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FEDERAL RESERVE BOARD
WASHINGTON
OFFICE O F VICE GOVERNOR
July 2, 1934.
Enclosed I am handing you correspondence discussed
at the recent conferonco of Governors and Chairman, to w i t :
l e t t e r from Honorable Joseo Jonos, of tho Reconstruction
Financo Corporation, to me under date of Juno 22, 1934, and
my reply under date of Juno 36, 1934.
You w i l l note that I mado my reply a s much along
the s p i r i t of the discussion had i n tho confer onco a s I could.
I understood tho expressions of tho conference to moan that
tho Roscrvo Banks should not have j o i n t action with the
Reconstruction Finance Corporation i n tho making of t h e s e
loans hut that f u l l cooperation between the two agencies i n
the i n t e r e s t of making the loons could woll bo had.
I b e l i e v e that t h i s cooperation i n each bank w i l l
prevent harmful competition between the Reconstruction Finance
Corporation and your bonk, tho appearance of an applicant
before tho Reconstruction Finance Corporation who had boon
declined by your bank, and tho p o s s i b i l i t y of a c r i t i c a l
review of any a c t i o n of your bank by the Reconstruction
Finance Corporation.
I am expressing myself f r e e l y on t h i s subject f e e l i n g that you are primarily i n t e r e s t e d i n your bank doing a
f i n e job i n the i n t e r e s t I f the small i n d u s t r i a l i s t s of your
d i s t r i c t , and that you w i l l work out tho d e t a i l s of cooperat i o n to a f f i r m a t i v e l y accomplish tho desired ends.
m t h ny regards, I am
Sincerely yours,
Governor.
Enclosures
TO GOVERNORS A£D CHAIRMEN OF ALL F . R. BASKS.
X-7948-a
COPY
RECONSTRUCTION FINANCE CORPORATION
Washington
June 22, 1934.
Dear Governor Black:
I t e g to enclose herewith copy of our regulations for i n d u s t r i a l
loans. These can he a l t e r e d i f and as required.
I t seems to me that as far as i s p r a c t i c a l under the law, the HFC
and Federal Reserve Banks should consider these loans j o i n t l y , i . e . , Fedoral Reserve Industrial representatives and RFC Loan Committeemen s i t t i n g
as a j o i n t Loan Committee i n considering industrial loans, i n v i t i n g the
cooperation of "banks, and e s p e c i a l l y the "bank having the account of the
applicant. In t h i s way, greater speed w i l l he accomplished, with each
agency taking such p a r t i c i p a t i o n i n the loan as may he agreed upon at the
time of making the loan. By t h i s procedure a greater spread i n the credit
r i s k would a l s o ho obtained.
Inasmuch as our o f f i c e s , with few exceptions, are i n Federal Reserve
Bank buildings, i n d u s t r i a l loan applicants could he directed to a common
o f f i c e for "Industrial Loans"; the Advisory Loan Committee, composed of
representatives of the RFC and the Federal Reserve Bank, determining
whether the loan would he recommended, and i f s o , what agency would make
i t , or how i t would he participated i n ; Federal Reserve Bank management,
as w e l l as the RFC Board, n e c e s s a r i l y reserving the r i g h t to adopt, a l t e r ,
change, modify, or r e j e c t recommendations of the Loan Committee.
There w i l l undoubtedly he loans which Federal Reserve Bank management w i l l he w i l l i n g to make, i n cooperation with hanks, and i n which the
RFC w i l l have no p a r t . On the other hand, there w i l l probably bo loans
i n which the Federal Reserve and the RFC w i l l p a r t i c i p a t e i n connection
with banks.
I f somo such procedure as t h i s i s not agreeable to the Federal Reserve
Board and the several Federal Reserve Banks, the RFC w i l l , at a l l events,
cooperate w i t h Federal Reserve and other banks and lending agencies, with a
view to f a c i l i t a t i n g such loans.
Sincerely yours,
Honorable Eugene R. Black
Governor, Federal Reserve Board
Washington, D. C.
(signed) J e s s e H. Jones
Chairman
OPT
X-7948-13
FEDERAL BESEBVB BOARD
Washington
June 26, 1934.
Honorable J e s s e Jones, Chairman,
Reconstruction Finance Corporation,
Washington, D. C.
Dear Mr. Jones:
Your l e t t e r of the 22nd r e l a t i v e to cooperation i n
the matter of making loans to industry was today considered at
our conference.
The conference f e l t that the law covering loans t o
industry "by the Reserve Banks s p e c i f i c a l l y defines the funct i o n s and duties of the Reserve Banks i n the matter of making
such loans. This law also provides f o r a Statutory Advisory
Committee composed of i n d u s t r i a l i s t s and defines i t s duties
and powers.
The conference was of opinion that the Federal Reserve Banks cannot waive the duties or obligations imposed by
law by any form of c o l l a t e r a l agreement. I t b e l i e v e s , however,
that the Federal Reserve Banks w i l l f i n d many ways i n which
they and the Reconstruction Finance Corporation agencies can
be of mutual help by cooperation i n exchanging information and
expeditiously handling the applications that w i l l come under
the new l e g i s l a t i o n . To a considerable extent cooperation a l ready e x i s t s i n f a c t , and i t i s the f e e l i n g of the conference
that such further working arrangements as may be necessary or
desirable w i l l be developed most speedily and s a t i s f a c t o r i l y
as the work progresses i n each bank.
In the end wo are a l l s t r i v i n g to aid industry and
to that end we w i l l cordially cooperate. In t h i s way wo w i l l
help to a i d recovery.
With my regards, I am
Sincerely yours,
(Signed) E. R. Blade
Governor.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
^
7 O 4 9
J u l y 3, 1934.
SUBJECT:
F i n a l D i s p o s i t i o n of
Applications under
Section 32.
Dear S i r :
The Board has w r i t t e n to a number of i n d i v i d u a l s who have
f i l e d a p p l i c a t i o n s under Section 32 of t h e Banking Act of 1933, adv i s i n g them t h a t i t was unable to f i n d t h a t t h e r e l a t i o n s h i p s covered by t h e r e s p e c t i v e a p p l i c a t i o n s were not incompatible with the
p u b l i c i n t e r e s t , and s t a t i n g , pursuant to Section 17(g) of Regulat i o n E, t h a t i t was prepared to give c o n s i d e r a t i o n to any f u r t h e r
f a c t s or arguments which the a p p l i c a n t s might d e s i r e t o submit i n
connection with t h e i r a p p l i c a t i o n s .
In t h e circumstances, such
a p p l i c a t i o n s cannot "be regarded as f i n a l l y disposed of u n t i l d e f i n i t e advice i s r e c e i v e d i n each case t h a t t h e a p p l i c a n t has brought
h i s r e l a t i o n s h i p s i n t o compliance with t h e requirements of t h a t
s e c t i o n ; and the purpose of t h i s l e t t e r i s to o u t l i n e t h e s t e p s
which w i l l he nccossary to accomplish t h a t r e s u l t .
1.
Where r e p l i e s have been received by t h e Board s t a t i n g
t h a t t h e a p p l i c a n t i s r e s i g n i n g from one of t h e i n s t i t u t i o n s involved
i n h i s a p p l i c a t i o n , a copy of such r e p l y w i l l be forwarded to you i n
order t h a t you may a s c e r t a i n when t h e r e s i g n a t i o n becomes e f f e c t i v e
and a d v i s e t h e Board i n order to complete i t s r e c o r d s .
X-7949
-
2.
:
2 -
tlhere the applicant writes to you instead of to the
Board s t a t i n g that he i s resigning from one of the i n s t i t u t i o n s i n volved, i t w i l l be appreciated i f you w i l l ascertain when the r e s i g nation takes e f f e c t and advise the Board i n order that i t s records
may he complete .
3.
Where an applicant writes the Board requesting further
consideration of the application, you w i l l r e c e i v e from the Board a
copy of the applicant's l e t t e r and a copy of such reply thereto as
the Board may make so t h a t , i f the application i s denied, you may
a s c e r t a i n what steps the applicant takes pursuant to the Board's
reply and advise the Board i n order to complete i t s records.
4.
In the remaining c a s e s , unless i t appears that there
i s some reason why the matter should he dealt with otherwise, i t
w i l l he appreciated i f you w i l l ascertain what a c t i o n the applicant
takes i n view of the Board's l e t t e r and advise the Board, i n order
that the matter may he closed.
The above procedure contemplates t h a t , i n each case, your
f i l e s , as well as those of the Board, w i l l contain evidence that the
matter i s closed and that the r e l a t i o n s h i p s i n question have been
brought i n t o conformity with the requirements of the s e c t i o n .
Very truly yours,
Chester Morrill,
Secretary.
TO ALL F. R. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7950
July 3, 1934.
SUBJECT:
Statements for the Press.
Dear S i r :
There are transmitted herewith, f o r your information,
copies of press statements e n t i t l e d "Securities company within
provisions of sections 20 and 32 of Banking Act of 1933" and
"Membership i n Federal Reserve System of trust companies doing
s u b s t a n t i a l l y no "banking business", which have been prepared for
r e l e a s e to the press Saturday morning, July 7, 1934.
The r e -
l e a s e date has been f i x e d s u f f i c i e n t l y i n advance i n order to
permit a l l Federal reserve agents to receive copies of the
Board's rulings prior to their publication, and i t should be
stated, in t h i s connection, that the statements w i l l be incorporated i n the Federal Reserve B u l l e t i n for the month of July.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosures
TO ALL F, R. AGENTS.
7
X-7951
FEDERAL
P. E S E R VT.3 B O A R D
STATEMENT FOR THE PRESS
For r e l e a s e i n morning papers
of July 7, 1934.
SECURITIES COMPANY WITHIN PROVISIONS OF SECTIONS
20 and 32 of BANKING- ACT OF 1933.
The Banking Act of 1933 was enacted on June 16, 1933, and
Section 20 of that Act became e f f e c t i v e June 16, 1934, and reads i n
part as f o l l o w s ;
"Sec. 20. After one year from the date of the
enactment of t h i s Act, no member bank s h a l l be
a f f i l i a t e d i n any manner described i n s e c t i o n 2(b)
hereof with any corporation, a s s o c i a t i o n , business
t r u s t , or other similar organization engaged p r i n c i p a l l y i n the i s s u e , f l o t a t i o n , underwriting,
public s a l e , or d i s t r i b u t i o n at wholesale or r e t a i l
or through syndicate p a r t i c i p a t i o n of s t o c k s , bonds,
debentures, notes, or other s e c u r i t i e s . * * * * .
The Federal Reserve Board recently considered the question
whether a t r u s t company which was a f f i l i a t e d with a member bank withi n the meaning of the provisions of section 2 (b) of the Banking Act
of 1933 and which was engaged i n the business of i s s u i n g and s e l l i n g
^
mortgage bonds was a corporation carrying on the kind of business described i n s e c t i o n 20 of the Banking Act of 1933.
The business of
the company involved was as f o l l o w s :
The t r u s t company made loans secured by f i r s t mortgages on
improved real e s t a t e and the obligations secured by such mortgages were
&
assigned to one of t wo corporate t r u s t e e s , i n accordance with the terns
of a t r u s t agreement, to secure the payment of bonds of the trust coopany which were issued and sold to the public by the t r u s t company.
It
X-7951
— 2 —
appeared that these bonds were issued s e r i a l l y i n denominations of
$100, $500, or $1000 each; that the bonds "bore i n t e r e s t payable semiannually; that at the time of the Board's consideration of the matter
the r a t e of i n t e r e s t on such bonds then being issued was 4§$; that
the bonds were negotiable i n form; that the bonds were the direct
obligations of the trust company; that i n addition to obligations
secured by mortgages certain s e c u r i t i e s of s p e c i f i e d c l a s s e s might
be deposited with the trustees to secure the payment of such bonds;
that i t was the p r a c t i c e of the trust company to authorize the i s s u e
of such bonds i n s e r i e s of $1,000,000 or l e s s , although the whole
amount of each s e r i e s might not i n every case be sold; and that i t
was the practice of the trust company to i s s u e the s e r i e s of bonds
with maturities of either f i v e or ten years.
It a l s o appeared
that the trust company received deposits to some extent and did a
considerable amount of trust business.
However, i t appeared that
the principal business of the trust company was the malring of mortgage loans and the issuance and s a l e of i t s mortgage bonds.
After careful consideration of t h i s matter the Board ruled,
i n view of a l l the f a c t s involved, that the trust company was engaged
p r i n c i p a l l y i n the i s s u e and s a l e of s e c u r i t i e s within the meaning of
Section 20 of the Banking Act of 1933, and that, i n view of the a f f i l i a t i o n of the t r u s t company with a member bank, appropriate a c t i o n
should be taken t o comply with the requirements of Section 20 of the
Banking Act of 1933.
X-7951
*" 3 **
Section 32 of the Banking Act of 1933 reads i n part
as f o l l o w s :
"Sec. 32. From and a f t e r January 1, 1934, no o f f i c e r
or director of any member tank s h a l l be an o f f i c e r ,
d i r e c t o r , or manager of any corporation, partnership,
or unincorporated a s s o c i a t i o n engaged primarily i n the
business of purchasing, s e l l i n g , or negotiating s e c u r i t i e s * * * unless i n any such case there i s a permit
therefor issued by the Federal Reserve Board; and the
Board i s authorized to i s s u e such permit i f i n i t s
judgment i t i s not incompatible with the public i n t e r e s t ,
and to revoke any such permit whenever i t finds a f t e r
reasonable notice and opportunity to be heard, that the
public i n t e r e s t requires such revocation."
In the case discussed above i t a l s o appeared that directors
of the trust company were also directors of a member bank.
In view
of the f a c t s described above, the Board also ruled that the trust
company was engaged primarily i n the business of s e l l i n g or negotiating s e c u r i t i e s within the meaning of Section 32 of the Banking Act
of 1933.
X-7952
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e i n morning papers
of July 7, 1934.
M-embtcpswtp IB FEDERAL RESERVE SYSTEM OF TRUST
COMPANIES DOING- SUBSTANTIALLY HO BANKING BUSINESS
During the past several years the Board has taken the
p o s i t i o n that i t would not admit to membership i n the Federal
Reserve System trust companies which do s u b s t a n t i a l l y no commercial banking business, but r e c e n t l y i t reviewed the question
and decided that i t should give consideration to applications
for membership from trust companies of t h i s type.
Accordingly,
the Federal Reserve Agent at each of the Federal reserve banks
has been requested to inform any trust company i n h i s d i s t r i c t
that may have been advised that i t would not be admitted to
membership because i t was doing s u b s t a n t i a l l y ho commercial
banking business that the Board w i l l give consideration to i t s
application for membership i f i t desires to f i l e one.
X-7953
INTERPRETATION OF BANKING ACT OF 1933
(Copies t o "be sent t o a l l Federal r e s e r v e "banks)
J u l y 3, 1934.
Mr* Lewis B, Williams,
Federal Reserve Agent,
Federal Reserve Bank of Cleveland.,
Cleveland, Ohio.
Dear Mr * Williams:
This r e f e r s t o Mr# F l e t c h e r ' s l e t t e r of April 9, 1934,
with i n o l o s u r e s , i n regard t o the question whether t h e method used
by The ___________ Bank and Trust Company,
, i n handling de-
p o s i t s of funds accumulated f o r bona f i d e t h r i f t purposes i s i n
accord with t h e provisions of s e c t i o n 19 of t h e F e d e r a l Reserve Act
and of t h e Board's Regulation Q«
I t i s understood t h a t the bank r e -
t a i n s the savings pass books issued upon t h e d e p o s i t of funds and
t h a t t h e funds evidenced t h e r e b y may be withdrawn i n whole or i n
p a r t by check or by non-negotiable r e c e i p t .
I t i s a l s o understood
t h a t i t i s t h e contention of t h e bank t h a t i t s r e t e n t i o n of a pass
book c o n s t i t u t e s the bank or any employee thereof the agent of the
drawer f o r t h e purpose of p r e s e n t i n g t h e pass book whenever a withdrawal i s made, and t h a t t h i s procedure i s p e r m i s s i b l e under t h e
law and t h e Board's r e g u l a t i o n s .
Under the d e f i n i t i o n contained i n Section V(a) of t h e
Board's Regulation Q, a d e p o s i t may n o t be c l a s s i f i e d as a "savings
deposit" i f i t does not c o n s i s t of funds i n r e s p e c t t o which t h e
X-7953
pass book or other form of r e c e i p t evidencing such d e p o s i t must be
presented t o the bank whenever a withdrawal i s made.
A deposit in
r e s p e c t t o which the pass book or other form of r e c e i p t i s r e t a i n e d
by the bank or by an o f f i c e r , employee, or agent t h e r e o f , r a t h e r
than by the d e p o s i t o r , does not comply with t h i s r e q u i r e m e n t .
Ac-
cordingly, i t i s t h e opinion of t h e Board t h a t such a deposit does
n o t c o n s t i t u t e a "savings d e p o s i t " , but must be considered a deposit
payable on demand.
In a r u l i n g published on page 609 of t h e Federal Reserve
B u l l e t i n f o r August, 1927, t h e Board considered t h e q u e s t i o n whether
accounts of a c e r t a i n member bank which were s u b j e c t t o check w i t h out t h e p r e s e n t a t i o n of the pass book, which i n some cases was r e t a i n e d by the bank i n order t o make i t unnecessary f o r the d e p o s i t o r
t o p r e s e n t t h e pass book with each withdrawal, might p r o p e r l y be
c l a s s i f i e d as savings accounts f o r r e s e r v e purposes, and t h e Board
r u l e d "that such d e p o s i t s could n o t be so c l a s s i f i e d .
The Board
s t a t e d t h a t a pass book i s the d e p o s i t o r ' s r e c e i p t , t h a t the apparent
purpose of i t s r e t e n t i o n by the bank was t o render the account subj e c t t o check without t h e n e c e s s i t y of p r e s e n t i n g t h e pass book, and
t h a t an account s u b j e c t t o check i n such manner could not p r o p e r l y
be c l a s s i f i e d as a savings account w i t h i n t h e meaning of s e c t i o n 19
of the Federal Reserve Act.
I t i s b e l i e v e d t h a t the p r i n c i p l e s involved i n t h a t r u l ing are p r o p e r l y a p p l i c a b l e t o the i n s t a n t s i t u a t i o n and t h a t the
r e t e n t i o n of a savings pass book by a member bank f o r a continuing
period of time i n order to avoid the n e c e s s i t y of t h e d e p o s i t o r ' s
p r e s e n t i n g such pass book each time a withdrawal i s made i s not i n
accord with t h e purpose of s e c t i o n 19 of t h e Federal Reserve Act
and does not comply with t h e requirements of Regulation Q«
Accord-
i n g l y , i t i s t h e opinion of tho Board t h a t d e p o s i t s r e p r e s e n t e d by
savings pass books which are r e t a i n e d by t h e bank cannot be regarded
as "savings d e p o s i t s " f o r t h e purpose of determining whether i n t e r e s t
may l a w f u l l y be paid t h e r e o n .
For s i m i l a r r e a s o n s , such deposits
may not be considered "savings accounts" f o r t h e purpose of computing r e s e r v e s t h e r e o n .
I t i s noted t h a t Mr.
, Cashier of the
of the Federal Reserve Bank of
Branch
, i n his l e t t e r t o Mr. F l e t c h e r
of April 6, 1934, s t a t e d t h a t he has expressed the opinion t o the
P r e s i d e n t of The
Bank and Trust Company t h a t an out-of-town
customer may draw a check a g a i n s t h i s savings account# provided the
pass book i s attached t o such check, t h e r e b y c o n s t i t u t i n g the p r e s e n t ing bank the agent of the h o l d e r .
In t h e Board's opinion, the drawl-
ing of n e g o t i a b l e checks a g a i n s t a savings deposit i n t h e manner
described and t h e payment of such checks accompanied by t h e pass
book by t h e drawee bank i s not p r o h i b i t e d by t h e law or the Board's
Regulation Q, provided, of course, t h a t t h e passbook i s promptly
r e t u r n e d t o t h e depositor and i s not t h e r e a f t e r r e t a i n e d by the bank
as a b a s i s f o r f u t u r e withdrawals.
Very t r u l y yours,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7954
July 5, 1934.
Subject: Eight of National Banks to Purchase
Stocks s o l e l y for the Account of
Customers.
Dear Sir:
There i s inclosed herewith for your information a copy
of a l e t t e r addressed "by the Comptroller of the Currency under
date of June 28, 1934, to a l l national bank examiners with regard
to the question whether national banks may l a w f u l l y purchase and
s e l l stocks s o l e l y upon the order and for the account of customers.
Very t r u l y yours,
Chester Morrill,
Secretary.
Inclosure
TO CHAIRMEN OF ALL FEDERA.L RESERVE BANKS.
X-7954-a
(Copy)
TREASURY DEPARTMENT
O f f i c e of Comptroller of the Currency
Washington
June 28, 1934.
No. 62
TO ALL NATIONAL BAM EXAMINERS:
The question as to whether national hanks are permitted
under the law to purchase and s e l l stocks s o l e l y upon the order of
and f o r the account of customers has received the serious considerati o n of my department. In my annual Report to Congress, Page 11, I
made t h e following comment on Section 16:
"Section 16, amending paragraph 7 of s e c t i o n 5136, Revised
Statutes, as amended (U.S.C., t i t l e 12, s e c . 34: supp. 71, t i t l e 12,
sec. 24), provides i n part that 'The business of dealing i n investment
s e c u r i t i e s by national hanks s h a l l he limited to purchasing and s e l l i n g
such s e c u r i t i e s without recourse s o l e l y upon the order and for the account of customers, and i n no case f o r i t s own account.' The section
a l s o defines 'investment s e c u r i t i e s ' as being marketable obligations
evidencing indebtedness of any person, copartnership, a s s o c i a t i o n , or
corporation i n the form of bonds, notes and/or debentures. I t would
appear from tho language that a national bank i s prohibited from performing the s e r v i c e of purchasing or s e l l i n g corporate stocks f o r the
account of one of i t s customers. Since t h i s does not e n t a i l the i n vestment by the bank of i t s own funds and the bank merely a c t s i n an
accommodation capacity, i t i s believed that i t was not the intention
of Congress to penalize the public located i n communities removed
from the money centers i n disposing of or purchasing s e c u r i t i e s i n the
form of corporate stocks f o r investment purposes."
The further provision i n the same s e c t i o n provides, "the r e s t r i c t i o n of t h i s s e c t i o n as to dealing i n investment s e c u r i t i e s shall
take e f f e c t one year a f t e r the date of tho approval of t h i s Act". The
Act was approved June 16, 1933.
A b i l l c l a r i f y i n g t h i s section f a i l e d of passage at t h e l a s t
Congress. My contact with Congress convinces me that my statement
with reference to the intention of that distinguished body was correct
and that only the rush of c l o s i n g business prevented the passage of
t h e b i l l . I have t h i s day hold that national banks have the right to
purchase and s e l l stocks s o l e l y upon the order and f o r the account of
customers. This does not mean that national banks may do a brokerage
business and any charge must not exceed the actual cost of s e r v i c i n g .
Please acknowledge r e c e i p t of t h i s l e t t e r .
Respectfully,
(Signed) J . F. T. O'CONNOR,
Comptroller of the Currency.
J . . '
1 6
FEDERAL RESERVE BOARD
WASHINGTON
A D D R E S S O F F I C I A L C O R R E S P O N D E N C E TO
T H E FEDERAL RESERVE BOARD
X**7955
July 5, 1934.
Subject: Statement Regarding Section 7 of
the S e c u r i t i e s Exchange Act of 1934.
Dear S i r :
At i t s recent (conference with the Chairmen and Governors of
the Federal reserve "banks the Federal Reserve Board considered the new
r e s p o n s i b i l i t i e s placed upon the System by the S e c u r i t i e s Exchange Act
of 1934.
This act gives the Federal Reserve Board authority to deter-
mine the margins to be required by brokers and dealers i n extending
credit to their customers, and also empowers the Board, within certain
l i m i t a t i o n s , to prescribe rules and regulations, including margin r e quirements , for loans extended by other persons, including banks, for
the purpose of purchasing or carrying s e c u r i t i e s r e g i s t e r e d on national
s e c u r i t i e s exchanges.
Margin requirements do not become e f f e c t i v e before October 1,
1934, and the Board's regulations on the subject w i l l not be issued
for several weeks.
In the case of brokers the law lays down a standard of margins , which s h a l l c o n s t i t u t e the b a s i s of the Board's r e g u l a t i o n s ,
although the Board i s given authority to prescribe lower requirements,
X-7955
<• 2 "
i f i t deems i t necessary or appropriate f o r the accommodation of commerce and industry, with due regard to the general credit s i t u a t i o n i n
the country, and to prescribe higher margins i f i t deems i t necessary
or appropriate i n order to prevent the excessive use of credit to
finance transactions i n s e c u r i t i e s .
In the case of other lenders on
s e c u r i t i e s , including banks, no standard i s s p e c i f i c a l l y l a i d down
i n the law, the margins to be prescribed being l e f t to the Board's
discretion.
The fundamental p r i n c i p l e by which the Board i s to be
guided i n determining margin requirements and i n formulating i t s
regulations i s stated i n the law.
The Board i s directed to enforce
i t s new powers f o r the purpose of preventing the excessive use of
credit for the purchase or carrying of s e c u r i t i e s .
This p r i n c i p l e
i s i n l i n e with the provisions of the Banking Act of 1933, which
i n several s e c t i o n s places s p e c i a l r e s p o n s i b i l i t y on the Federal
reserve banks and the Federal Reserve Board i n connection with exc e s s i v e use of bank credit i n the security markets.
The law imposes
upon the Federal Reserve Board no duties i n connection with the superv i s i o n of the stock exchanges or t h e prevention of undesirable pract i c e s among members of such exchanges.
Responsibility f o r these mat-
t e r s i s placed upon the Securities and Exchange Commission.
The
Federal Reserve Board's duty under t h i s act r e l a t e s c h i e f l y to the
determination of margins to be required on security loans, a power
to be exercised as a part of the Federal Reserve System's general
credit p o l i c y of controlling undue credit expansion i n the security
markets.
%
1 8
X-7955
In so f a r as "banks are concerned, the Federal Reserve Board's
authority under t h i s a c t r e l a t e s t o loans made f o r the purpose of purchasing or carrying s e c u r i t i e s r e g i s t e r e d on national s e c u r i t i e s exchanges.
I t does not apply, therefore, to loans made s o l e l y f o r i n d u s t r i a l ,
a g r i c u l t u r a l , or commercial purposes, regardless of t h e question
whether these loans are secured or unsecured, a n d , i f secured, regardless
of the character of the c o l l a t e r a l .
The determining factor i s the pur-
pose of the loan and not the nature of the security o f f e r e d .
If a loan
i s c o l l a t e r a l e d "by stocks or other equity s e c u r i t i e s and i s made for
the purpose of purchasing or carrying s e c u r i t i e s r e g i s t e r e d on a
national s e c u r i t i e s exchange„ i t comos under t h i s s e c t i o n of the a c t ;
i f i t i s made for any other purpose, then i t i s exempt.
The Board's
power under t h i s section, furthermore, does not apply to loans on
exempted s e c u r i t i e s , which are defined "by the law as including among
other s e c u r i t i e s obligations of the United S t a t e s , or of any State or
p o l i t i c a l subdivision, and such other s e c u r i t i e s as the S e c u r i t i e s and
Exchango Commission may declare to "be exempted s e c u r i t i e s .
The power
of the Board i s further limited "by exemptingiiiank loans on s e c u r i t i e s
ojsher than equity s e c u r i t i e s , which means i n p r a c t i c e that i t i s not
applicable to loans on bonds, except bonds such as those having conversion p r i v i l e g e s , and there are certain other exemptions.
In gen-
e r a l , the law, i n so far as i t a p p l i e s t o control over banks, i s
intended to prevent the banks from being used for the purpose of
- 4 -
X-7955
circumventing the margin requirements prescribed f o r loans extended
by "brokers to t h e i r customers, and to prevent undue expansion of "bank
credit employed i n the s e c u r i t i e s markets.
General "backing p r a c t i c e s i n r e l a t i o n to loans f o r indust r i a l , a g r i c u l t u r a l , or commercial purposes are not a f f e c t e d "by t h i s
Act.
P l e a s e transmit copies of t h i s l e t t e r to a l l the "banks i n
your Federal Reserve D i s t r i c t .
Very t r u l y yours,
Chest3r M o r r i l l ,
Secretary.
TO ALL P. B. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
30-7956
ADDRESS OFFICIAL C O R R E S P O N D E N C E TO
T H E FEDERAL RESERVE BOARD
July 6, 1934.
SUBJECT;
Code Word Covering New Issue
of Treasury B i l l s
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve "banks, the
following code word has "been designated to cover a new
i s s u e of Treasury B i l l s :
"NOXLUVO11 - Treasury B i l l s to be dated July 11,
1934, and to mature January 9, 1935.
This word should be inserted i n the Federal Reserve Telegraph Code Book, following the supplemental
code word "NOXLUT" on page 172.
Very truly yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF AI& F. R, BANES.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7957.
July 7, 1934 .
Dear Sir:
There are "being transmitted to you, under
separate cover, twenty-five copies of Public No. 438 73d Congress, "An Act to authorize the Secretary of the
Treasury to purchase s i l v e r , i s s u e s i l v e r c e r t i f i c a t e s ,
and for other purposes", known as the "Silver Purchase
Act of 1934", approved on June 19, 1934,
Very truly yours
L. P. Bethea,
A s s i s t a n t Secretary.
TO ALL FEDERAL EESEEVE AGENTS
(No copies to governors and, no extra copies to "banks)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7958.
July 7, 1934,
Dear Sir:
There are being transmitted to you, under separate
cover, twenty-five copies of Public No. 479 - 73d Congress,
"An Act to encourage improvement i n housing standards and
conditions, to provide a system, of mutual mortgage insurance,
and f o r other purposes", known as the "National Housing Act",
approved on June 27, 1934.
Your attention i s i n v i t e d to the provisions of subs e c t i o n (d) of Section 402 and to subsections (a)
of Section 505 of the a c t .
Very t r u l y yours,
Assistant Secretary.
TO ALL EBDBBAL EE SERVE AGENTS
(No copies to governors and no extra copies to banks,)
(t>)
X-7959
INTEEPEETA.TION OP BACKING ACT OF 1933
(Copies to be sent to a l l Federal Reserve Banks)
July 6, 1934.
Mr. W. W. Hoxton,
Federal Reserve Agent,
Federal Reserve Bank of Richmond,
Richmond, Virginia.
Dear Mr. Hoxton:
This r e f e r s to your l e t t e r of March 13, 1934, making cert a i n inquiries with regard to the procedure you should f o l l o w i n
reporting p o s s i b l e v i o l a t i o n s of the provisions of Section 32(g)
of the Federal Reserve Act.
With reference to loans or extensions of credit made to
i t s own executive o f f i c e r s by a State member "bank i n your d i s t r i c t ,
you should, as indicated i n your l e t t e r , proceed i n accordance with
the provisions of the Board's circular l e t t e r of July 22, 1933,
(X-7518).
In cases where i t appears from information which has come
to your a t t e n t i o n through reports of examination or other o f f i c i a l
sources that a State member hank or a national bank In your d i s t r i c t has made a loan to an executive o f f i c e r of another State member bank i n your d i s t r i c t or has permitted that o f f i c e r t o become
indebted to i t within the purview of Section 22(g) of the Federal
Reserve Act, you should ascertain whether the particular executive
o f f i c e r has f i l e d with the chairman of the board of directors of
X-7959
Mr. W. W. Hoxton — 2
h i s bank a report of the kind required "by Section 22(g) of the
Federal Reserve Act.
I f such a report has not "been furnished, you
should report the matter i n the usual manner to the Board and the
l o c a l United States Attorney as a possible v i o l a t i o n of Section 22(g).
I t i s suggested that you consider the a d v i s a b i l i t y of obtaining
through your examiners the required information as to whether a loan
to an executive o f f i c e r which comes to the a t t e n t i o n of your o f f i c e
has been reported to the chairman of the board of directors of the
member bank of which he i s an executive o f f i c e r , e i t h e r at the time
of the next examination of the member bank by which the executive
o f f i c e r i s employed or by correspondence i n connection with the
examination of the bank making the loan.
Where i t appears from such information that an executive
o f f i c e r of a S t a t e member bank i n another Federal reserve d i s t r i c t
has obtained a loan or extension of credit from a State member bank
or a national bank i n your d i s t r i c t , you should bring to the a t t e n t i o n of the Federal Reserve Agent for that d i s t r i c t such f a c t s as
you may have i n your possession regarding the transaction i n question
and that Federal Reserve Agent should thereupon proceed i n accordance
with the procedure above s e t f o r t h .
However, where you have been advised that executive o f f i c e r s of a national bank i n your d i s t r i c t have borrowed from or have
become indebted to a State member bank i n the same or another Federal
X-7959
Mr. W. W. Hoxton — 3
reserve d i s t r i c t , the Board i s of the opinion that i t i s only necessary for you to report such d e t a i l s of the transaction as you may
have to the chief national bank examiner for your d i s t r i c t f o r such
action as he considers advisable.
In t h i s connection, your a t t e n t i o n
i s directed a l s o to the Board's l e t t e r of February 8, 1928, (X-5072).
The Board appreciates that there may be cases i n which executive o f f i c e r s of State member banks w i l l borrow from non-member
banks and that, except with the cooperation of the State banking
a u t h o r i t i e s , information regarding such cases would not be a v a i l a b l e
to you.
Accordingly, i t i s suggested that, i f you have not already
done so, you acquaint the State banking authorities i n your d i s t r i c t
with the provisions of Section 22(g) of the Federal Reserve Act and
request that, i f i t i s f e a s i b l e to do so, they furnish you from time
to time with any information they may have readily available regarding loans by non-member banks to executive o f f i c e r s of State member
banks.
If the State authorities do not f e e l that they can furnish
you with such information they may be w i l l i n g to take the matter up
i n each case with the State member bank involved.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7960
*
<1
INDUSTRIAL ADVISORY COMMITTEE
FIRST FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF BOSTON
Heme
Business A f f i l i a t i o n
Albert M. Creighton, Chairman
Director, Boston Woven Hose and Rubber Co
Boston, Mass.
Robert Araory
President, Nashua Manufacturing Co.,
Boston, Mass,
Winthrop L. Carter
President, Nashua Gummed and Coated Paper
Co., Nashua, New Hampshire.
Carl P. Dennett
Director, G r i f f i n Wheel Co.,
Boston, Mass.
Edward M. Graham
President, Eastern Manufacturing Co.,
Bangor, Maine.
J u l y 11, 1934.
X-7960
INDUSTRIAL ADVISORY COHI1ITE5
SSCQitO BBD2RAL BSS3RVS DISTRICT
FED3RA1 B3S3RV5 BAHK OF HSf YORZ
Hame
Business A f f i l i a t i o n
William E. Pouch, Chairman
President, Concrete Ste el Compaq,
Hex? York, If. Y.
John A. Hartford, Vice Chairman
President, Great A t l a n t i c and
P a c i f i c Tea Company,
Hen York, F. Y.
John B. Clarlc
President, Clark Thread Company,
Newark, IT. J .
Albert A. Hopeman
A. W. Hop email and Sons,
Rochester, H. Y.
C. R. Palmer
President, d u e t t Peabody and
Compare, Troy, H. Y.
July 20, 1934
1
2 8
X-7960
INDUSTRIAL ADVISORY COMMITTEE
THIRD FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF PHILADELPHIA
Name
Business A f f i l i a t i o n
J . Ebert B u t t e r n o r t h , Chairman
V i c e - P r e s i d e n t , H. W. Buttei-trorth and
Sons Co., P h i l a d e l p h i a , Pa,
Charles E. B r i n l e y
P r e s i d e n t , American P u l l e y Co.,
P h i l a d e l p h i a , Pa.
John S. Chipman
P r e s i d e n t , Chipman K n i t t i n g M i l l s ,
Easton, Pa.
V i c e - P r e s i d e n t , Rosedale M i l l s ,
Reading, Pa,
W. F. R. Iviurrie
P r e s i d e n t , Hers hey Chocolate Company,
Hershey, Pa.
Richard D. Wood
P r e s i d e n t , M i l l v i l l e Manufacturing Co.,
M i l l v i l l e , H. J . , (Main O f f i c e ,
Philadelphia.)
July 20, 1934.
X-7960
2 9
DTDUS TRIAL ADVISORY COMMITT33
FOURTH ZEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF CLBVELAITO
Hame
Business A f f i l i a t i o n
F. A. Smythe, Chairman
President, Thew Shovel Company,
Lorain, Ohio.
Daniel R. Davies, Vice Chairman
President, Acme Machinery Company,
Cleveland, Ohio.
Frank B. B e l l
President, Edgewater Steel Company,
Oakmont, Pa,
Edward. C. Folsom
President, Ottawa River Paper Company,
Toledo, Ohio.
President, Railway Materials Company,
Toledo, Ohio.
H. L. gutter
President, Black and Clawson Company,
Hamilton, Ohio.
July 20, 1934.
X-7960
IEDUSTRIA.L ADVISORY COMMITTEE
FIFTH O E m i i R3S3RV3 DISTRICT
FSDHRAL RES3RV3 BAI1K CST RICHMOND
Hame
Business A f f i l i a t i o n
J. G« Holtzclaw, Chairman
President, Virginia E l e c t r i c & Porrer Co. ,
Richmond, Virginia.
Overton D. Dennis
Dominion Oil Company,
Richmond, Virginia.
Harvey W. Moore
S e c t ' y , Treas,, & Manager, Brown Manufacturing Company,
Concord, ST. C.
George 3. Protest, J r .
Sect'y & Treas., Bar11ett-Eayward Company,
Baltimore, Md.
Walker D. Stuart
President, Richmond Hardware Co.,
Richmond, Virginia.
July 20, 1934.
X-7960
INDUSTRIAL ADVISORY COMMITTEE
SIXTH INDERAL RESERVE DISTRICT
FEDERAL RESERVE M M OF ATLANTA
lame
Business A f f i l i a t i o n
John Sanford, Chairman
President, Armour F e r t i l i z e r Works,
Atlanta, Georgia.
Wm. A. Parker , Vice Chairman
President, Beck & Gregg Hardware Company,
Atlanta, Georgia.
A. R. Forsyth
Executive Vice-President, Gulf States
Steel Company, Birmingham, Alabama.
Ernest T. George
President, Seaboard Refining Company,
Hew Orleans, Louisiana.
I . C. Milner
Executive Vice-President, Gate City Cotton
M i l l s , Atlanta, Georgia.
July 20, 1934.
X-7960
INDUSTRIAL ADVISORY COMMITTEE
SEVENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF CHICAGO
Name
Business A f f i l i a t i o n
Max Epstein, Chairman
Chairman, General American Tank Car
Corporation, Chicago, I l l i n o i s .
Major Howard Greene
President, Milwaukee Drug Co.,
Milwaukee, Wisconsin.
R. R. Monroe
President, Des Moines Foundry and
Machinery Co., Des Moines, Iowa.
William R. Odell, Jr.
Treasurer, International Harvester
Company of America, Chicago,
Illinois.
George W. Young
Vice President, Marshall Field and
Co., Chicago, I l l i n o i s .
July 11, 1934.
1-7960
INDUSTRIAL ADVISORY COMMITTEE
EIGHTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF ST. LOUIS
ITame
Business A f f i l i a t i o n
William K. Norris, Chairman
President, McQoay-Norris Manufacturing Co
St. Louis, Mo.
Jacob Van Dyke, Vice Chairman
President, Western T e x t i l e Products Co.,
St. Louis, Mo.
H. E. Finch,
Secretary-Treasurer, American Snuff Co.,
Memphis, Tenn.
Henry S. Gray,
Secretary-Treasurer, L o u i s v i l l e Cement Co
L o u i s v i l l e , Ky.
Maurice Weil,
President, Woil-Kaltor Manufacturing Co.,
St. Louis, Mo.
July 24, 1934.
X-7%0
<>,
INDUSTRIAL ADVISORY COISIITTEE
UIUTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF MIiTOAPOLIS
Name
Business A f f i l i a t i o n
John Bush,
Cleveland C l i f f s Mining Co.,
Negaunee, Mich
C. 0. F o l l e t t ,
Vice President, Fargo Mercantile Co.,
Fargo, 1ST. D.
Harvey Jewett,
Jewett Grocery Company and Jewett Drug Co. ,
Aberdeen, S. D.
Albert Miller,
President and General Manager, Miller Broom Cc
LaCrosse, Wis.
Sheldon V. Wood,
President, Minneapolis E l e c t r i c Stool
Castings Co.,
Minneapolis, Minn.
July 23, 1934.
*
X-7960
I3TOUSTRIAL ADVISORY COMMITTEE
TENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM! OP KANSAS CITY
Uame
Business A f f i l i a t i o n
R. L. Gray, Chairman
President, Sheffield. Steel Company,
Kansas City, Missouri.
Walter J. Berkomtz
Secretary-Treasurer, Berkowitz
Envelope Company, Kansas City,
Missouri.
D. Bruce Forrester
Vice-President and General Manager,
General. Box Company, Kansas
City, Missouri.
Ed S. Miller
President, Miller Cereal Company,
Omaha, Nebraska.
L. F. Rooney
Vice-President, Manhattan Construct i o n Company, Muskogee,
Oklahoma.
July 20, 1934,
X-7960
o
INDUSTRIAL ADVISORY COMMITTEE
ELEVENTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM Cg DALLAS
Hame
Business A f f i l i a t i o n .
Clarence Ousley, Chairman
President, Globe Laboratories,
Fort Worth, Tex.
Lewis R. Ferguson
Vice-President and General Manager,
Lone Star Cement Co., Dallas, Tex.
Will B. Marsh
President, Chronister Lumber Co.,
Woodhurst, Tex. (P.O. Forest, Tex.)
President, Lyon Gray Lumber Co.,
Dallas, Tex.
President, Oak C l i f f Lumber Co.,
Dallas, Tex.
President, The Trinity Lumber Co.,
Dallas, Tex.
Charles R. Moore
President, Austin Bridge Co.,
Dallas, Tex.
W. B. Wise
President and General Manager,
Merchants and Farmers Compress Co.
Greenville, Tex.
July 20, 1934.
OfX-7960
INDUSTRIAL ADVISORY COMMITTEE
TWELFTH FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BAM OF SA1T FRA3TCISC0
Name
Business A f f i l i a t i o n
Stuart L, Rawlings, Chairman
Calaveras Cement Company, San
Francisco, California.
Ralph Burns ide
Receiver, P a c i f i c Spruce Corporation,
Portland, Oregon
Shannon Cranial1
President, California Hardware Company,
Los Angeles, California.
Henry D. Nichols
President, Tubbs Cordage Company,
San Francisco, California,
H. L. Terwilliger
Manager, Ingersoll Rand Company,
San Francisco, California.
July 26, 1934.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
X—7961
T H E FEDERAL RESERVE BOARD
July 14, 1934.
SUBJECT:
Code Word Covering Hew Issue
of Treasury B i l l s .
Dear S i r :
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve "banks, the
following code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"N0XMA2T" - Treasury B i l l s to be dated July 18,
1934, and to mature January 16, 1935,
This word should be inserted i n the Federal He-,
serve Telegraph Code book, following the supplemental
code word "HOXLUVO" on page 172.
Very truly yours,
J. C. N o e l l ,
Assistant Secretary.
TO GOVEBETOES 03* ALL I . E. BAMS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7962
July 14, 1934
SUBJECT: Expense, Main Lines, Leased
Wire System, June, 1934,
Dear Sir;
Inclosed herewith you w i l l find two mimeographed statements, X-7962-a and X-7962-b, covering
i n d e t a i l operations of the main l i n e s , Leased Wire
System, during the month of June, 1934.
Please credit the amount payable by your bank
f o r your share of the expense of the Leased Wire
System, to the Federal Reserve Bank of Richmond i n
your daily statement of credits through the Gold Settlement Fund for the account of the Federal Reserve
Board, and advise the Federal Reserve Bank of Richmond
by wire the amount and purpose of the c r e d i t ,
Very t r u l y yours,
Fiscal Agent
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS
<
REPORT SE:~r^7 CLASSIFICATION AND NUMBER QP WORDS TRANSMITTED OVER 1L4I2T LIEES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JUNE, 1934.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
32,444
157,110
29,971
53,930
54,462
53,542
91,686
67,476
34,596
72,276
57,866
90,299
795,678
Words sent by
New York chargeable to other
F. R. Banks ( l )
1,5H
—
1,691
1,679
1,805
1,738
2,448
2,091
1,756
1,683
2,666
3,315
22,383
F. R. Board "business
Reimbursable business Incoming & Outgoing
Net Federal
reserve
bank
business
33,955
157,110
31,662 .
55,609
56,287
55,280
94,134
69,567
36,352
73,959
60,532
93,614
818,061
407,518
. . . . . . . .
. . . . . . .
Total words transmitted over main l i n e s
(*)
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-7962-b),
(1)
Sumber of words sent by New York to other F. R. Banks for their s o l e b e n e f i t charged to
banks indicated in accordance with action taken at Governors' Conference
November 2-4, 1925.
X-79b2-a
Per cent of t o t a l
Bank business (*)
4.15
19.21
3.87
6.80
6.88
6.76
11.51
8.50
4.44
9.04
7.4o
11.44
100.00
1,225,579
782,986
2,008,565
X-7962-b
REPORT 07 EXPENSE Mil" LIKES
INDERAL BE SERVE LEASED WIRE SYSTEM, JUEB, 193%.
Name of Bank
Operators'
salaries
Retirement
Contributions
Wire
rental
$ -
$ ~
5.00
-
—
-
-
.75
—
—•
-
—
O
ro
—-4
1
Boston
$260.00
$ 23.40
Hew York
121.12
l,3%5-80
Philadelphia
225.00
20.25
Cleveland
306.66
27.60
Richmond
262.00
17.10
Atlanta
270.00
24.30
Chicago
%,467.60(f) 375.75
St. Louis
195.00
17.55
Minneapolis
18.01
200.07
Kansas City
287.00
25.83
Dallas
251.OO
22.59
San Francisco
380.00
34.20
Federal Beserve Bd.
Total
$8,450.13 $
Ooerators'
overtime
$ 5.75
Less Reimbursable Charges:
(&)
(#)
(*)
(a)
Main l i n e r e n t a l , Bichmond-Wiashington
Includes s a l a r i e s of Washington operators
Credit
Amount reimbursable to Chicago
Total
expenses
$283.40
1,471.92
245.25
—
334.26
230.000&)
509.10
—
294.30
4,843.35
213.30
218.08
312.83
—
273.59
4l4.20
15,765.56
15,765.56
$25,179.14
$15,995.56
-
9,815.42
$15,363.72
Pro rata
share of
total
expenses
$637.59
2,951.37
594.58
1,044.73
1,057.02
1,038.59
1,768.36
1,305.92
682.15
1,388.88
1,136.92
1,757.61
—
$15,363.72
Credit s
Payable to
Federal
Reserve
Board
$283.40
1,471.92
245.25
334.26
509.10
294.30
4,843.35
213.30
218.08
312.83
273.59
4I4.20
$354.19
1,479.45
349.33
7IO.47
5%7.92
744.29
3,074.99(*)
1,092.62
464.07
1,076.05
863.33
1,343.41
mm
$ 9,413.58
$9,025.13
3,074.99(a)
$5,950.14
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-7963
July 17, 1934.
SUBJECT:
Section 32 - Information to "be Submitted
by Member Banks Operating Under Blanket
Permi t .
Dear Sir:
In i t s telegram of June 23, 1934, Trans. 2015, the Federal Reserve Board advised you that i t had issued a permit under Section 32
of the Banking Act of 1933 authorizing any member bank or banks to
have correspondent relationships with any dealer or dealers i n connect i o n with underwriting and dealing i n municipals and other obligations
of the kinds exempted from the r e s t r i c t i o n s of Section 5136 of the Revised Statutes.
In that telegram the Board stated that:
n* * *instead of formal applications usually required, each
member bank which exercises p r i v i l e g e granted herein s h a l l
promptly furnish to Federal Reserve Agent of d i s t r i c t i n
which member bank i s located such information concerning i t s
operations under t h i s permit as Federal Reserve Board may
require, and Board w i l l at an early date advise as to informat i o n which must be submitted. Upon receipt of required i n formation, each Federal Reserve Agent w i l l be expected to
review promptly f a c t s involved in each correspondent r e l a t i o n ship covered by t h i s permit in h i s d i s t r i c t , and to advise
Board of any case i n which f a c t s are such as to i n d i c a t e that
permit should be revoked as to particular r e l a t i o n s h i p . Each
Federal Reserve Agent i s requested to review a l l correspondent
relationships covered by t h i s permit i n his d i s t r i c t , and adv i s e Board, not l a t e r than November 15, 1934, whether i n h i s
opinion i t w i l l be compatible with the public i n t e r e s t to
renew t h i s permit, s t a t i n g reasons for his opinion. • * *.lt
X-7963
You are requested to advise a l l member "banks i n your d i s t r i c t
that each, such hank a v a i l i n g i t s e l f of the p r i v i l e g e granted "by the.
permit above referred to must submit to you promptly information describing the nature of the relationship and the following d e t a i l e d
information regarding each syndicate operation i n which i t p a r t i c i p a t e s :
1.
A description of the i s s u e , including the name
of the i s s u e r , the nature of the obligations (whether bonds,
notes, or other o b l i g a t i o n s ) , the amount of the i s s u e , the
maturity, and the rate of i n t e r e s t ;
2.
The names of the other manbers of the syndicate
or group which participated i n the transaction;
3.
The amount of the i s s u e subscribed for by the reporting
member bank;
4.
The amount of the issue actually taken by the reporting
member bank;
5.
The p r i c e paid for the s e c u r i t i e s by the member bank,
and the price at which they were sold to the public.
6.
The extent to which the member bank's p a r t i c i p a t i o n
has been disposed of at the time of i t s report t o the Federal
Reserve Agent and the extent, i f any, to which the member bank
proposes to r e t a i n the s e c u r i t i e s f o r i t s own account.
If i n any case you f e e l that the information submitted i s not
s u f f i c i e n t to enable you to form a conclusion as to whether or not the
X-7963
-3permit i n the particular case i s i n the public i n t e r e s t , you are r e quested to obtain such additional information from the member bank as
you deem advisable.
The information to be obtained i s intended to supplement the
information available to you from reports of examination and other
sources and a s s i s t you i n advising the Board as requested i n the l a s t
trro sentences quoted above from i t s telegram of June 23, 1934, Trans.
2015.
Very truly yours,
Yf)
Chester Morrill,
Secretary.
TO ALL F. B. A&MTS.
FEDERAL RESERVE BOARD
WASHINGTON
X-7964
July 19, 1934: •
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
SUBJECT;
Holidays during August, 1934.
Dear Sir:
The Federal Reserve Board has been advised that the following holidays w i l l "be observed by Federal reserve banks and branches during August:
Wednesday, August
1
Denver
Colorado Day
Thursday,
«
2
Nashville
Memphis
Primary Election Day
Tuesday,
«
7
St. Louis
Kansas City
Tuesday,
"
28
San Francisco
Los Angeles
On the dates given the o f f i c e s mentioned w i l l not p a r t i c i p a t e i n
either the t r a n s i t or the Federal reserve note clearing through the Gold
Settlement Fund.
Please include transit clearing credits f o r the o f f i c e s
concerned on each of the holidays with your credits for the following business day.
No debits covering shipments of Federal reserve notes should be
made for account of the Federal Reserve Banks of St. Louis or Kansas City
on August 7 or for San Francisco on August 28.
Please n o t i f y branches.
TO GOVERNORS
Very truly yours,
' J». C.
Assistant Secretary.
OF ALL F. R. BAMS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7965
July 20, 1934
SUBJECT;
Code Word Covering New Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve banks, the
following code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"UOXMED" - Treasury B i l l s to be dated July 25,
1934, and to mature January 23, 1935.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental code
word "HOXMAIT" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BASKS,
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7966
July 25, 1934.
SUBJECT: New Issue of Federal Farm Mortgage
Corporation Bonds.
Dear Sir:
In connection with telegraphic transactions "between Federal
reserve "banks covering Government s e c u r i t i e s , the following code
word has been designated to cover a new i s s u e of Federal Farm Mortgage
Corporation Bonds:
"NOWCENS" - Federal Farm Mortgage Corporation 3$ Bonds
of 1944-49, to be" dated May 15, 1934, and
to mature May 15, 1949.
This code word should "bo inserted i n the Federal Reserve Telegraph Code "book following the supplemental code word "HOWCELL" on
page 172.
Very t r u l y yours,
J . C. Hoell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAMS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7968
J u l y 26, 1934.
SUBJECT;
Examination of S t a t e Member Banks
i n Connection w i t h t h e Required
C e r t i f i c a t i o n t o t h e F e d e r a l Deposit
Insurance C o r p o r a t i o n .
Dear S i r :
There i s i n c l o s e d f o r your i n f o r m a t i o n a copy of
a l e t t e r which t h e Board has addressed t o t h e F e d e r a l Reserve Agent a t t h e F e d e r a l Reserve Bank of St# Louis with
r e g a r d t o t h e examination of S t a t e member banks i n connect i o n w i t h t h e r e q u i r e d c e r t i f i c a t i o n t o t h e F e d e r a l Deposit
Insurance C o r p o r a t i o n , i n view of t h e amendment, t o S e c t i o n
12 B of t h e F e d e r a l Reserve Act extending t h e time w i t h i n
which t h e permanent i n s u r a n c e fund may become e f f e c t i v e .
Very t r u l y ypurs,
Chester M o r r i l l ,
Secretary.
Inclosure.
http://fraser.stlouisfed.org/TO ALL
Federal Reserve Bank of St. Louis
FEDERAL RESERVE AGENTS
X-7968-a
COPY
J u l y 26, 1934.
Mr. John 8 . Wood.,
Federal Reserve Agent#
Federal Reserve Bank of S t . Louis,
S t . Louis, Mo.
Dear Mr. Wood:
Reference i s made to your l e t t e r of J u l y 17, 1934, r e g a r d ing examinations of S t a t e member banks i n connection with the r e quired c e r t i f i c a t i o n t o the Federal Deposit Insurance Corporation
and r e q u e s t i n g a u t h o r i z a t i o n t o make such examinations commencing
October 1, 1934.
The Board f e e l s t h a t r e p o r t s of examination made as of
October 1, 1934, or subsequent t h e r e t o , may p r o p e r l y be used as a
b a s i s f o r c e r t i f i c a t i o n i n connection with a p p l i c a t i o n s of S t a t e member banks f o r t h e purchase of stock i n the Federal Deposit Insurance
Corporation p r i o r t o J u l y 1, 1935, provided, of course, such r e p o r t s
i n d i c a t e t h a t a thorough examination has been made and f a i r l y r e p r e sent the c o n d i t i o n of t h e banks at t h e time of c e r t i f i c a t i o n .
Before
making f i n a l recommendations with regard t o c e r t i f i c a t i o n , t h e r e f o r e ,
i t w i l l be expected t h a t you w i l l review the r e p o r t s of any examinat i o n s made p r i o r t o January 1, 1935, f o r t h e purpose of determining
whether, s i n c e t h e date of examination, t h e r e has been any change i n
the condition of the bank which would render t h e q u e s t i o n of c e r t i f i cation doubtful.
In case of doubt, e i t h e r as t o whether t h e c o n d i t i o n
Mr. John S. Wood
-2-
X-7968-a
of the bank as r e f l e c t e d i n the r e p o r t of examination warrants c e r t i f i c a t i o n t o t h e Federal Deposit Insurance Corporation, or whether
t h e r e has been any subsequent change i n the c ondition of the bank
which would r a i s e a q u e s t i o n as t o whether t h e a s s e t s of the bank
are adequate t o enable i t t o meet a l l of i t s l i a b i l i t i e s t o deposit o r s and other c r e d i t o r s , another examination should be made t o serve
as a b a s i s f o r t h e r e q u i r e d c e r t i f i c a t i o n *
I t i s assumed t h a t the program of examinations w i l l be so
arranged t h a t whenever p o s s i b l e examinations of banks dependent upon
seasonal l i q u i d a t i o n w i l l be made subsequent t o the l i q u i d a t i o n
period#
Very t r u l y yours,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL PRESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7969
July 37, 1934
SUBJECT;
Code Word Covering New Issue
of Treasury B i l l s ,
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve hanks, the
following code word has "been designated to cover a new
i s s u e of Treasury B i l l s ;
"NOXMIX" - Treasury B i l l s to be dated August 1,
1934, and to mature January 30, 1935
This word should he inserted i n the Federal Reserve Telegraph Code hook, following the supplemental
code word "NOXMED" on page 172.
Very truly yours
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
X-7970
INTERPRETATION OF BANKING ACT OF 1953
^
(Copies to be sent t o ' a l l Federal r e s e r v e banks)
J u l y 27, 1934.
Mr.
The
, Cashier
Bank of
,
Dear S i r :
Your l e t t e r of June 8, 1934, addressed t o t h e Comptroller of
t h e Currency, regarding t h e renewal of matured c e r t i f i c a t e s of d e p o s i t
has been r e f e r r e d to t h e Federal Reserve Board f o r r e p l y .
I t i s understood t h a t i n view of the f a c t t h a t many of t h e
customers of your bank are unable t o get i n t o town on the exact date of
the m a t u r i t i e s of t h e i r c e r t i f i c a t e s of d e p o s i t , you wish t o be advised
whether you may l a w f u l l y renew a c e r t i f i c a t e of deposit p r i o r t o i t s
m a t u r i t y , d a t i n g t h e new c e r t i f i c a t e as of the date of m a t u r i t y of t h e
original certificate*
I t i s noted t h a t you s t a t e t h a t a l l c e r t i f i c a t e s
presented a f t e r m a t u r i t y are renewed as of t h e date prese nted, and t h a t
i n t e r e s t i s paid only t o t h e date of m a t u r i t y of t h e o r i g i n a l c e r t i f i c a t e .
Upon the b a s i s of the information submitted i t appears t h a t t h e
p r a c t i c e which you suggest involves merely the making of a new c o n t r a c t
of d e p o s i t with r e s p e c t to the funds i n question which i s t o t a k e e f f e c t
on the d a t e of m a t u r i t y of t h e o r i g i n a l c e r t i f i c a t e and t h a t no p a r t of
the funds evidenced by t h e o r i g i n a l c e r t i f i c a t e i s withdrawn u n t i l t h e
m a t u r i t y of the renewal c e r t i f i c a t e .
There i s no p r o v i s i o n of law which
would preclude t h e adoption of t h i s procedure and the Federal Reserve
Board has no o b j e c t i o n t h e r e t o .
Very t r u l y yours,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
X-7971
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
J u l y 30, 1934.
Dear S i r ;
There are being forwarded t o you today,
under s e p a r a t e cover, one hundred copies of t h e
provisions of t h e National Housing Act, approved
June 27, 1934, which a f f e c t the Federal Reserve
System*
Copies of the National Housing Act were
sent you under date of J u l y 7, 1934.
Very t r u l y yours,
S. R. Carpenter,
Assistant Secretary.
TO ALL F. R. AGENTS
(No copy t o Governors and no e x t r a copies t o banks
one copy to be sent t o Mr. K i t z m i l l e r . )
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
THE FEDERAL RESERVE BOARD
X-7972
August 2, 1934
Dear Sir:
There are being forwarded to you today under
separate cover, for the use of your bank, three copies
of part 17 of the hearings before the Committee on
Banking and Currency of the United States Senate on
stock exchange p r a c t i c e s .
Copies of part 16 of these
hearings were forwarded to you under date of June 7,
1934.
Very truly j^yrs
"" ' /
V
v
S. R. Carpenter,
Assistant Secretary
TO ALL F. R. AGENTS
(No copies to .Governors or extra copies to banks;
one copy to be sent to Mr. K i t z m i l l e r . )
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7974
August 3, 1934.
SUBJECT:
Code Word Covering New Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve banks,
the following code word has been designated to cover a
new i s s u e of Treasury B i l l s :
"HOXMOB" - Treasury B i l l s to be dated August 8,
1934, and to mature February 6, 1935.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental
code word "NOXMIX" on page 172.
Very truly yours,
J . C. Hoell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAMS.
X-7975
August 6, 1934.
Dear S i r :
There i s i n c l o s e d , f o r your i n f o r m a t i o n , a copy
of a l e t t e r addressed t o the Federal Reserve Agent a t
the Federal Reserve Bank of Atlanta under date of J u l y 27,
1934, concerning the scope of examinations to be made of
p r i v a t e banks or bankers under the p r o v i s i o n s of Section 21
of the Banking Act of 1933.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosure.
TO ALL F. E. AGENTS
X-7975-a *
CopyJ u l y 27, 1954.
Mr. Oscar Newton,
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of A t l a n t a ,
A t l a n t a , Ga.
Dear Mr. Newton;
R e f e r e n c e i s made t o your l e t t e r of J u l y 3, 1954, concerning t h e
scope of examinations t o be made of p r i v a t e banks o r bankers under t h e p r o v i s i o n s of S e c t i o n 21 of t h e Banking Act of 1933.
You s t a t e t h a t i n many-
i n s t a n c e s p r i v a t e bankers who have e x p r e s s e d a p r e f e r e n c e t o be examined by
t h e F e d e r a l Reserve Bank a r e engaged i n o t h e r a g r i c u l t u r a l , m e r c a n t i l e , o r
m a n uf actur ing a c t i v i t i e s , and t h a t , while they p r o b a b l y a t t e m p t t o s e g r e g a t e
t h e a s s e t s p e r t a i n i n g t o t h e i r banking o p e r a t i o n s , t h e laws of t h e S t a t e of
Georgia a r e such t h a t , i n case of i n s o l v e n c y , a l l a s s e t s would be pooled f o r
t h e b e n e f i t of a l l c r e d i t o r s , and t h e d e p o s i t o r s , t h e r e f o r e , would have no
l i e n on the s o - c a l l e d banking a s s e t s .
In t h e c i r c u m s t a n c e s , you r e q u e s t i n -
s t r u c t i o n s a s t o whether t h e examinations should cover a l l a s s e t s and l i a b i l i t i e s of t h e p r i v a t e b a n k e r , or only t h o s e p e r t a i n i n g t o t h e banking o p e r a tions.
The Board i s a d v i s e d t h a t t h e laws of t h e S t a t e of New York r e q u i r e
every p r i v a t e banker t o i n v e s t i n t h e b u s i n e s s permanent c a p i t a l in s t i p u l a t e d amounts, and p r o v i d e f o r t h e s e g r e g a t i o n of such c a p i t a l and of d e p o s i t s
r e c e i v e d and t h e a s s e t s a c q u i r e d through t h e i n v e s t m e n t of such f u n d s , and,
f u r t h e r , t h a t t h e a s s e t s so a c q u i r e d w i l l be f i r s t a v a i l a b l e t o s a t i s f y t h e
c l a i m s of d e p o s i t o r s .
S i m i l a r laws a r e s a i d t o be i n f o r c e i n C o n n e c t i c u t ,
58
Mr. Oscar Newton - 2
X-7975-a
and, p e r h a p s , o t h e r S t a t e s .
Where such laws e x i s t , i t would appear t h a t
t h e examinations r e q u i r e d under t h e p r o v i s i o n s of S e c t i o n 21 of t h e Banking Act of 1933 should be c o n f i n e d t o t h e banking o p e r a t i o n s of t h e p r i v a t e
b a n k e r , whether or n o t he has o t h e r a s s e t s and l i a b i l i t i e s .
Where t h e bank-
i n g a s s e t s of t h e p r i v a t e b a n k e r , however, a r e a v a i l a b l e t o s a t i s f y t h e
claims of any and a l l c r e d i t o r s , and i n t h e event of i n s o l v e n c y unsecured
d e p o s i t o r s would be on an equal f o o t i n g with o t h e r g e n e r a l c r e d i t o r s , i t would
appear t h a t , i n a d d i t i o n t o an examination of t h e a s s e t s and l i a b i l i t i e s a r i s ing from t h e banking o p e r a t i o n s , t h e examination should i n c l u d e such i n v e s t i g a t i o n of o t h e r a s s e t s and l i a b i l i t i e s a s i s n e c e s s a r y t o determine t h e t r u e
c o n d i t i o n of t h e bank.
In the B o a r d ' s l e t t e r of June 26, 1934 (X-7936) i t was s t a t e d
t h a t inasmuch a s , under t h e terms of S e c t i o n 21, a l l r e p o r t s of c o n d i t i o n
a r e to be made and p u b l i s h e d a t t h e same times and i n t h e same manner and
with l i k e e f f e c t and p e n a l t i e s a s a r e now provided by law i n r e s p e c t of
n a t i o n a l banking a s s o c i a t i o n s t r a n s a c t i n g b u s i n e s s i n t h e same l o c a l i t y ,
such r e p o r t s of c o n d i t i o n , i n a l l c a s e s , and w i t h o u t r e g a r d t o t h e a u t h o r i t y which may make t h e examinations r e f e r r e d t o in S e c t i o n 21, should be
made t o t h e C o m p t r o l l e r of the Currency and p u b l i s h e d i n t h e same manner
a s r e p o r t s of c o n d i t i o n of n a t i o n a l banks.
In t h e c i r c u m s t a n c e s , i t i s
w i t h i n t h e power of t h e Comptroller of t h e Currency t o p r e s c r i b e t h e
form of such r e p o r t s .
Presumably, t h e purpose of e x a m i n a t i o n s under
t h e terms of t h e s e c t i o n i s t o determine t h e t r u e c o n d i t i o n of t h e bank,
X-7975-a
59
Mr. Oscar Newton - 5.
v e r i f y the accuracy of such r e p o r t s of c o n d i t i o n a s may be made, and d i s c l o s e any i r r e g u l a r i t i e s t h a t may be s u b j e c t t o p e n a l t y .
Therefore, the
m a t t e r has been d i s c u s s e d with the o f f i c e of t h e Comptroller of t h e Currency t o a s c e r t a i n t h e C o m p t r o l l e r ' s requirements with r e s p e c t t o t h e
form of the r e p o r t of c o n d i t i o n by p r i v a t e b a n k e r s , and w i t h a view t o t h e
adoption of r e a s o n a b l y uniform procedure i n t h e examinations conducted by
t h e Comptroller of t h e Currency and the examiners f o r t h e F e d e r a l Reserve
banks under t h e terms of S e c t i o n 21.
In connection with the c a l l f o r r e p o r t s of c o n d i t i o n a s of June
30, 1934, t h e Comptroller forwarded to p r i v a t e bankers t h e same form
(Form 2130 - C a l l No. 340) t h a t was forwarded t o n a t i o n a l banks.
This
form i n c l u d e s t h e items "Other a s s e t s " and "Other l i a b i l i t i e s " and p r o v i d e s
f o r the i t e m i z a t i o n of such a s s e t s and l i a b i l i t i e s under schedules "M" and
"N" which a r e n o t a p a r t of t h e statement t o be p u b l i s h e d .
I t i s probable
t h a t a l e t t e r of i n s t r u c t i o n s w i l l be forwarded t o p r i v a t e bankers by t h e
Comptroller a t t h e time of t h e n e x t c a l l f o r r e p o r t s of c o n d i t i o n , a d v i s i n g
them t h a t they should l i s t under the item "Other a s s e t s " a l l a s s e t s o t h e r
than t h o s e p e r t a i n i n g d i r e c t l y t o banking o p e r a t i o n s , and under t h e item
"Other l i a b i l i t i e s " a l l l i a b i l i t i e s o t h e r than those p e r t a i n i n g d i r e c t l y
t o banking o p e r a t i o n s .
Some p r o v i s i o n may a l s o be made t o provide f o r a
statement of the o u t s i d e worth of p a r t n e r s i n cases i n v o l v i n g p a r t n e r s h i p .
The form f o r r e p o r t s of c o n d i t i o n i s r e v i s e d from time to t i m e , and, of
c o u r s e , the Comptroller may f i n d i t n e c e s s a r y or d e s i r a b l e t o r e v i s e t h e
;
6
X-7975-a
Mr. Oscar Newton - 4 .
g e n e r a l form or t o p r e p a r e a s p e c i a l form f o r r e p o r t s of p r i v a t e bankers
i n connection with f u t u r e c a l l s .
The Comptroller of t h e Currency concurs i n t h e B o a r d ' s o p i n i o n
t h a t examinations under t h e terms of S e c t i o n 21, where d e p o s i t o r s a r e on
t h e same f o o t i n g a s o t h e r g e n e r a l c r e d i t o r s , should i n c l u d e an examination
of t h e a s s e t s and l i a b i l i t i e s p e r t a i n i n g t o t h e banking o p e r a t i o n s of t h e
p r i v a t e banker i n t h e same manner and t o t h e same e x t e n t a s i f an examinat i o n were b e i n g made of a n a t i o n a l bank or a S t a t e member bank, and t h a t
t h e examiner should conduct such f u r t h e r i n v e s t i g a t i o n s or examination a s
may be n e c e s s a r y t o s a t i s f y himself a s t o t h e accuracy of any s t a t e m e n t s
made w i t h r e s p e c t t o o t h e r a s s e t s and t h e soundness of t h e v a l u e s r e p r e s e n t e d t h e r e b y , or t h e e x t e n t of o t h e r l i a b i l i t i e s of t h e p r i v a t e b a n k e r .
