully, (Signed) Raymond E. Schumacher Raymond E. Schumacher, Receiver. RES: JEW Enclosure - 1 X-6741 (COPY) F i l e Ho. 1362 iTORTH CAROLINA CRAVEN COLWTI: TO E. E. Schumacher, Esquire, Receiver of the F i r s t National Bank of New Bern, North Carolina. Dear S i r : In "behalf of the e s t a t e of W. J . Lucas, who was a stockholder i n the National Bank of Mew Berne, predecessor of the F i r s t National Bank of Hew Bern, and who was likewise a depositor i n the F i r s t National Bank of New Bern, and i n behalf of s a i d e s t a t e j o i n t l y with Mrs. Kate S. Lucas, wife of s a i d W. J . Lucas, deceased; and of a l l other stockholders of the National Bank of New Berne and d e p o s i t o r s and c r e d i t o r s of the F i r s t National Bank of New Berne, and any other persons, firms or corporations s i m i l a r l y s i t u a t e d , r e q u e s t and demand i s hereby made upon you t h a t you f o r t h w i t h i n s t i t u t e p r o ceedings i n a Court of competent j u r i s d i c t i o n a g a i n s t the Federal Reserve Bank of Richmond f o r the r e t u r n to you to be handled f o r the b e n e f i t of those persons making the demand and a l l other persons s i m i l a r l y s i t u a t e d , of a l l n o t e s , b i l l s of exchange, d r a f t s , bonds, evidences of indebtedness, warehouse r e c e i p t s or other items of s e c u r i t y which have been or may have been deposited with the s a i d Federal Reserve Bank of Richmond as s e c u r i t y f o r any indebtedness due from the National Bank of New Berne to the said Federal Reserve Bank of Richmond and/ or from the F i r s t National Bank of New Bern other than notes denominated e l i g i b l e n o t e s , d r a f t s , etc* withi n tne meaning and term of the Federal Reserve Act which were discounted or purchased by the Federal Reserve Bank without c o l l a t e r a l s e c u r i t y # - 2 ~ X-6741 And i n a d d i t i o n t h e r e t o , t h a t i n said proceeding you w i l l demand the r e t u r n of the items of the character received from the F i r s t National Bank of 27ew Bern and/ or the National Bank of New Berne "by the Federal Reserve Bank of Richmond not held i n accordance with s a i d Federal Re~ serve Act and when s a i d items a r e shown to have "been c o l l e c t e d or i f the r e t u r n of same cannot "be had, t h a t you demand f o r the b e n e f i t of the c r e d i t o r s of s a i d F i r s t National Bank of New Bern and the National Bank of New Berne, the cash proceeds received by the Federal Reserve Bank of Richmond from s a i d items so c o l l e c t e d or which they f a i l e d to r e t u r n . This demand i s made upon you i n order t h a t you s h a l l obtain f o r c o l l e c t i o n and d i s t r i b u t i o n among the c r e d i t o r s of the i n s t i t u t i o n f o r which you a r e Receiver said items u n l a w f u l l y obtained and h e l d by the Federal Reserve Bank of Richmond f o r the b e n e f i t of the c r e d i t o r s of the s a i d F i r s t National Bank of New Bern and/ or the c r e d i t o r s of the National Bank of New Berne. You a r e f u r t h e r n o t i f i e d t h a t should you f a i l to comply with t h i s demand and immediately i n s t i t u t e s a i d proceedings within a r e a s o n able time of t h i s n o t i c e , t h a t the persons making the demand m i l , i n t h e i r own r i g h t , i n s t i t u t e said proceedings. You w i l l k i n d l y advise w i t h i n ten days whether i t i s your purpose to i n s t i t u t e s a i d a c t i o n f o r the recovery of the a s s e t s iimp r o p e r l y and u n l a w f u l l y h e l d by the Federal Reserve Bank of Richmond otherwise your f a i l u r e so to advise w i l l be deemed a r e f u s a l by you to comply with t h i s n o t i c e . - 3 - X-6741 This 9th day of October, 1930. W. J . Lucas, J r . and J . W. Lucas, Administrators of the E s t a t e of W. J . Lucas. Kate S. Lucas By Whitehurst & Barden W. B. E. G-ui on ' Attorneys. Served 10/9/30 J a s , S. Bryan, Constable. COPY X-6742 ANALYSIS OF EXTRAORDINARY CHARGES M D AGAINST AE FEDERAL RESERVE BANK OF RICHMJID IN DEFENDANT'S ANS'TER IN CASE OF FEDERAL RESERVE BANK OF RICHMOND V. ATTMORE. (NOTE: Numbers with the l e t t e r "A" p r e f i x e d r e f e r t o numbered s e c t i o n s of the f i r s t p o r t i o n of the Answer (pages 1 - 3 ) ; numbers with the l e t t e r s "A.D." p r e f i x e d r e f e r to numbered s e c t i o n s of t h a t p o r t i o n of the Answer (pages 3-15) containing the a f f i r m a t i v e defenses; numbers with the l e t t e r "p" p r e f i x e d r e f e r to pages of mimeograph No. X-6727-a. In a d d i t i o n to the usual a l l e g a t i o n s a p p r o p r i a t e to an answer f i l e d i n a s u i t of t h i s k i n d , the Defendant makes the following e x t r a ordinary a l l e g a t i o n s : 1. That the Federal Reserve Bank i s not a banking corporation but has made an e f f o r t " t o p e r v e r t t h i s Federal Reserve Bank, c r e a t i o n of the Democratic Administration, and to abrogate, d e s t r o y and d i s r e g a r d the b e n e f i c i e n t and wise purposes and l i m i t a t i o n s of the c r e a t i o n " , a s s e t f o r t h i n the t i t l e of the Federal Reserve Act. ( A - l , p . l . ) 2. That, p r i o r to 1920, the Peoples Bank, a S t a t e member bank, was l a r g e l y indebted to Federal Reserve Bank, and, "because of the r e q u i r e ments a p p l i e d by the p l a i n t i f f , unable p r o p e r l y to f u n c t i o n ; " and t h a t the Federal Reserve Bank, "in i t s e x e r c i s e of power a r r o g a n t l y assumed, caused the National Bank of New Berne to absorb the s a i d Peoples Bank and to assume i t s obligations." 3. (A.D. 3, p . 4 ) That National Bank of New Berne became i n s o l v e n t ; t h a t Federal Reserve Bank knew i t to be i n s o l v e n t ; t h a t , with f u l l knowledge of Federal r e s e r v e Bank, the National Bank of New Berne on March 19, 1929 ent e r e d i n t o an agreement With the F i r s t National Bank of New Berne whereby - 2 X-674S the l a t t e r assumed a l l l i a b i l i t i e s of the former (except to stockholders) i n c o n s i d e r a t i o n of the t r a n s f e r of c e r t a i n s e l e c t e d a s s e t s of the former and the execution of d e f i c i e n c y note f o r $250,000 secured by the pledge of the remaining a s s e t s of the former; and t h a t these f a c t s were concealed from the p u b l i c u n t i l about April 1930. (A.D. 3, pp. 4 5 and "Exhibit A") 4. That the F i r s t National Bank of New Berne was organized March 20, 1920, and took over c e r t a i n a s s e t s and assumed the l i a b i l i t i e s (except to s h a r e h o l d e r s ) of the National Bank of New Berne; and t h a t the c a p i t a l and s u r p l u s of the F i r s t ITational Bank was provided f r a u d u l e n t l y from the -publ i c funds of the County of Craven, with f a l l knowledge of the Federal Reserve Bank. (A. D. 4, p . 5 . ) 5. That the F i r s t National Bank was i n s o l v e n t a t the time of i t s c r e a t i o n and continued i n s o l v e n t u n t i l October 26, 1929, "when i t ceased to function". (A. D. 5, p . 6 . ) 6. That the a s s e t s taken over by the F i r s t ITational Bank were the same as those shown i n the l a s t statement of the ITational Bank of Hew Berne except f o r those r e j e c t e d by the examiners and grouped as c o l l a t e r a l to i t s d e f i c i e n c y note of $250,000 (A.D. 5, p . 6 . ) ; t h a t s a i d d e f i c i e n c y note was never worth more than $20,000, has never been c o l l e c t e d , and never can be c o l l e c t e d ; and t h a t Federal Reserve Bank had f u l l knowledge of a l l these f a c t s . (A. D. 5, p . 6 . ) 7. That the Peoples Bank was a member of the Federal Reserve Bank and as such was r e g u l a r l y examined by Federal Reserve Bank, and t h a t Federal Re serve Bank " r e q u i r e d and brought about the amalgamation" of the Peoples Bank with the National Bank of ITew Berne. (A.D. 6, p . 6 . ) 3 5 0 ~ 3 8. X-6742 That i n 1927 or 1928 the National Bank of Hew Berne was r e - quired to make good $225,000 worth of l o s s e s and t h a t t h i s was done by t i e use of the money of Craven County. 9. (A. D. 6, p . 7.) That about the same time the Federal Reserve Bank "dominating s a i d "bank" n o t i f i e d i t t h a t i t d e s i r e d i t to employ Hugh R. Beal, one of the Federal Reserve Bank's examiners, and to take charge of the National Bank. (A.D. 6, p . 7 . ) 10. That Beal accepted a p o s i t i o n with a member "bank i n E l i z a b e t h City and remained with i t about f i v e months, or u n t i l i t closed; b u t , thereupon a t the i n s t a n c e of the Federal Reserve Bank made an examination of the n a t i o n a l Bank of New Berne. (A. D. 6, p . 7.) 11. That, a t the time of such examination, there were among the a s s e t s of s a i d bank a l a r g e p a r t of the a s s e t s acquired from the Peoples Bank, which Beal had a l r e a d y i n v e s t i g a t e d for the Federal Reserve Bank while examining the Peoples Bank and b r i n g i n g about i t s amalgamation with the National Bank of New Berne. (A. D. 6, p . 7.) 12. That Beal became v i c e p r e s i d e n t of the National Bank of New Berne, "under the mandate of" the Federal Reserve Bank, and remained i n t h i s p o s i t i o n about 6 months. (A. D. 6, p . 7.) 13. That on March 7, 1929, there was d e p o s i t e d i n the Seventh National City Bank, under the control of Beal, to the account of the National Bank of New Berne, $200,000 proceeds from the s a l e of Craven County n o t e s , which were i s s u e d u n l a w f u l l y by the Commissioners of Craven County. (A.D. 6, PP> 7, 8 . ) 14. That $180,000 of such $200,000 was placed by Beal i n the P l a n t e r s Bank of Richmond and on March 19 t r a n s f e r r e d "by him to the Federal : - 4 ~ o 5 I X-6742 Reserve Bank of Richmond* (A.D. 6, p . 8 . ) 15. That, on or about March 19, the Comptroller of the Currency " l i c e n s e d " a new n a t i o n a l "bank ( a p p a r e n t l y the F i r s t National Bank ) " t o "be operated "by the City of Hew Bern"; t h a t Seal had organized t h i s "bank, under the advice and counsel of the Federal Reserve Bank; and t h a t Beal was i t s vice p r e s i d e n t and executive o f f i c e r . (A.D. 6, p . 8.) 16. That on or about March 19, 1929, the s a i d sum was p l a c e d to the c r e d i t of the F i r s t National Bank of ITew Berne as i t s p a i d - i n c a p i t a l stock and s u r p l u s . 17. (A.D. 6, p . 8.) That an a d d i t i o n a l sum of $50,000 or $80,000 was i n some s i m i l a r manner made a v a i l a b l e f o r the use of the F i r s t National Bank through the same agency. (A.D. 6, p . 8 . ) 18. That throughout a l l these t r a n s a c t i o n s the National Bank of Hew Berne was i n s o l v e n t , t h a t i t s condition was f u l l y r e p o r t e d to and f u l l y known by the Federal Reserve Bank and t h a t i t s a s s e t s were, from time to time appraised and the value thereof r e p o r t e d to the Federal Reserve Bank. (A.D. 6, p . 9 . ) 19. That b e f o r e March 20, 1929, the Federal Reserve Bank had maintained an agent a t New Berne to p r e s e n t items f o r c o l l e c t i o n i n cash across the counter of the National Bank of Hew Berne. (A.D. 5, p. 9 . ) 20. That, on March 20, 1929, the a s s e t s of the National Bank of New Berne became the a s s e t s of the F i r s t National Bank of Hew Berne. (A.D. 7, p. 9.) 21. That the comity money "obtained u n l a w f u l l y and through fraud" never became the p r o p e r t y of the F i r s t National Bank but remained the p r o p e r t y - 5 X-»674^ r of the County. (A.D. 7, p . 9 . ) 22. That, with a l l these matters f u l l y known to the Federal Reserve Bank, the F i r s t National Bank was i n s o l v e n t when i t opened and remained i n s o l vent throughout i t s s h o r t c a r e e r , i . e . , from March 20, 1929, to October 25, 1929* (A.D. 7, p . 9 . ) 23. That " u n l a w f u l l y , c o n t r a r y to the power granted to the p l a i n t i f f , wholly u l t r a v i r e s , and i n f r a u d upon the d e p o s i t o r s and c r e d i t o r s of the R a t i o n a l Bank of Mew Berne and the F i r s t National Bank of New Berne" the Federal Reserve Bank h e l d i n i t s p o s s e s s i o n $500,000 or $700,000 f a c e value of the a s s e t s of such n a t i o n a l hanks. (A.D. 7, p . 9 . ) 24. That, from i t s very beginning, 12 of i t s c r e d i t o r s , including the Federal Reserve Bank, h e l d 64$s of a l l of i t s a s s e t s to cover 34$ of the t o t a l g e n e r a l l i a b i l i t y of the F i r s t National Bank, leaving 36$ of the a s s e t s , composed of the " l e f t overs" of p r a c t i c a l l y no v a l u e . (A.D. 7, p . 10.) 25. That Defendant b e l i e v e s t h a t the Receiver, under advice and guidance of the Comptroller of the Currency, and with knowledge and consent of the Federal Reserve Bank, had brought a c t i o n s to reduce to possessi on a l l of s a i d 64$ of the a s s e t s , except $500,000 or $700,000 c a r e f u l l y s e l e c t e d by the Federal Reserve Bank, which the Receiver has 11 conveniently s e l e c t e d and designated x x x f o r u s e f o r the purposes: f i r s t , of embarrassme n t to the community and, second, the d e s t r u c t i o n of the "business l i f e of the community." (A.D. 7, p. 10.) 26. That, under the Federal Reserve Act, the Federal Reserve Bank can n e i t n e r hold nor own such a s s e t s "but should "be r e q u i r e d to account to the Receiver of the F i r s t National Bank and the Liquidating Agent of the National 353 ~ 6 - X-5742 Bank of Hew Berne f o r a l l a s s e t s of the r e s p e c t i v e banks and. to Craven County f o r the $425,000 of i t s money "unlawfully, f r a u d u l e n t l y had and obtained". (A.D. 7, p . 10.) 27. That- the debt, i f any, of the F i r s t National Bank to the Fede r a l Reserve Bank was $208,000 a g a i n s t which the Federal Reserve Bank h e l d $400,000 or $500,000 of the b i l l s r e c e i v a b l e a s assigned c o l l a t e r a l . (A.D. 7, p . 11.) 28. That the d e f e n d a n t ' s $5,000 note was an accommodation note given \vithout any c o n s i d e r a t i o n . (A.D. 8, p . 11.) 29. That, i n view of i t s power of examination and s u p e r v i s i o n over member banks under t h e p r o v i s i o n s of the Federal Reserve Act, the Federal Reserve Bank was chargeable with n o t i c e of these f a c t s . .(A. D. 8, p . 11.) 30. That the Federal Reserve Bank examined the National Bank of New Berne from time to time and t h a t a proper examination was bound to d i s c l o s e the f a c t t h a t the $5,000 note was given without c o n s i d e r a t i o n . (A.D. 8, p., 1 1 . ) 31. That the Federal Reserve Bank c o n s t i t u t e d the National Bank of New Bern i t s agent to c o l l e c t t h i s note.. (A.D. 8, p . 12.) 32. That the National Bank of New Berne, the F i r s t National Bank and the Federal Reserve Bank, i n c o l l u s i o n , converted t h i s note and the Fede r a l Reserve Bank holds i t as t r u s t e e f o r defendant. (A.D. 9, p . 1 3 . ) 354 COPY X-6743 FEDERAL RES3RVE BANK OF RICHMOND October 25, 1930. Federal Reserve Board, Washington, D. C. A t t e n t i o n Mr. Walter l y a t t , General Counsel My dear Mr. Wyatt: I r e c e i v e d your l e t t e r of October 22nd upon the s u b j e c t of the employment of Honorable Newton D. Baker to a s s i s t i n the case of the Federal Reserve Bank of Richmond v. Attmore and r e l a t e d l i t i g a t i o n s . . I have discussed t h i s m a t t e r with the o f f i c e r s of t h i s bank and a l l of us agree t h a t these cases may well p r e s e n t questions which w i l l make them m a t t e r s of i n t e r e s t to the e n t i r e Federal Reserve System, so that i t w i l l be h i g h l y d e s i r a b l e to bring Mr. Baker i n t o c o n s u l t a t i o n . Mr, Seay h a s , t h e r e f o r e , asked me to request the Federal Reserve Board to make with Mr. Baker such an arrangement as i s u s u a l l y made i n such c a s e s . As you know I have never had any experience i n such arrangements; consequently i f t h e r e q u e s t should come from Mr. Seay to the Federal Reserve Board, l e t me know, but otherwise you may t r e a t t h i s l e t t e r as a r e q u e s t to the Federal Reserve Board to r e t a i n Mr. Baker f o r consultation* I am e n c l o s i n g you herewith a memorandum f i l e d in the t r i a l c o u r t . The docket i n the court of Craven County, N. C., i s so congested that the t r i a l judge has l i t t l e time f o r thorough study. The memorandum which I enclose, Was intended merely as an o u t l i n e of my views f o r the b e n e f i t of my a s s o c i a t e , but he t e l l s me that he d e l i v e r e d i t to the t r i a l judge supplemented only by a few c i t a t i o n s of Noi*th Carolina cases r e l a t i n g to the general s u b j e c t of s t r i k i n g out i r r e l e v a n t or immaterial a l l e g a t i o n s * I have w r i t t e n to my a s s o c i a t e to ask what w i l l be the time allowed us to p e r f e c t an a p p e a l . I took d e p o s i t i o n s i n f i v e o t h e r cases pending i n New Bern, brought to recover upon notes h e l d as marginal c o l l a t e r a l . The examination of the w i t n e s s e s made by the a t t o r n e y s f o r the defendants i n those c a s e s , show t h a t they expect to p r e s s on the court the question of our r i g h t to receive and h o l d marginal c o l l a t e r a l , and a l s o I think showed t h e i r det e r m i n a t i o n to h i n d e r and delay the p r o g r e s s of case as much as p o s s i b l e . They made no s e c r e t of the f a c t t h a t the docket i n t h e i r county was so congested t h a t a t r i a l could not be obtained f o r a t l e a s t a year on any question r e q u i r i n g j u r y t r i a l . They a l s o made demands during the p r o g r e s s of the t a k i n g of the d e p o s i t i o n s f o r the production and e x h i b i t i o n of 8 5 5 Mr. Walter Wyatt, General Counsel, Federal Reserve Board X-6743 -2- October 23, 1930. numerous records and accounts. Some were produced and e x h i b i t e d . The w i t n e s s e s under my advice r e f u s e d many o t h e r s upon the ground t h a t i t would take several days or several weeks to f i n d the documents and t h a t they were e n t i r e l y immaterial to the i s s u e of the c a s e . • I am c e r t a i n t h a t my opponents 1 o b j e c t i s to r a i s e as many questions as p o s s i b l e , hoping t h a t the court may exclude the depositions a t the t r i a l or e l s e permit them to have a continuance upon the ground t h a t the documents should have been produced. I have mentioned the general conditions because I think t h a t we a r e i n r e a l i t y c a l l i n g Mr. Baker i n to consult about m a t t e r s when our opponents a r e much more anxious to avoid a d e c i s i o n than they a r e to o b t a i n one. In other words they are r a i s i n g the questions a s a means of c r e a t i n g delays and with some hope, of course, t h a t by some a ccident a d e c i s i o n w i l l be rendered i n t h e i r f a v o r . I think, however, as I s t a t e d i n the beginning, t h a t the t i o n i s such as to suggest r e t a i n i n g Mr. Baker, I a l s o agree with i t i s a d v i s a b l e to appeal from any adverse r u l i n g to the motion to out the answer i n the Attmore case, but of course, i f Mr. Baker i s t a i n e d he should have the deciding voice on t h a t q u e s t i o n . situayou t h a t strike re- As I have never been involved i n a System case since we adopted the p l a n f o r j o i n t a c t i o n , I do not know j u s t how I should proceed i n p l a c i n g these m a t t e r s b e f o r e Mr. Baker. My suggestion would be t h a t when he has been r e t a i n e d , I should send him copies of a l l papers i n the Attmore case and copies of the d e p o s i t i o n s to which I have r e f e r r e d , and t h a t a f t e r he has had an opportunity to read the papers we should have a conference. I t would be very h e l p f u l , I think, to have you a t t h a t conference, and i f i t s u i t s Mr. Baker's convenience, we could have i t a t your o f f i c e . When you have made arrangements with Mr. Baker, you can communicate with me. Of course, I could go to Cleveland to consult him t h e r e , i f more convenient to him. Very t r u l y yours, (S) Me G. Wallace, Counsel, Mr /m GWm enc* P . S. I should l i k e very much to have a memorandum by you concerning the d u t i e s of the Federal Reserve Agent and h i s r e l a t i o n s to the Bank and to the Board; and Mr. Hoxton advises that he would l i k e to have such a memorandum i n h i s f i l e s f o r h i s own guidance. M. Gr. W e ,356 X-6743-a M M R N U OF MOTION TO STRIKE OUT ANSWER OF DBFEBHANT IN ACTION E OADM OF FEDERAL RESERVE SANK OF RICHMOND v G. S. ATTMORE PARAGRAPH 1 OF THE ANSWER: : Paragraph one of the answer i s not a s p e c i f i c or general d e n i a l of the corresponding a l l e g a t i o n of the complaint as reouired by Section 519 of the Code of North Carolina. I n t h i s paragraph the defendant a p p a r e n t l y concedes t h a t -the p l a i n t i f f has organized under the a c t s of Congress r e l a t i v e to Federal r e s e r v e "banks hut denies t h a t Federal reserve "banks are ""banking c o r p o r a t i o n s " . • The powers of the p l a i n t i f f are p r e s c r i b e d by law (see Section 4 of the Federal Reserve Act; U. S. Code, T i t l e 12, Section 541, e t s e q . ) This paragraph, t h e r e f o r e , p r e s e n t s a question of law and not an i s s u e of f a c t , (see 108 N. C. 147. 12 S. 2 . 896) The l a s t sentence i s p l a i n l y n e i t h e r "a s p e c i f i c or general denial of the a l l e g a t i o n of the complaint" nor "a statement of new matter i n ordinary concise language" as r e q u i r e d by Section 896 of the Code of North Carolina, and can have been i n s e r t e d f o r no purpose except to attempt to arouse passion and p r e j u d i c e on the p a r t of the j u r y . PARAGRAPHS 5 and 8 OF THE ANSWER: These paragraphs a r e p l a i n l y not proper p l e a d i n g . That p o r t i o n which de- mands the production of documents i s n e i t h e r an admission or d e n i a l of matters a l l e g e d i n the complaint, nor a statement of new m a t t e r , f o r the defendant i s app a r e n t l y u n w i l l i n g t o commit himself to the a l l e g a t i o n t h a t any such documents e x i s t , but leaves t h i s to i n f e r e n c e . Section 899, e t s e q . of the Code of North Carolina provides means f o r compelling the production of documents and f u r t h e r provides t h a t the method t h e r e i n p r e s c r i b e d i s an exclusive method. Doubtless one of the o b j e c t s of such a p r o v i s i o n was t o permit the court to determine the p r o p r i e t y of r e q u i r i n g the production of the documents and the a d m i s s i b i l i t y of ~ 2 - X-6743~a t h e i r contents; to determine on matters r e l a t i v e to the production of documents without p e r m i t t i n g the j u r y to be misled or confused by the i r r e g u l a r presentation of matters which a r e w i t h i n the province of the judge. The defendant has not seen f i t to a v a i l himself of the remedy provided "by s t a t u t e and the i n c l u s i o n of a r e f e r e n c e to such a remedy i n the answer i s obviously an e f f o r t to employ the answer as a s u b s t i t u t e f o r a b i l l of discovery, which l a t t e r remedy has been exp r e s s l y a b o l i s h e d , and the reading to the j u r y of t h i s s e c t i o n of the answer can serve no purpose except to convey by suggestion the i d e a t h a t the p l a i n t i f f has i n i t s p o s s e s s i o n s e c r e t documents which i t has wrongfully f a i l e d to produce, when the f a c t i s t h a t i f the production of the documents i s proper the court may i n the manner p r e s c r i b e d by s t a t u t e require the production. PARAGRAPH ONE OF THE FURTHER DEFENSE: This i s a r e s t a t e m e n t of the p o s i t i o n taken by the defendant i n p a r a graph one of the answer and as such i s open to the o b j e c t i o n s s t a t e d above. PARAGRAPH T O OF THE FURTHER DEFENSE: W The matters h e r e i n a l l e g e d are a b s o l u t e l y i r r e l e v a n t to the i s s u e s of the case, which are simply - 1+ I s the defendant l i a b l e upon the notes sued on? 2. Were these notes t r a n s f e r r e d to the p l a i n t i f f so t h a t i t became the holder of them? 3. I s the a l l e g e d balance due by the F i r s t National Bank of New Bern to the defendant a v a i l a b l e as defense in a c t i o n by the p l a i n t i f f ? PARAGRAPH THREE OF THE FURTHER DEFENSE: These a l l e g a t i o n s r e l a t e to matters occurring e i g h t years b e f o r e the execution of the notes i n the s u i t and are t h e r e f o r e wholly immaterial to any cont r o v e r s y between the p a r t i e s to t h i s action* I n a d d i t i o n , the a l l e g a t i o n t h a t "The Peoples Bank becajne unable to f u n c t i o n because of the requirements of the p l a i n t i f f " i s a mere conclusion of the #> - 3 pleader. r-i X-6743-a He should s p e c i f i c a l l y a l l e g e the requirements to which he r e f e r s i n order t h a t the court may he able to determine whether or not such requirements were l a w f u l or u n l a w f u l . The a l l e g a t i o n t h a t the p l a i n t i f f causedthe National Bank of Mew Berne to absorb the s a i d Peoples Bank i s a l s o a conclusion, and furthermore a conclusion impossible as a m a t t e r of law since the proceedings i n the c o n s o l i d a t i o n of Nati o n a l banks a r e s u b j e c t to the control of the Comptroller of the Currency (see U. S. Code, T i t l e 12, S e c t i o n s 33 and 35) so t h a t the p l a i n t i f f could have no power to r e q u i r e or compel a National tank to consolidate with a s t a t e bank. PARAGRAPH FOUR OF THE FJRTHER DEFENSE: This a l l e g a t i o n i s i r r e l e v a n t to the controversy between the p a r t i e s , and i n a d d i t i o n i t ap Dears t o be held i n North Carolina, as elsewhere, t h a t an a l l e g a t i o n t h a t an a c t was done f r a u d u l e n t l y i s a mere conclusion. Tne p l e a d e r should allege, the a c t i o n which c o n s t i t u t e d the f r a u d in order that the court may draw i t s own i n f e r e n c e from the a l l e g a t i o n . PARAGRAPH FIVE OF THE IURTH3R DEFENSE: The a l l e g a t i o n s of t h i s paragraph are i r r e l e v a n t , as the insolvency of the National Bank of New Berne would not debar i t from t r a n s f e r r i n g i t s a s s e t s f o r value. PARAGRAPH SIX OF THE FURTHER DEFENSE: The a l l e g a t i o n s of t h i s paragraph are i r r e l e v a n t , and i n a d d i t i o n the a l l e g a t i o n as to the amalgamation of the two banks i s as a matter of law inpossi-. b l e f o r the reasons s e t out above. The a l l e g a t i o n as t o the use of the funds of Craven County i s wholly i r r e l e v a n t , and i n a d d i t i o n i s a mere conclusion, as there i s no a l l e g a t i o n as t o why or by what means the funds of Craven County came i