As s t a t e d , t h e Comptroller of t h e Currency may f i n d i t n e c e s s a r y
or d e s i r a b l e t o p r e s c r i b e s p e c i a l forms f o r r e p o r t s of c o n d i t i o n of p r i v a t e
b a n k e r s , and, l i k e w i s e , f u t u r e e x p e r i e n c e may i n d i c a t e t h e n e c e s s i t y f o r
more d e t a i l e d and e x h a u s t i v e e x a m i n a t i o n s .
In any e v e n t , a l l examinations
under S e c t i o n 21 of t h e Banking Act of 1935 should be conducted w i t h t h e
f a c t i n mind t h a t t h e i n t e r e s t s of d e p o s i t o r s a r e i n e x t r i c a b l y i n t e r m i n g l e d
w i t h t h o s e of a l l o t h e r c r e d i t o r s wherever such i n t e r e s t s a r e n o t s p e c i f i c a l l y s e g r e g a t e d by law.
Very t r u l y y o u r s ,
(Signed) Chester M o r r i l l ,
Chester M o r r i l l ,
Secretary.
61
FEDERAL RESERVE BOARD
WASHINGTON
X-7976
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 7, 1934
SUBJECT:
New Issues of Home Owners 1 Loan
Corporation Bonds.
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 between Federal r e serve "banks covering Government s e c u r i t i e s , the following code words
have t e e n designated t o cover new i s s u e s of Home Owners 1 Loan Corporat i o n Bonds:
"NOWCENT" - Home Owners* Loan Corporation l i $ Bonds,
S e r i e s C, 1936, to be dated August 15,
1934 and to mature August 15, 1936.
"UOWCEPH" - Home Owners« Loan Corporation
Bonds,
S e r i e s D, 1937, to be dated August 15,
1934 and to mature August 15, 1937.
"NOWCIA" - Home Owners 1 Loan Corporation 2$ Bonds,
S e r i e s E, 1938, to be dated August 15,
1934 and to mature August 15, 1938.
These code words should be i n s e r t e d i n t h e Federal Reserve
Telegraph Code book on page 172
TO GOVERNORS
Very t r u l y yours,
' J . C. Noell,
No e l l ,
Assistant Secretary.
OF ALL F. R. BANKS
/
FEDERAL RESERVE BOARD
WASHINGTON
X—7977
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
August 8 , 1934.
SUBJECT:
Reports of Examination of
S t a t e Member Banks.
Dear S i r :
In view of t h e added r e s p o n s i b i l i t i e s of t h e Federal Reserve
Board under t h e p r o v i s i o n s of the Banking Act of 1933 and other r e c e n t
l e g i s l a t i o n , the Board f e e l s t h a t i t i s d e s i r a b l e to have a v a i l a b l e copies
of current r e p o r t s of examination of a l l S t a t e member banks, and you a r e
r e q u e s t e d , t h e r e f o r e , to continue to forward to t h e Board a copy of each
r e p o r t of examination of a S t a t e member bank made by your examiners.
This
supersedes i n s t r u c t i o n s given i n the Board's l e t t e r of J u l y 26, 1930,
X-6665, to forward only analyses of r e p o r t s of examination u n l e s s i n some
exceptional case i t was d e s i r e d t h a t t h e Board should have b e f o r e i t a
complete r e p o r t of examination, which i n s t r u c t i o n s were subsequently modif i e d on December 7, 1933, X-7702, to r e q u e s t the submission of r e p o r t s of
examination of S t a t e member banks f o r c o n s i d e r a t i o n i n connection with the
c e r t i f i c a t i o n to the. F e d e r a l Deposit Insurance Corporation r e q u i r e d under
the p r o v i s i o n s of Section 12B of the Federal Reserve Act.
Inasmuch as the various Federal r e s e r v e banks w i l l be u s i n g a
uniform and d e t a i l e d r e p o r t of examination, i t i s not considered necessary to continue to forward, with such r e p o r t s of examination a d e t a i l e d
X-7977
6,3
~2—
a n a l y s i s on I . R. B. Form 212, and accordingly a d r a f t of a proposed
memorandum form (F. B. B. Form 513) to "be t r a n s m i t t e d with t h e r e p o r t s of
examination of S t a t e member "banks made "by examiners of t h e r e s e r v e "bank#is
attached.
Attached a l s o i s a r e v i s e d a n a l y s i s form (F. B. B. Form 212) f o r
use i n forwarding t o t h e Board analyses of r e p o r t s of examinations of S t a t e
member banks made independently "by S t a t e "banking a u t h o r i t i e s .
I t w i l l be a p p r e c i a t e d i f you w i l l review t h e d r a f t s of t h e s e
forms and forward your suggestions and comments the re on t o Mr. Paulger,
Chief of t h e Board's Division of Examinations.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosures.
TO ALL F . B. AGENTS,
X-7978.
August 10, 1934.
SUBJECT: Correspondence with Attorney General
regarding Section 21 of t h e Banking
Act of 1935.
Dear S i r ;
There a r e inclosed herewith f o r your i n f o r m a t i o n
copies of a l e t t e r and i t s i n c l o s u r e addressed by t h e f e d e r a l
Reserve Board to the Attorney General of the United S t a t e s and
of a r e p l y r e c e i v e d from t h e Acting Attorney General with r e gard to t h e n e c e s s i t y for examinations under s e c t i o n 21 of t h e
Banking Act of 1933 of persons who a r c a u t h o r i z e d to r e c e i v e
d e p o s i t s "but a r e not p r e s e n t l y engaged i n the business of r e ceiving deposits.
You may adVise persons i n t e r e s t e d i i s i m i l a r
cases of t h e substance of the i n c l o s e d correspondence t u t i t id
suggested t h a t you do not d i s c l o s e t h e correspondence or the
f
substance thereof to o t h e r s .
Vdry t r u l y y o u r s ,
Inclosures.
TO CHAIRMEN OF ALL F. B. BAMS.
Chester M o r r i l l ,
Secretary.
2
6
X~7978~a.
Copy.
J u l y 30, IS34.
The Honorable,
The Attorney General,
Washington, D. C.
S I E:
There i s inclosed herewith an excerpt from a l e t t e r
r e c e i v e d by t h e Federal Reserve Board from t h e A s s i s t a n t Federal
Reserve Agent a t the Federal Reserve Bank of P h i l a d e l p h i a , which
r a i s e s the questiori whether a person a u t h o r i z e d to engage i n t h e
business of r e c e i v i n g d e p o s i t s , but not no* engaged i n a c c e p t i n g
any d e p o s i t s j i s r e q u i r e d by s e c t i o n 21(a) (2) of t h e Banking Act
of 1933 to submit to p e r i o d i c examination and to make and p u b l i s h
p e r i o d i c r e p o t t s of c o n d i t i o n .
I t i s t h e view of t h e Federal Reserve Board t h a t s a i d
s e c t i o n 2 l ( a ) (2) does not, embrace a person who has not been engaged,
\
s i n c e June 16, 1934, "in thL business of r e c e i v i n g d e p o s i t s s u b j e c t
to check or to repayment upon^presentation of a passbook, c e r t i f i c a t e
of d e p o s i t , or o t h e r evidence bf d e b t , or upon r e q u e s t of t h e dep o s i t o r " , even though such n o r s o t was engaged i n such busine ss p r i o r
to t h a t d a t e .
Consequently, t h e Aoard f e e l s t h a t t h e f a c t t h a t a
v
person i s a u t h o r i z e d to engage i n s t ^ h a business i s not s u f f i c i e n t
t o b r i n g such person w i t h i n t h e scope',^o£ t h e p r o v i s i o n s under d i s c u s s i o n , and t h a t t h e person who i s t h ^ s u b j e c t of t h i s i n q u i r y and
who i s not p r e s e n t l y engaged i n the busine ss of r e c e i v i n g d e p o s i t s
i s not r e q u i r e d t o submit to examination and to make and p u b l i s h
X-7978-a
:
The Honorable, The Attorney General
r e p o r t a of c o n d i t i o n .
However, s i n c e an expression of opinion "by the Board votild
not. prevent a p r o s e c u t i o n f o r v i o l a t i o n of such p r o v i s i o n s i f your
Department should take a view c o n t r a r y to t h a t expressed above, i t
m i l l "be a p p r e c i a t e d i f you w i l l advise t h e Board whether you concur
i n i t s c o n s t r u c t i o n of the p r o v i s i o n s of s a i d s e c t i o n 21(a) ( 2 ) ,
and whether i t i s necessary f o r S p i r i d i o n Furcich of S t e e l t o n ,
Pennsylvania, to submit to examination and to make and p u b l i s h
p e r i o d i c r e p o r t s of condition so long as such person does not accept
d e p o s i t s of the k i n d r e f e r r e d to i n s a i d s e c t i o n 21(a) ( 2 ) .
Respectfully,
(Signed) Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
Inclosure
6 6
X-7973~"b
:
EXCERPT FROM LETTER RECEIVED BY FEDERAL RESERVE BOARD
FROM AS SI STUM FEDERAL RESERVE AGENT AT FEDERAL RESERVE BAH OF PEILADELPHIA.
"Supplementing our l e t t e r of June 23, 1934, r e l a t i v e to your l e t t e r X-7936, wo 'beg leave to a d v i s e you
t h a t S p i r i d i o n Furcich, a p r i v a t e "banker of Steelton*
Pennsylvania, who requested t h a t we examine h i s "bank
pursuant t o the p r o v i s i o n s of Section 21 of the Banking
Act of 1933, was examined "by one of our examiners on
J u l y 16, 1934.
"The examiner r e p o r t e d t h a t t h i s p r i v a t e banker has
no d e p o s i t a n d according to t h e b a n k e r ' ; s t a t e m e n t , had
not r e c e i v e d d e p o s i t s f o r s e v e r a l y e a r s . However, he des i r e s to r e t a i n the r i g h t to r e c e i v e d e p o s i t s , which r i g h t
he may e x e r c i s e a t any time. In v i e ? of t h i s s i t u a t i o n ,
we presume t h a t we should continue- to conduct send- nnu.al
e x a m i n a t i o n of t h e p r i v a t e b a n k e r ' s "busi ...jvs so louf a s
he ntxo the r i g h t to r e c e i v e deposit*-' or r u i t i l he sho-JLd
withdraw ..is r e q u e s t t h a t we conduct t h e oxaminaticu r o auired "by Section 21 of the A c t . "
6 7
Copy
OFFICE OF THE ATTORNEY GEMBHkL
Washington, D. C.
August 2, 1934.
The Federal Reserve 7 :ard,
Washington, D. C.
Gentlemen:
I have your l e t t e r of J u l y 30, s t a t i n g your view t h a t
a person "authorized" t o engage i n t h e ""business of r e c e i v i n g
d e p o s i t s s u b j e c t to check," e t c . , who may a t some f u t u r e time
r e c e i v e such d e p o s i t s t u t p r e s e n t l y has none and has r e c e i v e d
none f o r s e v e r a l y e a r s , i s not s u b j e c t t o Section 21 (a) (2)
of t h e Banking Act of 1933, i n t h e sense t h a t he must now submit to examination and f i l e r e p o r t s as p r e s e n t l y engaging i n
such "business. You have submitted t h e matter to me p a r t i c u l a r l y because the s t a t u t e , while imposing a duty upon t h e Board,
p r o v i d e s f i n o and imprisonment f o r v i o l a t i o n s .
I am glad to inform you t h a t I ccnciir : u t h e conclus i o n which you have reached ana to aS-vure you t h a t i t vould not
be t h e purpose of t h i s Department to i n s t i t u t e ny prosecution
under such circumstances. Of course, i f the i n d i v i d u a l h e r e a f t e r does r e c e i v e such d e p o s i t s he amut then comply with the
statute.
Respectfully,
(Signed) Harold M. Stephens,
Acting Attorney General.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7979.
August 11, 1934.
SUBJECT:
Code Word Covering Hew I s s u e
of Treasury B i l l s .
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
f o l l o w i n g code word has "been designated to cover a new
i s s u e of Treasury B i l l s :
"HOXMUL" - Treasury B i l l s t o "be dated August 15,
1934, and to mature February 13, 1935.
This word should "be i n s e r t e d i n t h e F e d e r a l Reserve Telegraph Code hook, f o l l o w i n g the supplemental
code word "HOXMCB" on page 173.
http://fraser.stlouisfed.org/ TO GOVERNORS
Federal Reserve Bank of St. Louis
y t r u l y yours,
J . C. N o e l l ,
Assistant Secretary.
OF ALL F. R. BASKS.
X-7981
COPY
70
TO:
Secretary Morgenthau.
FROM: Mr. Oliphant.
Be:
Sale of "building s i t e to F e d e r a l
Reserve Board,
I t i s my opinion t h a t you a r e given a u t h o r i t y "by s e c t i o n 5 of t h e
Act of May 25, 1926, as amended, (44 S t a t . 633; Feb. 24, 1928, d
94,
45 S t a t . 137; Feb. 16, 1931, c . 203, sec. 2, 46 S t a t . 1164; U. S. C.,
T i t l e 40, s e c . 345) t o s e l l a t p r i v a t e s a l e t o the Federal Reserve
Board, p r o p e r t y of t h e United S t a t e s described as squares E-87 and
£-88, l o c a t e d on C o n s t i t u t i o n Avenue between 20th and 21st S t r e e t s ,
2T»W., Washington, D. C.
The Federal Reserve Board i s a u t h o r i z e d to purchase t h i s p r o p e r t y
under t h e p r o v i s i o n s of s e c t i o n 4 of the Act approved June 19, 1934,
(Public ITo. 417, 73rd Congress) which reads as f o l l o w s :
"SEC. 4 . Section 10 of t h e Federal Reserve Act, as amended,
i s f u r t h e r amended by changing t h e p e r i o d a t t h e end of the t h i r d
paragraph thereof t o a comma and i n s e r t i n g t h e r e a f t e r the f o l l o w i n g : "and such assessments may i n c l u d e amounts s u f f i c i e n t t o p r o v i d e f o r the a c q u i s i t i o n by. the Board i n i t s own name of such s i t e
or b u i l d i n g i n the D i s t r i c t of Columbia as i n i t s judgment alone
s h a l l be necessary f o r the purpose of providing s u i t a b l e and
adequate q u a r t e r s f o r t h e performance of i t s f u n c t i o n s . A f t e r
approving such p l a n s , e s t i m a t e s , and s p e c i f i c a t i o n s as i t s h a l l
have caused to be prepared, t h e Board may, notwithstanding any
o t h e r p r o v i s i o n of law, cause t o be constructed on t h e s i t e so
acquired by i t a tra.ildi.ng s u i t a b l e and adequate i n i t s judgnent
f o r i t s purposes and proceed to take a l l such s t e p s as i t may deem
necessary or a p p r o p r i a t e i n connection with the c o n s t r u c t i o n , equipment, and f u r n i s h i n g of such b u i l d i n g . The Board may m a i n t a i n ,
e n l a r g e , or remodel any b u i l d i n g so acquired or constructed and
s h a l l have s o l e c o n t r o l of such b u i l d i n g and space t h e r e i n . "
71
— 2 —
The p r o p e r t y i n question had "been leased by the Government i n
1918 and upon t h i s p r o p e r t y the Government had constructed c e r t a i n
temporary "buildings.
Authority f o r the purchase of the p r o p e r t y was
given by t h e following p r o v i s i o n s of t h e Act of June 12, 1922, (42
S t a t . 646):
"The commission i n charge of the S t a t e , War and Navy
Departments Buildings * * * i s hereby authorized and d i r e c t e d
t o a c q u i r e * * * t h e following squares of land f o r p u b l i c
p u r p o s e s , t o w i t , the whole of squares known a s numbers east
of e i g h t y - s e v e n ; e a s t of e i g h t y - e i g h t ; * * * Provided f u r t h e r ,
That the squares authorized t o be acquired h e r e i n s h a l l be
under t h e c o n t r o l of the Superintendent of the S t a t e , War,
and Navy Departments Buildings. 1 1
By the Act of February 26, 1925 (43 S t a t . 983) t h e commission
i n charge of t h e S t a t e , War and Navy Department Buildings and the
o f f i c e of Public Buildings and Grounds were consolidated to form t h e
o f f i c e of Public Buildings and Public Parks of the N a t i o n a l C a p i t a l ,
The Superintendent of the S t a t e , War and Navy Departments B u i l d i n g s ,
under whose control t h e p r o p e r t y i n question had been p l a c e d , was
i n v e s t e d with the powers and d u t i e s formerly h e l d by t h e commission
and was designated D i r e c t o r of Public Buildings and P u b l i c Parks of
the National C a p i t a l .
Subsequently, by Executive Order 6166 of June
10, 1933, the f u n c t i o n s of t h e o f f i c e of P u b l i c Buildings and P u b l i c
Parks were t r a n s f e r r e d to t h e O f f i c e of National P a r k s , Buildings
and Reservations of t h e National C a p i t a l , which o f f i c e by t h e Act
of Congress approved March 2 , 1934 (Public No. 109 - 73rd Congress)
became known as t h e N a t i o n a l Park S e r v i c e .
I t w i l l appear from the s t a t u t e s here o u t l i n e d t h a t t h e p r o p e r t y
which t h e Government proposes t o s e l l t o the Federal Reserve Board i s
now under t h e " c o n t r o l " of the National Park S e r v i c e .
I t does not
n e c e s s a r i l y f o l l o w from t h i s t h a t the National Park Service has
a u t h o r i t y t o dispose of the p r o p e r t y .
In t h e case of Farmers Bond
and Mortgage Company v . Walker (1929 ) 207 Iowa 696 , 223 N. W. 497,
the Court used t h e following language;
"The word ' c o n t r o l ' has v a r i o u s s i g n i f i c a t i o n s , dependi n g on t h e circumstances and connection i n which i t i s u s e d .
2 Words and P h r a s e s , F i r s t S e r i e s , p . 1549; 1 Words and
P h r a s e s , Second S e r i e s , p . 1021. The word may "be so used a s
w i t h t h e context t o imply and confer complete dominion and
ownership with t h e consequent power of d i s p o s i t i o n . Welsh v .
G i s t , 101 Md. 606, 61 A. 665. Of i t s e l f , however, t h e word
i s o r d i n a r i l y t h e equivalent of 'manage', ' d i r e c t ' , ' g o v e r n ' ,
• s u p e r v i s e ' , as c o n f e r r i n g the u s u a l power of a t r u s t e e , and,
w i t h r e s p e c t to r e a l property a t l e a s t , without power of d i s p o s i t i o n . Bramell v . Cole. 136 Mo. 201, 37 S. W. 924, 58 Am.
S t . Rep. 619; Randall v . J o s s e l y n . 59 Vt. 557, 10 A. 577;
Wolffe v . Loe"b. 98 Ala. 426, 13 So. 744."
The question "before t h e Court i n In r e Lyman (D. C., S. D. New
York - 1893)
55 F. 29, concerned t h e r i g h t of the United S t a t e s Trea-
sury Department to i n t e r f e r e with t h e C o u r t ' s p o s s e s s i o n of a c e r t a i n
room i n the Post O f f i c e Building.
I n defense of i t s a c t i o n t h e
Treasury Department r e l i e d upon the f a c t t h a t i n a p p r o p r i a t i o n a c t s
the b u i l d i n g was r e f e r r e d t o as "under control of the Treasury Department".
I t was determined "by the Court, however, t h a t the " c o n t r o l "
i n v e s t e d i n t h e Treasury r e l a t e d only to the " c a r e , maintenance and
r e p a i r " of t h e b u i l d i n g and did not expend to s u p e r v i s i o n over i t s u s e
and occupation.
That the word " c o n t r o l " as used i n t h e Act of June 12, 1922, was
intended to i n c l u d e only the duty of care and maintenance, becomes
evident upon examination of s e c t i o n 1 of the Act of March 3, 1883,
which c r e a t e d the commission i n charge of the S t a t e , War and Navy
Department Building.
This s e c t i o n provided as f o l l o w s :
"The P r e s i d e n t i s hereby authorized and d i r e c t e d t o d e s i g n a t e from the Engineer Corps of the Army or t h e Navy, an
o f f i c e r well q u a l i f i e d f o r the purpose, who s h a l l "be d e t a i l e d
to a c t as superintendent of t h e completed p o r t i o n s of the S t a t e ,
War, and Navy Department B u i l d i n g , under the d i r e c t i o n of the
S e c r e t a r i e s of S t a t e , War, and Navy, who a r e hereby c o n s t i t u t e d
a commission f o r the purposes of t h e care and s u p e r v i s i o n of
s a i d "building, a s h e r e i n a f t e r s p e c i f i e d . Said o f f i c e r s h a l l
l a v e charge of s a i d "building, and a l l the engines, machinery,
steam and water supply, h e a t i n g , l i g h t i n g , and v e n t i l a t i n g
a p p a r a t u s , e l e v a t o r s , and a l l other f i x t u r e s i n s a i d "building,
and a l l necessary r e p a i r s and a l t e r a t i o n s t h e r e o f , a s w e l l a s
t h e d i r e c t i o n and c o n t r o l of such f o r c e of e n g i n e e r s , watchmen, l a b o r e r s , and others engaged about t h e b u i l d i n g or t h e
apparatus under h i s s u p e r v i s i o n ; of the c l e a n i n g of t h e c o r r i d o r s and water c l o s e t s ; of t h e approaches, sidewalks, lawns,
c o u r t y a r d s , and a r e a s of the b u i l d i n g , and of a l l rooms i n
t h e sub-basement which contain t h e b o i l e r s and other machinery,
or so much of s a i d rooms as may be i n d i s p e n s a b l e t o t h e proper
performance of h i s d u t i e s as h e r e i n p r o v i d e d . "
The "maintenance and p r o t e c t i o n " of t h e other temporary b u i l d i n g s
e r e c t e d during t h e War had been e n t r u s t e d to the commission by t h e Act
of March 28, 1918 (40 S t a t . 483; June 4 , 1918, c . 93, 40 S t a t . 588)
and convenience r e q u i r e d t h a t , when i n 1922 the temporary b u i l d i n g s
on squares E-87 and E-88 were a c q u i r e d , the "maintenance and p r o t e c t i o n " of t h e s e b u i l d i n g s a l s o should be given to the commission.
It
i s necessary to conclude t h a t the u s e of t h e word " c o n t r o l " was a
shorthand method of accomplishing t h i s r e s u l t ,
In view of t h e f a c t
t h a t the commission never had any powers other than t h o s e necessary i n
t h e care and maintenance of p u b l i c b u i l d i n g s , i t i s absurd t o suppose
t h a t Congress intended t h a t as t o c e r t a i n i s o l a t e d p r o p e r t y the commission should have a l s o t h e power of d i s p o s i t i o n .
I t i s my opinion t h a t the power to s e l l t h e p r o p e r t y i n question
i s n o t , t h e r e f o r e , i n t h e National Park Service, but i n y o u r s e l f by
•"5**
v i r t u e of the Act of May 25, 1926, as amended.
Pertinent provisions
of t h i s Act a r e as f o l l o w s :
"Be i t enacted "by t h e Senate and House of R e s p r e s e n t a t i v e s
of t h e United S t a t e s of America I n Congress assembled. That,
to enable the S e c r e t a r y of the Treasury t o provide s u i t a b l e
accomodations i n the D i s t r i c t of Columbia f o r the executive
departments, and independent establishments of the Government
not under any executive department, and f o r courthouses, p o s t o f f i c e s , immigration s t a t i o n s , customhouses, marine h o s p i t a l s ,
q u a r a n t i n e s t a t i o n s , and other p u b l i c b u i l d i n g s of the c l a s s e s
under t h e c o n t r o l of the Treasury Department i n t h e S t a t e s ,
T e r r i t o r i e s , and possessions of the United S t a t e s , he i s
hereby authorized and d i r e c t e d to a c q u i r e , by purchase, condemnation, or otherwise, such s i t e s and a d d i t i o n s to s i t e s
as he may deem necessary, and t o cause t o be c o n s t r u c t e d
thereon, and upon lands belonging t o the Government convenientl y l o c a t e d and a v a i l a b l e f o r the purpose (but exclusive of
m i l i t a r y or naval r e s e r v a t i o n s ) , adequate and s u i t a b l e
b u i l d i n g s f o r any of the foregoing purposes, g i v i n g p r e f e r e n c e ,
where he considers c o n d i t i o n s j u s t i f y such a c t i o n , t o cases
where s i t e s f o r p u b l i c b u i l d i n g s have h e r e t o f o r e been acquired
o r a u t h o r i z e d t o be acquired, and to e n l a r g e , remodel, and
extend e x i s t i n g p u b l i c b u i l d i n g s under the c o n t r o l of t h e
Treasury Department, and t o purchase b u i l d i n g s , i f found t o
be adequate, adaptable, and s u i t a b l e f o r t h e purposes of t h i s
Act, t o g e t h e r with t h e s i t e s t h e r e o f , and t o remodel, e n l a r g e ,
or extend such b u i l d i n g s and provide proper approaches and
o t h e r necessary improvements to the s i t e s t h e r e o f . When a
b u i l d i n g i s about t o be constructed on a s i t e h e r e t o f o r e acquired
and such s i t e i s found by the Secretary of t h e Treasury t o be
u n s u i t a b l e f o r i t s intended purpose, he i s hereby f u r t h e r a u t h o r i z e d and empowered t o acquire a new s i t e i n l i e u thereof by
purchase, condemnation, exchange. or otherwise, and except i n
case of exchange to dispose of the p r e s e n t s i t e by p u b l i c s a l e
and to execute t h e necessary q u i t c l a i m deed of conveyance:* * * *
"Sec. 5. *
*
*
" I n c a r r y i n g i n t o e f f e c t the p r o v i s i o n s of t h i s Act, i f
the S e c r e t a r y of the Treasury deems i t to be to the b e s t i n t e r e s t s of the Government to c o n s t r u c t Federal b u i l d i n g s to
take the p l a c e of e x i s t i n g Federal b u i l d i n g s , he i s hereby
authorized t o cause the present b u i l d i n g s to be demolished,
i n order t h a t t h e s i t e s may be u t i l i z e d i n whole or i n p a r t
f o r such b u i l d i n g s , or where i n h i s .judgment i t i s more
advantageous to c o n s t r u c t a Federal b u i l d i n g on a d i f f e r e n t
s i t e i n tho same c i t y , t o s o i l any such b u i l d i n g or b u i l d i n g s
and t h e s i t e or s i t e s t h o r o o f , a t such time and on such terms
as ho deems proper, and t o convey ttio same t o tho r e s p e c t i v e
purchasers thereof by the usual q u i t c l a i m deed, and t o d e p o s i t
t h e proceeds of t h e s a l e s thereof i n t h e Treasury as m i s c e l l a neous r e c e i p t s , and t o charge a g a i n s t t h e t o t a l sum of
$150,000,000 h e r e i n b e f o r e authorized only t h e r e s p e c t i v e n e t
excess c o s t , i f any, over and above the proceeds of s u c h s a l e s ,
of providing such new s i t e s and b u i l d i n g s . " (Underscoring
supplied)
I t w i l l be observed t h a t t h e r e are two p r o v i s i o n s of t h i s Act which
give t h e S e c r e t a r y of t h e Treasury a u t h o r i t y t o s e l l p r o p e r t y of t h e
Government under c e r t a i n circumstances.
The question as t o which of
those two provisions i s applicable t o t h e f a c t s of t h e p r e s e n t case
may f o r t h e moment be d e f e r r e d .
Let i t be assumed t h a t , a c t i n g i n r e -
l i a n c e on t h e a u t h o r i t y of ono of those p r o v i s i o n s , you wore to give a
q u i t c l a i m deed t o tho Federal Rosorvo Board covering tho p r o p e r t y i n
question and i t wore then determined t h a t t h e necessary a u t h o r i t y f o r
the execution of t h i s deed e x i s t e d not i n you but i n an o f f i c i a l of the
National Park S e r v i c e .
Even i n t h a t case, I b e l i e v e i t extremely doubt-
f u l t h a t you would have submitted yourself t o any danger of p e r s o n a l
liability.
I t i s well established t h a t a public o f f i c e r i s not l i a b l e
f o r mistakes of judgment i n t h e performance of a d i s c r e t i o n a r y a c t .
Kendall v . Stokes (1845) 3 How. 87, 11 L.Ed. 506.
And t h e S e c r e t a r y
of t h e I n t e r i o r Department, of which t h e National Park Service i s a p a r t ,
i n h i s w i r e l e s s t o t h e President dated J u l y 13, 1934, would seem t o have
expressed h i s approval of your giving such a deed.
In view of t h e s t a t u s
of t h e Federal Reserve Board as an independent establishment of the Government, i t i s d o u b t f u l i f t h e Board could show any damage from t h e
o f f i c i a l a c t of an o f f i c e r of the Government.
C e r t a i n l y i n executing
a q u i t c l a i m deed you would warrant n o t h i n g , except perhaps by i m p l i c a t i o n
that you had a u t h o r i t y to execute t h e deed, and i t has been h e l d
t h a t a p u b l i c o f f i c e r i s not l i a b l e f o r d e c e i t i f i n executing a
c o n t r a c t he r e p r e s e n t s t h a t the c o n t r a c t may he v a l i d l y made "by him,
since the other c o n t r a c t i n g p a r t y i s equally "bound to know the law and
to know i t c o r r e c t l y .
Commercial Trust Company v . Burch (D.C., S. D.,
G-a. — 1920) 367 F. 907.
Of course, the Federal Reserve Board may
r e f u s e to accept t h e deed u n l e s s i t i s accompanied by another deed
executed by an authorized o f f i c e r of the National Parks S e r v i c e .
Of.
United S t a t e s v. Jonas (La. 1874) 19 Wall. 598, 22 L.Ed. 177.
But t h a t q u e s t i o n i s not involved i n t h i s memorandum.
The q u e s t i o n remains as to whether a u t h o r i t y t o s e l l the p r o p e r t y
i n q u e s t i o n i s given you by s e c t i o n 1 or s e c t i o n 5 of the Act of May
25, 1926.
These s e c t i o n s appear t o be mutually e x c l u s i v e .
Section 1
provides t h a t when p r o p e r t y acquired as a s i t e f o r a Federal b u i l d ing i s determined by you t o be u n s u i t a b l e , you may dispose of t h a t
property at p u b l i c s a l e and acquire other p r o p e r t y .
Section 5 provides
t.aat i n c o n s t r u c t i n g a new Federal b u i l d i n g to r e p l a c e an e x i s t i n g
one, you may s e l l the e x i s t i n g Federal b u i l d i n g and s i t e at such time
and upon such terms as you may deem proper.
The scope of each of these provision^ becomes apparent i n the
l i g h t of t h e purpose f o r which the p r o v i s i o n was enacted.
At t h e time
of the passage of t h e Act of May 23, 1926, t h e r e had been no r e g u l a r
a p p r o p r i a t i o n f o r p u b l i c b u i l d i n g s since 1913.
During the War i t was
necessary t o put the monies provided f o r p u b l i c b u i l d i n g s l a r g e l y t o
other purposes, and as a consequence the Government found i t s e l f the
owner of numerous b u i l d i n g s i t e s which, i n t h e course of y e a r s , had
become u n s u i t a b l e f o r t h e purposes f o r which they were o r i g i n a l l y acquired.
I t was, t h e r e f o r e , provided i n s e c t i o n 1 t h a t when a new
b u i l d i n g was about t o be b u i l t and t h e S e c r e t a r y of t h e Treasury determined t h a t t h e b u i l d i n g s i t e provided t h e r e f o r had become u n s u i t a b l e ,
he might dispose of t h a t s i t e a t p u b l i c s a l e .
In contrast t o t h i s ,
t h e p r o v i s i o n under c o n s i d e r a t i o n i n s e c t i o n 5 was not designed t o care
f o r an unusual s i t u a t i o n ; i t was enacted t o enable t h e S e c r e t a r y g e n e r a l l y
t o rcplaco Federal b u i l d i n g s which had bocome o b s o l e t e .
Provision was
made t h a t the S e c r e t a r y might s o i l e x i s t i n g b u i l d i n g s and t h e s i t e s
thereof i n connection with t h e c o n s t r u c t i o n of now b u i l d i n g s on d i f f e r e n t
s i t e s i n t h e same c i t y .
I t w i l l be soon t h a t t h e p r e s e n t case c l e a r l y f a l l s w i t h i n t h e
provisions of s e c t i o n 5, since i t i s contemplated t o s e l l t o t h e Federal
Reserve Board not only a b u i l d i n g s i t e but t h e Federal b u i l d i n g s now
standing upon t h a t s i t e .
These b u i l d i n g s are l a r g e l y occupied, I under-
stand, by t h e Federal Trade Commission, f o r which a new b u i l d i n g i s
being provided.
That t h i s p r o p e r t y may v a l i d l y be sold t o t h e Federal Reserve Board
a t p r i v a t e s a l e I have l i t t l e doubt.
Section 5 provides t h a t s a l e s s h a l l
be made by t h e S e c r e t a r y " a t such times and upon such terms as he deems
proper", and i t sooms h a r d l y probable t h a t any court would apply t h e
requirement of p u b l i c s a l e contained i n s e c t i o n 1 t o s a l e s under t h e
provisions of s e c t i o n 5 .
In t h i s connection t h e case of United S t a t e s
v . Jonas, supra, should bo noted and d i s t i n g u i s h e d .
I t was decided i n
t h a t case t h a t t h e a c t of March 3, 1863, providing f o r the s a l e of
p r o p e r t y acquired by the United S t a t e s i n the c o l l e c t i o n of debts
had t h e e f f e c t of amending the Act of May 29, 1930, i n s o f a r as i t
r e q u i r e d t h a t t h e S o l i c i t o r of t h e Treasury should obtain t h e Secret a r y ' s approval t o t h e s a l e of such p r o p e r t y .
I t was contended by
the Government t h a t t h e r e was no c o n f l i c t between t h e s t a t u t e s , s i n c e
t h e l a t e r s t a t u t e might be confined i n i t s e f f e c t t o unproductive
property.
The court dismissed t h i s contention with the statement
t h a t "no good reason can be assigned why the d i s p o s i t i o n of unproduct i v e lands should be s u b j e c t t o t h e approval of t h e s e c r e t a r y , and
other p r o p e r t y , which, i n t h i s
case, consisted of valuable r e a l e s t a t e
i n the City of New Orleans, with b u i l d i n g s on i t , be l e f t t o t h e s o l e
d i s p o s a l of t h e subordinate o f f i c e r , "
I t i s p l a i n l y evident t h a t t h i s
language i s not a p p l i c a b l e t o t h e present case, since t h e r e i s a
v a l i d reason f o r supposing t h a t Congress intended t o r e q u i r e t h a t
s a l e s under s e c t i o n 1 should be p u b l i c , while p e r m i t t i n g s a l e s under
s e c t i o n 5 t o be made i n such manner as t h e S e c r e t a r y might deem proper#
The b u i l d i n g s t o be sold under s e c t i o n 5 are government b u i l d i n g s which
are customarily purchased by S t a t e s or m u n i c i p a l i t i e s , many of which
are f o r b i d d e n by law t o b i d a t public p a l e s , while t h e s i t e s t o be sold
under s e c t i o n 1 are e i t h e r vacant lande or lands containing b u i l d i n g s
s u i t a b l e f o r pubchase by anyone,
T/Vhile i t has been t h e general p r a c t i c e of t h e Procurement Division
i n a c t i n g under s e c t i o n 5 t o s e l l Federal Buildings and s i t e s a t p u b l i c
s a l e , yet exceptions have r e g u l a r l y been made when t h e circumstances
r e q u i r e d t h a t p r i v a t e sales should be h e l d .
In view of t h e f a c t t h a t
-10-
t h e Federal Reserve Board was c r e a t e d by Act of Congress, and is# as
has been s t a t e d , an independent establishment of t h e Government, i t
would seem evident t h a t i n t h e p r e s e n t case an exception t o the g e n e r a l
a d m i n i s t r a t i v e p r a c t i c e might a p p r o p r i a t e l y be made*
tv. •
.C-758S
August 15, 1934.
StrBJSCr:
Sxclubion fro?- Banking Quarters of Member Banks
and 3axJ:s V/hose Deposits are Inr.ured toy the Federal Deposit Insurance Corporation of O f f i c e s o*
Oth ? :v Organ! zati ons.
Dear S i r :
An amendment to e x i s t i n g law has t e e n proposed for the purpose
of excluding from the hanking quarters of member hanks and other hanks
whose deposits are insured hy the Federal Deposit Insurance Corporation
any other organization whose a c t i v i t i e s might embarrass such hanks or
might render the supervision of the hanks more d i f f i c u l t .
As submitted,
the proposed amendment would prohibit any bank, banking a s s o c i a t i o n , or
trust company, and any other organization or person engaged i n the banking, building and loan, brokerage, s e c u r i t i e s , insurance, indemnity or
trust business, or i n Ihn bvainess of receiving d e p o s i t s , or engaged i n
issuing or s e l l i n g -i- t e s ov other evidences of indebtedness, from occupying any part of t>o quarters in Which any or the business of a member
bank or bank whose dop -: i t s are insured under s e c t i o n 1233 of the Federal
Reserve Act i s conducted.
Tan proposed pr . - i n i t i o s rc ild |idt include organization# which,
R6 tenants, simply occ-mj-* s w c e i n other parts of the hank b u i l d i n g , and
S p p l i e s only to or?*?*»iizatiotts which share space i n the tytrMn^ quarters
or occupy r.-ijoiniru^ r.pac<.;, access to which i s p o s s i b l e through the bazfeiiv; quarters.
~
8 0
X-7532
«* 2 •*
l a order f
t
i.vi:z ^iro proper consideration to thv pro.
j.. jfc.od ^,^aic!iuont, i t w i l l "be appreciated i f you w i l l make a» i n v e s t i " t i r i a your d i s t r i c t of the extent to which other organizations maintain o f f i c e s i n the banking quarters of member banks and other banks whose
deposits are insured by the Federal Deposit Insurance Corporation, f.id
what the e f f e c t on such organizations and the banks might be i f the proposed amendment were enacted i n t o law.
In making the requested i n v e s t i -
gation, i t i s not b e l i e v e d necessary or desirable to c i r c u l a r i z e State
member banks, as i t i s believed that, from your general information and
from information a v a i l a b l e to your examiners, an approximate idea may be
obtained as to the extent the State member banks share t h e i r quarters with
other organisations.
I t aoy a l s o be p o s s i b l e i n conversations with the
chief national bank examiners aad the supervising exa^iiners for the Federal
Deposit Insurance Corporation to obtain further information as t o tho extent of such p r a c t i c e i n other banks, and i t i s not wipes ted that you
should c i r c u l a r i z e the banks whose deposits are insured by the Federal Dep o s i t Insurance Corporation, as such inquiries ni£ht "c- n d s i ^ - r p r v t e d .
The Board a l s o w i l l a ^ r o c i a t e your suggestions and comments, with
•
>-
,
special reference to the qu.estion the^fcor the purpose i s desirable and
wlxethdr the proposed anoaicfoant as described above i s s u f f i c i e n t l y co;xprehensive, or whether, ojx f the other haafl f
r e s u l t i n i n j u s t i c e t o some banks*
i s too i n c l u s i v e and Would
-
Tory truly yours,
Chaster Morrill
Secretary.
COPY
X-7983
White House
Washington, D. 0 .
August 15th, 1934.
Dear Governor
I have accepted, with g r e a t r e l u c t a n c e , your
r e s i g n a t i o n as Governor of the Federal Reserve Board, e f f e c t i v e
today as requested "by you.
And now t h a t you a r e leaving Washington and r e t u r n i n g to A t l a n t a where you w i l l reassume the p o s t of Governor of t h e
Federal Reserve Bank t h e r e , I am glad you a r e u n d e r t a k i n g a new
and important a d d i t i o n a l t a s k .
You can do much good "by p r e s e n t i n g the recovery
program to the c o u n t r y ' s r e s e r v e "banks, commercial "banks and other
f i n a n c i a l i n s t i t u t i o n s ; "by a c q u a i n t i n g them with t h e successive
s t e p s taken "by t h e Administration which have r e s u l t e d i n t h e present
prosperous c o n d i t i o n of t h e s e i n s t i t u t i o n s and which make p o s s i b l e
t h e i r cooperation w i t h the A d m i nistration i n i t s program of complete
"business r e h a b i l i t a t i o n .
I am pleased t o t h i n k t h a t your p o s i t i o n as Governor of
the Federal Reserve Bank a t A t l a n t a w i l l give you o p p o r t u n i t y t o
undertake t h i s work, and t h a t t h a t bank, together with the F e d e r a l
Reserve Board, w i l l cooperate with you i n i t s performance.
I n order t h a t I may keep f u l l y informed as your work
p r o g r e s s e s , I wish you would send me r e p o r t s from time t o time.
I want a l s o to express to you my deep p e r s o n a l a p p r e c i a t i o n f o r the f i n e s e r v i c e you have rendered a t a l l times
s i n c e you assumed the Governorship of the Federal Reserve Boards
The splendid r e c o r d you have made e n t i t l e s you to the g r a t i t u d e ,
not only of those d i r e c t l y i n t e r e s t e d i n Government and "banking,
but to the m i l l i o n s of hank d e p o s i t o r s throughout t h e country who
owe much to you because of the wise judgment you exercised i n t h e
c r i t i c a l times of not long ago.
The thanks of the e n t i r e country should, t h e r e f o r e ,
be conveyed to you along with t h i s expression of my own p e r s o n a l
appreciation.
I am t h a n k f u l , a l s o , f o r the reason t h a t although
you a r e leaving us h e r e i n Washington, you s t i l l w i l l be a s a c t i v e ,
or even more a c t i v e , i f such i s p o s s i b l e , i n t h e discharge of the
A t l a n t a Bank's r e s p o n s i b i l i t i e s and i n t a k i n g on new d u t i e s which
w i l l h e lp the whole country.
Very s i n c e r e l y y o u r s ,
(Signed)
F r a n k l i n D. Roosevelt
Honorable Eugene Black,
Governor, Federal Reserve Board,
Washington, D. C.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7984.
August 17, 1934.
Dear S i r :
R e f e r r i n g to the Board's l e t t e r of J u l y 3,
1934, (X-7949), i n regard to t h e f i n a l d i s p o s i t i o n of
a p p l i c a t i o n s under Section 32, a t t e n t i o n i s c a l l e d to
t h e f a c t t h a t the phrase "beginning a t l i n e 5 on page 1
thereof r e a d i n g "pursuant to Section 17(g) of Regulation
R , " should read "pursuant to Section IV(h) of Regulation
R,".
A l l a v a i l a b l e copies of t h e f o r e g o i n g l e t t e r
should be c o r r e c t e d a c c o r d i n g l y .
TO
Very t r u l y yours,
Chester M o r r i l l ,
Secretary,
ALL F. R. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
Xp-7985
August 18, 1934.
SUBJECT:
Code Word Covering New I s s u e
of 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 hanks, the
following code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"NOXNAT" - Treasury B i l l s to "be dated August 22,
1934, and to mature February 20, 1935.
This word should be i n s e r t e d i n t h e F e d e r a l Res e r v e Telegraph Code book, following the supplemental code
word "HOXMUL" on page 172.
Very t r
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e TO
the federal reserve board
X-7986
August 18, 193^
SUBJECT:
Expense, Main Lines, Leased
Wire System, J u l y , 193^*
Dear S i r :
Inclosed herewith you w i l l find two mimeographed statements, X-7986~a and X-7986-b, covering
in d e t a i l operations of the main l i n e s , Leased Wire
System, during the month of July, 193^«
P l e a s e c r e d i t the amount payable "by your bank
f o r your share of the expense of the Leased Wire
System, to the Federal Reserve Bank of Richmond in
your d a i l y statement of c r e d i t s through the Gold S e t tlement Fund f o r the account of the F e d e r a l Reserve
Board, and advise the Federal Reserve Bank of Richmond
by wire the amount and purpose of the c r e d i t .
Very t r u l y yours,
F i s c a l Agent
Inclosures
TO GOVERNORS OF ALL F. R, BAMS,
86
4
X-7986-a
REPORT SHOWING CLASSIFICATION AM) NUMBER OF WORDS TRANSMITTED OVER MAI IT LIHES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MOITTH OF JULY, 193%,
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t , Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
F . R. Board b u s in e s s
Net Federal
reserve
bank
business
Words sent "by
Hew York chargeable t o other
F. R, Banks ( l )
72,033
37,527
4.i4
17.86
3.85
7*11
6.61
7»10
11.37
9.40
4.90
54,159
85,739
765,911
7.07
11.19
100.00
31,677
136,776
29,465
54,437
50,637
54,400
1,370
30,307
136,776
27,923
52,965
49,130
52,796
85,137
70,527
36,155
70,510
51,692
82,280
7^6,298
Per cent of t o t a l
Bank business (*)
1,542
1,472
1,507
l,6o4
1,964
87,101
1,506
1,372
71,960
1$
h m .
19,613
. . . . . . . .
345,4)9
1,111,350
Reimbursable b u s ine s s Incoming & Outgoing . .
Total words t r a n s m i t t e d over main l i n e s .
.
671,200
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(*)
These percentages u s e d 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 ? i r e expense as shown
on the accompanying statement (X^-7986-b).
(l)
Number of words sent by New York to other F. R. Banks f o r t h e i r sole 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 1 Conference
Nobember 2-4, 1925.
. . . . .
1,782,550
00
X-7986-b
REPORT OF EXPENSE MAI 17 LIKES
FEDERAL RESERVE LEASED WIRE SYSTEM, JULY, 1S31+.
STame of Bank
Operators'
Salaries
Retirement
Contributions
$260.00
$ 23.40
Boston
121.12
1,345.80
Hew York
225.00
20.25
Philadelphia
306.66
27.60
Cleveland
190.00
17.10
Richmond
Atlanta
270.00
24.30
Chicago
4 , 4 6 8 . 3 8 ( f ) 373.43
S t . Louis
195.00
17.55
Minneapolis
18.00
211.25
Kansas C i t y
287.00
25.83
Dallas
251.OO
22.59
San F r a n c i s c o
380.00
34.20
—
F e d e r a l Reserve Bd.
Total
$8,390.09
$725.1+2
$ -
$ -
-
-
7-00
-
-
—
—
$10.00
Main l i n e 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
Amount reimbursable t o Chicago
Wire
rental
3.00
Less Reimbursable Charges:
(&)
(#)
(*)
(a)
Operators'
overtime
Total
expenses
$283.40
1,469.92
245.25
—»
33^.26
230.00(&)
437.10
—
294.30
4,848.86
212.55
229.25
312.83
—
273.59
414.20
15,637.6?
15,637.65
$15,867.68
$24,993-19
-
9,410.91
$15,582.28
Pro r a t a
share of
total
expenses
$645.11
2,783.00
599.92
1,107.90
1,029.99
1,106.34
1,771.70
1,464.73
1,101.67
1,743.66
Credits
$283.40
1,469.92245.25
334.26
437.10
294.30
4,848.86
212.55
229.25
312.83
273.59
414.20
Payable t o
Federal
Reserve
Board
$361.71
1,313.08
354.67
773.64
592.89
812.04
3,077.16c*)
1,252.18
534.28
1,151.90
828.08
1,329.46
—
$15,582.28
$9,355.51
$9,303,93
3,077.16(a)
$6,226,77
e
00
00
FEDERAL RESERVE BOARD
89
WASHINGTON
address official correspondence t o
the federal reserve board
X-7987
August 18, 1934.
SUBJECT:
Preliminary D r a f t of Regulation Ee Extension and
Maintenance of Credit "by Brokers, D e a l e r s , and
Members of S e c u r i t i e s Exchanges.
Dear S i r :
There i s enclosed herewith a p r e l i m i n a r y d r a f t of Regulation T —
Extension and Maintenance of Credit "by Brokers, D e a l e r s , and Members of
S e c u r i t i e s Exchanges.
There a r e a l s o enclosed drafts of a proposed a g r e e -
ment to be signed by nonmember banks wishing to q u a l i f y under t h e S e c u r i t i e s Exchange Act of 1934 to make loans to brokers, and c e r t a i n r e l a t e d
documents.
You w i l l n o t e t h a t t h e s e a r e p r e l i m i n a r y d r a f t s and t h a t
not f o r p u b l i c a t i o n .
they
are
I t i s the Board's d e s i r e to have t h e b e n e f i t of f u l l
and f r e e c r i t i c i s m s of these d r a f t s and suggestions a s t o t h e i r improvement
i n any r e s p e c t t h a t may seem d e s i r a b l e .
You a r e r e q u e s t e d t h e r e f o r e i n -
formally to submit copies to r e p r e s e n t a t i v e s of s e c u r i t i e s exchanges i n
your D i s t r i c t and t o other persons whd a r e i n your judgment q u a l i f i e d to
offer useful suggestions.
I t i s requested t h a t you o b t a i n suggestions and
c r i t i c i s m s from such persons i n w r i t i n g and transmit t h e o r i g i n a l s thereof
to the Board as soon a s they a r e received and t h a t , i n a d d i t i o n t h e r e t o ,
you f u r n i s h to the Board i n w r i t i n g your own c r i t i c i s m s and suggestions and
X-7987
g
— 2 —
t h e substance of any a d d i t i o n a l c r i t i c i s m s and suggestions which you may
r e c e i v e v e r b a l l y from other sources.
I t i s a l s o suggested t h a t i f p o s s i b l e you a r r a n g e f o r a conference
to which you would i n v i t e r e p r e s e n t a t i v e s of t h e exchanges and a t which the
substance and form of the r e g u l a t i o n would be d i s c u s s e d .
While summary r e -
p o r t s of the proceedings of such conferences should be t r a n s m i t t e d to the
Board, i t i s not intended t h a t t h e se should take t h e p l a c e of t h e w r i t t e n
comments r e q u e s t e d .
Whenever p r a c t i c a b l e , i t w i l l be a p p r e c i a t e d i f you
w i l l n o t i f y the Board of any general conference of t h i s c h a r a c t e r i n time
f o r members of the Board or i t s s t a f f to a t t e n d i f they d e s i r e t o do s o .
You w i l l note t h a t t h e margin requirements p r e s c r i b e d by t h i s regul a t i o n a r e those o u t l i n e d i n the S e c u r i t i e s Exchange Act of 1934.
Attention
i s c a l l e d , however, t o the f a c t t h a t t h e Board has a u t h o r i t y t o p r e s c r i b e
d i f f e r e n t margin requirements and t h a t the i n c l u s i o n of t h e s t a t u t o r y
formula i n t h i s p r e l i m i n a r y d r a f t of the r e g u l a t i o n i s not to be taken a s
i n d i c a t i n g t h a t t h e Board has decided t o promulgate t h i s p a r t i c u l a r standard.
Since the r e g u l a t i o n must become e f f e c t i v e October 1 , and p a r t i e s
i n t e r e s t e d should have p r i o r to such d a t e as much time as p o s s i b l e to become
f a m i l i a r w i t h t h e new r e g u l a t i o n , you a r e requested t o have a l l suggestions
and c r i t i c i s m s i n t h e hands of t h e Bo&rd a t t h e e a r l i e s t p o s s i b l e moment, and
i n any event not l a t e r than September 1.
TO ALL P. R.
Very t r u l y yours
€Z\j
Chester M o r r i l l
Secretary.
AGENTS
jy")
0
FEDERAL RESERVE BOARD
<
WASHINGTON
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e TO
t h e federal reserve board
7 9 Q8
August 20, 1934.
SUBJECT:
Holidays d u r i n g Septemberj 19344
Dear S i r ;
On Monday, September 3, Labor Day, t h e o f f i c e s of t h e F e d e r a l
Reserve Board and a l l F e d e r a l r e s e r v e banks and b r a n c h e s m i l be c l o s e d .
The Board has been advised t h a t h o l i d a y s a l s o w i l l be observed
by F e d e r a l r e s e r v e banks and branches during September, as f o l l o w s :
Monday,
S e p t , 10,
Wednesday, S e p t . 12,
San F r a n c i s c o
Los Angeles
Admission Day
(California)
Baltimore
Defenders Day
(Maryland)
On t h e d a t e s g i v e n t h e o f f i c e s mentioned w i l l n o t p a r t i c i p a t e
i n e i t h e r t h e t r a n s i t or t h e F e d e r a l r e s e r v e n o t e c l e a r i n g t h r o u g h t h e
Gold S e t t l e m e n t Fund.
Please include t r a n s i t clearing 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 t h e h o l i d a y s w i t h your c r e d i t s f o r t h e f o l lowing b u s i n e s s day*
No d e b i t s covering shipments of F e d e r a l r e s e r v e
n o t e s f o r t h e F e d e r a l Reserve Bank of San F r a n c i s c o should be i n c l u d e d
i n your n o t e c l e a r i n g of Monday, September 10*
Please n o t i f y branches.
TO GOVERNORS
Very t r u l y yours
S. R» Carpenter
Assistant Secretary.
OF ALL FEDERAL RESERVE BANKS.
X-7989
There i s quoted below an a r t i c l e appearing i n t h e August 19, 1934,
e d i t i o n of t h e New York Times:
LOAN PLANS "WIN BANKERS' FAVOR
Conferences With S t a t e Groups Here
Expected t o Promote I n d u s t r y Program
C r e d i t Survey Speeded
Reserve O f f i c i a l s t o Explain th-;.
Methods t o North J e r s e y I n s t i t u t i o n s '
Heads This Week.
The s e r i e s of c o n f e r e n c e s of bankers from v a r i o u s s e c t i o n s of NeVr
York S t a t e h e l d l a s t week i n t h e F e d e r a l Reserve Bank i s expected t o
g i v e impetus t o t h e program of supplying working c a p i t a l l o a n s t o i n d u s t r y t h r o u g h t h e c o o p e r a t i o n of f i n a n c i a l i n s t i t u t i o n s and t h e Reserve
Banks under t h e r e c e n t amendment t o t h e F e d e r a l Reserve A c t .
Upward of
600 bankers a r e e s t i m a t e d to have a t t e n d e d t h e meetings h e l d f r o m Tuesday t o F r i d a y and t h e meeting i p Rochester y e s t e r d a y a f t e r n o o n .
A final
meeting t o be h e l d i n B u f f a l o next S a t u r d a y w i l l complete t h e coverage
of t h e S t a t e .
V i r t u a l l y t h e e n t i r e banking s t r e n g t h of t h e S t a t e has been brought
i n t o c o n t a c t w i t h t h e program by t h e meetings and d e t a i l e d e x p l a n a t i o n s
of t h e mechanics of t h e loans and t h e p o l i c i e s involved have been made
-2-
X-7989*
. •
available*
To Survey C r e d i t Needs.
As a r e s u l t of t h e meetings bankers i n t h e v a r i o u s r e g i o n a l groups
have agreed t o u n d e r t a k e surveys of t h e c r e d i t needs of t h e i r l o c a l i t i e s and t o r e p o r t back t o t h e i r group l e a d e r s d a t a which can be employed by t h e F e d e r a l Reserve Bank i n making more e f f e c t i v e t h e campaign
The bankers a r e expected t o l i s t t h e i n d u s t r i a l o r g a n i z a t i o n s i n t h e i r
r e s p e c t i v e c i t i e s and towns which would be e l i g i b l e f o r working c a p i t a l
loans and t o i n d i c a t e which of t h e s e a r e i n need of c r e d i t and which
could be e x p e c t e d t o q u a l i f y .
I t i s expected t h a t t h e r e s u l t s of t h e
survey w i l l be r e a d y w i t h i n t e n days t o two weeks.
These c o n f e r e n c e s of the New York S t a t e b a n k e r s , which were h e l d
under t h e a u s p i c e s of t h e New York S t a t e Bankers A s s o c i a t i o n , w i l l be
f o l l o w e d t h i s week by a s e r i e s of meetings of bankers f r o m Northern New
J e r s e y , which d i s t r i c t i s i n c l u d e d i n the New York Reserve Bank's a r e a .
Meetings of t h e New J e r s e y bankers w i l l be h e l d on Tuesday, Wednesday
and F r i d a y and groups of about 100 a r e expected t o a t t e n d each c o n f e r ence*
Bankers Are E n t h u s i a s t i c .
The meetings d i s c l o s e d a g e n e r a l l y e n t h u s i a s t i c a t t i t u d e on t h e
p a r t of t h o s e who a t t e n d e d , a l t h o u g h many bankers were d o u b t f u l i f
numerous borrowers e x i s t e d i n t h e i r l o c a l i t i e s who were n o t a l r e a d y
r e c e i v i n g adequate c r e d i t t h r o u g h t h e u s u a l channels or could q u a l i f y
under t h e new program.
94
3Bankers who a r e f a m i l i a r w i t h t h e program say t h a t some misunders t a n d i n g has a r i s e n over t h e r e l a t i v e l y small amount of loans t h u s f a r
r e p o r t e d made by t h e Reserve Banks.
They p o i n t out t h a t t h e program
i s j u s t g e t t i n g under way and t h a t t h e p u b l i s h e d t o t a l of ^214,000
r e p r e s e n t s only loans t h a t have a c t u a l l y been made, whereas i f t h e
t o t a l of loans a r r a n g e d f o r were shown i t would be l a r g e r .
I t i s ex-
p e c t e d t h a t from now on t h e f i g u r e s may r i s e more r a p i d l y Another misapprehension t h a t has appeared i n some q u a r t e r s i s t h a t
t h e loans may be made o n l y u n t i l Dec. 31.
This time l i m i t a p p l i e s t o
t h e d i r e c t l o a n s t o i n d u s t r y being iaade by t h e R e c o n s t r u c t i o n Finance
C o r p o r a t i o n under t h e Loans t o I n d u s t r y Act, b u t t h e r e i s no t i m e l i m i t
on t h e F e d e r a l R e s e r v e ' s o p e r a t i o n s under t h i s measure.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
x
w
79
August 25, 1934
SUBJECT:
A s s i s t a n t F e d e r a l Reserve Agents
a t Branches of F e d e r a l Reserve Banks.
Dear S i r :
I t h a s come t o the a t t e n t i o n of t h e F e d e r a l Reserve Board
t h a t t h e r e p r e s e n t a t i v e s of t h e F e d e r a l Reserve Agents a t c e r t a i n
of t h e "branches of t h e F e d e r a l r e s e r v e banks have been g i v e n
b l a n k e t a u t h o r i t y t o i s s u e F e d e r a l r e s e r v e n o t e s under c e r t a i n
c o n d i t i o n s w i t h o u t o b t a i n i n g s p e c i f i c a u t h o r i t y i n each c a s e from
t h e o f f i c e of t h e F e d e r a l Reserve Agent,
I n o r d e r t o i n s u r e compliance w i t h t h e requirement of t h e
s t a t u t e that the c o l l a t e r a l security f o r Federal reserve notes
s h a l l not be l e s s t h a n t h e amount of such n o t e s , t h e F e d e r a l Res e r v e Board i s i n c l i n e d to b e l i e v e t h a t no F e d e r a l r e s e r v e n o t e s
should be i s s u e d by A s s i s t a n t F e d e r a l Reserve Agents or A c t i n g
A s s i s t a n t F e d e r a l Reserve Agents at b r a n c h F e d e r a l r e s e r v e banks
except upon s p e c i f i c a u t h o r i t y or w i t h t h e s p e c i f i c consent of
t h e F e d e r a l Reserve Agent or an A s s i s t a n t F e d e r a l Reserve Agent
a t t h e head o f f i c e of t h e bank i n each c a s e .
However, b e f o r e
i s s u i n g i n s t r u c t i o n s t o t h i s e f f e c t , t h e F e d e r a l Reserve Board
•will be g l a d t o r e c e i v e your comments as t o t h e f e a s i b i l i t y of
such a r e q u i r e m e n t .
X-7992
-2The Board i s a l s o informed t h a t Acting A s s i s t a n t F e d e r a l
Reserve Agents a t t h e "branches of t h e F e d e r a l r e s e r v e "banks a r e
r e g a r d e d as employees of t h e r e s p e c t i v e "banks.
In t h i s connection
t h e Board d e s i r e s t o c a l l a t t e n t i o n t o t h e requirement of s e c t i o n 16
of t h e F e d e r a l Reserve Act t h a t a l l F e d e r a l r e s e r v e n o t e s and a l l
gold c e r t i f i c a t e s and l a w f u l money i s s u e d t o or d e p o s i t e d w i t h any
F e d e r a l Reserve Agent s h a l l "be h e l d by such Agent i n t h e j o i n t
custody of h i m s e l f and the F e d e r a l r e s e r v e "bank t o which he i s
accredited.
I n view of t h i s p r o v i s i o n of law t h e Board f e e l s t h a t
Acting A s s i s t a n t F e d e r a l Reserve Agents p a r t i c i p a t i n g i n such j o i n t
custody should be r e s p o n s i b l e t o t h e Agent and independent of t h e
F e d e r a l r e s e r v e bank i n so f a r as i s c o n s i s t e n t w i t h t h e p r a c t i c a l
situation.
They should be on t h e p a y r o l l of t h e F e d e r a l Reserve
Agent and s o l e l y r e s p o n s i b l e t o him f o r t h e p r o p e r performance of
their duties.
During such p e r i o d s as t h e y a r e not engaged w i t h t h e i r
d u t i e s a s Acting A s s i s t a n t F e d e r a l Reserve Agents, however, t h e y may
be d e t a i l e d by t h e F e d e r a l Reserve Agent t o p e r f o r m such f u n c t i o n s
f o r t h e bank as t h e F e d e r a l Reserve Agent may c o n s i d e r a d v i s a b l e .
I t i s s u g g e s t e d t h a t you make such changes i n your arrangements w i t h
r e s p e c t t o Acting A s s i s t a n t F e d e r a l Reserve Agents a t b r a n c h e s as
may be n e c e s s a r y t o conform t o t h e views e x p r e s s e d h e r e i n w i t h r e gard to t h i s matter.
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
TO ALL F. R. AGENTS
(Except Boston and P h i l a d e l p h i a )
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7993
August 25, 1934.
SUBJECTs
Code Word Covering New I s s u e
of Treasury B i l l s .
Dear S i r s
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 F e d e r a l r e s e r v e banks, t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of T r e a s u r y B i l l s :
"NOXNER" - T r e a s u r y B i l l s t o be d a t e d August 29,
1934, and t o mature F e b r u a r y 27, 1935
This word should be i n s e r t e d i n t h e F e d e r a l Reserve Telegraph Code book, f o l l o w i n g t h e supplemental
code word "NOXNAT" on page 172.
Very t r u l y y o u r s ,
S. R. C a r p e n t e r ,
Assistant Secretary
TO GOVERNORS OF ALL F . R. BANKS.
FEDERAL RESERVE BOARD
*
98
WASHINGTON
X-7994
address official correspondence t o
the federal reserve board
August 25, 1934.
SUBJECTi
A d m i n i s t r a t i o n of S e c u r i t i e s Exchange Act
of 1934.
Dear S i r s
P r i o r t o October 1, 1934, t h e Board w i l l i s s u e r e g u l a t i o n s under
t h e S e c u r i t i e s Exchange Act of 1934 concerning t h e e x t e n s i o n and maintenance of c r e d i t by b r o k e r s , d e a l e r s , and members of s e c u r i t i e s exchanges.
I t i s expected t h a t t h e p u b l i c a t i o n of t h i s r e g u l a t i o n may
give r i s e t o numerous i n q u i r i e s and t h a t i f a l l such i n q u i r i e s a r e r e f e r r e d t o t h e Board r e p l i e s w i l l be unavoidably delayed•
In order t o
e l i m i n a t e as much d e l a y as p o s s i b l e , i t i s hoped t h a t most of t h e quest i o n s can be disposed of a t t h e F e d e r a l r e s e r v e banks and w i t h t h i s i n
mind i t i s suggested t h a t , if you have not a l r e a d y done so, you d e s i g n a t e
a t your bank some member or members of your s t a f f , i n c l u d i n g i f p o s s i b l e
someone i n c o r n s e l 1 s o f f i c e , t o become f a m i l i a r w i t h t h e S e c u r i t i e s Exchange Act of 1934, t h e Board's r e g u l a t i o n s t h e r e u n d e r and t h e b u s i n e s s
p r a c t i c e s of members, b r o k e r s , and d e a l e r s to which such r e g u l a t i o n s
relate.
This procedure should help t o minimize t h e number of q u e s t i o n s
upon which i t w i l l be n e c e s s a r y f o r t h e Board t o i s s u e f o r m a l r u l i n g s .
TO ALL FEDERAL
Very t r u l y yours
f r l
Chester M o r r i l l ,
Secretary.
RESERVE AGENTS.
o v u X f
99
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7995
August 30, 1934.
SUBJECT:
Code Word Covering New I s s u e
of 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, t h e
following code word has been designated t o cover a new
i s s u e of Treasury B i l l s :
"UOXEIG-" - Treasury B i l l s to "be dated September 5,
1934, and to mature March 6, 1935.
This word should be i n s e r t e d i n t h e Federal Reserve Telegraph Code book, f o l l o w i n g the supplemental
code word "UOXHER" on page 172.
Very t r u l y yours,
S. B. Carpenter,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. M S .
100
X-7996
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
September 1, 1934•
Vice Governor Thomas, of t h e F e d e r a l Reserve Board, t o d a y i s s u e d
the following statement:
"The Federal Reserve Board, under t h e terms of t h e S e c u r i t i e s
Exchange Act of 1934, i s r e q u i r e d t o i s s u e by October 1, 1934
r e g u l a t i o n s r e l a t i n g t o t h e e x t e n s i o n and maintenance of c r e d i t i n
connection with t h e purchasing and c a r r y i n g of s e c u r i t i e s .
A pre-
l i m i n a r y d r a f t of t h e s e r e g u l a t i o n s , prepared by t h e s t a f f but not
p r e v i o u s l y considered by t h e Board, was f u r n i s h e d f o r comments and
s u g g estio n s t o a l i m i t e d number of persons, but not f o r p u b l i c a t i o n .
The Federal Reserve Board has not yet decided upon t h e terms of t h e
r e g u l a t i o n s , and p a r t i c u l a r l y i t has not e s t a b l i s h e d margin r e q u i r e ments *
In t h e p r e l i m i n a r y d r a f t , f o r t h e purpose of d i s c u s s i o n ,
the margin requirements used are those p r e s c r i b e d i n t h e law as a
b a s i s f o r t h e Board's d e t e r m i n a t i o n of margins.
I t i s t h e Board's
e x p e c t a t i o n t o i s s u e t h e r e g u l a t i o n s during September."
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7997
September 4, 1934.
SUBJECT;
C l a s s i f i c a t i o n of Loans under
T i t l e I of t h e N a t i o n a l
Housing A c t .
Dear S i r :
There i s a t t a c h e d f o r your i n f o r m a t i o n a copy
of a l e t t e r a d d r e s s e d by t h e Board under d a t e of September 4, 1934, t o t h e F e d e r a l Reserve Agent a t t h e F e d e r a l
Reserve Bank of Cleveland, w i t h r e g a r d t o t h e c l a s s i f i c a t i o n by examiners f o r t h e F e d e r a l r e s e r v e banks of
loans made under t h e p r o v i s i o n s of S e c t i o n 2, T i t l e I
of t h e N a t i o n a l Housing A c t .
Very t r u l y yours
Chester M o r r i l l
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
• 103
COPY
X-7997-a
September 4, 1934.
Mr• L. B. Williamsj
Federal Reserve Agent,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Dear Mr. Williams:
Reference i s made t o your l e t t e r of August 20, 1934, concerning loans made by banking i n s t i t u t i o n s under the p r o v i s i o n s of Section
2, T i t l e I of t h e National Housing Act and, p a r t i c u l a r l y , t h e c l a s s i f i c a t i o n of such loans by examiners f o r t h e Federal Reserve Banks.
The National Housing Act provides f o r the insurance of such
loans, under the conditions imposed, t o an amount not t o exceed 20 per
cent of t h e t o t a l amount of the loans, advances of c r e d i t , and purchases
made by each approved f i n a n c i a l i n s t i t u t i o n f o r the p r e s c r i b e d purposes.
Under Section 3, T i t l e I of t h e Act, the Administrator i s
authorized t o make loans t o i n s t i t u t i o n s insured under Section 2, upon
the s e c u r i t y of o b l i g a t i o n s which meet t h e requirements p r e s c r i b e d under
Section 2, f o r the f u l l f a c e value of the o b l i g a t i o n s o f f e r e d as s e c u r i t y , s u b j e c t t o such r a t e s , terms and conditions as t h e Administrator
s h a l l determine.
B u l l e t i n No. 1, issued by the Federal Housing Adminis-
t r a t i o n August 10, 1934, contains the following statement;
" L i q u i d i t y i s assured by an agreement of t h e Federal
Housing Administration incorporated i n the Contract of
Insurance, t o advance cash t o any f i n a n c i a l i n s t i t u t i o n
demonstrating the need f o r same, a t any time, up t o t h e
f u l l f a c e value of a l l outstanding insured notes i n good
standing."
Mr. L. B. Williams
2-
X-7997-a
I t i s f u r t h e r e x p l a i n e d i n t h e B u l l e t i n t h a t such r e d i s c o u n t
f a c i l i t i e s a r e n o t i n t e n d e d f o r use i n order t o o b t a i n government money
t o lend b u t a r e t o a s s u r e t h e a b i l i t y of t h e f i n a n c i a l i n s t i t u t i o n t o
r a i s e cash a g a i n s t such r e c e i v a b l e s i n case of emergency#
The Board f e e l s t h a t the examiners f o r t h e F e d e r a l Reserve
Banks should be i n s t r u c t e d t h a t no p a r t of t h e loans made under t h e
p r o v i s i o n s of S e c t i o n 2, T i t l e I of t h e N a t i o n a l Housing Act should be
c l a s s i f i e d as slow, d o u b t f u l , or l o s s so long as t h e i n s u r a n c e provided
by t h e F e d e r a l Housing A d m i n i s t r a t i o n a d e q u a t e l y covers t h e l o a n s or
p o r t i o n s t h e r e o f which might otherwise be so c l a s s i f i e d .
I t i s under-
stood t h a t s i m i l a r i n s t r u c t i o n s have been i s s u e d by t h e Comptroller of
t h e Currency t o a l l n a t i o n a l bank examiners.
I t i s understood t h a t , i f you have n o t a l r e a d y done so, you
w i l l r e c e i v e copies of t h e r e g u l a t i o n s of t h e F e d e r a l Housing A d m i n i s t r a t i o n from t h a t o r g a n i z a t i o n .
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7998
September 5, 1934
SUBJECT:
Discount of o b l i g a t i o n entered i n t o to
o b t a i n working c a p i t a l f o r "business l o cated i n another Federal r e s e r v e d i s trict.
Dear S i r :
For your information t h e r e i s inclosed herewith a copy
of a telegram r e c e n t l y received "by t h e Federal Reserve Board from
the Federal Reserve Bank of Cleveland, together w i t h a copy of
the Board's r e p l y t h e r e t o , r e l a t i n g to the a u t h o r i t y of t h e
Federal r e s e r v e "banks to discount f o r a f i n a n c i n g i n s t i t u t i o n an
o b l i g a t i o n e n t e r e d i n t o f o r the purpose of o b t a i n i n g working c a p i t a l f o r an e s t a b l i s h e d i n d u s t r i a l or commercial b u s i n e s s l o c a t e d
i n another Federal r e s e r v e d i s t r i c t .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosures.
TO CHAIRMEN OF ALL FEDERAL RESERVE BAHKS.
105
COPY
TELEGRAM
FEDERAL
RESERVE
SYSTEM
(Leased Wire Service)
X-<7998-a
Cleveland, J u l y 25, 1934.
Board
Washington
Request r u l i n g a s t o whether t h i s hank may handle t r a n s a c t i o n
under s u b s e c t i o n (B) of s e c t i o n 13B with f i n a n c i n g i n s t i t u t i o n
o p e r a t i n g i n t h i s d i s t r i c t f o r u l t i m a t e b e n e f i t of customer of
such f i n a n c i n g i n s t i t u t i o n located i n another d i s t r i c t .
We have urged f i n a n c i n g i n s t i t u t i o n s to p a r t i c i p a t e i n
such c r e d i t s and i n p r a c t i c e A negative answer w i l l be s e r i o u s
impediment to operations as A s i m i l a r r u l i n g would be under s e c t i o n
13.
We b e l i e v e t h a t due c o n s i d e r a t i o n must be given to f a c t t h a t
t r a d e a r e a s and Federal Reserve d i s t r i c t l i n e s do not c o i n c i d e
This p a r t i c u l a r l y t r u e i n t h i s d i s t r i c t .
Our counsel a d v i s e s :
"While above question not f r e e from doubt i n view of
f a c t t h a t subsection (B) uses term 'such e s t a b l i s h e d i n d u s t r i a l
or commercial b u s i n e s s , 1 which phrase apparently r e f e r s to
phrase i n subsection (A) ' e s t a b l i s h e d i n d u s t r i a l or commercial
b u s in e s s l o c a t e d i n i t ' s d i s t r i c t , ' we b e l i e v e t h a t i t was not
i n t e n t f o r congress to c r e a t e s i t u a t i o n
i n which i n d u s t r i a l
business would be u n a b l e t o secure c r e d i t under 13B through
106
2.
X-7998-a
i t ' s regular financing i n s t i t u t i o n "by reason of intervening Federal
Reserve d i s t r i c t l i n e .
Apparently congress intended i n d u s t r i a l and
commercial businesses to secure credit from regular sources i n cooperation with reserve "banks, and only to have reserve "banks make
direct loans as l a s t r e s o r t .
To further such p o l i c y , we b e l i e v e
that Mathematical construction of s e c t i o n should be avoided and
f a i l to percoive any v i o l a t i o n of policy i n making l i b e r a l construction.
If l i b e r a l construction i s given, wo b e l i e v e that proper
Federal Reserve bank i s that one in d i s t r i c t of which financing
i n s t i t u t i o n i s located.
We recognize our opinion contrary to
regulation S, s e c t i o n I I , paragraphs (B) and (C)."
Early advice w i l l be appreciated sincc two cases of
type i n question pending and others certain to a r i s e by reason of
geographical l o c a t i o n of number of our principal c i t i e s .
Zurlinden
±07
COPY
TELEGRAM
FEDERAL
RESERVE
BOARD
WASHINGTON
X-7998-b
July 31, 1934.
ZURLINDEN
CLEVELAND
Your wire July 25 requesting ruling whether under provisions of
subsection (b) of s e c t i o n 13b of the Federal Reserve Act your
"bank may discount for a financing i n s t i t u t i o n operating i n i t s
d i s t r i c t an obligation entered into for the purpose of obtaining
working capital for an established industrial or commercial business located i n another Federal reserve d i s t r i c t j u s t across the
l i n e dividing that d i s t r i c t from the Cleveland d i s t r i c t .
Federal
Reserve Board i s of the opinion that your bank may lawfully make
such discount provided, of course, that other applicable requirements of law and regulation are met.
(Signed)
Chester Morrill
MORRILL.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7999
September 5, 1934
SUBJECT:
Possible v i o l a t i o n s of the provisions
of Section 21 of the Banking Act of
1933.
Dear Sir:
There i s inclosed herewith, f o r your information,
a copy of a l e t t e r addressed by the Board to the Federal
Reserve Agent at Dallas, with regard to possible v i o l a t i o n s
of the provisions of Section 21 of the Banking Act of 1933.
Very truly yours,
Yf)<rvuJJZ
Chester Morrill,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AG-EM'S.
copy
" 1.09
X-7999-a
August 25, 1934
Mr. C. C. Walsh,
Federal Reserve Agent,
Federal Reserve Bank of D a l l a s , ,
Dallas, Texas.
Dear Mr. Walsh;
This r e f e r s to your l e t t e r of July 23, 1934, advising
that on July 2, 1934, you wrote a l e t t e r to each of certain named
unincorporated hanks in the State of Texas c a l l i n g i t s a t t e n t i o n
to the provisions of section 21 of the Banking Act of 1933, and
that you have not received r e p l i e s from any of them.
You s t a t e that
you are advising the Board of the status of these banks as shown by
your records i n order that the Board may decide whether the f a c t s
should be reported to the Department of J u s t i c e and that you are
deferring making a report to the l o c a l United States Attorneys u n t i l
you receive the Board's i n s t r u c t i o n s .
I t may be said i n general that i n a case in which the
f a c t s i n the possession of a Federal Reserve Agent show that a person or organization i s acting i n v i o l a t i o n of the provisions of
s e c t i o n 21 of the Banking Act of 1933 he should make a report of the
matter to the l o c a l United States Attorney and to the Federal Reserve
Board for transmission to the Department of J u s t i c e , but unless the
f a c t s within his knowledge are such as to make i t appear that a l l
the e s s e n t i a l elements of a v i o l a t i o n of the s t a t u t e are present
i t i s not believed that the matter i s one which should be reported.
X-7999-a
Mr. C. C. Walsh - 2
As stated i n the Board's l e t t e r of June 26, 1934 (X-7936), the Board
does not f e e l that i t i s necessary under the law that Federal reserve
"banks or Federal reserve agents maks an i n v e s t i g a t i o n i n order to
determine what persons or organizations i n their respective d i s t r i c t s
may be subject to the provisions of section 21 of the Banking Act of
1933, and the s t a t u t e does not impose any r e s p o n s i b i l i t y upon a
Federal reserve bank or a Federal reserve agent to ascertain whether
any such person or organization i s complying with the requirements of
that s e c t i o n .
However, i f the f a c t that a person, firm, corporation,
a s s o c i a t i o n , business trust or other similar organization, not subj e c t to examination and regulation under Federal law, has engaged i n
the business of receiving deposits since June 16, 1934, i s disclosed
by the records of the Federal reserve bank or i n the performance of
your duties and such person or organization has not submitted or
offered to submit to examination either by the Comptroller of the
Currency or by the Federal reserve bank, i t w i l l be appropriate for
you to ascertain, i f practicable, from the State banking authorities
whether such parson or organization i s subject to examination and
regulation under State law.
If a f t e r obtaining these f a c t s i t ap-
pears that a v i o l a t i o n of the law has been committed by any such
person or organisation, the matter should be made the subject of a
report to the l o c a l United States Attorney and to the Federal Reserve Board for transmission to the Department of J u s t i c e i n accordance with the usual procedure.
Likewise, i f i t i s d i s c l o s e d from the
X-7999-a
Mr. C. C. Walsh - 3
records of the Federal reserve tank or in the performance of your
duties, that s i n c e June 16, 1934, a person or organization has
engaged i n the "business of receiving deposits and a l s o that at the
same time such person or organization has engaged i n the "business of
i s s u i n g , underwriting, s e l l i n g or distributing s e c u r i t i e s , the matter
should "be made the subject of a report to the United States Attorney
and to the Board f o r transmission to the Department of J u s t i c e .
In view of the statement i n your l e t t e r of July 33rd that
i t i s p o s s i b l e that some of the "banks named therein may have d i s continued receiving deposits prior to June 16, 1934, or for other
reasons are exempt from the provisions of the law, the Federal Reserve
Board i s not transmitting copies of your l e t t e r to the Department of
J u s t i c e and i t i s suggested that each of these cases "be treated i n
accordance with the views above expressed.
Very truly yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
112
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8000
September 7, 1934
SUBJECT: Maximum rate of i n t e r e s t on
time and savings deposits.
Dear Sir:
The Federal Reserve Board has given careful consideration
to the r e p l i e s received from the Federal reserve agents i n response
to i t s telegram of July 3, 1934, Trans. 2023, with regard to i n t e r e s t rates on time and savings deposits.
On the "basis of the information received and i t s own study
of the question, the Board has decided that no change should he
made at the present time i n the maximum rate of i n t e r e s t of 3$ on
time and savings deposits prescribed i n Regulation %.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
113
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS o f f i c i a l CORRESPONDENCE T O
t h e f e d e r a l RESERVE B O A R D
X-8001
September 8, 1934.
SUBJECT!
Code Word Covering New Issue
of 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, t h e
following code word has been designated t o cover a new
i s s u e of Treasury B i l l s ?
"NOXNOW" - Treasury B i l l s t o be dated September
12, 1934, and t o mature March 13, 1936.
This word should be i n s e r t e d i n the Federal Reserve Telegraph Code book, following t h e supplemental
code word "HQXNIG" on page 172.
Very t r u l y yours,
J . C. UoeXx,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS.
X«-8002
FEDERAL RESERVE B C ^ S b e r 11, 1934
WASHINGTON
114
address official correspondence t o
t h e federal reserve board
Dear S i r :
I t now seems a l t o g e t h e r probable t h a t the Federal Reserve Board
w i l l take a c t i o n w i t h i n a few days on Regulation T, and t h a t i n order t o
secure prompt d i s t r i b u t i o n the Board w i l l r e q u e s t the Federal r e s e r v e banks
t o have the r e g u l a t i o n p r i n t e d .
In view of t h i s p r o b a b i l i t y an e x t r a copy
of the d r a f t of September 5, which w i l l be the b a s i s of t h e f i n a l r e g u l a t i o n , i s i n c l o s e d , and the suggestion i s made t h a t the necessary arrangements f o r p r i n t i n g may be taken up i n a p r e l i m i n a r y way i n advance of your
r e c e i p t of t h e r e g u l a t i o n i n i t s f i n a l form*
I t w i l l be necessary t o d i s t r i b u t e the r e g u l a t i o n to a l l members
of a l l n a t i o n a l s e c u r i t i e s exchanges, and i n a d d i t i o n t o " a l l brokers and
dealers who t r a n s a c t a business i n s e c u r i t i e s through the medium of any
such member"•
For t h e purpose of making up the necessary mailing l i s t we
understand t h a t one of the Federal reserve banks has used the 1934 mid-year
e d i t i o n of " S e c u r i t y Dealers of North America", supplemented by l i s t s of
r e g i s t e r e d s e c u r i t y dealers obtained from the s e v e r a l S t a t e S e c u r i t i e s Commissions in the s t a t e s comprising the d i s t r i c t .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-8OO3
September 13> 193*+•
SUBJECT:
Expense, Main Lines, l e a s e d
Wire System, August, 193^*
Dear S i r :
Inclosed herewith you " i l l f i n d two mimeographed s t a t e m e n t s , X-8003-a and X-8003-b, covering
in d e t a i l operations of the main l i n e s , Leased Wire
System, during the month of August, 193^*
P l e a s e c r e d i t the amount payable by your bank
f o r your share of the expense of the Leased Tire
System, to the Federal Reserve Bank of Richmond i n
your d a i l y statement of c r e d i t s through the Gold Settlement Fund f o r the account of the Federal Reserve
Board, and advise the Federal Reserve Bank of Richmond
by wire the amount and purpose of the c r e d i t .
Very t r u l y yours,
F i s c a l Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BAMS.
REPORT SHOWISB CLASSIFICATION AED HJISER OF 70KDS TRANSMITTED OVER ilAIF LI1JES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1934.
Business
reported
by banks
From
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s c o
Total,
30,634
137,817
27,325
51,722
49,701
49,003
84,300
65,802
35,375
67,936
53,417
86,044
739,076
F. R. Board b u s i n e s s
Words sent by
Hew York c h a r g e a b l e t o other
F. R. Banks ( l )
1,175
-
1,313
1,187
1,262
1,264
1,415
1,384
1,259
1,180
2,430
2,733
16,602
Met F e d e r a l
reserve
bank
business
31,809
137,817
28,638
52,909
50,963
50,267
85,715
67,186
36,634
69,116
55,847
88,777
755,678
362,788
X-8003-a
Per cent of t o t a l
bank b u s i n e s s ( * )
4.21
18.24
3.79
7.00
6.74
6.65
11.34
8.89
4.85
9.15
7.39
11.75
100.00
1,118,466
Reimbursable b u s i n e s s Incoming & Outgoing
T o t a l r o r d s 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 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 vrire expense a s sharrn
on the accompanying statement (X-S003~b).
(l)
Kumber of Tords s e n t by l?ev 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 t o
banks i n d i c a t e d i n accordance » i t h a c t i o n taken a t Governors 1 Conference
November 2 - 4 , 1925.
659,738
1,778,204
c:
X-8003-b
REPORT OF EXPE7S3S MAIF LIKES
FEDERAL RESERVE LEASED TCEE SYSTEM, AUGUST, 193%.
Uame of Bank
Operators 1
Salaries
Retirement
Contributions
$260.00
$ 23.40
Boston
121.12
New York
1,345.80
Philadelphia
20.25
225.00
27.60
Cleveland
306.66
190.00
Richmond
17.10
24.30
270.00
Atlanta
Chicago
4 , 5 0 0 . 3 0 ( f ) 382.04
St. Louis
195.00
17.55
18.00
200.00
Minneapolis
Kansas City
287.00
25.83
Dallas
251.00
22.59
34.20
San Francisco
350.00
—
Federal Reserve Bd.
Total
$8,410.76
$733-98
Less Reimbursable Charges:
(&)
(#)
(*)
(a)
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
Account reimbursable to Chicago
http://fraser.stlouisfed.org/
Federal
Reserve Bank of St. Louis
i
Operators'
overtime
$ -
Wire
rental
Total
exoenses
$253.40
$661.44
1,466.92
2,865.73
245.25
595-46
—
334.26
1,099.79
1,058.94
230.00C&)
437.IO
—
1,044.80
294.30
4,882.34
1,781.66
212.55
1,396.73
218.00
762.00
312.83
1,437.58
1,161.06
273.59
—
414.20
1,846.07
—
15,603.96
15,603.96
$24,976.70 $15,711.26
$15,833.96
$ -
—
—
—
-
-
$ -
Pro rata
share of
total
expenses
9,267.44
415,711.2&
Credits
Payable to
Federal
Reserve
Board
$283.40
1,466.92
245.25
334.26
437.IO
294.30
4,882.34
212.55
218.00
312.83
273.59
414.20
$378.04
1,398.81
350.21
765.53
621.84
750.50
3,100.68(*)
1,184.18
544.00
1,124.75
887.47
1,431.87
«•
$9,374.74
$9,437.20
3,100.68(a)
*5,335.58
l-^
X-8004
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
September 13, 1934.
At a meeting t h i s morning t h e F e d e r a l Reserve Board h e a r d
s t a t e m e n t s by Mr. Richard Whitney, P r e s i d e n t of t h e New York Stock
Exchange, and o t h e r s , i n connection w i t h t h e r e g u l a t i o n t o be i s s u e d
"by t h e Board, p u r s u a n t t o t h e p r o v i s i o n s of t h e S e c u r i t i e s Exchange
Act of 1934, w i t h r e g a r d to the e x t e n s i o n and maintenance of c r e d i t
by b r o k e r s , d e a l e r s , and members of s e c u r i t i e s exchanges.
In
a d d i t i o n to Mr. Whitney, t h e r e were p r e s e n t Mr. E. H. H. Simmons, exP r e s i d e n t of t h e Hew York Stock Exchange; Messrs. Roland L. Redmond,
L. Randolph Mason and Henry Alexander, of counsel f o r t h e New York
Stock Exchange; Mr. S. Parker G i l b e r t , of J . P. Morgan & Co., Hew
York, Hew York; Mr. Gayer G-. Dominick, of Dominick & Dominick, Hew
York, Hew York; Mr. Henry W. Brower, of Laidlaw & Co., Hew York, Hew
York; and Mr. Warren A. lamson, of Lamson B r o s . & Co., Chicago,
Illinois.
Mr. J o s e p h P. Kennedy, Chairman of t h e S e c u r i t i e s and Ex-
change Commission, was a l s o p r e s e n t .
The views expressed a t the meeting w i l l be given c o n s i d e r a t i o n by t h e Board i n connection w i t h t h e p r e p a r a t i o n of i t s r e g u l a t i o n
which vrill be i s s u e d i n t h e very near f u t u r e .
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8005
September 14, 1934,
SUBJECT}
Code Words Covering New I s s u e s of
Treasury Notes.
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 between
Federal r e s e r v e banks covering Government s e c u r i t i e s , the
following code words have been designated t o cover new i s s u e s
of Treasury Notes;
"NOWKAB" 1 \/Z% Treasury Notes, S e r i e s D«-1936, t o
be dated September 15, 1934 and t o mature
September 15, 1936•
"NOWKiX"
2 l/Z% Treasury Notes, Series D-1938, t o
be dated September 15, 1934, a n d . t o mature
September 15, 1938.
These code words should be i n s e r t e d i n the Federal
Reserve Telegraph Code book, on page 172.
Very t r u l y yours,
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
ISO
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8006
September 14, 1934.
SUBJECT:
Code Word Covering New Issue
of 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 word has been designated t o cover a new
i s s u e of Treasury B i l l s :
"NOXNUM" - Treasury B i l l s t o be dated September
19, 1934, and t o mature March 20, 1935.
This word should be i n s e r t e d i n t h e Federal Reserve Telegraph Code book, following t h e supplemental
code word "UOXNOW" on page 172*
r
ery t r u l y yours,
J . C• Noell,
Assistant Secretary,
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
121
WASHINGTON
address official correspondence t o
t h e federal reserve board
SUBJECT:
X-8007
September 17, 1934#
Section 32--Suggestions as t o
Questionnaire t o be Answered by
Member Banks Operating under
Blanket Permit.
Dear S i r :
There are inclosed f o r your information a copy of
the body of a l e t t e r received from the o f f i c e of the Federal
Reserve Agent a t the Federal Reserve Bank of Mew York, a
copy of the form r e f e r r e d t o t h e r e i n , and a copy of t h e
Board's l e t t e r t o Mr. Case, r e l a t i n g t o the obtaining of i n formation from member banks regarding syndicate operations
i n which they p a r t i c i p a t e pursuant t o t h e blanket permit r e f e r r e d t o i n t h e Board's telegram of June 23, 1934 (Trans
2015).
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosures•
TO'ALL FEDERAL RESERVE AGENTS EXCEPT HEW YORK.
A-8007-a
132
Folio-wing our telephone conversation, I am enclosing f o r
your c o n s i d e r a t i o n a d r a f t of a p r i n t e d form which might be used t o
f a c i l i t a t e obtaining from member banks information d e s i r e d i n conn e c t i o n with Section 32 of t h e Banking Act of 1933.
In g e n e r a l , t h e questions appearing on t h i s form f o l l o w
those suggested i n t h e Board's l e t t e r of J u l y 17* I a l s o enclose a
copy of t h e c i r c u l a r l e t t e r which was sent t o a l l member banks i n
t h i s d i s t r i c t , i n accordance with the Board's l e t t e r of J u l y 17.
In compliance with t h i s c i r c u l a r l e t t e r , we have a l r e a d y r e c e i v e d
some twelve or f i f t e e n r e p o r t s from member banks. These r e p o r t s
are not uniform i n a l l cases, as t o t h e i n f o r m a t i o n r e p o r t e d , manner
of r e p o r t i n g and time as of which the r e p o r t was made. I t would
m a t e r i a l l y f a c i l i t a t e our a n a l y s i s of t h e information i f t h e incoming r e p o r t s were uniform as t o period covered, the answers given and
the s i z e of paper used i n r e p o r t i n g . I n informal d i s c u s s i o n s with
s e v e r a l of t h e important r e p o r t i n g banks, t h e l a t t e r have volunteered
t h a t a p r i n t e d form would likewise f a c i l i t a t e them i n f u r n i s h i n g t h e
desired information.
From t h e d i s c u s s i o n s r e f e r r e d t o , i t appeared t h a t c e r t a i n
of t h e questions enumerated by t h e Board might be s l i g h t l y r e p h r a s e d ,
t o f u r n i s h a somewhat c l e a r e r p i c t u r e of the underlying t r a n s a c t i o n s .
The q u e s t i o n s , as phrased i n t h e proposed p r i n t e d form, met with t h e
approval of the banks, who t e l l us t h a t t h e answers can i n every
case be e a s i l y a s c e r t a i n e d from t h e i r e x i s t i n g records w i t h a minimum
of e f f o r t .
You w i l l note t h a t i n our proposed question No. 2, we have
included the amount of p a r t i c i p a t i o n of each syndicate member. This
i s r e a d i l y obtainable from t h e copy of t h e syndicate l e t t e r which
each p a r t i c i p a n t r e c e i v e s .
In 2b we have provided f o r the name of t h e syndicate
manager, i n t h e event of any question a r i s i n g upon which we might
d e s i r e f u r t h e r information than t h a t contained i n t h e r e g u l a r report#
2c would i n d i c a t e r e l a t i o n s h i p as t o l i a b i l i t y . P r a c t i c a l l y a l l syndicates o r i g i n a t i n g i n t h e East are s o - c a l l e d undivided
syndicate accounts, t h a t i s , each p a r t i c i p a n t i s l i a b l e , not only
f o r the s a l e of h i s own share of t h e account, but p r o p o r t i o n a t e l y
t h e unsold share of other p a r t i c i p a n t s . The more unusual divided
account i s one where t h e p a r t i c i p a n t i s r e s p o n s i b l e f o r t h e d i s p o s i t i o n of h i s p a r t i c i p a t i o n only.
-2-
123
X-8007-a
In our suggested question 3a, we have used t h e expression
"withdrawn from the account", r a t h e r than t h e word subscribed# since
i t i s t h e p r a c t i c e as regards municipal i s s u e s not t o s u b s c r i b e but t o
withdraw s e c u r i t i e s from t h e account only as t h e y a r e a c t u a l l y s o l d .
Hence t h i s f i g u r e may be more or l e s s than t h e a c t u a l amount of p a r ticipation.
3b w i l l i n d i c a t e t h e amount of the i s s u e apportioned t o t h e
r e p o r t i n g bank, i n a d d i t i o n t o what the bank i t s e l f took down from
the account.
Question 4, I b e l i e v e , i s s e l f - e x p l a n a t o r y .
Question 5 should i n d i c a t e the spread between purchase and
s a l e p r i c e , i n d i c a t i n g t h e approximate p r o f i t r e s u l t i n g from t h e
transaction.
In 5b, p r o v i s i o n i s made f o r t h e average p r i c e t o t h e
p u b l i c , because i t sometimes happens t h a t a p r o p o r t i o n of the i s s u e
w i l l be sold a t one p r i c e and t h e n , i n order t o move t h e balance, a
p r i c e adjustment must be made.
As I say, we have discussed t h i s i n f o r m a l l y and r a t h e r
c a r e f u l l y with s e v e r a l banks who t h i n k well of i t . If i t meets with
your approval, we should l i k e t o adopt i t f o r t h e balance of t h e
period during which t h e information w i l l be coming i n t o u s . If
you have any questions regarding the use of t h e r e p o r t , or t h e
phraseology of t h e q u e s t i o n s , I should be glad t o t r y t o answer
them.
COPY
CORRESPONDENT RELATIONSHIPS BETWEEN MEMBER BANKS
AND DEALERS IN SECURITIES
X-8007-1)
Information t o be Submitted t o Federal Reserve Bank of New York
by Member Banks Operating Under Blanket Permit
(Section 32 of t h e Banking Act of 1933)
1.
Description of i s s u e , including name of t h e i s s u e r , n a t u r e of t h e o b l i g a t i o n s (vdiether bonds, n o t e s , or other o b l i g a t i o n s ) , amount of t h e i s s u e ,
m a t u r i t y , and r a t e of i n t e r e s t »
2.
a ) Names of members of t h e syndicate or group, including yourselves,
which p a r t i c i p a t e d i n the t r a n s a c t i o n , and amount of each member's o r i g inal participation
b) Name of syndicate manager
c) Nature of r e l a t i o n s h i p Divided)
.. , .,. ,
Undivided) a s t 0 l i a b x l i t y
3.
a ) Amount of the i s s u e a c t u a l l y -withdrawn from t h e account by the r e p o r t ing member bank
b) Amount of t h e i s s u e apportioned t o r e p o r t i n g member bank on t e r m i n a t i o n of t h e account
c) Amount of t h e i s s u e otherwise acquired by the r e p o r t i n g member bank
during the term of the account
d) Total of a, b, and c
4.
a ) The amount of t h e i s s u e sold by the r e p o r t i n g member bank during t h e
term of t h e account
b) The amount of t h e i s s u e r e t a i n e d by the r e p o r t i n g member bank as i n vestment
c) The amount of t h e i s s u e held by t h e r e p o r t i n g member bank pending r e s a l e
d) Total of a, b, and c
5.
(Should equal 3d)
a ) Purchase p r i c e paid t o i s s u e r of s e c u r i t i e s by t h e buying syndicate or
group
b) Average o f f e r i n g p r i c e t o p u b l i c
(Please forward above information as of close of
account, as promptly as p o s s i b l e a f t e r i t s t e r m i n a t i o n )
(Name of Bank)
(Official signature)
(Date)
COPY
X-8007-c
125
September 17, 1934.
Mr. J . H. Case#
Federal Reserve Agent,
Federal Reserve Bank of Hew York,
Hew York, Hew York.
Dear Mr. Case:
In i t s l e t t e r of J u l y 17, 1934 (X-7963), t h e Board described t h e information which should be submitted t o you by each
member bank i n your d i s t r i c t regarding each syndicate o p e r a t i o n i n
which i t p a r t i c i p a t e s pursuant t o the b l a n k e t permit r e f e r r e d t o i n
t h e Board's telegram of June 23, 1934 (Trans 2015).
The Board
a l s o requested you t o obtain such information i n a d d i t i o n t o t h a t
described i n i t s l e t t e r as you may f e e l i s necessary t o enable you
t o form a conclusion as t o whether or not t h e permit i n each
p a r t i c u l a r case i s i n the public i n t e r e s t .
Accordingly, t h e Board's l e t t e r of J u l y 17, 1934, was not
intended t o p r e s c r i b e r i g i d l y the form of the questions which should
be asked i n connection with such syndicate o p e r a t i o n s , and the Board
w i l l o f f e r no o b j e c t i o n t o t h e use by your bank of a q u e s t i o n n a i r e
s i m i l a r i n form t o t h a t inclosed i n Mr. Douglas 1 l e t t e r of August 23,
1934.
I n view of the f a c t t h a t t h e r e may be i n s t a n c e s i n which
you w i l l wish t o obtain information other than t h a t c a l l e d f o r by
the q u e s t i o n n a i r e , or a t a time other than the c l o s i n g of t h e p a r t i c u l a r account, you may f i n d i t d e s i r a b l e , i n t r a n s m i t t i n g any r e v i s e d ,
q u e s t i o n n a i r e t o t h e member banks i n your d i s t r i c t , t o r e p e a t t h e
-2~
X 8007
-
$36
substance of t h e l a s t paragraph of your c i r c u l a r Ho. 1403, dated J u l y
23, 1934, -which r e a d s :
"In i t s l e t t e r of J u l y 17, 1934 the Board a l s o
requested me t o obtain such a d d i t i o n a l information from
a member bank as I deem advisable, i f i n any case I f e e l
t h a t t h e information submitted i s not s u f f i c i e n t t o
enable me t o form a conclusion as t o whether or not t h e
permit i n t h e p a r t i c u l a r case i s i n the p u b l i c i n t e r e s t . "
Very t r u l y yours,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
127
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8009
September 18, 1934
SUBJECT:
Regulation T.
Dear S i r :
In accordance w i t h the telegram sent you today, t h e r e
i s a t t a c h e d one copy of a c o n f i d e n t i a l r e v i s e d p r e l i m i n a r y
d r a f t of Regulation T, together w i t h a copy of form of a g r e e ment to he signed by nonmember banks.
P l e a s e s e t type f o r
p r i n t i n g the r e g u l a t i o n i n accordance with t h e telegram sent
you y e s t e r d a y .
Very t r u l y yours
Chester M o r r i l l ,
Secretary.
TO T.B.AGENTS AT ALL F.E.BA1IKS EXCEPT
KANSAS CITY, DALLAS AH) SAN FRANCISCO
X-8010
(Superseding X-7631)
FEDERAL RESERVE SYSTEM
The F e d e r a l Reserve System was e s t a b l i s h e d pursuant to a u t h o r i t y
contained i n the Act of December 23, 1913, known as t h e F e d e r a l Reserve Act,
t h e purposes of which, as s t a t e d i n the promable, a r e "To provide ?or t h e
establishment of Federal r e s e r v e banks, to f u r n i s h an e l a s t i c currency, to ,
a f f o r d 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 s u p e r v i s i o n of banking i n the United S t a t e s , and f o r other p u r p o s e s , "
The system comprises the Federal Reserve Board, which e x e r c i s e s supervisory
f u n c t i o n s , the Federal Advisory Council, nhich a c t s i n an advisory capacity
t o the Federal Reserve Board, the twelve Federal r e s e r v e banks s i t u a t e d i n
d i f f e r e n t s e c t i o n s of the United S t a t e s , the Federal Open Market Committee,
and the member banks, which include a l l n a t i o n a l banks and such S t a t e banks
and t r u s t companies as have v o l u n t a r i l y a p p l i e d to the Federal Reserve Board
f o r membership and have been admitted to t h e System.
The F e d e r a l r e s e r v e banks a r e located i n Boston, Hew York, P h i l adelphia , Cleveland, Richmond, A t l a n t a , Chicago, S t . Louis, Minneapolis,
Kansas City, D a l l a s and San F r a n c i s c o .
There a r e a l s o i n o p e r a t i o n
t w e n t y - f i v e branches and two agencies of the Federal r e s e r v e banks, a l l of
which a r e l o c a t e d i n other c i t i e s of the United S t a t e s , except one agency
i n Havana, Cuba.
The c a p i t a l stock of t h e Federal r e s e r v e banks i s e n t i r e l y owned
by the member banks and may not be t r a n s f e r r e d or hypothecated.
Every
n a t i o n a l bank i n e x i s t e n c e a t the time of the establishment of t h e Federal
Reserve System was r e q u i r e d to subscribe to the c a p i t a l stock of t h e
Federal r e s e r v e bank of i t s d i s t r i c t i n an amount equal to s i x per cent of
t h e s u b s c r i b i n g b a n k ' s c a p i t a l and surplus .
A l i k e amount of Federal r e -
X-8010.
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serve bank stock must "be subscribed f o r by every n a t i o n a l bank organized
s i n c e t h a t time and by every S t a t e bank or t r u s t company (except mutual savings banks) upon becoming a member of the Federal Reserve System; and, when a
member bank i n c r e a s e s i t s c a p i t a l or s u r p l u s , i t i s r e q u i r e d to subscribe f o r
a d d i t i o n a l stock i n the same p r o p o r t i o n .
A mutual savings bank which i s ad-
mitted to membership i n t h e Federal Reserve System must s u b s c r i b e f o r Federal
r e s e r v e bank stock i n an amount equal to s i x - t e n t h s of one per centum of i t s
t o t a l deposit l i a b i l i t i e s ; and t h e r e a f t e r such s u b s c r i p t i o n must be a d j u s t e d
semi-annually on t h e same percentage b a s i s .
One h a l f of t h e s u b s c r i p t i o n of
each member bank must be f u l l y p a i d and t h e remainder i s s u b j e c t to c a l l by
the Federal Reserve Board; but c a l l f o r payment of t h e remainder has not been
made.
A f t e r a l l necessary expenses of a Federal r e s e r v e ban]: have been
paid or provided f o r , i t s stockholding member banks a r e e n t i t l e d to r e c e i v e
an annual dividend of s i x per cent on the p a i d - i n c a p i t a l s t o c k , which d i v i dend i s cumulative.
A f t e r these dividend claims have been f u l l y met, the
net earnings a r e p a i d i n t o the surplus fund of t h e Federal r e s e r v e bank.
Federal r e s e r v e banks, i n c l u d i n g t h e c a p i t a l stock and s u r p l u s t h e r e i n and
the income derived therefrom, a r e exempt from F e d e r a l , S t a t e and l o c a l t a x a t i o n , except taxes upon r e a l e s t a t e .
The board of d i r e c t o r s of each Federal r e s e r v e bank i s composed of
nine members, e q u a l l y divided i n t o t h r e e c l a s s e s , designated Class A, Class B
and Class C.
ber banks.
D i r e c t o r s of Class A a r e r e p r e s e n t a t i v e of the stockholding memD i r e c t o r s of Class B must be a c t i v e l y engaged i n t h e i r d i s t r i c t i n
commerce, a g r i c u l t u r e or some other i n d u s t r i a l p u r s u i t , and may not be o f f i cers , d i r e c t o r s or employees of any bank.
Digitized cers
for FRASER
, directors,
Class C d i r e c t o r s may not be o f f i -
employees, or stockholders of any bank.
The s i x Class A
X-8010
_3_
and B d i r e c t o r s a r e e l e c t e d by t h e stockholding member banks,
Federal Reserve Board appoints the t h r e e Class 0 d i r e c t o r s .
1 3 0
while the
The term of
o f f i c e of each d i r e c t o r i s t h r e e y e a r s , so arranged t h a t t h e term of one d i r ector of each c l a s s expires each y e a r .
One of the Class C d i r e c t o r s appointed "by t h e Board i s designated as
chairman of the hoard of d i r e c t o r s of the Federal r e s e r v e bank and as Federal
r e s e r v e a g e n t , and i n the l a t t e r c a p a c i t y he i s r e q u i r e d to maintain a l o c a l
o f f i c e of the Federal Reserve Board on the premises of t h e Federal r e s e r v e bank.
Another Class C d i r e c t o r i s appointed by the Federal Reserve Board as deputy
chairman.
Federal r e s e r v e banks a r e a u t h o r i z e d , among other t h i n g s , to discount
f o r t h e i r member banks n o t e s , d r a f t s , b i l l s of exchange and b a n k e r s ' a c c e p t ances of s h o r t m a t u r i t i e s a r i s i n g out of commercial, i n d u s t r i a l and a g r i c u l t u r a l t r a n s a c t i o n s , and s h o r t term paper secured by o b l i g a t i o n s of the United
S t a t e s ; to make advances to t h e i r manber banks upon t h e i r promissory notes f o r
periods not exceeding n i n e t y days upon t h e s e c u r i t y of paper e l i g i b l e f o r d i s count or purchase and f o r periods not exceeding f i f t e e n days upon the s e c u r i t y
of o b l i g a t i o n s of t h e United S t a t e s and c e r t a i n other s e c u r i t i e s ; i n c e r t a i n
exceptional circumstances and under c e r t a i n p r e s c r i b e d c o n d i t i o n s , t o make advances upon other kinds of s e c u r i t y to groups of member banks and, u n t i l March
3 , 1935, to i n d i v i d u a l member banks; under c e r t a i n p r e s c r i b e d c o n d i t i o n s , t o
grant c r e d i t accommodations t o f u r n i s h working c a p i t a l f o r e s t a b l i s h e d indust r i a l or commercial b u s i n e s s e s f o r p e r i o d s not exceeding f i v e y e a r s , e i t h e r
through the medium of f i n a n c i n g i n s t i t u t i o n s o r , i n e x c e p t i o n a l circumstances,
d i r e c t l y to such b u s i n e s s e s , and to make c o m i t n e n t s w i t h r e s p e c t t o t h e
granting of such accommodations; i n unusual and exigent circumstances when
a u t h o r i t y has been
granted by a t l e a s t f i v e members of t h e F e d e r a l Reserve
X-8010
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- 4 Board, to discount f o r i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s , under
c e r t a i n p r e s c r i b e d c o n d i t i o n s , n o t e s , d r a f t s and "bills of exchange of the kinds
and m a t u r i t i e s m d e e l i g i b l e f o r discount f o r e m b e r banks; to make advances to
i n d i v i d u a l s , p a r t n e r s h i p s or corporations upon t h e i r promissory n o t e s secured
"by d i r e c t o b l i g a t i o n s of the United S t a t e s f o r p e r i o d s not exceeding n i n e t y
days; to purchase and s e l l i n the open market bankers 1 acceptances and b i l l s
of exchange of the kinds and m a t u r i t i e s e l i g i b l e f o r d i s c o u n t , o b l i g a t i o n s of
the United S t a t e s and c e r t a i n other s e c u r i t i e s ; to r e c e i v e and hold on deposit
the r e s e r v e balances of nsober banks; to i s s u e Federal r e s e r v e notes and
Federal r e s e r v e bank n o t e s ; to a c t as c l e a r i n g houses and as c o l l e c t i n g agents
f o r t h e i r member banks , and under c e r t a i n conditions f o r nonmenber banks, i n
the c o l l e c t i o n of checks and other i n s t r u m e n t s ; to a c t as d e p o s i t a r i e s and f i s cal agents of the United S t a t e s ; and to exorcise other banking f u n c t i o n s s p e c i f i e d i n tho Federal Reserve Act.
Federal r e s e r v e notes a r e a f i r s t and paramount l i e n on a l l the a s s e t s of the Federal r e s e r v e banks through which they a r e i s s u e d and a r e a l s o
o b l i g a t i o n s of the United S t a t e s .
They a r e i s s u e d a g a i n s t the s e c u r i t y of
gold c e r t i f i c a t e s and of commercial and a g r i c u l t u r a l paper discounted or p u r chased by Federal r e s e r v e banks, and, u n t i l March 3, 1935, or u n t i l t h e e x p i r a t i o n of such a d d i t i o n a l period not exceeding two years as the P r e s i d e n t may
p r e s c r i b e , when a u t h o r i z e d by the Federal Reserve Board, may a l s o be secured
by d i r e c t o b l i g a t i o n s of t h e United S t a t e s .
Every Federal r e s e r v e bank i s
r e q u i r e d to maintain r e s e r v e s i n gold c e r t i f i c a t e s of not l e s s than f o r t y per
cent a g a i n s t i t s Federal r e s e r v e notes i n a c t u a l c i r c u l a t i o n and i s a l s o r e quired to maintain r e s e r v e s i n gold c e r t i f i c a t e s or l a w f u l money of not l e s s
than t h i r t y - f i v e per cent a g a i n s t i t s d e p o s i t s .
X-8010. |
- 5 Federal r e s e r v e "bank notes a r e the o b l i g a t i o n s of t h e F e d e r a l r e s e r v e
"bank p r o c u r i n g them and a r e redeemable i n l a w f u l money of t h e United S t a t e s on
p r e s e n t a t i o n a t the United S t a t e s Treasury or a t t h e bank of i s s u e .
They a r c
issued a g a i n s t the s e c u r i t y of d i r e c t o b l i g a t i o n s of t h e United S t a t e s i n an
amount equal to the f a c e value of such o b l i g a t i o n s and a g a i n s t the s e c u r i t y of
n o t e s , d r a f t s , b i l l s of exchange and b a n k e r s ' acceptances i n an amount equal
to not more than n i n e t y per cent of the estimated value t h e r e o f .
Each Federal
r e s e r v e bank maintains on deposit i n the Treasury of t h e United S t a t e s i n lawf u l money a redemption fund equal to f i v e per cent of i t s l i a b i l i t y on Federal
r e s e r v e bank notes i n a c t u a l c i r c u l a t i o n , or such o t h e r amount as may be r e quired by the Treasurer of t h e United S t a t e s with t h e approval of the S e c r e t a r y
of t h e Treasury, and i s r e q u i r e d to pay a t a x of o n e - f o u r t h of one per cent
each h a l f year upon t h e average amount of i t s Federal r e s e r v e bank notes i n
circulation.
Ho such Federal r e s e r v e bank notes may be i s s u e d a f t e r the P r e s i -
dent s h a l l have d e c l a r e d by proclamation t h a t the emergency recognized by him
i n M s proclamation of March 6, 1933, has terminated, u n l e s s such notes a r e s e cured by the deposit of bonds of t h e United S t a t e s of c e r t a i n c l a s s e s which a r e
e l i g i b l e as s e c u r i t y f o r n a t i o n a l bank n o t e s .
Broad supervisory powers a r e v e s t e d i n t h e Federal Reserve Board,
which has i t s o f f i c e s i n Wshington.
The law designates t h e S e c r e t a r y of
the Treasury and the Comptroller of the Currency as e x - o f f i c i o members, and
provides f o r the appointment of s i x msabers by t h e P r e s i d e n t with t h e advice
and consent of the Senate.
In s e l e c t i n g these s i x members, t h e P r e s i d e n t i s
r e q u i r e d to have a due regard to a f a i r r e p r e s e n t a t i o n of t h e f i n a n c i a l , a g r i c u l t u r a l , i n d u s t r i a l and commercial i n t e r e s t s , a n d geographical d i v i s i o n s of
the country.
No two a p p o i n t i v e members may be from the same Federal r e s e r v e
X-8010
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6
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1 8 3
district.
Among the more important d u t i e s of the Federal Reserve Board a r e
the review and determination of discount r a t e s charged "by t h e Federal r e s e r v e
banks on t h e i r d i s c o u n t s and advances and s u p e r v i s i o n over t h e open market
operations of the Federal r e s e r v e banks.
Such open market o p e r a t i o n s a r e
conducted under r e g u l a t i o n s adopted "by the Federal Reserve Board with a view
to accommodating commerce and "business and with r e g a r d t o t h e i r "bearing upon
the general c r e d i t s i t u a t i o n of the country.
The Federal Open Market Com-
m i t t e e , which makes recommendations w i t h regard to open market o p e r a t i o n s ,
was c r e a t e d "by the law and c o n s i s t s of twelve members, one member being s e l e c t e d annually by t h e board of d i r e c t o r s of each Federal r e s e r v e bank.
The
meetings of the Committee a r e held i n Washington a t l e a s t four times each
year upon the c a l l of t h e Governor of the Federal Reserve Board or a t the
request of any t h r e e members of t h e Committee.
In connection with i t s supervision of Federal r e s e r v e banks the
Federal Reserve Board i s a l s o authorized to make examinations of such banks;
to r e q u i r e statements and r e p o r t s from such banks; to r e q u i r e the e s t a b l i s h ment or discontinuance of branches of such banks; to supervise t h e i s s u e and
r e t i r e m e n t of Federal r e s e r v e n o t e s ; and to e x e r c i s e s p e c i a l s u p e r v i s i o n over
a l l r e l a t i o n s h i p s and t r a n s a c t i o n s of the Federal r e s e r v e banks ^ i t h f o r e i g n
banks or bankers.
For the purpose of preventing the excessive use of c r e d i t f o r t h e
purchase or c a r r y i n g of s e c u r i t i e s , tho Federal Reserve Board i s a u t h o r i z e d
to r e g u l a t e t h e amount of c r e d i t t h a t may be i n i t i a l l y extended and subsequently maintained 011 any s e c u r i t y (with c e r t a i n exceptions) r e g i s t e r e d on
a n a t i o n a l s e c u r i t i e s exchange.
C e r t a i n other powers have been c o n f e r r e d
134
X-8010
-7upon the Board which a r e likewise designed to enable i t t o prevent an undue
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 o p e r a t i o n s .
The Federal Reserve Board a l s o passes on the admission of S t a t e
banks and t r u s t companies to nsaber ship i n the Federal Reserve System and on
the termination of membership of such banks; i t has the power to examine
member banks and a f f i l i a t e s of member banks; i t r e c e i v e s c o n d i t i o n r e p o r t s
from S t a t e member banks and t h e i r a f f i l i a t e s ; i t l i m i t s by r e g u l a t i o n the
r a t e of i n t e r e s t which may be paid by member banks on time and savings dep o s i t s ; i t i s a u t h o r i z e d , i n i t s d i s c r e t i o n , to i s s u e v o t i n g permits t o holding company a f f i l i a t e s of member banks e n t i t l i n g them to vote the s t o c k of
such banks a t e l e c t i o n s of d i r e c t o r s and i n deciding questions a t meetings of
shareholders and to i s s u e permits covering c e r t a i n r e l a t i o n s between member
banks and organizations dealing i n s e c u r i t i e s ; i t has the power to remove
o f f i c e r s and d i r e c t o r s of a member bank f o r continued v i o l a t i o n s of law or
u n s a f e or unsound p r a c t i c e s i n conducting the business of such bank; i t may,
i n i t s d i s c r e t i o n , suspend member banks from the use of the c r e d i t f a c i l i t i e s
of the Federal Reserve System, f o r making undue use of bank c r e d i t f o r specul a t i v e purposes or f o r any other purpose i n c o n s i s t e n t with t h e maintenance of
sound c r e d i t c o n d i t i o n s ; i t passes on a p p l i c a t i o n s of n a t i o n a l banks f o r
a u t h o r i t y t o e x e r c i s e t r u s t powers or to a c t i n f i d u c i a r y c a p a c i t i e s ; i t may
grant a u t h o r i t y to n a t i o n a l banks t o e s t a b l i s h branches i n f o r e i g n c o u n t r i e s
or dependencies or i n s u l a r possessions of the United S t a t e s , or to i n v e s t i n
the s t o c k of banks or corporations engaged i n i n t e r n a t i o n a l or f o r e i g n banki n g ; i t s u p e r v i s e s the organization and a c t i v i t i e s of c o r p o r a t i o n s organized
under Federal law to engage i n i n t e r n a t i o n a l or f o r e i g n banking; and i t i s s u e s
X-8010
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135
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p e m i t s under the a u t h o r i t y granted by the p r o v i s i o n s of the Clayton A n t i t r u s t Act r e l a t i n g to i n t e r l o c k i n g d i r e c t o r a t e s .
Another f u n c t i o n of the
Board i s the o p e r a t i o n of a settlement f u n d , "by which "balances due to and
from the v a r i o u s F e d e r a l r e s e r v e "banks a r i s i n g out of t h e i r own t r a n s a c t i o n s
or t r a n s a c t i o n s of t h e i r manber "banks or of the United S t a t e s Government a r e
s e t t l e d i n Washington through t e l e g r a p h i c t r a n s f e r of funds without p h y s i c a l
shipments of currency.
In e x e r c i s i n g i t s supervisory f u n c t i o n s over the Federal r e s e r v e
"banks and member banks, the Federal Reserve Board promulgates r e g u l a t i o n s ,
pursuant to a u t h o r i t y granted by the Federal Reserve Act, governing c e r t a i n
of the above-mentioned a c t i v i t i e s of Federal r e s e r v e banks and member banks.
To meet i t s expenses and to pay the s a l a r i e s of i t s members and i t s employees,
the Board makes semi-annual assessments upon the F e d e r a l r e s e r v e banks i n
proportion to t h e i r c a p i t a l stock and s u r p l u s .
Annual r e p o r t s of the opera-
t i o n s of the Board a r e made to the Speaker of the House of R e p r e s e n t a t i v e s f o r
the information of Congress a s r e q u i r e d by law.
The Federal Advisory Council a c t s i n an advisory c a p a c i t y , c o n f e r r i n g " i t h the Federal Reserve Board on general business conditions and making
recommendations concerning m a t t e r s w i t h i n the Board's j u r i s d i c t i o n and the
general a f f a i r s of the Federal Reserve System.
The Council i s composed of
twelve members, one from each Federal r e s e r v e d i s t r i c t being s e l e c t e d annually
by the board of d i r e c t o r s of t h e Federal r e s e r v e bank of the d i s t r i c t .
The
Council i s r e q u i r e d t o meet i n Washington a t l e a s t f o u r times each year and
o f t e n e r i f c a l l e d by the Federal Reserve Board.
September 1, 1934.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8011.
September 18, 1934.
Dear S i r :
For your information t h e r e i s i n c l o s e d a copy of a
l e t t e r r e c e i v e d by the Board from the Third A s s i s t a n t
Postmaster General, together with a copy of a l e t t e r
addressed to the Director of the P o s t a l Savings System
by Mr. E. p . Tyner, A s s i s t a n t Cashier of t h e Federal
Reserve Bank of Kansas City, and of t h e r e p l y made
t h e r e t o by t h e Third A s s i s t a n t Postmaster General.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosures.
TO ALL GOVERNORS
(Copy)
Board of Trustees
P o s t a l Savings System
Washington
August 25, 1934
Federal Reserve Board,
Washington, D. C.
Gentlemen;
There i s enclosed a copy of a l e t t e r sent today to t h e
Federal Reserve Bank, Kansas City, Missouri, which brought
up the question of i t s a c c e p t i n g payments f o r the c r e d i t of
the Board of T r u s t e e s , P o s t a l Savings System, from "banks
r e c e i v e d a f t e r the e x p i r a t i o n of the time p e r i o d .
In view of the f a c t t h a t i t i s not p o s s i b l e f o r such
t r a n s f e r s to he received "by Federal Reserve Banks l o c a t e d i n
c i t i e s d i s t a n t from the sending "banks, i t would seem approp r i a t e f o r t h e Federal Reserve Bank to accept t h e d e p o s i t s
r e c e i v e d a t a l a t e r d a t e , allowance "being made f o r time i n
transit.
If t h e above meets with your approval I w i l l a p p r e c i a t e
i t i f you w i l l i n s t r u c t "banks accordingly, a d v i s i n g t h i s
o f f i c e of the a c t i o n taken.
Very t r u l y yours ,
(Signed) C. B. E i l e n b e r g e r .
Third A s s i s t a n t Postmaster General
Enclosure
(Copy)
X-8011-1)
FEDERAL RESERVE BAH
of
KANSAS CITY.
August 9, 1934.
D i r e c t o r of P o s t a l Savings System,
Washington, D. C.
Sir:
We a r e e n c l o s i n g a Ruling of the Federal Reserve Board w i t h r e f e r ence to the payment of i n t e r e s t on P o s t a l Savings Funds, which was
forwarded by us t o a l l tanks i n our d i s t r i c t under d a t e of November
27, 1933.
This r u l i n g of the Federal Reserve Board quotes order No. 4420 of
the Postmaster General i s s u e d under date of October 24, 1933, with
r e f e r e n c e to t h e r e t u r n of secured i n t e r e s t b e a r i n g P o s t a l Savings
Funds by banks. Acting under t h i s r u l i n g and the r u l i n g of the
Federal Reserve Board, s i n c e November, 1933, i t has not been t h e
p o l i c y of t h i s bank to accept f o r depository banks, P o s t a l Savings
Funds to be r e t u r n e d to the Board of T r u s t e e s , P o s t a l Savings System
except on t h e d a t e s i n d i c a t e d i n the schedule contained i n t h e order
of t h e Postmaster General.
There seems to be some misunderstanding inasmuch a s a number of banks
have s t a t e d t h a t i n i n s t r u c t i o n s received from t h e Board of T r u s t e e s ,
P o s t a l Savings System, d e p o s i t s of secured i n t e r e s t b e a r i n g funds a r e
to be r e t u r n e d by them on the dates i n d i c a t e d i n t h e schedule, the
banks having construed such to mean t h a t e n t r i e s may be made on t h e i r
books on t h e date i n d i c a t e d but t h a t t h e a c t u a l t r a n s f e r of funds
need not be completed on t h a t d a t e . Our Counsel has given h i s opinion t h a t the t r a n s a c t i o n should be completed on t h a t d a t e and the
funds a c t u a l l y c r e d i t e d to t h e Treasurer of t h e United S t a t e s .
I t w i l l , t h e r e f o r e , be a p p r e c i a t e d , i n view of the d i f f i c u l t i e s mentioned above, i f you w i l l advise as to whether i t i s the i n t e n t i o n
of the Department i f such t r a n s a c t i o n s should be completed on t h e
d a t e i n d i c a t e d or whether the Federal Reserve Bank may accept dep o s i t s one or two days a f t e r t h a t d a t e and s t i l l handle t h e matter
i n accordance w i t h both the r u l i n g of t h e Postmaster General and
the Federal Reserve Board.
Yours very t r u l y ,
EPT*MP
encl.
(Signed) E. P. Tyner,
A s s i s t a n t Cashier.
X-8011(Copy)
August 25, 1934.
Mr. E. P. Tyner, A s s i s t a n t Cashier,
Federal Reserve Bank,
Kansas City, Missouri.
My dear S i r :
In r e p l y t o your l e t t e r of August 9, I have t o a d v i s e
t h a t P o s t a l Savings funds w i t h "banks being on time deposit
"basis may only "be r e l e a s e d a t the e x p i r a t i o n of a time p e r i o d .
I t i s r e a l i z e d t h a t i n many cases the payments cannot r e a c h
the Federal Reserve Bank a t a d i s t a n t p o i n t on t h e same d a t e .
I t i s , t h e r e f o r e , suggested t h a t any such t r a n s f e r s received
"by you from "banks dated a s of t h e e x p i r a t i o n of t h e time
period "be a c c e p t e d , even though received a t a l a t e r d a t e ,
allowance "being made f o r time i n t r a n s i t .
If t h i s meets with your approval 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 i n s t r u c t your "branches accordingly.
Very t r u l y yours,
Third A s s i s t a n t Postmaster General.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8012.
September 19, 1934.
Dear Sir:
R e f e r r i n g to the Board's telegram, Trans 1873, of September 23,
1933, with regard to the r e c l a s s i f i c a t i o n of member banks f o r e l e c t o r a l purposes, the Board w i l l not r e q u i r e a r e c l a s s i f i c a t i o n a t t h i s
time, but r e q u e s t s t h a t you review the p r e s e n t c l a s s i f i c a t i o n so f a r
as your d i s t r i c t i s concerned and advise the Board whether, i n your
opinion, a r e c l a s s i f i c a t i o n of banks f o r e l e c t o r a l purposes should be
made e f f e c t i v e next year and, i f so, what changes i n the p r e s e n t
c l a s s i f i c a t i o n you would recommend.
In t h i s connection, p l e a s e a l s o advise the Board whether you
would favor a r e c l a s s i f i c a t i o n whereby the number of member banks i n
Group 2 w i l l be approximately o n e - t h i r d of the t o t a l number of member
banks i n t h e d i s t r i c t , with the number of member banks i n Group 1 as
n e a r l y as may be i n the same r a t i o to t h e t o t a l number of a l l member
banks as the combined c a p i t a l and surplus of member banks i n Group 3
bears to the combined c a p i t a l and surplus of a l l member banks.
In submitting your views, p l e a s e f u r n i s h the Board with a s t a t e ment grouping the member banks i n your d i s t r i c t according to combined
c a p i t a l and s u r p l u s , those having the smallest c a p i t a l and surplus to
X-8012
-
2 -
be shown f i r s t and those having the l a r g e s t c a p i t a l and surplus l a s t ,
together with p r o g r e s s i v e cumulations of the f i g u r e s i n the manner
o u t l i n e d i n t h e Board's l e t t e r X-6159 of October 12, 1928.
The c a p i -
t a l and surplus of a member bank f o r t h i s purpose should be t h e same
as t h a t used i n determining i t s r e q u i r e d holdings of F e d e r a l Reserve
bank s t o c k .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO ALL CHAIF.MM.
FEDERAL RESERVE BOARD
WASHINGTON
X-8013
address official correspondence t o
the federal reserve board
September 20, 1934
SUBJECT:
Holidays during October, 1934
Dear S i r :
The Federal Reserve Board i s advised t h a t on Wednesday,
October 10, the Havana Agency of t h e Federal Reserve Bank of
A t l a n t a w i l l he closed i n observance of the a n n i v e r s a r y of the
Revolution of Yara.
On F r i d a y , October 12, Columbus Day, t h e r e w i l l be n e i t h e r
t r a n s i t nor F e d e r a l Reserve note c l e a r i n g , and the books of t h e
Board's Gold Settlement Fund w i l l be closed.
The o f f i c e s of the
Board and the f o l l o w i n g Federal r e s e r v e banks and branches w i l l
be open f o r b u s i n e s s as u s u a l :
S t . Louis
L i t t l e Rock
Memphis
Charlotte
Atlanta
Nashville
Detroit
Minneapolis
Kansas City
Oklahoma City
P l e a s e n o t i f y branches.
^ e y y t r u l y yours,
J . C. Moell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BAMS.
FEDERAL RESERVE BOARD
WASHINGTON
3dress official correspondence t o
t h e federal reserve board
X-8015
September 20, 1934
Dear S i r :
There i s inclosed, f o r your information a copy
of a telegram addressed to Mr. Logan, Deputy Governor
and General Counsel of t h e Federal Reserve Bank of Hew
York under d a t e of September 10, 1934, with r e g a r d to
the question whether a concern, a s u b s t a n t i a l p a r t of
the b u s i n e s s of which c o n s i s t s of providing funds f o r
business e n t e r p r i s e s through t h e u n d e r w r i t i n g , s a l e
and d i s t r i b u t i o n of s e c u r i t i e s , may be considered a
f i n a n c i n g i n s t i t u t i o n within the meaning of s e c t i o n
13b of the Federal Reserve Act, as amended.
Very t r u l y yours,
HQ ^
Chester M o r r i l l ,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS EXCEPT NEW YORK.
X-8015-a
(Copy)
LOGAN
EEW YORK
Your wire September 6 p r e s e n t i n g question whether Lehman Brothers
investment "bankers i n Hew York may toe considered a f i n a n c i n g i n s t i t u t i o n w i t h i n the meaning of Section 13b of Federal Reserve Act.
I t i s understood t h a t a s u b s t a n t i a l p a r t of the b u s i n e s s of Lehman
Brothers c o n s i s t s of providing funds f o r business e n t e r p r i s e s through
t h e u n d e r w r i t i n g , s a l e and d i s t r i b u t i o n of s e c u r i t i e s .
I t i s also
understood t h a t under t h e t r a n s a c t i o n which i s now proposed Lehman
Brothers w i l l make a loan or advance to an e s t a b l i s h e d i n d u s t r i a l or
commercial b u s i n e s s to provide i t w i t h working c a p i t a l and t h a t such
loan or advance w i l l be evidenced by the note of such b u s i n e s s .
It
i s Board's view t h a t i n circumstances s t a t e d and upon condition t h a t
t r a n s a c t i o n w i l l comply i n a l l other r e s p e c t s w i t h a p p l i c a b l e r e q u i r e ments of law and r e g u l a t i o n Federal Reserve Bank may l a w f u l l y discount
or purchase from f i r m of Lehman Brothers such o b l i g a t i o n of e s t a b l i s h e d
i n d u s t r i a l or commercial business pursuant to s e c t i o n 13b.
(Signed) Chester M o r r i l l
MORRILL
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
x - 8 0 1 6
September 21, 1934.
SUBJECT:
Code Word Covering Mew I s s u e
of Treasury B i l l s •
Dear S i r :
In c o n n e c t i o n w i t h 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 F e d e r a l r e s e r v e banks, t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of T r e a s u r y B i l l s :
"NOXOAR" - T r e a s u r y B i l l s t o be d a t e d September
2G, 1934, and t o mature March 27,
1935.
This word should be i n s e r t e d i n t h e F e d e r a l Reserve Telegraph Code book, f o l l o w i n g t h e supplemental
code word "NOXNXJM" 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. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8017
September 24, 1934
Dear S i r :
A t t e n t i o n i s invited, t o t h e f a c t t h a t s e c t i o n 2(a) of
the Act approved May 18, 1934 (Public No. 235), a copy of which
was s e n t to you under date of June 9, 1934, provides as f o l l o w s :
"Whoever, by f o r c e and v i o l e n c e , or by p u t t i n g i n
f e a r , f e l o n i o u s l y t a k e s , or f e l o n i o u s l y attempts to
t a k e , from t h e person or presence of another any prope r t y or money or any other t h i n g of value belonging t o ,
or i n t h e c a r e , custody, c o n t r o l , management, or p o s s e s s i o n o f , any bank s h a l l be f i n e d not more than $5,000
or imprisoned not more than twenty y e a r s , or b o t h . "
You w i l l note t h a t t h e word "bank" as used i n the p r o v i s i o n s
above quoted i s d e f i n e d i n t h e Act t o include "any member bank of t h e
Federal Reserve System, and any bank, banking a s s o c i a t i o n , t r u s t company, savings bank, or other banking i n s t i t u t i o n organized or o p e r a t i n g under t h e laws of the United S t a t e s " .
Accordingly, i t would seem
t h a t a v i o l a t i o n of t h e s e p r o v i s i o n s may b e involved i f any p r o p e r t y
of t h e kind described t h e r e i n "belonging t o , or i n t h e c a r e , custody,
c o n t r o l , management, or possession o f " your Federal Reserve Bank or
one of i t s member banks i s taken as the r e s u l t of any a c t i n which
f o r c e and v i o l e n c e or i n t i m i d a t i o n has been used; and an attempt to
commit an a c t of t h i s k i n d , r e g a r d l e s s of whether any a c t u a l taking
occurred, would a l s o seem to be embraced by such p r o v i s i o n s .
! 47
X-8017
- 2 -
I t i s r e q u e s t e d , t h e r e f o r e , t h a t apparent v i o l a t i o n s of
the Act of May 18, 1934 which come to your a t t e n t i o n i n t h e performance of your d u t i e s he made the s u b j e c t of a r e p o r t t o t h o l o c a l
United S t a t e s D i s t r i c t Attorney and to tho Federal Reserve Board f o r
submission to t h e Department of J u s t i c e i n accordance with t h e u s u a l
procedure.
However, a s i n d i c a t e d i n the Board's l e t t e r of February
8, 1928 (X-5072), i n a case where the only bank connected w i t h t h e
t r a n s a c t i o n i s a n a t i o n a l bank, i t i s not necessary t o make such a
r e p o r t but merely t o a d v i s e t h e Chief n a t i o n a l Bank Examiner f o r your
d i s t r i c t of t h e matter f o r such a c t i o n as he considers a d v i s a b l e .
If
a p a r t i c u l a r t r a n s a c t i o n , r e g a r d l e s s of whether i t a f f e c t s a n a t i o n a l
bank or other banks of t h e kind described i n t h e s t a t u t e , appears t o
be one i n which t h e Post O f f i c e a u t h o r i t i e s would be i n t e r e s t e d , i t
i s requested t h a t you b r i n g the matter to t h e a t t e n t i o n of those a u t h o r i t i e s and advise the Federal Reserve Board to that e f f e c t .
Very t r u l y yours
L. P. Bethca,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGEHTS.
X-8019
Revised
(Statement proposed t o be p r i n t e d i n side f r o n t page of Regulation T.)
INQUIRIES REGARDING THESE RBSUIATIONS.
I t i s suggested t h a t a l l i n q u i r i e s as t o these r e g u l a t i o n s
be addressed f i r s t to the S e c u r i t i e s Exchange of which the persons
making t h e i n q u i r i e s a r e members or the f a c i l i t i e s of which a r e
used f o r t h e i r t r a n s a c t i o n s .
In t h e event t h e Exchange o f f i c i a l s d e s i r e information as
to such q u e s t i o n s , they should make inquiry of the Federal Reserve
Agent a t t h e Federal Reserve Bank of t h e i r d i s t r i c t .
In t u r n the Federal Reserve Agent may make i n q u i r y of
the Board a s to any question t h a t needs the Board's d e t e r m i n a t i o n .
All answers made by the Board t o such i n q u i r i e s w i l l be
d i s t r i b u t e d t o a l l Exchanges through the Federal Reserve Agents*
X-8020 , |
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
September 25, 1934
SUBJECTi
System Committee on L e g i s l a t i v e
Program.
Dear S i r s
At t h e F e d e r a l Reserve Agents' Conference held i n May of t h i s
year# t h e r e -was appointed a Committee f o r t h e Study of L e g i s l a t i v e
Suggestions, and during t h e conference of Governors and F e d e r a l r e s e r v e
agents with t h e F e d e r a l Reserve Board i n Washington i n June, 1934, a
Recovery Program Committee was appointed by t h e Board f o r t h e purpose
of making a s t u d y of banking laws and of p r e p a r i n g a l e g i s l a t i v e program
f o r c o n s i d e r a t i o n by t h e Board.
Since t h e n Governor Black as Governor
of t h e F e d e r a l Reserve Bank of A t l a n t a has been added t o t h e l a t t e r committee •
I n order t o avoid unnecessary d u p l i c a t i o n of a c t i v i t i e s , t h e
F e d e r a l Reserve Board f o I t t h a t t h e work of t h e Agents' Committee should
bo combinod w i t h t h a t of t h e Recovery Program Committee, and, t h e r e f o r e ,
has added Messrs. L. B. Williams, of Cleveland and J . E. Peyton, of Minnea p o l i s , who wore members of tho F e d e r a l r e s e r v e a g e n t s ' committee, t o
t h e membership of tho Recovery Program Committee, which w i l l bo c a l l e d
t h o System Committee on L e g i s l a t i v e Program.
The other members of tho
committee a r e Mr. Thomas, Vice Governor of t h e F e d e r a l Reserve Board,
Governor Harrison of New York, Chairman of the committee, Governor Young
of Boston, Governor Morris of P h i l a d e l p h i a , Governor Fancher of Cleveland, Governor Black of A t l a n t a , and Governor Schaller of Chicago.
At a meeting of t h e committee on September 6, 1934, i t was agreed
t h a t Mr* Walter R. Stark, who u n t i l r e c e n t l y was Chief of t h e F i n a n c i a l
and Economic Research Section of t h e Treasury Department, should be employed on a monthly b a s i s as t e c h n i c a l a s s i s t a n t t o t h e committee, with
s a l a r y a t the r a t e of $750 per month, with the understanding t h a t t h e
expense involved would be a l l o c a t e d among the twelve F e d e r a l r e s e r v e
banks under t h e same arrangement as w&s used i n connection with t h e
expense i n c u r r e d by t h e System Committee on Reserves#
I t i s understood
t h a t Mr. Stark w i l l a l s o serve as s e c r e t a r y of t h e committee#
Under
t h e proposed arrangement Mr# S t a r k ' s s a l a r y would be paid by t h e Federal
Reserve Bank of New York and a l l o c a t e d among t h e Federal r e s e r v e banks
on t h e b a s i s of t h e c a p i t a l and surplus of t h e banks.