n t o the hands of the National Bank of New Berne, and i n any event the use or misuse of 3 5 9 ~ 4 — X-6743-a the funds of Craven County "by the National Bank of Hew Berne must be i r r e l e v a n t to any controversy between the Federal Reserve Bank of Richmond and G*. S. Attmore. The i n c l u s i o n of t h i s a l l e g a t i o n can have been intended only to arouse passion or p r e j u d i c e on the p a r t of the j u r y by i n s i n u a t i n g t h a t i n matters wholly unconnected with the p r e s e n t case the p l a i n t i f f has connived a t i r r e g u l a r i t i e s on the p a r t of National banks. PARAGRAPH SEVEN 0? THE FURTHER DEFENSE: This paragraph appears t o be i r r e l e v a n t , a s the defendant does not a l l e g e t h a t h i s notes are held as c o l l a t e r a l by the Federal Reserve Bank of Richmond, and the t i t l e of the Federal Reserve Bank of Richmond to notes of o t h e r persons t r a n s f e r r e d t o i t by the F i r s t National Bank of New Bern cannot be m a t e r i a l i n a controversy concerning i t s t i t l e to the notes of the defendant. The a l l e g a t i o n t h a t other notes were taken i n pursuance of an u l t r a v i r e s c o n t r a c t i s a mere conclusion of the pleader or an a l l e g a t i o n of a matter of law. The p l a i n t i f f has general power to lend money and rediscount notes for member banks and to make advances t o them secured by the pledging of notes or b i l l s made by customers of member banks (U. S. Code, T i t l e 12, Sections 343-7) and p l a i n t i f f i s likewise authorized to e x e r c i s e such i n c i d e n t a l powers as may be necessary to c a r r y on the business of banking within the l i m i t a t i o n s of the a c t c r e a t i n g the p l a i n t i f f (U. S. Code, T i t l e 12, Sections 34-7). There i s no d e f i n i t e l i m i t a t i o n upon the amount of the notes which p l a i n t i f f may discount f o r a member bank nor the amount of advances which may be made to a member bank. l y i n c i d e n t a l to the lending of money. The taking of s e c u r i t y i s obvious- I f the defendant contends t h a t any p a r - t i c u l a r a c t of the p l a i n t i f f i s u l t r a v i r e s , he should a l l e g e t h a t a c t with such p a r t i c u l a r i t y t h a t t h e court may determine whether or not i t was a u t h o r i z e d or 3G0 - 5 p r o h i b i t e d by the Federal Reserve Act. X-6743-a In a d d i t i o n i t has been decided t h a t t i t l e to a s s e t s acquired f o r value by banks organized under t t h e law of the United S t a t e s i n u l t r a v i r e s t r a n s a c t i o n s i s voidable only, and the question of u l t r a v i r e s may be r a i s e d only i n a d i r e c t proceeding by the United S t a t e s . (See Union National v Matthews, 98 U. S. 521; National Bank v Whitney 103 U. S. 99; Swope v Leffingwell 105 U. S. 3; Reynolds v F i r s t National Bank, 112 U. S. 405; Kerfoot v Farmers & Merchants Bank, 218 U. S. 281; also Crowell v Federal Reserve Bank, 12 Fed. 2nd 259) This paragraph a l s o contains a prayer t h a t p l a i n t i f f be required t o account to Craven County and *?. W. G r i f f i n and to R. E. Schumacher, Receiver. None of these persons are p a r t i e s to t h i s a c t i o n and consequently any a l l e g a t i o n as to their r i g h t s i s immaterial. PARAGRAPH EIGHT OF THE FURTI-Mt DEFENSE: This paragraph a l l e g e s t h a t the note f o r $5,000.00 was without cons i d e r a t i o n and was wholly an accommodation o b l i g a t i o n . The Supreme Court of North Carolina, i n Merchants National Bank v Andrews, 102 S. E. 500, 179 N. C. 341, h e l d t h a t a l l e g a t i o n t h a t a note was wi thout cons i d e r a t i o n was a mere conclusion of the p l e a d e r . I t seems t h a t a good pleading should a l l e g e the c o n d i t i o n s and circumstances under which the note was executed i n order t h a t the court may determine whether or not i t was supported by good consideration. I n a d d i t i o n i t i s provided by Section 3009 of the Code of North Carolina t h a t knowledge by the t r a n s f e r e e that a negotiable note was given f o r accommodat i o n has no defense to a c t i o n upon i t , hence the matters and things a l l e g e d in t h i s paragraph are immaterial to the a c t i o n . PARAGRAPH NINE OF THE FURTHER DEFENSE: This paragraph appears to be a mere conclusion. 361 — 6 *• X-5743-a PARAGRAPH TEN OF THE HJRTH3R DEFENSE: This paragraph, appears open to t h e same o b j e c t i o n s as those made to paragraph e i g h t . PARAGRAPH ELEVEN OF THE FURTHER DEFENSE: There appears to be no ground f o r o b j e c t i o n to the a l l e g a t i o n of t h i s paragraph except t h a t the statement " t h a t t h i s defendant i s e n t i t l e d to apply the s a i d d e p o s i t as an o f f s e t " i s a mere conclusion of law and, f u r t h e r m o r e , an e r roneous conclusion (see Sowell v Federal Reserve Bank 286, U. S. 4 4 9 ) . The statement t h a t the note i s i n the hands of R. E. Schumacher i s immaterial. PARAGRAPH TWELVE OF THE FURTHER DEFENSE: There appears t o be no good o b j e c t i o n to t h i s paragraph. I t i s a mere r e p e t i t i o n of a p o r t i o n of the denial of paragraph e i g h t of the answer. PARAGRAPH THIRTEEN OF THE FURTHER DEFENSE: That p o r t i o n of t h i s paragraph t h a t demands the production of w r i t t e n instruments i s open to the objections mentioned under d i s c u s s i o n of paragraphs f i v e and e i g h t of the answer. Furthermore v the court may take j u d i c i a l n o t i c e of the f a c t t h a t r e p o r t s of examinations of National banks are made by the Examiners to the Comptroller of the Currency, who i s an o f f i c e r of the United S t a t e s a c t i n g under the d i r e c t i o n of the S e c r e t a r y of the Treasury (U. S. Code, T i t l e 12, Sections 1, 9 and 481) so t h a t such r e p o r t s could not be e x h i b i t e d by the p l a i n t i f f . PARAGRAPH FOURTEEN OF THE FURTHER DEFENSE: This paragraph i s not an a l l e g a t i o n of any f a c t but an i r r e g u l a r prayer f o r r e l i e f and should be s t r i c k e n , as the r e l i e f obviously cannot be g r a n t e d . The r e l i e f asked i n the f i r s t paragraph i s f o r the b e n e f i t of persons not 3 6 2 — * ** • 7 • X-674o)-a p a r t i e s to the s u i t f o r whose b e n e f i t he has no r i g h t to prosecute an a c t i o n , and i n a d d i t i o n the appointment of a r e c e i v e r to take charge of the a s s e t s and administer them f o r the "benefit of c r e d i t o r s of n a t i o n a l banks would be i n cont r a v e n t i o n of the laws of the United S t a t e s which provide t h a t the r e c e i v e r s of National banks s h a l l a c t under the d i r e c t i o n of the Comptroller of the Currency. ,363 FEDERAL R E S E R V E BOARD Statement f o r the P r e s s . For r e l e a s e i n morning papers Thursday, October 30. X-6745 October 29, 1930. The Federal Reserve Board today announced t h a t Mr. William A. Heath, in accordance with the decision he expressed to t h e Board over a year ago, would r e t i r e from the p o s i t i o n of Class C D i r e c t o r , Chairman of t h e Board of D i r e c t o r s and Federal Reserve Agent a t the Federal Reserve Bank of Chicago, at the e x p i r a t i o n of h i s p r e s e n t term of o f f i c e , December 31, 1930. In connection with the r e t i r e m e n t of Mr. Heath, the Board s a i d : "Mr. Heath has had one of the longest terms of s e r v i c e of any of the Chairmen of the Federal Reserve Banks, having held h i s p r e s e n t p o s i t i o n s i nc e January 1, 1917. His long tenure of o f f i c e i s testimony of the f i d e l i t y , i n t e g r i t y and a b i l i t y with which he h a s handled the r e s p o n s i b i l i t i e s of t h e p o s i t i o n from which he has asked to be r e l i e v e d a t the end of the c u r r e n t y e a r . " The Federal Reserve Board axmountied, in connection with the vacancy c r e a t e d on the Board of the Federal Reserve Bank of Chicago by the r e t i r e m e n t of Mr. Heath, the appointment of Mr. Eugene M. Stevens, of Chicago, a s Class C Director with designation as Chairman of t h e Board of D i r e c t o r s and Federal Reserve Agent, in succession to Mr. Heath, h i s appointment to take e f f e c t January 1, 1931. In connection with tho s e l e c t i o n of Mr, Stevens f o r t h i s important p o s i t i o n , the Board s t a t e d : "Mr. Stevens comes to t h e Federal Reserve System with the high c r e d e n t i a l s of a long, v a r i e d and s u c c e s s f u l banking, f i n a n c i a l and b u s i n e s s experience in Chicago and the ITpper M i s s i s s i p p i Valley, in t h e course of which he became P r e s i d e n t of one of the l a r g e s t and most important banking i n s t i t u t i o n s in the United S t a t e s . Mr. Stevens w i l l r e t i r e from t h i s p o s i t i o n a t the end of the y e a r , when he assumes the Chairmanship of the Federal Reserve Bank of Chicago. "Mr. Stevens became P r e s i d e n t of t h e Continental I l l i n o i s Bank and Trust Company and i t s a f f i l i a t e d o r g a n i z a t i o n , t h e Continental I l l i n o i s Company, a t the time of i t s o r g a n i z a t i o n on March 18, 1929, by the c o n s o l i d a t i o n of the Continental National Bank and Trust Company and the I l l i n o i s Merchants Trust Company. At the time of the c o n s o l i d a t i o n of t h e s e two i n s t i t u t i o n s Mr. Stevens was P r e s i d e n t of the I l l i n o i s Merchants Trust Company." FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-6746 October 29, 1930, SUBJECT: Bank F a i l u r e s . Dear S i r : R e f e r r i n g to Governor Meyer's telegram of October 18, 1930, there i s a t t a c h e d h e r e t o f o r your i n f o r m a t i o n , copy of a l e t t e r which the Federal Reserve Board has today addressed to Mr. Clement H. Congdon of the P h i l a d e l p h i a Sunday T r a n s c r i p t , on the s u b j e c t of bank f a i l u r e s . Very t r u l y yours, E, M. McClelland, Assistant Secretary. Enclosure. (TO GOVERNORS OF ALL FEDEEAC, RESERVE BAMS) ( 385 X-6746-a COPY October 29, 1930. Mr. Clement H. Congdon Sunday T r a n s c r i p t 329 Heal E s t a t e Trust Building P h i l a d e l p h i a , Pennsylvania Dear Mr. Congdon: A number of the Federal reserve "banks have r e f e r r e d t o the Board your l e t t e r of October t h i r t e e n t h r e l a t i n g to bank f a i l u r e s . In the f i r s t paragraph of your l e t t e r , you s t a t e t h a t "during a l l the p e r i o d of tj.me throughout which the Federal Reserve Bank System was being formed and developed i t was most s p e c i f i c a l l y and most p e r s i s t e n t l y i n s i s t e d t h a t the System would make member banks f a i l u r e p r o o f . " I t has never b e f o r e been brought to my a t t e n t i o n t h a t any one f a m i l i a r with the purposes of the Federal r e s e r v e s y s tem, as l a i d down i n the Federal Reserve Act, has claimed t h a t the system was designed to or could prevent a l l bank f a i l u r e s . The s t a t e m e n t , however, was f r e q u e n t l y made a t the time of the passage of the Federal Reserve Act, t h a t under the system no member bank with an adequate supply of e l i g i b l e paper would be compelled to close i t s doors because of i n a b i l i t y to obtain the necessary cash to meet o v e r - t h e - c o u n t e r withdrawals of i t s customers. Experience has shown t h a t t h i s has proven to be the ease, a s every member bank with an adequate supply of e l i g i b l e paper or of United S t a t e s s e c u r i t i e s i n i t s p o r t f o l i o i s able to borrow promptly from the Fede r a l r e s e r v e bank and obtain a l l the currency i t may r e q u i r e to meet deposit withdrawals. This was not true b e f o r e the e s t a b l i s h ment of the Federal reserve system, when the currency was n o t e l a s t i c and not s u s c e p t i b l e of expansion to take care of emergencies. At t h a t time u n u s u a l l y large demands f o r currency not i n f r e q u e n t l y r e s u l t e d i n currency p a n i c s , but no such panics have occurred or could occur under the Federal reserve system. The Federal Reserve Board has given a good deal of thought and study to the question of the reasons f o r the r e c e n t bank f a i l u r e s , and has d i s c u s s e d t h i s subject from time to time i n i t s annual r e p o r t s . May I p a r t i c u l a r l y r e f e r you t o the s e c t i o n on bank suspensions , beginning on page ten of the annual r e p o r t f o r 1926, of which a copy i s enclosed? Very t r u l y yours, Eugene Meyer Governor (copy) Si X-6749 September 12, 1930. Mr. W. S. McLucas, Member Federal Advisory Council, Tenth Federal Reserve D i s t r i c t , c/o Mayflower H o t e l , Washington, D.C. Dear Mr. McLucas: At t h e meeting of our Executive Committee t h i s morning, Mr. Mull an ey brought to our a t t e n t i o n a r e s o l u t i o n which was adopted by our Board of D i r e c t o r s a t i t s meeting of A p r i l 24, 1930, i n r e g a r d to t h i s F e d e r a l r e s e r v e bank r e c e i v i n g d i r e c t l y from country non-member banks checks to be c o l l e c t e d and c r e d i t e d to t h e accounts of t h e i r c i t y c o r r e s pondents, a s f o l l o w s : "At t h e suggestion of Governor B a i l e y , Deputy Governor Worthington explained & p r o p o s a l t h a t non-membetf banks be p e r m i t t e d to forward items d i r e c t to t h e Federal r e s e r v e bank f o r c o l l e c t i o n and c r e d i t of t h e i r member bank c o r r e s p o n d e n t s , s t a t i n g t h a t a number of our member banks have r e q u e s t e d t h i s s e r v i c e . A f t e r g e n e r a l d i s c u s s i o n , in which i t was brought out t h a t Governor Young of the Federal Reserve Board c o n s i d e r s the p l a n worthy of c o n s i d e r a t i o n and t h a t the System Committee on C o l l e c t i o n s h a s taken t h e p o s i t i o n t h a t the p l a n should not be adopted, i t was moved by D i r e c t o r P a r k s , seconded by D i r e c t o r Mullaney and u n a n i mously c a r r i e d , t h a t t h e views of' t h e Board of D i r e c t o r s be recorded a s f a v o r i n g t h e a d o p t i o n of such a p l a n because of t h e g e n e r a l b e n e f i t s to be accomplished through saving in t h e p h y s i c a l h a n d l i n g of items, saving i n the time of c o l l e c t i o n of items, and in a f f o r d i n g an o p p o r t u n i t y f o r member banks l o c a t e d in o t h e r than Federal r e s e r v e bank and branch c i t i e s to b e t t e r s e r v e t h e i r correspondent banks." Our Executive Committee r e q u e s t e d me to w r i t e you, sending you t h i s r e s o l u t i o n , t h e same being in accord with the unanimous opinion of t h e Board, and a s k i n g you, i f p o s s i b l e , to get the endorsement of t h i s p l a n from t h e F e d e r a l Advisory Council. Very t r u l y y o u r s , (Signed) M. L. McClure, Chairman. COPY X-5750 3G? October 1, 1930 Mr. James Mr. Wyatt-General Counsel. Proposed amendments to the Federal Reserve Act and Related Statutes, Dear Mr. James: In accordance with your r e q u e s t , I r e s p e c t f u l l y submit the following information with respect to proposed amendments to the Federal Reserve Act and other s t a t u t e s a f f e c t i n g the Federal Reserve System which have been recommended to Congress w i t h i n recent years or which have been considered by the Federal Reserve Board without making any recommendation to Congress: AMENDMENTS RECOMMENDED TO CONGRESS BY THE FEDERAL RESERVE BOARD. An amendment to Section 4 of the Federal Reserve Act to permit an o f f i c e r , d i r e c t o r or employee of a mutual savings bank to serve as a Class B d i r e c t o r of a Federal reserve bank. - This amendment was recommended to Congress by the Board in i t s Annual Reports f o r the years 1927, 1928 and 1929, and i n l e t t e r s addressed to the Chairmen of the Banking and Currency Committees of the Senate and House under date of February 18, 1930. Accordingly, i n the 2nd Session of the 71st Congress, Senator Brookhart on April 2, 1930, introduced a b i l l (S. 4079) containing t h i s amendment. This b i l l was passed by the Senate on April 14, 1930, and although i t was r e p o r t e d out by the House Banking and Currency Committee on May 26, 1930, i t was not passed by the House. An amendment to Section 9 of the Federal Reserve Act a u t h o r i z i n g the Federal Reserve Board to r e q u i r e a S t a t e member bank to s u r render i t s Federal r e s e r v e bank stock and to f o r f e i t i t s membership whenever such bank has f a i l e d to comply with the a p p l i c a b l e p r o v i s i o n s of the banking laws of the S t a t e i n which i t i s l o c a t e d . - This amendment was recommended to Congress by the Board i n i t s Annual Report f o r the year 1929, but no b i l l conforming to the Board's recommendation was introduced i n e i t h e r the Senate or the House. An amendment to Section 9 of the Federal Reserve Act to p e r mit S t a t e member banks to e s t a b l i s h f o r e i g n branches. - This amendment was recommended to Congress by the Board in i t s Annual Reports f o r the years 1927., 1928 and 1929, and i n l e t t e r s addressed to the Chairmen of the Senate and House Banking and Currency Committees during 1929. In the 1 s t Session of the 71st Congress, Senator Norbeck introduced a b i l l (S. 1070) along the l i n e of the amendment proposed by the Board; but t h i s b i l l was never r e p o r t e d out by the Senate Banking and Currency Committee, and no s i m i l a r b i l l was introduced i n the House during t h i s s e s s i o n . In the second s e s s i o n of t h i s Congress, Senator Norbeck introduced on December 11, 1929, another b i l l (S. 2605) conforming to the Board's recommendations; — 2 — X-S750 3G8 and. t h i s b i l l was passed "by the Senate on April 14, 1930. On April IS, 1930, i t was presented, to the House and. r e f e r r e d by t h a t body to i t s Banking and Currency Committee. S. 2605 was not r e p o r t e d out by the Banking and Currency Committee of the House, and no s i m i l a r b i l l was introduced in the House. An amendment to Section 13 of the Federal Reserve Act i n c r e a s ing from 15 to 90 days the maximum m a t u r i t y of advances made by Federal r e s e r v e banks to member banks on t h e i r promissory notes secured by paper e l i g i b l e f o r rediscount or f o r purchase by Federal reserve banks. - An amendment of t h i s k i n d h a s been recommended to Congress by the Board i n i t s Annual Reports f o r the years 1927, 1928 and 1929, and i n l e t t e r s addressed to Congress under d a t e s of January 16, 1926, April 24, 1928, and March 6, 1930. On January 18, 1926, Mr. McFadden, i n the 1 s t Session of the 69th Congress, introduced a b i l l (H.R. 7894) conforming to the Board's views but no s i m i l a r b i l l was introduced i n the Senate during t h i s Congress. In the 70th Congress, 1st Session, Mr. Sunners of Texas introduced on March 23, 1928, a s i m i l a r b i l l (H.R. 12349) i n the House; and i n the 2nd Session of t h i s Congress, Mr. Baird on A p r i l 8, 1930, and Mr. McFadden on May 1, 1930, a l s o introduced b i l l s of t h i s k i n d i n the Senate and House r e s p e c t i v e l y (S. 4139 and H.R. 12068). Hone of the b i l l s above r e f e r r e d to was ever r e p o r t e d o u t . An amendment to Section 22 of the Federal Reserve Act making the robbery or b u r g l a r y of any Federal reserve bank or member bank a Federal o f f e n s e punishable through the Federal c o u r t s . - An amendment of t h i s kind was i n c o r p o r a t e d i n the e a r l i e r d r a f t s of the McFadden B i l l which l a t e r became known as the Act of February 25, 1927; and d r a f t s of that b i l l containing such p r o v i s i o n s were favorably r e p o r t e d by the Banking and Currency Committees of both the Senate and House of R e p r e s e n t a t i v e s . These d r a f t s of the b i l l , however, f a i l e d of enactment; and, when the b i l l was r e i n t r o d u c e d a t the next Congress, t h i s amendment was o m i t t e d . The amendment, however, was recommended to Congress by the Board i n i t s Annual Report f o r the year 1929, and i n l e t t e r s addressed to the Chairmen of the Banking and Currency Committees of the Senate and House under date of February 12, 1930. Following the Board's recommendations, b i l l s were introduced under dates of February 19 and A p r i l 4, 1930, by Congressman Hooper and Senator Walcott during the 2nd Session of the 71st Congress i n the House and Senate r e s p e c t i v e l y . These b i l l s , however, were never r e p o r t e d out by e i t h e r the tiouse or Senate Banking and Currency Committees. An amendment to Section 22 of the Federal Reserve Act to make i t a crime to c i r c u l a t e f a l s e statements about or to b l a c k l i s t a member bank. - There were contained i n c e r t a i n e a r l y d r a f t s of the McFadden B i l l , which l a t e r became known as the Act of February 25, 1927, amendments to the law to make punishable conspiracies to boycott or black l i s t or to cause a general withdrawal of d e p o s i t s from a member bank. These p r o v i s i o n s , however, did not become law although the Federal Reserve Board approved a — 3 X-6750 d r a f t of the M i l containing such p r o v i s i o n s . Daring the e a r l y p a r t of 1930, a number of b i l l s were introduced i n the House the general purpose of which was to amend the law along the l i n e s s t a t e d above, and, i n r e sponse to a r e q u e s t f o r an expression of the views of the Board with r e f e r e n c e to H. B. 10560, a b i l l on t h i s s u b j e c t introduced by Mr. McFadden i n the 2nd Session of the 71st Congress, the Board under date of March 27, 1930, addressed a l e t t e r to Congress s t a t i n g the enactment of the b i l l would be b e n e f i c i a l to member banks and to t h e i r d e p o s i t o r s and stockholders. This b i l l was reported out by the House Banking and Currency Committee on April 24, 1930, but i t did not pass the House; and no s i m i l a r b i l l was introduced i n the Senate. An amendment to Section 22(a) of the Federal Reserve Act making i t c l e a r t h a t the p r o h i b i t i o n a g a i n s t examiners a c c e p t i n g loans and g r a t u i t i e s from member banks a p p l i e s to State examiners. - This amendment was recommended to Congress by the Board i n i t s Annual Report f o r the year 1929, and i n l e t t e r s addressed to the Chairmen of the Banking and Currency Committees of the Senate and House under date of February 10, 1930. In the 2nd Session of the 71st Congress, Senator ITorbeck on February 12, 1930, and Mr. S e i b e r l i n g on February 19, 1930, introduced b i l l s conforming to the Board's recommendations i n the Senate and House, r e s p e c t i v e l y (S. 3541 and H.R. 10070). S. 3541 was passed by the Senate on April 14th, and was p r e s e n t e d to the House and r e f e r r e d by t h i s body to i t s Banking and Currency Committee; but n e i t h e r t h i s b i l l nor H.R. 10070 were r e p o r t e d out by t h e House Banking and Currency Committee. An amendment exempting Federal r e s e r v e banks from attachment or garnishment proceedings b e f o r e f i n a l judgment i n any case or proceeding. The enactment of an amendment of t h i s c h a r a c t e r was recommended to Congress by the Board i n i t s Annual Reports f o r the years 1927, 1928 and 1929, and i n l e t t e r s addressed to the Chairmen of the Banking and Currency Committees of the Senate and House under date of February 14, 1930. Accordingly, in the 2nd Session of the 71st Congress, Mr. Fenn on February 18, 1930, and Mr. ITorbeck on February 19, 1930, introduced b i l l s conforming t o the Board's recommendations in the House and Senate, r e s p e c t i v e l y ; but these b i l l s were never r e p o r t e d o u t . An amendment to the J u d i c i a l Code r e s t o r i n g to the United S t a t e s D i s t r i c t Court j u r i s d i c t i o n of s u i t s by and a g a i n s t Federal r e s e r v e banks. The Board has recpmmended the enactment of an amendment of t h i s k i n d i n i t s Annual Reports f o r the years 1927, 1928 and 1929, but no b i l l s covering t h i s s u b j e c t have ever been introduced i n Congress. AMENDMENTS CONSIDERED BY FEDERAL RESERVE BOARD BUT HOT RECOMMENDED TO CONGRESS. Amendments p r o v i d i n g f o r a more e q u i t a b l e d i s t r i b u t i o n to member banks of earnings of Federal reserve banks. - During the y e a r s 1929 and 1930, a number of b i l l s were introduced i n Congress providing f o r a l a r g e r d i s t r i b u t i o n of the earnings of Federal reserve banks among member banks, and 4 - X-S750 370 the Board has gone on r e c o r d i n i t s Annual Report f o r the year 1929 as saying t h a t such p r o p o s a l s are s u b j e c t s "which i n the judgment of the Federal Reserve Board might well have the c o n s i d e r a t i o n of Congress i n connection with any l e g i s l a t i o n a f f e c t i n g the s t a t u s of member banks of the Federal Reserve System; but the problem involves c e r t a i n p r a c t i c a l d i f f i c u l t i e s , and the Board d e s i r e s to study the s u b j e c t f u r t h e r before recommending any s p e c i f i c amendment f o r t h i s purpose." .On March 13, 1930, i n response to a r e q u e s t f o r a r e p o r t of the Treasury Department on S. 3564, a b i l l introduced i n the 2nd Session of the 71st Congress to amend Section 7 of the Federal Reserve Act, the S e c r e t a r y of the Treasury addressed a l e t t e r t o Senator Norbeck s t a t i n g t h a t he had c o n f e r r e d with the Federal Reserve Board regarding t h i s b i l l and t h a t the Board disapproved of i t s adoption. I t was s t a t e d t h a t "the Federal Reserve Board f a v o r s a change i n the e x i s t i n g law which would accord to member banks a somewhat l a r g e r percentage of the earnings of Federal r e s e r v e banks than they a r e now r e c e i v i n g , but the Board b e l i e v e s t h a t the p l a n of d i s t r i b u t i o n proposed i n t h i s b i l l should not be adopted". The Board's o b j e c t i o n to t h i s p a r t i c u l a r b i l l was lodged a g a i n s t the p r o v i s i o n t h a t a f t e r the payment of the 670 dividend to member banks and the c r e a t i o n of the 100$ surplus fund, 10$ of the net earnings s h a l l then be p a i d i n t o s u r p l u s , and the remainder, or 90$ of such net earnings, which under the p r e s e n t law are p a i d to the United S t a t e s a s a f r a n c h i s e tax, would be d i s t r i b u t e d to the member banks on a pro r a t a basis. As s t a t e d above, the Board has expressed the opinion t h a t member banks should have a g r e a t e r share i n the excess earnings of Federal r e s e r v e banks, and the Federal Advisory Council and the December, 1S29, Conferences of Federal Reserve Agents and Governors have a l s o taken the position. An amendment to Section 9 of the Federal Reserve Act and Section 5240 of the Revised S t a t u t e s regarding examinations of member b&nks, This amendment provided, among other things, t h a t a l l examinations of member banks should be under the j u r i s d i c t i o n of the Comptroller of the Currency, and t h a t the expenses of such examinations should be p a i d by the Federal Reserve Board out of t h e proceeds of assessments l e v i e d a g a i n s t the Federal reserve banks, i n s t e a d of being p a i d by the banks examined. This amendment was prepared a t t h e r e q u e s t of Governor Young and was submitted f o r the c o n s i d e r a t i o n of the December, 1929, Conferences of Federal Reserve Agents and Governors, which recommended t h a t the Board decline to give i t s approval to t h i s proposed measure. On February 6, 1930, the Board voted not to recommend the enactment of such an amendment. An amendment to the f i r s t paragraph of Section 19 of the Federal Reserve Act more c l e a r i n g d e f i n i n g demand d e p o s i t s , time d e p o s i t s , savings d e p o s i t s , e t c . , and making i t more d i f f i c u l t to evade the proper c l a s s i f i c a t i o n of d e p o s i t s f o r the purpose of computing r e s e r v e s . 871 X-6750 - 5 r Ail amendment to Section 19 of the Federal Reserve Act a u t h o r i z ing member "banks i n computing t h e i r r e s e r v e s to deduct ""balances due from banks" from t h e i r gross demand d e p o s i t s i n s t e a d of from "balances due to other banks". An amendment completing r e v i s i n g Section 19 of the Federal Reserve Act so as to a d j u s t , c l a r i f y and s i m p l i f y the r e s e r v e requirements. The Agents' and Governors' Conferences of December, 1929, recommended t h a t the above three proposals be submitted to a s p e c i a l committee f o r study and recommendation, and t h e Board on February 6, 1930, voted to take no a c t i o n on these proposals i n view of the f a c t t h a t t h i s s p e c i a l committee had been appointed. Amendment to the Bankruptcy Act providing t h a t funds i n the custody of t h e Federal c o u r t s s h a l l be deposited with member banks. The December, 1929, Conference of Federal Reserve Bank Governors approved of an amendment of t h i s k i n d and on January 6, 1930, i n the 2nd Session of the 71st Congress, Senator Walsh introduced a b i l l (S. 2950) p r o v i d i n g t h a t member banks may be designated d e p o s i t a r i e s of bankruptcy f u n d s . The Board has not s p e c i f i c a l l y recommended t h a t an amendment of t h i s k i n d be enacted, but a t i t s meeting of February 6, 1930, the Law Committee was a u t h o r i z e d to conduct such n e g o t i a t i o n s as might be necessary to have Senator Walsh's b i l l , S. 2950, so amended as t o provide t h a t bankruptcy funds " s h a l l " be deposited i n member banks i n s t e a d of "nay" be so dep o s i t e d ; and on February 17, 1930, Mr. Hani in, a c t i n g f o r the Law Comm i t t e e , addressed a l e t t e r to Senator Walsh suggesting t h a t the wording of h i s b i l l be changed so a s to accomplish t h i s r e s u l t . The b i l l was never r e p o r t e d out by the Senate Banking and Currency Committee and no s i m i l a r b i l l was introduced in the House. Amendment to the National Bank Act l i m i t i n g the amount of i n vestment by a n a t i o n a l bank i n bank b u i l d i n g and f i x t u r e s . - The December, 1929, Conference of Federal Reserve Agents recommended t h i s amendment, and on February 6, 1930, the Board voted to r e f e r t h i s proposal to the Comptroller of the Currency. Amendment r e q u i r i n g the approval of the Federal Reserve Board before c h a r t e r s a r e g r a n t e d to new n a t i o n a l banks. - An amendment of t h i s k i n d was recommended by recent Conferences of Federal Reserve Agents, but the Board voted on February 6, 1930, not to recommend the enactment of such an amendment. Respectfully, (S) SBS sad Walter Wyatt, General Counsel X-6751 BXCEBFT FROM. THE BEPOBT OF THE STAEDING- COMMITTEE O COLLECTIONS N 8 7 2 TO THE C01TFEBE1-IC5 OF GOVEB1TORS, SPBIMO, 1930. Acceptance by Federal Reserve Banks of Cash L e t t e r s from Hon-Member Banks for the Credit of Member Banks The Committee has been advised by one of the Federal reserve banks t h a t s e v e r a l of i t s l a r g e member banks l o c a t e d outside of the Federal r e s e r v e c i t y have submitted on a number of occasions a p l a n under which t h e i r country non-member bank correspondents would prepare d a i l y cash l e t t e r s on the l e t t e r - h e a d s of the member banks, which l e t t e r s would be dispatched d i r e c t by the non—member banks to the Federal reserve bank f o r the c r e d i t of i t s member banks. The checks would be endorsed by each non-member bank with a double endorsement stamp b e a r i n g the name of both the member bank and the non-member bank. Under the plan the member bank would r e c e i v e c r e d i t a t the Federal re* serve bank without having to handle the checks. Since a matter of p o l i c y , which should be uniform i n a l l Federal reserve d i s t r i c t s , i s involved i n the question as to whether or not such p r a c t i c e should be p e r m i t t e d , the s u b j e c t was r e f e r r e d to the Standing Committee on Collections f o r c o n s i d e r a t i o n and r e p o r t to the next Conference of Governors. In r e p o r t i n g to the Governors 1 Conference of April 1, 1929, on the s u b j e c t of t r a n s f e r s requested by non^member banks, the Committee exp r e s s e d the opinion t h a t under a s t r i c t i n t e r p r e t a t i o n of Section 13 of the f e d e r a l Reserve Act, Federal r e s e r v e banks cannot r e c e i v e d e p o s i t s of any d e s c r i p t i o n from non—member banks even i f such d e p o s i t s are f o r the c r e d i t of member banks. I t was f e l t , however, t h a t the acceptance from non-member banks of c e r t a i n remittances f o r the c r e d i t of member banks was d e s i r a b l e - 2 ~ X-6751 and might "be defended on the ground t h a t the non-member "banks i n making the d e p o s i t s wore a c t i n g as agents of the member banks r e c e i v i n g c r e d i t f o r the deposits* In i t s r e p o r t the Committee recommended t h a t Federal r e s e r v e "banks should accept from non-member banks for the c r e d i t of member banks only one form of r e m i t t a n c e , namely, a non-member bank's own d r a f t on a c l e a r i n g house bank i n the c i t y of the Federal r e s e r v e bank or one of i t s branches, and then only i n case the member bank r e c e i v i n g c r e d i t has authorized the Federal r e serve bank to accept the deposit s u b j e c t to the same terms and conditions t h a t Y7ould p r e v a i l i f the deposit had been made by the member bank i t s e l f • The Governors approved t h i s recommendation and the Federal Reserve Board i n i t s l e t t e r of November 4, 1929 (X-6407) made the a c t i o n mandatory upon a l l Federal r e s e r v e banks. In the opinion of the Committee t h i s a c t i o n precludes the sending by non-member banks t o Federal reserve banks f o r the c r e d i t of member banks of any items except t h e i r own d r a f t s drawn on s p e c i f i c points# Even i f t h i s were not the case, i n the opinion of the Committee Federal r e s e r v e banks should under no conditions accept miscellaneous checks from non-member banks. Such a procedure would as a p r a c t i c a l matter throw open the c o l l e c t i o n f a c i l i t i e s of the Federal Reserve System to non-member banks without r e q u i r i n g them to become members or to c o n t r i b u t e i n any way to i t s maintenance. Such banks would receive c r e d i t on the member banks 1 accounts j u s t as soon as they would i f they themselves maintained accounts. Questions involving l i a b i l i t y , endorse- ments, e t c . , as well as the mechanics of procedure would be p r e s e n t e d , and i t i s the b e l i e f of the Committee t h a t the operation would r e s u l t i n g r e a t l y i n creased expense to the Federal Reserve System. The Committee i s s t r o n g l y of the opinion t h a t such procedure should not be p e r m i t t e d under any circumstances# FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board „ X-6752 — November 3, 1930. SUBJECT: Hew Size Package F. B. Botes of l a r g e Denomination. Dear S i r : The Board's a t t e n t i o n has been c a l l e d to the inconvenience experienced by some of the p a r e n t Federal r e s e r v e banks i n supplying t h e i r branches with Federal reserve notes i n denominations above $100 caused by the l a r g e amounts of money involved i n the p r e s e n t sifce packages. The matter was taken up with the Bureau of Engraving & P r i n t i n g and they approved the suggestion t h a t the s i z e of these packages be reduced from 400 notes to 200 notes each* The Board accordi n g l y r e q u e s t e d t h a t the Bufeau of Engraving & p r i n t i n g r e wrap the stocks of these denominations now h e l d i n i t s v a u l t s i n t o packages of the smaller s i z e and f o r your information there i s enclosed herewith a schedule showing the number of packages of the new s i z e now on hand here i n Washington. In t h i s connection i t w i l l be noted t h a t there ai'e s e v e r a l packages of odd s i z e i n the stock and the Bureau was requested to p l a c e the notes having the lowest s e r i a l numbers i n these odd packages* The Board suggests, t h e r e f o r e , t h a t when r e q u i s i t i o n i n g these denominations the Federal r e s e r v e agents arrange to Withdraw these odd l o t packages f i r s t and t h a t , i n ordef t o avoid t h e i r recurrence i n the f u t u r e , a l l orders f o r p r i n t i n g of new notes i n these denominations be f i l e d i n m u l t i p l e s of 50 sheets each. This w i l l permit the s t o c k to be wrapped in even packages of the new s i z e . Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure. TO AGENTS OF ALL F. R. BANKS. TOTAL NUMBER OF PACKAGES OF FEDERAL BE SERVE NOTES OF HIGHER DENOMINATIONS HELD BY BUREAU OF ENGRAVING & PRINTING AFTER REWRAPPING 200 NOTES TO EACH PACKAGE. 500's Boston 1000's 12 - 8 Richmond 10 10 Atlanta 66 126 Chicago 92 S t . Louis 4 - - 4 1 1 - 96* l - 96* 5 - 40* - 10 b - — - - - - 2 - 40* S Dai ]a s 14 18 CVI San Francisco 14 12 4 - 144* 398 450 • 24 O 20 1 18 * Kansas City- Total 2 24 - 196* 6 Minneapolis 6 CVJ 6 Cleveland - 1—1 22 - t 26 Philadelphia 10000's CM 180 * i4o New York 5000's X-6752-a 5 - 184* 15 I n d i c a t e s the number of notes in odd package t o be r e q u i s i t i o n e d first. ,'•** •? FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-6753 November 4, 1930. 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 : As h e r e t o f o r e , the Federal Reserve Board w i l l f u r n i s h a complimentary copy of the Federal Reserve B u l l e t i n to each S t a t e hank examiner during the year 1931. P l e a s e f u r n i s h t h i s o f f i c e , not l a t e r than December 15th, With the names and addresses of the S t a t e bank examiners in your d i s t r i c t to whom a complimentary copy should be s e n t . Very t r u l y yours, J . C. N o e l l , Assistant Secretary. 10 ALL FEDERAL RESERVE AGENTS. 377 X-6755 STATEBIENT OF BUREAU OF ENGRAVING AND PRINTING. Federal ReSerVe Notes, S e r i e s 1928. October 1 t o 31, 1930. |5 Boston New York Philadelphia Cleveland Richmond Atlanta S t . Louis Minneapolis Kansas CityDallas San Francisco $10 #20 Total sheets Amount 146,000 370,000 143,000 144,000 83,000 64,000 42,000 51,000 52,000 52,000 92,000 $13,497.70 34,206.50 13,220.35 13,312.80 7,673.35 5,916.80 3,882,90 4,714.95 4,807;40 4,807.40 8,505.40 70,000 200,000 80,000 72,000 48,000 36,000 24,000 24,000 36,000 30,000 48,000 64,000 120,000 45,000 36,000 20,000 16,000 10,000 15,000 8,000 14,000 24,000 12,000 50,000 18,000 36,000 15,000 12,000 8,000 12,000 8,000 8,000 20,000 668,000 372,000 199,000 1,239,000 s h e e t s , 1,239,000 | 9 2 . 4 5 M, 114,545.55 #114,545.55 378 FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-6756 November 10, 1930. Dear S i r : Consideration h&8 been given by the Federal Reserve Board to the s e v e r a l m a t t e r s which were discussed a t the r e c e n t Conferences of Governors and Federal Reserve Agents and r e p o r t e d a t the j o i n t Conference on September 26th, &nd a c t i o n has been taken by the Board as s e t out below; Revision of membership condition r e purchase of bank s t o c k s . The Board voted to hold i n abeyance the proposed r e v i s i o n of membership c o n d i t i o n Ho. 3 and has r e f e r r e d to the System Coihm i t t e e on Branch, Chain and Group Banking the r e p o r t s of the Governors 1 and Federal Reserve Agents' Conferences on the m a t t e r . p u b l i c a t i o n i n Federal Reserve B u l l e t i n of n o t i c e s of i n t e n t i o n to withdraw from membership in the Federal Reserve System. I n accordance with the opinions expressed by "both the Agents' and Governors' Conferences i t was voted to continue the p r e s e n t p r a c t i c e of not making p u b l i c n o t i c e s of i n t e n t i o n to withdraw from the System f i l e d by S t a t e member banks. Computation of r e s e r v e s of member hanks on b a s i s of d e p o s i t s h e l d a t thai opening of b u siness r a t h e r than a t the close of business on the c u r r e n t day. As you were advised i n the Board's l e t t e r of October 2, 1930, (X-6725) the Board has amended Regulation D so as to permit the computation of d e f i c i e n c i e s i n r e s e r v e s on the b a s i s of member banks deposits a t the opening of business i n s t e a d of a t the close of b u s i ness. Method of s t i m u l a t i n g a wider d i s t r i b u t i o n of Treasury B i l l s , At the r e q u e s t of the S e c r e t a r y of the Governors' Conference, t h i s matter has been r e f e r r e d to the Undersecretary of the Treasury for consideration. Jk ;u t w 3 —2— Change i n s i z e of p r i n t e d r e g u l a t i o n s of the Federal Reserve Board. At the time of p l a c i n g the order f o r the next p r i n t i n g of i t s r e g u l a t i o n s the Board w i l l give c o n s i d e r a t i o n to p r i n t ing the s e p a r a t e r e g u l a t i o n s i n pamphlets which conform more n e a r l y i n s i z e to the c i r c u l a r l e t t e r s of the Treasury Department and the m a j o r i t y of the Federal r e s e r v e "banks, as suggested by the Governors' Conference. Proper c l a s s i f i c a t i o n of d e p o s i t s , with p a r t i c u l a r r e f erence to the question a s to the steps which should "be taken "by examiners to determine whether r e s e r v e s on d e p o s i t s are p r o p e r l y maintained. The statement adopted "by the Federal Reserve Agents' Conference has "been r e f e r r e d by the Board to the System Committee on Reserves f o r r e p o r t . D e s i r a b i l i t y of providing, i f p o s s i b l e , f o r examination of a f f i l i a t e d or s u b s i d i a r y c o r p o r a t i o n s of member banks. In considering t h i s t o p i c and the statement adopted by the Federal Reserve Agents'" Conference regarding i t , the Board f e l t t h a t i n view of the f a c t t h a t the Comptroller of the Currency i n h i s annual r e p o r t , recommended to Congress the enactment of l e g i s l a t i o n along the l i n e s r e f e r r e d to i n the statement, the matter should be r e f e r r e d to him f o r comment. A r e p l y from the Comptroll< has not yet been r e c e i v e d . The Committee r e p o r t s submitted a t the Conferences and the o t h e r t o p i c s discussed by the Governors and Federal Reserve Agents have been noted, no a c t i o n on the p a r t of the Federal Reserve Board being r e q u i r e d . Very t r u l y yours, E. M. McClelland, Assistant Secretary. TO ALL GOVERNORS AND FEDERAL RESERVE AGENTS. 3 8 0 FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-6757 November 11, 1930. SUBJECT; Code word to cover "National Trust and Savings A s s o c i a t i o n " . Dear S i r : Upon request of one of the Federal r e s e r v e banks, and i n order to f a c i l i t a t e l e a s e d wire and other operationsi the Federal Reserve Board has designated the code word HUMORIST" to i n - d i c a t e ''National Trust and Savings A s s o c i a t i o n " . This word should "be i n s e r t e d i n the Federal Reserve Telegraphic Code, following the word "HUMORING", on page 123. Very t r u l y yours, J. C. Noell, Assistant Secretary. TO GOVERNORS OF AIL F. R. BANKS. FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-6759 November 13, 1930. SUBJECT: Reply to L e t t e r from P r o f . Westerfield. r e C o l l a t e r a l Loans. Dear S i r : R e f e r r i n g to the Board's telegram of October 23, t h e r e i s a t t a c h e d h e r e t o copy of a l e t t e r which Governor Meyer i s today forwarding to Mr. Ray B. West e r f i e l d of Yale U n i v e r s i t y i n r e p l y to h i s questionn a i r e of October 15, regarding c o l l a t e r a l l o a n s . I t would seem t h a t a f u r t h e r r e p l y to P r o f e s s o r Westerf i e l d ' s l e t t e r by the i n d i v i d u a l Federal reserve banks, w i l l not be necessary. Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure, TO CHAIRMEN OF ALL FEDERAL RESERVE BAMS 3 8 2 COPY X-6759-a November 13, 1930 • Mr, Ray B. W e s t e r f i e l d P r o f e s s o r of P o l i t i c a l Economy Yale U n i v e r s i t y New Haven, Connecticut Dear Mr. Y / e s t e r f i e l d : Your q u e s t i o n n a i r e to c e r t a i n of the Federal r e s e r v e agents r e l a t i v e to c o l l a t e r a l loans has been r e f e r r e d to the Board f o r r e p l y . Our r e p l y to your i n q u i r y has r e f e r e n c e to the t r e n d of member hank loans secured "by stocks and "bonds, as there i s no adequate information r e garding loans on o t h e r c o l l a t e r a l , nor on loans by nonmember banks. The p r i n c i p a l f a c t o r s underlying the growth during r e c e n t years in the p r o p o r t i o n of member bank loans that i s r e p r e s e n t e d by loans on s e c u r i t i e s a r e b e l i e v e d to be the f i n a n c i a l p o l i c y of c o r p o r a t i o n s and the growth i n p u b l i c p a r t i c i p a t i o n i n the stock market. In the r e l a t i v e l y easy money market conditions p r e v a i l i n g i n r e c e n t years and with the high l e v e l of c o r p o r a t e earnings, c o r p o r a t i o n s found i t both d e s i r a b l e and p o s s i b l e to provide themselves with a l a r g e p a r t of t h e i r working c a p i t a l from p r o f i t s and from the i s s u e of s e c u r i t i e s r a t h e r than through borrowing a t banks. This p o l i c y has been f a c i l i t a t e d by the i n c r e a s i n g w i l l i n g n e s s of the p u b l i c to buy common stocks during a p e r i o d of r i s i n g s e c u r i t y p r i c e s . This development has operated both t o reduce bank borrowing by c o r p o r a t i o n s on l i n e - o f - c r e d i t loans and to provide the p u b l i c with s e c u r i t i e s e l i g i b l e as c o l l a t e r a l f o r s e c u r i t y l o a n s . An important f a c t o r i n the increase of s e c u r i t y loans during the p e r i o d from 1922 to 1929 has been the growth of s p e c u l a t i o n i n l i s t e d stocks, which Mr, Ray B. W e s t e r f i e l d 2. Xr6759~a r e s u l t e d i n a growth i n the demand f o r loans by "brokers. 1 * Cj " The ease with which loans to brokers could "be n e g o t i a t e d was i n i t s e l f a f a c t o r i n the growth of s e c u r i t y l o a n s . Judging "by the member bank r e p o r t s f o r the system a s a whole the change appears to have a f f e c t e d a l l c l a s s e s of banks. You w i l l f i n d some d a t a on t h i s s u b j e c t i n the Board's Annual Report f o r 1928 (Table 52) and 1929 (Table 44), a l s o i n r e c e n t i s s u e s of the Member Bank Call Report, of which copies f o r June, 1929 and June, 1930 a r e enclosed. Corresponding data a r e not a v a i l a b l e p r i o r to 1925, and they have not been assembled s e p a r a t e l y f o r the d i f f e r e n t c l a s s e s of banks i n each d i s t r i c t . A special t a b u l a t i o n t h a t may be of i n t e r e s t to you w i l l appear i n the forthcoming November i s s u e of the Federal Reserve B u l l e t i n . The Federal reserve banks have done nothing whatever to encourage member banks to increase the p r o p o r t i o n of t h e i r s e c u r i t y l o a n s . On the c o n t r a r y , the d e s i r a b i l i t y from the p o i n t of view of member banks of having a l a r g e p a r t of t h e i r loans i n the form of paper e l i g i b l e f o r rediscount a t the r e s e r v e banks has been an i n f l u e n c e a g a i n s t the growth of s e c u r i t y loans which a r e i n e l i g i b l e . The p r e f e r e n c e of member banks f o r e l i g i b l e loans i s r e f l e c t e d i n the f a c t t h a t customer loans on s t o c k s u s u a l l y bear a higher r a t e than other customer loans, as can be v e r i f i e d by r e f e r e n c e to the t a b l e of r a t e s charged customers t h a t i s p u b l i s h e d r e g u l a r l y i n the Federal Reserve B u l l e t i n . According to our information, a s f u r n i s h e d by the Federal r e s e r v e agents, i t i s not customary in any Federal r e s e r v e d i s t r i c t f o r banks to " i n s i s t on c h a t t e l mortgage or o t h e r s e c u r i t y f o r p r a c t i c a l l y a l l of t h e i r l o a n s . " Enclosures Very t r u l y yours, Eugene Meyer Governor FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-5760 November 18, 1930. SUBJECT: Holidays during December, 1930. Dear S i r : On Christmas Day, the o f f i c e s of the Federal Reserve Board and a l l Federal reserve tanks and "branches w i l l be closed. P l e a s e advise branches. Very t r u l y yours, J . C. IToell, Assistant Secretary. TO GOVERNORS OF ALL F. E. BANKS. FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-6763 November 22, 1930. Dear S i r : In order to check the information i n the Board's f i l e s , p l e a s e f u r n i s h us with the p r e s e n t address and home telephone number of the Governor and Chairman of your Bank. I t would a l s o be a p p r e c i a t e d i f you would keep the Board advised of any changes. Please a l s o advise of the telephone number of the Bank. Very t r u l y yours, E. M. McClelland, Assistant Secretary. $o the Cashiers of a l l F. R. Banks. 38G " FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-S765 November 25, 1930. SUBJECT: Expense, Main Line, October, 1930, Leased Wire System, 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-5765-a and X-6755-Id, covering i n d e t a i l operations of the main l i n e , Leased Wire Systemi during the month of October, 1930* Please c r e d i t the amount, payable "by youfc "bank i n the general account, Treasurer, U. S i , oil your books, and i s s u e C/B Form 1, National Banks * f o r account of " S a l a r i e s and Expenses, Federal Reserve Board, Special Fund1*, Leased Wire System, sending d u p l i c a t e C/D to the Federal Beserve Board. Very t r u l y yours, F i s c a l Agent* Enclosures. TO GOVERNS OF ALL F. R. BASKS EXCEPT CHICAGO. X — 6 5 ™A REPORT SHOWING CLASSIFICATION AND NUJFBER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RE,SERVE L"AS^D ^IRE SYSTEM FOR TB? MONTE OF OCTOBER, 1 9 3 0 . Business reported "banks from Boston lew York Philadelphia Cleveland Richmond Atlanta Chicago S t . Louis Minneapolis Kansas City Dallas San F r a n c i s c o Total Words sent 'byNew York chargea b l e to o t h e r F. R Banks (1) Net F e d e r a l Reserve Bank "business 30,009 148,371 3M59 91,042 57,101 63,797 102,589 78,283 34,907 83,896 70,054 98,565 893,471 2J22 1,150 2,974 2,602 8,118 3,959 2,647 4,079 2,752 '7,047 3,701 41,781 32,731 148,371 36,039 94,016 59,703 71,915 106,548 80,930 38,986 86,648 77,101 102,264 935,252 F. R. Board b u s i n e s s P e r c e n t of t o t a l "bank "business (*) 3-50 15-87 3.85 10.05 6.38 7-69 11.39 8.65 4.17 9-27 8.24 10-94 100.00 296,348 Treasury Department b u s i n e s s Incoming and Outgo-ng . T otal words t r a n s m i t t e d over main l i n e s (*) 78,179 1,309,779 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 l e a s e d wire expense a s shown on the accompanying statement (X-6765-b). (l) 1,271,600 Number of words s e n t by New York to other 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 a t Governors' Conference November 2 - 4 , 1925. UC * # REPORT OF EXPENSE MAIN LIKE FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER, I93O. Operators' Salaries Name of Bank Boston $ New York Philadelphia Cleveland Richmond Atlanta Chicago S t . Loui s Minneapolis Kansas CityDallas San F r a n c i s c o Federal Reserve Board Total $ Operators' Overtime 260.00 $ 1,129.14 225.00 306.66 190.00 270.00 3,765.00(#) 195.00 200.00 2S7-50 251.00 350.00 7,459.30 $ 6.00 Wire Rental $ $ - - - - — - 230.00(&) - 3.00 - - - - - - - - - — - 9-00 15,76^.10 $ 15,994.10 $ $ (&) (#) (*) (a) (t>) Pro Rata Share of Total Expenses Total Expenses - 260.00 1,135.14 225.00 306.66 420.00 270.00 3,768.00 195.00 200.00 287-50 251.00 380.00 15,764.10 X-6765-b $ 772.17 3,501.23 849.39 2,217.23 1,407.55 1,696.57 2,512.86 1,908.36 919.9s 2,045.14 1,517.91 2,413.58 - 23,462.40 .$ 22,061.97 1.400.43(a) 22,061.97 Credits $ 260.00 1,135-14 225.00 306.66 420.00270.00 3,768.00 195.00 200.00 287.50 251.00 380.00 - $ 7,698.30 Payable to Federal Reserve Board $ 512.17 2,366.09 624.39 1,Q10.57 937-55 1,426.57 1,255.I4(*) 1,713.36 719.9s 1,757-64 1,566.91 2,033.5s - $ 15.6lS.Sl 1.255.14(b) $ 14.363.67 Main Line r e n t a l , Richmond-Washington. 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 $1,400.4-3 from Treasury Department covering business f o r the month of October 1930. Amount reimbursable to Chicago. GO qo FEDERAL RESERVE BOARD WASHINGTON address official correspondence to the federal reserve board X-6766 November 25, 1930. SUBJECT: Unissued Federal Reserve Motes a t Branches. Dear S i r : t h i s l e t t e r i s w r i t t e n f o r the purpose of c a l l i n g the a t t e n t i o n of those Federal reserve "banks^ which operate branches to the f a c t t h a t a stock of unissued Federal r e s e r v e notes f o r use i n emergencies has been e s t a b l i s h e d under t r i p l e c o n t r o l of the Federal r e s e r v e bank, the f e d e r a l r e s e r v e agent and the Auditing Department a t the P i t t s b u r g h ahd Cincinnati Branches of the Federal Reserve Bank of Cleveland and a t the J a c k s o n v i l l e and Hew Orleans Branches of the f e d e r a l Reserve Bank of A t l a n t a . The agreement under which Federal reserve notes have been placed a t these branches i s s i m i l a r to t h a t described i n the Board 1 s l e t t e r of October 7, 1926, (X-4682). I t may be t h a t other Federal reserve banks w i l l wish to e s t a b l i s h a supply of unissued notes a t one or more of t h e i r branches under s i m i l a r conditions and you ate advised t h a t the Federal Reserve Board would not o b j e c t to the establishment of such a p l a n a t any branch. In order t h a t t h i s p l a n may be put into operation, i t f i r s t w i l l be necessary fofc the Federal r e s e r v e bank and the Federal r e s e r v e agent to eftiet4 into an agreement s u b s t a n t i a l l y i n the form enclosed herewith. The Governor of the Bank should execute the agreement on behalf of the Federal r e s e r v e bank pursuant to a proper r e s o l u t i o n of a u t h o r i t y from the Board of D i r e c t o r s of the Bank, a c e r t i f i e d copy of which should be f u r n i s h e d the Federal Reserve Board, together with a c e r t i f i e d copy of the agreement as adopted. For the purpose of p l a c i n g unissued Federal r e s e r v e notes a t any branch, under the t r i p l e c o n t r o l agreement r e f e r r e d to, i t w i l l be necessary f o r the Federal reserve agent or an A s s i s t a n t Federal reserve agent *to v i s i t the branch to receive the notes from the Post O f f i c e a u t h o r i t i e s and to see t h a t they a r e p r o p e r l y deposited under the necessary c o n t r o l combinations# In the event t h a t t h i s p l a n i s e s t a b l i s h e d , you should n o t i f y the Federal Reserve Board of the date on which the Federal X-6766 — 2 ~ r e s e r v e agent or A s s i s t a n t Federal reserve agent w i l l "be p r e s e n t a t the "branch f o r t h i s purpose and. the Board w i l l ship to the agent or a s s i s t a n t agent such amount of Federal r e s e r v e notes as may "be d e s i r e d , to a r r i v e a t the branch on the date s p e c i f i e d . Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure. TO ALL FEDERAL RESERVE AGENTS. X~6766-a AGREEMENT REGARDING CUSTODY OF UNISSUED FEDERAL RESERVE NOTES AT THE BRANCH OF THE FEDERAL RESERVE BANK OF WHEREAS, a stock of unissued Federal reserve notes f o r use i n emergency purposes has been placed i n a number of chests w i t h i n the v a u l t of the branch of the Federal Reserve Bank of , each chest under t r i p l e control of an o f f i c e r of the branch, a r e p r e s e n t a t i v e of the a u d i t i n g department s t a t i o n e d a t the branch, and the Federal Reserve Agent and A s s i s t a n t Federal Reserve Agent a t the Federal Reserve Bank of ; WHEREAS, i t i s proposed t h a t when Federal r e s e r v e notes a r e needed f o r emergency purposes, the need w i l l be communicated to the Federal Reserve Agent a t , who w i l l t e l e g r a p h or telephone h i s c o n t r o l combination or combinations f o r a s p e c i f i c chest or c h e s t s to the s a i d branch; and the s a i d branch w i l l p r e p a r e and mail to the Federal Reserve Agent the u s u a l v a u l t record sheet showing the s e r i a l numbers, denominations and amount of notes i s s u e d , a t t e s t e d by the o f f i c e r of the branch and the r e p r e s e n t a t i v e of the a u d i t i n g department designated as j o i n t custodians, and c a r r y ing a r e c e i p t signed by an o f f i c e r of the branch f o r the amount of notes received from the Federal Reserve Agent through the r e l e a s e of the p a r t i c u l a r chest or chests; WHEREAS, i t i s f u r t h e r proposed t h a t whenever i t i s deemed n e c e s s a r y to r e p l e n i s h the emergency supply of Federal reserve n o t e s h e l d i n accordance with the conditions h e r e i n s e t f o r t h a t the branch of the Federal Reserve Bank of , e i t h e r the Federal Reserve Agent or an A s s i s t a n t "Federal Reserve Agent w i l l be p r e s e n t a t the branch i n order to r e c e i v e such Federal r e s e r v e notes from the p o s t o f f i c e a u t h o r i t i e s or from the branch whenever an accumulation of notes i s turned back to the Fede r a l Reserve Agent, and i n order to see t h a t such notes are p r o p e r l y d e p o s i t e d i n the chest or chests under the necessary control combinations; WHEREAS, the Federal Reserve Board has advised t h a t i t w i l l i n t e r p o s e no o b j e c t i o n to the operation of the p l a n as s e t f o r t h i n t h i s agreement, with the p r o v i s o , however, t h a t i f a t any time i t should appear f o r any reason t h a t the p l a n i s impracticable or i n any way o b j e c t i o n a b l e , the Federal Reserve Board w i l l r e q u i r e i t to be discontinued or modified i n any way which may seem proper under the circumstances; HOW, THEREFORE, i n c o n s i d e r a t i o n of the premises, the Federal Reserve Agent of the Federal Reserve Bank of and the Federal X-6766-a *i9,2 — 2 -* Reserve Bank of , through i t s Governor a c t i n g pursuant to a proper r e s o l u t i o n of i t s board of d i r e c t o r s , hereby e x p r e s s l y consent and agree t h a t the dispatch by the Federal Reserve Agent or by the A s s i s t a n t Federal Reserve Agent of the t e l e g r a p h or t e l e phone message giving the control combination or combinations to a p a r t i c u l a r chest or c h e s t s under the circumstances above s e t f o r t h , w i l l , i n each and every case, be considered as a d e l i v e r y to the Federal r e s e r v e bank of the amount of such Federal r e s e r v e notes shown by the r e c o r d s of the Federal Reserve Agent and of the other j o i n t custodians to have been p l a c e d i n the s a i d c h e s t or c h e s t s a t the time the c o n t r o l was e s t a b l i s h e d , and t h a t t h i s amount w i l l be accepted a s conclusive f o r a l l purposes. In witness whereof, the s a i d Federal Reserve Agent has h e r e unto s e t h i s hand and s e a l , and the s a i d Federal r e s e r v e bank has caused i t s corporate name to be hereunto signed by i t s Governor and i t s corporate s e a l to be hereunto a f f i x e d by i t s S e c r e t a r y t h i s day of 1930. Federal Reserve Agent Federal Reserve Bank of By_ (Corporate Seal) Attest: Secretary. Governor. (SEAL) COPT X—6770 IN THE ST. LOUIS OCTOBER COURT TERM, R. S. JACOBS BANKING COMPANY, a corporation Appellant, 0 F APPEALS 1930. No. 20895. Appeal from C i r c u i t Court, City of S t . Louis. v. Hon. Erwin G. Ossing, Judge. FEDERAL RESERVE BANK OF ST. LOUIS, a c o r p o r a t i o n , OPINION FILED Respondent. December 2 . 1930 This a c t i o n was "brought "by the R. S. Jacobs Banking Company of G r e e n f i e l d , Missouri, a g a i n s t the Federal Reserve Bank of S t . Louis, to recover the sum of $3,758.43, and i n t e r e s t , to cover l o s s e s s u f f e r e d by the p l a i n t i f f bank on account of the f a i l u r e of the Holland Banking Company of S p r i n g f i e l d , Missouri. A t r i a l by a j u r y was waived, and the case was t r i e d by the court s i t t i n g as a j u r y and r e s u l t e d i n a judgment f o r defendant and p l a i n t i f f has appealed. When o r i g i n a l l y f i l e d , the case was removed to the Federal Court, and the evidence was t h e r e heard, a f t e r which the case was removed to the S t a t e Court. Upon t r i a l below, i n the C i r c u i t Court, the case was submitted on a s t i p u l a t i o n and a t r a n s c r i p t of the testimony given i n the Federal Court. Each side f i l e d a w r i t t e n r e - quest asking t h e court to make s p e c i a l f i n d i n g s of f a c t i n w r i t i n g s e p a r a t e l y from i t s conclusions of law. The p e t i t i o n i s in seven counts, but inasmuch as the 9/1 - 2 - X-6770 pleadings do not become p a r t i c u l a r l y m a t e r i a l upon appeal, we Trill s t a t e i n substance what the p e t i t i o n a l l e g e s . I t i s a l l e g e d i n the f i r s t count t h a t on February 8, vv.* 1921, the defendant n o t i f i e d the p l a i n t i f f t h a t a l l checks, d r a f t s , notes and b i l l s drawn upon the p l a i n t i f f , or upon the Bade County Bank of G r e e n f i e l d , Missouri, and the Bank of Areola, of Areola, Missouri, received by the defendant f o r c o l l e c t i o n , would be sent by the defendant to the p l a i n t i f f f o r c o l l e c t i o n and r e t u r n s , and designated the p l a i n t i f f as the d e f e n d a n t ' s agent f o r the c o l l e c t i o n of these checks, d r a f t s n o t e s and b i l l s ; t h a t t h e r e a f t e r , and p r i o r to January 14, 1924, the defendant i n s t r u c t e d the p l a i n t i f f t h a t the proceeds of the c o l l e c t i o n of such checks, d r a f t s , notes and b i l l s should be forwarded by mail by the p l a i n t i f f to the Holland Bank i n the form of p l a i n t i f f ' s d r a f t upon the s a i d Holland Bank, paya b l e to the order of the Holland Bank; that during s a i d time, and on and p r i o r to January 14, 1924, the p l a i n t i f f maintained a cash balance with the d e f e n d a n t ' s s a i d correspondent and a g e n t , Holland Bank, f o r the purpose of paying such items of c o l l e c t i o n as should be n e c e s s a r i l y remitted by the p l a i n t i f f under s a i d arrangement; t h a t on January 12, 1924, the p l a i n t i f f received from the defendant f o r c o l l e c t i o n i t s cash l e t t e r of January 11, 1924, containing checks, d r a f t s and b i l l s aggregating $1,803,45; t h a t on s a i d date the p l a i n t i f f drew i t s d r a f t i n s a i d sum on the Holland Bank, payable to s a i d Holland Bank, and mailed s a i d d r a f t to s a i d Holland Bank i n payment of s a i d cash - 3 . X-6770 l e t t e r i n an addressed and stamped envelope f u r n i s h e d "by the defendant f o r t h a t purpose, as p l a i n t i f f had "been d i r e c t e d by defendant to do; t h a t the amount of s a i d cash l e t t e r was thereby p a i d by the p l a i n t i f f to d e f e n d a n t ' s s a i d agent and correspondent, Holland Bank; t h a t the p l a i n t i f f thereupon n o t i f i e d the defendant of such payment by a s e l f - a d d r e s s e d p o s t a l card f u r n i s h e d by the defendant f o r t h a t purpose; t h a t the p l a i n t i f f ' s o b l i g a t i o n regarding the payment of such cash l e t t e r was f u l l y and seasonably discharged by so mailing s a i d d r a f t and n o t i f y i n g t h e ' d e f e n d a n t of such payment, under s a i d i n s t r u c t i o n s by the defendant; t h a t the p l a i n t i f f had on d e p o s i t with said Holland Bank a cash balance s u f f i c i e n t to pay s a i d d r a f t of $1,803.45 to i t s p r i n c i p a l , the defendant h e r e i n ; t h a t t h e r e a f t e r on January 1924, the defendant made demand upon the p l a i n t i f f for the payment o f said cash l e t t e r of $1,803.45 p a i d ' b y p l a i n t i f f , as a f o r e s a i d , and the p l a i n t i f f r e f u s e d to pay the same f o r the reason t h a t p l a i n t i f f had f u l l y complied with the d e f e n d a n t ' s i n s t r u c t i o n s as to the payment t h e r e o f , and had f u l l y p a i d the same and discharged i t s duty to the defendant with regard t h e r e t o , by mailing i t s d r a f t to s a i d Holland Bank, as a f o r e s a i d ; t h a t t h e r e a f t e r , on February 4, 1924, the defendant n o t i f i e d the p l a i n t i f f t h a t i t was charging back a l l of the items included i n s a i d cash l e t t e r to the de— it'v it**'1 .""•ft fendant*s e n d o r s e r s ; t h a t the defendant did so charge back s a i d items to i t s e n d o r s e r s , and the s e v e r a l items contained i n s a i d cash l e t t e r were, i n the u s u a l and ordinary course, charged back by the s e v e r a l endorsers and payees t o the makers t h e r e o f ; - 4 - X-6770 t h a t s a i d items were wrongfully so charged hack by the defendant; t h a t by reason of the wrongful act of defendant i n charging hack: s a i d items to i t s endorsers, as a f o r e s a i d , the makers and drawers of s a i d iterns, who were and are customers of the p l a i n t i f f , were compelled to pay s a i d items a second time* t h a t s a i d makers and drawers could not understand why they were so compelled to pay* as a f o r e s a i d , and complained " b i t t e r l y thereof* and t h a t the wrongful a c t of the defendant i n charging "back s a i d items was c a l c u l a t e d to shake the confidence of the p l a i n t i f f 1 s customers i n the solvency of the p l a i n t i f f , and was wrongfully done "by the defendant f o r such purpose, in order to wrongfully f o r c e and coerce the p l a i n t i f f to pay s a i d cash l e t t e r of $1,803.45 a second time; t h a t the defendant a l s o f o r s a i d purpose r e p o r t e d p l a i n t i f f 1 s a l l e g e d f a i l u r e to pay s a i d items to the Finance Commissioner of Missouri, and t h a t "by reason of s a i d wrongful a c t of the defendant, the p l a i n t i f f was t h e r e a f t e r , on or about the 13th day of February, 1924, by duress and i n order to save i t s r e p u t a t i o n and c r e d i t , coerced i n t o sending to the defendant said sum the second time i n order t o prevent the defendant from charging back s a i d items, and did on the s a i d date again pay the defendant s a i d sum; t h a t on January 14, 1924, the s a i d Holland Bank was closed by order of the S t a t e Banking Department of Missouri, and taken over f o r l i q u i d a t i o n by the Commissioner of Finance of s a i d s t a t e ; t h a t although s a i d remittance and d r a f t made by the p l a i n t i f f to s a i d Holland Bank was r e ceived by s a i d Holland Bank b e f o r e the same was closed by the S t a t e Banking Department of Missouri, s a i d item was never charged to the p l a i n t i f f ' s account i n s a i d Holland Bank; t h a t the p l a i n t i f f never learned of t h e insolvency or the closing of s a i d Holland Bank u n t i l a f t e r January 15, 1924; t h a t i n order to minimize i t s damages and recover what i t could and p r o t e c t both i t s e l f and the defendant i n a s i t u a t i o n which was l i k e l y to r e s u l t i n l i t i g a t i o n concerning the l i a b i l i t y of the defendant to the p l a i n t i f f f o r s a i d wrongful a c t s , the p l a i n t i f f f i l e d i t s claim with the Commissioner of Finance i n charge of said Holland Bank with the amount of p l a i n t i f f ' s balance i n s a i d bank, and t h e r e a f t e r received a f o r t y p e r cent dividend on s a i d claim, and thereby received the sum of $721.38 on the amount which was on hand to pay i t s d r a f t of $1,803.45, which i s the t o t a l amount that can be r e a l i z e d from the e s t a t e of s a i d Holland Bank, and t h a t the balance of s a i d item, to-wit $1,082.07, has n o t been paid by the defendant or any other person in i t s b e h a l f , and i s s t i l l due and unpaid, by reason whereof the p l a i n t i f f asked judgment f o r s a i d sum of $1,082.07, with i n t e r e s t , and c o s t s . The other counts i n the p e t i t i o n a r e of s i m i l a r n a t u r e The answer to the f i r s t count a l l e g e s t h a t under the a u t h o r i t y of the a c t c r e a t i n g the Federal Reserve Board, the Federal Reserve Board issued and promulgated an order r e q u i r i n g a l l Federal Reserve Banks, i n c l u d i n g defendant, to operate a c l e a r i n g house f o r i t s member and non-member c l e a r i n g banks, and promulgated c e r t a i n r e g u l a t i o n s , which r e g u l a t i o n s were i n f u l l f o r c e and e f f e c t a t a l l times, and v a r i o u s p a r t s of these - 6 - X-6770 r e g u l a t i o n s were s e t f o r t h i n the answer, The answer a l s o r e f e r s to a c i r c u l a r , known as Circ u l a r Uio. 6, S e r i e s of 1922, a l l e g e d to have been issued "by the Federal Reserve Board to a l l Federal Reserve Banks and nonmember c l e a r i n g "banks. The answer denies the agency of the p l a i n t i f f f o r the usfendant. The answer a l s o pleads an agreement on the p a r t of the p l a i n t i f f , dated J u l y 21, 1916, to c o l l e c t items sent by the defendant to the p l a i n t i f f on the p l a i n t i f f , the Dade County Bank, and the Bank of Areola. I t i s then a l l e g e d t h a t t h e p l a i n t i f f r e m i t t e d d i r e c t to the defendant a t S t . Louis i n S t . Louis exchange, hut t h a t the p l a i n t i f f d e s i r i n g to use S p r i n g f i e l d exchange, e n t e r e d i n t o the arrangement with the Bank of Commerce of S p r i n g f i e l d and then the Holland Bank of S p r i n g f i e l d , "by which the p l a i n t i f f r e m i t t e d to s a i d S p r i n g f i e l d "banks, and secured an arrangement with s a i d S p r i n g f i e l d "banks f o r the t r a n s f e r of the funds to the defendant a t S t . Louis, which arrangement i s a l l e g e d to have been i n f o r c e i n January, 1924. The answer admits the items were charged back, but denies t h a t such a c t of charging the same back was wrongful, and denies t h a t the payment of the amount of s a i d cash l e t t e r by the p l a i n t i f f , on February 14, 1924, was made by duress and coercion, and a l l e g e s t h a t s a i d payment was v o l u n t a r i l y made. The answer a l s o pleads an estoppel a g a i n s t the - 7 - X-6770 p l a i n t i f f "because of the f i l i n g of the claim a g a i n s t the Holland Bank and the securing of a f o r t y per cent dividend on such claim. We t h i n k i t i s unnecessary to r e f e r f u r t h e r t o the p l e a d i n g s a t t h i s time. P l a i n t i f f seeks to recover of defendant on the theory t h a t the Holland Bank of S p r i n g f i e l d , Missouri, was the agent of defendant, and t h e r e f o r e defendant i s l i a b l e for t h e a c t s or negligence of i t s agent. A few p r e l i m i n a r y f a c t s are n e c e s s - a r y to a proper d i s c u s s i o n and determination of t h i s case. Under an agreement i n w r i t i n g dated J u l y 21, 1916, p l a i n t i f f and defendant had an arrangement whereby defendant sent f o r c o l l e c t i o n , checks drawn on the p l a i n t i f f and other banks i n t h a t t e r r i t o r y , and the proceeds were to he immediately r e m i t t e d i n a v a i l a b l e S t . Louis exchange, p r i o r to 1920, the defendant had begun to get i n , by way of remittance f o r c o l l e c t i o n , items s e n t to country banks i n s t e a d of exchange immediately a v a i l a b l e on St. Louis# From some time i n February, 1918, to some date i n 1920, p l a i n t i f f r e m i t t e d to defendant to cover c o l l e c t i o n items, checks on i t s e l f , by a d r a f t drawn on the Bank of Commerce i n S p r i n g f i e l d , Missouri. This method of exchange was u n d e s i r a b l e to defendant because i t took two days to c o l l e c t a f t e r i t was r e c e i v e d . This i n t e r f e r e d with the time schedules e s t a b l i s h e d by the defendant f o r the giving of c r e d i t to the banks which had forwarded these items to defendant for collection. P l a i n t i f f maintained a d e p o s i t account with the Bank of Commerce i n S p r i n g f i e l d from 1917 up to - 8 - X-6770 February 7, 1921, on which l a t t e r date the Bank of Commerce merged with the Holland 3arising Company, a l s o of S p r i n g f i e l d . The P l a i n t i f f a l s o maintained a general d e p o s i t account with the Holland Banking Company f o r a number of y e a r s , and maint a i n e d such an account p r i o r t o the merger of the two Danks. In June, 1920, on account of the numerous complaints of defendant about S p r i n g f i e l d exchange being sent to i t , p l a i n t i f f stopped sending S p r i n g f i e l d exchange to defendant on account of c o l l e c t i o n s , but i n s t e a d s e n t i n s e t t l e m e n t of c o l l e c t i o n items exchangeon S t . Louis. Other banks i n t h a t t e r r i t o r y had been r e m i t t i n g t o defendant f o r c o l l e c t i o n , items i n S p r i n g f i e l d exchange which were u n s a t i s f a c t o r y to defendant. The S p r i n g f i e l d banks were a l s o complaining t h a t the d e f e n d a n t ' s i n s i s t e n c e upon S t . Louis exchange or i t s e q u i v a l e n t was l o s i n g accounts f o r them, because the customer banks f e l t t h a t they had to c a r r y l a r g e r accounts i n S t . Louis. In the year 1920, t h e r e was a l a r g e amount of correspondence, and a number of conferences were h e l d between r e p r e s e n t a t i v e s of the Federal Reserve Bank and other country banks i n t h a t t e r r i t o r y , i n cluding p l a i n t i f f , and plans were discussed f o r avoiding the d i f f i c u l t i e s and u n s a t i s f a c t o r y methods t h a t had t h e r e t o f o r e existed. D e f e n d a n t ' s r e p r e s e n t a t i v e s discussed with the S p r i n g f i e l d bank various plans under riiich a country bank could use a S p r i n g f i e l d correspondent through whom to f u r n i s h defendant with exchange on S t . Louis, to the e f f e c t t h a t checks intended t o be c o l l e c t e d by the country banks would be sent d i r e c t to the country banks' S p r i n g f i e l d correspondents, X-6770 - 9 - the l a t t e r r e m i t t i n g immediately to defendant f o r the aggregate of the checks r e c e i v e d , and charging the account of the country "bank with the amount r e m i t t e d , and a t the same time i t would forward to the country banks the check so p a i d . The country "bank would then charge the checks a g a i n s t the r e s p e c t i v e drawe r ' s balances. There were other plans discussed, the defend- a n t ' s contention being t h a t i t did not want to go d i r e c t l y to the correspondents of the S p r i n g f i e l d banks, because such a course would i n j u r e the S p r i n g f i e l d banks. The record i n t h i s case i s a lengthy one, and i t i s impossible to s e t out a l l the evidence introduced without u n n e c e s s a r i l y burdening t h i s opinion. But we deem i t proper and necessary a t t h i s p o i n t to s e t out the following findings of f a c t s as made by the t r i a l c o u r t : "The Court f i n d s the f a c t s , s p e c i a l l y , to be as follows "1. In the year, 1915, a w r i t t e n agreement ( s e t f o r t h i n the pleadings) was e n t e r e d i n t o between p l a i n t i f f and defendant, pursuant to which p l a i n t i f f r e ceived by mail from defendant c o l l e c t i o n l e t t e r s enclosing checks drawn on the p l a i n t i f f and two neighboring banks to be c o l l e c t e d by p l a i n t i f f and r e m i t t e d to defendant i n immediately a v a i l a b l e exchange. There was no subsequent agreement made d i r e c t l y between the p l a i n t i f f and defendant. In the f i r s t h a l f of 1930, there was considerable tendency shown by p l a i n t i f f , (and by o t h e r country banks) to remit f o r c o l l e c t i o n s i n S p r i n g f i e l d , Missouri, exchange, which exchange was not immediately a v a i l a b l e f o r the reason t h a t i t took two days to c o l l e c t from S t . Louis, and defendant i n s i s t e d on S t . Louis exchange or exchange immediately cashable. "2. S p r i n g f i e l d banks complained t h a t d e f e n d a n t ' s i n s i s t e n c e upon immediately a v a i l a b l e S t . Louis exchange was l o s i n g them accounts. Defendant disclaimed any i n t e n t i o n to i n j u r e S p r i n g f i e l d banks, and v a r i o u s plans to rneet the d i f f i c u l t y were discussed between defendant and S p r i n g f i e l d Bank of Commerce. The l a t t e r i - 10 - X-6770 requested, defendant not to approach country c o r r e s pondents of Bank of Commerce, but to permit i t to do so and i t would make arrangements s a t i s f a c t o r y "both to country "banks and to defendant. "3. P l a i n t i f f maintained a general deposit a c count with Bank of Commerce f o r some f o u r years p r e ceding February 7, 1921, on which date Bank of Commerce merged with Holland Banking Company, a l s o of Springs f i e l d . P r i o r to merger, p l a i n t i f f maintained a g e n e r a l deposit account with Holland Banking Company; and a f t e r merger of the two banks, p l a i n t i f f continued uni n t e r r u p t e d l y to maintain a general d e p o s i t account with the consolidated Holland Banking Company. "4. Among other p l a n s discussed between Springf i e l d banks and defendant, i n the endeavor to avoid exchange u n a v a i l a b l e in St. Louis, without i n j u r y to S p r i n g f i e l d banks, was one f o r t e l e g r a p h i c t r a n s f e r . "On May 15, 1920, defendant wrote Holland Banking Company t h a t the following plan had been suggested: The Holland Banking Company to have i t s country correspondence remit d i r e c t to Holland Banking Company i n s t e a d of d i r e c t to defendant: Holland Banking Company to t r a n s f e r funds to defendant by wire upon . r e c e i p t of remittances from country correspondents: the wire t r a n s f e r t o be followed by l e t t e r giving d e t a i l s of remittance and amount t r a n s f e r r e d t o be h e l d i n suspense as a deduction from outstanding items, awaiting r e c e i p t of d e t a i l e d advice. "The Holland Banking Company did not approve the plan suggested, and never had to do with any plan f o r t e l e g r a p h i c t r a n s f e r u n t i l a f t e r i t s merger with the Bank of Commerce. "5. The Bank of Commerce did not e n t e r i n t o any p l a n f o r t e l e g r a p h i c t r a n s f e r u n t i l on or about J a n uary 11, 1921, On t h i s date defendant addressed l e t t e r t o Bank of Commerce to e f f e c t t h a t defendant -7as advised t h a t Bank of Commerce was prepared to adopta p l a n i n connection with remittances from some of i t s country correspondents, under which r e m i t t a n c e s might be mailed to addressee f o r t e l e g r a p h i c t r a n s f e r to defendant; t h a t under the ope r a t i on of t h i s p l a n defendant would f u r n i s h a d d r e s s e e ' s correspondents w i t h forms f o r t h e i r use i n r e m i t t i n g t o addressee by d r a f t on addressee, and would supply addressee with forms to be mailed to defendant, showing the d e t a i l s of remittances r e c e i v e d . I t was requested t h a t addressee t r a n s f e r to defendant d a i l y , by wire, the t o t a l amount of remittances received f o r d e f e n d a n t ' s u s e , 403 403 - 11 - X-6770 i n c l u d i n g i n telegram statement t h a t deposit was to be made with defendant. 'Account remittances r e ceived. 