The committee's
a c t i o n has been approved by t h e Federal Reserve Board•
I t w i l l be appreciated i f you w i l l advise t h e Board i f t h e a l l o c a t i o n t o your bank i n t h e manner r e f e r r e d t o of a p o r t i o n of t h e expense
involved i n connection with t h e employment of Mr • Stark meets w i t h t h e
approval of your d i r e c t o r s #
Very t r u l y yours.
f&
L. P . Bethea,
Assistant Secretary.
TO THE CHAIRMEN AND GOVERNORS OF ALL F. R. BANKS.
X-8021
INTERPRETATION OF BANKING ACT OF 1935
(Copies t o be sent t o a l l Federal reserve banks)
September 25, 1934.
Mr.
Dear Mr.
:
Reference i s made t o your l e t t e r of September 6, 1934,
i n c l o s i n g a copy of a l e t t e r dated August 31, 1934, addressed t o
Mr.
, A s s i s t a n t Federal Reserve Agent a t the Federal Re-
serve Bank of
, i n which you ask f o r the opinion of the
Board with regard to the question whether Mr.
, who
holds the p o s i t i o n of Manager of the Branch O f f i c e a t
, of
,
, should be regarded a s a "manager" of
t h a t company w i t h i n the meaning of s e c t i o n 32 of the Banking Act
of 1933.
Your l e t t e r , and t h e l e t t e r from
t h a t Mr.
p o i n t out
a u t h o r i t y i s l i m i t e d and t h a t the home o f f i c e
p r e s c r i b e s d e f i n i t e r u l e s which he crust f o l l o w i n a l l t r a n s a c t i o n s .
The l e t t e r from
a m p l i f i e s t h i s statement, and adds
t h a t he has no a u t h o r i t y over t h e c h a r a c t e r of t h e b u s i n e s s t r a n s acted.
In the circumstances, you suggest t h a t s e c t i o n 32 i s not
a p p l i c a b l e to Mr.
since the word "manager" should be
i n t e r p r e t e d t o include persons who not only carry on some p a r t of
the management of t h e o r g a n i z a t i o n but who a r e a l s o vested with
a share of t h e f i n a l c o n t r o l or a u t h o r i t y i n the o r g a n i z a t i o n , or
a s s i s t i n formulating i t s p o l i c i e s .
.53
- 2 -
X-8021
The Board has given c a r e f u l c o n s i d e r a t i o n to the view which
you express i n t h i s m a t t e r b u t , a s the word "manager" i s f r e q u e n t l y
used t o d e s c r i b e a person i n charge of a l o c a l branch o f f i c e of an
organization an# i n view of the wide use of the term a s a p p l i e d to
managers of braSch o f f i c e s of s e c u r i t i e s d e a l e r s a t the time when the
Banking Act of 1933 was under c o n s i d e r a t i o n by Congress, the Board i s
of the opinion t h a t the words " o f f i c e r , d i r e c t o r , or manager" i n sect i o n 32 a r e properly to be regarded a s including a manager of such a
branch o f f i c e .
This view i s i n d i c a t e d in t h e d e f i n i t i o n of the word
"manager" i n the Board's Regulation R and has been followed i n connect i o n with s e v e r a l a p p l i c a t i o n s under s e c t i o n 32 which have been acted
upon by the Board,
Very t r u l y yours,
(Signed) L. P. Bcthea
L. P. Bcthea,
Assistant Secretary.
X-8023
Statement of Bureau of Engraving and P r i n t i n g
f o r f u r n i s h i n g Federal Reserve Notes
Series 1928, August 1 t o 31, 1934.
$10
15
-
Philadelphia
90,000
28,000
26,000
26,000
170,000
100,000
151,000
-
-
-
-
-
2,000
"
253,000
-
423,000 s h e e t s , @ $86.00 M.
$20
Total
Sheets
Amounts
100,000
241,000
28,000
26,000
__28500£
$8,600.00
20,726.00
2,408.00
2,236.00
2,408.00
423,000
$36,378.00
$36,378.00
X-8024
In order t h a t persons a f f e c t e d by Regu1 a t i o n I of the Federal Reserve Board might have
-
a d d i t i o n a l time a f t e r October 1# 1934, w i t h i n which
t o f a m i l i a r i z e themselves with t h i s r e g u l a t i o n , t h e
S e c u r i t i e s and Exchange Commission, a t t h e r e q u e s t
of t h e Federal Reserve Board, has exempted, u n t i l
midnight of October 14, 1934, from the p r o v i s i o n s
of s e c t i o n 7 and subsection ( a ) of s e c t i o n 8 of t h e
|
S e c u r i t i e s Exchange Act of 1934 a l l s e c u r i t i e s not
|
exempted by t h e law, whether r e g i s t e r e d or n o t .
!
i
1
?
.
j
2-8025
I n s e r t a t bottom of page 19)
(h)
Transactions outside United S t a t e s . - In view of the
p r o v i s i o n s of s e c t i o n 30(b) of the S e c u r i t i e s Exchange Act of
1954, nothing i n t h i s r e g u l a t i o n s h a l l apply t o any c r e d i t o r
i n s o f a r as he t r a n s a c t s a business i n s e c u r i t i e s without t h e
j u r i s d i c t i o n of t h e United S t a t e s , unless he t r a n s a c t s such
business i n contravention of such r u l e s and r e g u l a t i o n s as t h e
S e c u r i t i e s and Exchange Commission may p r e s c r i b e as ne cessary
or a p p r o p r i a t e t o prevent t h e evasion of t h e S e c u r i t i e s Exchange
Act of 1934#
•# »,
!
*,
'i f hJ
,r
,»
X-8026
STATEMENT FOR THE PRESS
For r e l e a s e i n morning papers,
Friday, September 28, 1934.
September 27, 1934.
MARGIN REQUIREMENTS.
The Federal Reserve Board, a c ting i n accordance vdth t h e requirements
of t h e S e c u r i t i e s Exchange Act of 1934, has prescribed the margins t o be
required by brokers and d e a l e r s from customers borrowing f o r t h e purpose
of purchasing or c a r r y i n g s e c u r i t i e s .
The margin requirements which t h e Board has p r e s c r i b e d are those
l a i d down as a standard i n the a c t , which gives t h e Board a u t h o r i t y t o
impose lower or higher margins i n accordance with p r e v a i l i n g c o n d i t i o n s .
Under t h e standard adopted a broker or dealer may lend t o a customer on
many s e c u r i t i e s as much as 75 per cent of t h e i r c u r r e n t market value,
while on other s e c u r i t i e s , in p a r t i c u l a r on those t h a t have had a r a p i d
r i s e i n value since J u l y 1, 1933, the percentage t h a t may be l e n t i s
smaller, but i n no case l e s s than 55 per c e n t .
Rules p r e s c r i b e d f o r margin requirements c o n s t i t u t e a p a r t of
Regulation T issued by t h e Federal Reserve Board, which a l s o deals with
other m a t t e r s r e l a t i n g t o the extension or maintenance of c r e d i t by
brokers, d e a l e r s and members of s e c u r i t i e s exchanges f o r t h e purpose
of purchasing or c a r r y i n g s e c u r i t i e s .
Most of t h e r u l e s i n t h i s r e g u l a -
t i o n are f o r the purpose of preventing the circumvention of t h e margin
requirements, and no r e s t r i c t i o n s are placed on loans f o r i n d u s t r i a l ,
X-8026
-2-
a g r i c u l t u r a l , or commercial purposes»
The r e g u l a t i o n becomes e f f e c t i v e October 1, 1934*
I n o r d e r , how-
e v e r , t h a t p e r s o n s a f f e c t e d might have a d d i t i o n a l t i m e t o f a m i l i a r i z e
t h e m s e l v e s w i t h i t s p r o v i s i o n s , t h e S e c u r i t i e s and Exchange Commission
a t t h e r e q u e s t of t h e F e d e r a l Reserve Board has made b r o a d use of i t s
power t o exempt s e c u r i t i e s f r o m t h e p e r t i n e n t s e c t i o n s of t h e S e c u r i t i e s
Exchange Act#
The exemption g r a n t e d i s f o r t h e p e r i o d f r o m October 1
t o October 15•
R e g u l a t i o n T does n o t p r e s c r i b e a s p e c i f i c margin t h a t must be
m a i n t a i n e d a f t e r a locm h a s been g r a n t e d , b u t imposes r e s t r i c t i o n s on
t h e o p e r a t i o n s "which t h e customer may c a r r y on i n h i s a c c o u n t i f h i s
margin f a l l s below t h e s t a n d a r d p r e s c r i b e d f o r i n i t i a l e x t e n s i o n of
credit.
Under t h e law t h e Board has a u t h o r i t y t o p r e s c r i b e r e g u l a t i o n s ,
i n c l u d i n g margin r e q u i r e m e n t s , a p p l i c a b l e t o l o a n s made by banks f o r t h e
purpose of p u r c h a s i n g or c a r r y i n g s e c u r i t i e s •
This a u t h o r i t y i s a d d i -
t i o n a l to other s t a t u t e s f o r credit supervision#
The Board i s s t u d y i n g
t h e p r e s e n t s t a t u t e i n c o n n e c t i o n w i t h t h e s e o t h e r s t a t u t e s and i n due
time w i l l i s s u e t h e r e q u i r e d r e g u l a t i o n as t o bank l o a n s made t o pur chase
or c a r r y s e c u r i t i e s .
X-8027
I1TTERPRBTATI0H OP BAMING ACT OF 1933
(Copies to he sent to a l l Federal r e s e r v e "banks)
September 21, 1934
AG1JEW
SAH FRANCISCO
E e t e l J u l y 25, 1934, r e q u e s t i n g Board's opinion upon question
whether holding company a f f i l i a t e of member "bank may l a w f u l l y
cumulate i t s shares i n e l e c t i o n s of d i r e c t o r s .
Comptroller of
Currency has h e r e t o f o r e r u l e d that holding company a f f i l i a t e
of n a t i o n a l "bank may cumulate i t s shares i n v o t i n g f o r d i r e c t o r s i n same manner a s i n d i v i d u a l shareholders a r e p e r m i t t e d
t o cumulate under s e c t i o n 5144 of Revised S t a t u t e s and Board
concurs i n t h a t opinion.
Furthermore, Board i s of opinion
t h a t t h e r e i s no p r o h i b i t i o n i n Federal s t a t u t e s a g a i n s t
holding company a f f i l i a t e of S t a t e member "bank cumulating
i t s s h a r e s when p e r m i t t e d "by a p p l i c a b l e S t a t e laws.
(Signed)
Chester M o r r i l l
MORRILL
FEDERAL RESERVE BOARD
X-8028
WASHINGTON
address official correspondence t o
t h e federal reserve board
September 28, 1934.
Dear S i r :
For your information t h e r e a r e a t t a c h e d a copy
of a l e t t e r r e c e i v e d "by t h e Board from the A s s i s t a n t
Federal Reserve Agent a t San F r a n c i s c o , dated September
13, 1934, and a copy of the Board's r e p l y . t h e r e t o , dated
September 27, 1934, concerning t h e Board's p o l i c y w i t h
r e s p e c t t o t h e issuance of general v o t i n g p e r m i t s .
Very t r u l y y o u r s ,
L. P . Bethea,
Assistant Secretary.
Inclosures
TO ALL
FEDERAL RESERVE AGENTS.
161
X-8028-a
FEDERAL RESERVE BAM OF SAH FRAHCISCO
Soptember 13, 1934.
Federal Reserve Board,
Washington, D. C.
A t t e n t i o n : Mr. Leo. E. P a u l g e r ,
Chief. Division of Examinations.
Dear S i r s :
We a r e beginning to r e c e i v e i n q u i r i e s from holding
company a f f i l i a t e s as to whether or not permanent v o t i n g p e r mits w i l l be issued b e f o r e t h e forthcoming annual stockholders
meetings. May we be advised as to the procedure which w i l l be
followed i n t h i s r e s p e c t ? Will i t bo t h e p o l i c y to i s s u e p e r manent p e r m i t s , or w i l l i t be necessary t o again i s s u e s p e c i a l
or temporary permits?
t
Yours v e r y t r u l y ,
(Signed) S. G. SARGENT
A s s i s t a n t Federal Reserve Agent
%.8028-t)
September 27, 1934.
SARGENT - SAN I M C I SCO
Relet September 13.
The Board d e s i r e s to i s s u e general voting; permits
i n a l l cases where c u r r e n t simultaneous examinations of h o l d i n g company a f f i l i a t e s and t h e i r s u b s i d i a r i e s a r e a v a i l a b l e and i n d i c a t e cond i t i o n , management and r e l a t i o n s h i p s to j u s t i f y .
As a c o n d i t i o n p r e c e -
dent to the g r a n t i n g of general voting permits the Board r e q u i r e s
holding company a f f i l i a t e s and t h e i r s u b s i d i a r y banks i n general to
comply w i t h t h e same conditions as to the elimination of c r i t i c i z e d
a s s e t s , c o r r e c t i o n s i n management p o l i c i e s and r e l a t i o n s h i p s as i f
they were applying f o r and being admitted to membership i n t h e Federal
Reserve System.
I t i s expected t h a t a l l holding company a f f i l i a t e s
which have complied w i t h t h e s e conditions w i l l be granted general v o t i n g permits during t h i s y e a r .
In a l l other cases c o n s i d e r a t i o n w i l l
be given to t h e i s s u a n c e of the necessary l i m i t e d permits u n t i l n e c e s s a r y c o r r e c t i o n s have been made by holding company a f f i l i a t e s and t h e i r
s u b s i d i a r y banks or t h e r e l a t i o n s h i p s have boon terminated.
In a l l
cases where i t i s necessary f o r the stock owned by holding company
a f f i l i a t e s to bo voted f o r s p e c i f i c purposes p r i o r to t h e issuance of
general p e r m i t s , your o f f i c e should a d v i s e the Board of the d e t a i l s
t h e r e o f , together with your recommendation i n t h e m a t t e r .
BETHEA
t r.2
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
8 0 2 9
September 29, 1934.
SUBJECT:
Code Word Covering Hew Issue
of 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, t h e
following code word has been designated t o cover a new
i s s u e of Treasury B i l l s :
"N0X0DE" - Treasury B i l l s t o be dated October 3,
1934, and t o mature April 3, 1935,
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 "U0X0AR" on page 172,
Very t r u l y yours
J . C. "Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAi.liS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
.
a - o u u i
October 2/ 1954 i
Dear S i r :
There a r e inclosed f o r your i n f o r m t i o n a copy of a summary
statement of t h e meeting i n Washington on September 27, 1934 of members of the Federal Reserve Board with r e p r e s e n t a t i v e s of the Indust r i a l Advisory Committees of the twelve Federal r e s e r v e d i s t r i c t s
and a copy of the minutes of the meeting of the members of the Indust r i a l Advisory Committees held i n Washington on the a f t e r n o o n of
t h a t day.
A copy of a l e t t e r being addressed by the Board today t o
each of t h e members of the I n d u s t r i a l Advisory Committees who a t t e n d ed the meetings above r e f e r r e d t o i s a l s o i n c l o s e d .
I t w i l l be noted from the summary record of the morning
meeting t h a t when the question was r a i s e d as t o reimbursement of t h e
members of the I n d u s t r i a l Advisory Committees f o r the time spent in
performing t h e i r d u t i e s , the opinion was expressed by t h e r e p r e s e n t a t i v e s p r e s e n t t h a t any suggestion i n t h i s regard should come from the
Federal r e s e r v e banks.
I t w i l l a l s o be noted t h a t Governor Calkins
suggested t h a t the lav; be amended to a l l o w reimbursement f o r a c t u a l
expenses and, i n a d d i t i o n , per diem payments f o r t h e time spent by
the members of the I n d u s t r i a l Advisory Committees i n committee a c t i v ities.
2
X-8031
The F e d e r a l Reserve Board w i l l a p p r e c i a t e i t i f you w i l l
study t h i s m a t t e r and submit t o t h e Board f o r c o n s i d e r a t i o n , your
recommendation w i t h regard t h e r e t o .
Very t r u l y y o u r s ,
L. P . Bethea,
Assistant Secretary.
Inclosures.
TO FEDERAL RESERVE AGMTS AND GOVERNORS OF ALL FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
X—8030
t h e federal reserve board
October 2, 1934.
Dear S i r :
In accordance with t h e understanding had a t t h e meeting of members
of the F e d e r a l Reserve Board w i t h t h e r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Adv i s o r y Committees i n Washington on Septeinb*L 27,. 1934, t h e r e i s a t t a c h e d a
copy of a summary statement of t h a t meeting.
There i s a l s o a t t a c h e d a copy
of t h e signed minutes of the meeting of the members of the I n d u s t r i a l Adv i s o r y Committees held during the a f t e r n o o n of September 27, 1934.
Four
e x t r a copies of t h e s e documents a r e a l s o i n c l o s e d and 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 hand t h e s e t o the o t h e r members of your committee.
The F e d e r a l Reserve Board has arranged t o send d i r e c t l y t o each member of the r e s p e c t i v e I n d u s t r i a l Advisory Committees in 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 weekly, a summary statement of a p p l i c a t i o n s r e c e i v e d and
considered by t h e I n d u s t r i a l Advisory Committees and the F e d e r a l r e s e r v e
banks.
This i s i n conformity w i t h the a c t i o n t a k e n during t h e a f t e r n o o n
meeting.
In connection w i t h the q u e s t i o n of t h e u n w i l l i n g n e s s of banks t o
extend l o a n s which would reduce t h e l i q u i d i t y of t h e i r a s s e t s or which
might be s u b j e c t t o c r i t i c i s m by a d m i n i s t r a t i v e a u t h o r i t i e s , c o n s i d e r a t i o n
i s being given t o t h e p r e p a r a t i o n of a statement which may be s e n t t o a l l
banks i a accordance* with t h e recommendation made by the members wf the
I n d u s t r i a l Advisory Committees t h a t a d e f i n i t e announcement by p r o p e r
166
-
2 -
X-8030
o f f i c i a l s on the standing of i n d u s t r i a l loans be made immediately. •
I t i s r e p o r t e d on page 6 of the minutes of the meeting of the members of the I n d u s t r i a l Advisory Committees t h a t the following r e s o l u t i o n was
unanimously adopted during t h e meeting:
"Although in our experience the a t t i t u d e of o f f i c i a l s of
Federal r e s e r v e banks has a t a l l times been a l i b e r a l one on
the c o n s t r u c t i o n and i n t e r p r e t a t i o n of the law and the making
of l o a n s , we have been impressed today in our meetings by the
very apparent d e s i r e of the Federal Reserve Board i n Washington and the Federal reserve banks to handle a l l m a t t e r s i n
connection with such loans in such a l i b e r a l manner t h a t the
maximum number of proper loans be made, with the l e a s t d e l a y
and expense t o the borrower.
"We t h e r e f o r e pledge ourselves t o use our b e s t e f f o r t s to
bring t h i s about i n our s e v e r a l d i s t r i c t s . "
The Federal Reserve Board a p p r e c i a t e s very much the s p i r i t of cooperation evidenced by the above r e s o l u t i o n and expresses t h e hope t h a t the
c l o s e r contact which has been c r e a t e d by the meeting i n Washington w i l l be
continued.
Very t r u l y y o u r s ,
'J?
/ 1 1 (• •
L. P . Bethea,
Assistant Secretary.
Inclosures.
TO ALL REPRESENTATIVES OF INDUSTRIAL ADVISORY C0i-1 ITTEES V.UO ATTENDED MEETING IN WASHINGTON ON SEPTEMBER 27, 1934, AND ALSO TO MR. STUART L. RAI7LINGS,
CHAIRMAN.
;
1G7
X-8030-a
At the meeting held i n Washington on September 27, 1934, a t
10:00 a . m. of members of the Federal Reserve Board and members of i t s
s t a f f with r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees of the
twelve Federal r e s e r v e d i s t r i c t s , t h e following i n d i v i d u a l s were p r e s e n t :
Mr. Henry Morgenthau, Secretary of the Treasury
and Chairman of t h e Federal Reserve Board
Mr. George R. James, Member, Federal Reserve Board
Mr. M. S.. Szymczak, Member, Federal Reserve Board
Mr. J . F. T. O'Connor, Comptroller of the Currency
and ex o f f i c i o member of the Federal Reserve Board
Messrs. Albert M. Creighton, 17m. H. Pouch, J . Ebert
Butterworth, J , G. Holtzclaw, John Sanford, Max
E p s t e i n , Vto. K. N o r r i s , Sheldon V. Wood and
Clarence Ousley, Chairmen of the I n d u s t r i a l
Advisory Committees of the F i r s t , Second, Third
F i f t h , S i x t h , Seventh, Eighth, Minth and Eleventh
Federal Reserve D i s t r i c t s , r e s p e c t i v e l y , .
Messrs. Frank B. Bell and L. F. Rooney, members of
the I n d u s t r i a l Advisory Committees of the Fourth
and Tenth Federal Reserve D i s t r i c t s , r e s p e c t i v e l y . .
Mr. L. P. Bethea, A s s i s t a n t S e c r e t a r y , Federal Reserve
Board
Mr. 5 . R. Carpenter, A s s i s t a n t S e c r e t a r y , Federal
Reserve Board
Mr. E. L. Smead, Chief of the Division of Bank Operat i o n s , Federal Reserve Board
Mr, L. H. Paulger,. Chief of t h e Division of Examinat i o n s , Federal Reserve Board
Mr# George B. Vest, A s s i s t a n t Counsel, Federal Reserve
Board
Mr. H». Lee Boatwright, a s s i s t a n t Counsel, F e d e r a l
Reserve Board
Mr. E. M. Stevens, Federal Reserve Agent a t the Federal
Reserve Bank of Chicago
Mr. John U. Calkins, Governor of the Federal Reserve
Bank of San Francisco
Mr. 2 , G. H u l t , A s s i s t a n t Cashier of the Federal
Reserve Bank of Boston
Mr. Jacob Viner, _-_ssi.-itunt to thu Locretary of the
Treasury.
X-8030
—2—
Mr. Szymczak s t a t e d t h a t Hr. Thomas, Vice Governor of t h e Board,
and Mr. Hamlin, t h e o t h e r member of the Board who i s i n Washington, were
engaged i n a n o t h e r meeting and would be unable t o meet w i t h t h e r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Committees t h i s morning, and t h a t
Mr, Thomas had r e q u e s t e d him t o take charge of t h e m e e t i n g .
Mr. Szymczak made a statement t h e substance of which was a s f o l lows:
He s t a t e d t h a t the purpose of the meeting was:
F i r s t , f o r the r e p r e s e n t a t i v e s and t h e Chairmen of t h e
I n d u s t r i a l Advisory Committees to hear from t h e Board on t h e
s u b j e c t of i n d u s t r i a l l o a n s ,
Second, t o give t h e r e p r e s e n t a t i v e s and Chairmen of tho
I n d u s t r i a l Advisory Committees an o p p o r t u n i t y t o e x p r e s s thems e l v e s f r e e l y upon t h i s s u b j e c t , and
T h i r d , f o r t h e conference t o make such s u g g e s t i o n s a s i t
saw f i t t o t h e F e d e r a l r e s e r v e banks and t o t h e F e d e r a l Reserve
Board.
He t h e n reviewed t h e l e g i s l a t i v e h i s t o r y of t h e I n d u s t r i a l
Loan Act and the circumstances under which i t was f i n a l l y p a s s e d .
He p a r t i c u l a r l y c a l l e d a t t e n t i o n t o t h e f a c t t h a t i t uas c l e a r l y
the i n t e n t i o n of Congress:
F i r s t , t h a t t h e l o a n s made under t h i s a u t h o r i t y would i n volve a g r e a t e r amount of r i s i c t h a n i s involved in an o r d i n a r y
bank l o a n ;
Second, t h a t t h e l o a n s would be f o r t e r n s l o n g e r than t h e
Ordinary b5Lk l o a n , not exceeding f i v e y e a r s ; and
T h i r d , t h a t t h e l o a n s would be made f o r t h e purpose of
f u r n i s h i n g working c a p i t a l r a t h e r than t o supply t h e s h o r t term c r e d i t needs of t h e commercial or i n d u s t r i a l borrower.
He f u r t h e r p o i n t e d out t h a t t h e purpose of the law was:
(a) t o a i d s n a i l i n d u s t r y , and
(b) t o c o n t i n u e , and, i f p o s s i b l e , t o i n c r e a s e
employment.
He s t r e s s e d the importance of the I n d u s t r i a l Advisory Comm i t t e e s by shov.int. t h a t i n t h e o r i g i n a l b i l l p r o v i s i o n '..as made
X-3030-a
-3f o r i n t e r m e d i a t e c r e d i t "banks, and t h a t i n the amended b i l l the sug^g e s t i o n of i n t e r m e d i a t e c r e d i t tanks was r e t a i n e d through the prov i s i o n f o r an I n d u s t r i a l Advisory Committee i n each d i s t r i c t . The
law provides f o r t h e appointment of members of an I n d u s t r i a l Advisory Committee "by each r e s e r v e t a n k with the approval and under t h e
r e g u l a t i o n s of t h e Federal Reserve Board. The committees have a
d e f i n i t e s t a t u s under the law and r e p r e s e n t the p u b l i c i n t e r e a t i n
connection with t h e o p e r a t i o n of the law i n the g r a n t i n g of i n d u s t r i a l l o a n s . The law i s s p e c i f i c t n i t s requirement. Each member
of the committee must "be an a c t i v e i n d u s t r i a l i s t . The committee
t h e r e f o r e i s independent ( t o the extent of i t s s t a t u t o r y e x i s t e n c e )
of the Federal r e s e r v e "bank a s such, and has a d e f i n i t e a u t h o r i t y
and r e s p o n s i b i l i t y which r e q u i r e t h a t t h e committee consider c a r e f u l l y each a p p l i c a t i o n and rinke i t s recommendations to t h e Federal
r e s e r v e bank as to t h e a c t i o n i t thinks the bank should take on t h e
a p p l i c a t i o n . Congress desired t o make c e r t a i n t h a t the -mblic
would be r e p r e s e n t e d i n the a d m i n i s t r a t i o n of t h i s law. The committee represents the public.
From t h e v e r y beginning t h e Federal Reserve Board has taken
the a t t i t u d e t h a t the' law should be administered l i b e r a l l y . The
r e g u l a t i o n s adopted by t h e Federal Reserve Board a r e s h o r t and
simple, g i v i n g every opportunity to t h e Federal r e s e r v e banks to
operate under t h e law without d i f f i c u l t y . I t should be remembered
t h a t i n a d d i t i o n to t h e $140 ,000,000 which r e p r e s e n t s t h e p r e s e n t
s u r p l u s of the F e d e r a l r e s e r v e banks, t h e r e i s a l s o a n o t h e r
$139,000,000 i n the Treasury of t h e United S t a t e s which t h e Secret a r y of t h e Treasury has agreed, pursuant to t h e a u t h o r i t y granted
Mm under the p r o v i s i o n s ef Section 13b (e) of the F e d e r a l Reserve
Act> to t r a n s f e r to the Federal r e s e r v e banks i f needed f o r t h e
purpose of making i n d u s t r i a l advances. F i f t y per cent ef t h e t o t a l
amount of i n d u s t r i a l loans made by t h e Federal r e s e r v e banks w i l l
be advanced from the banks * s u r p l u s , and t h e other 50 per cent from
funds to be f u r n i s h e d t h e banks by t h e Secretary of t h e Treasury.
There i s , t h e r e f o r e , a revolving fund of about $280,000,000 t o be
used f o r t h i s purpose.
Mi*. Szymczak r e f e r r e d to h i s r e c e n t v i s i t to n i n e F e d e r a l r e serve d i s t r i c t s , d u r i n g which he met w i t h o f f i c e r s and beards of
d i r e c t o r s of t h e F e d e r a l r e s e r v e banks, as well as w i t h members of
the I n d u s t r i a l Advisory Committees and r e p r e s e n t a t i v e s of the
commercial banks. He discussed h i s t r i p q u i t e i n f o r m a l l y and i n
some d e t a i l . He s t a t e d t h a t while he found t h a t a g r e a t deal has
a l r e a d y been done by t h e I n d u s t r i a l Advisory Committees and the
F e d e r a l r e s e r v e banks, as well as p r i v a t e f i n a n c i n g i n s t i t u t i o n s ,
to t h e end of p r o v i d i n g c r e d i t t o i n d u s t r y , a g r e a t d e a l remains
t o be done, p a r t i c u l a r l y on the s u b j e c t of informing f i n a n c i n g
i n s t i t u t i o n s of the p r o v i s i o n s of t h e law, t h e r e g u l a t i o n s of t h e
Board and t h e requirements of Federal r e s e r v e banks, t o t h e end
of o b t a i n i n g t h e i r cooperation under the law.
•: 1 7 0
'Z-8050-a
-4When t h e m a t t e r i s c a r e f u l l y e x p l a i n e d t o f i n a n c i n g i n s t i t u t i o n s they
g e n e r a l l y become i n t e r e s t e d , n o t only because of the p o s s i b i l i t y of
t h e i r being a b l e t o make a l o a n on which a cocjmit,ment from t h e i ' e d e r a l
r e s e r v e bank t o r e d i s c o u n t t h e l o a n can be o b t a i n e d , t h u s g i v i n g the
f i n a n c i n g i n s t i t u t i o n a d d i t i o n a l e a r n i n g a s s e t s and l i q u i d i t y , b u t
a l s o because of t h e g e n e r a l p u b l i c i n t e r e s t involved i n t h e s u b j e c t .
I t would seem important from t h e banker*s s t a n d p o i n t , p a r t i c u l a r l y
a t t h i s t i m e , t h a t he c o o p e r a t e i n t h e I n d u s t r i a l Loan a c t i v i t y , a t
l e a s t t o t h e e x t e n t of i n f o r m i n g himself f u l l y on t h i s s u b j e c t and
making e v e r y e f f o r t t o meet t h e purpose of t h e law c o n s i s t e n t w i t h
i t s p r o v i s i o n s , so t h a t the r e s u l t of h i s e f f o r t i n t h i s d i r e c t i o n
w i l l prove d e f i n i t e l y t h e t r u e c o n d i t i o n s and t n e r e a s o n s t h e r e f o r .
I t a p p e a r s , t h e r e f o r e , t h a t s t r e s s should be l a i d on t h e importance
of a c t i v e s t e p s being t a k e n by t h e F e d e r a l r e s e r v e banks and t h e
I n d u s t r i a l Advisory Committees, not only t o inform banks, 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 on t h e law and the r e g u l a t i o n s , b u t a l s o on
the ourncseo ol the I n d u s t r i a l Loan A c t .
I t i s a l s o i m p o r t a n t t h a t sympathetic t r e a t m e n t be g i v e n the
a p p l i c a n t s when they come t o t h e F e d e r a l r e s e r v e bank f o r t h e p u r pose of d i s c u s s i n g an i n d u s t r i a l l o a n . Many of t h e p r o s p e c t i v e b o r rowers a e e n t i r e l y -ma ca ua int ed w i t h the F e d e r a l r e s e r v e bank, i t s
p e r s o n n e l , or with t h e I n d u s t r i a l Advisory Coranittee, and i t s members h i p , and a r e p e r h a p s small borrowers who have had l i t t l e o c c a s i o n
p r i o r t o t . i i s time t o v i s i t a F e d e r a l r e s e r v e bauk,' and a c c o r d i n g l y
might be overawed i n t h e i r f i r s t v i s i t t o the F e d e r a l r e s e r v e bank
or f r i g h t e n e d by t h e s i z e and d e t a i l of t h e form of a p p l i c a t i o n t h e y
a r e asked t o f i l l o u t . I t i s doubly i m p o r t a n t , t h e r e f o r e , t h a t every
e f i o r t be made t o have them u n d e r s t a n d t h a t t h e y a r e e n t i r e l y w i t h i n
t h e i r r i g h t s i n coming t o t h e bank, and t h a t t h e y a r e welcome aad
a r e to be out a t e a s e ana a d v i s e d t h a t t h e i r a p p l i c a t i o n , even i f f o r
a small amount, w i l l be given c a r e f u l and thorough c o n s i d e r a t i o n .
Courtesy and kind t r e a t m e n t w i l l prove a most v a l u a b l e i n v e s t m e n t .
One of the important a d v a n t a g e s of t h i s loan a c t i v i t y i s t h a t
i t a f f o r d s t h e F e d e r a l Heserve System an o p p o r t u n i t y t o come i n t o
d i r e c t c o n t a c t w i t h t h e p u b l i c i n a vay which e n a b l e s t h e System t o
l'-iid a sympathetic hand and t o b r i n g about a b e t t e r u n d e r s t a n d i n g on
t h e p o r t of t h e g e n e r a l p u b l i c of the f u n c t i o n s of the System, i t s
h i s t o r y and i t s p e r f o r m a n c e . T h i s i s an o p p o r t u n i t y t h a t we should
a v a i l o u r s e l v e s of a t t h i s time w i t h a t r e a t d e a l of e n t h u s i a s m .
I t t;eej;;5 v h s r e f o r e t h a t t h e r e ^ i e o o n t u t i v e s and chairmen
of tue JuVaUiitrial Advisory Committees should c o n s i d e r t h e f o l l o w i n g
points:
X-8030-a
1 7 1
-51. How b e s t to aid i n obtaining the cooperation of f i n a n c i n g
i n s t i t u t i o n s on loans to i n d u s t r y .
2. How t o give the f u l l e s t c o n s i d e r a t i o n to each a p p l i c a t i o n
on d i r e c t loans so t h a t nothing w i l l be overlooked which would make
p o s s i b l e t h e g r a n t i n g of a loan i n accordance w i t h t h e p r o v i s i o n s and
requirements of the law.
3. The a t t i t u d e to be shown toward an a p p l i c a n t on a d i r e c t
loan to i n d u s t r y , so t h a t i n case of delays he might a t once be i n formed of t h e reason f o r such d e l a y s , and i n case ef a r e f u s a l he
might be informed a t once of the reasons f o r the r e f u s a l i n a c o u r t e ous way, and i n case of t e c h n i c a l or l e g a l o b s t a c l e s , he might be
informed of t h e s e o b s t a c l e s and shown t h a t t h e matter i s wholly b e yond the a u t h o r i t y of the committee or the bank and t h e r e f o r e not
i t s r e s p o n s i b i l i t y , and i n case of need f o r advice the a p p l i c a n t
might obtain such advice from the bank.
4 . How b e s t t o review an a p p l i c a t i o n t h a t has been turned
down i n order to make c e r t a i n t h a t r e f u s a l was a b s o l u t e l y necessary
and t h a t t h e r e have been no new developments s i n c e t h e d a t e of the
r e f u s a l t h a t might change the a c t i o n ef the committee or t h e bank or
both.
' While t h e Federal Reserve Board does not expect t h e I n d u s t r i a l
Advisory Committees or t h e Federal r e s e r v e banks t o . a c t imprudently
or i l l o g i c a l l y or to v i o l a t e the p r o v i s i o n s of the I n d u s t r i a l Loan
Act, the Board does f e e l s t r o n g l y t h a t t h e circumstances under which
the a c t was passed r e q u i r e a l i b e r a l c o n s t r u c t i o n of the law; t h a t
the I n d u s t r i a l Advisory Committees and the Federal r e s e r v e banks
should do everything p o s s i b l e to make reasonably sound loans and be
prepared t o prove beyond a question of a doubt why i t was not p o s s i b l e
to make c e r t a i n loans a p p l i e d f o r i n accordance w i t h t h e powers and
the l i m i t a t i o n s of the law.
Apparently t h e Federal r e s e r v e banks and the I n d u s t r i a l Adv i s o r y Committees a r e making a very s i n c e r e e f f o r t under t h i s law,
and i t would be most u n f o r t u n a t e i f , be cause of t h e emission by the
committee or t h e bank of some d e t a i l small as i t may a p p e a r , someone
might be given reason to think t h a t such an e f f o r t i s not b e i n g made.
Mr, Szymczak then read excerpts frcm the law and r e f e r r e d t o
a comparative statement of i n d u s t r i a l loans made by t h e twelve
Federal r e s e r v e banks.
At t h e close of Mr. Szymczak's s t a t e m e n t , Mr. Henry Morgenthau,
S e c r e t a r y of t h e Treasury and Chairman of t h e Federal Reserve Board,
X-8030-a
-6-
joinod the m e e t i n g .
He s t a t e d t h a t , inasmuch a s h i s time was l i m i b e d , h<
would a p p r e c i a t e i t v e r y much i f each of the r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees would make a s h o r t s t a t e m e n t w i t h r e g a r d t o
the i n d u s t r i a l l o a n a c t i v i t y i n h i s d i s t r i c t .
I n accordance w i t h the Chairman's r e q u e s t s t a t e m s n t s were made
by each of the r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Committees
p r e s e n t and by Governor C a l k i n s r e p r e s e n t i n g the T w e l f t h F e d e r a l Reserve
District.
The s t a t e m e n t s i n d i c a t e d g e n e r a l l y t h a t , i n t h e o p i n i o n of
t h e r e p r e s e n t a t i v e s of t h e Advisory Committees, the F e d e r a l r e s e r v e
bunks a r e l e n d i n g e v e r y a s s i s t a n c e t o t h e I n d u s t r i a l Advisory Committees
tii-nt t h e r e i s c l o s e c o o p e r a t i o n between the i n d u s t r i a l loan a c t i v i t i e s
of the F e d e r a l r e e e r v e banks and the l o c a l a g e n c i e s of the R e c o n s t r u c t i o n Finance C o r p o r a t i o n and t h a t , i n most c a s e s, t h e F e d e r a l r e s e r v e
banks have adopted a more l i b e r a l a t t i t u d e toward the- g r a n t i n g of i n d u s t r i a l l o a n s than have the I n d u s t r i a l Advisory Committees.
I n connection with t h e c u e s t i o n of d e l a y s i n f i n a l a c t i o n on
a p p l i c a t i o n s , i t was s t a t e d by some of t h e r e p r e s e n t a t i v e s t h a t t h e y
a r e g i v i n g s p e c i a l a t t e n t i o n t o t h i s m a t t e r and t h a t t h e y f e e l t h a t
t h e d e l a y s a r c due t o t h e n e c e s s a r y i n v e s t i g a t i o n and c o n s i d e r a t i o n
which must be given t o t h e a p p l i c a t i o n s , t o t h e f a c t t h a t i t i s d i f f i c u l t i n many c a s e s t o >\et s a t i s f a c t o r y i n f o r m a t i o n , and t h a t i n some
i n s t a n c e s t h e f u n d s a r e t o t r e q u i r e d immediately.
The p o i n t was a l s o
made t h a t c a r e f u l c o n s i d e r a t i o n i s bein& 'siveu t o a l l a p p l i c a t i o n s ,
p a r t i c u l a r l y t h o s e of the s m a l l b o r r o w e r , f o r the r e a s o n t h a t t h e
X-8030-a
I n d u s t r i a l a d v i s o r y Committee d i d not v/isa t o w e the a u a l l b u s i n e s s
man put out of b u s i n e s s because of h i s i n a b i l i t y t o g e t t h e n e c e s s a r y
c r e d i t when h i s p o s i t i o n would j u s t i f y t h e e x t e n s i o n of such c r e d i t .
I t xa.3 i n d i c a t e d by most of the r e p r e s e n t a t i v e s p r e s e n t , however, t h a t
a l a r g e number of t h e i n q u i r i e s r e c e i v e d by t h e f e d e r a l r e s e r v e banks
were from persons who had no u n d e r s t a n d i n g of t h e r e q u i r e m e n t s of the
law and vvho.3e f i n a n c i a l p o s i t i o n was such t h a t t h e y were n o t e n t i t l e d
to c r e d i t .
I t v.as i n d i c a t e d a l s o
t h a t t h e I n d u s t r i a l a d v i s o r y Com-
m i t t e e s i n one or two d i s t r i c t s had approved l o a n s on t h e b a s i s of t h e
c h a r a c t e r and b u s i n e s s r e c o r d of the a p p l i c a n t w i t h n o t h i n g more t h a n
nominal s e c u r i t y f o r the l o a n .
I n c o n n e c t i o n w i t h the q u e s t i o n which was r a i s e d by some of
the r e p r e s e n t a t i v e s a s bo t h e p o s s i b l e c r i t i c i s m by examiners of i n d u s t r i a l l o a n s p a r t i c i p a t e d i n by b a n k s , i t was p o i n t e d out by the
C o m p t r o l l e r of the Currency t h a t he had i n s t r u c t e d examiners t o l i s t
i n d u s t r i a l l o a n s , and p a r t i c i p a t i o n s t h e r e i n , by n a t i o n a l banks under
a separate schedule.
On t h e q u e s t i o n of bank c o o p e r a t i o n , i t was s t a t e d t h a t some
of t h e commercial bank:, were c o o p e r a t i n g but t h a t o t h e r s were not
i n t e r e s t e d i n the c o n s i d e r a t i o n of i n d u s t r i a l l o a n s , and t h a t i t was
r e a l i s e d t h a t i t i s i m o r t a n t t h a t t h e a c t i v e c o o p e r a t i o n of the banks
be s o u g h t .
I n r e s p o n s e t o an i n q u i r y , soiae of t h e r e p r e s e n t a t i v e s i n d i cated that t h e I n d u s t r i a l Advisory Committees had t a k e n a much more
l i b e r a l a t t i t u d e than t h e y would have been a b l e t o t a k e nad t h e y been
X-oG30-a
'
1 7 4
—8—
a c t i n 0 us d i s c o u n t committees of commercial banking i n s t i t u t i o n s .
A l l of t h e r e p r e s e n t a t i v e s i n d i c a t e d ta&t t h e i r commietees were
t r y i n g t o f i n d ways t o make l o a n s and t h a t i n a number of c a s e s a p p l i c a t i o n s had been r e c o n s i d e r e d and s u g g e s t i o n s made a s t o s t e p s which
might be t a k e n i n o r d e r t o make i t p o s s i b l e f o r t h e a p p l i c a t i o n t o be
considered f a v o r a b l y .
One r e p r e s e n t a t i v e s t a t e d t h a t his committee i n -
v i t e s an appearance of t h e a p p l i c a n t i n b o r d e r - l i n e c a s e s , but i t was
i n d i c a t e d g e n e r a l l y t h a t t h e committees do n o t i n t e r v i e w a p p l i c a n t s a?,
such procedure vvoulc! bu p r o h i b i t i v e from t h e s t a n d p o i n t of t h e time
consumed.
The o p i n i o n was a l s o expressed t h a t the maicin^ of i n d u s t r i a l
l o a n s i s s e r v i n g a r e a l need and i s a worthwhile u n d e r t a k i n g .
The s t a t e m e n t was r:.; de by one r e p r e s e n t a t i v e t h a t h i s impress i o n was t h a t t h e m a j o r i t y of i n d u s t r i a l i s t s g e n e r a l l y a r e n o t r e q u e s t ing c r e d i t l o r the r e a s o n t h a t t.aey do not want t o i n c r e a s e t h e i r a c t i v i t i e s i n t h e f a c e of the u n c e r t a i n t y which t h e y f e e l as t o the
future.
Mr. S n s t e i n read a p r i n t e d pamphlet p r e p a r e d by aim, o u t l i n i n g
a s u g g e s t i o n a s t o t h e p r o c e d u r e f o r making small l o a n s , and t h e sugg e s t i o n was made t h a t i t be d i s c u s s e d by t h e r e p r e s e n t a t i v e s w h i l e
t h e y a r e i n Washington. .
Mr. N o r r i s s a i d , d u r i n g h i s s t a t e m e n t , t h a t he f e l t i f h i s
committee had g r a n t e d any of t h e l o a n s which had been r e f u s e d , i t
would have amounted t o a d o n a t i o n which n e v e r would have been r e p a i d .
Governor C a l k i n s s t r e s s e d the n e c e s s i t y of e x p l a i n i n g t o t h e
a p p l i c a n t , where t h e a p p l i c a t i o n i s i n e l i g i b l e under t h e law, t h e
X-8030-a
1 7 5
-9r e a s o n s which raake i t i n e l i g i b l e .
No mention i s made i n t h i s s t a t e m e n t of t h e s t a t i s t i c s given
by t h e r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Conruitteos ar> t o t h e
number of a p p l i c a t i o n s r e c e i v e d and c o n s i d e r e d f o r the reason t h a t
such i n f o r m a t i o n was a v a i l a b l e i n t h e s t a t e m e n t p r e p a r e d i n t h e B o a r d ' s
o f f i c e s and d i s t r i b u t e d d u r i n g t h e m e e t i n g .
At t h e c o n c l u s i o n of t h e statements by t h e r e p r e s e n t a t i v e s of
t h e I n d u s t r i a l Advisory Committees and t h e q u e s t i o n s asked by members
of the Board i n c o n n e c t i o n t h e r e w i t h , Mr. Mo.genthau l e f t t h e meeting
and s h o r t l y t h e r e a f t e r Mr. Viner l e f t *
Mr. James r e f e r r e d t o t h e e x p e r i e n c e of t h e F e d e r a l r e s e r v e
banks under t h e a u t h o r i t y g r a n t e d by the t h i r d paragraph of s e c t i o n
13 of t h e F e d e r a l Reserve Act t o t h e F e d e r a l r e s e r v e banks t o make
d i r e c t l o a n s t o i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s i n unusual
and e x i g e n t c i r c u m s t a n c e s , and t o t h e f a c t t h a t v e r y few l o a n s were
made under t h a t a u t h o r i t y .
He expressed the o p i n i o n t h a t the banks
a r e i n f a c t meeting t h e l e g i t i m a t e c r e d i t n e e d s of the- c o u n t r y i n so
f a r a s commercial bank c r e d i t i s concerned and he s t a t e d he f e l t
t h a t t h e e x p e r i e n c e of t h e F e d e r a l r e s e r v e banks w i t h i n d u s t r i a l
l o a n s w i l l be somewhat s i m i l a r t o t h e i r e x p e r i e n c e under t h e earlier
a u t h o r i t y t o make d i r e c t l o a n s f o r t h e r e a s o n t h a t t h e number of
e s t a b l i s h e d i n d u s t r i a l and commercial concerns which a r e e n t i t l e d
t o C r e d i t , and wiii.cn a r e unable t o o b t a i n c r e d i t t o meet t h e i r
l e g i t i m a t e n e e d s , are c o m p a r a t i v e l y fevj, and t h a t t h i s would be
X-8030-a
XYO
—10—
demonstrated by t h e a c t i v i t i e s of the F e d e r a l r e s e r v e "banks i n t h e
i n d u s t r i a l loan f i e l d .
He a l s o c a l l e d a t t e n t i o n t o t h e f a c t t h a t t h e F e d e r a l Reserve Board lies d e c l i n e d t o d e f i n e d e f i n i t e l y t h e term "working c a p i t a l " a s used i n t h e i n d u s t r i a l loan a c t and t h e B o a r d ' s r e g u l a t i o n w i t h
regard t o i n d u s t r i a l loans.
He s t a t e d t h a t he was c e r t a i n t h e members
of the Board would be v e r y l i b e r a l i n interpreting t h e term and t l . a t ,
i n his o p i n i o n , t h e paranouni, c o n s i d e r a t i o n i s whether o r n o t t h e l o a n
i s a good one, r . - e . , r e a s o n a b l y s a f e . - He said t h a t he v a s i n t e r e s t e d
p r i m a r i l y i n t h e number of people who could be put t o work by t h e i n dustrial l o a n s made br trio 7ede_-al reserve banks and t h a t he would not
b e inclined t o criticize t h s I n d u s t r i a l Advisory C o m m i t t e e s o r t n e
F e d e r a l r e s e r v e banks f o r a l i b e r a l i n t e r p r e t a t i o n of the r e q u i r e m e n t s
of t h e ' law.
Mr. Szymczak made t h e f u r t h e r s u g g e s t i o n t h a t t h e I n d u s t r i a l
Advisory Committees g i v e c o n s i d e r a t i o n t o whether any changes should
be made i n the law with r e g a r d t o i n d u s t r i a l advances by F e d e r a l r e serve b a n k s .
I n t h i s connection t h e opinion was e x p r e s s e d by some
r e p r e s e n t a t i v e s t h a t t h e presence of t h e term :'workin,_> c a p i t a l " i n
t h e lav/ i s a r e a l l i m i t a t i o n on t h e f i e l d of a p p l i c a n t s who a r e
eligible for industrial loans.
Mr. J?u,'.e3 r a i s e d t h e q u e s t i o n a s t o reimbursement of t h e
members of t h e I n d u s t r i a l Advisory Committees f o r the t i u c s p e n t and
the expenses i n c u r r e d i n performing t h e i r d u t i e s , and he s t a t e d t h a t
i n h i s o p i n i o n t h i s i s an i m p o r t a n t q u e s t i o n because of t h e a p p a r e n t l y
X-8030-a
1 7 ?
-11-
permanent character of the committees.
In t h i s connection t h e r e p r e -
s e n t a t i v e s i n d i c a t e d t h a t they f e l t any suggestion i n regard t o reimbursement should cone from the Federal r e s e r v e b a n k s .
Governor Calkins
suggested t h a t the law be amended t o allow reimbursement f o r a c t u a l
expenses and in a d d i t i o n per diem payments f o r the time spe^t by the
members of the I n d u s t r i a l Advisory Committees i n committee a c t i v i t i e s .
F u r t h e r r e f e r e n c e was made t o the p o s s i b l e c r i t i c i s m by e x aminers of i n d u s t r i a l l o a n s and p a r t i c i p a t i o n s by banks and the s t a t e ment was made t h a t some bonks h e s i t a t e t o make such l o a n s or p a r t i c i p a t e
t h e r e i n f o r the reason t h a t t h e y do not want t o show i n d e b t e d n e s s t o
t h e F e d e r a l r e s e r v e bank.
Mr. .-xuad oointed out t h a t commitments by
F e d e r a l r e s e r v e banks t o r e d i s c o u n t i n d u s t r i a l l o a n s made by comm e r c i a l banks c r e a t e no indebtedness t o t h e r e s e r v e banks and t h a t i f
a commercial bank p a r t i c i p a t e s in a l o a n t o the e x t e n t of twenty p e r
cent or more and tho Federal r e s e r v e bank t a k e s t h e b a l a n c e , t h e p a r t i c i p a t i o n would be t r e a t e d us a loan by the commercial bank and c a r r i e d
i n i t s l o a n s a c c o u n t , and t h e r e would be no r e f e r e n c e i n i t s statement
t o t h e p a r t of the l o a n taken by the Federal r e s e r v e bank.
Some of
t h e r e p r e s e n t a t i v e s s t a t e d t h a t they f e l t t h e banks d i d n o t u n d e r stand t h e s e p o i n t s o r t h e f a c t t h a t the Comptroller of t h e Currency
has provided a s p e c i a l l i s t i n g f o r i n d u s t r i a l l o a n s by n a t i o n a l b a n k s ,
and t h e y e x p r e s s e d tho opinion t h a t i t was important t h a t thu i n f o r m a t i o n bo sent t o the b a n k s .
Accordingly, Mr. Szymczak s t a t e d the Board
would iiivo c o n s i d e r a t i o n t o t h e p r e p a r a t i o n of a s t a t e m e n t with r e g a r d
t o the p o i n t s r e f e r r e d t o , t o be s e n t to member b a n k s .
%-803&_a ^
-12-
Mr. Szymczak expressed the a p p r e c i a t i o n of tlie F e d e r a l Reserve Board of t h e w i l l i n g n e s s of the members of t h e I n d u s t r i a l Adv i s o r y Committees to g i v e t h e b e n e f i t of so nruch of t h e i r time and
experience to t h i s work, and thanked t h e r e p r e s e n t a t i v e s of t h e
committees f o r t h e i r v i s i t to Washington.
He then suggested t h a t
t h e r e p r e s e n t a t i v e s meet a g a i n a t two p . m. t h i s a f t e r n o o n t o d i s cuss the t o p i c s on a program which had "beon prepared f o r t h e i r cons i d e r a t i o n and any o t h e r phase of t h e i r i n d u s t r i a l l o a n a c t i v i t i e s ,
and to f o r m u l a t e any recommendations or suggestions they might
wish to make.
X-6050-b
A meeting of members of t h e I n d u s t r i a l Advisory Committees
was held i n Washington, D. C., on September 27, 1934, a t 2:00 p . m«
PRESENT $ Mr. A l b e r t M. Creighton, (Chairman, Boston)
D i r e c t o r , Boston Woven Hose and Rubber Co*,
Boston, M a s s a c h u s e t t s .
Mr. "ton. H. Pouch, (Chairman, New York)
P r e s i d e n t , Concrete S t e e l Company,
New York, Few York.
Mr. J . E b e r t B u t t e r w o r t h , (Chairman, P h i l a d e l p h i a )
V i c e - P r e s i d e n t , II. W. B u t t e r w o r t h and Sons Co.,
Philadelphia, Pennsylvania.
Mr. Frank B# B e l l , (Member, C l e v e l a n d )
P r e s i d e n t , Edgewater S t e e l Company,
Oakmont, P e n n s y l v a n i a .
Mr. Jolin S a n f o r d , (Chairman, A t l a n t a )
P r e s i d e n t , Armour F e r t i l i z e r Works,
A t l a n t a , Georgia.
Mr. Max E p s t e i n , (Chairman, Chicago)
Chairman, General'American Tank Car C o r p o r a t i o n ,
Chicago, I l l i n o i s .
Mr• Win. K. N o r r i s , (Chairman, S t . L o u i s )
P r e s i d e n t , McQuay-lIorris Manufacturing Co.,
S t . Loui s , Mi s s o u r i .
Mr,. Sheldon V. Wood, (Chairman, M i n n e a p o l i s )
P r e s i d e n t , Minneapolis E l e c t r i c S t e e l Casting Co.,
Minneapolis, Minnesota.
Mr. L. F. Rooney, (Member, Kansas C i t y )
V i c e - P r e s i d e n t , Manhattan C o n s t r u c t i o n Company,
Muskogee, Oklahoma.
Mr. Clarence Ousley, (Chairman, D a l l a s )
P r e s i d e n t , Globe L a b o r a t o r i e s ,
F o r t Worth, Texas.
ALSO PRESENT:
Mr.
Mr.
Mr.
Mr.
Thomas, Vice-Governor, F e d e r a l Reserve Board
Hamlin, Member, F e d e r a l Reserve Board
Szymczak, Member, F e d e r a l Reserve Board
J n o . U. C a l k i n s , Governor, F e d e r a l Reserve
Bank of San F r a n c i s c o , San F r a n c i s c o , C a l i f o r n i a .
X-8030-b
-2-
The meeting v/as a d d r e s s e d b r i e f l y by Vice Governor Thomas, Mr
Hamlin and Mr# Szymczak#
T h e r e a f t e r t h e meeting was t u r n e d over t o
Mr# E p s t e i n as t e m p o r a r y Chairman and Messrs* Thomas, Hamlin and
Szymczak l e f t t h e room#
I t was moved and seconded t h a t Mr#
C r e i g h t o n be made permanent Chairman of
t h e meeting#
Unanimously c a r r i e d .
The d i s c u s s i o n d u r i n g t h e meeting was based upon t h e f o l l o w i n
outlinei
"A*
P u b l i c i t y methods( a ) Bankers group m e e t i n g s
( b ) Radio a d d r e s s e s
( c ) Newspaper p u b l i c i t y
(d) Q u e s t i o n n a i r e s
( e ) V i s i t s by bank r e l a t i o n s men of t h e
F e d e r a l r e s e r v e bank
( f ) C i r c u l a r s of i n f o r m a t i o n t o b a n k s ,
business concerns, etc*
B.
What may be done by the Chairman and other
members of t h e I n d u s t r i a l Advisory Committees,
a p a r t from what t h e F e d e r a l r e s e r v e banks have
done or should do, t o a c q u a i n t t h e p u b l i c w i t h
t h e i n d u s t r i a l l o a n f a c i l i t i e s o f f e r e d by t h e
F e d e r a l r e s e r v e banks, and t o g e t f u n d s i n t o
t h e hands of i n d u s t r i a l and commercial c o n c e r n s
f o r working c a p i t a l p u r p o s e s where such f u n d s
cannot be o b t a i n e d t h r o u g h u s u a l b a n k i n g
channels#
C#
To what e x t e n t has t h e i n a b i l i t y of e s t a b l i s h e d
businesses t o obtain loans from usual sources
f o r working c a p i t a l p u r p o s e s been due t o :
( a ) Absence of l o c a l banking f a c i l i t i e s
as a r e s u l t of bank c l o s i n g s o r
otherwise#
( b ) U n w i l l i n g n e s s of banks t o e x t e n d l o a n s
which would r e d u c e t h e l i q u i d i t y of
t h e i r a s s e t s o r which might be s u b j e c t
t o c r i t i c i s m by a d m i n i s t r a t i v e a u t h o r i t i e s #
"D.
7/hat i n g e n e r a l i s the a t t i t u d e of a p p l i c a n t s
whose a p p l i c a t i o n s are d i s a p p r o v e d .
Be
I s t h e r e any i n d i c a t i o n t h a t t h e r e s e r v e "banks
a r e t o o s t r i c t i n p a s s i n g on a p p l i c a t i o n s f o r
i n d u s t r i a l advances.
F.
An i n d u s t r i a l concern t h a t o b t a i n e d a p p r o v a l of
a loan f r o m t h e R. F . C. r e c e n t l y sought t o
o b t a i n a d i r e c t l o a n from a r e s e r v e bank i n
a s u b s t a n t i a l l y l a r g e r amount, w i t h t h e i n t e n t i o n of n o t a c c e p t i n g t h e R. F« C. l o a n i f
t h e l a r g e r amount were o b t a i n e d f r o m t h e F e d e r a l
r e s e r v e bank. Have s i m i l a r i n s t a n c e s been
encountered i n your d i s t r i c t ,
G.
What volume of i n d u s t r i a l advances can be made
a c c o r d i n g t o t h e p r e s e n t o u t l o o k by t h e end
of 1934."
A show of hands was c a l l e d f o r t h e purpose of d e t e r mining t h e o p i n i o n of t h o s e p r e s e n t ' r e g a r d i n g t h e a d v i s a b i l i t y of employing r a d i o p u b l i c i t y , w i t h t h e f o l l o w i n g
resulti
Favorable
Doubtful
Against
3
5
3
The Chairman a p p o i n t e d t h e f o l l o w i n g committee t o f o r m u l a t e
recommendations r e g a r d i n g p u b l i c i t y :
Mr. Pouch, Chairman
Mr. S a n f o r d ,
Mr. N o r r i s .
D i s c u s s i o n of Topic B showed t h a t f i v e d i s t r i c t s had f i e l d
examiners r e p r e s e n t i n g t h e F e d e r a l r e s e r v e banks, and f i v e d i s t r i c t s
employed e x p e r t s whenever n e e d e d .
Mr. Ousley moved t h a t t h e Chairman
a p p o i n t a s p e c i a l committee t o f o r m u l a t e
an e x p r e s s i o n of t h e opinion of t h i s
meeting on Topic C.
Unanimously c a r r i e d
-4-
X-8030-b
'
1
The Chairman appointed t h e f o l l o w i n g committee i n accordance
•with t h e above motion:
Mr. B u t t e r w o r t h , Chairman,
Mr. B e l l ,
Mr • Wood•
At t h i s p o i n t Governor Calkins l e f t t h e m e e t i n g .
The Chairman a p p o i n t e d t h e f o l l o w i n g committee t o f o r m u l a t e
a s t a t e m e n t of t h e g e n e r a l consensus of t h e meeting as t o t h e a t t i t u d e
of a p p l i c a n t s f o r l o a n s t
.Mr. Rooney, Chairman,
Mr. Ousley.
The meeting was asked t o v o t e upon t h e q u e s t i o n -whether t h e r e
i s any i n d i c a t i o n t h a t t h e F e d e r a l r e s e r v e banks a r e t o o s t r i c t i n
p a s s i n g upon a p p l i c a t i o n s f o r i n d u s t r i a l advances, each v o t e t o r e p r e s e n t t h e member's o p i n i o n as t o h i s ovm d i s t r i c t o n l y .
Nine answered t h e q u e s t i o n negat i v e l y and one a f f i r m a t i v e l y .
Mr. E p s t e i n made t h e f o l l o w i n g
motions
" I t i s recommended t h a t a c l e a r i n g h o u s e
arrangement w i t h t h e R e c o n s t r u c t i o n
Finance C o r p o r a t i o n be made i n any
d i s t r i c t where n o t now i n f o r c e . "
Unanimously c a r r i e d .
The meeting t h e n r e c e s s e d f o r f i f t e e n minutes and reconvened
a t 3:45 p . m.
The Committee on P u b l i c i t y submitted t h e f o l l o w i n g r e s o l u t i o n *
" I t i s recommended, f i r s t , t h a t b a n k e t s ' group
meetings be held i n a l l d i s t r i c t s ; secondly, t h a t a t
-5-
X-8030-b
•
i:
" t h i s time no e f f o r t be made t o use t h e r a d i o ;
t h i r d , t h a t t r a d e p a p e r s , such as t h e c r e d i t a s s o c i a t i o n magazines, chamber of commerce w e e k l i e s and
m o n t h l i e s , and o t h e r t r a d e p u b l i c a t i o n s seem t o be
t h e b e s t v e h i c l e f o r p u b l i c i t y i n our work, and
t h a t t h e use of t h e s e v e h i c l e s be s t r e s s e d . The
committee a l s o recommends t h e use of newspaper
space, i f p r o p e r l y guarded, s t r e s s i n g t h a t l o a n s
be made on r e a s o n a b l e and sound b a s i s , as t h e banks
can n o t make unsound l o a n s ; f o u r t h , we do not r e c ommend q u e s t i o n n a i r e s , but b e l i e v e t h a t p e r s o n a l
c o n t a c t i s p r e f e r a b l e ; f i f t h , we recommend t h e
d i s t r i b u t i o n of c i r c u l a r s p u b l i s h e d by t h e F e d e r a l
r e s e r v e banks t o banks, b u s i n e s s c o n c e r n s , t r a d e
a s s o c i a t i o n s , and chambers of commerce.
"With r e f e r e n c e t o Topic B, t h i s s u b j e c t i s
covered by t h e p u b l i c i t y m a t t e r s r e f e r r e d t o above.
T h i s m a t t e r could be j u d i c i o u s l y handled by p e r s o n a l
c o n t a c t of members of t h e Committee w i t h i n d i v i d u a l
banks and i n d u s t r y . "
Mr. E p s t e i n moved t h a t t h e above
r e s o l u t i o n be adopted as t h e s e n s e of t h e
Conference.
Unanimously c a r r i e d .
The Committee appointed t o d r a f t an o p i n i o n on Topic C subm i t t e d t h e f o l l o w i n g s t a t e m e n t which was adopted as t h e s e n s e of t h e
Conference:
"(a)
This has been a v e r y small f a c t o r a l t h o u g h i t has been
g i v e n as a r e a s o n by a p p l i c a n t s whose c r e d i t s t a n d i n g
did n o t j u s t i f y a l o a n .
"(b)
Many banks a r e r e l u c t a n t t o p a r t i c i p a t e i n long term
l o a n s because t h e y are u n c e r t a i n of t h e a t t i t u d e
which may be t a k e n by v a r i o u s bank e x a m i n e r s . We
recommend t h a t a d e f i n i t e announcement by p r o p e r
o f f i c i a l s on t h e s t a n d i n g of such l o a n s be made
immediately t o r e l i e v e t h i s s i t u a t i o n . "
The Committee a p p o i n t e d t o f o r m u l a t e t h e concensus of t h e
meeting as t o t h e a t t i t u d e of a p p l i c a n t s f o r loans o f f e r e d t h e f o l lowing s t a t e m e n t which was unanimously adopted as t h e sense of t h e
Conference;
-6-
X-8030-b. ^
L
"The consensus i s t h a t t h e g e n e r a l a t t i t u d e of a p p l i c a n t s
whose a p p l i c a t i o n s have been disapproved i s a b o u t what would
be e x p e c t e d from any a p p l i c a n t f o r any bank l o a n - only two
or t h r e e c a s e s of h a r s h or unreasonable c r i t i c i s m have been
r e p o r t e d except i n one d i s t r i c t which r e p o r t s c o n s i d e r a b l e
d i s a p p o i n t m e n t and s h a r p c r i t i c i s m . "
Mr. Pouch moved t h a t a weekly c o m p i l a t i o n of a p p l i c a t i o n s , app r o v a l s , r e j e c t i o n s and commitments be s e n t by t h e F e d e r a l Reserve
Board t o each member of each of t h e I n d u s t r i a l Advisory Committees a t
his business address.
Unanimously c a r r i e d .
At t h i s p o i n t , Dr. Jacob Viner, A s s i s t a n t t o t h e S e c r e t a r y of
t h e T r e a s u r y , e n t e r e d t h e room and spoke i n f o r m a l l y t o t h e m e e t i n g ,
f o l l o w i n g which a f u l l d i s c u s s i o n was had on s p e c i a l c r e d i t c a s e s .
Mr* E p s t e i n a d d r e s s e d t h e meeting on t h e s u b j e c t of small
l o a n s , f o l l o w i n g which i t was suggested t h a t the p l a n which he b r i e f l y
o u t l i n e d be s u b m i t t e d by him i n w r i t i n g a t an e a r l y d a t e t o t h e C h a i r men of t h e I n d u s t r i a l Advisory Committees f o r t h e i r c o n s i d e r a t i o n and
suggestions.
Mr. B e l l o f f e r e d t h e f o l l o w i n g r e s o l u t i o n , which was unanimously carried:
"Although i n our e x p e r i e n c e t h e a t t i t u d e of o f f i c i a l s of
F e d e r a l r e s e r v e banks has a t a l l t i m e s been a l i b e r a l one on
t h e c o n s t r u c t i o n and i n t e r p r e t a t i o n of t h e law and t h e making
of l o a n s , we have been impressed t o d a y i n our meetings by t h e
v e r y a p p a r e n t d e s i r e of t h e F e d e r a l Reserve Board i n Washington
and t h e F e d e r a l r e s e r v e banks t o handle a l l m a t t e r s i n connect i o n w i t h such loans i n such a l i b e r a l manner t h a t t h e maximum
number of proper loans be made, w i t h t h e l e a s t d e l a y and expense
to the borrower.
"We t h e r e f o r e pledge o u r s e l v e s t o use our b e s t e f f o r t s t o
b r i n g t h i s about i n our s e v e r a l d i s t r i c t s
X-8030-b
-7-
Mr. Ousley submitted, the f o l l o w i n g r e s o l u t i o n , which tra.s
unanimously a d o p t e d :
"We wish t o r e c o r d our high a p p r e c i a t i o n of t h e i n s t r u c t i v e a d d r e s s e s and d i s c u s s i o n s i n i t i a t e d by members of t h e
F e d e r a l Reserve Board and o f f i c e r s of t h e Treasury and t o
express our t h a n k s f o r t h e g r a c i o u s c o u r t e s i e s extended*"
Thereupon t h e meeting a d j o u r n e d .
(Signed)
A. M« C r e i ^ h t o n .
Chairman,
X-8032
i ! vi l i n g 1 0 • 2
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For release in the
O c t o b e r 2, 1934.
evening papers,
October
2,
19 34
arisen in
con-
INTERPRETATION OF M a R G I ^ REQUIREMENTS
"Old accounts"
In response
to
a number
nection with section 7(a)
of
questions which have
of R e g u l a t i o n T,
the
Board has
issued the
following interpretations:
1,
The account
account as
it
that may be designated as
stood at
with such changes as
section 7(a)
an old
of the
account
2.
The
regulation
if
to November
15,
1934,
as
at the
beginning
any t r a n s a c t i o n which cannot be
3*
the
1934,
such account under
on October
such account as
1,
1934.
an old
account
and may permit transactions
but
there may not
in
be included
account
if
of b u s i n e s s
it
had been designated as
on October
1,
1934,
so included must be made in
and
or trans-
a new account.
After
an account has
regulation permits
at
an old account any transaction which
have been made in the
an old account
1,
is
account had been designated as
of business
such designation;
in any account designated
ferred to
the
account
on October
could have been permitted in
at the beginning
account pending
could not
opening of business
creditor may designate
any time prior
the
the
an old
been designated as
the withdrawal
of
cash
an old
or s e c u r i t i e s
account the
only if
the
-2account is
an unrestricted
does not make the
4.
If,
the time
account
X-8032
on October
account a restricted
between the
securities
account cannot be d e s i g n a t e d as an old
whichever
from the
is
on October
the
later,
account
are
on October
1,
1934 and
such account as an old account,
has been any -withdrawal of money or
account
the withdrawal
account.
opening of business
of the d e s i g n a t i o n of
stricted
15 and i f
account unless
1.5 o r o n t h e
or unless
the
from the
date
of
account,
it
is
such
an unre-
such designation,
cash and/or
replaced before the
there
account
securities
is
withdrawn
designated as
an
old account#
5.
the time
If,
between the
of the
opening of
designation
of
sults
consisting
in an increase
securities
of
of a s a l e
in the
securities
1934,
old account,
in the
adjusted debit balance
account designated
1,
and
there
account or
any
and replacement purchase which re-
purchased and any debit for
cluded in the
on October
such account as an
has been any additional purchase
substitution
business
as
the
of t h e
cost thereof
account,
the
cannot be in-
an old account but may be transferred
to a new account.