1 D e t a i l s of remittances showing date and t o t a l of cash l e t t e r s , hank making remittances and t o t a l r e m i t t a n c e s wero to he mailed to defendant, following telegram, and should defendant presumed, i n most cases, he received hy defendant the day a f t e r r e c e i p t of d e p o s i t made hy a d d r e s s e e ' s correspondents p u r suant to a d d r e s s e e ' s t e l e g r a p h i c d i r e c t i o n . Defendant was p l a c i n g order f o r forms needed, and when comp l e t e d they would he forwarded promptly with i n s t r u c t i o n s to a d d r e s s e e ' s country correspondents. I f d e t a i l s not c l e a r to addressee, advices awaited. "6. Thereupon the Bank of Commerce appears to have taken up the matter with i t s country corresponde n t s . The Bank of Commerce sent out a c i r c u l a r l e t t e r to p l a i n t i f f , under date of January 13, 1921, s t a t i n g t h a t Bank of Commerce had e f f e c t e d arrangement with defendant whereby d r a f t s by country banks on Bank of Commerce, i n payment of c o l l e c t i o n l e t t e r s , would be immediately a v a i l a b l e i n S t . Louis. The defendant would send a l l c o l l e c t i o n items d i r e c t to p l a i n t i f f f o r remittance to Bank of Commerce, and the Bank of Commerce would handle the r e s t of the t r a n s a c t i o n f o r p l a i n t i f f e n t i r e l y . To t h i s p l a i n t i f f agreed, and on January 17, 1921, Bank of Commerce wrote defendant, giving a l i s t of country banks ( p l a i n t i f f among them) to which i n f u t u r e c o l l e c t i o n items sent them should be sent d i r e c t , with addressed envelope i n which they would r e t u r n to Bank of Commerce i n payment t h e r e f o r , the Bank of Commerce wiring defendant each day to cover same. "7. Beginning with January 28, 1921, the plan of t e l e g r a p h i c t r a n s f e r was i n operation between Bank of Commerce, p l a i n t i f f and defendant. The a r r a n g e ment was taken over on the merger with the Bank of Commerce by the consolidated Holland Banking Company. Mr. Randall who had been the cashier of the Bank of Commerce became the c a s h i e r of the Holland Banking Company and the plan as begun with the Bank of Commerce was c a r r i e d on without i n t e r r u p t i o n . "8. The o p e r a t i o n of the plan was a s follows: "(a) Defendant had a p r i n t e d cash l e t t e r form, which s t a t e d , a f t e r t h e blank f o r a d d r e s s , t h a t defendant enclosed f o r c o l l e c t i o n and remittance i n immedia t e l y a v a i l a b l e funds; t h a t prompt r e p o r t was requeste d, giving d a t e and t o t a l of t h i s l e t t e r ; t h a t a l l unpaid items .should be immediately returned g i v i n g reasons - 12 - X-6770 for non-payment; t h a t non-payment of a l l items over $500.00 should be telegraphed defendant, giving r e a sons f o r non-payment, and quoting name of preceding tank e n d o r s e r . "A blank space followed to be f i l l e d i n with typew r i t t e n l i s t of items s e n t . I n s t r u c t i o n s as to p r o t e s t were p r i n t e d a t the f o o t . "(b) Defendant had a l s o p r i n t e d a p o s t a l card form, addressed to i t s e l f , s t a t i n g t h a t w r i t e r had r e ceived cash l e t t e r , and had remitted proceeds to Holland Banking Company f o r t e l e g r a p h i c t r a n s f e r t o defendant. The date of cash l e t t e r was then given, i t s amount, the items s u b t r a c t e d f o r non-payment with reasons f o r nonpayment. "Beneath the blank f o r s i g n a t u r e i t was s t a t e d t h a t the p o s t a l card was absolute advice of payment of a l l items i n the cash l e t t e r mentioned, except those h e r e i n l i s t e d as unpaid. "(c) Defendant had a l s o p r i n t e d envelopes, stamped and addressed to Holland Banking Company. "(d) Defendant a l s o had p r i n t e d a l e t t e r form, f o r use by the country correspondents of Holland Banking Company i n making r e m i t t a n c e s . This form was addressed to Holland Banking Company and s t a t e d t h a t w r i t e r enclosed d r a f t on Holland Banking Company f o r $ f o r t e l e g r a p h i c t r a n s f e r to Federal Reserve Bank of S t . Louis, i n payment of t h e i r cash l e t t e r of , These l e t t e r forms were f u r n i s h e d i n considerable number to Holland Banking Company. "(e) Defendant had a l s o p r i n t e d and f u r n i s h e d to Holland Banking Company f o r use by the l a t t e r i n exp l a i n i n g more f u l l y to defendant the t e l e g r a p h i c t r a n s f e r , a l e t t e r form, addressed to defendant, wherein w r i t e r advised defendant t h a t he had i n s t r u c t e d [one of h i s S t . Louis correspondence) to t r a n s f e r to defendant on t h a t day $ covering r e mittances received aa l i s t e d below. Then followed t h r e e v e r t i c a l columns, headed r e s p e c t i v e l y a t the top, 1 payment your l e t t e r , 1 and 1 received from, 1 and the t h i r d ( f o r amounts) with no heading. "With each cash l e t t e r (a) mailed to p l a i n t i f f , defendant would enclose the checks to be c o l l e c t e d ; a p o s t a l card form (b); and a stamped envelope ( c ) . When p l a i n t i f f c o l l e c t e d the checks, p l a i n t i f f made out a remittance l e t t e r form ( d ) , drew a d r a f t on i t s — 13 -» X—6770 general d e p o s i t account, on the Holland Banking Company, to order of l a t t e r , f o r amount shown by r e mittance l e t t e r , and mailed d r a f t and remittance l e t t e r , i n t h e stamped and adaressed envelope to Holland Banking Company. P l a i n t i f f a t the same time, made out and mailed to defendant the p o s t a l card form ( b ) . "Upon r e c e i p t and payment of the d r a f t , Holland Banking Company w i r e d ! t s S t . Louis correspondent to pay defendant and mailed to defendant the explanatory l e t t e r of advice ( c ) . "At the time of making out i t s d r a f t on the Holland Banking Company, i n favor of the Holand Banking Company, the p l a i n t i f f entered i t s d r a f t i n i t s d r a f t r e g i s t e r and charged the amount thereof a g a i n s t the account of the Holland Banking Company upon p l a i n t i f f ' s books. "9. U n t i l a f t e r t h i s controversy had a r i s e n , there was no communication between p l a i n t i f f and defendant r e s p e c t i n g the foregoing system of t e l e g r a p h i c t r a n s f e r a p a r t from the sending and the u s e of the forms s e t f o r t h above. "10. During the time between the merger and the f a i l u r e of the Holland Banking Company s l i g h t l y more than one-half of the d r a f t s , drawn by p l a i n t i f f on i t s general d e p o s i t account with the Holland Banking Comr pany, were i n favor of the l e t t e r , f o r t e l e g r a p h i c t r a n s f e r t o pay cash l e t t e r s sent by defendant; and the remainder of s a i d d r a f t s were drawn f o r o t h e r purposes. "11. On January 12, 1924, p l a i n t i f f received a cash l e t t e r from defendant t o t a l i n g $1,803.45. P l a i n t i f f c o l l e c t e d the same, drew a d r a f t to order of Holland Banking Company, made out a remittance l e t t e r , and mailed d r a f t and l e t t e r to Holland Banking Company and p o s t a l card advice to defendant, a l l i n the usual way as above d e s c r i b e d . This d r a f t reached Holland Banking Company (Sunday i n t e r v e n i n g ) on Monday morning January 14, 1924. "On January 14, 1924, p l a i n t i f f r e c e i v e d two cash l e t t e r s from defendant; one f o r $496.78 and one f o r $40.73. P l a i n t i f f c o l l e c t e d these, and made out the usual d r a f t s and remittance l e t t e r s , and mailed them to Holland Banking Company, a l l i n the manner h e r e i n above d e s c r i b e d . These two d r a f t s reached Holland Banking Company's o f f i c e on the morning of January 15, - 14 - X-6770 1924. "On January 15, 1924, p l a i n t i f f received too cash l e t t e r s from defendant; one f o r $1,833.90 and the other f o r $2,089.19. These p l a i n t i f f c o l l e c t e d , made out the d r a f t s t h e r e f o r , mailed these d r a f t s with remittance l e t t e r s to Holland Banking Company, a l l i n the manner described above. These two d r a f t s reached the o f f i c e of the Holland Banking Company on January 16, 1924. "12. While these two l a s t mentioned d r a f t s , f o r $1,833.90 and $2,089.19 r e s p e c t i v e l y , were w r i t t e n out, with the customary remittance l e t t e r s , and entered on the books of p l a i n t i f f b e f o r e p l a i n t i f f ' s o f f i c e r s i n charge of i t s books learned of the closing of the Holland Banking Company, the evidence i s persuasive t h a t these two d r a f t s were not deposited i n the mail u n t i l a f t e r p l a i n t i f f ' s s a i d o f f i c e r s had learned of such closing; and the Court so f i n d s . "13. The Holland Banking Company was open on Monday, January 14, 1924, closed on t h a t day a t the u s u a l time, and never t h e r e a f t e r re-opened f o r b u s i n e s s . I t was taken i n charge by the S t a t e Finance Department e a r l y on the morning of January 15, 1924, and was t h e r e a f t e r l i q u i d a t e d by s a i d department. "14. A l l of the f i v e d r a f t s s p e c i f i e d above, and i n volved i n t h i s controversy were r e t u r n e d i n t a c t to p l a i n t i f f by the S t a t e Finance Department. In one of the f i v e d r a f t s mentioned was ever i n any way marked, or stamped, by the Holland Banking Company, or i n any wise e n t e r e d upon i t s books or p a i d . "The balances i n favor of p l a i n t i f f i n i t s general deposit account with the Holland Banking Company, were a t a l l times l a r g e r than the amount of s a i d d r a f t s . When the Holland Banking Company closed, s a i d Banking Company had i n cash and cash items approximately $275,000.00 and had over $50,000.00 i n v a r i o u s banks to i t s c r e d i t . The a s s e t s of the Holland Banking Company have proved i n s u f f i c i e n t up to t h i s time to pay more than f o r t y p e r cent to i t s "depositors. "15. A f t e r the closing of the Eoland Banking Company correspondence ensued between defendant and p l a i n t i f f r e s p e c t i n g the f i v e cash l e t t e r s i n controv e r s y . In the course of t h i s correspondence the p l a i n t i f f claimed that the Holland Banking Company was the agent of the defendant f o r the r e c e i p t and t r a n s mission of the funds sent t o Holland Banking Company by p l a i n t i f f . The defendant urged t h a t the s i t u a t i o n was - 15 - X-6770 analogous to t h a t which would have a r i s e n i f the p l a i n t i f f had s e n t to defendant d r a f t s on the Holland Banking Company, which the l a t t e r f a i l e d to honor or pay. "On February 4, 1924, the defendant charged back the items covered by the d r a f t s i n controversy to i t s end o r s e r s , n o t i f y i n g them of the f a c t • Both p l a i n t i f f and defendant appear to have taken the matter up with the S t a t e Finance Department. Both p a r t i e s r e f e r r e d the matt e r t o t h e i r r e s p e c t i v e a t t o r n e y s . F i n a l l y on February 13, 1924, the p l a i n t i f f sent i t s d r a f t on S t . Louis to defendant i n payment of the disputed items. In the l e t t e r s e n t a t the same time, p l a i n t i f f d i r e c t e d defendant to reverse the charges t h e r e t o f o r e made a g a i n s t , and to c r e d i t back the items t o , defendant v s endorsers. This was thereupon done by defendant and the c r e d i t s were made and n o t i f i e d by defendant to i t s various endorsers. P l a i n t i f f then canc e l l e d the d r a f t s i n controversy r e t u r n e d to i t by the S t a t e Finance Department. ,r 16. The Court f i n d s t h a t s a i d payment of February 13, 1924, was not made under p r o t e s t ; and, i n view of the burden of proof r e s t i n g in t h a t regard on p l a i n t i f f , the Court f u r t h e r f i n d s t h a t s a i d payment can not be s a i d to have been coerced or induced by duress a p p l i e d by the defendant. The Court f i n d s that under the c i r cumstances surrounding the s i t u a t i o n the p l a i n t i f f concluded t h a t i t was wiser and more advantageous to p l a i n t i f f to make the payment, and t h a t i t was volunt a r i l y made. "17. The Court f u r t h e r f i n d s t h a t i n the communicat i o n s between the p l a i n t i f f and defendant, a f t e r the closing of the Holland Banking Company and b e f o r e the payment of February 13, 1924, there was no r e p r e s e n t a t i o n of f a c t made by defendant to p l a i n t i f f , to the e f f e c t t h a t the Holland Banking Company was not an agent of the defendant; and t h a t the p l a i n t i f f i s not e n t i t l e d to claim t h a t i t was misled by any such r e p r e s e n t a t i o n p r i o r to the making of the payment of February 13, 1924. "18. The Court f u r t h e r f i n d s t h a t p l a i n t i f f i s estopped from reclaiming the payment of February 13, 1924, or any p o r t i o n t h e r e o f , by i t s l e t t e r of February 13, 1924, sent with such payment, and the subsequent a c t i o n of defendant thereunder. "The Court i s not persuaded t h a t the p l a i n t i f f did not know, or by the e x e r c i s e of reasonable d i l i g e n c e and i n q u i r y , could not have learned, the s u b s t a n t i a l 408 - 16 - X-S770 and m a t e r i a l f a c t s r e s p e c t i n g the r e l a t i o n s h i p and c i r cumstances involved i n the s o - c a l l e d t e l e g r a p h i c t r a n s f e r payment plan "between the p a r t i e s and the Holland Banking Company. The Court t h e r e f o r e f i n d s t h a t the p l a i n t i f f a t or "before the making of the payment of February 13, 1924, knew, or "by the e x e r c i s e of reasonable d i l i g e n c e and i n q u i r y could have l e a r n e d , the subs t a n t i a l and m a t e r i a l f a c t s with regard to the r e l a t i o n s h i p and circumstances involved in the s o - c a l l e d t e l e g r a p h i c t r a n s f e r payment p l a n "between the p a r t i e s and the Holland Banking Company; and the Court f i n d s t h a t the e s t o p p e l a r i s i n g out of i t s payment and l e t t e r of February 13, 1924, i s not d e f e a t e d by p l a i n t i f f ' s i g norance of the f a c t s involved a t the time of making such payment. "19. The Court f u r t h e r f i n d s t h a t t h e d e p o s i t i n g i n t h e p o s t o f f i c e of the d r a f t s drawn on and mailed to Holland Banking Company by p l a i n t i f f , did not c o n s t i t u t e payment of the c o l l e c t i o n items s e n t to p l a i n t i f f by defendant and covered by s a i d d r a f t s . "20. The Court f i n d s t h a t , p r i o r t o acceptance thereof by the Holland Banking Company, the d r a f t s drawn on and mailed to Holland Banking Company by p l a i n t i f f did not c o n s t i t u t e payment of the c o l l e c t i o n items sent to p l a i n t i f f by defendant and covered by s a i d d r a f t s . "21. The Court f i n d s t h a t , p r i o r to -Dayment thereof by the Holland Banking Company, the d r a f t s drawn on and mailed to Holland Banking Company by P l a i n t i f f did not c o n s t i t u t e payment of the c o l l e c t i o n items sent to p l a i n t i f f and covered by s a i d d r a f t s . "22. The Court f i n d s t h a t the f a i l u r e or r e f u s a l of the Holland Banking Company to accept the d r a f t f o r $1,803.45 was not the f a i l u r e or r e f u s a l of an agent of defendant. "23. The Court f i n d s that the f a i l u r e or r e f u s a l of the Holland Banking Company to accept the d r a f t s f o r $496.78, $40.73, $1,833.90, and $2,089.19, or any of them, was not the f a i l u r e or r e f u s a l of an agent of defendant. "23-t. The Court f i n d s t h a t the d r a f t s of $1,803.45, $496.78, $40.73, $1,833.90 and $2,089.19, or any of them were not payment of the c o l l e c t i o n items covered thereby, p r i o r to the acceptance or payment of s a i d d r a f t s by the Holland Banking Company. ~ 17 — X-6770 "24. The Court f i n d s t h a t the f a i l u r e or r e f u s a l of the Holland Banking Company to honor or pay the d r a f t s f o r $1,803.45, $495.78, $40.73, $1,833.90 and $2,089.19, was not the f a i l u r e or r e f u s a l of an agent of defendant. "25. The Court f u r t h e r f i n d s t h a t t h e p l a i n t i f f made and proved i t s claim a g a i n s t the l i q u i d a t o r s of the Holland Banking Company, f o r tlie whole balance of i t s gene r a l d e p o s i t , which included the amounts of the unentered d r a f t s here i n controversy, and t h a t there was subsequently p a i d on such claim a dividend of f o r t y p e r cent; but the p l a i n t i f f never n o t i f i e d the defendant t h a t any such claim was "being made or f i l e d as i n "behalf, or f o r the u s e , of defendant, nor did the claim as f i l e d p r o f e s s or appear to "be made i n "behalf of any other than p l a i n t i f f , and p r i o r to the c o l l e c t i o n of s a i d claim, p l a i n t i f f assigned s a i d claim to another "bank, i n r e t u r n f o r moneys advanced. "26. The Court f i n d s t h a t the following r e g u l a t i o n s had "been adopted and promulgated "by the Federal Reserve Board, f o r the governance of Federal Reserve Banks, with r e s p e c t to c o l l e c t i o n s and were i n f o r c e a t a l l times when the cash l e t t e r s and d r a f t s involved i n t h i s controversy were sent and r e c e i v e d . "Check Clearing and C o l l e c t i o n . "Section 16 of the Federal Reserve Act a u t h o r i z e s the Federal Reserve Board to r e q u i r e each Federal Reserve Bank to e x e r c i s e the f u n c t i o n of a c l e a r i n g house f o r i t s member "banks, and s e c t i o n 13 of the Federal Reserve Act, as amended "by the a c t approved June 21, 1917, a u t h o r i z e s each Federal Reserve Bank to receive from any non-member bank or t r u s t company, s o l e l y f o r the purposes of exchange, or of c o l l e c t i o n , d e p o s i t s of current funds i n lawful money, n a t i o n a l bank n o t e s , Federal Reserve notes, checks and d r a f t s payable upon p r e s e n t a t i o n , or maturing notes and b i l l s , provided such non-member bank or t r u s t coup any maintains with i t s Federal Reserve Bank a balance s u f f i c i e n t to o f f s e t the items i n t r a n s i t hold f o r i t s account by the Federal Reserve Bank. " I n pursuance of the a u t h o r i t y vested i n i t under these p r o v i s i o n s of law, the Federal Reserve Board, d e s i r i n g t o a f f o r d both to the p u b l i c and to the v a r i o u s banks of the country a d i r e c t , e x p e d i t i o u s , and economical system of check c o l l e c t i o n and settlement of b a l a n c e s , has arranged to have each Federal Reserve - 18 - X-6770 Bank e x e r c i s e the f u n c t i o n s of a c l e a r i n g house f o r such of i t s member "banks as d e s i r e to a v a i l themselves of i t s p r i v i l e g e s and. f o r such non-member s t a t e "banks and t r u s t companies as may maintain with the Federal Reserve Bank "balances s u f f i c i e n t to q u a l i f y them under t h e p r o v i s i o n s of s e c t i o n 13 to send items to Federal Reserve Banks f o r purposes of exchange or of c o l l e c t i o n . Such non-member s t a t e "banks and t r u s t companies w i l l h e r e i n a f t e r "be r e f e r r e d to i n t h i s r e g u l a t i o n as non-member c l e a r i n g "banks. "Each Federal Reserve Bank s h a l l e x e r c i s e the f u n c t i o n s of a c l e a r i n g house under the following g e n e r a l terms and c o n d i t i o n s . " ( l ) Bach Federal Reserve Bank w i l l receive a t par from i t s member "banks and from non-member c l e a r i n g "banks i n i t s d i s t r i c t , checks drawn on a l l member and non-member c l e a r i n g "banks and on a l l other non-member "banks which agree to remit a t par through the Federal Reserve Bank of t h e i r d i s t r i c t . " ( 2 ) Each Federal Reserve Bank w i l l receive a t p a r from o t h e r Federal Reserve Banks, and from a l l member and non-member c l e a r i n g banks, r e g a r d l e s s of t h e i r l o c a t i o n , f o r the c r e d i t of t h e i r accounts with t h e i r r e s p e c t i v e Federal Reserve Banks, checks drawn upon a l l member and non-member c l e a r i n g banks of i t s d i s t r i c t and upon a l l o t h e r non-member banks of i t s d i s t r i c t whose checks are c o l l e c t e d a t par by the Federal Reserve Bank. "(3) Immediate c r e d i t e n t r y upon r e c e i p t s u b j e c t to f i n a l payment w i l l be made f o r a l l such items upon the books of the Federal Reserve Bank a t f u l l f a c e value, but the proceeds w i l l not be counted as p a r t of the minimum reserve nor become a v a i l a b l e to meet checks drawn u n t i l such time as may be s p e c i f i e d i n the approp r i a t e time schedule r e f e r r e d to in subdivision 7. " (4) Checks received by a Federal Reserve Bank on i t s member or non-member c l e a r i n g banks w i l l be forwarded d i r e c t to such banks and w i l l not be charged to t h e i r accounts u n t i l s u f f i c i e n t time has elapsed w i t h i n which t o receive advice of payment, as shown by the a p p r o p r i a t e time schedule r e f e r r e d to i n subd i v i s i o n 7. "(5) Under t h i s p l a n each Federal Reserve Bank w i l l r e c e i v e a t par from i t s member and non-member c l e a r i n g banks checks on a l l member and non-member c l e a r i n g banks and on a l l other non-member banks whose - 19 « X-6770 checks can "be c o l l e c t e d a t par "by any Federal Reserve Bank. Member and non-member c l e a r i n g "banks w i l l "be r e q u i r e d "by the Federal Reserve Board to provide funds to cover a t p a r a l l checks received from or f o r the account of t h e i r Federal Reserve Banks • Provided, however, t h a t a member or non-member c l e a r i n g "bank may ship currency or specie from i t s own v a u l t s a t the expense of i t s Federal Reserve Bank to cover any d e f i c i e n c y which may a r i s e because of and only i n the case of i n a b i l i t y to provide items to o f f s e t checks received from or f o r the account of i t s Federal Reserve Bank* w that; (6) Section 19 of the Federal Reserve Act provides H The r e q u i r e d "balance c a r r i e d "by a member "bank with a Federal Reserve Bank may, under the r e g u l a t i o n s and subj e c t to such p e n a l t i e s as may "be p r e s c r i b e d "by the Federal Reserve Board, be checked a g a i n s t and withdrawn by such member bank f o r the purpose of meeting e x i s t i n g l i a b i l i t i e s : Provided, however, that no bank s h a l l a t any time make new loans or s h a l l pay any dividends u n l e s s and u n t i l the t o t a l balance r e q u i r e d by law i s f u l l y r e s t o r e d . "Items can not be counted as a p a r t of the minimum r e s e r v e balance to be c a r r i e d by a member bank with i t s Federal Reserve Bank u n t i l such time as may be s p e c i f i e d i n the a p p r o p r i a t e time schedule r e f e r r e d to i n s u b d i v i s i o n 7. Therefore, should a member bank draw a g a i n s t items b e f o r e such time, the d r a f t would be charged a g a i n s t i t s r e s e r v e balance i f such balance were s u f f i c i e n t i n amount to pay i t ; but any r e s u l t i n g impairment of reserve balances would be s u b j e c t to a l l the p e n a l t i e s provided by the Act. 11 Inasmuch as i t i s e s s e n t i a l t h a t the law i n r e s p e c t to the maintenance by member banks of the r e q u i r e d minimum r e s e r v e balance s h a l l be s t r i c t l y complied w i t h , the Federal Reserve Board, under a u t h o r i t y vested i n i t by s e c t i o n 19 of the Act, has p r e s c r i b e d as the b a s i c p e n a l t y f o r any d e f i c i e n c y in reserve a sum equivalent to an i n t e r e s t charge on the amount of the d e f i c i e n c y of 2 per cent per annum above the n i n e t y - d a y discount r a t e of the Federal Reserve Bank of the d i s t r i c t i n which the member bank i s l o c a t e d , and has announced t h a t i t w i l l p r e s c r i b e f o r any Federal Reserve d i s t r i c t , upon the a p p l i c a t i o n of the Federal Reserve Bank of t h a t d i s t r i c t , as an a d d i t i o n a l p r o g r e s s i v e p e n a l t y f o r any subsequent d e f i c i e n c y by the same member bank during the same calendar year a sum equivalent to an i n t e r e s t charge on the amount of the subsequent d e f i c i e n c y a t a — 20 — X-6770 r a t e i n c r e a s i n g one-half of 1 per cent f o r each such subsequent d e f i c i e n c y . " ( 7 ) Each Federal Reserve Bank w i l l determine "by a n a l y s i s the amounts of u n c o l l e c t e d funds appearing on i t s books to the c r e d i t of each member bank. Such ana l y s i s w i l l show the t r u e s t a t u s of the r e s e r v e h e l d by the Federal Reserve Bank f o r each member bank and w i l l enable i t to apply the p e n a l t y f o r impairment of r e s e r v e . "Each Federal Reserve Bank w i l l p u b l i s h time schedules showing the time a t which any item sent to i t w i l l be counted as r e s e r v e and become a v a i l a b l e to meet any checks drawn. "(8) In handling items f o r member and non-member c l e a r i n g banks, a Federal Reserve Bank w i l l a c t a s agent only. The board w i l l r e q u i r e t h a t each member and non-member c l e a r i n g bank a u t h o r i z e i t s Federal Reserve Bank to send checks, f o r c o l l e c t i o n to banks on which checks are drawn, and, except f o r n e g l i g e n c e , such Federal Reserve Bank w i l l assume no l i a b i l i t y . Any f u r t h e r requirements t h a t the board may deem necessary w i l l be s e t f o r t h by the Federal Reserve Banks i n t h e i r l e t t e r s of i n s t r u c t i o n to t h e i r member and non-member c l e a r i n g banks. Each Federal Reserve Bank w i l l a l s o promulgate r u l e s and r e g u l a t i o n s governing the d e t a i l s of i t s operations as a c l e a r i n g house, such r u l e s and r e g u l a t i o n s to be binding upon a l l member and non-member banks which a r e c l e a r i n g through the Federal Reserve Bank. "27. The Court f u r t h e r f i n d s t h a t the Federal Reserve Bank of S t . Louis, with the consent and approval of the Federal Reserve Board, did on the 30th day of December, 1922, adopt, promulgate and send out to a l l member banks and to a l l non-member c l e a r i n g banks within i t s d i s t r i c t , and to a l l other Federal Reserve Banks, Circular Ho. 5, s t a t i n g the c o n d i t i o n s under which checks sent to s a i d Federal Reserve Bank of S t . Louis f o r c o l l e c t i o n would be handled; and t h a t s a i d Circular Ho. 6 remained unchanged up to and during the p e r i o d of the f a c t s mentioned and complained of i n p l a i n t i f f ' s petition. " C i r c u l a r Mo. 6, S e r i e s of 1922, i s as follows; "Federal Reserve Bank of S t . Louis "Operation of Check Collection System " S t . Louis, Mo., December 30, 1922. "To the Member Banks of D i s t r i c t Ho. 8: - 21 - X-6770 "On the following pages of t h i s c i r c u l a r w i l l be found, i n s t r u c t i o n s and. r e g u l a t i o n s governing the deposit and c o l l e c t i o n of checks through the Federal Reserve Bank of S t . Louis and i t s t r a n c h e s . " I t i s requested t h a t a l l member banks f a m i l i a r i z e t h e i r s t a f f s with the i n s t r u c t i o n s and r e g u l a t i o n s h e r e i n , i n order that they may obtain the g r e a t e s t b e n e f i t of the f a c i l i t i e s provided f o r t h e i r u s e . "Additional copies of t h i s c i r c u l a r w i l l be f u r n i s h e d on r e q u e s t . "Respectfully, "D. C. Biggs, "Governor. "Cash Items Received "The Federal Reserve Bank of S t . Louis and i t s branches w i l l r e c e i v e for c o l l e c t i o n and c r e d i t a t p a r such checks payable i n the United S t a t e s a s can be c o l l e c t e d a t p a r , as per l i s t published semi-annually by the Federal Reserve Board and amended by the monthly supplements t h e r e t o , and checks and warrants drawn on the t r e a s u r e r of the United S t a t e s . "Exceptions to t h i s g e n e r a l r u l e a r e as follows: " ( l ) Checks which have been p r o t e s t e d and are reforwarded f o r payment. "(2) Checks drawn by the sending bank on i t s account with a correspondent l o c a t e d elsewhere than i n the c i t y i n which the r e c e i v i n g Federal Reserve Bank or branch i s l o c a t e d , u n l e s s s p e c i a l a r r a n g e ments have been made to charge such d r a f t s immediately to the drawee bank's r e s e r v e account. "(3) attached. Checks with pa ss books or other documents "Items of the kinds mentioned in the l i s t of exceptions noted, as well as any other items which banks are not a u t h o r i z e d by t h i s c i r c u l a r to l i s t as cash items w i l l be charged to the account of any bank l i s t i n g them a s cash, and entered f o r c o l l e c t i o n and proceeds c r e d i t e d only when a c t u a l l y paid.. "Checks and Warrants on the Treasurer of the United S t a t e s . r- 22 w X-6770 11 Checks and warrants drawn on the t r e a s u r e r of the United S t a t e s w i l l "be received f o r immediate c r e d i t s u b j e c t to examination and f i n a l payment by the Treasurer. "The t r e a s u r e r of the United S t a t e s r e s e r v e s the u s u a l r i g h t of the drawee t o examine, when received, a l l Government warrants and checks and to r e f u s e payment thereon, and the Federal Reserve Bank of S t . Louis and i t s "branches r i l l handle such items i n accordance with the p r o v i s i o n s of Treasury Department, Circular Ho. 176, as amended and supplemented May 15, 1922. "The t r e a s u r e r w i l l r e t u r n immediately any warrant or check, payment of which i s r e f u s e d on account of forged s i g n a t u r e of drawer, i n s u f f i c i e n t funds, s t o p page of payment, or any m a t e r i a l d e f e c t discovered upon f i r s t examination. Such items w i l l "be charged "back and r e t u r n e d to the d e p o s i t i n g tank f o r immediate c r e d i t . "In the event t h a t any warrant or check which has been p a i d by the t r e a s u r e r i s subsequently found to bear a forged endorsement, or to have been r a i s e d , or to bear any .other m a t e r i a l a l t e r a t i o n or d e f e c t which was not discoverable upon f i r s t examination, a photographic copy of the warrant or check m i l be sent to the d e p o s i t i n g bank, but i t s account w i l l not be charged pending adjustment. " I n the cases of warrants or checks b e a r i n g a forged s i g n a t u r e of the drawer, not discovered upon f i r s t examination by the t r e a s u r e r , and in other cases where the t r e a s u r e r ' s r i g h t to reclaim i s i n q u e s t i o n , the warrants or checks w i l l not be charged to the account of the d e p o s i t i n g bank but w i l l be r e t u r n e d to i t as c o l l e c t i o n items f o r adjustment. " P r e p a r a t i o n of Cash L e t t e r s . " I n l i s t i n g checks on cash l e t t e r s the name and l o c a t i o n of the drawee should appear opposite each amount. The numerical system of the American Bankers A s s o c i a t i o n may be used to advantage i n t h i s connection. "In order t h a t checks may be economically and e x p e d i t i o u s l y handled and the quickest a v a i l a b i l i t y given, i t i s necessary t h a t depositing banks s o r t t h e i r checks according to the d i v i s i o n s of the time schedule, forwarding s e p a r a t e l e t t e r s f o r — " ! Checks s u b j e c t to immediate c r e d i t . 1 " 1 Checks s u b j e c t to one day d e f e r r e d c r e d i t . 1 - 23 - X-6770 "'Checks s u b j e c t t o two days deferred, c r e d i t . ' " 1 Checks s u b j e c t to t h r e e days d e f e r r e d c r e d i t , ' e t c . " L e t t e r s containing checks of v a r i o u s a v a i l a b i l i t i e s w i l l be d e f e r r e d f o r the time necessary to c o l l e c t "those l o n g e s t outstanding i n accordance with the time schedule. More than one l e t t e r may "be enclosed i n one envelope, b u t as cash l e t t e r s w i l l be accounted f o r s e p a r a t e l y , d e p o s i t i n g banks a r e requested not to show r e c a p i t u l a t i o n of the v a r i o u s t o t a l s . "All cash l e t t e r s f o r d e f e r r e d c r e d i t w i l l be acknowledged by the Federal Reserve Bank of S t . Louis and i t s branches. The acknowledgment w i l l be i n form s i m i l a r t o the i l l u s t r a t i o n below and w i l l show the date on which proceeds w i l l be a v a i l a b l e . "Federal Reserve Bank: of S t . Louis "October 30, 1922. "Advice " F i r s t National Bank "Blanktown, S t a t e "Receipt i s acknowledged of j o u r cash l e t t e r dated 10—28—22. "Total $1220.00 which w i l l be a v a i l able and c r e d i t e d to your Reserve Amount "Account on Hov. 3, 1922. $1220.00 "Subject to f i n a l payment. "Hours a t which Checks w i l l be r e c e i v e d . "Checks may be deposited with the Federal Reserve Bank of S t . Louis and i t s branches f o r handling on the c u r r e n t day u n t i l 2 p.m. d a i l y , except Saturday. On Saturday checks w i l l be received by the Federal Reserve Bank of S t . Louis and i t s branches a t Memphis u n t i l 12 o ' c l o c k noon and by i t s branches a t L i t t l e Rock and L o u i s v i l l e u n t i l 1 p.m. "Checks received l a t e r than the p r e s c r i b e d hours w i l l not e n t e r i n t o the current day's work, but w i l l be handled i n a l l r e s p e c t s as i f received on the succeeding b u s i n e s s day w i t h i n the hours named. "Uniform I n s t r u c t i o n s . "All checks received or forwarded by the Federal Reserve Banks and branches w i l l be handled s u b j e c t to t%e following uniform i n s t r u c t i o n s : "1. Do not p r o t e s t items of $10.00 or l e s s . j 4_f5 24 — X-5770 "2. P r o t e s t items of $10.01 or over except those t e a r i n g on t h e i r face t h i s stamp 'ITo Pro 4 - 4 ' or a s i m i l a r symbol containing the A. B. A. number of a preceding bank endorser, "3. Telegraph non-payment of a l l items $500,00 and over, giving reason f o r non-payment and quoting the name of the preceding hank endorser. "Checks w i l l "be handled only i n accordance with these uniform i n s t r u c t i o n s and any other or s p e c i a l i n s t r u c t i o n s Trill he d i s r e g a r d e d . I f d e p o s i t i n g hanks wish any checks handled otherwise than under the ahove i n s t r u c t i o n s , i t w i l l be necessary to forward such checks f o r c o l l e c t i o n and c r e d i t when p a i d , i n which case the Federal Reserve Bank of S t . Louis, and i t s branches n i l l follow the i n s t r u c t i o n s contained i n the l e t t e r of t r a n s m i t t a l from the forwarding bank. "The Federal Reserve Bank of S t . Louis and i t s branches w i l l absorb t e l e g r a p h i c costs i n connection with wiring advice of non-payment of items of $500.00 or over. A l l other t e l e g r a p h i c costs i n connection with obtaining and advising payment or non-payment, or any o t h e r information or i n s t r u c t i o n s a t the request of the d e p o s i t i n g member bank, w i l l be charged to the r e q u e s t i n g member bank. "Endorsements. "All checks forwarded to the Federal Reserve Banks and branches must bear the u n q u a l i f i e d endorsement of the forwarding bank, d i r e c t i n g payment to be made to any bank or banker, or to the order of t h e Federal Reserve Bank or branch addressed, c a r r y i n g a guarantee of a l l p r i o r endorsements and bearing the date and American Bankers A s s o c i a t i o n t r a n s i t number of t h e endorsing bank. "In the i n t e r e s t of good banking, the i n d i r e c t r o u t ing of checks '.'ill be discouraged and member banks w i l l not be p e r m i t t e d to deposit with the Federal Reserve Bank of S t . Louis or i t s branches, or send d i r e c t to other Federal Reserve Banks or branches f o r t h e i r account, any checks payable i n other Federal Reserve d i s t r i c t s , which bear the endorsement of banks l o c a t e d i n o t h e r Federal Reserve d i s t r i c t s , in cases where i t i s evident t h a t such checks have been routed i n d i r e c t l y . "When Proceeds of Checks Trill be a v a i l a b l e . "Proceeds of checks deposited with the Federal - 25 ~ X-6770 He serve Bank of S t . Louis or one of i t s "branches w i l l "be a v a i l a b l e f o r c r e d i t to the accounts of d e p o s i t i n g banks a f t e r the lapse of the time noted i n the c u r r e n t time schedule. "In order to obtain immediate c r e d i t f o r checks s u b j e c t to immediate a v a i l a b i l i t y , they must be i n the hands of the Federal Reserve Bank of S t . Louis or i t s branches, by 10 a.m. d a i l y , except Saturday. On Saturday checks s u b j e c t to immediate a v a i l a b i l i t y , they must be i n the hands of the Federal Reserve Bank of S t . Louis by 8:30 a.m. and i n the hands of i t s branches a t L i t t l e Rock, L o u i s v i l l e and Memphis by 9:30 a.m. Credit f o r checks s u b j e c t to immediate a v a i l a b i l i t y received a f t e r t h e hours mentioned w i l l be d e f e r r e d one business day. "The p r o v i s i o n s of the preceding paragraph w i l l not apply to d r a f t s on the Federal Reserve Bank of S t . Louis or i t s branches deposited a t the o f f i c e on which they are drawn. Such items w i l l be received f o r immediate c r e d i t up to the closing time as s p e c i f i e d on Page 3 of t h i s c i r c u l a r under the caption 'Hours a t which Checks w i l l be Received. 1 "Direct Routing. "Member banks w i l l be permitted under c e r t a i n cond i t i o n s and r e g u l a t i o n s , to route checks payable i n other Federal Reserve d i s t r i c t s d i r e c t t o the Federal Reserve banks and branches of the d i s t r i c t s i n which the items a r e payable, f o r the account of the Federal Reserve Bank of S t . Louis or i t s branches, provided, permission to do so i s f i r s t obtained from the Federal Reserve Bank of S t . Louis. Member banks d e s i r i n g to a v a i l themselves of t h i s p r i v i l e g e w i l l w r i t e the Federal Reserve Bank of S t . Louis f o r permission ( i f permission has not a l r e a d y been obtained) and, i f g r a n t e d , they w i l l be advised i n a l e t t e r g i v i n g f u l l i n f o r m a t i o n and complete i n s t r u c t i o n s . "The Federal Reserve Bank of S t . Louis r e s e r v e s the r i g h t to r e q u i r e d i r e c t routing to other Federal Reserve Banks and branches, when, i n i t s judgment, the number or amount of checks handled by banks may warr a n t such a c t i o n on i t s p a r t . "Conditions under which Checks w i l l be Handled. "Every bank sending checks or other cash items t o the Federal Reserve Bank of St. Louis or i t s branches, or to another Federal Reserve Bank d i r e c t , 41 *y 1 - X-6770 26 - f o r t h e i r account, w i l l "be understood to have agreed to the terms and conditions of t h i s c i r c u l a r and to have agreed t h a t i n r e c e i v i n g such items the Federal Reserve hanks w i l l a c t only as the c o l l e c t i n g agent of the sending ba:.ik; t h a t the Federal Reserve "banks w i l l he responsible only f o r due d i l i g e n c e and care i n forwarding or p r e s e n t i n g such items; t h a t the Federal Reserve "banks are a u t h o r i z e d to p r e s e n t or send such items f o r payment i n cash or "bank d r a f t , d i r e c t to the "bank on which they a r e drawn, or i n t h e i r d i s c r e t i o n to forward them to another agent with a u t h o r i t y to p r e s e n t or send them f o r payment i n cash or "bank d r a f t , d i r e c t to the "bank on which they a r e drawn; and t h a t the Federal Reserve "banks a r e a u t h o r i z e d to charge "back the amount of any items (whether or not the items themselves can be r e t u r n e d ) f o r which payment e i t h e r i n cash or i n the proceeds of bank d r a f t has not a c t u a l l y been r e c e i v e d . " This i s an action a t law, and i f the f i n d i n g s of f a c t made by the t r i a l court are supported by s u b s t a n t i a l evidence, t h i s court w i l l not i n t e r f e r e on appeal. This i s a w e l l - e s t a b l i s h e d r u l e of law and procedure i n t h i s s t a t e , as i a shown by r e f e r e n c e to the following a u t h o r i t i e s ; Walther v. Mull, 233 Mo. 104, 134 s . !?. 993; Green v Whaley, 271 Mo. 636, 197 S. ¥ . 355; Holt v . S t . Louis-San Francisco R. Co. (Mo.), 245 S. ¥ . 1054; Abrams v . Unknown Heirs of Rice, 317 Mo. 216, 295 S. W. 83. And i n determining whether there i s such s u b s t a n t i a l evidence, every reasonable i n f e r e n c e i n behalf of the s u c c e s s f u l p a r t y , which can be derived from the evidence heard, must be indulged f o r h i s benefit. (Eowyer v. Bradford, 162 Mo. App. 138, 144 S. W. 145.) Aside from any question of agency i n t h i s case, we t h i n k the judgment of the t r i a l court vras f o r the r i g h t p a r t y , because p l a i n t i f f i s estopped from a s s e r t i n g i t s r i g h t to r e cover t h i s money because the record i n t h i s case j u s t i f i e s the - 27 ~ X-6770 conclusion t h a t p l a i n t i f f knew or should have known a l l the f a c t s with r e s p e c t to the r e l a t i o n t h a t e x i s t e d "between defendant and the Holland Bank a t the time p l a i n t i f f and i t s o f f i c e r s a u t h o r i z e d the payment of t h i s money to the defendant. P r i o r to the date of these payments to defendant, no request was made "by the p l a i n t i f f to see any of the defendant 1 s f i l e s or correspondence with r e s p e c t to the r e l a t i o n s h i p e x i s t i n g "between defendant and the Holland Bank The p l a i n t i f f and i t s o f f i c e r s were f a m i l i a r with the o p e r a t i o n of the arrangement and with the forms used i n i t s operation, and p l a i n t i f f had i n i t s own f i l e s the correspondence e s t a b l i s h i n g the arrangement• When p l a i n t i f f p a i d the money to defendant, i t s o f - f i c e r s t e s t i f i e d i t was done "because they were a f r a i d a run would "be made upon the p l a i n t i f f bank; t h a t there were rumors i n the neighborhood and community t o the e f f e c t t h a t p l a i n t i f f had f a i l e d to pay defendant what i t owed, and to avoid these rumors they p a i d p l a i n t i f f the sum i n controversy. duress, This was not a payment under Hor was i t a payment without knowledge of the f a c t s . In order to recover back money so p a i d , i t must appear not only t h a t the demand was i l l e g a l , but p l a i n t i f f must show duress, and t h e r e can be no duress u n l e s s the p r e s u r e or c o n t r a i n t was such as to v i r t u a l l y take away the f r e e agency of the p l a i n t i f f • Defendant p r a c t i c e d no f r a u d upon p l a i n t i f f . Whether t h e Holland Bank was the agent of defendant or not matters l i t t l e i n t h i s case, i n our opinion, f o r p l a i n t i f f paid the money demanded by defendant v o l u n t a r i l y , or i - 28 - X-6770 under such circumstances as not to amount to d u r e s s , and t h e r e f o r e other questions r a i s e d on t h i s appeal "become of l i t t l e importance. I t follows, t h e r e f o r e * t h a t the judgment should he affirmed* Haid, P. J , , and Beckerj J . , contiur; S. G. Hipper JU'TrB. STATE OF MISSOURI - S e t : I , Hazel B. English, Clerk of the S t . Louis Court of Appeals, do hereby c e r t i f y t h a t the foregoing i s a true copy of the opinion d e l i v e r e d by t h i s court in the foregoing e n t i t l e d cause on the 2nd day of December . 19 30, as f u l l y as the same appears on f i l e i n my o f f i c e . I IT TESTIMONY WHE.HS0F, I have hereunto s e t my hand and A f f i x e d the s e a l of s a i d Court, a t o f f i c e , i n the City, of Sti Louis this 3rd 430 day of December 1930. HAZEL B. ENGLISH Clerk. federal reserve board WASHINGTON address official correspondence to the federal reserve board X-6771 December 9, 1930. SUBJECT* Code words to cover 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 new i s s u e s of Treasury C e r t i f i c a t e s of i n debtedness, S e r i e s 1?J3-193i and TD-1931* Dear S i r ; In connection with ttelegfagibic 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 following code words have been designated to cover new i s s u e s of Treasury C e r t i f i c a t e s of I n d e b t e d n e s s , as follows: "ITOWHtGrGrliS" , S e r i e s T J 2 - 1 9 3 1 , , dated December 1 5 , 1 9 3 0 , due June 1 5 , 1 9 3 1 . "HOWHICrlt'', S e r i e s T i > - 1 9 3 l } del t e d D e c e m b e r 1 5 ; due December 1 5 , 1 9 3 1 . 1930, These code words should be i n s e r t e d i n the Federal Reserve Telegraph Code book, following the supplemental code word " N O W H J D D E N " , on page 1 7 2 . Very t r u l y y o u r s , J . C. N o e l l , Assistant Secretary. TO GOVERNORS OF ALL F. R. BANKS. a. federal reserve board WASHINGTON address official correspondence t o the federal reserve board X-6772 December 9, 1930. SUBJECT: cod© words to cover 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 Treasury B i l l s * 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 following code words have been designated to cover new i s s u e s of Treasury B i l l s , as follows; "1T0XABE" S e r i e s dated October 15 and maturing December 16, 19(30 "MOXADY" S e r i e s dated October 16 and maturing December 17* 1930 "HOXA.G'O" S e r i e s dated Hovombcr 17 and maturing February 16, 1931 These words should be i n s e r t e d in the Federal Reserve Telegraph Code book, following the code word "HOWHOUSS", on page 172. Very t r u l y yours, J . C. ZTooll, Assistant Secretary, 10 GOVERNORS OF ALL F. R. BAKKS. / X-6774 STATEMENT OF BUREAU OF ENGRAVING AND PRINTING Federal Reserve Notes, Series 1928. November 1 t o 29, 1930. 62,000 21,000 36,000 35,000 41,000 - 16,000 15,000 10,000 14,000 30,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - 8,000 8,000 10,000 500 10,000 12,000 12,000 20,000 - 710,000 397,000 221,000 8,000 1,346,750 s h e e t s , @ >.?92.45 per M, ;$500 =£V M O o o sgioo - 8 O - ^50 M o Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, S t . Louis, Minneapolis, Kansas City, Dallas, San Francisco, $5 ^20 J10 75> 000 60,000 12,000 200,000 120,000 60*000 86,000 50,000 18,000 82,000 42,000 40,000 42,000 24,000 15,000 30,000 16,000 14,000 500 Total Sheets 147,000 380,000 154,000 164,000 81,000 60,000 - - - 250 u 104,750 46,000 58,000 61,000 91,000 - - Amount #13,590.15 35,131.00 14,237.30 15,161.80 7,488.45 5,547.00 9,684.14 4,252.70 5,362.10 5,639.45 8,412.95 250 1 ,346,750 <1124,507.04 .....$124,507.04 X-6775 FEDERAL RESERVE BOARD U 0 T I C *3 to Employees December 11, 1930. In order to conform with the p r a c t i c e followed by other G-overnment Establishments, e f f e c t i v e with the December 15, 1930, Pay Roll the raid-monthly checks covering s a l a r i e s of the Board's employees w i l l be drawn i n the amount earned, i n d o l l a r s only. Any balance of l e s s than a d o l l a r t h a t may have been earned during the f i r s t h a l f of the month w i l l be c a r r i e d to the l a s t h a l f and added to the t o t a l earned a t t h a t time. C. W. Hanford, Chief Clerk. federal reserve board 4% WASHINGTON X-6776 address official correspondence to the federal reserve board December 18, 1930. SUBJECT: Holidays during January, 1931. Dear S i r : On Hew Y e a r ' s Day t h e r e w i l l "be n e i t h e r Gold Fund nor Federal r e s e r v e note c l e a r i n g , and the hooks of the Board w i l l he c l o s e d . In a d d i t i o n , the following Federal r e s e r v e hanks and branches w i l l observe h o l i d a y s during the month of January: New Orleans Anniversary of the B a t t l e of Hew Orleans Thursday January 8 Monday January 19 Richmond Charlotte Atlanta Birmingham Mashville Jacksonville Louisville Memphis Birthday of General Robert E. Lee Wednesday January 28 Havana Agency Birthday of Jose Marti On the d a t e s i n d i c a t e d , the banks a f f e c t e d w i l l not p a r t i c i p a t e in e i t h e r the Gold Fund or the Federal reserve note c l e a r i n g . P l e a s e include c r e d i t s f o r the o f f i c e s a f f e c t e d on each of the h o l i d a y s with your c r e d i t s in the Gold Fund c l e a r i n g f o r the f o l l o w i n g b u s i n e s s day, and make no shipment of Federal r e s e r v e n o t e s , f i t or u n f i t , f o r account of the Federal r e s e r v e banks of Richmond and A t l a n t a on January 19 th . p l e a s e n o t i f y branches, Very t r u l y yours, J . C. Hoell, Assistant Secretary. TO GOVERNORS OF ALL F . R. BAMS. 4:26 federal reserve board WASHINGTON address official correspondence t o the federal reserve board X-6779 December 20, 1930. SUBJECT: Expense, Main Line, Leased Wire System, November, 1930, 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-6779-a and X-6779-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, 1930. P l e a s e c r e d i t the amount payable by your bank in the general account, Treasurer, U. S . , on your books, and issue C/D Form 1, 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 Fund", Leased '.Tire System, sending d u p l i c a t e C/D to the Federal Reserve Board. Very t r u l y yours, F i s c a l Agent. Enclosures. To Governors of a l l F. E. Banks except Chicago. X—6779*" a REPORT SHOWING C L A S S I F I C A T I O N AND NUMBER 0 ? WORDS TRANSMITTED OVER MAIN L I N E O F THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THF. MONTH OF NOVEMBER, Business reported Words by F. banks From sent by Net New Y o r k c h a r g e able to other R. Banks 25,210 123,461 Philadelphia 30,209 77,631 52,194 S3,053 2,430 1,971 6,102 2,704 94,811 1,816 30,861 Richmond Atlanta Chicago St. Louis Minneapolis Kansas City 27,4^1 123,461 - 59,974 Dallas San F r a n c i s c o 61,26s 89,355 Total 805,751 Total (*) Department words These total 3.80 9.54 6.45 7-87 10.81 90,757 96,627 11.51 4.04 33,920 74,496 8.88 3,114 67,919 92,469 8.09 11.02 33,579 839,330 100.00 258,072 1,097,402 business percentages 59,352 over main l i n e s transmitted used (*) 3-28 14.71 54,165 66,076 . . . Treasury of business 31,898 20,061 3,059 2,372 6,651 72,124 bank Bank business (1) 1,059 Cleveland Percent Federal Reserve 2,271 Boston New Y o r k 1930. in 1,156,754 calculating the pro rata share of leased wire expense a s shown on the accompanying statement (X—6779"™b) (1) Number o f words sent banks "by N e w Y o r k indicated in to other F. accordance R. with Banks f o r action November 2 - their sole taken at 4, benefit Governors' charged to Conference 1925- to X-6779-t REPORT OF EXPE1TSE MAI IT LIKE FEDERAL RESERVE LEASED WIRE SYSTEM, NOVEMBER, I93O. Operators' Salaries Name of Bank Operators' Overtime Boston $ 260.00 $ Hew York 1,129.14 Philadelphia 225.00 Cleveland 306.66 Richmond 190.00 Atlanta 270.00 Chicago 3,687.00(f) S t . Louis 195.00 Minneapolis 201.13 Kansas City287-50 Dallas 25I.OO San F r a n c i s c o 380.00 F e d e r a l Reserve Board Total $ 7,38*2.43 $ Wire Rental $ Total Expenses $ - - - — - - - 230.00(&) - - - 2.00 8.00 - — - - - - - - 10.00 — 15,813.28 $ 16,043.28 $ $ (&) (#) (*) (a) (b) Pro Rata Share of Total Expenses 260.00 1,129.14 225.00 306.66 420.00 270.00 3,689.00 203.00 201.13 287.50 251.00 380.00 15,813.28 $ 729.25 3,270.51 644.86 2,121.05 1,434.05 1,749.76 2,403.42 2,559.05 898.22 1,974.31 1,798.67 2,450.10 - 23,435.71 $ 22,233.25 1,202.46(a) 22,233.25 Credits $ 260.00 $ 1,129.14 225.00 306.66 420.00 270.00 3,689.00 203.00 201.13 287.50 251.00 380.00 — 469-25 2,141.37 619.86 1,814.39 1,014.05 1,479.76 1,285.58(*) 2,356.05 697.09 1,686.81 1,5^7.67 2,070.10 - 7,622.43 $ 15,896.40 1,285.55(h) $ 14,610.82 Main Line r e n t a l , Richmond-Washington. 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 $1,202.46 from Treasury Department covering b u s i n e s s f o r the month of November, 1930. Amount reimbursable t o Chicago. Payable t o Federal Reserve Board 4 2 FEDERAL RESERVE BOARD X-6781 STATEMENT FOR THE PRESS For immediate r e l e a s e December 23, 1930. The Federal Reserve Board announces t h a t the Federal Reserve Bank of New York has e s t a b l i s h e d a rediscount r a t e of 2 per cent on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e December 24, 1930. X-6783 ? E II S E A L R E S 2 R VE BOARD STATE!,IEIJT FOR THE PRESS Washington,. D. C. For r e l e a s e a t 12 o ' c l o c k noon. December 27, 1930 The Federal Reserve Board announces t h a t the Federal Reserve Bank of Cleveland has e s t a b l i s h e d a r e discount r a t e of 3 fo on a l l classes of paper of a l l m a t u r i t i e s , e f f e c t i v e December 29, 1930. 431 federal reserve board WASHINGTON address official correspondence t o the federal reserve board X-6785 December 30, 1930. SUBJECT: ASSESSMENT FOR GENERAL EXPENSES OF THE FEDERAL RESERVE BOARD JANUARY 1 TO JUNE 30, 1931. 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 h e r e with copy of a r e s o l u t i o n adopted by t h e Federal Reserve Board levying an assessment upon t h e several Federal r e s e r v e banks of an amount equal t o eighty-one thousandths of one per cent (£10081) 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 such banks at c l o s e of b u s i n e s s December 31, 1930, t o defray t h e estimated general expenses of t h e Board from January 1 t o June 30, 1931. Kindly deposit one-half of t h e amount of your a s s e s s ment i n the General ^-ccount, Treasurer, U. S . , on your books January 1, 1931, and one-half March 1, 1931, in each instance 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 t o the Federal Reserve Board. Also please f u r n i s h a statement of your c a p i t a l and surplus used as a b a s i s f o r t h e assessment. Very t r u l y yours, W. M. IMLAY F i s c a l Agent. Enclosure. 432 X-6785-a RESOLUTION LEVYING ASSESSMENT WHEREAS, u n d e r S e c t i o n 10 of t h e a c t a p p r o v e d December 23, 1913, and known a s t h e F e d e r a l R e s e r v e A c t , t h e F e d e r a l R e s e r v e Board i s empowered t o l e v y s e m i - a n n u a l l y upon t h e F e d e r a l r e s e r v e banks i n p r o p o r t i o n t o t h e i r c a p i t a l s t o c k and s u r p l u s an a s s e s s m e n t s u f f i c i e n t t o pay i t s e s t i m a t e d e x p e n s e s , i n c l u d i n g t h e 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 , e x p e r t s and employees f o r t h e h a l f - y e a r s u c c e e d i n g t h e l e v y i n g of such a s s e s s m e n t , 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 f o r w a r d f r o m t h e p r e c e d i n g h a l f - y e a r ; and WHEREAS, i t a p p e a r s from e s t i m a t e s s u b m i t t e d and considered t h a t i t i s necessary t h a t a fund equal t o e i g h t y one t h o u s a n d t h s of one p e r c e n t of t h e t o t a l p a i d - i n c a p i t a l s t o c k and s u r p l u s of t h e F e d e r a l r e s e r v e banks be c r e a t e d f o r t h e p u r p o s e h e r e i n b e f o r e d e s c r i b e d , e x c l u s i v e of t h e c o s t of e n g r a v i n g and p r i n t i n g of F e d e r a l r e s e r v e n o t e s ; Now, t h e r e fore, BE IT RESOLVED, That p u r s u a n t t o t h e a u t h o r i t y v e s t e d i n i t by law, t h e F e d e r a l R e s e r v e Board h e r e b y l e v i e s an a s s e s s m e n t upon t h e s e v e r a l F e d e r a l r e s e r v e b a n k s of an amount e q u a l t o e i g h t y one t h o u s a n d t h s of one p e r c e n t ( . 