6.
quent to
the
September
30,
1934,
account exactly as i t
October
made
Even though transactions
1,
1934,
as
subsequent to
an
old
the
have been made in an account
creditor may f o r convenience
existed
at the
account and may transfer
September
50,
1934,
may be t r a n s f e r r e d any money and/or
the
old
account in
beginning
accordance with
of
business
all
section 7(a)
designate
on
transactions
to a new account,
securities
subse-
to which also
lawfully withdrawn from
of
the
Regulation*
*
"
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-8033
October 2, 1934.
Dear S i r :
I t has appeared i n a few i n s t a n c e s from correspondence and
c o n v e r s a t i o n s t h a t t h e B o a r d ' s p o s i t i o n on t h e m a t t e r of p u b l i c a d d r e s s e s by r e s p o n s i b l e o f f i c e r s of F e d e r a l r e s e r v e banks has been
misunderstood.
The Board h a s imposed no g e n e r a l p r o h i b i t i o n upon the
making of speeches or a d d r e s s e s or t a l k s by such o f f i c i a l s .
As was
i n d i c a t e d t o the Governors a t t h e i r r e c e n t meeting i n Washington,
t h e r e have been two or t h r e e c a s e s of members of t h e s t a f f s of t h e
F e d e r a l r e s e r v e banks who have indulged i n p u b l i c i t y on c o n t r o v e r s i a l
a s p e c t s of banking which i n v o l v e t h e p o s s i b i l i t y of embarrassment t o
the system, but such c a s e s have been t a k e n up i n d i v i d u a l l y and d i r e c t l y with t h e F e d e r a l r e s e r v e banks concerned and the a c t i o n t h e r e o n
has not j u s t i f i e d any m i s u n d e r s t a n d i n g of the B o a r d ' s p o s i t i o n on t h e
general s u b j e c t .
There i s a t t a c h e d f o r ready r e f e r e n c e a copy of t h e
B o a r d ' s l e t t e r cf* A p r i l 18, 1932, on t h e s u b j e c t "Addresses on Banking
and C r e d i t " , from which i t w i l l be noted t h a t , while t h e Board d e s i r e d
t o be a d v i s e d c u r r e n t l y w i t h r e g a r d t o a d d r e s s e s on banking and c r e d i t
made by p e r s o n s connected w i t h the F e d e r a l r e s e r v e system and t h a t i t
be f u r n i s h e d w i t h c o p i e s of a l l a d d r e s s e s on t h e s e s u b j e c t s d e l i v e r e d
188
Jfc#by o f f i c e r s and
ly
stated that
employees
copies
Board in advance
of
to assist
the Federal reserve banks,
such addresses need not
This request was made
is being
This is
the l a t e s t
circular
therefore it
quired that
addresses be approved
to be informed f u l l y as to the
scripts
in advance and the
reserve banks
under which a talk
pare a manuscript
resume of the
in advance,
such that
Governors and
speeches which re-
system is
interested,
occasion and the
it
is not
it
the manuFederal
conditions
practical
to pre-
desires
is
other r e s p o n s i b l e o f f i c e r s of
felt
by the banks that
system but is
exists at this
is
desirable
especially when the
of an e x p o s i t i o n and not
Board desires
only sees no o b j e c t i o n to addresses
to the Federal reserve
the Federal
or
the
re-
if
a
remarks be sent as promptly as p o s s i b l e .
this character,
nature
While
it will meet the Board's
times and circumstances when it
of
of the
in serious
Board has not
Board has advised o f f i c e r s of the
is made are
reserve banks when it
ficial
the
n a t u r e of t a l k s
when the nature
The Board not
by Chairmen,
in position
intention of the Board to undertake to edit
that,
to
Board might
might result
in advance.
in which the Federal reserve
been the
the
the
issued by the Board on this
should be clear that
has not
should be sent
said and written and also be
subject and
to matters
it was express-
be furnished to
so that
in correcting misunderstandings that
consequences.
late
X-8033
their delivery although they
the Board promptly.
be informed of what
of
of
w
time with respect
reserve banks,
of
the
talks
Federal
they would be beneopinion that
that
there
are
there be activity
subject of discussion
a controversial one.
to the
or
Such a
is
in the
situation
industrial loan activities
in connection with which it
is
of
the desire
X-8053
of the Board that
pose
of
the
every effort possible
industrial
loan act,
be made to
carry out
and' d i s c u s s i o n s of t h i s
subject
should afford an opportunity to promote better understanding
functions and
cooperation
services
of the Federal reserve
of bankers g e n e r a l l y in matters
of
common i n t e r e s t .
L. P . B e t h e a
Assistant Secretary.
TO THE CHAIRMEN 0? ALL FEDERAL RESERVE BANKS.
of
the
system and to enlist
Very truly yours
Inclosure.
the pur-
the
X-7135
A p r i l 18, 1932.
SUBJECT:
Addresses on Banking and C r e d i t .
Dear S i r :
I n o r d e r t h a t t h e F e d e r a l Reserve Board may be
a d v i s e d c u r r e n t l y w i t h r e g a r d t o a d d r e s s e s on banking
and c r e d i t made by p e r s o n s connected w i t h t h e F e d e r a l
Reserve System, 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 f u r n i s h t h e Board w i t h c o p i e s of a l l a d d r e s s e s on t h e s e
s u b j e c t s d e l i v e r e d by o f f i c e r s and employees of your
bank.
Copies of such a d d r e s s e s need not be f u r n i s h e d
t h e Board i n advance of t h e i r d e l i v e r y b u t i t w i l l be
a p p r e c i a t e d i f t h e y a r e s e n t t o t h e Board p r o m p t l y .
Very t r u l y y o u r s ,
i
,
TO CHAIRMEN OF ALL F. R. BANKS.
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-8034
October 3 , 1934
Dear S i r :
There i s i 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 a copy
of a l e t t e r r e c e i v e d "by t h e F e d e r a l Reserve Board from t h e S e c r e t a r y of t h e Treasury w i t h r e g a r d to t h e agreement e n t e r e d i n t o
"between t h e S e c r e t a r y of t h e Treasury and each F e d e r a l r e s e r v e
bank p u r s u a n t to t h e p r o v i s i o n s of s e c t i o n 13b of t h e F e d e r a l Res e r v e Act and i n c l o s i n g a copy of t h e S e c r e t a r y ' s r e g u l a t i o n s
i s s u e d p u r s u a n t to t h a t s e c t i o n .
Your a t t e n t i o n i s i n v i t e d t o
t h e l a s t p a r a g r a p h of t h e i n c l o s e d l e t t e r w i t h r e g a r d to compliance w i t h s e c t i o n 3 of t h e r e g u l a t i o n s of t h e S e c r e t a r y of t h e
T r e a s u r y on t h i s s u b j e c t .
Very t r u l y y o u r s ,
L. P. Bethea,
Assistant Secretary.
Inclosure.
TO GOVERNORS AH) FEDERAL RESERVE AGENTS AT ALL FEDERAL RESERVE BAHS
copy
*
.
X-8034-a
.+•
TREASURY
D E P A R T ME IT T
'
;|_
WASHINGTON
Dear S i r s :
R e c e i p t i s acknowledged of your l e t t e r d a t e d September
20, 1934, and t h e e n c l o s u r e s c o n t a i n e d t h e r e i n .
There i s e n c l o s e d a copy of t h e r e g u l a t i o n s i s s u e d under
d a t e of August 15, 1934, by the S e c r e t a r y of t h e T r e a s u r y p u r s u a n t
to S u b s e c t i o n (e) of P a r a g r a p h 13b of t h e F e d e r a l Reserve A c t , a s
amended by t h e Act of June 19, 1934.
There i s a l s o e n c l o s e d a copy
of a l e t t e r of t h i s d a t e to t h e F e d e r a l Reserve Bank of P h i l a d e l p h i a .
I d e n t i c a l l e t t e r s have been s e n t to t h e twelve F e d e r a l Reserve Banks.
You axe c o r r e c t i n your u n d e r s t a n d i n g t h a t l o a n s , d i s c c u n t s
advances, p u r c h a s e s and commitments which may have been made by a Fede r a l r e s e r v e bank p r i o r t o t h e e x e c u t i o n of the p r e s e n t agreement
would be r e g a r d e d a s s u b j e c t to t h e terms of t h e p r e s e n t agreement.
I t i s u n d e r s t o o d t h a t t h e correspondence between you and
t h e F e d e r a l Reserve Bank of Chicago, c o p i e s of which correspondence
you f o r w a r d e d to u s , i s not i n t e n d e d i n any way to a f f e c t or modify
t h e agreement e n t e r e d i n t o between t h e S e c r e t a r y of t h e T r e a s u r y and
t h e F e d e r a l Reserve Bank of Chicago.
Your a t t e n t i o n i s c a l l e d to S e c t i o n 3 of t h e e n c l o s e d Regulations.
Your c o o p e r a t i o n i n having t h e F e d e r a l r e s e r v e banks and
F e d e r a l r e s e r v e a g e n t s do t h e t h i n g s p r e s c r i b e d i n s a i d s e c t i o n 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 y o u r s ,
The F e d e r a l Reserve Board,
Washington, D. C.
Enclosures.
(Signed) H. Morgenthau, J r .
S e c r e t a r y of t h e T r e a s u r y .
X-8035
,JLQ9lJ
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
September 28, 1934.
CURTISS
BOSTON
WILLIAMS
CLEVELAND
STEVENS
CHICAGO
McCLTJRE
KANSAS CITY
CASE
Z3W YORK
HOXTON
RICHMOND
WOOD
ST. LOUIS
WALSH
DALLAS
AUSTIN
PHILADELPHIA
NEWTON
ATLANTA
PEYTON
MINNEAPOLIS
SARGENT
SAN FRANCISCO
TRAITS. No. 2094
I n order t o c a r r y out p r o v i s i o n s of s e c t i o n 10 of B o a r d ' s R e g u l a t i o n
T> each F e d e r a l Reserve Agent should u n t i l f u r t h e r n o t i c e n o t i f y each
o t h e r F e d e r a l Reserve Agent and t h e F e d e r a l Reserve Board, "by t e l e graph w i t h c o n f i r m a t i o n "by m a i l , t h e t e l e g r a m s t o b e numbered s e r i a l l y
"beginning w i t h number one i n each d i s t r i c t , of t h e name and p r i n c i p a l
p l a c e of "business of each nonmember "bank which f i l e s an agreement on
F.R.B. Form T - l or T-2 p u r s u a n t to s e c t i o n 8 ( a ) of S e c u r i t i e s Exchange
Act of 1934 and i s g i v e n a c e r t i f i c a t e on F.R.B. Form T-3.
For t h i s
purpose code word "ALIGHTABLE" J.s a s s i g n e d to mean "Agreement on F.R.B.
Form T - l or T-2 h a s "been f i l e d by and c e r t i f i c a t e on F.R.B. Form T-3
given t o (name of "bank) of ( p r i n c i p a l p l a c e of b u s i n e s s ) " .
This code
word should be i n s e r t e d on page 8 of F e d e r a l Reserve Telegram Code
Book f o l l o w i n g the code "ALIGHT".
Each F e d e r a l Reserve Agent should
p r e p a r e and have a v a i l a b l e f o r d i s t r i b u t i o n upon r e q u e s t a l i s t showi n g t h e name and p r i n c i p a l p l a c e of b u s i n e s s of each nonmember bank
which has f i l e d an agreement on F.R.B, Form T - l or T-2 which i s s t i l l
in effect.
At t h e end of each month each F e d e r a l Reserve Agent should
forward a copy of such l i s t t o t h e Board.
Consideration w i l l l a t e r
he g i v e n t o the a d v i s a b i l i t y of i s s u i n g a s i n g l e l i s t by t h e Board
f o r d i s t r i b u t i o n to a l l F e d e r a l Reserve Agents.
(Signed)
L. P. 3ETHEA
BETHEA
itulinp; 1-0. 1
X-8036
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
September 29, 1934
CURTISS - Boston
CASE - N e w York
AUSTIN - P h i l a d e l p h i a
WILLIAMS - Cleveland
HOXT ON - Richmond
NEWTON - A t l a n t a
STEVENS - Chicago
WOOD - S t . Louis
PEYTON - Minneapolis
McCLURE - Kansas C i t y
WALSH - D a l l a s
SARGENT - San F r a n c i s c o
Trans No. 2095
R e f e r r i n g R e g u l a t i o n T t h e f o l l o w i n g t e l e g r a m was s e n t on Septemb e r 28 t o
QUOTE Answering s p e c i f i c q u e s t i o n
4
s wire
of t o d a y t o Wyatt STOP. Orders executed Saturday September 29
even though not a c t u a l l y debited or c r e d i t e d t o a c c o u n t s u n t i l
a f t e r October 1 s t may be c o n s i d e r e d a s p a r t of a c c o u n t s m a i n t a i n e d
a t t h e opening of b u s i n e s s on October 1, 1934, so a s t o s e c u r e
b e n e f i t s of p r o v i s i o n s of s e c t i o n 7 ( a ) of F e d e r a l Reserve B o a r d ' s
R e g u l a t i o n T. UNQUOTE.
(Signed)
L. P . BETBEA
BETHEA
liuling Lio. 5.
X-8037
TELEGRAM
FEDERAL RESERVE BCARD
WASHINGTON
October 2, 1934
CURTISS - Boston
CASE - New York
AUSTIN - Philadelphia
WILLIAMS - Cleveland
TRAITS. No. 2100
HOXTON - Richmond
NEWTON - Atlanta
STEVENS - Chicago
WOOD - St. Louis
PEYTON - Minneapolis
MCCLORE - Kansas City
WALSH - Dallas
SARGENT - San Francisco
Replying to inquiry as to whether and under what
conditions nonmember bank which has executed agreement on F. R. B.
Form T-l or T-2 under section 8(a) of Securities Exchange Act may
cancel such agreement, Board has taken p o s i t i o n that, inasmuch as
statute makes no reference to termination or c a n c e l l a t i o n except
in case of "bank's f a i l u r e to comply with provisions of agreement,
there i s doubt as to Board's power t o permit voluntary cancellation
by a bank i n other cases and that, since question depends upon i n terpretation of criminal statute rather than interpretation of
of Board's regulation. Board could not s a f e l y sanction such canc e l l a t i o n without opinion from Attorney General holding that such
action would be lawful and would r e l i e v e bank from further compliance with agreement.
Since i t i s practice of Attorney General
to decline to express opinions except on basis of s p e c i f i c f a c t s
i n actual cases requiring some action by Government, i t i s not
believed to be p o s s i b l e to obtain opinion from Attorney General
on hypothetical question.
In order to clear up t h i s question,
Board w i l l consider recommending to Congress at next s e s s i o n
X-80S7
—2—
that s t a t u t e be amended so as expressly to authorize voluntary
cancellation of such agreement "by a bank which has closed out
a l l loans made under section 8(a) while agreement was in f o r c e .
(Signed) L. P. BETHEA.
BETHEA.
199
TELEGRAM
FEDERAL RESERVE BOARD
TZA.SEING-TON
October 2, 1934
CURTISS - Boston
CASE - Hew York
AUSTIN - Philadelphia
WILLIAMS - Cleveland
KOXTON - Richmond
NEWTON - Atlanta
.STEVENS - Chicago
FOOD - St. Louis
PEYTON - Minneapolis
MCCLURE - Kansas City
WALSH - Dallas
SARGENT - San Francisco
TRANS. NO. 2102
On account of highly technical nature of questions a r i s i n g under
Regulation T, n e c e s s i t y of conferences between Counsel's o f f i c e
and technical s t a f f and necessity of obtaining Board approval
before any rulings or interpretations are made, i t i s requested
that a l l such questions be submitted i n writing or by telegraph
rather than by telephone.
Answers to a l l questions of general
i n t e r e s t w i l l be aont simultaneously to a l l Federal reserve agents
and each Federal reserve agent i s requested to s e e that copies of
such rulings are furnished promptly to appropriate o f f i c i a l s of
each s e c u r i t i e s exchange in his d i s t r i c t .
(Signed)
L. P. BETHEA
BETHEA
X-8039
Ruling Ho. 4 .
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
October 2, 1934
CURTISS
BOSTON
WILLIAMS
CLEVELAND
STEVENS
CHICAGO
McCLURE
KANSAS CITY
CASE
NEW YORK
HOXTON
RICHMOND
WOOD
ST. LOUIS
WALSH
DALLAS
AUSTIN
PHILADELPHIA
NEWTON
ATLANTA
PEYTON
MINIxTEAPOLIS
SARGENT
SAN FRANCISCO
Trans. No. 2103
In response to an inquiry as to a p p l i c a b i l i t y
of s e c t i o n 4 ( e ) of Board's Regulation T i n l i g h t of word
"additional" preceding word "margin" i n f i r s t sentence, Board
has r e p l i e d that the subsection r e f e r s to a l l margin which mast
be demanded i n order to comply with Regulation T.
(Signed)
L. P. Bethea
BETHEA
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-8040
October 4, 1934.
Dear Sir:
There are "being forwarded to you today under
separate cover, for the use of your "bank, three copies
of part 18 of the hearings "before the Committee on Banking and Currency of the United States Senate on stock
exchange p r a c t i c e s .
Copies of part 17 of these hearings
were forwarded to you on August 2, 1934.
your^
S. E. Ca/penter,
Assistant Secretary,
TO ALL F. R. AGENTS
(ITo copies to Governors or extra copies to "banks;
one copy to "be sent to Mr. K i t z m i l l e r . )
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-8041
October 4, 1934
SUBJECT: Examinations and reports
under Section 21 of the
Banking Act of 1933.
Dear Sir:
In the Board's l e t t e r of June 26, 1934, X-7936, the Federal
Reserve Agents were advised that i t would not be necessary to submit
to the Board copies of reports of examination made under the provisions of Section 21 of the Banking Act of 1933.
Several questions, however, have since arisen regarding examinations made i n accordance with the provisions of Section 21 of the Banking Act of 1933 and i t w i l l "be helpful to the Board to have copies of
such reports a v a i l a b l e .
I t i s requested, therefore, that copies of a l l
such reports of examination made in the future be forwarded to the Board,
together with your comments on the s i t u a t i o n and any other pertinent
data i n connection therewith, such as copies or "briefs of correspondence
or memoranda r e l a t i n g to conferences with representatives of the i n s t i tutions examined.
Please forward also copies of reports of examinations
which have already been completed i f such copies are a v a i l a b l e .
If
copies are not a v a i l a b l e , i t w i l l not be necessary to make an extra
X-8041
-2-
copy to be forwarded to the Board.
In such cases, however, i t w i l l
be appreciated i f you w i l l forward a brief analysis of each report,
gether with the other information referred to above.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS
;
^ 0 4
X-8042
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
October 2, 1934.
Curtiss - Boston
Case - Hew York
Austin - Philadelphia
Williams - Cleveland
Hoxton - Richmond
Newton - Atlanta
Stevens - Chicago
Wood - St. Louis
McClure - Kansas City
Peyton - Minneapolis
Walsh - Dallas
Sargent - San Francisco
TRANS. NO. 2099
Re Regulation T•
Under s e c t i o n 11 of Regulation T, F.R.B. Forms T-l and T-2
are to he f i l e d i n duplicate and Federal Reserve Agents are requested to f o r ward to Board one original counterpart of each form f i l e d .
For the period
prior to November 1, 1934 each Federal Reserve Agent i s authorized, notwithstanding the provisions of Regulation T, i n any case which he deems to he of
an emergency nature, to accept an agreement properly executed on F.R.B. Form
T-l or (in the case of the Federal Reserve Agents at New York or San Francisco)
on F.R.B. Form T-2 even though not f i l e d i n duplicate and even though the
resolution authorizing the execution of such agreement and the c e r t i f i c a t e
as to the adoption of such resolution are not in the i d e n t i c a l form prescribed
by the Board, provided that in the opinion of counsel for the Federal Reserve
Bank such resolution i s s u f f i c i e n t to authorize the execution of the agreement on Form T-l or T-2 and such c e r t i f i c a t e furnishes s u f f i c i e n t evidence
of the adoption of such resolution.
While Board desires prompt advice i n
accordance with Trans. No. 2094 of issuance of c e r t i f i c a t e s on Form T-3, i t
i s not necessary to send copies of Form T-3 to Board.
(Signed) L. P. Bethea
BETHEA
X-8043
T E L E ORAM
FEDERAL EESERVE BOARD
WASHINGTON
CURTISS - BOSTON
CASE - NSW YORK
AUSTIN - PHILADELPHIA
WILLIAMS - CLEVELAND
TRANS. NO. 2105.
HOXTON - RICHMOND
NEWTON - ATLANTA.
STEVENS - CHICAGO
WOOD - ST. LOUIS
October 4 , 1934.
PEYTON - MINNEAPOLIS
MC CLURE - KANSAS CITY
WALSH - DALLAS
SARGENT - SAN FRANCISCO
In reply to an inquiry as to the e f f e c t under sections 4(c)
and 4(e) of Regulation T of a creditor allowing a customer to e f f e c t a transaction i n an unrestricted account which would make the account a r e s t r i c t e d
account and then f a i l i n g to obtain, within three f u l l business days as s p e c i f i e d in section 4(e) of the regulation, the margin required for the transac4
t i o n , the Board has advised that such f a i l u r e to obtain margin w i l l not merely
cause the account to become a r e s t r i c t e d account but w i l l constitute a v i o l a t i o n of the regulation, unless within said three day period the account i s
otherwise brought into conformity with the regulation or within said three
day period an extension of time i s obtained as provided i n the f i r s t proviso
«
of section 4 ( e ) .
Such an account may be brought into conformity with the
regulation by such increase i n the maximum loan value of the s e c u r i t i e s i n
the account and/or such decrease i n the adjusted debit balance of the account
as would r e s u l t in the account being an unrestricted account a f t e r eliminating
from the computation of the adjusted debit balance any temporary credit given
pursuant to clause 8 of s e c t i o n 3 ( f ) for margin required on the transaction
and demanded but which has not been obtained.
The inquiry as submitted pointed
out that i n the case of a s a l e made on the third business day for the purpose
of bringing the account into conformity with the regulation the proceeds would
not ordinarily be obtained u n t i l a f t e r the three day l i m i t bad expired.
It
ii06
X-8043
— 2 —
should be noted, however, that under clause 7 of s e c t i o n 3 ( f ) of the regulat i o n the adjusted debit balance of the account r e f l e c t s the s a l e as soon as
i t i s made even though proceeds of the s a l e are not yet credited to the account .
(Signed) L. P. Bethea
BETHEA.
• d07
Ruling No* 5.
X-C044
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 6, 1934.
MARGIN REQUIREMENTS - TRANSACTIONS IN UNRESTRICTED ACCOUNTS.
In reply to an inquiry as to the e f f e c t under sections 4(c) and 4(e) of
Regulation T of a creditor allowing a customer to e f f e c t a transaction in an
unrestricted account which would make the account a r e s t r i c t e d account and
then f a i l i n g to obtain, within three f u l l business days as s p e c i f i e d in s e c tion 4(e) of the regulation, the margin required f o r the transaction, the
Board has advised that such f a i l u r e to obtain margin w i l l not merely cause
the account to become a r e s t r i c t e d account but w i l l constitute a v i o l a t i o n
of the regulation, unless within said three day period the account i s otherwise brought into conformity with the regulation or within said three day
period an extension of time i s obtained as provided in the f i r s t proviso of
section 4 ( e ) .
Such an account may be brought into conformity with the regu-
l a t i o n by such increase in the maximum loan value of the s e c u r i t i e s in the
account and/or such decrease in the adjusted debit balance of the account as
would r e s u l t in the account being an unrestricted account a f t e r eliminating
frail the computation of the adjusted debit balance any temporary credit given
pursuant to clause 8 of section 3 ( f ) for margin required on the transaction
and demanded but which has not been obtained.
The inquiry as submitted pointed
out that in the case of a sale made on the third business day for the purpose
of bringing the account into conformity with the regulation the proceeds would
not ordinarily be obtained u n t i l a f t e r the three day l i m i t had expired.
It
should be noted, however, that under clause 7 of section 3 ( f ) of the regulat i o n the adjusted debit balance of the account r e f l e c t s the sale as soon as i t
i s made even though proceeds of the sale are not yet credited t o the account.
X-8046
liulinrr tio • 6 .
£.5.5.1.5.15.
£2ARD
STATEMENT FOR THE PRESS
Far immediate r e l e a s e .
October 6» 1934.
MARGIN REQUIREMENTS - NEW PURCmSES IN RESTRICTED ACCOUNTS.
In r e p l y t o an i n q u i r y Board has r u l e d t h a t under s e c t i o n 4 ( d )
of Regulation T new purchases may be made i n r e s t r i c t e d accounts i f
a d d i t i o n a l margin i n t h e amount r e q u i r e d by s e c t i o n 3 t o oover such
new purchases i s demanded on same day and is obtained w i t h i n time
allowed by s e c t i o n 4 ( e ) , even though t h e account i s n o t made an
unrestricted account.
•jA
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X- 8046
October 6, 1934
Dear Sir:
The representatives of the Industrial Advisory Committees, at
their meeting i n Washington on September 27, stated they f e l t that
member banks do not understand how industrial loans, made under the
provisions of Section 13(b) of the Federal Reserve Act, are to be
r e f l e c t e d in condition and examination reports, and expressed the
opinion that i t i s important that they be advised i n t h i s regard.
The Board concurs i n t h i s opinion and, accordingly, requests that
you send the attached l e t t e r to each State bank member i n your d i s t r i c t and a copy thereof to the State banking department of each
s t a t e the c a p i t a l of which i s situated in your d i s t r i c t .
The Board
i s sending a copy of the l e t t e r to the Chairman of the Industrial
Advisory Committee in each d i s t r i c t f o r h i s information.
The Comptroller cf the Currency i s sending a similar l e t t e r
to National banks and copies to National bank examiners.
Very truly yours,
Assistant Secretary.
Inclosure
TO ALL FEDERAL RESERVE AG-EFTS
210
X— 8041-fi—a
TO THE BAH ADDRESSED:
The Act of Congress approved June 19, 1934, r e l a t i n g to direct
loans for i n d u s t r i a l purposes by Federal Reserve banks, published on
pages 430-434 of the July 1934 i s s u e of the Federal Reserve B u l l e t i n ,
added a new s e c t i o n , 13(b) to t h e Federal Reserve Act, paragraph (b)
of which authorizes each Federal reserve bank to discount f o r , or
purchase from, any member bank or other financing i n s t i t u t i o n operating i n i t s d i s t r i c t , obligations having maturities not exceeding f i v e
years entered into f o r the purpose of furnishing working c a p i t a l to
an established i n d u s t r i a l or commercial business; to make loans or
advances direct to any member bank or financing i n s t i t u t i o n on the
security of such obligations; and to make commitments with regard
thereto, including commitments made in advance of the actual undertaking of such o b l i g a t i o n s .
The Act a l s o provides that a member bank or other financing i n s t i t u t i o n , which discounts or s e l l s such an obligation to a Federal
*"9serve bank, s h a l l obligate i t s e l f to the s a t i s f a c t i o n of the
Federal reserve bank for at l e a s t 20 percent of any l o s s which may
be sustained thereon; a l s o that, i n l i e u of so o b l i g a t i n g i t s e l f
to the Federal reserve bank, a member bank cr financing i n s t i t u t i o n may advance a t least 20 percent of a working c a p i t a l loan to
an.established i n d u s t r i a l or commercial business and the Federal
reserve bank the reniainder, provided the t o t a l cf such loan i s
considered as one advance and repayment made prorata under such
regulations as the Federal Reserve Board may prescribe.
'
211
X-*8046—si
-2-
In view of the apparent misunderstanding on the part of some member hanks on t h i s subject, the Federal Reserve Board has requested me
to advise you a s follows i n regard to the manner i n which these loans
should he included i n condition reports submitted to t h e Federal r e serve bank and i n examination reports made by examiners for the Federal
reserve banks.
1.
If your bank discounts with, or s e l l s t o , the Federal
reserve bank any obligation of an industrial or commercial business issued for working capital purposes, only that portion of
such o b l i g a t i o n rediscounted with, or sold t o , the Reserve
bank on which your bank has obligated i t s e l f to the Federal
reserve bank for any l o s s sustained thereon i s to be included
among the a s s e t s and l i a b i l i t i e s of your bank in condition
reports submitted to the Federal reserve bank.
The amount of
such obligation on which your bank i s l i a b l e for any l o s s sustained i s to be included i n leans cr investments and shown
among l i a b i l i t i e s as "Obligations on industrial advances transferred to Federal Reserve Bank".
2.
I f , instead of discounting a working capital obligation
with, or s e l l i n g i t t o , the Federal reserve bank, your bank
advances not l e s s than 20 percent of such o b l i g a t i o n and the
remainder i s advanced by the Federal reserve bank, only the
amount of the advance by your bank should be included i n the
loans or investments in condition reports submitted to the
Federal reserve bank.
The amount advanced by the Federal
X™8046-a
-3reserve ba.ik should not "be included i n the balance sheet of
your bank.
3,
When your bank makes an industrial advance of the
kind described i n the Act of June 19, 1934, and obtains a
commitment from a Federal t-eserve bank in regard thereto,
the t o t a l advance should be included i n the loans or i n v e s t ments of your bank in condition reports submitted to the
Federal reserve bank, but the commitment obtained from the
Federal reserve bank should not be shown i n the balance
sheet of your bank.
4.
Examiners for the Federal reserve banks have been
instructed not to include in the loan c l a s s i f i c a t i o n the port i o n of a working capital advance which has been transferred
to the Federal reserve bank without obligation on the part
of your bank for any loss thereon or which, i n accordance
with a commitment obtained from the Federal reserve bank,
may be so transferred, and not to c l a s s i f y , except with
respect to apparent l o s s e s , the remaining portion of such
working capital advance.
Very truly yours,
}
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-8047
October 6, 1934.
Dear Sir:
In accordance with the suggestion made by the representatives
of the Industrial Advisory Committees who met i n Washington on
September 27, the Federal Reserve Board has asked each Federal Reserve Agent to send the inclosed l e t t e r , outlining the manner in
which industrial loans made under Section 13(b) of the Federal
Reserve Act are to be shown in condition and examination reports,
to each State bank member in his d i s t r i c t and a copy thereof to
the State banking department of each s t a t e in his d i s t r i c t .
You w i l l note from the inclosed copy of the l e t t e r sent to
the Federal Reserve Agents that the Comptroller of the Currency
i s sending to National banks and national bank examiners a l e t t e r
similar to that which i s being sent to State bank members.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosure
TO THE CHAIRMAN OF EACH INDUSTRIAL ADVISORY COMMITTEE
•
a l l
X- 804:0—3.
TO THE BAM ADDRESSED:
The Act of Congress approved June 19, 1934, r e l a t i n g to direct
loans for industrial purposes "by Federal Reserve "banks, published on
pages 430-434 of the July 1934 issue of the Federal Reserve B u l l e t i n ,
added a new s e c t i o n , 13(b) to t h e Federal Reserve Act, paragraph (b)
of Which authorizes each Federal reserve "bank to discount f o r , or
purchase from, any member bank or other financing i n s t i t u t i o n operating i n i t s d i s t r i c t , obligations having maturities not exceeding f i v e
years entered into f o r the purpose of furnishing working c a p i t a l to
an established i n d u s t r i a l or commercial business; to make loans or
advances direct to any member bank or financing i n s t i t u t i o n on the
security of such obligations; and to make commitments with regard
thereto, including commitments made in advance of the actual undertaking of such o b l i g a t i o n s .
The Act also provides that a member bank or other financing i n s t i t u t i o n , which discounts or s e l l s such an obligation to a Federal
>9serve bank, s h a l l obligate i t s e l f to the s a t i s f a c t i o n of the
Federal .reserve bank for at l e a s t 20 percent of any l o s s which may
be sustained thereon; a l s o that, i n l i e u of so obligating i t s e l f
to the Federal reserve bank, a member bank or financing i n s t i t u t i o n may advance at least 20 percent of a working c a p i t a l loan to
an established i n d u s t r i a l or commercial business and the Federal
reserve bank the remainder, provided the t o t a l of such loan i s
considered as one advance and repayment made prorata under such
regulations as the Federal Reserve Board may prescribe.
X— 804 (>—a
- 2 -
In view of the apparent misunderstanding on the part of some member "banks on t h i s subject, the Federal Reserve Board has requested me
to advise you a s follows i n regard to the manner i n which these loans
should "be included in condition reports submitted to t h e Federal r e serve "bank and in examination reports made "by examiners for the Federal
reserve banks.
1.
If your "bank discounts with, or s e l l s t o , the Federal
reserve bank any obligation of an industrial or commercial business issued for working capital purposes, only that portion of
such obligation rediscounted with, or sold t o , the Reserve
bank on which your bank has obligated i t s e l f to the Federal
reserve bank for any l o s s sustained thereon i s to be included
among the a s s e t s and l i a b i l i t i e s of your bank in condition
reports submitted to the Federal reserve bank.
The amount of
such obligation on which your bank i s l i a b l e for any l o s s sustained i s to be included i n loans cr investments and shown
among l i a b i l i t i e s as "Obligations on industrial advances transferred to Federal Reserve Bank".
2.
I f , instead of discounting a working capital obligation
with, or s e l l i n g i t to, the Federal reserve bank, your bank
advances not l e s s than 20 percent of such o b l i g a t i o n and the
remainder i s advanced by the Federal reserve bank, only the
amount of the advance by your bank should be included i n the
loans or investments in condition reports submitted to the
Federal reserve bank.
The amount advanced by the Federal
X—804 6«*a
—3reserve bank should not be included i n the balance sheet of
your bank.
3.
When your bank makes an industrial advance of the
kind described i n the Act of June 19, 1934, and obtains a
commitment from a Federal reserve bank in regard thereto,
the t o t a l advance should be included in the loans or i n v e s t ments of your bank in condition reports submitted to the
Federal reserve bank, but the commitment obtained from the
Federal reserve bank should not be shown i n the balance
sheet of your bank.
4.
Examiners for the Federal reserve banks have been
instructed not to include i n the loan c l a s s i f i c a t i o n the port i o n of a working capital advance which has been transferred
to the Federal reserve bank without obligation on the part
of your bank for any l o s s thereon or which, i n accordance
with a commitment obtained from the Federal reserve bank,
may be so transferred, and not to c l a s s i f y , except with
respect to apparent l o s s e s , the remaining portion of such
working capital advance.
Very truly yours,
FEDERAL RESERVE BOARD
2
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-8048
October 6, 1934
Bear Sir:
At a recent meeting, the System Committee on l e g i s l a t i v e
Program authorized the technical s t a f f to obtain such help as might
be necessary to accomplish i t s purpose expeditiously.
It i s antic-
ipated at t h i s time that the additional services required w i l l be
one or two junior a s s i s t a n t s and two stenographers, bringing the
t o t a l expenses of the committee, including the salary of Mr. Walter
R. Stark,to an amount not to exceed $2,000 per month.
The action of the committee, which meets with the Board's
approval, was taken with the understanding that the expenses would
be paid by the Federal Reserve Bank of New York and a l l o c a t e d among
the twelve Federal reserve banks i n the manner referred to i n the
Board's l e t t e r of September 25, 1934, X-8020, with regard to the
salary of Mr, Walter R. Stark, secretary of the committee.
I t w i l l be appreciated i f you w i l l submit to your directors
the matter of the a l l o c a t i o n to your bank in the manner referred
to of a portion of the additional expense involved, and forward
to the Board advice of their decision.
Several of the banks, i n
response to the Board's l e t t e r of September 25, have already adv i s e d of approval by their directors of the a l l o c a t i o n to the
X-8048
2 1 8
-2-
banks of a portion of the expense involved i n connection with the
employment of Mr. Stark.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
To the Chairmen of a l l Federal reserve "banks.
r
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-8049
October 6, 1934
SUBJECT:
Code Word. Covering Hew Issue
of Treasury B i l l s .
Dear Sir;
In connection with telegraphic transactions in
Government s e c u r i t i e s "between Federal reserve banks, the
following code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"NOXOPA" - Treasury B i l l s to be dated October
10, 1934, and to mature April 10,
1935.
This word should be inserted i n the Federal Reserve Telegraph Code book, following the supplemental
code word "SfOXODE" on page 172.
Very truly yours,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAMS.
X-8050
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
October 5, 1934
CURTISS - BOSTON
CASE - NEW YORK
AUSTIN - PHILADELPHIA
WILLIAMS - CLEVELAND
HOXTON - RICHMOND
NEWTON - ATLANTA
STEVENS - CHICAGO
WOOD - ST. LOUIS
PEYTON ~ MINNEAPOLIS
MCCLURE - KANSAS CITY
WALSH - DALLAS
SARGENT - SAN FRANCISCO
TRANS. NO. 2106
I n r e s p o n s e t o i n q u i r y f r o m a F e d e r a l Reserve Agent as t o method of
d i s t r i b u t i n g r u l i n g s under R e g u l a t i o n T, Board s u g g e s t s t h a t t h e y n o t be
s e n t d i r e c t t o a l l b r o k e r s and d e a l e r s i n D i s t r i c t by F e d e r a l Reserve
Agents b u t be s e n t only t o exchanges i n D i s t r i c t , i n o r d e r t o encourage
b r o k e r s and d e a l e r s t o submit i n q u i r i e s t h r o u g h exchanges i n s t e a d of d i r e c t t o F e d e r a l Reserve Agents•
There i s no o b j e c t i o n t o s e n d i n g c o p i e s
of s u c h r u l i n g s i n answering s p e c i f i c q u e s t i o n s s u b m i t t e d t o F e d e r a l Res e r v e Agents, b u t i t would seem a d v i s a b l e t h a t each answer t o a q u e s t i o n
s u b m i t t e d d i r e c t by a b r o k e r or d e a l e r be accompanied by a s u g g e s t i o n
t h a t f u t u r e i n q u i r i e s be s u b m i t t e d t h r o u g h e x c h a n g e s .
There i s no ob-
j e c t i o n t o e s t a b l i s h m e n t by F e d e r a l r e s e r v e a g e n t s , i n t h e i r d i s c r e t i o n ,
of m a i l i n g l i s t s f o r d i s t r i b u t i o n of r u l i n g s under R e g u l a t i o n T, t o a t t o r n e y s , a c c o u n t a n t s , f i n a n c i a l i n f o r m a t i o n s e r v i c e o r g a n i z a t i o n s and
o t h e r p e r s o n s who would not n o r m a l l y be e x p e c t e d t o o b t a i n i n f o r m a t i o n
t h r o u g h t h e S e c u r i t i e s Exchanges.
I t would be p e r m i s s i b l e t o send t o
p e r s o n s on such m a i l i n g l i s t s a l l r u l i n g s under R e g u l a t i o n T which a r e
communicated t o a l l F e d e r a l r e s e r v e a g e n t s i n t e l e g r a m s b e a r i n g
X-8050
-2-
" T r a n s . Numbers" o r i n mimeographed l e t t e r s b e a r i n g "X" numbers, u n l e s s
otherwise i n d i c a t e d i n such t e l e g r a m s or l e t t e r s .
(Signed)
L. P. Bethea
BETHEA
*•
: Ruling lk>*7«.
X-805X
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 9, 1934.
ACCOUNTS TRANSFERRED FROM BAMS HOT TO BE
DESIGHA.TED AS "OLD ACCOUNTS".
Board has "been asked whether a loan carried with a "bank
prior to October 1, 1934 may be transferred a f t e r that date
to a broker and designated as an "old account" under s e c t i o n
7(a) of Regulation T.
Assuming that bank i n question i s not
a member of a national s e c u r i t i e s exchange, Board has advised
i n reply that suggested designation may not be made as s e c t i o n
8(e) of Regulation T with respect to "Transfer of Accounts"
r e f e r s only to transfers from one "creditor" to another
"creditor" and term "creditor" as defined i n section 2(b) of
Regulation T does not include a bank which i s not a member
of a national s e c u r i t i e s exchange.
P.OO
rx J
t
*
ituling Ho. 8.
2Q1
f-'-Tjj
X-8052
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October
9, 1934
DESIGNATION OF "OLD ACCOUNTS".
In answer to i n q u i r i e s as to the nature of an account which
may he designated as an "old account" pursuant to s e c t i o n 7(a)
of the Board's Regulation T, Board has advised that the account
to he designated as an "old account" s h a l l include a l l f i n a n c i a l
r e l a t i o n s h i p s e x i s t i n g between a creditor and a customer at the
opening of business on October 1, 1934, except that those r e l a tionships which may be recorded separately i n other s p e c i a l
accounts i n conformity with s e c t i o n s 3 ( b ) , 3 ( c ) , 3 ( d ) , 5 ( b ) ,
and 6 need not be included i n such old account.
The adjusted
debit balance of such old account and the maximum loan value
of t h e s e c u r i t i e s therein must be c a l c u l a t e d i n accordance with
s e c t i o n 3 ( f ) of the r e g u l a t i o n as i f i t were a combined account,
except that the old account s h a l l not a f f e c t or be a f f e c t e d by
the s t a t u s of any other s p e c i a l account or of any new account
e s t a b l i s h e d f o r such customer.
Ruling Bo, 9,
X**8053
FEDERAL
RESERVE
BOARD
STATIC23-IT FOR THE PRESS
For immediate r e l e a s e .
October 9, 1934.
EFFECT OF SECTION 8(a) OF SECURITIES
EXCHANGE ACT ON EXISTING LOANS
In response t o q u e s t i o n whether s e c t i o n 8(a) of S e c u r i t i e s Exchange
Act of 1934 and s e c t i o n 10(a) of Regulation T r e q u i r e b r o k e r s , d e a l e r s
and members of n a t i o n a l s e c u r i t i e s exchanges to pay o f f b e f o r e October
15, any money borrowed p r i o r t o October 1, 1934, from persons o t h e r
than member banks, nonmember banks which have f i l e d agreements pursuant
t o s e c t i o n 11 of r e g u l a t i o n , and o t h e r b r o k e r s , d e a l e r s and members of
n a t i o n a l s e c u r i t i e s exchanges, Board expressed the view t h a t the r e s t r i c t i o n s of s e c t i o n 10(a) of t h e r e g u l a t i o n and s e c t i o n 8(a) of t h e Act
apply only to borrowing on r e g i s t e r e d non-exempted s e c u r i t i e s on or
a f t e r October 1, 1934, when t h i s s e c t i o n of the Act became e f f e c t i v e ,
and do not r e q u i r e t h e paying off of money borrowed b e f o r e t h a t d a t e
or p r o h i b i t t h e
renewal or e x t e n s i o n of a loan obtained b e f o r e t h a t
d a t e ; provided t h a t such renewal or e x t e n s i o n i n v o l v e s no i n c r e a s e i n
the amount of t h e l o a n .
In view of f a c t t h a t v i o l a t i o n of s e c t i o n 8(a)
of t h e Act i s a c r i m i n a l o f f e n s e , however, B o a r d ' s opinion upon t h i s
s u b j e c t would not p r e c l u d e p r o s e c u t i o n i f Department of J u s t i c e should
i n t e r p r e t t h e lav/ d i f f e r e n t l y ; and, i n case of any doubt, member, b r o k e r ,
or d e a l e r should o b t a i n advice of h i s own counsel.
Ruling Ho. 10.
X-8054
FEDEE A L RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 9, 1934
SCOPE OF AGREEMENT OF NONMEKBER BANKS UNDER
SECTION 8 ( a ) OF SECURITIES EXCHANGE ACT OF 1934#
S e v e r a l i n q u i r i e s have been r e c e i v e d as t o which p r o v i s i o n s of t h e
S e c u r i t i e s Exchange Act of 1934, t h e F e d e r a l Reserve Act, as amended# and
t h e Banking Act of 1935 a r e a p p l i c a b l e t o member banks and r e l a t e t o t h e
use of c r e d i t t o f i n a n c e t r a n s a c t i o n s i n s e c u r i t i e s w i t h i n t h e meaning of
s e c t i o n 8 ( a ) of t h e S e c u r i t i e s Exchange Act of 1934 and of t h e B o a r d ' s Forms
T - l and T~2 p r e s c r i b e d p u r s u a n t t h e r e t o .
Since q u e s t i o n r e q u i r e s i n t e r p r e -
t a t i o n of c r i m i n a l s t a t u t e r a t h e r t h a n i n t e r p r e t a t i o n of B o a r d ' s r e g u l a t i o n ,
e x p r e s s i o n of o p i n i o n by Board would n o t a f f o r d p r o t e c t i o n from c r i m i n a l
p r o s e c u t i o n i f t h e Department of J u s t i c e , upon c o n s i d e r a t i o n of t h e m a t t e r
should t a k e p o s i t i o n i n c o n s i s t e n t w i t h t h a t t a k e n by Board and should f e e l
compelled t o p r o s e c u t e f o r v i o l a t i o n of t h e s e c t i o n *
Accordingly, Board
does n o t f e e l t h a t i t would be a p p r o p r i a t e f o r i t t o e x p r e s s an o p i n i o n upon
t h e q u e s t i o n o t h e r t h a n t o a d v i s e nonmember banks c o n t e m p l a t i n g t h e execut i o n of Form T - l or T-2 t o f a m i l i a r i z e themselves w i t h * s t a t u t e s i n q u e s t i o n
and to c o n s i d e r p o s s i b i l i t y t h a t i t may be h e l d t h a t
above-mentioned
language of s e c t i o n 8 ( a ) r e f e r s t o the f o l l o w i n g p r o v i s i o n s , among o t h e r s :
S e c t i o n 11 (m) of F e d e r a l Reserve Act as amended by s e c t i o n 7 of Banking Act
of 1933, s e v e n t h paragraph of s e c t i o n 19 of F e d e r a l Reserve Act as amended
by s e c t i o n 11 of Banking Act of 1933, f o u r t h p a r a g r a p h a f t e r p a r a g r a p h
11
Eighth u of s e c t i o n 4 of F e d e r a l Reserve Act as amended by s e c t i o n 3 of
Banking Act of 1933, and t h o s e p r o v i s i o n s of S e c u r i t i e s Exchange Act of
1934 which a r e c o n t a i n e d i n appendix t o R e g u l a t i o n T*
In r e p l y t o another
"2"
X-8054
i n q u i r y . Board a d v i s e s t h a t f o r e g o i n g should be brought t o a t t e n t i o n of
nonmember banks c o n t e m p l a t i n g e x e c u t i o n of agreements b u t t h a t c i r c u l a r i z a t i o n of such i n f o r m a t i o n t o a l l .nonmembe r banks i s b e l i e v e d t o be unnecessary#
llulins No. 11.
x-8055
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 9, 1934.
WITHDRAWALS PRIOR TO DESIGNATION OP OLD ACCOUNTS.
In i n t e r p r e t i n g s e c t i o n 7(a) of Regulation T on October 2, 1934, t h e
F e d e r a l Reserve Board s a i d :
" I f , between the opening of b u s i n e s s on
October 1, 1934 and the time of t h e d e s i g n a t i o n of such account a s an
old account, t h e r e has been anf withdrawal of money or s e c u r i t i e s from
t h e account, such account cannot be d e s i g n a t e d as an old account u n l e s s
i t i s an u n r e s t r i c t e d account on October 15 or on t h e date of such
d e s i g n a t i o n , whichever i s the l a t e r , or u n l e s s t h e cash a n d / o r s e c u r i t i e s withdrawn from the account a r e r e p l a c e d b e f o r e t h e account i s d e s i g nated as an old a c c o u n t . "
inquiries.
T h i s r u l i n g has given r i s e t o two a d d i t i o n a l
(1) Does i t prevent the withdrawal of any s e c u r i t i e s or only
of s e c u r i t i e s which as of October 15 w i l l have t h e s t a t u s of r e g i s t e r e d
a n d / o r exempted s e c u r i t i e s ? and (2) What i s meant by the replacement of
cash or s e c u r i t i e s withdrawn from the account?
In answer t o the f i r s t
q u e s t i o n , t h e Board has r u l e d t h a t the r e s t r i c t i o n a p p l i e s t o the w i t h drawal of u n r e g i s t e r e d , non-exempted s e c u r i t i e s a s w e l l as t o the w i t h drawal of r e g i s t e r e d a n d / o r exempted s e c u r i t i e s .
In answer to the
second q u e s t i o n , t h e Board has r u l e d t h a t , where cash has been withdrawn,
i t must be r e p l a c e d by an e q u i v a l e n t amount of cash and, where s e c u r i t i e s
have been withdrawn, t h e y must be r e p l a c e d by money a n d / o r s e c u r i t i e s
t o such an e x t e n t t h a t the money p l u s the market v a l u e of the s e c u r i t i e s
d e p o s i t e d i s not l e s s than the aggregate market value of the s e c u r i t i e s
-
2 -
X-8055
which were withdrawn and the money p l u s the maximum loan v a l u e of the
s e c u r i t i e s d e p o s i t e d i s not l e s s than the a g g r e g a t e maximum loan v a l u e
of the s e c u r i t i e s which were withdrawn from the a c c o u n t .
For t h e purpose
of determining the amount of cash a n d / o r s e c u r i t i e s needed t o r e p l a c e
s e c u r i t i e s withdrawn, the c u r r e n t market value and maximum loan v a l u e of
the s e c u r i t i e s withdrawn and of t h e s e c u r i t i e s r e p l a c e d must be a s c e r t a i n e d
in accordance w i t h s e c t i o n 3 of R e g u l a t i o n T a s of the opening of b u s i n e s s
on October 15 or the d a t e of r e p l a c e m e n t , whichever i s l a t e r .
X-8056
TELEGRAM
FEDERAL RESERVE BOARD
mSHIHGTOH
October 6, 1934.
CURTISS
BOSTON
Re wire from G-etteray October 5th.
Under s e c t i o n 11(c)
of Regulation T delivery to Federal Reserve Agent of
duplicate o r i g i n a l s of form $ - 1 , properly executed, cons t i t u t e s f i l i n g with Federal Reserve Board, even though
c e r t i f i c a t e on Form T-3, evidencing such f i l i n g , has not
been issued.
As to cancellation by bank of agreement on
Form T-l which i t has f i l e d , please refer to Trans. Ho.
2100.
(Signed)
L. P. Bethea
BETHEA.
,330
X-8057
October 6, 1934
Mr 4 F r e d e r i c II • Curt i s s ,
Federal Reserve Agent,
Federal Reserve Bank of Boston,
Boston, Massachusetts•
Dear Mr. C u r t i s s :
This r e f e r s t o your l e t t e r of J u l y 19, 1934 r e s p e c t i n g
t h e s t a t u s of mutual savings banks i n view of c e r t a i n p r o v i s i o n s of
s e c t i o n 8 of t h e S e c u r i t i e s Exchange Act of 1934.
Section 8 prohibits
members of n a t i o n a l s e c u r i t i e s exchanges and c e r t a i n b r o k e r s and d e a l e r s
t o borrow from non-member banks u n l e s s such banks have f i l e d with t h e
F e d e r a l Reserve Board an agreement to comply with those p r o v i s i o n s of
t h e S e c u r i t i e s Exchange Act of 1934, t h e Federal Reserve Act, as amended,
and t h e Banking Act of 1933 which are a p p l i c a b l e t o member banks and
which r e l a t e t o t h e use of c r e d i t t o f i n a n c e t r a n s a c t i o n s i n s e c u r i t i e s •
As c e r t a i n of t h e s e p r o v i s i o n s r e l a t e t o t h e c a p i t a l and s u r p l u s of banking i n s t i t u t i o n s you i n d i c a t e t h a t t h e r e i s a q u e s t i o n as t o t h e i r app l i c a b i l i t y t o mutual savings banks which have no c a p i t a l and o r d i n a r i l y
do n o t have what i s c a l l e d a s u r p l u s , although you s t a t e t h a t t h e y may
have a guaranty fund s i m i l a r t o s u r p l u s .
As suggested i n t h e concluding sentence of your l e t t e r ,
t h e Board has borne t h e s e f a c t s i n mind during t h e p r e p a r a t i o n of i t s
r e g u l a t i o n s under t h e S e c u r i t i e s Exchange Act of 1934, but t h e q u e s t i o n
which you r a i s e i s one which i t i s impossible t o answer e i t h e r i n t h e
r e g u l a t i o n s or by a l e t t e r a t t h i s t i m e .
As t h e answer t o t h e i n q u i r y
-
2'
X-8057
w i l l depend i n each case upon the i n t e r p r e t a t i o n of a p r o v i s i o n of law
i n view of t h e a p p l i c a b l e f a c t s of a s p e c i f i c case, i t i s suggested
t h a t any i n t e r e s t e d mutual savings bank d e l i v e r t o you f o r submission
t o t h e Board a f u l l statement of f a c t s and s p e c i f i c r e f e r e n c e t o the
p r o v i s i o n s of law w i t h r e s p e c t t o which t h e q u e s t i o n i s r a i s e d .
The
p r o p r i e t y of t r e a t i n g a guaranty fund as s u r p l u s w i t h i n t h e meaning of
the Federal s t a t u t e s w i l l depend i n p a r t upon the law of t h e s t a t e
under which t h e mutual savings bank i s i n c o r p o r a t e d and i t would be
h e l p f u l t o t h e Board i f t h e p r e s e n t a t i o n of f a c t s could be accompanied
by an opinion of your counsel or of counsel f o r t h e i n q u i r i n g bank,
which would d e a l p a r t i c u l a r l y with t h i s a s p e c t of t h e q u e s t i o n .
Very t r u l y yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
T,
n.
Ruling
-vo. TO
12 •
X-8058
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 10, 1934.
MARGIN REQUIREMENTS - FLUCTUATIONS
III liLiRKST PRICES.
The Board has been asked whether R e g u l a t i o n T r e q u i r e s t h a t a d d i t i o n a l
margin be obtained i f i n a r e s t r i c t e d combined account c o n t a i n i n g s e c u r i t i e s and commodity commitments t h e r e a r e no new t r a n s a c t i o n s b u t t h e r e a r e
adverse f l u c t u a t i o n s of t h e commodity m a r k e t .
In r e p l y t h e Board advised
t h a t R e g u l a t i o n T does n o t r e q u i r e t h e c r e d i t o r t o o b t a i n a d d i t i o n a l margin i n t h e circumstances i n d i c a t e d and t h a t under s e c t i o n 4 ( b ) of Regulation
T t h e c r e d i t o r may permit c r e d i t t o be maintained i n such an account r e g a r d l e s s of mere f l u c t u a t i o n s i n t h e commodity market and r e g a r d l e s s of mere
bookkeeping e n t r i e s used t o i n d i c a t e such f l u c t u a t i o n s •
X-8059
Ruling iio» 13.
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 10, 1934.
MARGIN REQUIREMENTS - SHORT SALES
AND OTHER TRANSACTIONS IN RESTRICTED
ACCOUNTS.
In r e p l y t o an i n q u i r y , t h e Board has r u l e d t h a t under s e c t i o n 4 ( d )
of Regulation T s h o r t s a l e s may be made i n a r e s t r i c t e d account i f t h e
margin c u s t o m a r i l y r e q u i r e d by t h e c r e d i t o r on such s h o r t commitments
i s demanded on t h e same day and i s obtained w i t h i n t h e time allowed by
section 4(e).
The same p r i n c i p l e a p p l i e s t o the e x e c u t i o n i n r e s t r i c t e d
accounts of t r a n s a c t i o n s of t h e kinds r e f e r r e d t o i n c l a u s e 4 of s e c t i o n
3(f).
So. 14.
x _8060
IEDEEA1
E E S | R T I
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 10,1934.
WITHDRAWALS OF CASH FROM OLD ACCOUNTS
PRIOR TO OCTOBER 15, 1934
In reply to an inquiry, the Board has advised t h a t , i n the
case of an account which has been designated as an old a c count pursuant to s e c t i o n 7(a) of Regulation T, a withdrawal
of cash which i s made prior to October 15 and which thereby
increases the adjusted debit balance of the account i s
nevertheless permitted i f the account i s not thereby made
a r e s t r i c t e d account
and i f , on October 15, the account i s
an u n r e s t r i c t e d account.
Ruling No. 15.
X-8061
FEDERAL
RESERVEBOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October
10, 1934.
TIME WITHIN WHICH COMBINATION OF TRANSACTIONS MUST BE MADE IN OLD ACCOUNTS.
In r e p l y t o an inquiry, Board has advised that i n order to "be
considered a "combination of transactions" w i t h i n the meaning
of the second proviso of s e c t i o n 7(a) of Regulation T, the
transactions c o n s t i t u t i n g such combination must be made on the
same day except that any s u b s t i t u t i o n of s e c u r i t i e s c o n s i s t i n g
of a s a l e of s e c u r i t i e s i n the account and t h e purchase of
other s e c u r i t i e s may be considered as a s i n g l e t r a n s a c t i o n occurring on the day on which the purchase occurs, i f completed
within a period of two s u c c e s s i v e business days, regardless of
whether the s a l e occurs before or a f t e r the purchase.
X-8062
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 11, 1934.
MARGIN REQUIREMENTS - TRANSACTIONS
IN CASH ACCOUNTS.
Ruling No. 16 interpreting Regulation T.
In response
to an inquiry as to whether i n a cash account under s e c t i o n 6
of Regulation T credit may "be extended on unregistered nonexempt s e c u r i t i e s as an incident to the purchase of such s e c u r i t i e s , the Board advised that s e c t i o n 6 of Regulation T does not
authorize such extensions of credit and also pointed out that
section 7 ( c ) ( 2 ) of the Securities Exchange Act of 1934 expressly
prohibits a creditor as defined i n section 2(h) of Regulation T
from extending or maintaining credit on such s e c u r i t i e s under
the circumstances indicated.
36-8063
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 11, 1934
CONFIRMATION OF DEMAND FOR MARGIN.
RULING NO. 17 INTERPRETING REGULATION T.
In response to an
inquiry, the Federal Reserve Board has ruled that, where a
demand for margin has not "been made "by a l e t t e r or telegram
sent to a customer at his l a s t known address hut has been
delivered to the customer in person, the amount so demanded
cannot be included i n the computation of the adjusted debit
balance of the customer's account pursuant to the provisions
of clause 8 of section 3 ( f ) of Regulation T, unless such
demand for margin has been confirmed by a l e t t e r or telegram
which the creditor shall have sent to the customer at h i s
l a s t known address.
3*3
X-3064
F E D 2 RAL RESERVE
BOARD
STAISkiSNT FOR THE PRESS
For imredinte r^lewso
October 12# 1934.
INCREASES IK ADJUSTED DEBIT
BALANCE OF AN OLD ^CCOUNT
RULING HO. 18 INTERPRETING REGULATION T.
In response t o an inquiry the
Federal Reserve Board has advised that, i f the adjusted debit balance
of an account which has been designated as an "old account" pursuant t o
section 7(a) of Regulation T, i s reduced by reason of a s a l e of s e c u r i t i e s
or otherwise, the creditor may not thereafter permit the customer t o make
any transaction which would r e s u l t in an increase i n the adjusted debit
balance except a withdrawal of money made i n conformity with the t h i r d
proviso of s e c t i o n 7(a) of Regulation T.
In t h i s connection the Board
c a l l e d attention t o the fact that a transaction which would r e s u l t i n an
increase i n the adjusted debit balance i f standing alone i s not prohibited
by s e c t i o n 7(a) i f i t i s part of a "combination of transactions" which
r e s u l t s i n no increase i n the adjusted debit balance*
X-8065
LER1B:
A
h
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 12, 1934.
MARGIN REQUIREMENTS ™ TIME ALLOWED FOR OBTAINING MARGIN.
RULING NO. 19 INTERPRETING REGULATION T.
The F e d e r a l Reserve Board has
been asked whether under s e c t i o n 4 ( e ) of Regulation T, i n t h e case of a
purchase of s e c u r i t i e s on a Monday, t h e t h r e e - d a y p e r i o d allowed f o r obt a i n i n g margin e x p i r e s a t midnight Wednesday or a t midnight Thursday, i f
the days s p e c i f i e d and a l l t h e i n t e r v e n i n g days are f u l l b u s i n e s s d a y s .
In r e p l y t h e Board advised t h a t t h e t h r e e - d a y p e r i o d s p e c i f i e d means
t h r e e f u l l b u s i n e s s days f o l l o w i n g t h e date of the t r a n s a c t i o n and t h a t ,
i n the case i n d i c a t e d , t h e t h r e e - d a y period allowed by s e c t i o n 4 ( e ) would
not e x p i r e u n t i l midnight on Thursday.
X-8066
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
CURTISS - BOSTON
CASE - NEW YORK
AUSTIN - PHILADELPHIA
WILLIAMS - CLEVELAND
TRANS. NO. 2118.
October 11, 1934
HOXTON - RICHMOND
NEWTON - ATLANTA
STEVENS - CHICAGO
WOOD - ST. LOUIS
PEYTON - MINNEAPOLIS
McCLURE KANSAS CITY
WALSH - D-uLLAS
SARGENT - SAN FRAMCIfCO
In order t o avoid confusion in referring to previous rulings
interpreting Regulation T, the Board m i l , i n the future, give a number t o
each ruling interpreting Regulation T which i s of s u f f i c i e n t general i n t e r e s t
t o be sent t o a l l Federal Reserve .agents and released by Board as a press
statement.
Rulings issued a f t e r t h i s change of procedure w i l l be numbered in
order beginning with No. 16.
follows:
Rulings heretofore issued have been numbered as
Trans. No. 2095 (Beginning a f t e r word "STOP" and eliminating f i n a l
word "UNQUOTE")
- Ruling No. 1 interpreting Regulation Tj
Ruling No. 2 interpreting Regulation Tj
preting Regulation Tj
Tj
Trans. No. 2097 -
Trans. No. 2100 - Ruling No. 3 i n t e r -
Trans. No. 2103 - Ruling No. 4 interpreting Regulation
Trans.No. 2105 - Ruling Ho. 5 interpreting Regulation T;
- Ruling No, 6 interpreting Regulation T;
terpreting Regulation T;
l a t i o n T;
Trans. No. 2107
Trans. No. 2108 - Ruling No. 7 in-
Trans. No. 2109 - Ruling No. 8 interpreting Regu-
Trans• No. 2110 - Ruling No. 9 interpreting Regulation Tj
No. 2111 - Ruling No. 10 interpreting Regulation Tj
No. 11 interpreting Regulation Tj
ing Regulation T;
Trans.
Trans. No. 2112 - Ruling
Trans . No. 2114 - Ruling No. 12 interpret-
Trans . No. 2115 - Ruling No. 13 interpreting Regulation Tj
Trans. No. 2116 - Ruling No. 14 interpreting Regulation Tj
Ruling No. 15 interpreting Regulation T.
Trans. No. 2117 -
In giving out copies of any of
these f i f t e e n rulings i n the future, i t i s suggested that the appropriate
number be inserted at the beginning of the r u l i n g .
(Signed) L. P. Bethea
BETHEA
X-8067
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
CURTISS - BOSTON
CASE - NEW YORK
AUSTIN - PHILADELPHIA
WILLIAMS - CLEVELAND
October 12#1934
HOXTON - RICHMOND
NEWTON - ATLANTA
STEVENS - CHICAGO
WOOD - ST. LOUIS
PEYTON - MINNEAPOLIS
McCLURE - KANSAS CITY
WALSH - DALLaS
SaRGENT - SAN FRANCISCO
TRANS NO. 2123.
R e f e r r i n g Regulation T.
The S e c r e t a r y of t h e Treasury has advised t h e
Federal Reserve Board t h a t he has designated f o r exemption under t h e p r o v i s i o n s of paragraph 12 of s e c t i o n 3(a) of t h e S e c u r i t i e s Exchange Act of
1934, i n d i v i d u a l and c o n s o l i d a t e d Farm Loan bonds i s s u e d by F e d e r a l land
banks and debentures i s s u e d by 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 under the
a u t h o r i t y of t h e F e d e r a l Farm Loan Act, approved J u l y 17, 1916, as amended.
(Signed) L. P. BETHEA
BETHEA
X-8068
FEDERAL
RESERVE
BOARD
STATElvIENT FOR THE PRESS
For immediate r e l e a s e
October 13, 1954.
GUARANTEED ACCOUNTS.
RULING NO. 21 INTERPRETING REGULATION T.
I n response t o an i n q u i r y w i t h r e s p e c t to guaranteed a c c o u n t s , t h e
Board a d v i s e s t h a t under s e c t i o n 8(d) of R e g u l a t i o n T, a c r e d i t o r mayr e g a r d as an u n r e s t r i c t e d account any account which i s g u a r a n t e e d i n
w r i t i n g f o r an amount s u f f i c i e n t t o make such account an u n r e s t r i c t e d
account by a person who has an account with such c r e d i t o r c o n t a i n i n g
a cash c r e d i t b a l a n c e a n d / o r s e c u r i t i e s of s u f f i c i e n t loan v a l u e t o
make such g u a r a n t e e d account an u n r e s t r i c t e d account i n a d d i t i o n t o
p r o v i d i n g t h e margin r e q u i r e d by R e g u l a t i o n T on the g u a r a n t o r ' s
account#
.
FEDERAL
RESERVE
'
243
3h8P69
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 12* 1934
CASH TRANSACTIONS
RULING NO. 20 INTERPRETING REGULATION T.
In response t o two i n q u i r i e s
with r e s p e c t t o the time when the seven day period allowed under s e c t i o n
6 of Regulation T begins to r u n i n connection with bona f i d e cash t r a n s a c t i o n s , t h e F e d e r a l Reserve Board r u l e d t h a t :
In the case of a bona f i d e cash t r a n s a c t i o n i n which a broker purchases a s e c u r i t y as agent f o r a customer and makes payment t o t h e s e l l e r
of t h e s e c u r i t y , the seven day period commences t o r u n when the broker pays
f o r t h e s e c u r i t y without having r e c e i v e d payment from h i s customer.
. In t h e case of a bona f i d e cash t r a n s a c t i o n i n which a d e a l e r a c t ing as p r i n c i p a l or as agent f o r t h e s e l l e r s e l l s a s e c u r i t y t o a customer,
the seven day p e r i o d commences t o run when t i t l e t o t h e s e c u r i t y passes t o
the customer without t h e customer having paid f o r t h e s e c u r i t y *
In both cases and i n a l l other cases i n v o l v i n g cash t r a n s a c t i o n s , t h e
seven day p e r i o d commences t o run when the r e l a t i o n of d e b t o r and c r e d i t o r
a r i s e s between t h e purchaser and the c r e d i t o r as a r e s u l t of the cash
transaction.
In t h i s connection, t h e Board explained t h a t t h e s o l e purpose of
s e c t i o n 6 i s t o a l l o w t h e e x t e n s i o n of c r e d i t f o r l i m i t e d p e r i o d s of time
i n connection with bona f i d e cash t r a n s a c t i o n s and t h a t t h i s s e c t i o n does
not place any r e s t r i c t i o n s upon a bona f i d e cash t r a n s a c t i o n which does
not r e s u l t i n any debtor and c r e d i t o r r e l a t i o n s h i p between t h e customer
and the broker or d e a l e r .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-8070
.
October 1 3 , 1934,
SUBJECT:
Code Word Covering New
I s s u e of Treasury B i l l s .
Dear S i r :
In c o n n e c t i o n w i t h 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 F e d e r a l r e s e r v e banks, the
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of T r e a s u r y B i l l s :
"NOXOEE" - Treasury B i l l s t o be d a t e d October
17, 1954, and t o mature A p r i l 17,
1935,
This word should be i n s e r t e d i n t h e F e d e r a l Res e r v e Telegraph Code book, f o l l o w i n g t h e s u p p l e m e n t a l
code word "NOXOEA" on page 172,.
Very t r u l y yours
Assistant Secretary,
TO GOVERNORS OF ALL F. R. BANKS.
X-8071
FEDERAL
RESERVE
BOARD
STATEMENT SDR THE PRESS
For immediate r e l e a s e .
,October 13, 1934
MARGIN REQUIREMENTS - JOINT ACCOUNTS
BETWEEN MEMBERS OF NA.1TOMAL SECURITIES
EXCHANGES.
RULIM3- NO. 22 INTERPRETING REGULATION T.
The F e d e r a l Reserve Board has been asked t o r u l e on
the q u e s t i o n whether t h e r e i s an e x t e n s i o n of c r e d i t by a
c r e d i t o r to a customer w i t h i n t h e meaning of t h e Board's
Regulation T i n t h e case p r e s e n t e d by t h e f o l l o w i n g f a c t s ;
A f i r m having membership i n a n a t i o n a l s e c u r i t i e s exchange
and an i n d i v i d u a l member of t h e exchange form a j o i n t a c count f o r t r a n s a c t i o n s i n s e c u r i t i e s .
The i n d i v i d u a l p r o -
vides no c a p i t a l but f u r n i s h e s to t h e j o i n t account s e r v i c e s
i n purchasing and s e l l i n g t h e s e c u r i t i e s .
The f i r m pays f o r
the s e c u r i t i e s bought, f u r n i s h e s t h e s e c u r i t i e s sold and
"clears the account".
In t h e s e circumstances, t h e Board
has r u l e d t h a t such r e l a t i o n s h i p does not c o n s t i t u t e a
c r e d i t o r - c u s t o m e r r e l a t i o n s h i p , within the meaning of
Regulation T, between the f i r m and the j o i n t account o r the
f i r m and the i n d i v i d u a l , and t h a t , t h e r e f o r e , such t r a n s a c t i o n s a r e not s u b j e c t t o the p r o v i s i o n s of the r e g u l a t i o n
governing e x t e n s i o n s of c r e d i t t o a customer.
X-8072
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 13, 1934,
CALCULATION OF NET DEBIT BALANCE IN
ARBITRAGE ACCOUNTS
RULING NO. 23 INTERPRETING REGULATION T.
I n r e s p o n s e t o an i n q u i r y t h e
F e d e r a l Reserve Board has r u l e d t h a t , i n c a l c u l a t i n g t h e n e t d e b i t balance
of an a r b i t r a g e account w i t h i n t h e meaning of S e c t i o n 3(d) of R e g u l a t i o n
T, b o t h t h e long commitments and t h e s h o r t commitments i n s e c u r i t i e s
should be t a k e n i n t o c o n s i d e r a t i o n .
247
X-8073.
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 13, 1934.
TRANSACTIONS WITHIN THE UNITED STATES
FOR CUSTOMERS OF FOREIGN BRANCHES.
RULING NO. 24 INTERPRETING REGULATION T.
In response t o i n q u i r i e s as
t o "whether p a r t i c u l a r t r a n s a c t i o n s come v d t h i n t h e p r o v i s i o n s of Regul a t i o n T and t h e S e c u r i t i e s Exchange Act of 1934 i n view of Section 8(h)
of t h e Regulation and S e c t i o n 30(b) of t h e Act, t h e F e d e r a l Reserve
Board has expressed the following o p i n i o n s :
Mien a c r e d i t o r with a f o r e i g n branch o f f i c e which i s c a r r y i n g
s e c u r i t i e s i n a f o r e i g n country f o r a f o r e i g n customer executes w i t h i n
t h e United S t a t e s an order f o r t h e purchase of a r e g i s t e r e d s e c u r i t y
f o r such f o r e i g n customer, such t r a n s a c t i o n i s s u b j e c t t o p r o v i s i o n s of
Regulation T and i s not excepted t h e r e f r o m by S e c t i o n 8(h) t h e r e o f •
A c r e d i t o r borrowing i n the United S t a t e s on any r e g i s t e r e d s e c u r i t y
i n t h e o r d i n a r y course of b u s i n e s s as a broker or d e a l e r must comply with
the p r o v i s i o n s of Regulation T and of t h e Act w i t h r e s p e c t t o such b o r rowing, r e g a r d l e s s of whether or n o t t h e s e c u r i t y i s held f o r t h e
account of a f o r e i g n customer*
Xr&074
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
October 13, 1934
MARKET VALUE AMD LOAN VALUE OF SECURITIES INVOLVED IN SUBSTITUTIONS.
RULING NO. 25 INTERPRETING REGULATION T.
The F e d e r a l Reserve Board has
been asked t o r u l e upon t h e f o l l o w i n g q u e s t i o n :
11
s t r i c t e d account d e s i r e s t o s u b s t i t u t e s e c u r i t i e s •
A customer "with a r e The s u b s t i t u t e d
s e c u r i t i e s must have a c u r r e n t market value equal t o t h a t of t h e s e c u r i t i e s withdrawn; otherwise, t h e r e would be a n e t withdrawal, under Regulation 4(d)•
The q u e s t i o n i s whether the s u b s t i t u t e d s e c u r i t i e s must a l s o
have a loan value equal t o t h a t of t h e s e c u r i t i e s withdrawn#"
The Board
r e p l i e d t h a t , under s e c t i o n 4(d) of Regulation T, n e i t h e r t h e c u r r e n t
market value nor the maximum l o a n value of t h e s e c u r i t i e s s u b s t i t u t e d i n
a r e s t r i c t e d account should be l e s s t h a n t h e c u r r e n t market value or the
maximum loan v a l u e , r e s p e c t i v e l y , of the s e c u r i t i e s withdrawn, u n l e s s any
d i f f e r e n c e between such values i s made up by a d e p o s i t of cash or u n l e s s
the account i s made an u n r e s t r i c t e d a c c o u n t .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-8075
October 15, 193^•
SUBJECT:
Expense, Main Lines, Leased
Wire System, September, 1934.
Dear Sir:
Inclosed herewith you w i l l f i n d two mimeographed statements, X-8075-a and X-8075-b, covering
in d e t a i l operations of the main l i n e s , Leased Wire
System, during the month of September, 193^«
Please c r e d i t the amount nayable by your bank
for your share of the expense of the Leased Wire
System, to the Federal Reserve Bank of Richmond in
your d a i l y statement of c r e d i t s through the Gold S e t tlement Fund f o r the account of the Federal Reserve
Board, and advise the Federal Reserve Bank of Richmond
by wire the amount and purpose of the c r e d i t .
Very t r u l y yours,
F i s c a l Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS.
REPORT SHOWING- CLASSIFICATION AH) NUMBER OF WORDS TRANSMITTED OVER MAIN LIEES.
OF THE FEDERAL RESERVE LEASED TIRE SYSTEM FOR THE MONTH OF SEPTEMBER,
Business
reported
by "banks
From
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total,
29,329
l4l,l68
26,462
46,802
44,4o6
44,972
79,508
59,701
31,919
61,244
51,391
SI,903
698,805
F. R. Board business
Words sent by
Few York chargeable to other
F. R. Banks ( l )
1,599
1,550
1,497
1,667
1,462
1,372
1,773
1,518
1,568
2,184
3)081
19,771
yet Federal
reserve
bank
business
30,928
l4l,l68
28,012
48,299
46,073
46,434
81,380
61,474
33,^37
62,812
53,575
84,984
718,576
377,575
Reimbursable business Incoming & Outgoing
Total words transmitted over main l i n e s
Per cent of t o t a l
bank business (*)
4.30
19.65
3.90
6.72
6.4l
6.46
11.33
8-55
4.65
8.74
7.46
11.83
100.00
1,096,151
759,239
.
(*)
These percentages used in c a l c u l a t i n g the pro rata share of l e a s e d wire expense as shown
on the accompanying statement (X-8075-b)
(I)
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 indicated in accordance ? i t h a c t i o n taken at Governors' Conference
November 2 - 4 , 1925•
X-S075-a
1,855,390
CJi
X-S075-T3
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, September, 1934.
Fame of Bank
Operators'
Salaries
Retirement
Contributions
$260.00
Boston
$ 23.40
121.12
New York
1,345-SO
Philadelphia
225.00
20.25
Cleveland
27.60
306.66
221.00
Richmond
17.10
Atlanta
270.00
24.30
Chicago
4 , 2 1 1 . 4 0 ( f ) 371.70
S t . Louis
195.00
17.55
Minneapolis
200.00
18.00
Kansas City
287.00
25.83
Dallas
251.00
22.59
San Francisco
380.00
34.20
—
i!ederal Reserve Bd.
Total
$8,152.86
$723-64
Less Reimbursable Charges:
(&)
(#)
(*)
(a)
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
Amount reimbursable to Chicago
Operators 1
overtime
Wire
rental
Total
expenses
$285.40
1,485.92
245.25
334.26
—
468.10
230.00(&)
—
—
294.30
4,583.10
213.30
.75
218.00
312.83
—
.60
274.19
—
4i4.20
—
15,906.72
15,906.72
$22.35 $16,136.72
$25,035.57
$ 2.00
19.00
$
-
10,244.73
$14,790.8%
Pro r a t a
share of
total
expenses
$636.01
2,906.40
576.84
993.94
948.09
955.49
1,675.80
1,264.62
687.77
1,292.72
1,103.40
1,749.76
-
$14,790.84
Credits
Payable to
Federal
Reserve
Board
$285.40
1,485.92
245.25
334.26
468.10
294.30
4,583.10
213.30
218.00
312.83
274.19
4l4.20
4350.61
1,420.48
331.59
659.68
479.99
661.19
2,907.30(*)
1,051.32
469.77
979.89
829.2}
1,335.56
— .
$9,125.85
-
$8,569.29
2,907.30(a)
*5 Mi.99
IvJ
CJl
j&dk
a
X-6076
Statement of Bureau of Engraving and P r i n t i n g
f o r f u r n i s h i n g Federal Reserve Notes
S e r i e s 1928, September 4 t o 29, 1934.
|5
-
Minneapolis $
• • •
14,000
46,000
26,000
-
86,000
Total
Sheets
Amount
49,000
52,000
72,000
14,000
136,000
26,000
49,000
$4,472.00
6,192.00
1,204.00
11,696.00
2,236.00
4,214.00
263,000
349,000
#30,014.00
#10
52,000
72,000
-
90,000
-
349,000 s h e e t s , @ $86.00 M, . . . .
. $30,014.00
3 5 3
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-8077
October 16, 1934.
SUBJECT: Weekly Member Bank Condition Statement.
Dear Sir:
Beginning with the statement t o be issued on Monday, October
22, which w i l l show figures as of Wednesday, October 17, the Board1 s
weekly member bank condition statement w i l l be revised to incorporate
some of the additional data member banks have been reporting since
September 5*
The revised form of statement w i l l contain the following
items:
Loans and investments - t o t a l
Loans on s e c u r i t i e s - t o t a l
To brokers and dealers:
In New York
Outside New York
To others
Acceptances and commercial paper
Loans on real e s t a t e
Other loans
U, S. Government direct obligations
Obligations f u l l y guaranteed by U. S. Gov 1 t•
Other s e c u r i t i e s
Reserve with F# R. banks
Cash i n vault
Net demand deposits
Time deposits
Government deposits
-2-
X-8077
Due from banks
Due t o "banks
Borrowings from F« R. banlcs
The statement showing the principal assets and l i a b i l i t i e s
of reporting member banks in New York City and Chicago as of October
17 w i l l be issued i n the present form on Thursday, October 18, but
on the following Monday the statement for New York City and Chicago
w i l l be incorporated, i n the revised form, i n the complete weekly
member bank statement.
Beginning October 25 the Thursday statement
w i l l be i n the revised form.
The t e x t accompanying the statement to
be issued on Monday, October 22, w i l l contain the following paragraph:
"The statement has been revised to show separately, and by
Federal Reserve d i s t r i c t s , loans t o brokers and dealers i n New
York and outside Hew York, loans on s e c u r i t i e s to others, acceptances and commercial paper, loans on real e s t a t e , and obligations
f u l l y guaranteed both as to principal and i n t e r e s t by the United
States Government.
In view of the new c l a s s i f i c a t i o n of loans
the memorandum items heretofore appearing at the bottom of the
statement of condition of reporting member banks i n New York City,
r e l a t i n g to loans on s e c u r i t i e s to brokers and dealers, has been
eliminated from that statement.
The statement published l a s t
Thursday, which i s reissued herewith in revised form, showed the
t o t a l amount of brokers' loans made by New York City banks for
t h e i r own account as $603,000,000, of which (as shown i n the revised statement) $555,000,000 represented loans to brokers and
X-8077
- 3-
dealers i n New York City and §48,000,000 to brokers and dealers
outside of New York City.
Of the $136,000,000 loans to "brokers
and dealers made by weekly reporting member banks i n New York
City f o r the account of out-of-town banks (as shown i n the s t a t e ment i s s u e d l a s t Thursday), $131,000,000 was made f o r the account
of weekly reporting member banks outside New York City.
The
f i g u r e s as published i n t h i s statement do not include loans t o
brokers and dealers by New York banks f o r account of non-reporting
banks and f o r account of others•
Figures for such loans, which
at the present time amount t o about $6,000,000, w i l l be published
monthly i n the Federal Reserve
Bulletin."
The f i g u r e s quoted i n the above paragraph are as of September
26•
Figures for October 17 w i l l be substituted, of course, when the
revised form of statement i s f i r s t i s s u e d .
Very t r u l y yours,
L. P. Bethea,
Assistant Secretary*
TO ALL FEDERAL RESERVE AGENTS
X-8078
October 17, 1934
Dear Sirs
Thcro in attached, .Vvr your information, a
copy of a l e t t e r addressed t o the Federal Reserve Agent
at the Federal Reserve Bank of Cleveland under date of
October 15, 1934, with regard to the question whether
capital notes and debentures sold t o the Reconstruction
Finance Corporation by State member banks may be considered as capital or capital stock for the purpose of
determining limitations under certain sections of the
Federal Re nerve Act and the Agricultural Credits Act
of 1925.
Very t r u l y yours
• i-. Boihea,
;r firii Secretary
Ir- closure
TO ALL F. R. AGENTS EXCEPT CLEVELAND
257
X-8078*a
COPY
October 15, 1934.
Mr. L. B. Williams,
Federal Reserve Agent,
Federal Reserve Bank of Cleveland,
C l e v e l raid, Ohio*
Dear Mr. Williams;
This referc to iir* Anderson's telogran dated July 21,
1934, which reads as f e l l o w s :
4"
"Has the Board ruled Mother capital debentures sold t o
ft F C or otherwise may be considered capital for the
purpose of establishing loan l i m i t s . "
Although the above telegram i s not s p e c i f i c , i t i s
assumed that LSr. Anderson desires a ruling upon the question whether
c a p i t a l notes and debentures sold t o the Reconstruction Finance Corporation by State member banks may be considered as c a p i t a l or c a p i t a l
stock for the purpose of determining l i m i t a t i o n s under the following
sections of the Federal Reserve Act:
s e c t i o n 9, -which provides a
limitation upon purchasing, s e l l i n g , underwriting, and holding, by
member banks# of investment s e c u r i t i e s ; sections 9 end 15, which provide l i m i t a t i o n s npoti the ratount of paper of any one borrower which a
Federal reserve brail: may rediscount for a member Lank; s e c t i o n 13,
which provides a l i m i t a t i o n upen the amount of drafts or b i l l s of
any one borrower which t\ member btti^s: may accept, upon the t o t a l amount
of b i l l s which r. member bank may ^cdept, and upon the amount of drafts
or b i l l s which rany bo accepted by >t member bunk for the purpose of
providing dollar exchange; section 11(a)* iihAoh provides a l i m i t a t i o n
" 258
-2-
X-8073-a
upon the amount which a member bank way lorn upon the s e c u r i t y of stock
or bond c o l l a t e r a l j s e c t i o n 12B(c), which provides f o r the amount of
stcck of the Federal Deposit Insurance Corporation f o r which a member
bank organized a f t e r June
1 0 ,
may apply during the f i r s t twelve
months a f t e r i t s organization; s . c t i o n 19, which provides a l i m i t a t i o n
upon the sum which a member bank s h a l l keep on deposit with a nonmember
State bank} s e c t i o n 25A, a i c ,
provides a l i m i t a t i o n upon the amount
which a member tarac nav i n v e s t i n or loan upon s t o c k s , bone s , debentures,
or other such o i l i g a t i o n s -u an a f f i l i a t e ; and s e c t i o n 24A, which provi "•••s a lj.n5.tatior u,)on the nmour.t which a member bank may i n v e s t i n
bank promises or the stock, bonds, debentures, or other such o b l i g a t i o n s of a corporation holding the bank's premises, and upon the amount
which a member bank may loan upon the stock of such a corporation*
A
similar question a r i s e s under s e c t i o n 210 of the Agricultural Credits
Act of 1923, which provides a l i m i t a t i o n upon the amount of stock of
National Agricultural Credit Corporations i n which a member bank may
invest.
In view of the ruling of the Board contained i n i t s
telegram t o a l l Federal Reserve Agents, dated November 8, 1935, (Trans.
1905), end i n view of the l a t e r amendment to s e c t i o n 9 of the Federal
Reserve Act, contained i n the Act of June 16, 1934, which provides t h a t ,
for the purposes of membership of any State bank, the terms c a p i t a l
and c a p i t a l stock s h a l l inulu'lo the rev.oi.;at of outstanding c a p i t a l
notes and debentures ler;rlly issued by the applyiv.- bank and purchased
-3-
X—8078-a
by the Reconstruction Finance Corporation, the Federal Reserve Board i s
of the opinion that capital notes and debentures l e g a l l y issued by
State member banks and purchased by the Reconstruction Finance Corporation should be considered as capital or capital stock i n determining
limitations unuor the above mentioned s e c t i o n s ,
Er.jevor* since the above mentioned amendment t o sect i o n 9 of th-s i eoeral Reserve Act does not rofer t o capital notes and
debentures sold t o others than the Reconstruction Finance Corporation#
any notes or debentures not sold t o the Reconstruction Finance Corporat i o n may not be included in determining the limitations above referred
to.
Likewise, since the above mentioned amendment to s e c t i o n 9 r e f e r s
only t o c a p i t a l ndtes and debentures issued by State member banks, the
above opinion i s applicable only t o State banks.
In t h i s connection,
however, i t i s understood that i t i s not the practice of national
banks to issue capital notes or debentures.
You w i l l understand, of course, that the Board's advic
i n t h i s matter i s not intended to refer to limitations f i x e d by State
s t a t u t e s , as the construction of such statutes i s within the j u r i s d i c t i o n of the appropriate State supervisory a u t h o r i t i e s rather than the
j u r i s d i c t i o n of the Board.
Very t r u l y yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
X-8079
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate release
October 17, 1934*
TRANSFER OF TRANSACTIONS FROM CASH ACCOUNTS.
Ruling No. 26 interpreting Regulation T.
The Federal Reserve
Board has been asked f o r a ruling on the following f a c t s :
A customer
requests a broker t o purchase for the customer's account certain r e g i s tered s e c u r i t i e s t o be paid f o r by the customer in cash.
The customer
has a bona f i d e intention t o pay in cash; but, when d e l i v e r y day arr i v e s , he finds that he has not s u f f i c i e n t cash to pay for the securit i e s in f u l l and desires to pay f i f t y percent and have the broker
carry the s e c u r i t i e s in his margin account u n t i l the customer i s
ready to make payment in f u l l .
The question i s presented whether the
broker may transfer such transaction from the customer's cash account
to his margin account.
In reply the Board advised that the transfer
of such a transaction from a cash account t o a margin account i s
expressly permitted i n exceptional cases by section 6 of Regulation T,
i f authorization i s obtained from the business conduct committee or
other suitable committee of the appropriate national s e c u r i t i e s exchange*
FEDERAL RESERVE BOARD
WASHINGTON
X-8080
address official correspondence t o
t h e federal reserve board
October 17, 1934
Dear S i r :
In response t o a l e t t e r r e c e i v e d from a F e d e r a l r e serve agent a d v i s i n g t h e Board i n regard t o arrangements which
he has made f o r a r a t h e r e x t e n s i v e speaking t o u r throughout
h i s d i s t r i c t f o r t h e purpose of d i s c u s s i n g i n d u s t r i a l loansand i n q u i r i n g whether r e p o r t s are d e s i r e d by t h e Board i n each
i n s t a n c e w i t h r e s p e c t t o t h e substance of h i s t a l k s , t h e Board
advised t h a t , s i n c e i t appeared t h a t h i s remarks a t each of t h e
meetings shown on h i s schedule w i l l be on t h e same s u b j e c t and
presumably along s u b s t a n t i a l l y t h e same l i n e s , i t f e e l s t h a t a
r4sum4 o u t l i n i n g t h e substance of one of such t a l k s would comp l y w i t h the s p i r i t of the Board's l e t t e r of October 2, 1934
(X-8033), on t h i s s u b j e c t .
http://fraser.stlouisfed.org/TO ALL
Federal Reserve Bank of St. Louis
Very t r u l y yours,
L. P. Bethea,
A s s i s t a n t Secretary*
GOVERNORS AMD F. Re AGENTS#
X-8081
£££££.Ah
£££ERVE
2 ° 6 ^ 2
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 17, 1934
EXTENSIONS OF CREDIT ON UNREGISTERED NONEXEMPTED SECURITIES.
Ruling No. 27 interpreting Regulation T.
The Federal Reserve
Board has received inquiries as to whether a member of a national sec u r i t i e s exchange may extend:credit on unregistered, non-exempted
s e c u r i t i e s i n clearing for another broker or dealer transactions
involving the purchase of such s e c u r i t i e s for cash by such other
broker or dealer.
The inquiries submitted indicate that i n perform-
ing the function of clearing the transactions the clearing member
furnishes the cash which i s paid for the s e c u r i t i e s and thereby extends credit u n t i l he receives reimbursement either from the broker
or dealer or from some subsequent purchaser.
In reply the Board
has called a t t e n t i o n t o the f a c t that section 7 ( c ) of the Securities
Exchange Act of 1934 forbids any member of a national s e c u r i t i e s
exchange or any broker or dealer who transacts a business i n securit i e s through the medium of any such member to extend credit t o any
customer on unregistered, non-exempted s e c u r i t i e s for the purpose
of purchasing or carrying s e c u r i t i e s .
While the Act authorizes the
Board t o prescribe rules permitting the extension of c r e d i t on unregistered, non-exempted s e c u r i t i e s in certain circumstances, i t
denies the Board the right t o grant such permission i n cases where
_g_
• 263
X-8081
the extension of c r e d i t i s for the purpose of purchasing or carrying
securities.
As the questions giving r i s e to t h i s ruling indicate
that the extensions of credit i n the cases presented are f o r the pur*
pose of purchasing or carrying s e c u r i t i e s , and that the credit i s
extended t o "eustomers" as that term i s used i n section 7 ( c ) of the
Securities Exchange Act of 1934 and i n Regulation I , the Board has
advised that such extensions of credit are prohibited by law and
that no authority i s given t o the Board t o permit them t o be made,
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-8082
October 17, 1934,
SUBJECT:
Interpretation of Standard Condition of
Membership Numbered 8 Regarding Investment
i n Bank Premises.
Dear Sir:
Standard condition of membership numbered 8 which has been prescribed for some time reads as follows:
"Such bank shall not permit any investment in a bank building or
i n a s i t e for a bank building to assume such proportions as, in
the judgment of the Federal Reserve Board, would endanger the
bank's solvency or l i q u i d i t y or would otherwise be unduly large
or improper, and before any investment i s made in a bank building or a s i t e for a bank building the bank shall refer the matter to the Federal Reserve Board for consideration."
Recently the question has been raised as t o whether i t i s desired
that a l l requests of banks subject to such condition for permission to
make a l t e r a t i o n s and renovations in banking quarters, regardless of the
proposed expenditures, be submitted to the Board or whether the Board
would prefer t o authorize the Federal reserve agents to approve such expenditures within certain l i m i t s .
The purpose of the condition i s t o prevent excessive investments
in bank premises and the condition was meant t o apply primarily to purchases of land or buildings, the construction of new buildings, and
major a l t e r a t i o n s .
In order t o expedite the handling of requests cover-
ing alterations and improvements, the Board authorizes the Federal
365
-2-
X-8082
reserve agents, without referring the matter to the Board, t o grant
permission to banks which are subject to condition numbered 8 referred
to above to make alterations and improvements to t h e i r banking quarters
when the cost of such alterations and improvements i s not i n excess of
10 per cent of the bank* s capital stock and w i l l not increase the
bank's investment in bank premises to an amount i n excess of 100 per
cent of the bank's capital stock.
Federal reserve agents are requested,
however, to forward t o the Board advice of a l l permissions granted i n
accordance with t h i s l e t t e r .
In case a Federal reserve agent i s i n
doubt as to whether the expenditure involved in the proposed a l t e r a tions or improvements would be in contravention of the s p i r i t of the
condition of membership, the request should be referred to the Board
in the regular manner with his recommendation#
I t was not contemplated that the terms of the condition would
include minor a l t e r a t i o n s which are charged to expense and not c a p i t a l ized.
Very t r u l y yours,
L. P. Bethea
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
2 6 6
address official correspondence t o
t h e federal reserve board
X-8083
October 19, 1934#
SUBJECT:
Holidays d u r i n g November, 1934*
Dear S i r ;
The F e d e r a l Reserve Board i s advised t h a t on Thursday, November 1, t h e New Orleans Branch of t h e F e d e r a l Reserve Bank of A t l a n t a
w i l l be closed i n observance of A l l S a i n t s ' Day.
Please include
t r a n s i t c l e a r i n g c r e d i t s of November 1 f o r t h e New Orleans Branch i n
your c l e a r i n g of November 2 .
On Tuesday, November 6, 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 t r a n s i t nor F e d e r a l r e s e r v e note c l e a r i n g and t h e books of
t h e B o a r d ' s Gold S e t t l e m e n t Fund w i l l be c l o s e d .
The o f f i c e s of t h e
F e d e r a l Reserve Board and t h e f o l l o w i n g F e d e r a l r e s e r v e banks and
branches w i l l be open f o r b u s i n e s s on t h a t day:
Boston
Cleveland ( U n t i l 1:00 P. h*
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 C i t y
On Monday, November 12, i n observance of A r m i s t i c e Day, which
f a l l s on Sunday, and on Thursday, November 29, t h e r e w i l l be n e i t h e r
t r a n s i t nor F e d e r a l r e s e r v e n o t e c l e a r i n g and the books of t h e Board's
-2Gold Settlement Fund m i l be c l o s e d .
X-8083
The o f f i c e s of t h e Board and
of the Oklahoma C i t y Branch of t h e F e d e r a l Reserve Bank of Kansas
C i t y w i l l be open f o r b u s i n e s s on Monday, November 12•
Please n o t i f y branches#
Very t r u l y yours,
' V
• / C&2£jZ——y
C • Koell,
A s s i s t a n t Secretary#
TO GOVERNORS OF ALL F. R. BAEKS.
/
jr
268
x-8084
f e d e r a l
r e s e r v e
b o a r d
statement f o r the press
For immediate r e l e a s e
October 19* 1934.
s a l e s amd r e p u r c h a s e s OF s e c u r i t i e s
Ruling No. 28 interpreting Regulation T.
in old accounts.
The Federal Reserve
Board has been asked whether a creditor, as defined in s e c t i o n 2(b) of
Regulation 1', may permit a cus-tomer t o s e l l a registered security from
a designated old account and on the same day t o purchase i n i t s place
i n the old account an unregistered, non-exempted security, i f the adjusted debit balance of the old account i s not increased.
In reply the
Board called a t t e n t i o n to the prohibition contained in s e c t i o n 7 ( c ) ( 2 )
of the Securities Exchange Act of 1934 on the extension of credit on unregistered, non-exempted s e c u r i t i e s for the purpose of purchasing or
carrying s e c u r i t i e s , and t o the f a c t that the provisions of s e c t i o n 4
of Regulation T are made applicable to old accounts by the f i r s t proviso of s e c t i o n 7(a) of the Regulation.
Accordingly, the Board ad-
vised that in the circumstances indicated, the extension of credit
for the purchase of the unregistered* non-exempted s e c u r i t y i s not
permitted unless at the time of such purchase the maximum loan value
of the s e c u r i t i e s in the account exceeds the adjusted debit balance of
the account by an amount equal t o or greater than the purchase price
of the unregistered, non-exempted s e c u r i t y .
X-8085
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 19, 1934#
MANNER OF I3EPINC- SPECIAL CASH ACCOUNTS
Ruling No. 29 i n t e r p r e t i n g Regulation T.
In r e p l y t o an i n -
quiry t h e F e d e r a l Reserve Board has advised t h a t under s e c t i o n 6
of Regulation T a s p e c i a l cash account may be kept s e p a r a t e l y f o r
each customer, and t h a t t h e r e g u l a t i o n does not r e q u i r e a s i n g l e
s e p a r a t e account covering a l l cash t r a n s a c t i o n s f o r a l l customers.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-8086
October 19, 1934#
SUBJECT:
Examinations under Section 21 of
t h e Banking Act of 1933#
Dear S i r :
I n connection w i t h examinations of p r i v a t e banks and bankers,
made by the F e d e r a l r e s e r v e banks under t h e p r o v i s i o n s of s e c t i o n
2 1 ( a ) ( 2 ) of t h e Banking Act of 1933, q u e s t i o n s have been r a i s e d as
t o t h e r e s p o n s i b i l i t y of the Federal r e s e r v e banks and as t o the
a c t i o n , i f any, which should be t a k e n by them r e g a r d i n g ;
1#
P r o t e c t i o n of d e p o s i t o r s when the r e p o r t of examination
d i s c l o s e s an i n s o l v e n t condition#
2#
C o r r e c t i o n of other u n s a t i s f a c t o r y conditions#
3#
Reporting apparent v i o l a t i o n s of the c r i m i n a l p r o v i s i o n s
of S t a t e laws #
Under the p r o v i s i o n s of s a i d s e c t i o n 2 1 ( a ) ( 2 ) a F e d e r a l r e -
serve bank has no a u t h o r i t y t o r e q u i r e the c o r r e c t i o n of u n s a t i s f a c t o r y c o n d i t i o n s i n p r i v a t e banks s u b m i t t i n g t o examination and i s
under no s t a t u t o r y duty t o t a k e any a c t i o n f o r t h e p r o t e c t i o n of dep o s i t o r s , t o c o r r e c t u n s a t i s f a c t o r y c o n d i t i o n s , or t o r e p o r t t o the
S t a t e a u t h o r i t i e s apparent v i o l a t i o n s of t h e c r i m i n a l p r o v i s i o n s of
S t a t e laws#
The Board f e e l s , however, t h a t each F e d e r a l r e s e r v e
bank should e x e r t i t s b e s t e f f o r t s t o induce p r i v a t e banks t o c o r r e c t
2 7 1
>
X—8086
2-
any u n s a t i s f a c t o r y c o n d i t i o n s d i s c l o s e d by t h e examinations made by
t h e Federal r e s e r v e bank and otherwise t o p r o t e c t d e p o s i t o r s a g a i n s t
unsound and u n l a w f u l banking p r a c t i c e s .
The Board, t h e r e f o r e , expects
each F e d e r a l r e s e r v e bank t o adopt a c o n s t r u c t i v e a t t i t u d e i n t h i s
r e s p e c t and t o endeavor t o o b t a i n such c o r r e c t i v e a c t i o n i n t h e case
of p r i v a t e banks as may appear n e c e s s a r y or d e s i r a b l e i n t h e circumstances s
The Board a l s o b e l i e v e s t h a t i t i s proper f o r a F e d e r a l r e -
serve bank t o r e p o r t apparent v i o l a t i o n s of c r i m i n a l p r o v i s i o n s of
S t a t e laws t o t h e a p p r o p r i a t e S t a t e a u t h o r i t i e s .
Very t r u l y yours,
L. P. Bethea,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGENTS.
^
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-8087
October 20, 1934.
SUBJECT?
Code Word Covering New
I s s u e of Treasury B i l l s ;
Dear S i r :
I n connection w i t h 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 F e d e r a l r e s e r v e banks, t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of T r e a s u r y B i l l s :
!t
N0X0TY!t - Treasury B i l l s t o be dated October
24, 1934, and t o mature A p r i l 24,
1935.
This word should be i n s e r t e d . i n t h e F e d e r a l Reserve Telegraph Code book, f o l l o w i n g t h e supplemental
code word "NOXORE" on page 172.
Very t r u l y y o u r s ,
J-. C. No e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-8088
October 20, 1934.
Dear S i r :
The B o a r d ' s l e t t e r of October 6, 1934, X-8046, r e f e r r e d
t o t h e i n s t r u c t i o n s t o esgaminers r e g a r d i n g the c l a s s i f i c a t i o n of
i n d u s t r i a l loans made under t h e p r o v i s i o n s of s e c t i o n 13(b) of
t h e F e d e r a l Reserve Act#
The i n s t r u c t i o n s r e f e r r e d t o l o a n s which have been t r a n s f e r r e d i n whole or i n p a r t t o a F e d e r a l r e s e r v e bank, or i n conn e c t i o n with which a F e d e r a l r e s e r v e bank has extended a commitment
I t i s r e q u e s t e d t h a t i n each r e p o r t of examination made by your examiners a l l such loans be l i s t e d i n a s e p a r a t e s c h e d u l e immediately
f o l l o w i n g supplemental pages 6, t o g e t h e r w i t h a summary of t h e p e r t i n e n t c r e d i t d a t a r e g a r d i n g each l o a n .
In accordance w i t h p r e v i -
ous i n s t r u c t i o n s , however, t h e only c l a s s i f i c a t i o n of such loans
should be as t o a p p a r e n t l o s s e s #
http://fraser.stlouisfed.org/
TO ALL
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
L. P# Bethea
A s s i s t a n t Secretary#
FEDERAL RESERVE AGENTS.
X-8089
FEDERAL
KE S E R V E
B 0 AR D
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
'
October 22, 1934,
DIVIDENDS OR INTEREST ON SECURITIES
CARRIED IN RESTRICTED NEW ACCOUNTS
Ruling No. 30 i n t e r p r e t i n g R e g u l a t i o n T•
The F e d e r a l Re-
serve Board has been aslced' whether under R e g u l a t i o n T, a broker
may permit a customer t o withdraw cash d i v i d e n d s or i n t e r e s t
r e c e i v e d by t h e broker on s e c u r i t i e s c a r r i e d f o r t h e customer
i n a r e s t r i c t e d new a c c o u n t .
In r e p l y t h e Board a d v i s e s t h a t
f o r t h e purposes of R e g u l a t i o n T such withdrawal of i n t e r e s t or
d i v i d e n d s i s t o be c o n s i d e r e d as n o t d i f f e r e n t from any o t h e r
withdrawal of cash and t h e r e f o r e may not be p e r m i t t e d i n such
account except i n compliance w i t h the p r o v i s i o n s of s e c t i o n
4 ( d ) of t h e R e g u l a t i o n .
X-8090
*'
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
October 17, 1934.
CURTISS
Boston
Regarding Gettemy' s telegram October 13 with respect to whether, i n
case referred to i n telegram, there i s an "extension of credit" withi n meaning of Board's RULING NO. 16 INTERPRETING REGULATION T.
Board
advises that existence of "extension of credit" i n any case w i l l depend upon f a c t s of that particular case and applicable provisions of
State law.
For t h i s reason Board i s unable to answer question i n
general form submitted but c a l l s attention to RULING NUMBER 20 INTERPRETING REGULATION T which deals with cash transactions but which
indicates factors which Board considers important i n determining when
extension of credit occurs.
Furthermore, as question in telegram r e -
f e r s to u n l i s t e d s e c u r i t i e s i t should be borne i n mind that s e c t i o n
7 ( c ) ( 2 ) of Securities Exchange Act makes i t unlawful for a creditor as
defined in section 2(b) of Regulation T to extend credit t o or for a
customer without c o l l a t e r a l or on c o l l a t e r a l other than exempted and/or
registered s e c u r i t i e s except i n accordance with rules which Federal
Reserve Board may prescribe and that Board i s not empowered t o prescribe rules authorizing such extensions of credit i n cases where extension of credit i s for purpose of purchasing or carrying s e c u r i t i e s *
(Signed)
L. P. Bethea
BETHEA
X-8091
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
October 16, 1934.
CURTISS
BOSTON
Referring Gettemy's l e t t e r of October 10, Board considers
execution of agreement on F.R.B. Form T-l or T-2 to have
been made in accordance with prescribed form of r e s o l u t i o n
of authorization i f agreement i s signed by one of the two
o f f i c e r s named in resolution and a t t e s t e d by the other.
(Signed)
L. P. Bethea
BETHEA
X-8092
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE' PRESS
For immediate r e l e a s e .
October 23, 1934.
INDIVIDUAL1S PARTICIPATION IN A JOINT ACCOUNT NOT
TO BE COMBINED WITH HIS INDIVIDUAL ACCOUNT.
Ruling No, 31. interpreting Regulation T.
The Federal Reserve
Board has been asked -whether a certain individual's proportionate share
of the excess loan value i n a j o i n t account carried f o r such individual
and certain other persons j o i n t l y may be combined with the individual's
personal account carried simultaneously with the same broker i n order
that such personal account may be considered as an unrestricted rather
than a r e s t r i c t e d account under Regulation T.
In reply the Board
points out that the individual i n question i s a "customer" within the
meaning of the d e f i n i t i o n i n section 2(m) of the regulation and that
the parties to the j o i n t account as a group constitute a separate and
d i s t i n c t "customer" within the meaning, of such d e f i n i t i o n and accordingl y advised that the individual's personal account may not be considered
an unrestricted account because of the presence of excess loan value
in the j o i n t account unless the parties to the j o i n t account acting
j o i n t l y have, i n writing, guaranteed the individual's personal account
for an amount s u f f i c i e n t to make i t an unrestricted account.
1%,
1
X-8094
FEDERAL
U S E E V E
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e •
October 23, 1934*
DEimiD FOR DMRGIN INCLUDED IN CONFIRMATION OF TRANSACTION.
Ruling No. 32 i n t e r p r e t i n g Regulation T.
The F e d e r a l Reserve
Board has been asked whether, i f a c o n f i r m a t i o n of a t r a n s a c t i o n has
been s e n t by mail t o a customer a t h i s l a s t known address, a demand
f o r margin which appeared not on a s e p a r a t e piece of paper b u t on
t h e c o n f i r m a t i o n i t s e l f may be considered as having been made i n
t h e manner s p e c i f i e d i n c l a u s e 8 of s e c t i o n 3 ( f ) of R e g u l a t i o n T
so t h a t t h e amount of margin demanded may be deducted i n computing
t h e a d j u s t e d d e b i t balance of t h e customer 1 s a c c o u n t .
In reply the
Board a d v i s e s t h a t such a demand may be considered as a demand made
i n a " l e t t e r " w i t h i n t h e meaning of clause 8 and t h a t a c c o r d i n g l y
the q u e s t i o n should be answered i n the a f f i r m a t i v e •
FEDERAL RESERVE BOARD
x gQg5
WASHINGTON
address official correspondence t o
t h e federal reserve board
October 25, 1934
Dear Sir:
For your information, there i s attached a copy of
a telegram sent by the Board to Deputy Governor Rounds, of
the Federal Reserve Bank of Hew York, with regard to the
discount or purchase "by Federal reserve "banks of obligations evidencing industrial loans in which two or more
commercial "banks participate.
Very truly yours,
~%>RjiiA2Sh/
Chester Morrill,
Secretary.
Inclosure.
To the Federal reserve agents at a l l Federal reserve "banks.
280
Copy
X-8095-a
TELEGRAM
FEDERAL
RESERVE
BOARD
WASHINGTON
October 22, 1934
ROUNDS - NEW YORK
Retel October 18.
Board understands a p p l i c a t i o n s have been presented
wherein two or more commercial banks desire to p a r t i c i p a t e i n providing working c a p i t a l f o r i n d u s t r i a l or commercial b u s i n e s s , each bank
to o b l i g a t e i t s e l f to s a t i s f a c t i o n of Federal reserve bank f o r i t s
pro rata part of a t l e a s t 20 per centum of any l o s s which may be sustained by such F e d e r a l r e s e r v e bark upon o b l i g a t i o n s of i n d u s t r i a l or
commercial business acquired from such commercial banks.
For example,
i n case of equal p a r t i c i p a t i o n by banks A and B, i t i s understood that
i n d u s t r i a l or commercial business w i l l make s i n g l e a p p l i c a t i o n but
w i l l execute two separate notes, each equal i n amount to one-half of
t o t a l extension of credit and payable to banks A and B, r e s p e c t i v e l y ,
and that Federal reserve bank w i l l discount or purchase one of such
notes from bank A and other from bank B, each commercial bank o b l i gating i t s e l f f o r a t l e a s t 20 per centum of l o s s which may be sustained by Federal reserve bank upon o b l i g a t i o n acquired from such
commercial bank.
In such circumstances Board agrees with views of
your counsel that Federal reserve bank may l a w f u l l y discount or purchase o b l i g a t i o n s i f other requirements of law are s a t i s f i e d .
(Signed)
Chester Morrill
MORRILL.
X-8096
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
October 23, 1934
STEVENS
CHICAGO
Referring
to your l e t t e r of October 17 and question submitted
by the Chicago Stock Exchange i n l e t t e r to you dated October 16.
Ruling No. 11 interpreting Regulation T does not enlarge meaning
of term "net withdrawal" as defined i n Regulation T so as to make
i t necessary i n ascertaining existence of "net withdrawal" to i n clude market value of unregistered non-exempted s e c u r i t i e s withdrawn from a r e s t r i c t e d new account.
Ruling No. 11 dealt with
old accounts and i n particular with third proviso of s e c t i o n
7(a) of regulation which s p e c i f i e s conditions under which creditor may permit customer to withdraw money and/or s e c u r i t i e s and
does not mention or involve "net withdrawal" as defined i n the
regulation.
(Signed)
Chester Morrill
MORRILL
282
FEDERAL RESERVE BOARD
WASHINGTON
X-8097
address official correspondence t o
t h e federal reserve board
October 26, 1934.
SUBJECT:
Section 32 - Investment Trusts
Dealing i n Own S e c u r i t i e s .
Dear Sir:
The Board's l e t t e r of March 12, 1934 (X-7820) requested you, i n
any case in which a ruling was required as to the a p p l i c a b i l i t y of s e c t i o n 32 to a s o - c a l l e d investment trust of the management type, to furnish
the Board with certain information regarding the nature of the operations
of the organization, but that l e t t e r did not request information as to the
extent and nature of the a c t i v i t i e s of the organization i n connection with
the s a l e , d i s t r i b u t i o n , repurchase or redemption of i t s own stock, bonds,
or other s e c u r i t i e s .
However, i n considering applications and requests for
rulings involving the a p p l i c a b i l i t y of section 32 to such investment t r u s t s ,
i t has come to the a t t e n t i o n of the Board that i n some cases the nature and
extent of their a c t i v i t i e s in connection with dealings in their own securit i e s has been such as to became a factor i n determining the a p p l i c a b i l i t y
of section 32 to them.
Therefore, i t w i l l be appreciated i f , in connection with future
cases requiring a ruling of the Board as to the a p p l i c a b i l i t y of s e c t i o n 32
to such investment t r u s t s , you w i l l obtain and furnish the Board with
X-8097
— 2 *•
information as to the following, i n addition to the information requested
i n the Board's l e t t e r of March 12, 1934 (X-7820):
1.
The manner i n which the stock, "bonds or other s e c u r i -
t i e s of the organization were originally sold and distributed to the
public.
2.
The manner i n which such s e c u r i t i e s are at present being
sold or distributed, i f they are now being sold or d i s t r i b u t e d .
3.
For each of the past three years, the number and par
value of the (a) shares, (b) bonds, and (c) other s e c u r i t i e s of the
organization which have been sold or issued.
4.
For each of the past three years, the number and par value
of the (a) shares, (b) bonds, and (c) other s e c u r i t i e s of the organization
which have been repurchased or redeemed by the organization.
5.
In the event that any such s e c u r i t i e s have been thus
repurchased or redeemed, a description of the terms, conditions and manner
of such repurchase or redemption.
In addition to such information, the Board w i l l be glad to have
any further information or comments which you f e e l should be furnished.
TO ALL F. E.
Very truly yours,
-tfa&AZVv
Chester Morrill,
Secretary.
AGENTS.
YDcnsuJJL
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
y
rflqft
a - o u s o
October 27, 1934.
SUBJECT:
Code Word Covering Hew Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s "between Federal reserve "banks, the
following code word has "been designated to cover a new
i s s u e of Treasury B i l l s :
"EOXOVER" - Treasury B i l l s to "be dated October
31, 1934, and to mature May 1, 1935.
This word should "be inserted i n the Federal Reserve Telegraph Code took, following the supplemental code
word "UOXOTY" on page 172.
Very truly yours
S. R. Carpenter,
Assistant Secretary.
TO GOVERNORS OF AIL F. R. BANKS.
2
3-9099
FEDERAL
RESERVE
BOARD
STATEMENT TOR THE PRESS
For immediate r e l e a s e .
October 27, 1934.
WITHDRAWALS OF CASH OR SECURITIES FROM OLD ACCOUNTS ON AMD
AFTER NOVEMBER 15, 1934.
Ruling Ho. 33 interpreting Regulation T.
In reply to certain
inquiries as to whether cash or s e c u r i t i e s may "be withdrawn from
designated old accounts on and a f t e r November 15, 1934, the Federal
Reserve Board points out that the third proviso of s e c t i o n 7(a) of
Regulation T i s by i t s terms applicable only to withdrawals made prior
to that date.
Accordingly the Board rules that:
(1) On and a f t e r
November 15, 1934, s e c u r i t i e s may be withdrawn from a designated old
account to any extent not forbidden by section 4 of the regulation;
and (2) On and a f t e r November 15, 1934, cash may not be withdrawn
from a designated old account, whether r e s t r i c t e d or unrestricted, i f
such withdrawal r e s u l t s i n an increase i n the adjusted debit balance
of the account i n v i o l a t i o n of the second proviso of s e c t i o n 7(a) of
the regulation or i s forbidden by section 4 of the regulation.
21186
FEDERAL RESERVE BOARD
X-9000
WASHINGTON
address official correspondence t o
t h e federal reserve board
October 29, 1934
SUBJECT:
Issuance of Federal Reserve
notes at Branches of Federal
Reserve "banks.
Dear Sir:
Replies have "been received from the Federal reserve agents
to the Board's l e t t e r of August 25 (X-7992) on the above subject and,
a f t e r careful consideration of such r e p l i e s , the Board i s of the
opinion that no Federal reserve notes should be i s s u e d , except upon
s p e c i f i c authority, i n each case, of the Federal reserve agent or
an a s s i s t a n t Federal reserve agent at the Head O f f i c e .
I t w i l l be appreciated, therefore, i f instructions to t h i s
e f f e c t are issued to a l l persons designated to act for you i n the
issuance of Federal reserve notes at the Head Office and at each
branch of the Federal reserve bank.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL F. R. AGENTS EXCEPT BOSTON AND PHILADELPHIA
" 387
FEDERAL RESERVE BOARD
WASHINGTON
X-9003
address official correspondence t o
t h e federal reserve board
October 30, 1934,
Dear S i r :
R e f e r r i n g t o t h e Board's l e t t e r X-7817 of March 9, 1934, i n f o r m a l
advice has been r e c e i v e d from t h e Treasury Department t o t h e e f f e c t t h a t
i t has p r i n t e d and now has on hand gold c e r t i f i c a t e s i n t h e f o l l o w i n g
amounts and denominations:
Denomination
Amount
$100
$12,000,000
10,000
360,000,000
1,000
84,000,000
The Department a l s o a d v i s e s t h a t w i t h i n t h e n e x t two months i t
expects t o have p r i n t e d and on hand a s u b s t a n t i a l s t o c k of gold c e r t i f i c a t e s of t h e $100,000 denomination and t h a t i t w i l l t h e n be p r e p a r e d t o
i s s u e a l i m i t e d amount of gold c e r t i f i c a t e s t o t h e F e d e r a l r e s e r v e banks
upon r e q u e s t .
While no f i n a l d e c i s i o n has been r e a c h e d , i t i s understood
t h a t t h e Department e x p e c t s t o c a l l i n t h e old s t y l e gold c e r t i f i c a t e s a t
t h e time t h e 1934 s e r i e s are i s s u e d t o t h e F e d e r a l r e s e r v e banks•
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 a d v i s e t h e Board as t o t h e
amount, i f any, of each denomination of t h e new gold c e r t i f i c a t e s your
bank would l i k e t o have shipped t o i t by t h e T r e a s u r y .
TO ALL GOVERNORS
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
3 8 8
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9004
October 31, 1934,
Dear Sirs
On June 8, 1934, following the approval by the United States
and Cuba of a t r e a t y abrogating the s o - c a l l e d P i a t t amendment, the
board of directors of the Federal Reserve Bank of Atlanta adopted a
resolution directing the o f f i c e r s of the bank t o apply t o the Federal
Reserve Board for permission t o discontinue the agency operated by
the bank at Havana, Cuba.
A copy of the r e s o l u t i o n referred t o i s
attached.
The Federal Reserve Board was advised of the action taken
by the board of directors of the Atlanta bank, and a f t e r giving consideration to the matter, decided t o arrange for a meeting i n Washington of representatives of the American and Canadian banks operating o f f i c e s in Cuba for the purpose of discussing -with them the
question of the discontinuance of the Havana Agency.
Such a meeting was held i n Washington on July 13, 1934, at
which representatives of the National City Bank of New York, the
Chase National Bank of New York, the F i r s t National Bank of Boston,
the Royal Bank of Canada, the Canadian Bank of Commerce and the
Bank of Nova Scotia were present, and the resolution adopted by the
-2-
X-9004
board of d i r e c t o r s of t h e A t l a n t a bank and t h e f o l l o w i n g t e l e g r a m r e ceived under d a t e of J u l y 12, 1934, from Acting Governor Johns of t h e
F e d e r a l Reserve Bank of A t l a n t a , were brought t o t h e i r a t t e n t i o n :
"The f o l l o w i n g cable has been r e c e i v e d from Manager of
our Havana Agency:
"* Late y e s t e r d a y t h e Cuban S e c r e t a r y of Treasury c a l l e d
me t o h i s o f f i c e and advised t h a t he had i n f o r m a t i o n
t h a t a c o n f e r e n c e between F e d e r a l Reserve Board and
r e p r e s e n t a t i v e s of f o r e i g n banks o p e r a t i n g i n Cuba
would be h e l d J u l y 13th t o d i s c u s s t h e Cuba s i t u a t i o n .
He s t a t e s t h a t both he and t h e P r e s i d e n t f e a r e d t h a t
t h i s c o n f e r e n c e might r e s u l t i n t h e withdrawal of t h e
Havana Agency and due t o t h e v a l u a b l e s e r v i c e r e n d e r e d
c o n s i d e r e d t h e withdrawal of i t would prove v e r y d e t r i m e n t a l t o Cuban i n t e r e s t s and would l i k e t o see any
such d e c i s i o n avoided i f p o s s i b l e . S e c r e t a r y of Treas u r y r e q u e s t e d t h a t 1 a d v i s e you t h a t on J u l y 13th he
w i l l recommend t o c a b i n e t r e p e a l of a l l l e g i s l a t i o n
r e l a t i v e t o withdrawal of money from Cuba e n a c t e d s i n c e
May 22nd and t h a t i n a l l p r o b a b i l i t y immediate a d o p t i n g i n t h i s connection w i l l be t a k e n . S e c r e t a r y of
T r e a s u r y and t h e P r e s i d e n t r e q u e s t t h a t t h i s i n f o r m a t i o n be t r a n s m i t t e d t o you w i t h t h e r e q u e s t t h a t you
t r a n s m i t same t o F e d e r a l Reserve Board. 1 1 1
Governor Black advised the r e p r e s e n t a t i v e s of t h e banks t h a t
t h e f u n c t i o n s of t h e Havana Agency s i n c e i t s e s t a b l i s h m e n t had cons i s t e d l a r g e l y of t h e f u r n i s h i n g of new c u r r e n c y t o banks i n Cuba,
t h e exchanging of f i t c u r r e n c y f o r m u t i l a t e d , d i r t y and u n f i t n o t e s ,
and t h e h a n d l i n g of cable t r a n s f e r s between the United S t a t e s and
Cuba.
He s a i d t h a t t h e agency had been o p e r a t e d a t a l o s s and t h a t
such o p e r a t i n g l o s s e s had always been a c c e p t e d and had n o t a f f e c t e d
t h e c o n t i n u a n c e of t h e agency by t h e F e d e r a l Reserve Bank of A t l a n t a ,
b u t t h a t t h e d i r e c t o r s of t h e A t l a n t a bank had been concerned about
c o n d i t i o n s i n Cuba and f e l t t h a t t h e f u l l r e s p o n s i b i l i t y of t h e agency
3-
X-9004
should not be upon the Atlanta bank and that t h i s was e s p e c i a l l y true
because the agency served the commercial and exchange needs of a l l
parts of the United States and was in r e a l i t y operating f o r system
purposesj t h a t for a considerable period the Havana Agency kept on
hand approximately $>25,000,000 in currency and i n emergencies a great
deal more; that the amount had been reduced to between §10,000,000 and
vl2,000,000 a f t e r conferring with banks in Cuba; and that the reduced
amount had been found t o be a s u f f i c i e n t supply t o keep on hand at the
agency except in cases of emergency,
(in t h i s connection i t may be
noted that under date of September 17, 1934, the Board was advised by
the Atlanta bank that i t s directors had authorized the reduction of
the amount of currency at the agency t o $5,000,000).
He stated also
that the Havana Agency was established for the purpose of carrying on
the operations of a money depot i n Cuba at a time when transportation
f a c i l i t i e s were slow and unsatisfactory as compared with those of
today; that the Federal Reserve Bank of Atlanta has a branch i n Jacks o n v i l l e , Florida, where i t keeps on hand both issued and unissued
currency which can be transported by airplane from Jacksonville t o
Havana i n a few hours; that currency also can be sent by r a i l to Key
7/est, Florida, and from there could be transferred by plane t o Havana
in a few hours; and that i n the circumstances i t would seem that the
transportation problem as between t h i s country and Cuba has been
solved.
He added that he was of the opinion that the directors of the
Federal Reserve Bank of Atlanta were not concerned g r e a t l y over the
p o s s i b i l i t y of actual loss of funds inasmuch as i t was f e l t that the
-4-
:
2 9 i
X-9004
revolutions i n Cuba were merely p o l i t i c a l uprisings, but he f e l t that
the primary considerations prompting the action of the directors of the
Atlanta bank i n adopting a resolution to discontinue the Havana Agency
were ( l ) the f a c t that the transportation problem has now been solved,
(2) that the directors desire t o eliminate the risk of the p o l i t i c a l unr e s t in the island, and (3) the rscent abrogation of the s o - c a l l e d Piatt
Amendment•
All of the bank representatives present at the meeting expressed
the opinion that the agency should be continued and they were requested
to address l e t t e r s t o the Board s e t t i n g forth t h e i r reasons for t h e i r
opinion.
Copies of the l e t t e r s received by the Federal Reserve Board i n
response to t h i s request are attached for your c o n f i d e n t i a l information.
At a meeting of the board of directors of the Federal Reserve
Bank of Atlanta held i n Atlanta on August 10, 1934, at which Governor
Black was i n attendance, he reviewed the consideration given by the Federal Reserve Board to the resolution adopted by the Atlanta bank r e l a t i v e to the discontinuance of the Havana Agency and stated that he had
considered the p o s s i b i l i t y of the agency continuing as a system agency
which would be operated by the Federal Reserve Bank of Atlanta for the
twelve Federal reserve banks.
At that meeting the directors of the bank
voted that the Federal Reserve Board be advised that the Atlanta bank
would cooperate i n a system operation of the agency and t h a t , i n t h e i r
opinion, such an arrangement would be a proper solution of the problem.
As you know, Governor Black resumed his duties as Governor of
the Federal Reserve Bank of Atlanta on August 16, 1934, and under date
-5-
X-9004
of September 27, 1934, he addressed another l e t t e r t o the Board with
regard t o the operation of the agency on a system b a s i s , and a copy of
that l e t t e r i s also attached.
Under the law the Federal Reserve Board has the power t o r e quire a reserve bank t o operate a foreign agency but the Board f e e l s
that t o require system action would be undesirable and at the present
time unnecessary since the Board endorses the suggestion of the Atlanta
bank that the agency be operated by that bank for the account of the
twelve reserve banks, and has under consideration the necessary d e t a i l s
for that purpose.
Accordingly, i t w i l l be appreciated i f you w i l l pre-
sent the matter t o the board of directors of your bank at i t s next
meeting and advise the Board as soon as possible as to the attitude
of your bank towards participation with the other Federal reserve
banks on a system basis i n the operation of the agency by the Atlanta
bank.
Upon acceptance of such participation by a l l banks, the d e t a i l s
of the arrangement w i l l be determined promptly and submitted t o your
directors for approval*
Very truly yours
Chester Morrill,
Secretary.
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
(No copy t o Governor, or extra copies to banks)
copy
"
Federal Reserve Bank of A t l a n t a
2 9 3
X-9004-a
"YffiEREAS, t h i s bank has maintained f o r a number of y e a r s ,
•with t h e consent of t h e F e d e r a l Reserve Board, an agency i n t h e
City of Havana, Cuba, through which agency t h e banks i n Cuba have
been supplied w i t h currency of t h e United S t a t e s ; and
1/VIIEREAS, t h e p r i n c i p a l reason f o r t h e e s t a b l i s h m e n t of s a i d
agency was t h a t t h e Federal Reserve System might a c t i n accord w i t h
t h e s p i r i t of t h e s o - c a l l e d ' P i a t t Amendment', and t o t h e end t h a t a
s u f f i c i e n t supply of u s a b l e currency might be maintained i n Cuba;
and
YffiEREASj by t r e a t y between t h e United S t a t e s and t h e
Republic of Cuba, the s a i d P i a t t Amendment has been abrogated and
i t s p r o v i s i o n s a r e no longer of f o r c e ; and
WHEREAS, t h e d i r e c t o r s of t h i s bank f e e l t h a t t h e s a i d
agency should now be d i s c o n t i n u e d ,
THEREFORE, BE IT RESOLVED That the proper o f f i c e r s of t h i s
bank be and they hereby are d i r e c t e d t o apply t o t h e F e d e r a l Reserve
Board f o r permission t o d i s c o n t i n u e t h e s a i d Havana Agency.
BE IT FURTHER RESOLVED That i n a d d r e s s i n g t h e F e d e r a l Reserve Board the o f f i c e r s of t h i s bank make i t p l a i n t h a t t h e Board
of D i r e c t o r s d e s i r e s t o work no unnecessary inconvenience t o the
banks i n Cuba, and t h a t while i t i s t h e d e s i r e of t h e d i r e c t o r s t o
c l o s e s a i d agency as soon as p o s s i b l e , t h e y wish i t s d i s c o n t i n u a n c e
t o be e f f e c t e d i n such wise as not unduly t o a f f e c t t h e banking and
b u s i n e s s i n t e r e s t s of Cuba•
BE IT ALSO RES0D7ED That the good o f f i c e s of the Federal
Reserve Board be invoked t o t h e end t h a t t h e i n t e r e s t s of t h i s bank
may n o t be i n j u r i o u s l y a f f e c t e d by r e a s o n of l e g i s l a t i o n , o f f i c i a l
d e c r e e s , or other enactments or developments consequent upon or
f o l l o w i n g t h e withdrawal of t h e s a i d former t r e a t y o b l i g a t i o n s s e t
out i n t h e s a i d P i a t t Amendment•"
I , L« Me Clark, S e c r e t a r y of t h e Board of D i r e c t o r s of the
F e d e r a l Reserve Bank of A t l a n t a , do hereby c e r t i f y t h a t t h e f o r e g o i n g i s a
t r u e and c o r r e c t copy of a r e s o l u t i o n adopted by t h e Board of D i r e c t o r s of
t h e Federal Reserve Bank of A t l a n t a a t a meeting held on t h e e i g h t h day of
June, 19 34•
(Signed)
S E C
L. M. Clark
R E
T
A
R
Y
2 9 4
COPY
X-9004-b
THE NATIONAL CITY BANK
of New York
New York
August 8, 1934.
Honorable E. R. Black, Governor
Federal Reserve Board
Washington, D i s t r i c t of Columbia
Dear Governor Black:
I beg t o apologize f o r my delay i n complying with your
request t h a t , as one of the banks represented at the hearing held by
the Federal Reserve Board in Washington on July 13, 1934, we send
you a b r i e f w r i t t e n statement i n support of the verbal arguments made
at that hearing i n favor of the continued maintenance of the Habana
Agency of the Federal Reserve Bank of Atlanta. This delay was due t o
our desire f i r s t t o obtain the views of our r e p r e s e n t a t i v e s located
i n Habana on t h i s very important question.
The Federal Reserve Agency i n Habana was o r i g i n a l l y e s t a b l i s h e d , I b e l i e v e , for two reasons:
(a) Because of the r e s p o n s i b i l i t y which i t was f e l t had been assumed by the Government of the United States t o maintain i n Cuba an
adequate supply of American currency when the American a u t h o r i t i e s ,
charged with the s e t t i n g up of a new order of government and f o l l o w i n g
the f r e e i n g of Cuba from Spanish r u l e , e s t a b l i s h e d American currency
as t h e chief circulating-medium and as l e g a l - t e n d e r i n payment of a l l
debts; and
(b) Because of the very important s e r v i c e which such Agency could
and would perform f o r American business and banking i n t e r e s t s i n Cuba.
These reasons s t i l l e x i s t and with p r a c t i c a l l y the same f o r c e as at
the time of t h e establishment of t h a t Agency. American currency i s
s t i l l l e g a l - t e n d e r and the chief circulating-medium i n Cuba. I t s
place has not i n any way been taken by the recent i s s u e s of additional
Cuban s i l v e r coins or other legal-tender currency. The Agency i s
s t i l l performing a most important s e r v i c e for American business i n t e r e s t s located in Cuba, f o r American exporters of raw m a t e r i a l s , foods t u f f s and manufactured goods, and for American banks doing business
i n Cuba, e i t h e r d i r e c t l y , through branches located there, or through
correspondents.
X-9004-^ty*^
Sheet ifo. 2
Governor E. R. Black - Washington, D. C.
August 8, 1934
I t i s a w e l l Icnovm f a c t t h a t t h e b e n e f i t s c o n f e r r e d upon
American b u s i n e s s j t o say nothing of Cuban b u s i n e s s , by t h e e s t a b l i s h ment of t h e Agency, have been very m a t e r i a l # The g e n e r a l l e v e l of i n t e r e s t r a t e s i n Cuba has dropped very m a t e r i a l l y from what i t was bef o r e t h e establislament of t h a t Agency. I t i s probably f a i r t o s t a t e
t h a t , from a peak of twelve per c e n t . , with an average of approximately
t e n per c e n t . , t h e i n t e r e s t l e v e l f o r sound s h o r t - t e r m advances of a
commercial n a t u r e has dropped t o around s i x per c e n t . This i s l a r g e l y
due t o t h e presence i n Cuba of t h e money-stock provided by t h e Agency
and t o t h e ease and r a p i d i t y with which t r a n s f e r s have been e f f e c t e d
by t h a t Agency. Before t h e Agency was e s t a b l i s h e d , r e s e r v e s of from
f i f t y per c e n t , t o t h i r t y per c e n t , of d e p o s i t s were g e n e r a l . To-day
t e n t o f i f t e e n per c e n t , i s considered a d e q u a t e . The e f f e c t of t h e
unlocking of t h e s e r e s e r v e s upon the l e v e l of i n t e r e s t r a t e s was most
pronounced. I b e l i e v e t h a t I express t h e g e n e r a l c o n v i c t i o n of banks
doing b u s i n e s s i n Cuba when I say t h a t a m a t e r i a l i n c r e a s e i n i n t e r e s t
r a t e s would f o l l o w immediately upon t h e withdrawal of t h e Agency.
During t h e p e r i o d of t r o u b l e through which Cuba has
passed and i s p a s s i n g , t h e presence i n Habana of t h e Reserve Bank
Agency has been a very important f a c t o r i n m a i n t a i n i n g what confidence
has remained i n t h e s t a b i l i t y of t h e f i n a n c i a l s i t u a t i o n t h e r e . The
withdrawal of t h a t Agency a t t h i s time would, i n my o p i n i o n , have a
very u n f o r t u n a t e e f f e c t upon t h e confidence w i t h which both American
and Cuban b u s i n e s s i n t e r e s t s would regard the f i n a n c i a l s i t u a t i o n i n
that island.
From t h e s t a n d p o i n t of American b u s i n e s s , t h e maintenance
of American currency as l e g a l - t e n d e r i n Cuba i s of v i t a l importance.
This i s e s p e c i a l l y t r u e of t h e American e x p o r t e r of American goods,
such as American-grown r i c e , American-made automobiles, American
f l o u r , l a r d , o i l , e t c . These e x p o r t e r s can now draw f o r t h e i r s a l e s
i n American d o l l a r s w i t h o u t worry or r i s k of exchange c o m p l i c a t i o n s .
The c o s t of f i n a n c i n g such e x p o r t s i s p r a c t i c a l l y t h e same as f i n a n c i n g
shipments from one p a r t of t h e United S t a t e s t o a n o t h e r , p r i n c i p a l l y
because of t h e f a c t t h a t t h e currency i s t h e same. The presence of
t h e Agency i n Habana, w i t h an adequate supply of c u r r e n c y , i s almost
a v i t a l f a c t o r i n t h e continuance of t h e l e g a l - t e n d e r c h a r a c t e r of
American currency i n Cuba; whereas, i t i s g e n e r a l l y agreed t h a t t h e
withdrawal of t h e Agency would provide a p r e s s i n g argument f o r t h e
c r e a t i o n of a bank of i s s u e by t h e Cuban Government, the f o r c i n g i n t o
c i r c u l a t i o n of t h e i r own (and probably a dangerous and unsound) c u r rency, and t h e probable withdrawal of t h e l e g a l t e n d e r power of American
currency t h e r e .
As a r e s u l t of
t i e s of American currency as
t e n d e r value i n Cuba, a v a s t
has been b u i l t up t h e r e with
t h e i n t r o d u c t i o n by t h e American a u t h o r i t h e chief c i r c u l a t i n g - m e d i u m of l e g a l b u s i n e s s s t r u c t u r e and economic system
American currency as i t s b a s e . Many
296
X-9004-b
Sheet ITo. 3
Governor E. R. Black - Washington, D. C.
August 8, 1934
millions of dollars of obligations are owing i n Cuba t o -American exporters, business-men and banks, the c o l l e c t i o n of which would be made
i n f i n i t e l y more d i f f i c u l t with the creation of a Cuban bank of i s s u e
with i t s own currency and the disappearance of American currency as
tho chief circulating-medium of the i s l a n d . The trend i s i n that d i rection to-day, and both Cuban and American business i s already f e a r f u l
that i t may come. The exchange problem i s one of the major obstacles
impeding the s a l e s of American goods and products t o the other countries
of the world at present and i f Cuba were to aboli'sh the legal-tender
value of American currency i n Cuba, and by the advent of a cheaper
currency of i t s own cause the disappearance of American currency from
circulation, there would be created just one more obstacle t o the sales
of American goods abroad, and t h i s to a country which has for over
t h i r t y years been one of our principal customers.
The withdrawal of the Agency would be p a r t i c u l a r l y unfortunate at this time when a new commercial t r e a t y with Cuba i s about
to be signed by our government providing for added r e c i p r o c i t y , as i t
would unquestionably make more d i f f i c u l t the payment f o r our goods sold
to Cuba. I t would, thus, have a tendency t o destroy some of the benef i t s which i t i s hoped w i l l f o l l o w the signing of the new t r e a t y . We
fear such withdrawal w i l l have the e f f e c t of destroying t h a t confidence
in the s t a b i l i t y of the Cuban currency system which has already been
badly weakened by the p o l i t i c a l and s o c i a l disturbances through which
the Cuban Republic has passed.
Maintaining a money base at Miami w i l l not, i n our opinion, answer the needs of the s i t u a t i o n . That base would be outside
and not inside of Cuba, and the psychological e f f e c t of that f a c t w i l l
be very important as bank depositors w i l l continually f e e l that there
i s an inadequate supply of money i n the country, as banks w i l l not
f e e l the same s a f e t y in the matter of low reserves and consequent low
i n t e r e s t and transfer costs that they now f e e l , and the argument i n
favor of, and the temptation f o r , creating a Cuban bank of i s s u e w i l l
continue t o e x i s t and t o grow stronger. Emergency transfers of money
from Miami t o Habana would be very much more c o s t l y than they are now
under the simple procedure in e f f e c t under which currency can be obtained at any moment during the business day from the Agency at a very
reasonable c o s t .
I t i s also important, in estimating the future, t o take
into consideration the probability of an important increase i n the
f i n a n c i a l turnover in Cuba which should f o l l o w the development incident
to the establishing of new trade r e l a t i o n s favorable to Cuba through
the medium of the new treaty, and i t c e r t a i n l y seems f a i r t o estimate
that the operating p r o f i t s of the Reserve Agency i n Habana w i l l r e f l e c t
materially t h i s larger f i n a n c i a l turnover.
X-9004-b
Sheet Ho• 4 .