0 0 0 8 1 ) of t h e 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 b a n k s a s of t h e c l o s e of b u s i n e s s December 31, 1930, and t h e F i s c a l Agent of t h e Board i s h e r e b y a u t h o r i z e d t o c o l l e c t f r o m s a i d b a n k s such a s s e s s m e n t and e x e c u t e , i n t h e name of t h e B o a r d , r e c e i p t s f o r payments made. Such a s s e s s m e n t s w i l l be c o l l e c t e d i n two i n s t a l l m e n t s of o n e - h a l f e a c h ; t h e f i r s t i n s t a l l m e n t t o be p a i d on J a n u a r y 1, 1931, and t h e second h a l f on March 1, 1931. 4 3 3 X-6786 FEDERAL RESERVE BOARD STATEMENT FOR THE PRESS For r e l e a s e a t 3:00 p.m. December 31, 1930. The Federal Reserve Board announces t h a t the Federal Reserve Bank of Boston has e s t a b l i s h e d a rediscount r a t e of 2g- $ on a l l c l a s s e s of paper of a l l m a t u r i t i e s , e f f e c t i v e January 2 , 1931. federal reserve board WASHINGTON address official correspondence to the federal reserve board J u l y 14, 1930 S t . 6656 SUBJECT: Bank Suspensions Dear S i r : There i s enclosed herewith our u s u a l l i s t of member and nonmember "banks r e p o r t e d to the Board a s having suspended d u r i n g the month of J u n e . I f you note any c o r r e c t i o n s t h e r e i n , except in d e p o s i t f i g u r e s which w i l l "be r e v i s e d a s soon a s r e p o r t s on form S t . 6386b have been r e c e i v e d , i t w i l l "be a p p r e c i a t e d if you w i l l c a l l them promptly to our a t t e n t i o n . In the f u t u r e t h i s monthly statement w i l l be s e n t out without the u s u a l accompanying l e t t e r , but i t w i l l be a p p r e c i a t e d , however, i f any e r r o r s t h e r e i n a r e promptly c a l l e d to our a t t e n t i o n . Very t r u l y y o u r s , E« L. Smead, C h i e f , D i v i s i o n of Bank O p e r a t i o n s . Enclosure. TO ALL FSDERJIL RESERVE AGMSS* federal reserve board WASHINGTON address official correspondence to the federal reserve board J u l y 3 0 , 1930* St. 666s. SUBJECT: Preliminary c l a s s i f i c a t i o n of loans and i n v e s t m e n t s o f member banks a s o f June 30, 1930. Dear S i r : I n o r d e r t h a t t h e S y s t e m might have a v a i l a b l e a t the e a r l i e s t p r a c t i c a b l e date a c l a s s i f i c a t i o n of t h e l o a n s a n d i n v e s t m e n t s o f a l l member banks a s o f June 3 0 , t h e Board on J u l y l 6 a s k e d t h e F e d e r a l r e s e r v e a g e n t s t o have t h e l o a n and i n v e s t m e n t f i g u r e s t a b u l a t e d f r o m t h e June c a l l r e p o r t s o f b o t h N a t i o n a l a n d S t a t e member banks and t o f u r n i s h t h e f i g u r e s t o t h e B o a r d . These f i g u r e s h a v e b e e n r e c e i v e d b y t h e Board and I am e n c l o s i n g h e r e w i t h a s t a t e m e n t showing t h e d a t a f o r a l l member b a n k s , member banks i n New York C i t y , i n C h i c a g o , and i n o t h e r r e s e r v e c i t i e s , and f o r c o u n t r y banks. The f i g u r e s f o r N a t i o n a l banks h a v e n o t b e e n made p u b l i c by t h e C o m p t r o l l e r nor f i g u r e s f o r S t a t e banks by t h e F e d e r a l R e s e r v e B o a r d . I t w i l l b e a p p r e c i a t e d , t h e r f o r e , i f you w i l l t r e a t the statement as confidential. Very t r u l y y o u r s , Roy a . Young, Governor. TO ALL GOVERNORS AND AGENTS. * : 436 federal reserve board WASHINGTON August address official correspondence t o the federal reserve board SUBJECT: Condition .of Dear 12, S t . June of 30, 1930 6 6 8 U member b a n k s as 1930. Sir: For your information there are enclosed herewith loans and investments the following statements: 1. Classification of of all c e n t r a l r e s e r v e c i t y b a n k s i n Hew Y o r k a n d s e r v e c i t y banks and c o u n t r y banks on e a c h October 2. 3, 1928 to June 30, member b a n k s , i n Chicago, r e c a l l date from 1930. C l a s s i f i c a t i o n o f deiiiand a n d t i m e d e p o s i t s a n d b o r r o w i n g s o f a l l member b a n k s , c e n t r a l r e s e r v e c i t y b a n k s i n Hew York and call in Chicago, date reserve from October city 3. banks 1928 to and country banks June 30, on each 1930. 3. R e s o u r c e s and l i a b i l i t i e s o f a l l member b a n k s eral r e s e r v e d i s t r i c t as of June 30, 1930. 4. C l a s s i f i c a t i o n o f l o a n s , i n v e s t m e n t s , demand and t i m e d e p o s i t s a n d b o r r o w i n g s o f a l l member b a n k s i n e a c h F e d e r a l reserve d i s t r i c t as of June 30, 1930. The B o a r d ' s by tically for states, all of Member B a n k cities the distribution data around TO ALL GOVERNORS MlD Call Report and c l a s s e s shown the in end of the of corresponding (Ho. 48) giving which banks, will enclosed the Very each t The f i r s t s t a t e m e n t m e r e l y r e p l a c e s t h e f i g u r e s w h i c h w e r e s e n t t o y o u on J u l y 3 0 . ures in Fed- preliminary detailed include statements, will month. truly 15. L . Division FEDERAL RESERVE AGEHTS* yours, Smead, of Chi e f , Bank O p e r a t i o n s . fig- pracbe ready federal reserve board WASHINGTON address official correspondence to the federal reserve board August 18, 1930. s t . 6695. SUBJECT: F u n c t i o n a l Expenses, F i r s t H a l f , 1930. Dear S i r : There a r e enclosed, h e r e w i t h c o p i e s of t h e c o n s o l i d a t e d F u n c t i o n a l Expense E x h i b i t f o r the h a l f year ending June 30, 1930. A copy of t h e e x h i b i t i s a l s o "being mailed to the Governor of the "bank. Very t r u l y y o u r s , . J , E. Van Fossen, A s s i s t a n t C h i e f , Division of Bank O p e r a t i o n s i Enclosure L3TT3R TO CHAIBMAH OF EACH FEDERAL RESERVE BAIHC. * 438 federal reserve board WASHINGTON address official correspondence to the federal reserve board August 20, 1930. s t . 6697. 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 c o r dance with your u s u a l 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 t h e Federal Reserve Board, as soon as a v a i l a b l e , with 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, 1930. I f no c a l l was i s s u e d as of June 30, w i l l you k i n d l y a d v i s e the d a t e of c a l l n e a r e s t t h e r e t o and f u r n i s h the Board with a copy of your a b s t r a c t a s of t h a t d a t e , i f not a l r e a d y done. In s u b m i t t i n g the above-mentioned d a t a i t i s r e q u e s t e d t h a t the number of-banks ( e x c l u s i v e of branch 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 p r o v i d i n g t h e r e a r e any such banks o p e r a t i n g i n your s t a t e . A f r a n k e d and addressed envelope, r e q u i r i n g no p o s t a g e , i s enclosed f o r u s e i n 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 y o u r s , J . R . Tan r o s s e n , A s s t . C h i e f , D i v i s i o n of Bank O p e r a t i o n s . Enclosure TO ALL STATE BANKING DEPARTMENTS* 439 federal reserve board WASHINGTON address official correspondence to the federal reserve board August 20, 1930, s t . 6697a. 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 c o r dance with your u s u a l 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 Reserve Board, as soon as a v a i l a b l e , with a copy of the a b s t r a c t of r e p o r t s of c ondition 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, 1930. If no c a l l was i s s u e d as of June 30, w i l l you k i n d l y advise the date of the c a l l n e a r e s t t h e r e t o and f u r n i s h the Board with a copy of your a b s t r a c t as of t h a t d a t e , i f not already done. In submitting the above-mentioned d a t a i t i s r e q u e s t e d that the number of banks ( e x c l u s i v e of branch 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 p r o v i d i n g t h e r e a r e any such banks operating i n 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 addressed 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 i n t r a n s m i t t i n g the data r e q u e s t e d . Very t r u l y y o u r s , J . R . i r an ? o s s e n , A s s t . C h i e f , D i v i s i o n of Operations „ Enclosure. TO ALL STATE BANKING DEPARTMENTS* federal reserve board WASHINGTON address official correspondence to the federal reserve board August 29, 1930. s t . 6709. SUBJECT: Functional First Dear Expenses, Half, 1930. Sir: Referring St* 6695 ional to the Board's of 18, enclosing August Expense Exhibit for the letter the first Functhalf of 1930, c e r t a i n errors have been discovered i n the e x h i b i t and i t i s requested that the copies units forwarded units you be per branch from 1,523 1000 units follows: 818 to and the $4.07. On p a g e 3 5 , c h a n g e t h e n u m b e r o f h a n d l e d p e r e m p l o y e e p e r day a t t h e to 774. On p a g e 3 6 , c h a n g e t h e n u m b e r o f handled per employee per day at Chicago from 1,362 units to from $ 4 . l 4 Houston Branch from 744 units revised as On p a g e 3 4 , c h a n g e t h e n u m b e r o f h a n d l e d p e r e m p l o y e e p e r day a t t h e Baltimore cost to to 1,015 from $3.10 and to Very J. H. the cost per 1000 $4.35. truly yours Van F o s s e n , Division of Assistant Chief, Bank O p e r a t i o n s , LETTER TO CHAIRMAN OF EACH F. R. BAM* federal reserve board WASHINGTON address official correspondence to the federal reserve board September 6, 1930 s t . 671s SUBJECT: Member Bank Call Report f o r June 30, 1930 Dear S i r : We a r e forwarding to you under s e p a r a t e cover copies of the Board's Member Bank Call Report No. 4g, showing the c o n d i t i o n of a l l member banks on June 30, 1930. P l e a s e forward a copy to each member bank in your d i s t r i c t that has expressed a d e s i r e to r e c e i v e copies of c a l l r e p o r t s as i s s u e d . Very t r u l y yours, E. L. Smead, Chi e f , Division of Bank Operations. TO ALL FEDERAL RESERVE AGENTS* A2 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO * THE FEDERAL RESERVE BOARD SEPTEMBER ST, SUBJECT: 1 0 , 1 9 3 0 6 7 2 4 R e c l a s s i f i c a t i o n of average Uet Demand and Time Deposits f o r June 1930. Dear S i r ; The Committee on Bank Reserves would g r e a t l y a p p r e c i a t e a s p e c i a l r e p o r t from your d i s t r i c t showing d a i l y average net demand and d a i l y average time d e p o s i t s during June 1930 according to the following c l a s s if i e a t i o n t (Monthly average of d a i l y f i g u r e s June 1930) Net demand Time deposits deposits 1. Local banks ( i . e . , "banks which customarily o b t a i n currency over counter of reserve "bank or branch 2. Banks l o c a t e d i n c u r r e n t day p o i n t s , excluding banks to which currency payments a r e customa r i l y made over the counter 3. Banks l o c a t e d in one-day p o i n t s 4. Barks l o c a t e d in two-day p o i n t s 5. Banks l o c a t e d i n three-day p o i n t s You w i l l note t h a t t h i s c l a s s i f i c a t i o n i s the same as under (2) on form S t . 6618 covering the v a u l t cash h o l d i n g s during June* In making up t h i s c l a s s i f i c a t i o n * p l e a s e make the same member banks a r e included in each subgroup a s were corresponding group on form S t . 6618. t h a t requested of member banks certain that included i n the The r e p o r t s on member bank v a u l t cash during June were most i l l u m i n a t i n g and I i#ish to thank you p e r s o n a l l y a s well a s on behalf of the Committee f o r your prompt cooperation in securing and c l a s s i f y i n g the data. http://fraser.stlouisfed.org/ TO ALL FEDERAL Federal Reserve Bank of St. Louis Very t r u l y yours, E. L. Smead, Chairman, Committee on Bank Reserves RESERVE AGENTS* federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD September 19, 1930 s t . 6730 SUBJECT: Call Condition Heports of Member Banks Dear S i r : There are copies bank until three copies call for of 30, agents last (Trans ments of all sirous of member call for under 1233) tenks receipt call, to the the notice each separate from the cover forms blank state forms your at Board, bank a n d whereupon trust be h e l d p e n d i n g of in it of that l6, company receipt data as of be member all of and as after appreciated if invest' soon The B o a r d possible tanks Federal prepared and loans districts reports. soon a s therefore of wired they have respective condition will reports July classification their the similar and condition data requesting a preliminary obtaining forthcoming today under you reports. Board, the Board after that the to possible mailed the wired to Kindly hold telegraphic request condition June reserve of should be the Following as Form 1 0 5 . receipt member w i t h a being forwarded of is as de- the you will k i n d l y arrange to have a p r e l i m i n a r y c l a s s i f i c a t i o n of l o a n s and investments wired to the Board if p r a c t i c a b l e w i t h i n three weeks f r o m the date of t h e c a l l . It i s s u g g e s t e d that b e f o r e the f i g u r e s are t e l e g r a p h e d to the Board they be compared with corresponding figures for parable basis. for central banks in the June 30 in order Separate reserve manner city to figures banks, outlined in sure make that should be reserve the they are telegraphed city banks, on a c o m to and the form attached hereto. Very truly E. yours, M. McClelland, Assistant Secretary. Enclosure TO A L L FEDERAL RESERVE AGENTS-# Board country % % FRELIMHRY CLASS IF IC ATI O OF LOAN'S AND BV3S53.:TS OF ALL H MEMBER BANKS AS OF , 1930 (Amounts i n thousands of d o l l a r s ) F e d e r a l Reserve D i s t r i c t Central r e s e r v e c i t y (13$) banks Reserve c i t y (10$) banks* Country (7%) b?nks* # LQ£t7S AND DISCOUNTS (Schedule E) 1. Acceptances payable i n United States 2. E i l l s , a c c e p t a n c e s , e t c . , payable in f o r e i g n c o u n t r i e s 3. Commercial paper bought i n open marke t 4. Loans to banks; (a) On s e c u r i t i e s (b) A l l o t h e r 5„ Loans on s e c u r i t i e s , e x c l u s i v e of loans to banks: (a) To b r o k e r s and d e a l e r s i n New York (b) To b r o k e r s and d e a l e r s elsewhere (c) To o t h e r s 6. Heal e s t a t e l o a n s : (a) On farm land (b) On o t h e r r e a l e s t a t e 7. A l l o t h e r l o a n s INVESTMENTS 8. U. S. Government s e c u r i t i e s (Schedule F) 9. Other s e c u r i t i e s (Schedule G) -0. T o t a l loans and i n v e s t m e n t s Number of member banks • I n c l u d e s banks l o c a t e d in c e n t r a l r e s e r v e c i t i e s which have "been a u t h o r i z e d to c a r r y a 10 p e r cent r e s e r v e on n e t demand d e p o s i t s . " • i n c l u d e s hanks l o c a t e d i n o u t l y i n g s e c t i o n s of c e n t r a l r e s e r v e and r e s e r v e c i t i e s which have been a u t h o r i z e d to c a r r y a 7 p e r c e n t r e s e r v e on net demand deposits. s t . 6730 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD September 22, 1930. s t . 6732. SUBJECT: Condition, of A l l Banks i n t h e United S t a t e s on June 30, 1930. Dear S i r : For your i n f o r m a t i o n and u s e t h e r e i s e n c l o s e d h e r e w i t h a copy of a s t a t e m e n t i s s u e d to t h e p r e s s today g i v i n g summary c o n d i t i o n f i g u r e s of a l l "banks i n the United S t a t e s a t the end of J u n e . There i s a l s o e n c l o s e d a copy of a s t a t e m e n t showing corresponding f i g u r e s f o r each F e d e r a l r e s e r v e d i s t r i c t . Corresponding d a t a "by s t a t e s w i l l appear i n t h e forthcoming i s s u e of the Federal Reserve B u l l e t i n . Very t r u l y y o u r s , E. L. Smead, C h i e f , Division of Bank O p e r a t i o n s . TO ALL FEDERAL RESERVE AGEJTTS* 446 federal reserve board WASHINGTON October SUBJECT: Dear your will early "below t h a t any) Forms for during be appreciated if convenience will the the use you will number of during 1931 • calendar year Daily for separately that - advise the the Board forms listed branches, if 1931* "balance required A. of Title 34 R. kindly copies "be r e q u i r e d "by y o u r "bank ( i n c l u d i n g Form Number F. 1930. Sir: It at 4, s t . 6745. ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD 5 E Daily sheet. the Please state head o f f i c e and and a l s o give any the number e a c h "branch special punching m a y "be d e s i r e d . statement Semi-annual of Federal functional reserve expense agent report. 38 C l a s s i f i c a t i o n of discounted and purchased b i l l s h e l d a t the end of the month. 95 Monthly report of earnings 96 Monthly report of current Please except form 34, revised. show s e p a r a t e l y t h e number o f c o p i e s o f e a c h f o r m , r e q u i r e d i f i t i s r e v i s e d a n d t h e number i f n o t Very truly yours, E. 1. Division LETTER TO A L L FEDERAL RESERVE AG-EHTS* expenses. Smead, of Chief, Bank O p e r a t i o n s . federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD October 4, 1930. S t . 674s. SUBJECT: Debits to I n d i v i d u a l Accounts f o r Bach Reporting Bank. Dear S i r : One of the s t u d i e s being conducted "by t h e System's Committee on Bank Reserves r e l a t e s to the turnover in dep o s i t s . E x i s t i n g f i g u r e s of d e b i t s to i n d i v i d u a l accounts have helped m a t e r i a l l y i n t h i s connection but such f i g u r e s i n the aggregate are not s u f f i c i e n t f o r the Committee's purposes. The Committee's study would "be g r e a t l y f a c i l i t a t e d i f i t had a v a i l a b l e d e b i t f i g u r e s f o r i n d i v i d u a l r e p o r t i n g banks f o r u s e along with deposit f i g u r e s now a v a i l a b l e f o r such banks, in determining the deposit turnover i n d i f f e r e n t c l a s s e s of banks and i n banks i n d i f f e r e n t l o c a l i t i e s . I t w i l l be a p p r e c i a t e d , t h e r e f o r e , i f you w i l l ask the c l e a r i n g house managers, or others i n your d i s t r i c t who f u r n i s h you with the aggregate d e b i t f i g u r e s each week, to give you the f i g u r e s f o r each i n d i v i d u a l hank, i n a d d i t i o n to the aggreg a t e f i g u r e s now being r e p o r t e d , f o r the f o u r weekly periods beginning Thursday, October 23, and ending Wednesday, November 19. Care should, of course, he taken to see t h a t the mailing of these f i g u r e s f o r i n d i v i d u a l banks does not delay the transmission of the c i t y t o t a l s to the Board f o r use i n the weekly p r e s s statement. Your cooperation i n obtaining these f i g u r e s f o r the Committee w i l l be g r e a t l y a p p r e c i a t e d . Very t r u l y yours, E. L. Smead, Chairman, Committee on Bank Reserves. TO ALL FEDERAL RESERVE AGE!IS* 47 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD October 6, 1930. s t . 6751. SUBJECT: Monthly Reports of Deposits of Member Banks. Dear S i r : As you know monthly average f i g u r e s of n e t demand and time d e p o s i t s and of r e s e r v e s h e l d , comp i l e d from r e p o r t s submitted t o the Board on form S t , 60%-, a r e b e i n g p u b l i s h e d i n the Federal Reserve B u l l e t i n . The forthcoming October i s s u e w i l l c o n t a i n f i g u r e s f o r the month of J u l y . I t i s hoped, however, to p u b l i s h f i g u r e s f o r August and September i n the November b u l l e t i n , and t h e r e a f t e r to p u b l i s h f i g u r e s f o r a given month i n t h e b u l l e t i n of t h e second month t h e r e a f t e r . Accordingly, i t w i l l be a p p r e c i a t e d i f you vri.ll k i n d l y endeavor to have r e p o r t s on form S t . 6q44 roach the Board not l a t e r than the 25th of the succeeding month. In view of the f a c t t h a t the 1930 census f i g u r e s are now b e i n g r e l e a s e d , i t i s r e q u e s t e d t h a t the f i g u r e s f o r country banks l o c a t e d i n c e n t e r s having a p o p u l a t i o n under 15,000 be based on the 1930 census beginning with the month of J a n u ary 1931, a l s o t h a t the January r e p o r t s be accomp a n i e d with a l i s t of c i t i e s added to or deducted from the p o p u l a t i o n group under 1$,000, t o g e t h e r vTith f i g u r e s of n e t demand .and time d e p o s i t s of member banks i n each of such c i t i e s during the month of J a n u a r y . Very t r u l y y o u r s , E. L. Smead, C h i e f , Division of Bank O p e r a t i o n s . TO ALL FEDERAL RESERVE AGEitfTS* federal reserve board WASHINGTON address official correspondence to the federal reserve board October 24, 1930 s t . 6760 SUBJECT: P r e l i m i n a r y c l a s s i f i c a t i o n of loans and investments of member "banks as of September 24, 1930. Dear S i r : There a r e e n c l o s e d h e r e w i t h f o r your i n f o r m a t i o n c o p i e s of a memorandum and s t a t e m e n t s p r e p a r e d f o r the Board with r e s p e c t to changes in the loan and investment account of member "banks during the p a s t q u a r t e r and y e a r , a s d i s c l o s e d "by the September 24 c a l l r e p o r t s . The September 24 f i g u r e s as given i n the enclosed s t a t e m e n t s a r e based on the p r e l i m i n a r y d a t a f u r n i s h e d by t h e Federal r e s e r v e a g e n t s in response to the B o a r d ' s l e t t e r S t . 6730 of September 19. I t i s expected t h a t the enclosed f i g u r e s w i l l be publ i s h e d in the forthcoming November i s s u e of the Federal Reserve B u l l e t i n , b u t in the meantime they a r e given to you f o r your c o n f i d e n t i a l use. Very t r u l y y o u r s , Eugene Meyer, Governor. Enclosures TO ALL GOVERNORS AMD A&ENTS* 450 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD October 24, 1930. s t . 6769. SUBJECT: Weekly statement of c o n d i t i o n of F e d e r a l r e s e r v e banks. Dear S i r : In the case of a number of the F e d e r a l r e s e r v e banks, e a r n i n g s d u r i n g t h e c u r r e n t y e a r have not been s u f f i c i e n t to cover o p e r a t i n g e x p e n s e s , d i v i d e n d s accrued, e t c . , w i t h the r e s u l t t h a t a r e d f i g u r e i s being shown a g a i n s t the item "Available f o r d e p r e c i a t i o n a l l o w a n c e s , r e s e r v e s , s u r p l u s and f r a n c h i s e t a x " , code "CUTE", on t h e d a i l y balance s h e e t , Form 3^. In one c a s e r e c e n t l y the r e d f i g u r e was l a r g e enough to r e s u l t i n a n e g a t i v e amount b e i n g shown f o r "All o t h e r l i a b i l i t i e s " in the B o a r d ' s weekly s t a t e m e n t . I t i s f e l t t h a t whenever a r e d amount i s shown f o r item CUTE, i t should be i n c l u d e d among "All o t h e r r e s o u r c e s " i n s t e a d of b e i n g d e ducted from a c t u a l l y e x i s t i n g l i a b i l i t i e s . Acc o r d i n g l y i n c o n d i t i o n s t a t e m e n t s beginning w i t h Wednesday, October 29, we w i l l add the amount of i t e m CUTE on Form 3^ to "All o t h e r r e s o u r c e s " whenever i t r e p r e s e n t s an excess of deductions over c u r r e n t n e t earnings» 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 o l l o w the same procedure i n any s t a t e ments of c o n d i t i o n of your bank i s s u e d l o c a l l y . Very t r u l y y o u r s , E. L. Smead, C h i e f , D i v i s i o n of Bank O p e r a t i o n s . TO ALL FEDERAL RESERVE AGENTS * 4 5 1 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November 5, 1930 St. 6775 SUBJECT: S a l a r i e s of o f f i c e r s of Federal reserve "banks Dear S i r : In accordance with the usual p r a c t i c e a s t a t e ment showing the 1931 s a l a r y provided "by your Board of D i r e c t o r s a t i t s f i r s t meeting in January f o r each o f f i c e r of your bank and "branches, if any, s u b j e c t to the approval of the Federal Reserve Board, should "be forwarded to the Board as e a r l y in January as p r a c t i cable. P l e a s e l i s t the o f f i c e r s and t h e i r s a l a r i e s in the manner i n d i c a t e d in the a t t a c h e d form. In case the h a n k ' s counsel i s n o t an o f f i c e r of the "bank h i s annual r e t a i n e r f e e and any a d d i t i o n a l compensation f o r c l e r k h i r e should be shown s e p a r a t e l y . Very t r u l y yours, E. M. McClelland, Assistant Secretary. Enclosure TO CHAIRMAN OF EACH F. R.BiJIK* 452 OFFICERS' SALARIES FOR 1931 AT THE FEDERAL RESERVE BASK OF AND ITS ERANCHES, IF ANY, AS PROVIDED BY THE BOARD OF DIRECTORS SUBJECT TO APPROVAL BY THE FEDERAL RESERVE BOARD Name Title Departments or functions superv i s e d ( Form A classification) Total, Annua. Salary Dec. 31, 1931, f o r approval of 1930 F. R. Board officers S t . 6775a 458 federal reserve board WASHINGTON November 5, 1930 S t . 6776 ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD SUBJECT: S a l a r i e s of employees of F e d e r a l r e s e r v e banks Bear S i r : Will you k i n d l y f u r n i s h the Board a s e a r l y in January a s p r a c t i c a b l e with a statement showing the name of each' employee of your bank and i t s branches ( i f any) on January 1, 193^-» and the s a l a r y p a i d to each as of January 1, 1930 and January 1, 1931. The l i s t should be prepared in accordance with the sample form a t t a c h e d h e r e t o in order to f a c i l i t a t e checking with the approved p e r s o n n e l c l a s s i f i c a t i o n p l a n f o r your bank on f i l e with the F e d e r a l Reserve Board. As in the p a s t the schedules should cover a l l employees on the b a n k ' s p a y r o l l i n c l u d i n g those whose s a l a r i e s a r e reimbursed to the bank in whole or i n p a r t from notary f e e s , c a f e t e r i a r e c e i p t s , etc. Very t r u l y y o u r s , E. M. McClelland, Assistant Secretary. Enclosure CHAIRMAN OF EACH FED3BAL RESERVE BA5IK MOSE 1:ERS0MEL CLASSIFICATION 3LAII HAS BEEN APPROVED BY THE FEDERAL RESERVE BOARD* f EMPLOYEES OF THE FEDERAL RESERVE 3A1IX OF AND ITS 454 BRANCHES (IF AMY) ON JANUARY 1, 1931 Name of employee NOTE: Classification symbol T i t l e of j o b Salary range Salary < J a n . 