Governor E. R. Black, Washington, D. C#
2 9 7
August 8, 1934
Fundainentally, we b e l i e v e t h a t , because of her c l o s e and
economic r e l a t i o n s h i p t o t h e United S t a t e s , i t i s t o t h e g r e a t advant a g e of Cuba h e r s e l f t o have American c u r r e n c y as her p r i n c i p a l
c i r c u l a t i n g medium, and t h a t advantage i s as g r e a t t o American b u s i n e s s
i n Cuba and to American e x p o r t e r s of goods t o Cuba as i t i s t o t h e
Cubans t h e m s e l v e s • Cuba i s a c o u n t r y which h a s , s i n c e her independence,
been almost e n t i r e l y dependent upon American c a p i t a l f o r f i n a n c i n g her
a g r i c u l t u r a l and b u s i n e s s t u r n o v e r and i t seems l o g i c a l t o suppose
t h a t , f o r a c o n s i d e r a b l e time t o come, she w i l l c o n t i n u e t o remain
so* That n a t u r a l demand f o r t h e use of American f u n d s i n Cuba can
b e s t be met w i t h t h e c u r r e n c i e s of t h e two c o u n t r i e s b e i n g t h e same
and t h e p r e s e n c e i n Cuba of an agency of our F e d e r a l Reserve System
i s one of t h e s t r o n g e s t f a c t o r s t h e r e can be making f o r a continuance
of t h a t s i t u a t i o n . Under i t , American banks i n Cuba can o p e r a t e w i t h
t h e g r e a t e s t e f f i c i e n c y and a t t h e lowest c o s t . The o p e r a t i o n of
t h e s e banks i n Cuba i s of g r e a t b e n e f i t t o American c i t i z e n s doing
b u s i n e s s w i t h Cuba and t h e f i n a n c i n g of what w i l l p r o b a b l y a g a i n exceed
two hundred m i l l i o n d o l l a r s of annual imports and e x p o r t s between Cuba
and t h e United S t a t e s w i l l be m a t e r i a l l y helped by t h e continued maintenance of t h e Habana Agency of t h e F e d e r a l Reserve Bank of ^ i t l a n t a .
Thanking you f o r t h e o p p o r t u n i t y a f f o r d e d t h i s i n s t i t u t i o n t o l a y b e f o r e you i t s views upon t h i s problem, p l e a s e b e l i e v e
me
Very s i n c e r e l y yours
(Signed)
H. E. Henneman
Vice P r e s i d e n t
COPY
%9004-e 2 9 8
TEE CHA.SE HA.TI01TAL BAH
Of The City of Hew York
NEW YOEK
Shepard Morgan
Vice President
July 20, 1934.
The Honorable Eugene E. Black, Governor,
Federal Reserve Board,
Washington, D. C.
My dear Governor Black:
I take pleasure i n complying with your suggestion, made at the
meeting in Washington l a s t Friday, that I put i n writing our opinion on
the question of whether the Federal Reserve Bank of Atlanta should c l o s e
i t s "branch i n Havana.
I would l i k e to say at the outset that the Atlanta Bank has
provided through t h i s "branch an important service to member banks and
to American commerce with Cuba. The Chase National Bank, as you know,
has one o f f i c e i n Havana; otherwise i t has no branches i n Cuba. For
that reason we are perhaps not subject, i n the same degree as banks having a large number of branches, to the consequences of sudden and unforeseeable demands for currency. Yet even i n our own experience i t has been
sometimes a matter of p r a c t i c a l importance to have a ready source from
which to obtain currency, and at a l l times the ease of obtaining i t at
a moment's notice from the branch of the Atlanta bank has made our admini s t r a t i o n simpler and more economical.
This has undoubtedly resulted i n easier credit terms to both
Cuban and American customers having f i r s t or second-hand r e l a t i o n s with
our Havana branch. I cannot quote figures from our own records because
the Chase national Bank has operated i t s o f f i c e i n Havana only since the
Federal Reserve Bank of Atlanta established i t s branch there. But i t i s
clear that should the branch be withdrawn tre should have to hold larger
reserves of currency and would have to r a i s e our credit terms accordingly.
Similarly, the withdrawal of the Reserve Bank's transfer f a c i l i t i e s would mean heavier charges for exchange transactions between New York
and Havana. Our records i n d i c a t e strong seasonal movements of funds i n
and out of Cuba, and these periodic movements do not coincide. Even
assuming that American currency should remain legal tender a f t e r the withdrawal of the branch, i t follows that the e x i s t i n g premium or discount on
exchange operations would be materially larger and would s u f f e r considerable
"
X-9004-c
The Chase National Bank
Of The City of 17ew York
TO The Honorable Eugene R. Black
2<.
rw
*'
Sheet Ho 3
fluctuations from one season to another. Thus American commerce with Cuba
would be subjected to costs which the present arrangement l a r g e l y obviates.
But I think American currency would not remain l e g a l tender for
long. During the l a s t few months there has developed i n Cuba an aggressive movement favoring the establishment of a central bank. You w i l l r e c a l l that during our conference the other day frequent references were made
to the monetary decrees, which, according to the observations of the banking
representatives present, threatened the s t a b i l i t y of the Cuban currency and
interfered s e r i o u s l y with exchange operations. The f i r s t , among other
things, provided that the Cuban s i l v e r peso should have the character of unlimited legal tender. The author of that decree, Juan Andres L l i t e r a s ,
frankly stated i n the Havana newspaper Pais under date of May 37th that one
of the purposes he bad i n mind in drawing up the decree was the ultimate
establishment of a central bank of i s s u e .
The decree r e l a t i n g to exchange transactions has now been abrogated and i t i s hoped that similar action w i l l soon be taken with respect
to the currency decree. I f t h i s hope i s r e a l i z e d much damage w i l l be undone.
But i f i t should develop that the Reserve Bank of Atlanta withdraws i t s
branch, i t seems probable that both measures w i l l assume their former e f fectiveness , and that the a g i t a t i o n for a central bank would be pressed to
a conclusion.
Cuba
inadequate for
under e x i s t i n g
the bounds set
not be touched
rency would go
hope to obtain
now and probably for some time to come w i l l have resources
a central bank. I t would be d i f f i c u l t and probably impossible
conditions for such a bank t o keep i t s c i r c u l a t i o n within
by i t s limited reserves. The consequences of i n f l a t i o n need
upon except for t h i s , that a deterioration of the Cuban curfar to n u l l i f y the b e n e f i t s which Americans and Cubans a l i k e
from the trade treaty now under negotiation.
I t has been suggested that a money base i n Miami would serve the
practical purposes of the Atlanta Bank branch i n Havana. I venture the
opinion that such a base would not meet the r e a l requirements of the case.
I t would not r e l i e v e the banks from increasing reserves nor obviate wide
exchange f l u c t u a t i o n s . Nor would i t prevent the a c t i v e prosecution of the
plan for a Cuban central bank of i s s u e . On the other hand, i f we r e t a i n
Cuba within the f i e l d of our own currency, we avoid with respect to at l e a s t
one country one of the major factors of world-wide trade disturbance.
I much appreciate the opportunity the Board gave me t o appear
before i t l a s t week.
With kind regards,
Yours very truly,
(Signed)
Shepard Morgan
Shepard Morgan
COPY
X-9004-d
THE FIRST B.TIOH6.L BkW. OF BOSTON
BOSTOIJ, MASSACHUSETTS
1784
*
1934
July
Twenty-four
1 9
3 4
Hon. E. E. Black, Governor
Federal Reserve Board
Washington, D. C.
My dear Governor Black:
Just as we l e f t the meeting i n Washington I
think one of your Board members suggested that we might send i n
a memorandum and I am enclosing our thoughts regarding the Atlanta
Agency of the Federal Reserve Bank.
For your c o n f i d e n t i a l u s e , I am enclosing a
copy of a memorandum of the Board of Directors of the American
Chamber of Commerce of Cuba which was taken up at a s p e c i a l meeting that they had on June 13th and forwarded by the President of
the Chamber of Commerce to the State Department i n Washington.
Yours very t r u l y ,
(Signed) Charles E. Spencer, J r .
Charles E. Spencer, J r .
Vice President
Enclosures
X-9004-d 3 0 1
COPY
Liomorandum for Governor Blaclc, Federal Reserve Board,
Washington, D. C.
Our 'bank would favor the continuance of the Atlanta Agency of the
Federal Reserve Bank for the following reasons:
It allows us to carry a smaller cash reserve than would be necessary
i f we were dependent upon replenishing our reserves from outside the
Island.
With the higher cash reserves carried, this would contract the
loaning a b i l i t y of the bank operating on the Island and, as long as the
Cuban government carries United States currency as l e g a l tender, we f e e l
there i s a r e a l need for the Federal Reserve Bank Agency i n Cuba.
Should
they start a Bank of Emission, at that time we f e e l that the continuance
of the agency would not be called for; that the discontinuance of the
agency would have a strong bearing on f o s t e r i n g or bringing to a head a
central bank for Cuba, our best estimate being that i t would be a barrier
which American business would have to cope with should Cuba have i t s own
currency.
The r e t i r i n g of the agency at this time would have a very d i s q u i e t ing e f f e c t upon the depositors and would undoubtedly a f f e c t the economic
improvement of the Island for some time to come.
"Je trust that the Board's decision w i l l be to continue the f a c i l i t i e s
that e x i s t at present.
(Signed)
Charles E. Spencer, J r .
Charles E. Spencer, J r .
Vice President
July 24, 1934.
COPY
COPY
X-9004-a
"Z
Memorandum of the Board of Directors
of the
American Chamber of Commerce of Cuba
June 13, 1934.
I
Revival of Cuba's p o l i t i c a l and economic l i f e , and of
America's trade with Cuba, i s President Roosevelt's announced purpose.
Secretaries Hull and Wallace have eloquently stressed t h i s double object i v e , i n urging those bold and constructive l e g i s l a t i v e measures which now
make i t a t t a i n a b l e .
A l l Americans whose l i v e s , i n t e r e s t s or sympathies
are with Cuba, desire i t s f u l l e s t r e a l i z a t i o n .
The Sugar Act and the a b o l i t i o n of the Piatt Amendment are
already r e a l i t i e s .
How comes the third and most v i t a l step, - a new and
more l i b e r a l Reciprocity Treaty.
Unless talc en, and taken promptly and
soundly, the program i s unfinished, and i n e f f e c t i v e .
The Treaty should contain appropriate mutual safeguards
against the f r u s t r a t i o n of i t s aims.
b e n e f i t s T i l l not come.
Otherwise the expected mutual trade
While of great i n t e r e s t to both countries, such
safeguards are v i t a l to Cuba - as her l i f e depends upon prosperous trade
with America.
II
I t i s axiomatic that t a r i f f s and trade t r e a t i e s can be
neutralized by f i s c a l p o l i c y .
Legislation a f f e c t i n g currency, f o r e i g n ex-
change, taxes, e t c . can either increase or diminish the b e n e f i t s of lowered
duties and concessions.
Unwise l e g i s l a t i o n might even annul them.
For
example, as Secretary of Commerce Roper, and h i s Assistant Secretary John
Dickinson, recently stated during the Reciprocal Tariff B i l l hearings, one
x-9oo4-a 8 0 3
— s —
e f f e c t of the devaluation of the American dollar was to heighten the already
high American t a r i f f w a l l .
This devaluation made i t more c o s t l y for Ameri-
cans to buy goods from foreign countries, and made i t l e s s p r o f i t a b l e for
foreign countries to send t h e i r goods to America for s a l e i n competition
with American goods.
Applying that principal to Cuban-American trade, i t
i s easy to pcrccivo how the b e n e f i t s which American exporters might expect
to receive through the concession by Cuba, of an additional p r e f e r e n t i a l to
the United S t a t e s , might bo rendered to a large extent i l l u s o r y by Cuban fiscal
policy r e s u l t i n g i n depreciated Cuban currency.
If such depreciation
happened to be greater as compared with the dollar, than as compared with
the pound, the mark or the franc, the result would be a .."preferential"
which did not "prefer".
The essence of reciprocity i s mutuality.
Mutuality i n
international trade between Cuba and the United States should be complete,
not p a r t i a l .
And i t should be a mutuality of l i b e r t y .
In matters of trade,
prohibitions and r e s t r i c t i o n s may completely destroy mutuality and laclc of
confidence may v i t i a t e i t to the point of making i t unattainable.
Subject
to any necessary quota r e s t r i c t i o n s required to protect vested i n t e r e s t on
either s i d e , there should be no r e s t r i c t i o n s other than those covered by
the
tariff i t s e l f .
i n interchange
Realization of the President's objective of a revival
of goods between the two countries, w i l l not occur i f Cuban
merchants and Cuban f a c t o r i e s , whoever may own then, are penalized and r e s t r i c t e d by export taxes, exchange embargoes, depreciated currency, expropriations, etc.
Such measures strangle trade, destroy confidence and i f
adopted in either country would grievously d e v i t a l i z e and eventually ruin,
X-9004—d
804
- 3 the mutual b e n e f i t s which are the objective of the Treaty.
Ill
The new Treaty, l i k e the new Sugar Act, i s experimental.
It i s of paramount importance that the experiment he s u c c e s s f u l , and that
safeguards he provided to prevent i t s f a i l u r e from the outset.
As such safeguards> to protect the new commerce which these
measures are designed to promote, the following points are suggested as
e s s e n t i a l l y important matters for inclusion in the Treaty:
1.
xTeither country should impose any export tax, embargo
or similar r e s t r i c t i o n s (in addition to those e x i s t i n g January 1, 1934)
upon exportation to the other country of money, or credit (whether in the
form of currency, exchange or credits) for the purpose of payments.
A- On or with respect to loans, investments or s e c u r i t i e s .
B- For s e r v i c e s .
C- For the purchase or use of property, r e a l , personal or
otherwise.
D- In cases in which such payments are made by persons or
e n t i t i e s , c i t i z e n s or residents of the one country to persons or e n t i t i e s ,
c i t i z e n s or residents of the other country.
3 - Uor upon the exportation of money or credit to the other
country for the personal requirements of c i t i z e n s or residents of either
country.
2.
Provisions for payment of money in the national currency
of either country contained i n contracts made prior to or during the l i f e of
the Treaty by c i t i z e n s of either country s h a l l not be invalidated or suspended
X-9004-d
; 305
- 4 by l e g i s l a t i o n of cither country during or subsequent to the adoption of the
Treaty.
3.
Neither country should impose any export tax, d i r e c t l y
or i--tdii eculy' , (in addition to any such tax e x i s t i n g January 1, 1934) uoon
the products of i t s s o i l or industry exported, or produced or processed for
export, to the other country.
4.
Citizens or e n t i t i e s of either country r e s i d i n g or
carrying on business in the other country should enjoy the same r i g h t s and
p r i v i l e g e s , and "be e n t i t l e d to the same status and treatment, as c i t i z e n s
of such other country, v/ith respect to engaging i n commerce, industry,
agriculture, professional or other lavrful occupations, and to holding and
using property; and there should he no discrimination d i r e c t l y or i n d i r e c t l y ,
".7ith regard to taxation, or protection of property and person, "by either
country against c i t i z e n s of the other country, or against e n t i t i e s o:zned or
controlled "b; c i t i z e n s of the one country, "7lien resident or doing "business in
the other country.
Ho c i t i z e n s or e n t i t y of either country s h a l l "be subject to
confiscation of property, nor shall he or i t bo deprived of property except
by competent authority and f o r just cause of public u t i l i t y and a f t e r proper
indemnity.
ITote:
f i n a l form the
If under the terms of the Reciprocal Tariff B i l l i n i t s
inclusion of such matters as p o s i t i v e covenants of the Treaty
should be deemed to be beyond the pouor conferred by Congress upon the P r e s i dent, i t might bo p o s s i b l e to safeguard the Treaty i n t h i s respect by s p e c i f i c a l l y recognizing, as grounds for denunciation of the Treaty, a c t s i n v i o l a t i o n
of the provisions above outlined.
APPROVED i;
COPY
X-9004*e
°
AGE1TCY OF
THE ROYAL BAM OF CAMDA.
Incorporated 1869
68 William Street
Frederick T. walker)
John A . Beat son
( Agents
Edward C. Holahan )
HEW YOEK,
JulyEighteenth
19 3 4
Honorable Eugene E. Black,
Governor, Federal Reserve Board,
ULSHOTPCGSr, D. C.
My dear Governor Black:
At the meeting to which you called the representatives of the "banks
doing business i n Cuba, for the purpose of hearing their views as to the
continuance or discontinuance of the Havana Agency of the Federal Reserve
Bank of Atlanta, i t was the unanimous opinion of those attending that the
Agency of the Atlanta Federal Reserve Bank should "be maintained and reasons
were given therefor.
After t h i s discussion i t was suggested that, for the
purpose of record, each of the I n s t i t u t i o n s represented should write a
l e t t e r to the Board i n support of the opinions expressed at the meeting.
In compliance with t h i s request, I "beg to say on "behalf of t h i s I n s t i t u t i o n
that I think there are two principal reasons why the Agency should "be continued, certainly for the present time at l e a s t , and these are:
F i r s t , - That the present i s a c r i t i c a l stage for the Mendieta Government and such a step would be "bound to have a "bad e f f e c t on public confidence
j u s t when conditions seem to be improving and the Government has taken the
necessary steps to undo the i l l considered f i n a n c i a l decrees of the l a s t two
months,
" 307
X-9004-e
-
2 —
Second, - As the Board i s aware, there has "been considerable a g i t a t i o n
i n Cuba for the formation of a Cuban central bank with powers of emission
and while i t i s d i f f i c u l t to see how such a project could be carried out on
any sound l i n e s i n view of the f a c t that the Cuban Government i s not at the
present time i n a p o s i t i o n to provide a m e t a l l i c base for a national currency,
at the same time i t i s quite conceivable that the withdrawal of the Agency
would be seized upon by the advocates of a National Cuban currency as a
pretext for pushing such a plan, with the p o s s i b l e result that some unsound
currency plan would be adopted.
I need not s t r e s s to your Honorable Board the detrimental e f f e c t that
such a plan i f carried out would have on business between the United States
and Cuba.
Owing to the very low price of sugar obtaining for the l a s t couple
of years, reciprocal trade between Cuba and the United States has f a l l e n i n
terms of Dollars to very low f i g u r e s , but under the improved conditions
made possible by the Jones-Costigan Act and the betterment of World sugar
s t a t i s t i c s , there i s every reason to believe that Cuba with a greatly enhanced return from her sugar crop w i l l be i n a p o s i t i o n to l a r g e l y increase
her imports from the United States provided no currency or exchange barrier
i s set up.
Another point which should be mentioned i s that while i t i s true, as
stated by the Atlanta Bank, that the f a c i l i t i e s fcr the shipment of currency
from Jacksonville and Miami have been enormously improved, i t i s , nevertheless,
a f a c t that the withdrawal of the Atlanta Agency i n Havana would n e c e s s i t a t e
the carrying of larger reserves by the commercial banks i n Cuba, adding to
the already great expense of doing business there and having a tendency to
: 308
X-50G4-1
— 3 *•
bring "back the very high rates for money which prevailed a few years ago.
I think v/e may sun up our argument "by saying that the c l o s i n g of the
Agency of the Federal Reserve Bank of Atlanta would he a serious "blow to
American investors and business men in Cuba j u s t at t h i s time when they were
beginning to have hope and need a l l possible help in creating stable conditions
i n Cuba.
In conclusion, I wish to express the appreciation of t h i s I n s t i t u t i o n
i n being given the opportunity of s t a t i n g i t s views and thank the Board for
the courtesy and consideration with which we were received.
ITith assurances of our highest respect, we remain,
Yours very truly,
THE ROYAL BAH OF C&8H&,
(Signed)
F. T. Walker
A g e n t
COPY
3N9004-#
THE CAMADIAH BAHK OF COMMERCE
Hew Y ork Agency
Exchange Place and Hanover Street
HEW YORK
July 19, 1934
COiOIDEifTlAL
The Honourable Eugene H. Black,
Governor, Federal Reserve Board,
Washington, B.C.
Dear Governor Black:
In accordance with your request, we have pleasure
in confirming our verbal advices to you of Friday, the 13th
instant, regarding the a d v i s a b i l i t y or not of discontinuing
the Havana Agency of the Federal Reserve Bank of Atlanta.
The foreign trade of Cuba with Canada i s n e g l i g i b l e
with the result that the Cuban branches of Canadian banks
handle the same class of business as do the Cuban branches of
American banks, consequently a large portion of this business
i s dependent upon and of assistance to the interchange of
trade between Cuba and the United States.
We are i n f u l l
accord with the arguments set forth i n d e t a i l by the representatives of the i n t e r e s t e d American banks and emphasize the
follow!ng:The presence of the Havana Agency of the Federal
Reserve Bank of Atlanta has a strong s t a b i l i z i n g e f f e c t on
the f i n a n c i a l trend of thought of the population of Cuba
generally, and p a r t i c u l a r l y i n p o l i t i c a l c i r c l e s . That the
Cuban Government r e a l i z e s this would appear to be evidenced
by the f a c t that upon learning there was a p o s s i b i l i t y of
the closing of the Havana Agency of the Federal Reserve Bank
of Atlanta the Cuban Administration i n order to show i t s
good f a i t h and restore f i n a n c i a l confidence rescinded the
Decree prohibiting the exportation of c a p i t a l from Cuba.
To close the Havana Agency of the Federal Reserve Bank of
Atlanta at the present time would not only n u l l i f y a l l t h i s
but would encourage - indeed i t might f o r c e - Cuba to resort
to some form of currency of i t s own with a l l the attendant
hardships upon business i n and with Cuba, The withdrawal of
the Havana Agency of the Federal Reserve Bank of Atlanta would
n e c e s s i t a t e a l l Canadian and American banks with branches i n
309
X- 9004—f
The Honourable Eugene B. Blaclc - 2
July 19, 1934
Cuba carrying much larger cash reserves there, rzith a consequent increase i n the cost of c r e d i t , which increased cost
would have t o be "borne not only by Cubans but a l s o by Americans
doing business i n and with Cuba.
We take this opportunity of expressing to you our
appreciation of the services rendered us i n the past by the
Havana Agency of the Federal Reserve Bank of Atlanta, and
a l s o to thank you for your courtesy i n asking us to appear
before your Board.
Yours f a i t h f u l l y ,
(Signed)
C. J. Stephenson
Agent
COPY.
X-9004—g
AGEiJCY OF
THE BAM OF NOVA SCOTIA
49 HaLL STREET
P. IT. Murphy,Agents
F. W. Murray,(
HEW YOKE
July 20th 1934,
The Honorable E.R. Black, Governor,
Federal Reserve Board,
Washington, B.C.
Dear Governor Black:
Having reference to the recent conference
at your o f f i c e when Hew York representatives of Banks,
American and Canadian, which have "branches i n Cuba,
were i n v i t e d by your board to give consideration to
the continuance or discontinuance of the Havana Agency
of the Federal Reserve Bank of Atlanta, - At your request
I am glad to submit herewith our views in the matter.
It i s undoubtedly advantageous to American
business men i n Cuba and to American exporters to that
Country to have the Federal Reserve Agency i n Havana.
Were i t withdrawn the banks would have to carry larger
cash reserves i n their own v a u l t s , and consequently
Americans i n Cuba, as well as others, would be required
to pay higher i n t e r e s t rates on loans from the banks.
The psychological influence of the Agency
i n Havana on business a f f a i r s , particularly while the
general s i t u a t i o n , p o l i t i c a l l y and economically, i s uns e t t l e d , i s undeniably favorable to the i n t e r e s t s of
Americans i n Cuba and to American exporters to Cuba.
The proposed trade treaty between Cuba and
the United States now under consideration, and, i t i s
thought, soon to become operative, should be very h e l p f u l
to reciprocal business and we think that a continuance of
your Agency i n Havana would assuredly serve i n furthering
the b e n e f i t s under the treaty to American trade, inasmuch
as i t would exert a powerful influence i n s t a b i l i z i n g the
currency and a s s i s t materially i n f a c i l i t a t i n g the movement of money into and out of Cuba.
% think that while i t i s true, because of
a i r mail f a c i l i t i e s , currency can now be shipped quickly
to Havana from Atlanta or Jacksonville, nevertheless some
(contd)
;
X-9004-g
— 2r~
The Honorable E.R. Black, Governor,
Federal Reserve Board,
Washington, B.C.
July 20th 1934.
of the American and Canadian "banks have tranches i n the
i n t e r i o r of the i s l a n d and i n case of emergency i t would
he greatly to their advantage to have an immediate source
of supply of currency such as i s now afforded "by your
Agency i n Havana.
We are i n agreement with the views of the
representatives of the American "banlcs which were expressed
"by them at the meeting. We appreciate the "benefits that
we, as a Canadian i n s t i t u t i o n , derive from the Havana
Agency of the Federal Reserve Bank, and we f e e l that i t s
withdrawal would "be hurtful to the i n t e r e s t s of a l l "banks',
as w e l l as to those of commercial corporations and i n d i v i d uals doing "business i n or with Cuba.
I would l i k e to express to you and to your "board
my sincere thanks f o r your i n v i t a t i o n to attend the conference and f o r your courtesy there.
Yours f a i t h f u l l y ,
(Signed)
P. W. Murphy
Agent.
PW/AS
3 1 2
<?
ZJ>
13
X-9004-h
COPY
FEDERAL
OF
RESERVE
BAKE
ATLANTA
Office of
Governor
September 27, 1934
Mr. J . J . Thomas, "Vice Governor,
Federal Reserve Board,
Washington, D. C.
Dear Governor Thomas:
At the June meeting of our directors a r e s o l u tion was passed directing the o f f i c e r s of t h i s bank to applyto the Federal Reserve Board f o r permission t o discontinue the
Havana Agency of t h i s bank. The resolution directed the o f f i c e r s ,
in transmitting tliis action t o the Federal Reserve Board, to inform. the Board that t h i s bank desired to work no unnecessary inconvenience to the banks in Cuba and that they desired i t s d i s continuance e f f e c t e d in such a way as not u n d u l y t o a f f e c t the
banking and business i n t e r e s t s of Cuba.
This resolution was transmitted to the Board and
in considering i t the Board invited representatives from the
d i f f e r e n t banks in Cuba to a hearing in Washington. At that
hearing these banks protested the discontinuance of the agency
and afterwards transmitted opinions from business i n t e r e s t s , a l l
adverse to the discontinuance of the agency.
The Board has taken no action on the June resolut i o n of our d i r e c t o r s .
At the August, 1934, meeting of the directors of
t h i s bank a second resolution was passed in which the Federal
Reserve Bank of Atlanta stated that i t would cooperate with the
other twelve banks in the System operation of t h i s agency and in
which resolution it suggested t o the Board that the establishment
of such System agency would be a proper s o l u t i o n of t h i s question.
This August resolution of our Board has been duly transmitted t o
your Board.
Last week when I was in Washington I discussed
with the members of the Board the question of the establishment
of t h i s Havana agency as a System agency. This would r e a l l y
mean that the Atlanta bank would continue to operate the agency
for the account of the System. This procedure would be very
much in l i n e with the practice of the New York Bank in operating
foreign accounts as a System matter.
%9004rh
Mr. J. J . Thomas, Vice Governor - 2 .
For your information I tm attaching a statement
of the d i f f e r e n t functions of t h i s agency. You are, of course,
familiar with the f a c t that t h i s agency i s largely a currency
depot for the purpose of handling cable transfers of money in
and out of Cuba for the account of banks in Cuba, and e s p e c i a l l y
those banks i n Cuba which are branches of American banks. I t
i s true a l s o that the Havana agency has been of b e n e f i t to the
Cuban Government in the matter of currency exchanges.
I t should be borne in mind that the Havana agency
has no credit functions— that i s , i t lends no money in Cuba or
elsewhere. I t s operation, in my opinion, has been of great advantage to the banks in Cuba and t o the Government of Cuba. I t s
operation has resulted in the furnishing of clean and adequate
currency t o Cuba, which country has no currency of i t s own. I t
has prevented the n e c e s s i t y of the banks in Cuba carrying large
currency reserves in t h e i r own v a u l t s . I t has furnished a measure
of s t a b i l i t y to banking and currency operations in Cuba.
You w i l l r e c a l l that Assistant Secretary of State
Sumner Welles conferred with me on the discontinuance of t h i s
agency and expressed h i s strong opinion that at t h i s time, when
Cuba was struggling t o get on i t s f e e t both p o l i t i c a l l y and f i n a n c i a l l y , i t would be a direct blow to such e f f o r t s t o have the
agency discontinued. You w i l l a l s o r e c a l l that the Cuban Government has taken a c t i o n against the discontinuance of the agency.
I personally am in accord with the views of Mr.
Welles and with the views of the banks operating in Cuba and with
the views of the Cuban Government in t h i s matter. However, the
Federal Reserve Bank of Atlanta has operated t h i s agency through
a number of years and in i t s operation has served the whole country and other s e c t i o n s of the country more e s p e c i a l l y than t h i s
section, and my opinion that the agency should be continued would
not be complete without expressing my f e e l i n g that i t should be
continued as a System agency.
This conclusion i s reached, f i r s t , because of the
f a c t that the whole country i s being served; second, that the
currency carried in Cuba has been equal to the combined c a p i t a l
and surplus of t h i s bank and in that respect i s too large an
operation for t h i s bank in a foreign country. The agency has been
operated at some l o s s , but t h i s l o s s has not been a .moving factor
in the decision of our directors, and the l o s s can be l a r g e l y overcome by changing the rate f o r handling currency operations in
Cuba.
3C-,9004-h
Mr. J . J . Thomas, Vice Governor - 3.
Under the law the Board has the r i g h t t o require
a reserve bank t o e s t a b l i s h and consequently t o maintain an
agency in a f o r e i g n country. This puts rather a large r e s p o n s i b i l i t y upon the Board with respect to any one reserve bank and I
would not even suggest now that the Board require t h i s agency t o
be accepted by the System as a System agency. I rather f e e l t h a t
i f the Board would conclude t h a t t h i s agency should be operated
as a System agency and would request the cooperation of the twelve
reserve banks in the r e s p o n s i b i l i t y attached t o t h i s agency, such
proper s o l u t i o n would be accepted by the twelve banks and t h e
agency could be operated by the Atlanta ban!: f o r the account of
the twelve banks, and a l l questions as t o the continuance or d i s continuance of the agency would be solved.
At the present time we are reducing our currency
,
holdings i n Cuba t o $5,000,000. I think t h i s amount would be
adequate because currency can be transported from our Jacksonv i l l e branch, or indeed from a money depot which we might e s t a b - '
l'ish in Miami, in a very few hours. A supply of ')5,000,000 in
currency w i l l solve a l l the day t o day needs of the agency and in
event larger sums are required they can be s p e e d i l y transported
to Cuba.
I am of opinion t h a t t h e A t l a n t a bank should be t h e
o p e r a t i n g bank f o r t h i s agency because of i t s n e a r n e s s t o Cuba and
because t h e agency i s a l r e a d y w e l l e s t a b l i s h e d by t h e A t l a n t a bank
in Cuba.
I w i l l g r e a t l y appreciate i t i f the Board w i l l consider t h i s matter and w i l l determine that t h i s agency should be a
System agency and ask the cooperation of the twelve banks to t h i s
end. If the Board takes t h i s a c t i o n and the twelve banks acquiesce
in i t , the d e t a i l s of such arrangement can e a s i l y be worked out.
Thanking you and the Board f o r immediate considerat i o n of t h i s matter, I am, with my warm regards,
Sincerely yours,
(Signed)
B-C
E. R. Black
Governor.
* 316
Federal Reserve Bank of Atlanta
X-9004-h
miOEAKDUIvl FOR GOVERNOR BLACK:
FUNCTIONS OF THE HAVANA i&ENCY
The Federal Reserve Bank of Atlanta i s authorized t o
exercise the following powers in Havana, Cuba, through i t s Agency;
1 . To buy, s e l l and c o l l e c t , prime bankers' acceptances and prime b i l l s of exchange which are payable in dollars
arising out of actual import or export transactions; bear the
signatures of two or more responsible parties; bear a s a t i s f a c t o r y
bank endorsement; have not more than 90 days to run, exclusive of
days of grace, and are secured at the time of purchase by shipping
documents evidencing the actual importation or exportation and the
actual sale of goods, and conveying or securing t i t l e to such goods;
2 . To buy from or s e l l to the Republic of Cuba, or any
banking i n s t i t u t i o n doing business in Havana, cable transfers to
or from any banking i n s t i t u t i o n located in any c i t y in the United
States in which there i s located a Federal Reserve Bank or Branch,
charging a commission of $1 per $1000, provided that no such transf e r shall by i t s terms be for credit t o the account of any third
party;
3 . To pay out Federal Reserve notes or other currency
of the United States in such denominations as may be demanded in
payment of cable transfers t o Havana, or i n payment of cable transf e r s , bankers' acceptances or b i l l s or exchange purchased in Havana,
the kinds of currency t o be paid out to be discretionary with the
Agency;
4 . To accept any and a l l kinds and denominations of
United S t a t e s currency, including Federal Reserve n o t e s , in payment
for cable t r a n s f e r s , bankers' acceptances, or b i l l s of exchange
sold by i t in Havana;
5 . To make direct exchanges in l i k e denominations and
amounts of new or f i t currency for mutilated or u n f i t currency,
tendered by the Treasurer of the Republic of Cuba, or any banking
i n s t i t u t i o n doing business in Havana, charging for such exchanges
a commission at tho rate of $1 per $1000;
The Agency maintains a stock of $1 b i l l s for convenience of tho Havana banks and they are authorized to exchange
these b i l l s for any other denominations of United S t a t e s currency,
a charge of $1 per §1000 being made f o r such exchange*
X-9004
-
2 —
FOKCTIOI-E OF THE HAVANA AGENCY - Cont'd.
7. The Havana Agency i s also authorized t o make direct
exchanges of new and f i t currency for American s i l v e r or gold coin
tendered by the Treasurer of the Republic of Cuba or any banking
i n s t i t u t i o n doing business i n Havana, charging for such exchanges
a commission of §1 per ()1000. This has been discontinued in view
of the high cost of transportation of American s i l v e r coin t o the
United S t a t e s and such exchanges as have been made during the l a s t
two years have been made with the understanding that the entire
cost of transportation would be borne by the Treasurer of the
Republic of Cuba, plus our exchange commission of £>1 per AlOOO.
We have not been tendered American s i l v e r coin by any of the
Havana banks.
8 . The Havana Agency performs other f i s c a l transactions
for the Treasurer of the Republic of Cuba, such as receiving Cuban
gold coin under a repurchase agreement, delivering United States
currency f o r such Cuban gold coin; the Cuban gold coin to be r e deemed by payment of United States currency at the expiration of
the repurchase agreement.
Recently the Second Export-Import Bank desired t o ship
t o Cuba 10,000,000 Cuban pesos, and in order that delivery might
be made in Havana, our Agency was requested to act as a representa
t i v e of the Second Export-Import Bank and the Treasurer of the
Republic of Cuba in making t h i s delivery. A commission rate of
$1 per $1000 for the currency received in payment of these pesos
was charged, the t o t a l p r o f i t to the Agency being approximately
$3,800.
From time to time the Agency w i l l l i k e l y be c a l l e d
upon to perform other f i s c a l agency transactions which they w i l l
l i k e l y agree t o do, upon proper approval, when such transactions
can be consummated with due s a f e t y .
X-9005
TELEGRAM
FEDERAL
RESERVE
BOARD
WASHINGTON
October 27, 1934
WILLIAMS
CLEVELAND
Referring your l e t t e r of October 19, 1934, which i n quires as to correctness of your conclusion that Joint
Stock Land Bank Bonds are not "exempted s e c u r i t i e s " within
meaning of S e c u r i t i e s Exchange Act of 1934 and Board's
Regulation T thereunder.
Board knows of no reason for
d i f f e r i n g with your conclusion on question, and suggests
that persons inquiring whether s e c u r i t i e s have been
designated for exemption by the Secretary of the Treasury
or the S e c u r i t i e s and Exchange Commission be referred to
those a u t h o r i t i e s , unless you have d e f i n i t e information
regarding the security i n question.
(Signed)
Chester Morrill
MORRILL
319
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9006
November 1, 1934.
Dear Sir:
Daring the meeting of Chairmen and other representatives of
the Industrial Advisory Committees i n Washington on September 27,
1934, there was a discussion of the status of the committees and
their r e l a t i o n s with the Federal reserve "banks under the i n d u s t r i a l
credit a c t .
A "brief digest of this discussion i s contained i n the
summary statement which was sent to you with the Board's l e t t e r ,
X-8031, of October 2, 1934.
As you know, Congress, i n establishing the Industrial Advisory
Committees, provided that each member should "be a c t i v e l y engaged i n
some i n d u s t r i a l pursuit within the Federal reserve d i s t r i c t i n which
the committee i s established; that each application should "be submitted to such committee; and, a f t e r examination by i t of the business
with respect to which the application i s made, that the a p p l i c a t i o n
should be transmitted to the bank with the recommendation of the committee .
As the enactment of t h i s new l e g i s l a t i o n was based upon the
b e l i e f that there were many established business enterprises whose needs
for working capital had not been met by banking i n s t i t u t i o n s , i t was
X-9006
320
— 2 —
evidently the expectation of the Congress that establishment in each
d i s t r i c t of a body composed of carefully selected i n d u s t r i a l i s t s would
bring to bear in the f i r s t instance upon the problem submitted i n each
application the kind of independent judgment that would be most appropr i a t e for the determination of the question whether the loan desired
could be made on a sound and reasonable basis notwithstanding the r i s k s
and uncertainties that might have deterred banks from making such loans.
It i s important, therefore, i n order to carry out the obvious
intent of the Congress that the Industrial Advisory Committee s h a l l be
f r e e to use such means and methods as they may deem necessary in order
to enable them not only to make the examinations required by the law but
to exercise their independent judgment i n making their recommendations
to the Federal reserve banks.
The question has arisen, however, whether the o f f i c e r s of the
banks, i n a s p i r i t of cooperation and a desire quickly to reach harmonious
conclusions, may have overlooked the purpose of Congress as to the precedent and independent p o s i t i o n of the committees and have attempted to i n fluence the members of the committees to adopt views which the o f f i c e r s ,
in the l i g h t of their own banking experience, f e l t should apply to the
f i n a l d i s p o s i t i o n of the applications.
However sound such views might
be and however commendable the desire to a s s i s t , the Board f e e l s that i t
should point out the a d v i s a b i l i t y on the part of the o f f i c e r s of the
banks of refraining from any form of action with respect to the proceedings of the committees which might seem to j u s t i f y c r i t i c i s m s in the
X-9D06
- 3
future that the recommendations of the Industrial Advisory Committees
v/ere reached otherwise than through the e x e r c i s e of t h e i r independent
judgment.
This expression of the Board's f e e l i n g i n t h i s matter of
course should not be interpreted as r e s t r i c t i n g i n any degree the
freedom of the committee to c a l l for any a s s i s t a n c e that i t may need
and i t i s expected that the i n v e s t i g a t o r s who prepare data f o r submission to the committees w i l l include i n t h e i r reports a l l pertinent data
that they have been a b l e to gather regarding the condition, management,
e t c . , of the a p p l i c a n t , both of a favorable and unfavorable nature, i n
order that the committees may be i n p o s s e s s i o n of a l l the f a c t s which
the i n v e s t i g a t o r s have been able to a s c e r t a i n .
Very truly yours,
Chester M o r r i l l ,
Secretary.
TO GOVERNORS AND AGENTS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9007
November 2, 1934.
SUBJECT:
Code Word Covering New Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve "banks, the
following code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"NOXOWL" - Treasury B i l l s to be dated November 7,
1934, and to mature May 8, 1935.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental code
word "NOXOVER" on page 172.
% truly yours,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-9008
TE l U E i M
FEDERAL
RESERVE
BOARD
mSHHTGTOK
October 30, 1934
misH
DA.LIAS
Referring your telegram October 26, with respect to
a p p l i c a b i l i t y of Regulation T t o loan on s e c u r i t i e s by
national bank to a customer.
I t i s assumed that national
bank i n question i s not a "member" of a national s e c u r i t i e s
exchange, as that term i s defined, i n paragraph 3 of s e c t i o n
3(a) of the S e c u r i t i e s Exchange Act of 1934.
By d e f i n i t i o n
banks are neither "brokers" nor "dealers" under that Act or
under Regulation T.
Accordingly, loan by the n a t i o n a l bank
to i t s customer i s not a f f e c t e d by Regulation T or by any
r u l i n g which has been issued by Board under the S e c u r i t i e s
Exchange Act of 1934.
However, issuance of r e g u l a t i o n ap-
p l i c a b l e t o banks under s e c t i o n 7(d) of that Act i s a t
present time r e c e i v i n g consideration of Board's s t a f f .
(Signed) Chester Morrill
MORRILL
"
'
' 324
FEDERAL RESERVE BOARD
WASHINGTON
9009
address official correspondence t o
the federal reserve board
November 2, 1934.
Dear Sir:
The agreements executed by the Federal reserve banks and
the Secretary of the Treasury, s e t t i n g f o r t h the arrangements with
respect to transactions between the Secretary of the Treasury and
the Federal reserve banks pursuant to Section 13b of the Federal
Reserve Act as amended, provide that whenever the Federal reserve
bank s h a l l have made one or more loans, discounts, advances and
purchases or commitments, pursuant to the provisions of Section
13b of the Federal Reserve Act, i t may c e r t i f y the f a c t s to the
Secretary i n such manner as he s h a l l prescribe by regulation and
that upon receipt of such c e r t i f i c a t i o n i n proper form the Secretary
of the Treasury w i l l make payment to the Federal reserve bank as
outlined i n paragraphs 2 and 3 of the agreement.
Advice has been received by the Federal Reserve Board that
three Federal reserve banks already have forwarded to the Secretary
of the Treasury a c e r t i f i c a t i o n of the loans made by them under
Section 13b of the Federal Reserve Act, and as a l l of the banks have
made such loans, the Federal Reserve Board suggests that considerat i o n be given to the d e s i r a b i l i t y of the c e r t i f i c a t i o n promptly by
X-9009
-
2
-
your bank to the Secretary of the Treasury of the loans which have
been made by i t i n order that payment may be received from the
Treasury i n accordance with the provisions of the agreement above
referred to.
The Board b e l i e v e s that i t i s desirable a l s o for the Federal reserve banks to c e r t i f y to the Secretary of the Treasury the
i n d u s t r i a l loans h e r e a f t e r made by them as o f t e n as such a c t i o n i s
j u s t i f i e d , from the standpoint of p r a c t i c a l operation, by the a mount of new loans made since the previous c e r t i f i c a t i o n .
I t w i l l be appreciated i f you w i l l g i v e consideration to
t h i s matter and advise the Board of the d e c i s i o n reached i n connect i o n therewith.
Very t r u l y yours,
Chester Morrill,
Secretary.
TO GOVERNORS OF ALL I . E . BA.HKS.
8 2 8
X-9010
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
November 2, 1934.
CASH TRANSACTIONS IN UNREGISTERED SECURITIES.
Ruling Noi 34 interpreting Regulation T.
The Federal Reserve
Board has been requested t o reconsider i t s rulings numbered 16 and 27
interpreting Regulation T, wherein i t held in e f f e c t that credit may
not be extended on unregistered s e c u r i t i e s i n connection with bona
f i d e cash transactions for the limited periods and subject t o the terms
and conditions s p e c i f i e d i n section 6 of the regulation.
On reconsid-
eration the Board i s of the opinion that extensions of credit on unregistered s e c u r i t i e s for the limited periods and subject t o terms and
conditions s p e c i f i e d i n section 6 of Regulation T, may be permitted
when such extensions of credit are incident t o bona f i d e cash transactions i n such s e c u r i t i e s .
The Board, therefore, now rules that section
6 should be interpreted as applying t o bona f i d e cash transactions i n
unregistered, non-exempted s e c u r i t i e s as well as t o bona f i d e cash
transactions i n registered non-exempted s e c u r i t i e s and the Board consequently revokes rulings numbered 16 and 27.
327
X-9011
November 3 , 1934.
Dear S i r :
Consideration has been given to the report of the Federal
Reserve Agents' Committee on Uniform Examination Charges adopted
at the conference i n June, 1934, and the Board approves the f i r s t
recommendation of the Committee, which reads as f o l l o w s :
At l e a s t one regular examination of each S t a t e member
bank, including i t s t r u s t department, s h a l l be made during
each calendar year by examiners for Federal r e s e r v e banks
e i t h e r independently or j o i n t l y vdtb State "banking authori t i e s . Under c e r t a i n circumstances more than one such
examination annually may be d e s i r a b l e , i n which event the
Federal reserve agents should be empowered to have an add i t i o n a l examination made. A copy of each report of exami n a t i o n s h a l l be furnished to each State member bank
examined.
The Board b e l i e v e s i t a d v i s a b l e , however, to defer a c t i o n
on the question of general uniform charges u n t i l a f t e r completion
of the examinations made i n connection xvith c e r t i f i c a t i o n s to the
Federal Deposit Insurance Corporation, and t o continue i n e f f e c t
u n t i l July 1, 1935, the i n s t r u c t i o n s regarding charges f o r examinat i o n s contain ..3d in the Board's l e t t e r of Mar eh 2, 1334, X-7910-a,
which read as f o l l o w s :
"it i s the Board's opinion that charges may properly be
waived for exaniuations of State member bailee aade s o l e l y to
develop the information rcq-dred f o r c e r t i f i c a t i o n t o the
Federal Deposit Insurance Corporation, an! that i n such i n stances the q u e s t ! e n of waiving the charge should be l e f t to
the determination of the Federal Reserve Agent. The Board
f e e l s , however, that i n cases where the examination i s
36.9011 •
mm
mm
regarded as a regular ex@,mi nation. of the nature for which
charges have c o n s i s t e n t l y been made, the charge should not
be waived simply because of the f a c t that the report of
examination vzill serve as a basis for c e r t i f i c a t i o n t o the
Federal Deposit Insurance Corporation. I t w i l l be appreciated
i f you w i l l advise the Board of each case i n which a charge i s
not made for the examination giving a concise statement of tlx,
reasons why the charge was not rnadv i n the particular case,"
/
I t i s assumed that p r a c t i c a l l y a l l of the examinations made
between October 1, 1934, and July 1, 1935, vzill be used as a b a s i s f o r
c e r t i f i c a t i o n to the Federal Deposit Insurance Corporation.
The i n -
structions i n the Board's l e t t e r dated July 36, 1930, X-6665, w i l l
continue to apply to examinations other than for c e r t i f i c a t i o n purposes.
I t i s believed that the instructions i n the tvo l e t t e r s are s u f f i c i e n t l y
f l e x i b l e to provide for a l l circumstances.
I t i s assumed a l s o that i n so far as p r a c t i c a b l e t h e Federal
reserve agents w i l l obtain the cooperation of the State banking departments i n making j o i n t examinations, thereby minimising inconvenience
and expense to the banks examined.
Very truly yours,
Chester Morrill,
Secretary,
TO ALL mEBM, £bSKBVE AGMTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9013
November 7, 1934.
SUBJECT:
Salaries of Officers of Federal
Reserve Banks.
Dear Sir:
In the Board's l e t t e r X-7863 of April 16, 1934, you were
advised that the Board had considered a suggestion that some
method he adopted "by which proposed changes, at l e a s t with respect
to those of an important character, i n the s a l a r i e s of o f f i c e r s of
Federal reserve banks might "be considered somewhat informally i n
advance of submission of d e f i n i t e recommendations by boards of
directors of Federal reserve "banks.
This suggestion has been given further consideration "by the
Board.
I t s committee on s a l a r i e s and expenditures of the Federal
reserve "banks and i t s committee for your d i s t r i c t would "be glad to
have "brought to their a t t e n t i o n , i n such manner as you may think
most expedient, any proposed changes i n s a l a r i e s of o f f i c e r s of your
bank which you would l i k e to have considered informally i n advance
of the submission of d e f i n i t e recommendations by your board of d i rectors.
In order that any such procedure may not delay the sub-
mission of d e f i n i t e recommendations for changes i n s a l a r i e s by your
X-9013
-
2
-
board, of d i r e c t o r s , the Board's committees would appreciate your
taking up with than any changes you ,_'ould l i k e to have considered
in the manner indicated above not later than the f i r s t of December,
if practicable.
Very truly yours,
hr)
pvu-U.
Chester Morrill,
Secretary.
TO ALL F . R . CHAIRMEN EXCEPT NEW YOBK, CLEVELAND, ATLA.NTA,
CHICAGO AND MINNEAPOLIS.
330
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9014
November 8, 1934.
SUBJECT:
Code Word Covering Hew Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve banks, the
following code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"N0X0YD" - Treasury B i l l s to be dated November 14,
1934, and to mature May 15, 1935.
This word should be inserted i n the Federal Reserve Telegraph Code book, following the supplemental code
word "NOXOWL" on page 172.
truly yours,
— - v . C. ijoell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9015
November 8, 1934
Dear S i r :
There are being forwarded to you today
under separate cover, f o r the use of your tank,
two copies of Report Ho. 1455 of the Committee
on Banking and Currency of the United States
Senate on stock exchange p r a c t i c e s .
Very truly yours,
S. R. Carpenter,
Assistant Secretary.
TO ALL F. R. AGENTS
(No copies to Governors or extra copies to banks
one copy to "be sent to Mr. K i t z m i l l e r . )
333
*59016? :
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
/
November 8, 1934.
SECURITIES DEPOSITED FOR SALE.
RULING NO. 35 INTERPRETING REGULATION T.
The Federal Reserve Board has
been asked to r u l e on the following question a r i s i n g under Regulation T.
A customer maintaining with a broker a r e s t r i c t e d account which i s not
a s p e c i a l account d e l i v e r s c e r t a i n r e g i s t e r e d , non-exempted s e c u r i t i e s
to such broker with the request that he s e l l the s e c u r i t i e s and d e l i v e r
the entire proceeds of the s a l e to the customer.
with the customer's request?
May the broker comply
On the basis of the f a c t s submitted, the
Board rules that the broker may permit the withdrawal of the amount for
which such s e c u r i t i e s are s o l d , i f the delivery of such s e c u r i t i e s i n t o
the account, the s a l e of the s e c u r i t i e s , and the withdrawal of the funds
from the account, a l l occur on the same day, so that the withdrawal of
funds c o n s t i t u t e s a part of a combination of transactions nhich does not
r e s u l t i n a net withdrawal or an increase i n the excess of the adjusted
debit balance of the account over the maximum loan value of the s e c u r i t i e s i n the account i n v i o l a t i o n of s e c t i o n 4(d) of the r e g u l a t i o n .
X-9017
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
November 8, 1934.
'V17HBRAVAL OF PROCEEDS OF SALE OF UNREGISTERED,
NON-EZEMFTED SECURITIES FROM RESTRICTED NEW ACCOOlfT.
Ruling No. 36 i n t e r p r e t i n g Regulation T.
The F e d e r a l Reserve
Board has been asked whether under Regulation T a broker may pay t o
a customer from a r e s t r i c t e d new account t-oe proceeds of t h e s a l e of
u n r e g i s t e r e d , non-exempted s e c u r i t i e s s o l d i n such account.
In reply
t h e Board r u l e s t h a t , i n the absence of other m a t e r i a l f a c t s , the b r o k e r
may permit t h e withdrawal of any p a r t of the proceeds of such s a l e , i f
the s a l e , t h e payment of t h e proceeds i n t o t h e account, and t h e payment
of t h e proceeds from the a c c o u n t , a l l occur on t h e same day so t h a t t h e
withdrawal of t h e proceeds c o n s t i t u t e s a p a r t of a combination of t r a n s a c t i o n s which does not r e s u l t i n a net withdrawal or i n an i n c r e a s e i n
the excess of t h e a d j u s t e d d e b i t balance of t h e account over the maximum
z
l o a n value of t h e s e c u r i t i e s i n t h e account i n v i o l a t i o n of s e c t i o n 4(d)
of t h e R e g u l a t i o n .
335
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
SUBJECT:
X-9019
November 10, 1934.
Issuance of Voting Permits to Holding
Company A f f i l i a t e s .
Dear Sir:
In a l e t t e r to a l l Federal Reserve Agents dated September 28,
1934 (X-8028), the Federal Reserve Board outlined the circumstances
and conditions under which general voting permits would be granted to
holding company a f f i l i a t e s , and stated that i t desires to i s s u e general
voting permits i n a l l cases where reports of current simultaneous examinations of holding company a f f i l i a t e s and their subsidiaries are a v a i l able and indicate condition, management and r e l a t i o n s h i p s to j u s t i f y .
It was a l s o stated that as a condition precedent to the granting of
general voting permits the Board w i l l require holding company a f f i l i a t e s
and their subsidiary banks i n general to comply with the same conditions
as to elimination of c r i t i c i z e d a s s e t s , corrections of management p o l i c i e s , and r e l a t i o n s h i p s , as i f they were applying for and being admitted
to membership in the Federal Reserve System.
Thereafter, Mr. Leo H. Paulger, Chief of the Board's D i v i s i o n
of Examinations, addressed a l e t t e r dated September 29, 1934 (Exam.53),
to a l l Federal Reserve Agents requesting a report concerning the progress made i n completing and analyzing the simultaneous examinations
X-9018
of tanks and. holding company a f f i l i a t e s as outlined i n the Board's l e t t e r
dated January 20, 1934 (X-7763) and Mr. Paulger•s l e t t e r dated February
16, 1934 (Exam. 20), and concerning the extent to which such banks and
holding company a f f i l i a t e s have been, or w i l l be, able to make the eliminations and corrections referred to i n the Board's l e t t e r of September
28, 1934 (X-8028).
The Board d e s i r e s to i s s u e during t h i s year, or at the e a r l i e s t
practicable date, general voting permits i n a l l cases i n which reports
of current simultaneous examinations of holding company a f f i l i a t e groups
are available and indicate f i n a n c i a l condition, management and r e l a t i o n ships which j u s t i f y the issuance of such permits.
However, from the abovo
mentioned reports as to the status of each holding company a f f i l i a t e , and
from the information contained i n the Board's f i l e s , i t i s apparent that,
i n many cases, holding company a f f i l i a t e s w i l l not be able to obtain general voting permits prior to the January, 1935 meetings of the banks i n volved, either because arrangements could not be made with the national
and State supervisory authorities for simultaneous examinations, or because the holding company a f f i l i a t e s and their subsidiary member banks
have not completed t h e i r r e h a b i l i t a t i o n programs of have not made the r e quired eliminations and corrections, and apparently w i l l not be i n a pos i t i o n to do so prior to the January, 1935 meetings.
In a l l cases i n which i t has been or w i l l be impracticable to
i s s u e general voting permits prior to the January, 1935 meetings of the
O
;
OU
X-9018
- 3
banks, the Board w i l l consider the issuance of limited voting permits
to vote the stock owned or controlled "by holding company a f f i l i a t e s at
the regular annual meetings, or any adjournments thereof, held by shareholders of the subsidiary member banks prior to April 1, 1935, for the
following purposes:
1.
To e l e c t directors of the subsidiary member banks.
2.
To act thereat upon such matters of a routine nature
as are ordinarily acted upon at the annual meetings
of the subsidiary member banks.
In a l l cases i n which the Board has received applications for v o t ing permits on F.H.B. Form P - l , with e x h i b i t s , from holding company a f f i l i a t e s i n your d i s t r i c t which desire to vote the stock of t h e i r subs i d i a r y member banks at the next annual meeting only for the purposes
s e t f o r t h i n 1 and 2 above, i t w i l l not be necessary for the Board to
receive any request for limited voting permits f o r such holding company
affiliates.
I f , however, any such holding company a f f i l i a t e d e s i r e s to
vote the stock which i t owns or controls of i t s subsidiary member banks
at the January, 1935 meetings for any purposes other than those s e t
f o r t h i n 1 and 2 above, i t w i l l be necessary that the Board be advised
of the additional purposes for which a limited voting permit i s desired.
If you have not already done so, please obtain and furnish to the Board
such information together with a d e t a i l e d outline of the plan or plans
f o r which such shares are to be voted.
Such information when forwarded
to the Board should be accompanied by your recommendation and that of
f. 338
— 4 ••
X-9018
the Executive Committee of your "bank concerning the issuance of a
permit for such additional purpose or purposes, and concerning any
additional requirenents to "be prescribed as a condition to the i s s u ance thereof.
In view of the f a c t that i t i s impossible at t h i s t i n e to determine which of the holding company a f f i l i a t e s w i l l be able to obtain
general voting p e m i t s prior to the January, 1935 meetings, i t w i l l
be appreciated i f you w i l l advise the Board, at the e a r l i e s t p o s s i b l e
date concerning any holding company a f f i l i a t e which d e s i r e s to vote
the stock of any of i t s subsidiary member banks for purposes other
than those stated i n 1 and 2 above, except such holding company a f f i l i a t e s as have already been granted general voting permits.
In any
case i n which the Board has not received by December 1, 1934, inform
nation that a holding company a f f i l i a t e desires a limited v o t i n g permit to vote the stock of i t s subsidiary member banks for purposes i n
addition to those stated i n 1 and 2 above, the Board w i l l consider
that i t w i l l not be necessary to i s s u e to such holding company a f f i l i a t e a limited voting permit covering any purposes other than those
mentioned i n 1 and 2 above.
As a condition precedent to the issuance of a limited voting
permit for the purposes s e t f o r t h i n 1 and 2 above, the Board w i l l r e quire the f o l l o w i n g :
X-9018
Prior t o the issuance of the limited voting permit
the Federal Reserve Agent s h a l l s a t i s f y himself
that each of the subsidiary banks of the applicant
has charged o f f or otherwise eliminated (a) a l l
l o s s e s i n loans and discounts, (b) a l l depreciation
i n stocks and defaulted s e c u r i t i e s (c) a l l deprec i a t i o n i n s e c u r i t i e s not of the four highest grades as
c l a s s i f i e d by a recognized investment s e r v i c e organi z a t i o n regularly engaged in the "business of r a t i n g
or grading s e c u r i t i e s and (d) a l l other l o s s e s ; as
shown by the l a t e s t available reports of examinations
by the appropriate supervisory a u t h o r i t i e s , except
that the charge-offs and eliminations required by (b)
and (c) above may be based upon current appraisals of
marketable s e c u r i t i e s s a t i s f a c t o r y to the Federal
Reserve Agent.
Prior to the issuance of the limited voting permit
the Federal Reserve Agent s h a l l s a t i s f y himself that
the holding company a f f i l i a t e has s u b s t a n t i a l l y performed any agreement or agreements heretofore executed by i t as a condition to the issuance of a limi t e d voting permit by the Federal Reserve Board.
Prior to the issuance of the limited voting permit the
Federal Reserve Agent and the Executive Committee of
: • 340
r fr
6 ~
X-9018
the Federal reserve "bank s h a l l approve the issu#ance of such permit.
The above requirements are minimum conditions which should
"be complied with prior t o the issuance of a limited v o t i n g permit
and i n certain cases additional requirements may "be imposed, depending upon the f a c t s and circumstances i n any particular case.
How-
ever, i n any case i n which, i n your opinion, compliance with conditions prescribed i n connection with the issuance of a limited v o t ing permit i s impracticable or impossible prior t o the annual meet-^,.
ing of any of the banks involved, please advise the Board concerning
/
a l l of the pertinent f a c t s and circumstances i n such case, and f u r nish the Board with your recommendations as to what modification, i f
any, should be made in the conditions prescribed.
I t i s contemplated that in authorizing the issuance of limi t e d voting permits hereafter the Board w i l l continue the use of the
ANCIGAB telegram procedure outlined i n i t s l e t t e r dated December 21,
1933 (X-7730).
Instead of writing out the above mentioned conditions
following the l e t t e r
M
C" i n each AUCIGAE telegram, as has been done
heretofore, i n future AUGIGAB telegrams these conditions w i l l be
referred to by a code word which w i l l have the meaning s e t opposite
such word as f o l l o w s :
AECIEBAT
Prior to the issuance of the limited
voting permit authorized herein, ( l )
the Federal Reserve Agent s h a l l s a t i s f y
himself that each of the subsidiary
341
- 7 -
X-9018
"banks of the applicant has charged o f f
or otherwise eliminated, (a) a l l l o s s e s
i n loans and discounts, (b) a l l depreciation i n stocks and defaulted s e c u r i t i e s ,
(c) a l l depreciation i n s e c u r i t i e s not of
the four highest grades as c l a s s i f i e d "by a
recognized investment service organization
regularly engaged i n the "business of rating
or grading s e c u r i t i e s and (d) a l l other
l o s s e s ; as shown by the l a t e s t a v a i l a b l e
reports of examinations by the appropriate
supervisory a u t h o r i t i e s , exeept that the
charge-offs and eliminations required by
(b) and (c) above may be based upon current
appraisals of marketable s e c u r i t i e s s a t i s factory to the Federal Reserve Agent; (2)
the Federal Reserve Agent s h a l l s a t i s f y hims e l f that the applicant has s u b s t a n t i a l l y
performed any agreement or agreements heretofore executed by i t as a condition to the
issuance of a limited voting permit by the
Federal Reserve Board; (3) the Federal Reserve
Agent and the Executive Committee of the
Federal reserve bank s h a l l approve the i s s u ance of such permit.
Likewise, in. future AHCIGAR telegrams, instead of writing out,
following the l e t t e r »D" i n each AITCIGAR telegram, as has been done
heretofore, the purposes for which stock of subsidiary member banks
may be voted as s e t f o r t h i n 1 and 2 of page 2 of t h i s l e t t e r , such
purposes w i l l be referred to by a code word which w i l l have the meaning set opposite such word as f o l l o w s :
AHCILCO
To e l e c t directors of such (bank) at the
annual (meeting) of shareholders, or at
any adjournments thereof, at any time
prior to April 1, 1935, and to act thereat
upon such matters of a routine nature as
are ordinarily acted upon at the annual
meetings of such (bank),
4
» 8 *•
>
X-9018
°
Where tlio limited voting permit covers raore than one subsidiary
member bank, please use the plural instead of the singular of the words
inclosed i n parentheses above.
I t w i l l he appreciated i f you w i l l
promptly forward to the Board two executed copies of any limited voting
permits issued by you.
In order that general voting permits may be issued i n a l l cases
at the e a r l i e s t date practicable, you are requested to continue your
e f f o r t s to complete simultaneous examinations of holding company a f f i l i a t e
groups i n your d i s t r i c t and, i n each case in which such examinations have
been completed, to furnish to the Board your recommendations concerning
the conditions upon which a general voting permit should be issued.
Re-
gardless of whether simultaneous examinations have been completed or
recommendations furnished in a l l cases, i t w i l l be appreciated i f you
w i l l complete and forward to the Board, i f you have not already done so,
at the e a r l i e s t p o s s i b l e date, Part II of the status reports requested
i n .Mr. Paulger 1 s l e t t e r dated September 29, 1934 (Exam. 53).
I t was con-
templated that Part II of such report covering each holding company a f f i l i a t e group i n your d i s t r i c t would be forwarded t o the Board as soon
as information was obtained i n each case, without waiting for the comp l e t i o n of simultaneous examinations, or f o r information to be obtained
concerning any other holding company a f f i l i a t e group.
Very t r u l y yours,
Chester Morrill,
Secretary,
TO ALL FEDERAL RESERVE AGENTS,
843
X-9019
U S ^5. R A L R E S E R V E
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e ,
November 13# 1934«
SUBSTITWIOliC OF UMREGISTERED, UOJI-EXEvIPTED SECURITIES
I2i OLD ACCOUNTS PY SALE AKD PURCHASE OF SUCH SECURITIES,
Ruling No. 57 interpreting .Regulation T«
The Federal Re-
serve Loarti has been asked whether under Regulation ? the c*/u?titut i o n of x;nre/-iti vered, non-exempted s e c u r i t i e s i s permitted i n a
designated old account i f such substitution i s e f f e c t e d by the
sale of such s e c u r i t i e s and the purchase of other such s e c u r i t i e s .
In reply t o t h i s question, the Board rules thdt* i f such substitut i o n i s made within a period of two successive business days and
the pjrdceeds of the s e c u r i t i e s sold equal or exceed the cost of
the s e c u r i t i e s purchased so that the combination of transactions
does not r e s u l t i n an increase i n the adjusted debit balance of
the account, i t i s permitted by the regulation# regardless of
Whether the s a l e occurs before or a f t e r the purchase; Provided#
That# the broker must obtain payment for the s e c u r i t i e s sold before he pays f o r the s e c u r i t i e s purchased, unless the maximum
loan value of the s e c u r i t i e s in the account exceeds the adjusted
debit balance of the account by an amount not l e s s than that t o
be paid for the s e c u r i t i e s purchased*
844
X-9020
>
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
November 14, 1934.
WITHDRAWAL OF INTEREST AID HASH DIVIDENDS
FROM RESTRICTED ACCOUNTS.
Ruling Ho. 38 interpreting Regulation T.
In response to
several i n q u i r i e s , the Federal Reserve Board rules that i n t e r e s t
and cash dividends on s e c u r i t i e s i n any r e s t r i c t e d account may,
at the option of the creditor, he paid to the customer i f they
are paid on the same day on which, i n accordance with the c r e d i t o r ' s
usual p r a c t i c e , they are credited to the customer's account.
This
ruling applies t o i n t e r e s t on coupon bonds as well as to i n t e r e s t
on registered "bonds and cash dividends on stocks.
FEDERAL RESERVE BOARD
WASHINGTON
X-9021
address official correspondence t o
the federal reserve board
November 17, 1934.
SUBJECT:
Code Word Covering New I s s u e
of T r e a s u r y 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 F e d e r a l r e s e r v e banks, t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of Treasury B i l l s :
"NOXOZO" - T r e a s u r y B i l l s t o be d a t e d November
21, 1934, and t o mature May 22, 1935.
This word should be i n s e r t e d i n t h e F e d e r a l Res e r v e Telegraph Code book, f o l l o w i n g t h e supplemental code
word "NOXOYD" on page 172.
Very t r u l y yours
N&
TO GOVERNORS OF ALL F. R. BANKS.
346
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9022
November 17, 1934*
Dear S i r :
The Board r e c e n t l y r e c e i v e d a l e t t e r from an a p p l i c a n t f o r an
i n d u s t r i a l l o a n under S e c t i o n 13b of t h e F e d e r a l Reserve Act s t a t i n g
t h a t he had r e c e i v e d a b i l l from t h e F e d e r a l r e s e r v e bank t o which t h e
a p p l i c a t i o n was s u b m i t t e d , f o r s e v e r a l hundred d o l l a r s , r e p r e s e n t i n g
t h e charge made by an o u t s i d e f i r m of a u d i t o r s f o r making an examinat i o n i n connection with the a p p l i c a t i o n .
The a p p l i c a n t f o r t h e l o a n
s t a t e s t h a t he e i t h e r overlooked e n t i r e l y a p a r a g r a p h i n t h e bank 1 s
a p p l i c a t i o n form r e l a t i n g t o payment of expenses, or e l s e took i t f o r
g r a n t e d t h a t when he f u r n i s h e d a f u l l d e t a i l e d r e p o r t by a u d i t o r s of
r e c o g n i z e d s t a n d i n g t h e r e would be l i t t l e , i f any, expense involved f o r
further investigation.
A f t e r c o n s i d e r i n g t h e correspondence i n t h i s c a s e , and t h e
r e p l i e s t o t h e Board 1 s t e l e g r a m of October 12, 1934, Trans 2124, i t i s
f e l t t h a t , i n order t o avoid m i s u n d e r s t a n d i n g s , i t would be d e s i r a b l e
f o r t h e F e d e r a l r e s e r v e bank b e f o r e u n d e r t a k i n g any i n v e s t i g a t i o n or
examination i n c o n n e c t i o n with an a p p l i c a t i o n f o r a loan under s e c t i o n
13b which may i n v o l v e expense t o t h e a p p l i c a n t t o a d v i s e such a p p l i c a n t
as t o t h e b a n k ' s p o l i c y w i t h r c s p e c t t o t h e payment of t h e expense of
' 347
-2-
X-9022
such i n v e s t i g a t i o n or examination and t o give t h e a p p l i c a n t an e s t i m a t e of t h e amount of t h e charges i t w i l l be expected t o pay wherever
i t i s p o s s i b l e t o do s o .
I t does n o t appear t o be s u f f i c i e n t t o r e l y
upon a p r i n t e d s t a t e m e n t i n t h e a p p l i c a t i o n form, s i n c e such a s t a t e ment may be overlooked or n o t f u l l y a p p r e c i a t e d by t h e a p p l i c a n t .
Very t r u l y y o u r s ,
-fafUAXtA)
Chester M o r r i l l ,
Secretary.
TO TEE CHAIRMEN OP ALL F. R. BAlKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9023
November 19, 1934.
SUBJECT:
Holidays during December, 1934«
Dear S i r :
The F e d e r a l Reserve Board i s a d v i s e d t h a t
t h e Havana Agency of the F e d e r a l Reserve Bank of
A t l a n t a w i l l be c l o s e d on F r i d a y , December 7 i n
observance of Cuban Memorial Day.
On Christmas Day t h e o f f i c e s of t h e Fede r a l Reserve Board and a l l F e d e r a l r e s e r v e banks
and branches w i l l be c l o s e d .
Please n o t i f y branches•
Very t r u l y yours,
Assistant Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9024
November 20, 1934•
Dear S i r :
There are enclosed h e r e w i t h copies of
s t a t e m e n t r e n d e r e d by t h e Bureau of Engraving
and P r i n t i n g , c o v e r i n g t h e c o s t of p r e p a r i n g
F e d e r a l r e s e r v e n o t e s f o r t h e month of October,
1934.
Very t r u l y yours
0 . E. Foulk,
F i s c a l Agent
Enclosure
TO ALL FEDERAL RESERVE AGESfTS.
350
X-9024-a
$5
Boston, . . .