1 on 1930* 1931 Employees should "be l i s t e d "by f u n c t i o n s or departments and the p o s i t i o n s or jobs arranged in the same order a s they appear in the personnel c l a s s i f i c a tion plan, Form A, on f i l e with the Federal Reserve Board. The t o t a l number of employees including employees whose s a l a r i e s a r e reimbursed to the bank i n whole or i n p a r t and the t o t a l s a l a r i e s p a i d should be shown f o r each f u n c t i o n or department. E x t r a h e l p or temporary employees should be l i s t e d with the r e g u l a r employees of the bank and designated by the l e t t e r "T" a f t e r the c l a s s i f i c a t i o n symbol. In case of employees on a p e r diem or hourly b a s i s the e s t i m a t e d t o t a l annual compensation should a l s o be shown. * If h i r e d during 1930, p l e a s e show the i n i t i a l s a l a r y . St.6776a federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November 5, 1930 s t . 6777 SUBJECT: 193-L 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 ; I t w i l l be appreciated i f , in accordance with the usual custom, you w i l l k i n d l y submit to the Board f o r approval a budget f o r the S t a t i s t i c a l and A n a l y t i c a l Function of your "bank (including "branches, if any), f o r the year 1931. The budget should he prepared in accordance with the a t t a c h e d form and submitted to the Federal Reserve Board a s soon a s p r a c t i c a b l e a f t e r January 1, 1931. Veiy t r u l y yours, E. M. McClelland, A s s i s t a n t Secretary. Enclosure TO ALL FEDERAL RESERVE AGENTS* 455 St. FEDERAL RESERVE BAtTK OF 6?77a ( i n c l u d i n g "branches) 1 5 6 Proposed "budget f o r the 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 (as d e f i n e d i n the Manual of I n s t r u c t i o n s covering f u n c t i o n a l expense r e p o r t s form E) ( A l l f i g u r e s to "be shown to the n e a r e s t d o l l a r , cents omitted) BUDGET for 1A30 EXPENSES during 1950 BUDGET for 1951 ADMINISTRATION: Salaries - officers S a l a r i e s - employees Traveling expenses P r i n t i n g & s t a t i o n e r y & other s u p p l i e s Telephone and t e l e g r a p h A l l other* TOTAL STATISTICAL: S a l a r i e s - employees Traveling expenses P r i n t i n g & s t a t i o n e r y & other supplies Telephone and t e l e g r a p h Postage A l l other* TOTAL MONTHLY LETTER: P r i n t i n g and s t a t i o n e r y Pos tage TOTAL LIBRARY: S a l a r i e s - employees Traveling expenses P r i n t i n g & s t a t i o n e r y & other supplies Telephone and t e l e g r a p h Ner/s s e r v i c e - s u b s c r i p t i o n s to periodicals, etc. Books A l l other* TOTAL GRAND TOTAL MEMORANDA: Number of copies of monthly l e t t e r p r i n t e d , December 1930 R e c e i p t s from monthly l e t t e r s s o l d : Estimated, http://fraser.stlouisfed.org/ "•Classify, i f Federal Reserve Bank of St. Louis i n excess of $100. Year 1930 Year 1931 $ $ Do not deduct from expenses federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November 5» 1930 St. 67,78 SUBJECT: 1931 Budget. Dear S i r : In accordance with the usual p r a c t i c e a detailed, statement of the "budget approved f o r the head o f f i c e and each of i t s "branches, i f any, f o r the calendar year 1931 should "be forwarded to the Federal Reserve Board, a s soon a f t e r January 1 a s p r a c t i c a b l e . The "budget statement as submitted to the Board should "be in the same form and d e t a i l a s approved "by the "bank's "budget committee and should show i n comparison the budget and a c t u a l expenditures f o r 1930. If t o t a l expenditures f o r 1930, as shown i n the "budget statement, are not in agreement with t o t a l expenditures r e p o r t e d on the "bank's f u n c t i o n a l expense r e p o r t , Form "E", p l e a s e forward, with your "budget statement a memorandum r e c o n c i l i n g the two amounts. Very t r u l y yours, E. M. McClelland, Assistant Secretary. TO CHAIRMAN" OF EACH FEDERAL RESERVE.BAKK* 457 federal reserve board WASHINGTON November St. ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD SUBJECT: Dear of Books on 1930 December 3 1 , 1930. Sir: It Board Closing 5, 6J82. will of be appreciated Directors for the if the resolution payment of the of your semi-annual d i v i d e n d a n d r e q u e s t s f o r a u t h o r i t y t o make t h e u s u a l end of year charges f o r reserves, e t c . , are mailed in time to reach the Board not later than December 10, 1930. T h e d i v i d e n d r e s o l u t i o n s h o u l d "be a c c o m p a n i e d v/ith the f o l l o w i n g i n f o r m a t i o n : 1. Estimated gross earnings, current expenses, additions to and proposed deductions from current net earnings, and net earnings franchise tax the 2. for Indebtedness available calendar year to the Federal for surplus and 1930. reserve "bank o f ( a ) s u s p e n d e d t a n k s a n d ( b ) "banks c o n s i d e r e d t o "be i n a s e r i o u s l y o v e r e x t e n d e d c o n d i t i o n , g i v i n g t h e names of the banks, probable loss i n d e b t e d n e s s of e a c h on Uovember in the c a s e of each bank. 30, and The g e n e r a l p r o c e d u r e f o l l o w e d i n t h e p a s t w i t h reference to charge-offs, depreciation and other r e s e r v e s , t r a n s f e r s to s u r p l u s a c c o u n t and payment of franchise tax will be followed Very at the end of truly yours, E . M. M c C l e l l a n d , Assistant Secretary. LETTER TO ALL CHAIRI4M* this year. 459 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD . November 14, 1930, St. 6796. SUBJECT: Federal Form 3 4 , Dear Reserve for Bank B a l a n c e use Sheet, during 1931* Sir: proof copy There i s e n c l o s e d herewith an u n r u l e d o f d a i l y " b a l a n c e s h e e t , F o r m J k , t o "be u s e d "by t h e change in Federal reserve "banks d u r i n g 1931. I t w i l l "be n o t e d t h a t t h e p r i n c i p a l the form i s the elimination of the item " l i q u i d v a l u e of "bills and s e c u r i t i e s " and the transfer to "Miscellaneous Assets" and "Miscellaneous l i a b i l i t i e s " , r e s p e c t i v e l y , of items h e r e t o f o r e shown a s a d d i t i o n s to and d e d u c t i o n s from the par v a l u e of "bills and s e c u r i t i e s . The a r r a n g e ment of the b l o c k s on t h e l i a b i l i t y s i d e o f the statement has a l s o been changed somewhat. mailed as should be The y e a r ' s s u p p l y o f t h e f o r m w i l l soon as r e c e i v e d from the p r i n t e r , e a r l y i n December. Very truly yours, E. L, Division Enclusure. L3TT3R TO ALL (KfSEiMS* be which Smead, of Chief, Bank O p e r a t i o n s . federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November St. SUBJECT: Reports Banks of 24, Condition and Trust 1930. 6805. of State Companies. Dear S i r : It accordance will with be greatly your usual appreciated practice if in you w i l l kindly f u r n i s h the Federal Reserve Board, as soon as a v a i l able , with a copy of the abstract of reports of condition state as of of of state banks and trust companies in your on September 24, 1930, I f no c a l l was i s s u e d September 24, w i l l you k i n d l y advise the date call nearest a copy of your already done. In thereto abstract submitting and f u r n i s h as of the that the Board with date, if above-mentioned not data it i s r e q u e s t e d t h a t t h e number o f banks ( e x c l u s i v e of branch banks) be s t a t e d , and that separate f i g u r e s be f u r n i s h e d f o r mutual s a v i n g s banks p r o v i d i n g there are any such banks operating A franked and addressed i n g no p o s t a g e , i s e n c l o s e d the data requested. Very for your envelope, use truly B. in in state. requir- transmitting yours, L. Division Enclosure TO ALL STATE BASIC HPARTME^TTS * Smead, of Chief, Bank O p e r a t i o n s . federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November St. SUBJECT: Reports of Banks and Dear dance Sir: with of State Companies. I t w i l l be greatly appreciated i f i n your xisual p r a c t i c e you w i l l k i n d l y the with a copy state 1930. * nish of Condition Trust 24, 68053". Federal Reserve Board, of the abstract banks and trust of as soon reports companies in as of accorfur- available, condition your state on September 24, 1930. I f no c a l l was i s s u e d a s o f S e p tember 24, w i l l you k i n d l y a d v i s e the date of the c a l l n e a r e s t t h e r e t o and f u r n i s h the Board w i t h a copy of your abstract as of that date, if not already don6. In submitting the above-mentioned data it i s r e q u e s t e d t h a t t h e number o f b a n k s ( e x c l u s i v e of branch banks) be s t a t e d , and that separate f i g u r e s be f u r n i s h e d f o r mutual savings banks p r o v i d i n g there are any such banks o p e r a t i n g i n your s t a t e , a l s o that the f i g u r e s be s e g r e g a t e d by Federal r e s e r v e d i s t r i c t s . A franked and addressed envelope, r e q u i r i n g no p o s t a g e , i s e n c l o s e d f o r u s e i n t r a n s m i t t i n g the data requested. Very truly E. L. Division Enclosure, TO ALL S T A T E BANKING DEPARTMENTS* yours, Smead, of Chief, Bank Operations^ federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November 28, St. 6810 SUBJECT: Member B a n k C a l l for Dear copies 4-9, forwarding to y o u under of the Board's showing the condition September 24, member bank i n desire to Report 24, 1930 Sir: We a r e No. September 1930 1930. your receive Member B a n k C a l l Please of of all that call Very has copy E. L. Division Report to as on each expressed reports truly cover member b a n k s forward a district copies separate a issued. yours, Smead, C h i e f , of Bank O p e r a t i o n s . 463 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD D e c e m b e r 9» S t . 6824 SUBJECT: Dear a your letter Federal ficient that, to Mr. I am e n c l o s i n g Attebery, Bank of St. for purpose reserves, and h o l i d a y s the information, addressed Reserve quirement of R e q u i r e d r e s e r v e s o f member b a n k s on Sundays and h o l i d a y s . Sir: For of 1930 shall the required be of reserves based preceding business Louis, Deputy with on d e p o s i t a copy Governor regard assessing of herewith to the at Board's penalties member b a n k s liabilities on for at the de- Sundays the close day. Very truly yours, E . M. M c C l e l l a n d , Assistant Secretary. Enclosure GOVERNORS OF ALL FEDERAL RESERVE B A M S EXCEPT S T . PHILADELPHIA* re- L O U I S AND 464 (COPY) December 9, 1330 St. bS?3 Dear Mr. Attebery; This w i l l acknowledge r e c e i p t of your l e t t e r of November 29, with regard to the requirement of the Board t h a t , f o r the purpose of a s s e s s i n g p e n a l t i e s on r e s e r v e d e f i c i e n c i e s , the r e q u i r e d r e s e r v e s of member banks f o r Sundays and h o l i d a y s s h a l l be based on deposit l i a b i l i t i e s a t the c l o s e of the preceding business day. As you know t h e r e was considerable a g i t a t i o n on the p a r t of member banks in the l a r g e r c i t i e s during the p a s t few y e a r s f o r a change in the Board's Regulations which would permit them to determine t h e i r r e q u i r e d r e s e r v e s , so f a r a s the assessment of p e n a l t i e s i s concerned, on the b a s i s of d e p o s i t s a t the opening of b u s i n e s s . This r e quest was considered by the Governors of the Federal r e s e r v e banks and by the Board on several occasions but f i n a l a c t i o n thereon was not taken u n t i l October 2, 1930 when the Board voted to amend Regulation D so a s to accomplish so f a r a s p o s s i b l e the above purpose. In modifying the r e g u l a t i o n , however, as s t a t e d in ay l e t t e r of November I f , i t was not the purpose of the Board to change the amount of r e q u i r e d r e s e r v e s used i n determining p e n a l t i e s on d e f i c i e n c i e s . Some time a f t e r the issuance of the new r e g u l a t i o n one of the Federal r e s e r v e banks asked the Board whether r e q u i r e d r e s e r v e s f o r Saturdays and days preceding holidays should be r e p e a t e d f o r Sundays and h o l i d a y s , or whether the r e q u i r e d r e s e r v e s f o r Sundays and h o l i d a y s should be based on d e p o s i t s a t the close of busine ss on the immediately preceding days. This matter was given c a r e f u l consideration by the Board, and in order to determine the e f f e c t which the r e p e a t i n g of Saturdays' requirements f o r Sundays would have on r e q u i r e d r e s e r v e s we obtained d a i l y f i g u r e s on d e p o s i t s of member banks in New York City, and found t h a t n e t demand p l u s time d e p o s i t s over the t h r e e - y e a r period 1927-1929 averaged $27,000,000 more on Saturday mornings than on S a t urday n i g h t s . I t i s q u i t e probable t h a t somewhat the same t h i n g holds t r u e a t banks in many other p l a c e s , but whether i t does or n o t , i t i s evident t h a t d e p o s i t s a t the opening of business Saturday a r e d i f f e r e n t than a t the c l o s e of b u s i n e s s , and r e q u i r e d r e s e r v e s based on Saturday morning d e p o s i t s a r e consequently d i f f e r e n t than r e s e r v e s based on Saturday n i g h t d e p o s i t s . 465 It eral is required plying to clear reserve reserve with carry that "bank a t the on a higher at the in order to to carry a any an not circumstances it is Act. of duction could not the in basis relates does ing fact this of to not it is t h a n w o u l d "be c a l l e d of a concerned. penalty that can To for actually for regulation a deficiency of com- a "bank "by i t s compelling r e q u i r e d by a requirements require deficient issue avail opening way reserves in night than of stated on opening it, reserves, law. The which might in the under when reserves Federal to a change Reserve Saturday the the deposit in must be re- reserve reserves and requirements as banks regard- do a v e r a g e lowered requirements liabilities morning would, in are the on regulation deficient legal Saturday and any its The B o a r d ' s for on balance balance deficiency therefore, periods, where reduction reserve deposit penalties Inasmuch, cases this requirements. purport over those of closing would create assessment any itself Saturday's Saturday1s amount its the in Saturday urday its "business of Saturday would be of the Fedto is legal that required reserves. their close with equal a bank f o r penalize maintained against the excess the reserve Sunday on it the a Saturday h a s been o b j e c t e d t h a t a bank which h a s a r e d u c t i o n i n i t s on S a t u r d a y , j u s t i f y i n g a d e c r e a s e i n i t s r e s e r v e b a l a n c e Sunday, because at "business that bank has "business Sunday assessment complying with It deposits over of in feel of deposits so far a s close reserve does a member close reserve avoid Board its law deposits if the less for on S a t - ordinary course of b u s i n e s s , b e a v e r a g e d o u t o v e r t h e r e s e r v e c o m p u t a t i o n p e r i o d . However, a bank which l i t e r a l l y f o l l o w e d the F e d e r a l R e s e r v e Act would n e c e s s a r i l y the close posits at If vided of of the the that each deposit have business close of recent in a amendment at balances the at that as the for the any former state other in your required their deposit liability day. That true, is to carry of the close of Federal the reserve requirements Board's of the Regulation required each day business bank a t on its de- D had pro- reserve shall the member b a n k s a r e reserve on banks such days days, at i.e., the letter makes being the to be balances based preceding day, on its which c o u r s e t h e same a s a t t h e o p e n i n g o f b u s i n e s s question under c o n s i d e r a t i o n might not have deposits regulation to close that Federal same a s You or we a d m i t the required reserves basis are If with with equal deficiencies deposit balances are of on t h e c u r r e n t d a y , t h e serve day business. computing member bank arisen. reserve each any the course, should be on close that Sunday of you specific reserves at on it it of not on find re- the deposits, pamm which Saturday. that the present banks on h o l i d a y s business been on a follows t o member based reference has carry calculated business do to logicallv morning Sundays and close but required on S u n d a y s on the the preceding practice in the on p a s t to r e p e a t S a t u r d a y ' s reserve requirements f o r Sunday, and t h i s meant t h a t the Sunday's r e q u i r e d r e s e r v e s were "based on dep o s i t s a t the c l o s e of business Saturday. This i t would seem conforms to the i n t e n t of the Federal Reserve Act which presumably intended t h a t banks should maintain required r e s e r v e s with the Fede r a l r e s e r v e banks a t a l l times or be s u b j e c t to a p e n a l t y f o r def i c i e n c i e s . Under your proposal, you would r e q u i r e a bank to c a r r y a r e s e r v e on Sunday based on d e p o s i t s a t the c l o s e of b u s i n e s s Friday, which the Board f e e l s i s not c o n s i s t e n t with the p r o v i s i o n s of the Federal Reserve Act. Inasmuch a s member banks are permitted to average t h e i r r e quired r e s e r v e s over given p e r i o d s the n e c e s s i t y of knowing a c t u a l r e q u i r e d r e s e r v e s f o r Sundays and h o l i d a y s during b u s i n e s s hours on the preceding days i s not of g r e a t importance except when a reserve computation p e r i o d ends on Sunday or a h o l i d a y . Reserve computation p e r i o d s f o r banks in c e n t r a l reserve and reserve c i t i e s never end on Sunday and r e s e r v e computation p e r i o d s f o r a l l other banks a r e on a semi-monthly b a s i s . I t i s f e l t , t h e r e f o r e , t h a t the Board's r e q u i r e ment would not s e r i o u s l y inconvenience member banks i n view of the comparative infrequency with which reserve computation p e r i o d s end on Sundays or h o l i d a y s . This l e t t e r was p r e s e n t e d to and unanimously approved by the System's Committee on Bank Reserves. In accordance with a f u r t h e r recommendation of the Committee a copy of t h i s l e t t e r i s being sent to each Federal r e s e r v e tank. Very t r u l y yours, E. M. McClelland, Assistant Secretary. Mr. 0 . M. Attebery, Deputy Governor, Federal Reserve Bank, St. Louis, Mo. 4 6 7 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December St. SUBJECT: 17, 1930. 6830. Data f o r 1930 Annual Report of the Federal Reserve Board- Dear Sir: data T i l l you k i n d l y f u r n i s h u s w i t h the f o l l o w i n g f o r use i n the Board's forthcoming annual report: 1. Classification your and bank (2) of (1) in U. S. under securities repurchase investment held by agreement account, as at c l o s e o f b u s i n e s s December 31» 1 9 3 0 , g i v i n g t h e k i n d of s e c u r i t i e s , i n t e r e s t i r a t e , maturity only date, need be through the and h e l d i n 2. Statement banks and par shown f o r The securities total bought Open Market P o l i c y C o m m i t t e e Special Investment Account. showing in value. each the State number (or of part member of State in the d i s t r i c t ) accommodated through the discount of paper during the calendar year 1930. Very truly E. L. Division TO GOVERNORS OF A L L FEDERAL yours, Smead, of RESERVE Chief, Bank BASICS Operations. EXCEPT HEW YORK* federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD DOC6MB6P St. SUBJECT: Schedule of Federal 1 7 , 1 9 3 0 S 6831. Reserve Bank P e r s o n n e l . Dear Sir: It furnish personnel as at will be appreciated the Board with a of close if y o u r "bank ( i n c l u d i n g of "business you statement on will kindly relating to the "branches, if any) December 31 * 1 9 3 0 , and a s o f J a n u a r y 1 , 1 9 3 1 » made o u t i n a c c o r d a n c e w i t h The f i g u r e s f o r D e c e m b e r the form attached hereto. 1930, which should not take account of changes in e i t h e r t h e number or s a l a r i e s o f o f f i c e r s or employees that are put into effect as of January 1, w i l l "be p u b l i s h e d i n t h e B o a r d ' s 1 9 3 0 a n n u a l r e p o r t and should he comparable with corresponding f i g u r e s f o r your bank derived from the statement submitted l a s t y e a r and p u b l i s h e d on p a g e of the Board's I929 1931, after annual report. The figures for January b e e n made a n d a n n u a l s a l a r i e s o f o f f i c e r s mitted to the Board f o r i t s approval. Very as truly yours, E. M. McClelland, Assistant Enclosure. LETTER TO ALL CHAIRMEN* 1, should represent annual s a l a r i e s of employees a l l changes e f f e c t i v e as of January 1 have Secretary. sub- 469 S t . 6831a FEDERAL RESERVE B A M OF (including branches) Annual Number Jan. Dec. 1 1931 31 1930 Jan. 1931 Officers: Chairman and Governor Other Federal Reserve Agent officers Employees "by d e p a r t m e n t s : Banking department Federal Reserve Auditing Fiscal Agent's department Department Agency Department Total Employees whose reimbursed to salaries "bank: are F i s c a l Agency department Other employees* Grand T o t a l Temporary employees included above) (not •Subdivide r to he "by f u n c t i o n s and u n i t s on separate sheet. 1 Salaries Dec. 1930 31 470 federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December 1 7 , St, 6832. SUBJECT: Reports of Dividends, Payments Dear Earnings, Expenses, and Franchise for 1930. Tax 1930. Sir: In financial present order that results calendar requested that the Board's following of year a the B o a r d may h a v e operations as offices on information regarding Federal reserve "banks as p r a c t i c a b l e he Friday after telegraphed soon statement of mailed in morning, or January 2, January 1931, time 1, showing information: ESPY ETCH EACH EASY EDIT EVER Earnings frdm discounted b i l l s . . . Earnings Earnings f r o m ptLrChased b i l l s from U. S. s e c u r i t i e s . . Other Gross earnings earnings (items 4-7 Cost of Federal Reserve Other current expenses Total current expenses EARN Current ELBA ENID Additions net Net EAST - N e t Current tax, EYRE - Dividends EMET - Paid EVEN - Transferred to to or earnings net earnings deductions earnings . . . for dividends, and surplus . . . . (to franchise surplus agree account Subscribed capital January 1, CEDE - Surplus 1931 January 1, tax . . . w i t h i t e m EAST) CAPP - . paid Government as Total . $_ from current net earnings available to Currency net from Current additions franchise on Form 9 5 ) earnings to Deductions * . . . 1931 • the i t to (Code) EARL EDGE the during is re^ch the 471 2 ** It of an is also requested that the ductions ing the that in last from current net year day final with addition of the closing condition of to the year of earnings separate regular t h e "books, t h e "bank a t (Profit figures the OP A L L or FEDERAL sheet reports of i f any, of the the showing but prior entries not regularly to the Sznead, C h i e f , of Bank O p e r a t i o n s . B A S K S * the making made a t yours, RESERVE durand "bank a f t e r "business other truly account) form 3^ f o r condition E. L. Division GOVERNORS and Loss e a c h "branch, a f o r m 3 4 "be s u b m i t t e d close Very for "balance representing of any a d j u s t i n g , c l o s i n g the end of e a c h month. TO regular monthly e a r n i n g s and e x p e n s e s on forms 95 and 96 be accompanied w i t h i t e m i z e d statement showing i n d e t a i l a l l additions to and de- 4 % federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December 18, St.6238 SUBJECT: Call Condition Reports 1930 of Member B a n k s Dear Sir; There cover ' at are "being f o r w a r d e d copies your bank whereupon trust until three of copies receipt of a The B o a r d i s classification I country ? the banks June 30 you will , within report, nished of in three if for desirous and of arrange from practicable, September 24 to have the in 24 the date blank from forms district, will be data wired as was held to the the the data is a n d of done appreciated for It and be city designated call. Board, bank a preliminary reserve same f o r m a s the forms the state again of It such separate reports. obtaining calls. the each that investments reserve under notice to condition each Federal weeks the request for and September kindly mailed the call loans hold telegraphic should be company member w i t h pending of today Kindly Form 10$. receipt to y o u suggested for if Board next call were that fur- before the f i g u r e s are t e l e g r a p h e d to the Board they be compared with c o r r e s p o n d i n g f i g u r e s f o r S e p t e m b e r 24 i n o r d e r to make s u r e that they are on a comparable basis. Very truly E. yours, M. McClelland, Assistant TO ALL FEDERAL RESERVE AGENTS* Secretary. federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD D e c e m b e r 1.9, St. 6840 SUBJECT: Earnings, Reports Dear State and. D i v i d e n d s Bank Members. Sir: There under use Expenses of 193*0 separate of State reports ments are of for being forwarded cover Bank members earnings, the copies six in and ending Very of form submitting expenses months to y o u E. M. R. AGENTS* their 31, 1930. yours, McClelland, Assistant TO A L L F . 10% f o r dividend pay- December truly today Secretary. federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December 2J, 1930. S t . 6g%. S U B J E C T : Condition of A l l B t z l 3 . c s i n each d i s t r i c t on September 24, 1930. Dear S i r : For your information and use there i s enc l o s e d herewith a copy of a statement and accompanying memorandum showing l o a n s , investments, dep o s i t s and "borrowings of a l l member and nonmember "banks i n each Federal reserve d i s t r i c t on September 24, 1930, t o g e t h e r vrith changes t h e r e i n since June 30, 1930 and October 4, 1929. Very t r u l y y o u r s , E. 1. Smead, Chief, Division of Bank Operations Enclosures. TO AIL FEDERAL RESERVE AGENTS# federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December 27, S t . 6s4j. SUBJECT: Forms for Dear S i r : use during 1931. \ There separate use are cover a during being supply forwarded of the to yon following today under forms for 1931$ Form 3 2 , copies E, copies Form Form 9 5 , copies Form 96) copies Very truly 2* yours, L. Division TO GOVERNORS OF ALL F . 1930. R. BABIES* Smead, Chief, of Bank O p e r a t i o n s . federal reserve board 4 7 6 WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December St. SUBJECT: Dear R e v i s e d Forms, 30-1 30, 1930. 6851. and 3 0 - 2 . Sir: There forms B0-1 Federal are attached hereto daily reserve resources serve - "banks a n d 3 0 - 2 and l i a b i l i t i e s "banks statement thereon, of of of revised statement of - weekly statement the twelve Federal of re- combined. Pl'ease u s e footnote copies condensed condition in Form 3 0 - 1 , as telegraphing condition of your i n d i c a t e d "by t h e the condensed "bank e x c e p t on weekly statement and month-end dates. On w e e k l y s t a t e m e n t d a t e s your telegram s h o u l d i n c l u d e a l l code words a p p e a r i n g on Form 3 ^ a n d o n m o n t h - e n d d a t e s a l l c o d e w o r d s a p p e a r i n g o n F o r m 3^+ e x c e p t t h o s e r e l a t i n g t o the maturity distribution on the reverse side of the form. Very truly 3. yours, L. Division TO A L L FEDERAL RESERVE AGENTS* Smead, of Chief, Bank O p e r a t i o n s .
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