New York, . .
Philadelphia,
Cleveland,. .
Richmond, . .
Atlanta,. . .
Chicago,. . •
St. Louis,. .
Minneapolis,.
Kansas C i t y , .
34,000
30,000
-
-
14,000
24,000
54,000
17,000
-
173,000
$10
=05=
CO
o
Statement of Bureau of Engraving and P r i n t i n g
f o r f u r n i s h i n g Federal Reserve Notes
S e r i e s 1928, October 1 t o 31, 1934.
15,000
144,000
48,000
11,000
7,000
150,000
48,000
40,000
38,000
-
-
-
140,000
52,000
16,000
28,000
36,000
19,000
22,000
20,000
454,000
380,000
Total
Sheets
Amount
22,000
244,000
222,000
88,000
49,000
14,000
200,000
125,000
55,000
48,000
$ 1,892.00
20,984.00
19,092.00
7,568.00
4,214,00
1,204.00
17,200.00
10,750.00
4,730.00
4,128.00
30,000 1,067,000
91,762.00
$50
#100
30,000
30,000
-
-
-
-
-
-
-
—
•
-
-
-
-
-
-
30,000
1,067,000 s h e e t s , © #86.00 per M,
$91,762.00
S e r i e s 1934
New York $10,
38,000 s h e e t s , @ $86.00 per M
3,268,00
$95,030.00
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9025
November 21, 1934.
SUBJECT:
Expense, Main L i n e s , Leased
Wire System, October, 1934.
Dear S i r :
I n c l o s e d herewith you w i l l f i n d two mimeographed statements. X-9025-a and X-9025~b, covering
i n d e t a i l operations of the main l i n e s , Leased Wire
System, during the month of October, 1934.
P l e a s e c r e d i t the amount payable by your bank
f o r your share of the expense of the Leased Wire
System, t o the Federal Reserve Ba^k of Richmohd i n
your dai l y statement of c r e d i t s through t h e Gold S e t tlement Fund f o r the account of the Federal Reserve
Board, and a d v i s e the Federal Reserve Bank of Richmond
by wire t h e amount and purpose of the c r e d i t .
Very t ruly yours,
F i s c a l Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BAMS.
X-9025-a
REPORT SHOTOTG CLASSIFICATION AMD 2TUMBER OF WORDS TRANSMITTED OVER MAIF LIZES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE ImOITTH OF OCTOBER, 1934.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St- Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
32,425
159,534
31,296
52,026
48,937
51,187
83,712
64,771
38,257
64,797
55,127
88,958
771,027
F. E. Board business
Words sent by
New York chargeable to other
F. R. Banks ( l )
1,809
-
1,959
1,685
1,730
1,669
2,027
2,021
1,630
1,704
2,204
3,958
22,396
Net Federal
reserve
bank
business
34,234
159,534
33,255
53.711
50,667
52,856
85,739
66,792
39,887
66,501
57,331
92,916
793,423
406,406
Reimbursable business Incoming & Outgoing.
Total words transmitted over main l i n e s . . .
(*)
These percentages used in c a l c u l a t i n g the pro r a t a share of leased wire expense as shown
on the accompanying statement (X-9025-b)
(l)
Number of words sent by New York to other F. R. Banks for t h e i r sole b e n e f i t charged to
banks i n d i c a t e d in accordance with a c t i o n taken at Governors' Conference
November 2 - 4 , 1925.
Per cent of t o t a l
bank business (*)
4.31
20.11
4.19
6.77
6.39
6.66
10.81
8.42
5.03
8.38
7.22
11.71
100.00
1,199,829
697,7^3
1,897,572
X-9025-b
HEPOHT OF EXPENSE MAIIT 1,1:33
FEDERAL El SERVE LEASED WERE SYSTEM, OCTOBER, 1934.
Fame of Bank
Operators'
Salaries
Retirement
Contributions
Boston
$260.00
$ 23.40
ITerr York
1,345.80
121.12
Philadelphia
225.00
20.25
Cleveland
306.66
27.60
Richmond
190.00
17.10
Atlanta
270.00
24.30
Chicago
4 , 1 3 1 . 0 0 ( f ) 368.45
St- Louis
195.00
17.55
Minneapolis
200.00
18.00
Kansas City287.00
25.83
Dallas
251.00
22.59
San Francisco
380.00
34.20
Federal Reserve Bd»
—
Total
$8,041.46
$720.39
Operators 1
overtime
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.
Amount reimbursable t o Chicago.
Total
expenses1
$672.26
$283.40
1,487.92
3,136.69
245.25
653.54
33^.26
1,055.96
—
230.00(a)
437.10
996.69
1,038.80
294.30
—
4,R09.20
1,686.11
9.75
—
212.55
1,313.32
—
218.00
784.56
—
—
1,307.08
312.83
1,126.15
273.59
414.20
1,826.49
—
15,645.62
15,645.62
$24,668.22 $15,597.65
$30.75 $15,875-62
$
Less Reimbursable Charges:
C&)
(#)
(*)
(a)
Wire
rental
Pro r a t a
share of
total
expenses
-
21.00
$
—
—
9,070.57
$15,597.65
Credits
Payable to
Federal
Reserve
Board
$283.40
1,487.92
245.25
334.26
437.10
294.30
4,509.20
212.55
218.00
312.83
273.59
4l4.20
$388.86
1,648.77
408.29
721.70
559.59
744.50
2,823.09(*)
1,100.77
566.56
994.25
852.56
1,412.29
***
$9,022.60
$9,398.14
2,823.09(a)
$6,575.05
wv
Ol
November 21, 1934.
Dear S i r :
There I s i n c l o s e d f o r your i n f o r m a t i o n and
guidance a copy of t h e t e l e g r a m d a t e d November 15,
1954, from t h e F e d e r a l Reserve Board t o Mr. S a r g e n t
A s s i s t a n t F e d e r a l Reserve Agent a t San F r a n c i s c o ,
r e g a r d i n g t h e i n t e r p r e t a t i o n of t h e term " c a p i t a l
s t o c k " a s used i n s t a n d a r d c o n d i t i o n of membership
numbered 10 i n connection w i t h s u r p l u s r e q u i r e m e n t s
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
Inclosure.
TO ALL F . R. AGENTS.
355
COPY
X-9026-a
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
November I E , 1954.
SARGENT - San F r a n c i s c o
Your t e l e g r a m November 8 r e
Bank
, Washington.
S e c t i o n 9 of t h e F e d e r a l Reserve Act a s amended p r o v i d e s t h a t
f o r t h e purposes of membership t h e terra " c a p i t a l s t o c k " s h a l l
i n c l u d e t h e amount of o u t s t a n d i n g c a p i t a l n o t e s and d e b e n t u r e s
l e g a l l y i s s u e d by t h e bank and purchased by t h e R e c o n s t r u c t i o n
Finance C o r p o r a t i o n .
Accordingly t h e Board c o n s i d e r s t h a t t h e
term " c a p i t a l s t o c k " a s used i n standard c o n d i t i o n of members h i p numbered 10 r e g a r d i n g s u r p l u s i n c l u d e s c a p i t a l n o t e s and
d e b e n t u r e s a s d e s c r i b e d above a s w e l l a s c a p i t a l stock of a l l
classes.
MORRILL
FEDERAL RESERVE BOARD
WASHINGTON
X-9027
address official correspondence t o
the federal reserve board
SUBJECT:
November 23, 1934.
Code Word Covering New I s s u e
of Treasury B i l l s .
Dear S i r :
In c o n n e c t i o n w i t h 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 F e d e r a l r e s e r v e banks, t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of T r e a s u r y B i l l s :
"NOXPAD" - T r e a s u r y B i l l s t o be dated November
28, 1934, and t o mature May 29, 1935.
This word should be i n s e r t e d i n t h e F e d e r a l Reserve Telegraph Code book, f o l l o w i n g t h e supplemental code
word "NOXOZO" on page 172.
»ry 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.
357
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9028
llov ember 24, 1934
Dear Sir:
There i s inclosed for your information a copy of a
l e t t e r received from Mr. Worthington, Deputy Governor of the
Federal Reserve Bank of Kansas City, regarding the a t t i t u d e
of Dun & Bradstreet with reference to credit ratings of concerns that have mortgaged their real estate and plant equipment and i n some instances made assignments of receivables to
secure industrial loans; a copy of a l e t t e r from Mr. Rounds,
Deputy Governor of the Federal Reserve Bank of New York, i n
regard to the questions raised i n Mr. Worthington's l e t t e r ;
and a copy of the Board's reply to Mr. Worthington.
Very truly yours
Chester Morrill,
Secretary.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS EXCEPT KANSAS CITY.
C o p y
x-9028-a
f e d e r a l jreserve m m
of
kahsas c i t y
November 2, 1934.
Federal Reserve Board,
Washington,
D.
0.
Gentlemen:
In the handling of negotiations f o r i n d u s t r i a l loans
an o b s t a c l e has developed i n t h i s d i s t r i c t which may or may
not have been "brought to your a t t e n t i o n "by other Federal r e serve banks. I t i s the a t t i t u d e of Dun & Bradstreet, Inc. ,
with reference to credit ratings of concerns that have mortgaged their r e a l e s t a t e and plant equipment and, i n some
i n s t a n c e s , made assignment of receivables t o secure i n d u s t r i a l
l o a n s . One l o c a l applicant, whose loan has been approved by
our Industrial Advisory Committee and our Executive Committee,
has about decided to withdraw h i s application because he has
been informed by the Kansas City o f f i c e of Dun & Bradstreet
that the pledging of h i s r e a l e s t a t e , machinery and a portion
of h i s r e c e i v a b l e s w i l l make i t necessary f o r them t o eliminate
h i s rating from t h e i r reference books. I f t h i s i s done, the
applicant f e e l s that he w i l l be unable to obtain shipments of
raw materials except on a C.O.D. b a s i s . This a t t i t u d e of Dun
& Bradstreet w i l l have a tendency to destroy the value of an
i n d u s t r i a l loan to such an applicant. The matter has been d i s cussed with the l o c a l manager of the mercantile agency, who has
agreed to submit i t to New York but doubts whether the i n s t r u c t i o n s of the New York o f f i c e w i l l enable him to g i v e a s a t i s factory rating to such concerns as may take advantage of the
provisions of the law under which we are making these i n d u s t r i a l
loans.
It i s suggested that t h e Federal Reserve Board may
deem i t advisable to take t h i s matter up direct with Mr. Whiteside,
President of Dun & Bradstreet, I n c . , or with other responsible
o f f i c i a l s at t h e i r headquarters i n New York.
CAWiL
Very t r u l y yours,
(Signed)
C. A. Worth!ngton
C. A. Worthington,
Deputy Governor.
X-9028-b
CO P I
359
FED3RA.L RESERVE BAH
OF HEW YOEK
November 13, 1934.
Mr, E. 1. Smead
Chief, Division of Bank Operations
Federal Reserve Board
Washington, D. C.
Dear Mr. Sniead;
Referring to Mr. Worthington's l e t t e r of November 2
addressed to the Board concerning the p o l i c y or a t t i t u d e of Dun & Brads t r e e t , Inc. with reference t o credit ratings of concerns which have
mortgaged their real e s t a t e and plant equipment to secure i n d u s t r i a l
loans, l.Ir. Whiteside, President of Dun & Bradstreet, I n c . , i s now i n
Washington i n the Government service. Mr. Boy Foulke, Vice President of
the company, i s well known to one of our o f f i c e r s , and i n discussing this
matter with Mr. Foulke he has explained that i t i s , of course, the function of the rating agency to advise i t s c l i e n t s of any f a c t s coming to
i t s attention with reference to the f i n a n c i a l status of concerns rated
by them. These f a c t s may he d i f f e r e n t l y interpreted according to the
view taken by the subscriber to the s e r v i c e . Mr. Foulke says, however,
that so far as their rating of such concerns i s a f f e c t e d by these loans,
they have been i n c l i n e d to consider the loan a constructive f a c t o r . He
does not r e c a l l any instance where the r a t i n g of the concern has been
lowered because of the loan. On the other hand, he did r e c a l l some iinstances where the rating had been raised. He said that he knew of a few
cases where a rating had been lowered at about the time a loan was granted
but that i t was not the r e s u l t of the granting of the loan, but rather the
result of a review of the s i t u a t i o n and that the rating would have been
lowered even though the loan had not been granted.
Mr. Foulke has been i n contact with us i n connection
with a number of applications and he expressed the opinion that the making
of industrial loans as had been done in t h i s d i s t r i c t i s altogether
desirable from the standpoint of the creditors of the borrower . as well as
from the borrower*® standpoint.
*
Mr. Foulke indicated a willingness to review any s p e c i f i c
case that we might bring to h i s a t t e n t i o n , and i f Mr. Worthington w i l l submit the f a c t s i n the case he has mentioned, we w i l l be glad to take i t up
with Mr. Foulke.
There i s , of course, no escaping the f a c t s i n these s i t uations and creditors w i l l almost invariably consider that any concern which
has given a chattel mortgage upon i t s machinery and equipment, or which has
made an assignment of i t s accounts receivable, i s a l e s s desirable credit
r i s k from the point of view of the unsecured trade creditors than i t was
before such mortgage or assignment was made. This i s a fact which can not
be escaped. I t i s only f a i r to say, however, that t h i s change i n a t t i t u d e
F e d e r a l Reserve Bank of Hew York
X-9028-1)
2.
i s not a l o n e t h e r e s u l t of t h e a c t u a l g i v i n g of t h e mortgage or making of
t h e a s s i g n m e n t , but i s a l s o the r e s u l t of t h e d i s c l o s u r e of t h e extended
s i t u a t i o n which raade n e c e s s a r y t h i s a c t i o n .
We have been m i n d f u l of t h i s a d v e r s e e f f e c t on t h e
c r e d i t s t a n d i n g of a borrower by t h e t a k i n g of c o l l a t e r a l i n t h i s form
and have t r i e d t o a v o i d t a k i n g of c h a t t e l mortgages or a s s i g n m e n t s of a c counts r e c e i v a b l e wherever we can p r o p e r l y do so and i n many c a s e s i n
l i e u t h e r e o f have t a k e n t h e agreement of t h e borrower not t o g i v e a c h a t t e l
mortgage or t o make an assignment of a c c o u n t s r e c e i v a b l e t o any o t h e r p a r t y
without our c o n s e n t . There a r e s i t u a t i o n s , however, where i t i s i m p o s s i b l e
to make a l o a n on a r e a s o n a b l y sound b a s i s without t a k i n g t h e s e s t e p s , and
i t may g e n e r a l l y be c o n s i d e r e d t h a t i f t h e t a k i n g of t h i s s t e p r e s u l t s i n a
lowering of t h e c r e d i t r a t i n g of the borrower, then such c r e d i t r a t i n g was
p r e v i o u s l y h i g h e r t h a n j u s t i f i e d and was due f o r a l o w e r i n g i n any e v e n t .
I t would n o t seem t o t h e w r i t e r t h a t t h i s i s a m a t t e r t o be g r e a t l y concerned about and a t l e a s t from t h e p o i n t of view of our h a n d l i n g of t h e s e
c a s e s , we do not b e l i e v e i t r e p r e s e n t s a s e r i o u s o b s t a c l e t o t h e g r a n t i n g
of t h e s e l o a n s .
I f t h e r e i s any f u r t h e r i n f o r m a t i o n t h a t you d e s i r e ,
we s h a l l be g l a d t o b e of s e r v i c e .
Very t r u l y y o u r s ,
(Signed)
L. R. Rounds
L. R. Rounds
Deputy Governor
COPY
X-9028-c
November 23, 1934,
Mr. C• A. Worthington, Deputy Governor,
F e d e r a l Reserve Bank of Kansas C i t y ,
Kansas C i t y , M i s s o u r i .
Dear Mr. Worthington:
Upon r e c e i p t of your l e t t e r of November 2, r e l a t i n g t o t h e a t t i tude of Dun & B r a d s t r e e t w i t h r e f e r e n c e to c r e d i t r a t i n g s of concerns
t h a t have mortgaged t h e i r r e a l e s t a t e and p l a n t equipment a n d , i n sane
i n s t a n c e s , made a s s i g n m e n t s of r e c e i v a b l e s to s e c u r e i n d u s t r i a l l o a n s ,
we c a l l e d Mr. Rounds, who i s i n charge of malung i n d u s t r i a l loans a t
the F e d e r a l Reserve Bank of New York, and asked him whether he had encountered o b s t a c l e s s i m i l a r to t h o s e s e t f o r t h i n your l e t t e r .
Mr.
Rounds a d v i s e d us t h a t s i m i l a r d i f f i c u l t i e s had not been encountered by
h i s bank, b u t t h a t he would b e glad to c o n t a c t one of t h e o f f i c e r s of
Dun & B r a d s t r c e t , not f o r the purpose of i n f l u e n c i n g t h e company's
r a t i n g p r o c e d u r e i n any way, b u t f o r t h e p u r p o s e of f i n d i n g out t h e e x t e n t t o which i t s r a t i n g s a r e a f f e c t e d by the i n d u s t r i a l loans made by
t h e F e d e r a l Reserve b a n k s .
For your i n f o r m a t i o n , t h e r e i s i n c l o s e d a copy of a l e t t e r r e c e i v e d
from Mr. Rounds, under d a t e of November 13, i n which he s e t s f o r t h the
r e s u l t of h i s d i s c u s s i o n w i t h Mr. Foulke, Vice P r e s i d e n t of Dun &
Bradstreet, Inc.
I t i s u n d e r s t o o d from your l e t t e r t h a t t h e Kansas C i t y Manager of
Dun & Brads t r e e t i s s u b m i t t i n g the f a c t s i n t h e c a s e you mention t o h i s
• 362
X-9028-C
Mr. C. A. Worthington - # 2
Hew York o f f i c e , and i t i s assumed t h a t he w i l l r e c e i v e a r e p l y i n harmony
TTith t h e p o s i t i o n o u t l i n e d i n Mr. Rounds' l e t t e r .
T h i s rrould seem t o
make i t u n n e c e s s a r y f o r e i t h e r your "bank or t h e Board t o t a k e t h e m a t t e r
up f o r m a l l y vrith Dun & B r a d s t r e e t , I n c .
Very t r u l y y o u r s ,
(Signed) C h e s t e r M o r r i l l
Chester M o r r i l l ,
Secretary.
Inclosure.
363
X-903'0"
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
November 24, 1934.
The S e c u r i t i e s Exchange Act of 1934 placed a d d i t i o n a l r e s p o n s i b i l i t i e s on t h e F e d e r a l Reserve Board looking toward t h e p r e v e n t i o n of t h e
e x c e s s i v e use of c r e d i t f o r t h e purchase or c a r r y i n g of s e c u r i t i e s •
The r e s e a r c h and a d m i n i s t r a t i v e work of t h e B o a r d ' s s t a f f i n t h i s connect i o n has been c a r r i e d on i n t h e D i v i s i o n of Research and S t a t i s t i c s .
In
view of t h e importance of t h i s a c t i v i t y t h e Board has now c r e a t e d a new
d i v i s i o n f o r t h i s work which w i l l be c a l l e d t h e D i v i s i o n of S e c u r i t i e s
Loans.
Dr* Carl E, P a r r y who has been A s s i s t a n t D i r e c t o r of t h e B o a r d ' s
D i v i s i o n of Research and S t a t i s t i c s w i l l be t h e Chief of t h e new
division.
Dr. L a u c h l i n C u r r i e , who has been engaged i n r e s e a r c h i n t h e monetary
f i e l d i n the Treasury Department, has been a p p o i n t e d by t h e Board as Ass i s t a n t D i r e c t o r of t h e D i v i s i o n of Research and S t a t i s t i c s , and Dr.
Woodlief Thomas, who has been a member of t h e s t a f f of t h e d i v i s i o n , has
a l s o been d e s i g n a t e d A s s i s t a n t D i r e c t o r of t h e d i v i s i o n .
Under t h e
g e n e r a l s u p e r v i s i o n of Dr. E. A. Goldenweiser, t h e D i r e c t o r , i t i s contemplated t h a t t h e work of the d i v i s i o n i n v o l v i n g r e s e a r c h i n t h e
monetary f i e l d w i l l come under Dr $ C u r r i e and r e s e a r c h i n banking and
b u s i n e s s f i e l d s w i l l come under Dr. Thomas•
364
FEDERAL RESERVE BOARD
WASHINGTON
X-9031
address official correspondence t o
the federal reserve board
November 26, 1934.
Dear S i r :
The F e d e r a l Reserve Board has been a d v i s e d t h a t a l e t t e r , s i m i l a r t o t h e one i n c l o s e d , has been forwarded by t h e o f f i c e of t h e Compt r o l l e r of t h e Currency t o a l l banks which, a c c o r d i n g t o t h e r e c o r d s
of t h e C o m p t r o l l e r ' s o f f i c e , have two banking i n s t i t u t i o n s doing b u s i ness w i t h i n t h e same room.
I n a d v i s i n g t h e Board t h a t such l e t t e r s
have been s e n t t o t h e banks concerned, t h e C o m p t r o l l e r ' s o f f i c e has
suggested t h a t t h e F e d e r a l Reserve Board and t h e F e d e r a l r e s e r v e banks
lend t h e i r moral s u p p o r t i n c o r r e c t i n g t h e p r a c t i c e r e f e r r e d t o .
The p r i n c i p l e s expressed i n t h e l e t t e r of t h e Deputy C o m p t r o l l e r ,
dated October 27, 1934, a r e i n accord w i t h t h e p o l i c y which has been
followed by t h e Board f o r some time i n Connection w i t h a p p l i c a t i o n s f o r
membership of banks whose banking q u a r t e r s have been s h a r e d by b u i l d i n g
and loan a s s o c i a t i o n s and o t h e r f i n a n c i a l o r g a n i z a t i o n s .
Replies to
t h e B o a r d ' s l e t t e r d a t e d August 15, 1934, X-7982, a d d r e s s e d t o a l l Fede r a l r e s e r v e a g e n t s , r e f l e c t g e n e r a l agreement w i t h t h e p r i n c i p l e t h a t
o r g a n i z a t i o n s whose a c t i v i t i e s might embarrass member banks or o t h e r
banks which a r e i n s u r e d by t h e F e d e r a l Deposit I n s u r a n c e C o r p o r a t i o n ,
or which might r e n d e r t h e s u p e r v i s i o n of such banks more d i f f i c u l t ,
-2-
X-9031
should be excluded f r o m t h e banking q u a r t e r s of such b a n k s , or f r o m
quarters easily accessible therefrom.
I t i s s u g g e s t e d , t h e r e f o r e , t h a t i n s i t u a t i o n s of t h i s n a t u r e
you give due c o n s i d e r a t i o n t o t h e p r i n c i p l e s and p o l i c i e s which have
been e x p r e s s e d .
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS
COPY
X-9031-a
October 27, 1934.
Board of Directors
Bank
Gentlemen!
Many years ago i t was made c l e a r t o t h i s o f f i c e t h a t
there are a great many objections t o a National bank occupying
the same or adjoining room with some other bank or f i n a n c i a l i n s t i t u t i o n . These objections have become i n c r e a s i n g l y aggravated,
p a r t i c u l a r l y during the past few yearA. The objectionable f e a tures t o such c l o s e i d e n t i f i c a t i o n between two banking i n s t i t u t i o n s have become so pronounced t h a t some States have passed laws
prohibiting State banks from occupying the same building with
another bank.
I t has come t o my a t t e n t i o n that your bank and a
comparatively few other National banks i n the country are occupying the same or adjoining room with another bank or f i n a n c i a l i n s t i t u t i o n i n which j o i n t l y occupied rooms are found signs and
other material i n d i c a t i n g Federal Deposit Insurance as administered
by the Federal Deposit Insurance Corporation, Washington, D. C.
To the ordinary depositor reading the s i g n s , the assumption i s
t h a t the other bank or f i n a n c i a l i n s t i t u t i o n , as w e l l as your
bank, have deposits insured by the Federal Deposit Insurance Corporation.
In view of the foregoing, m i l you please advise me
what arrangements you can make looking towards a discontinuance
of the operation of your bank i n the same or adjoining room with
the other bank or f i n a n c i a l i n s t i t u t i o n which i s now doing b u s i ness i n the same or adjoining room.
Very t r u l y yours,
Deputy Comptroller.
TM-l/RMH
^ 8 6
X-9032
November 28, 1934.
SUBJECT:
The Use of Valuation Reserves i n
Lieu of Actually Charging Off Losses
and Depreciation in S e c u r i t i e s .
Dear S i r :
For your information there are inclosed a
copy of a l e t t e r received by the Board from Mr. J. M.
Peyton, Chairman of the Board at the Federal Reserve Bank
of Minneapolis, dated November 19, 1934, and a copy of
the Board's reply thereto, which are self-explanatory.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures
TO ALL FEDERAL RESERVE AGENTS
368
Copy
FEDERAL RESERVE BANK
X-9052-a
OF MINNEAPOLIS
November 19, 1934
Mr. Chester Morrill, Secretary,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Morrill,
From your l e t t e r X-9018 of November 10, 1934, I
quote as follows:
"Prior to the issuance of a limited voting permit the
Federal Reserve Agent s h a l l s a t i s f y himself that each
of the subsidiary banks of the applicant has charged
o f f or otherwise eliminated - ( a ) . * * * * *"
Undoubtedly the question w i l l a r i s e as to whether
a reserve s e t up against any of those items named i n ( a ) , (b),
(c) or (d) of t h i s paragraph w i l l be s a t i s f a c t o r y to the Federal
Reserve Agent. Personally, i f any bank desired to s e t up a r e serve adequate to cover the depreciation i n s e c u r i t i e s , assuming
that i t has eliminated the other requirements through actual
charge o f f , i t would be my i n c l i n a t i o n to recommend the bank f o r
a limited voting permit under those conditions.
Before taking d e f i n i t e action i n the matter and before advising the banks with regard to t h i s d e t a i l , I would
appreciate a word from you informing me i f i t w i l l be s a t i s f a c t o r y
to the Board to i s s u e a limited voting permit under these circumstances.
Very truly yours,
(Sgd.) J. N. Peyton
CHAIRMAN OF THE BOARD
369
Copy
X-9052-b
November £6, 1954.
Mr. J . M. P e y t o n ,
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Mr. Peyton:
R e f e r e n c e i s made t o your l e t t e r of November 19 i n which you
r e q u e s t i n f o r m a t i o n a s t o whether o r n o t t h e u s e of r e s e r v e s by s u b s i d i a r y banks c o n s t i t u t e s s a t i s f a c t o r y e l i m i n a t i o n of l o s s e s and d e p r e c i a t i o n a s a c o n d i t i o n p r e c e d e n t t o t h e i s s u a n c e of l i m i t e d v o t i n g p e r m i t s ,
a s o u t l i n e d i n the B o a r d ' s l e t t e r of November 10, 1934 (X-9018).
The Board c o n s i d e r s t h a t t h e charge o f f or e l i m i n a t i o n of e s t i mated l o s s e s and d e p r e c i a t i o n i n a s s e t s a s r e q u i r e d i n p a r a g r a p h numb e r e d 1 on page 5 of such l e t t e r may be e f f e c t e d p r o p e r l y through t h e
e s t a b l i s h m e n t and maintenance of v a l u a t i o n r e s e r v e s , p r o v i d e d t h a t i n
a l l r e p o r t s and p u b l i s h e d s t a t e m e n t s of c o n d i t i o n such r e s e r v e s be
deducted from t h e r e s p e c t i v e a s s e t s a g a i n s t which a l l o c a t e d , t h e r e b y
r e p o r t i n g such a s s e t s i n t h e same amounts a s i f t h e charge o f f 3 a c t u a l l y
had been made, and t h a t t h e l o s s e s t o p r o v i d e f o r which t h e r e s e r v e s
were e s t a b l i s h e d a r e charged a g a i n s t t h e r e s p e c t i v e r e s e r v e s a s soon
a s such l o s s e s a r e d e f i n i t e l y d e t e r m i n e d .
Very t r u l y y o u r s ,
(Signed) C h e s t e r M o r r i l l
Chester M o r r i l l ,
Secretary.
370
X-9033
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
November 28, 1934.
Mr. L. B. Williams, former Chairman and Federal Reserve Agent
of the Federal Reserve Bank of Cleveland has accepted the p o s i t i o n
of Chairman of the Board of the National City Bank of Cleveland.
The Federal Reserve Board wishes to announce that the Deputy
Chairman - Mr. E. S. Burke, J r . , of Cleveland, Ohio, who has "been
serving as Class »C" Director and Deputy Chairman s i n c e March 1933,
i s now Acting Chairman of the Board; and Mr. W. H. F l e t c h e r , who
has "been A s s i s t a n t Federal Reserve Agent a t that Bank f o r a period
of twelve y e a r s , i s now Acting Federal Reserve Agent.
These men are not only known and highly regarded i n the Federal
Reserve Bank of Cleveland, hut i n a l l "banking and business c i r c l e s
of that D i s t r i c t .
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
X-9034
H0V6Dlb6r 30, 1934,
t h e federal reserve board
SUBJECT:
Code Word. Covering New I s s u e
of Treasury B i l l s .
Dear S i r :
In connection w i t h 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 hanks, the
f o l l o w i n g code word has "been designated to cover a new
i s s u e of Treasury B i l l s :
"NOXPEN" - Treasury B i l l s t o he dated December
5, 1934, and to mature June 5, 1935
This word should he i n s e r t e d i n the Federal Res e r v e Telegraph Code hook, f o l l o w i n g the supplemental
code word "NOXPAD" on page 172.
Very t r u l y yours,
J . C. N o e l l ,
A s s i s t a n t Secretary.
TO G0VEE.WS OF ALL F . B. BASKS
372
FEDERAL RESERVE BOARD
WASHINGTON
X—9035
address official correspondence t o
t h e federal reserve board
November 30, 1934
Dear S i r :
There i s inclosed, f o r your information
a copy of a l e t t e r addressed by the Federal Reserve
Board to the Governor of the Federal Reserve Bank
of Chicago, suggesting t h a t , i n a l l cases where app l i c a t i o n s f o r i n d u s t r i a l loans are r e f u s e d , the
applicant be advised, f u l l y as to the reasons f o r
the d e c i s i o n of the FecLeral reserve bank.
Very t r u l y yours
Inclosure
Chester Morrill
Secretary.
TO GOVERNORS OF ALL F. R. BANKS
o
X-9035-a
November 30, 1934.
Mr. G. J . S c h a l l e r , Governor,
Federal Reserve Bank of Chicago,
Chicago, I l l i n o i s .
Dear Governor S c h a l l e r :
Receipt i s acknowledged of your l e t t e r of November 5 , 1934,
i n r e p l y to the Board's l e t t e r of October 31, 1934, i n which reference
was made to the a p p l i c a t i o n of Parret & Company, Normal, I l l i n o i s , f o r
an i n d u s t r i a l loan, and i n which i t was s t a t e d as the f e e l i n g of the
Federal Reserve Board that where an a p p l i c a t i o n f o r an i n d u s t r i a l loan
i s refused "by a Federal reserve "bank the applicant ordinarily should
be advised of the reasons making such r e f u s a l necessary.
Your l e t t e r s t a t e s that your Executive Committee has reached
the conclusion that i t i s desirable not to go i n t o s p e c i f i c reasons
f o r d e c l i n i n g a p p l i c a t i o n s due to the f a c t that i n some cases they r e f l e c t on the a b i l i t y and i n t e g r i t y of the a p p l i c a n t s .
You a l s o s t a t e
that i t would appear that your p r a c t i c e i n t h i s regard i s not out of
l i n e w i t h the p r a c t i c e of commercial "banks.
The Board f e e l s that a s p e c i a l r e s p o n s i b i l i t y r e s t s upon
the Federal r e s e r v e "banks i n the making of i n d u s t r i a l advances and
that i t i s h i g h l y important t h a t , i n a l l cases where an a p p l i c a t i o n
f o r an i n d u s t r i a l loan i s not approved, i t "be made clear to the app l i c a n t that the "bank's a c t i o n i s not the r e s u l t of an arbitrary dec i s i o n of the I n d u s t r i a l Advisory Committee not to recommend approval
$
374
Mi* . Or* <X • Schaller — 2 —
X—9035*51
or of the Federal reserve "bank not to grant the loan, "but i s i n a c cordance with the requirements of the law as to the purpose of the advance or that the loans be made on a reasonable and sound b a s i s .
In certain instances which have come t o the a t t e n t i o n of the
Board, the applicants have indicated a f e e l i n g that the bank's decision
not to make the loan was i n contravention of the purposes sought to be
accomplished by s e c t i o n 13b of the Federal Reserve Act and i t i s bel i e v e d that such a misunderstanding can be avoided, a t l e a s t i n a number
of cases, only by a f u l l explanation of the reasons for the r e f u s a l .
The Board suggests, therefore, that whenever an application i s
denied f o r the reason that the business i s not an established i n d u s t r i a l
or commercial concern within the meaning of the law, or the proceeds of
the loan are not to be used for the purpose of furnishing working c a p i t a l ,
or the application i s i n e l i g i b l e for other reasons, you explain f u l l y i n
your l e t t e r to the applicant why the Federal reserve bank i s without
authority to make the loan.
Also where the loan cannot be made because
of the credit standing of the applicant, future business prospects, uns a t i s f a c t o r y management, i n s u f f i c i e n t security, e t c . , i t i s suggested
that your l e t t e r contain a frank and f u l l explanation of the circumstances which impel the decision that the loan cannot be made on a
reasonable and sound b a s i s .
When more than one reason e x i s t s for the
r e f u s a l , a l l important reasons should be f u l l y explained.
The Board
f e e l s that such a procedure w i l l be productive of the most s a t i s f a c t o r y
375
Mr. G. J . Schaller - 3 -
X-9035-a
r e s u l t s as i t w i l l leave no p o s s i b i l i t y of misunderstanding on the
part of the applicant as to the reasons for the "bank's a c t i o n and
w i l l make clear that the Industrial Advisory Committee and the bank
are proceeding i n accordance with the intent of the law.
If cases do a r i s e where i t i s f e l t that the reasons f o r the
r e f u s a l of the application should not be put i n a l e t t e r t o the a p p l i cant, i t i s suggested that, wherever practicable, you arrange to have
one of your f i e l d men c a l l on the applicant and explain to him i n a
frank and f r i e n d l y manner the reasons for the bank s s a c t i o n , or, i f
more convenient, that the applicant be advised that i f he w i l l c a l l at
the bank the o f f i c e r s i n charge of the Industrial Loan Department w i l l
be glad to go f u l l y into the reasons why the application was not approved.
Of course, i s o l a t e d instances may a r i s e where i t would not be
advisable to s t a t e , either in a l e t t e r or an interview, one or more of
the reasons for not granting the application, but i n such a case the
other important reasons, i f any, should be f u l l y explained and i t should
be made clear i n any event that the bank's d e c i s i o n i s not an arbitrary
one.
Very truly yours,
Chester Morrill,
Secretary.
* 376
FEDERAL RESERVE BOARD
WASHINGTON
address official.correspondence t o
t h e federal reserve board
X-9036
December 3, 1934.
SUBJECT:
Code Words Covering Hew Issues of
Treasury Notes and Treasury Bonds.
Dear Sir:
In connection with telegraphic transactions "between
Federal reserve banks covering Government s e c u r i t i e s , the
following code words have been designated to cover new i s s u e s
of Treasury Notes and Treasury Bonds:
"NOWKED"
1 l / 8 $ Treasury Notes, Series E-1936, to
be dated December 15, 1934 and to mature
June 15, 1936.
"NOWCILO" 3 l / 8 $ Treasury Bonds of 1949-52 to be
dated December 15, 1934, and to mature
December 15, 1952.
These code words should be inserted in the Federal
Reserve Telegraph Code book, on page 172.
Very truly yours,
'''W
J . C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. B. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9037
Deceuber 4 , 1934.
Dear S i r :
In accordance r/ith the Board's telegram of
Kovember 28 c a l l i n g a conference of the chairmen of
the Industrial Advisory Corcuittees, to he held i n
Washington on Tuesday December 18, 1934, there i s i n c l o s e d a l i s t of t o p i c s suggested by the Board f o r cons i d e r a t i o n a t that conference.
I t w i l l be appreciated
i f you w i l l mail or wire, i n time to reach the Board
not l a t e r than Monday morning December 10, a l i s t of
any a d d i t i o n a l t o p i c s you would l i k e t o have discussed
a t the conference.
Very t r u l y yours,
Inclosure
Chester M o r r i l l ,
Secretary.
CH&IBMTS OF EACH INDUSTRIAL ADVISORY (XMIITT15E
X-9037FOR DISCUSSION WITH THE CHUBMTO OF THE INDUSTRIAL ADVISORY COIfi/IITOBES
1 . flhat i s f e e l i n g i n regard t o operation of S e c t i o n 13b "by t h e
Federal Reserve "banks,
( a ) Among i n d u s t r i a l i s t s , whether p o t e n t i a l borrowers
or not?
(b) Among other b u s i n e s s leaders?
( c ) Among f i n a n c i a l i n s t i t u t i o n s ?
2. Need f o r working c a p i t a l f o r industry and commerce.
(a) Has experience i n d i c a t e d that there was a substant i a l need not being met through u s u a l sources of
credit?
(b) I f such need now e x i s t s can i t be adequately met
under t h e present S e c t i o n 13b?
3 . Assuming that there w i l l be a continuing need f o r 13b advances or
commitments,
(a) Will a p p l i c a t i o n s f o r the most part take the form o f :
(1) A p p l i c a t i o n s f o r d i r e c t advances,
(2) A p p l i c a t i o n s i n v o l v i n g separate
advances by the Federal Reserve
bank and by f i n a n c i n g i n s t i t u t i o n , or
( 3 ) A p p l i c a t i o n s from f i n a n c i n g i n s t i t u t i o n s
f o r commitments covering proposed advances.
(b) Should the r a t e s charged by the Federal Reserve banks
be so f i x e d as t o encourage amplications under 1 ,
2 or 3 above?
4 . Recognising that subsection "a™ of S e c t i o n 13b i s designed t o meet
emergency s i t u a t i o n s , should i t be a permanent p r o v i s i o n of law,
and i f s o , should i t be amended a s regards:
( a ) Requirement t h a t applicant be unable t o o b t a i n
r e q u i s i t e a s s i s t a n c e from u s u a l s o u r c e s .
W 9
%.9037-a
(b) Requirement t h a t loans "be f o r working c a p i t a l
purposes.
( c ) Requirement that loans be made on a reasonable
and sound b a s i s .
(d) Requirement that loans be confined t o e s t a b l i s h e d
businesses.
Should s u b s e c t i o n
N n
b
of S e c t i o n 13b be a permanent p r o v i s i o n of
law, and i f s o , should i t be amended as regards;
(a) Authorization o f advances through f i n a n c i n g
i n s t i t u t i o n s other than member banks.
(b) Amount o f o b l i g a t i o n as t o l o s s s u s t a i n e d .
( c ) A u t h o r i z a t i o n of separate loans by Federal
Reserve banks aad by a f i n a n c i n g i n s t i t u t i o n on which repayments are made pro r a t a .
Would the making of loans f o r working c a p i t a l purposes presumably
have been conducted more e f f e c t i v e l y i f Intermediate Credit Banks
a f f i l i a t e d w i t h the Federal Reserve banks had been s e t up f o r
t h i s purpose a s provided i n the f i r s t b i l l proposed by the Federal
Reserve Board?
I f s o , why?
What has been experience a s regards a p p l i c a t i o n s ?
(a) Bxtent to which f e a r of r e j e c t i o n and of
p o s s i b l e adverse e f f e c t upon a p p l i c a n t ' s
c r e d i t standing has discouraged submission
of a p p l i c a t i o n s .
(b) Extent of and reasons f o r withdrawal of a p p l i cations .
'
( c ) I s character of a p p l i c a t i o n s improving" I s the
proportion of a p p l i c a t i o n s f o r d i r e c t advances
declining?
(d) Has there been any s u b s t a n t i a l number of comp l a i n t s of a l a c k of courtesy on the p a r t of
the Committee or of o f f i c i a l s or employes of
Federal Reserve banks?
/ 380
• 3 •
X-9037-a
( e ) l a t h e r e any evidence that Federal Reserve "banks are
r e q u i r i n g an e x c e s s i v e amount of c o l l a t e r a l t o
secure loans?
( f ) I s t h e r e evidence of any other ground f o r c r i t i c i s m
of e i t h e r the committees or the "basks?
0 . Assuming that more p a r t i c i p a t i o n s "by and commitments t o f i n a n c i a l
i n s t i t u t i o n s are d e s i r a b l e , what i s your recommendation as t o
how to "best obtain the cooperation of f i n a n c i a l i n s t i t u t i o n s
t o t h i s end?
9 . Has t h e Federal Reserve bank taken adequate measures t o b r i n g t o
the a t t e n t i o n of f i n a n c i a l i n s t i t u t i o n s , and p a r t i c u l a r l y of
member banks, the advantages t o them o f a c t i v e l y seeking out
commercial and i n d u s t r i a l e n t e r p r i s e s i n t h e i r t e r r i t o r y i n
need of a d d i t i o n a l working c a p i t a l and f u r n i s h i n g such c a p i t a l
under the p r o t e c t i o n of a commitment from the Federal Reserve
bank?
10. What, i n your experience, has been the most important s e r v i c e
rendered i n d u s t r y and commerce under S e c t i o n 13-b?
11. Has t h e a d m i n i s t r a t i o n of S e c t i o n 13-b to d a t e had any e f f e c t not
shown i n r e g u l a r reports of Federal Reserve Banks on t h e
e x t e n s i o n of c r e d i t through regular and usual channels t o
i n d u s t r y and commerce by p r i v a t e f i n a n c i n g i n s t i t u t i o n s ?
12. Recommendations, not covered elsewhere, on the s u b j e c t of t h e
a d m i n i s t r a t i o n of S e c t i o n 13-b.
X-9039
IHTEBPHSTlTIOl'l 01 BlHIi-TG ACT OF 1933
(Copies to be sent to a l l Federal reserve "banks)
November 26, 1934.
Mr.
. President,
_________ n a t i o n a l Bank of
.
Dear S i r :
This r e f e r s to your l e t t e r of August 21, 1934, addressed to
the Board's General Counsel, with regard to the i n t e r p r e t a t i o n of
the r u l i n g published on page 394 of the f e d e r a l Reserve B u l l e t i n f o r
June, 1934, as to the absorption of exchange or c o l l e c t i o n charges
by member banks under the provisions of s e c t i o n 19 of the f e d e r a l
Reserve Act.
You s t a t e that the __________ c l e a r i n g house banks are
a t present employing a uniform a n a l y s i s of account formula which i n cludes exchange charges and other out-of-pocket expenses and you r e quest a r u l i n g on the question whether the waiving of any exchange
charges or other out-of-pocket expenses would be i n v i o l a t i o n of the
law.
I t i s understood that you wish to be informed whether any such
exchange charges or other out-of-pocket expenses may l a w f u l l y be i n cluded i n an a n a l y s i s of an account which a l s o includes a c r e d i t a l lowed the customer f o r i n t e r e s t or for the reasonable value of the
account to the bank.
In t h i s connection, you a l s o ask whether i t
would be p e r m i s s i b l e f o r the c l e a r i n g house r u l e s to be amended t o
provide f o r waiving of out-of-pocket charges f o r a nominal sum for
X-9039
°
any one customer without regard for the amount of his balance, i n order
to eliminate the annoyance of inconsequential charges against an account.
Replying to your f i r s t question you are advised that the waiving of any exchange charges or other out-of-pocket expenses and the i n clusion of such charges or expenses by a member bank in an analysis of
an account which a l s o includes a credit allowed the customer f o r i n t e r e s t
or f o r the reasonable value of the account to the bank, would involve
a payment of i n t e r e s t to the extent that such credit o f f s e t s such charges
waived and absorbed by the bank, and would, accordingly, be i n v i o l a t i o n
of the law i f the d e p o s i t i s payablecn demand, except as indicated below.
The Federal Reserve Board has recently had occasion to consider
whether member banks of the Federal Reserve System may l a w f u l l y operate
i n accordance with the provisions of a clearing house rule reading as
follows:
"No bank s h a l l make a regular practice of absorbing for any customer a l l exchange or c o l l e c t i o n
charges or other out-of-pocket expenses incurred
on behalf of such customer; but, i n exceptional
circumstances, when i t would create f r i c t i o n or
misunderstanding to charge a customer f o r i s o l a t ed items of t r i v i a l amounts, the banks may absorb such individual items, including i s o l a t e d
exchange and c o l l e c t i o n charges and charges f o r
telephone c a l l s , telegrams and similar items,
provided that the banks act i n good f a i t h and
do not u t i l i z e the absorption of such items as
a b a s i s for s o l i c i t i n g accounts or attempting
to obtain an advantage over competitors."
Where the amount of such items absorbed does not vary with or
bear a s u b s t a n t i a l l y direct r e l a t i o n to the amount of the customer's
balance, the absorption of such items can not be considered an indirect
payment of i n t e r e s t within the meaning of section 19 of the Federal
X-9039
Reserve Act, unless such items are included in an analysis of accounts
which involves t h e i r "being o f f s e t i n whole or i n part "by an analysis
credit allowed to the customer for i n t e r e s t or the earning value of
the account.
Even where the bank analyzes accounts i n t h i s manner,
i t i s "believed that the absorption of i s o l a t e d items of the character
described above i n t r i v i a l amounts may be disregarded i n accordance
with the rule that the law takes no notice of inconsequential matters.
The Board, therefore, sees no objection to the adoption of a rule subs t a n t i a l l y i n accordance with that quoted above.
Your l e t t e r suggests that a member bank be permitted to absorb
such charges i n amounts up to $2.00 per month for any one customer i n
order to eliminate the annoyance of inconsequential charges against
an account.
While the Board does not f e e l that i t would be advisable
to prescribe any f i x e d amount of charges which might be absorbed under
the above-quoted r u l e , i t i s believed that such a rule w i l l afford a
s a t i s f a c t o r y b a s i s for treatment of exchange charges and other o u t - o f pocket expenses by member banks which may see f i t to operate under a
rule of t h i s kind.
Very t r u l y yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9040
December 6, 1934#
Dear S i r :
The F e d e r a l Reserve Board has given c o n s i d e r a t i o n t o t h e
r e p l i e s r e c e i v e d t o i t s t e l e g r a m of J u l y 14, 1934, Trans 2036, w i t h
r e g a r d t o expenses of t h e members of t h e i n d u s t r i a l a d v i s o r y committees.
As you know, s e c t i o n 13b (d) of t h e F e d e r a l Reserve Act, as
amended, reads i n p a r t as f o l l o w s :
"Each member of such committee s h a l l be a c t i v e l y
engaged i n some i n d u s t r i a l p u r s u i t w i t h i n t h e F e d e r a l
Reserve d i s t r i c t i n which t h e committee i s e s t a b l i s h e d ,
and each such member s h a l l serve w i t h o u t compensation
but s h a l l be e n t i t l e d t o r e c e i v e from t h e F e d e r a l Res e r v e bank of such d i s t r i c t h i s n e c e s s a r y expenses
while engaged i n the b u s i n e s s of t h e committee, or a
per diem allowance i n l i e u t h e r e o f t o be f i x e d by t h e
F e d e r a l Reserve Board. 11
While t h e Board i s sympathetic t o t h e s u g g e s t i o n t h a t t h e
members of t h e i n d u s t r i a l a d v i s o r y committees should r e c e i v e a comp e n s a t i o n f o r t h e i r s e r v i c e s , i t i s c l e a r from t h e p r o v i s i o n of
s e c t i o n 13b r e f e r r e d t o above t h a t t h e law contemplates t h a t t h e
s e r v i c e s r e n d e r e d by t h e members of the committees s h a l l be w i t h o u t
compensation and t h a t any per diem f i x e d by t h e F e d e r a l Reserve
Board should be i n l i e u of n e c e s s a r y expenses, and, t h e r e f o r e ,
X-9040
2
should bear some r e l a t i o n s h i p t o such e x p e n s e s .
Accordingly, t h e
F e d e r a l Reserve Board has approved t h e reimbursement of members of
the i n d u s t r i a l a d v i s o r y committees as f o l l o w s :
(l)
A member en-
gaged on b u s i n e s s f o r t h e committee i n t h e c i t y i n which h i s p l a c e
of b u s i n e s s i s l o c a t e d may be reimbursed f o r t h e a c t u a l expenses
i n c u r r e d by him, (2)
A member engaged on b u s i n e s s f o r t h e commit-
t e e o u t s i d e t h e c i t y i n which h i s p l a c e of b u s i n e s s i s l o c a t e d may
be paid a per diem of $10.00 a day plus a c t u a l t r a n s p o r t a t i o n e x p e n s e s , o r , i f he so e l e c t s , may be reimbursed f o r t h e a c t u a l expenses i n c u r r e d by him.
Very t r u l y y o u r s ,
4&V&4Z5/ h
Chester M o r r i l l ,
Secretary#
TO ALL FEDERAL RESERVE AGENTS
z
) c
r v u
^
X-9041
FEDERAL
RESERVE
2 2 6 ^ 2
STATEME^IT FOR THE PRESS
For immediate r e l e a s e .
December 7, 1934.
HIIvIE WHEN PAYMENT IS DEEMED RECEIVED IN CASH
TRANSACTIONS IN UNREGISTERED, NON-EXEMPTED
SECURITIES.
Ruling No. 39 i n t e r p r e t i n g R e g u l a t i o n T.
S e c t i o n 4 ( f ) of
R e g u l a t i o n T p r o v i d e s i n p a r t t h a t t h e r e c e i p t i n good f a i t h of
a check or d r a f t drawn on a bank which i n t h e o r d i n a r y course of
b u s i n e s s i s payable on p r e s e n t a t i o n , or t h e shipment i n good
f a i t h of s e c u r i t i e s w i t h s i g h t d r a f t a t t a c h e d may, f o r t h e p u r poses of t h e r e g u l a t i o n , be deemed to be t h e r e c e i p t of payment
of t h e amount of such check or d r a f t .
The F e d e r a l Reserve
Board has been asked, i n view of r u l i n g number 34 i n t e r p r e t i n g
R e g u l a t i o n T, whether t h i s a p p l i e s t o "cash t r a n s a c t i o n s " i n
u n r e g i s t e r e d , non-exempted s e c u r i t i e s .
I n r e p l y , t h e Board
r u l e s t h a t t h e p r o v i s i o n s of s e c t i o n 4 ( f ) of t h e r e g u l a t i o n
r e g a r d i n g t h e time when payment i s deemed t o be r e c e i v e d apply
t o "cash t r a n s a c t i o n s " i n u n r e g i s t e r e d , non-exempted s e c u r i t i e s
as w e l l as t o "cash t r a n s a c t i o n s " i n o t h e r s e c u r i t i e s •
387
X-9042
L1RH
al 1 r e s e r v e
STATEI/IENT FOR.TilE PRESS
For immediate r e l e a s e *
December 7, 1934.
JURISDICTION OF BUSINESS CONDUCT COMMITTEE TO
GRANT EXTENSIONS OF TIME IN CONNECTION VflTKCASH
TRANSACTIONS.
Ruling No. 40 i n t e r p r e t i n g R e g u l a t i o n T.
In r e p l y t o s e v e r a l
i n q u i r i e s r e g a r d i n g e x t e n s i o n s of time i n c o n n e c t i o n w i t h "cash
t r a n s a c t i o n s " ^ t h e F e d e r a l Reserve Board r u l e s t h a t t h e j u r i s d i c t i o n
of t h e b u s i n e s s conduct committee or o t h e r s u i t a b l e committee of a
n a t i o n a l s e c u r i t i e s exchange t o g r a n t e x t e n s i o n s of time under s e c t i o n 6 of R e g u l a t i o n T i s n o t c o n f i n e d t o members of t h a t exchange
or t o t r a n s a c t i o n s on t h a t exchange.
Assuming t h e c i r c u m s t a n c e s
w a r r a n t an e x t e n s i o n of t i m e , t h e committee may g r a n t such an ext e n s i o n of time t o any member of t h a t exchange or t o any b r o k e r or
d e a l e r who t r a n s a c t s a b u s i n e s s i n s e c u r i t i e s through t h e medium of
a member of t h a t exchange.
Furthermore, t h e committee may g r a n t
t h e s e persons such an e x t e n s i o n of time not only i n c o n n e c t i o n w i t h
t r a n s a c t i o n s e f f e c t e d on t h e exchange, but a l s o i n c o n n e c t i o n w i t h
t r a n s a c t i o n s n o t e f f e c t e d on t h e exchange.
This a p p l i e s t o " c a s h
t r a n s a c t i o n s " i n u n r e g i s t e r e d , non-exempted s e c u r i t i e s , as w e l l as
t o o t h e r "cash t r a n s a c t i o n s " ; and i t i s not n e c e s s a r y t h a t t h e
t r a n s a c t i o n i n v o l v e a s e c u r i t y r e g i s t e r e d on t h e exchange i n q u e s t i o n , or any o t h e r r e g i s t e r e d s e c u r i t y .
388
X-9045
December 7, 1954.
SUBJECT:
General Policy of Treating Appreciation
and Depreciation in S e c u r i t i e s in Connect i o n with Applications for Voting Permits.
Dear Sir;
In connection with the issuance of limited and general v o t ing permits to holding company a f f i l i a t e s under the provisions of
section 5144 of the Revised Statutes of the United S t a t e s , i t i s the
Board's p o l i c y , as you know, to require that holding company a f f i l i a t e s and their subsidiary banks charge o f f or otherwise eliminate
from their a s s e t s the following:
(a) a l l l o s s e s in loans and discounts, (b) a l l
depreciation in stocks and defaulted s e c u r i t i e s ,
(c) a l l depreciation i n s e c u r i t i e s not of the
four highest grades as c l a s s i f i e d by a recognized investment service organization regularly
engaged in the business of rating or grading s e c u r i t i e s and (d) a l l other l o s s e s , as shown by
the l a t e s t available report of examination.
In connection with the elimination of depreciation in securi t i e s under (b) and (c) above, the question has arisen as to what extent appreciation in s e c u r i t i e s may be deducted from the depreciation
in other s e c u r i t i e s .
This same general question has been ruled upon
by the Board in connection with applications for membership, in a
l e t t e r to a l l Federal reserve agents dated December 9, 1933 (X-7705).
X-9043
-2-
The principles stated in that l e t t e r should be applied with respect
to the elimination of depreciation in s e c u r i t i e s in cases involving
the issuance of voting permits.
You are a l s o advised that in connection with the elimination of depreciation in s e c u r i t i e s under (b) and (c) above, such
elimination, in the case of r e a d i l y marketable s e c u r i t i e s , may be
based upon current market values of such s e c u r i t i e s .
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
X-9044
WASHINGTON
address official correspondence t o
t h e federal reserve board
December 8, 1934.
SUBJECT:
Code Word Covering Hew Issue
of Treasury B i l l s .
Dear S i r :
In connection with telegraphic transactions i n
Government s e c u r i t i e s "between Federal reserve "banks, the
following code word has "been designated to cover a new
i s s u e of Treasury B i l l s :
"NOXPIG-" - Treasury B i l l s to "be dated December
12, 1934, and to mature June 12, 1935
This word should be inserted i n the Federal Reserve Telegraph Code book, following the supplemental
code word "NOXPEN" on page 172.
TO GOVERNORS
Very truly yours,
J. C. Noell,
Assistant Secretary.
OF AIL F. R. BANKS
"~~7
/
: 391
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9045
December 10,1934
SUBJECT:
Complimentary Copies of Federal
Reserve B u l l e t i n f o r State Bank
Examiners.
Dear Sir:
The Federal Reserve Board w i l l furnish a complimentary copy of the Federal Reserve B u l l e t i n during the
year 1935 to each State bank examiner who may desire i t .
Please send to t h i s o f f i c e , not l a t e r than December 30,
1934 a l i s t showing the name and address of each State
hank examiner i n your d i s t r i c t who desires to receive a
complimentary copy of each i s s u e .
sry truly yours,
Assistant Secretary
TO ALL F.R. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
X-9046
address official correspondence t o
t h e federal reserve board
December 14, 1934.
SUBJECT:
Code T7ord Covering New Issue
of Treasury B i l l s .
Dear S i r :
In connection with telegraphic transactions i n
Government s e c u r i t i e s "between Federal r e s e r v e banks, the
f o l l o w i n g code word has been designated to cover a new
i s s u e of Treasury B i l l s :
"SOXPOL" - Treasury B i l l s to be dated December
19, 1934, and to mature June 19, 1935.
This word should be i n s e r t e d i n the Federal Reserve Telegraph Code book, f o l l o w i n g the supplemental
code word "ITOXPIG" on page 172.
TO
n
Very t r u l y yours,
J. C. ? o e l l ,
A s s i s t a n t Secretary.
GOVERNORS OF ALL F. R. BAMS
3 9 3
X-9047
FEDERAL
RESERVE
BOARD
STA.TEMBE) FOR THE PRESS
December 14, 1934.
For r e l e a s e at 4:30 p. m.
The Federal Reserve Board announces that the Federal Reserve Bank of Atlanta has established a rediscount rate of 2§$
e f f e c t i v e December 15, 1934.
X-9048
December 15, 1934.
SUBJECT $ Approval of Reduction of Preferred
Stock or Capital Notes or Debentures
by the Federal Reserve Board.
Dear Sir;
This r e f e r s to a question raised by one of the Federal Reserve .Agents with regard t o whether or not the approval of the
Federal Reserve Board of the retirement of preferred stock of a
national bank or of the retirement of capital notes or debentures
or preferred stock of a State member bank i s required.
In connection with the inquiry regarding the retirement
of preferred stock of a national bank# you are advised that the
Board has heretofore taken the p o s i t i o n that i n view of the provisions of s e c t i o n 302 of the Ibiergency Banking Act of March 9, 1933,
the Board's approval i s not required with respect t o the reduction
of preferred stock of a national bank.
Under the terms of such
section 302, preferred stock issued by national banks i s made subj e c t t o retirement i n such manner and upon auch conditions as may
be provided i n the Articles of Association of the bank# with the
approval of the Comptroller of the Currency,
Under the provisions of the Federal Reserve Act a State
395
-2-
A-9048
member bank i s not required to obtain the approval of Vne
Federal
Reserve Board of a reduction i n i t s capital stock, either common or
preferred, unless the particular State member bank i s subject t o a
condition of membership requiring the Board's approval of a reduct i o n of i t s capital stock.
The Bfard f e e l s that in any case where
the Board's approval of the reduction of the c a p i t a l stock of a
State member bank i s required under a condition of membership such
approval would be required of a reduction of preferred stock as well
as commdn stock.
Under the provisions of section 9 of the Federal Reserve Act,
as amended, as you know, the terms "capital" and '^capital stock",
for the purposes of membership of State banks i n the Federal Reserve
System, s h a l l include the amount of outstanding c a p i t a l notes or
debentures l e g a l l y issued by the applying bank and purchased by the
Reconstruction Finance Corporation.
In view of t h i s f a c t , the
Board f e e l s that i n any case where, under a condition of membership,
the Board's approval of the reduction of the capital stock of a State
member bank i s required# approval of the reduction of c a p i t a l notes
or debentures lawfully issued by such bank and purchased by the Reconstruction Finance Corporation would a l s o be required*
On the
other hand* i n the case of any State member bank not subject t o such
a condition of membership, the Board's approval of a reduction of
such cap?tel notes or debentures issued by the bank would not be
required.
396
-3-
X-9048
The Board understands that provision i s usually made, among
other things, for the retirement from time t o time of c a p i t a l notes
or debentures or preferred stock out of earnings of the bank and t h a t ,
accordingly, there may bo numerous reductions i n comparatively small
amounts of c a p i t a l notes or debentures or preferred stock issued by
State member backs.
In the circumstances# the Board f e e l s that i t
i s appropriate to authorize the respective Federal Reserve Agents,
in cases in which the Board's approval i s required, t o approve on the
Board'e behalf reductions of capital notes or debentures or preferred
stock issued by State member banks where, i n the opinion of the Federal Reserve Agent, a l l of the circumstances involved warrant such a
reduction and where a f t e r such reduction i s accomplished the member
bank w i l l have an unimpaired capital and surplus of not l e s s than
one-tenth of the amount of i t s deposit l i a b i l i t i e s *
Each of the Fed-
eral Reserve Agents i s accordingly hdreby authorized t o approve on
behalf of the Board, i n the circumstances and within the l i m i t a t i o n s
described, reductions of capital nctes or debentures or preferred
stock issued by State member banks i n any case where the Board's
approval of such reduction i s required.
I t i s requested that in any such case the Board be advised
for i t s records of the reduction which, has been e f f e c t e d with the
Agent's approval.
Of course, should any case a r i s e i n which f o r
any rec son v-he i'eecral Reserve Agent i s i n doubt as t o the wisdom
397
-4«
A-9048
of the proposed reduction or i s unwilling t o give h i s approval thereto
under the authority granted herein, the bank's a p p l i c a t i o n may be submitted t o the Board f o r determination, together with current informat i o n as t o the condition of the applying bank, i t s reason f o r desiring
to e f f e c t the reduction and any other information, including the
•iigeiit's comments and recommendation, which may be of a s s i s t a n c e t o
the Board i n passing upon the application*
I t i s assumed, of course, t h a t i n passing upon any proposed
reduction of c a p i t a l notes or debentures or preferred stock, the
Agent w i l l g i v e consideration to the general condition of the i n s t i t u t i o n and the s u f f i c i e n c y of i t s remaining c a p i t a l structure, with
due regard t o the maintenance of lawful c a p i t a l requirements and an
adequate r a t i o of c a p i t a l t o deposits i n view of a l l the circumstances
involved in the particular c a s e .
F n i l e , as noted above, the Board's approval of reductions of
c a p i t a l stock or c a p i t a l notes or debentures i s not required under
the law i n some cases, the Board f e e l s , i n view of the important e f f e c t which a reduction i n the c a p i t a l stock of a bank may have on i t s
f i n a n c i a l condition, that the r e s p e c t i v e Federal .Reserve Agents should
endeavor to keep themselves informed as t o any proposed reductions i n
ihe c a p i t a l stock or c a p i t a l notes^or debentures of State member
banks* whether the Board's approval i s required i n such cases or not,
and t o take such a c t i o n as may be appropriate in any case where the
: 398
-5~
X-9048
proposed, reduction would not be t o the t e s t i n t e r e s t s of the bank.
The Board would l i k e t o be advised for i t s records of each
reduction e f f e c t e d i n the c a p i t a l stock or c a p i t a l notes or debentures of a State member bank, and the Board w i l l be glad t o give
consideration t o any such proposed reduction i n any case i n which
the Federal Reserve Agent f e e l s that the circumstances warrant, even
though the Board's approval of the reduction i s not required under
the conditions #f membership t o which the p a r t i c u l a r State member
bank i s subject*
Very t r u l y yours»
Q&upCDo
hD/rULdUi
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERV3 AGENT'S,
JC-9049
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e i n morning p a p e r s ,
Monday, December 17, 1934.
December 15, 1934.
REDUCTION IN INTEREST RATE ON TIME AND SAVINGS DEPOSITS
The F e d e r a l Reserve Board has reduced from 3% t o 2*|%
t h e maximum r a t e of i n t e r e s t t h a t may be p a i d on time and s a v i n g s
d e p o s i t s by member banks, and t h e F e d e r a l Deposit I n s u r a n c e Corporat i o n has made a c o r r e s p o n d i n g r e d u c t i o n i n t h e maximum r a t e t h a t
may be p a i d by S t a t e banks and t r u s t companies which a r e i n s u r e d by
t h e Corporation#
February 1, 1935.
The new maximum r a t e w i l l become e f f e c t i v e on
The r e d u c t i o n i n t h e d e p o s i t r a t e i s i n harmony
w i t h the p r e v a i l i n g downward t r e n d i n i n t e r e s t r a t e s , and i s expected
t o s u p p o r t t h a t t r e n d , p a r t i c u l a r l y i n regard t o r a t e s on l o n g - t i m e
money, which a r e an i m p o r t a n t f a c t o r i n b u s i n e s s r e c o v e r y .
The r e d u c t i o n i s i n l i n e w i t h t h e a c t i o n t a k e n by S t a t e
banking a u t h o r i t i e s i n s e v e r a l S t a t e s and a l s o w i t h v o l u n t a r y a g r e e ments made by c l e a r i n g house a s s o c i a t i o n s and o t h e r banking g r o u p s .
The d e c r e a s e i n r a t e s on time d e p o s i t s should have a t e n d e n c y t o
b r i n g about a d e c l i n e i n t h e c o s t t o borrowers and t o encourage dep o s i t o r s t o seek investment f o r t h e i r i d l e f u n d s .
A more f a v o r a b l e
c a p i t a l market may be expected t o c r e a t e a more f a v o r a b l e mortgage
market as w e l l as encourage r e f u n d i n g o p e r a t i o n s and t h e u n d e r t a k i n g
-2-
X-9049
of new c a p i t a l p r o j e c t s g e n e r a l l y , a development e s s e n t i a l t o recovery#
The F e d e r a l Reserve Board's a c t i o n i n t h i s m a t t e r i s i n
accordance w i t h t h e duty imposed upon i t by t h e Banking Act of 1933,
which p r o v i d e s t h a t
11
The F e d e r a l Reserve Board s h a l l f r o m time t o
time l i m i t by r e g u l a t i o n t h e r a t e of i n t e r e s t which may be p a i d by member banks on time d e p o s i t s • "
This p r o v i s i o n of t h e law p l a c e s upon the
F e d e r a l Reserve Board t h e r e s p o n s i b i l i t y of r a i s i n g or lowering from
time t o time t h e maximum r a t e t h a t may be p a i d by member banks on time
and s a v i n g s d e p o s i t s i n accordance w i t h p r e v a i l i n g economic c o n d i t i o n s
and the r e q u i r e m e n t s of t h e p u b l i c i n t e r e s t .
The F e d e r a l Reserve Board's R e g u l a t i o n Q, as amended t o
reduce t h e maximum r a t e t o 2 ^ , w i l l appear i n t h e December i s s u e of t h e
F e d e r a l Reserve B u l l e t i n .
In a d d i t i o n t o t h e amendment r e d u c i n g t h e maximum r a t e of
interest to
t h e r e g u l a t i o n , as amended, w i l l
(l)
p e r m i t t h e com-
p u t a t i o n of i n t e r e s t on time and savings d e p o s i t s a t a r a t e n o t i n excess
of 2jf/o compounded q u a r t e r l y i n s t e a d of (as p r o v i d e d i n t h e old r e g u l a t i o n ) a t a r a t e n o t i n excess of t h e maximum compounded s e m i - a n n u a l l y ,
(2)
enable member banks t o pay i n t e r e s t on time and s a v i n g s d e p o s i t s
r e c e i v e d d u r i n g t h e f i r s t f i v e days of any c a l e n d a r month a t t h e maximum
r a t e p r e s c r i b e d i n t h e r e g u l a t i o n c a l c u l a t e d from the f i r s t day of t h e
month, and ( 3 )
p e r m i t f o r e i g n branches of American banks t o o b t a i n
a u t h o r i t y from t h e Board t o pay i n t e r e s t on time and s a v i n g s d e p o s i t s
a t r a t e s c o n s i s t e n t with competitive conditions p r e v a i l i n g i n t h e
3l o c a l i t i e s where t h e f o r e i g n branches are s i t u a t e d .
X-9049
The a c t i o n of
t h e Board does n o t a f f e c t t h e payment of i n t e r e s t by member banks a t
a r a t e h i g h e r t h a n t h e maximum i n accordance w i t h t h e . t e r m s of any
c o n t r a c t l e g a l l y e n t e r e d i n t o p r i o r t o and i n f o r c e on December 18,
1934.
402'
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9050
December 17, 1934
SUBJECT:
Expense, Main L i n e s , Leased
Wire System, November, 1934.
Dear S i r :
Inclosed, h e r e w i t h you w i l l find, two mimeographed s t a t e m e n t s , X-9050-a and X-9050-b, c o v e r i n g
i n d e t a i l o p e r a t i o n s of t h e main l i n e s , Leased Wire
System, d u r i n g t h e month of November, 1934.
P l e a s e c r e d i t t h e amount p a y a b l e "by your hank
f o r your s h a r e of t h e expense of t h e Leased Wire
System, t o t h e F e d e r a l Reserve Bank of Richmond i n
your d a i l y s t a t e m e n t of c r e d i t s t h r o u g h t h e Gold S e t t l e m e n t Fund f o r t h e account of t h e F e d e r a l Reserve
Board, and a d v i s e t h e F e d e r a l Reserve Bank of Richmond
"by w i r e t h e amount and purpose of t h e c r e d i t .
Very t r u l y y o u r s ,
Q-€
F i s c a l Agent.
Inclosures.
TO GOVERNORS OF ALL F . R. BANKS -
X—9050—a
REPORT SHCWIFG CLASSIFICATION AIT NUMBER OF WORDS TRANSMITTED OVER MAIK LIMES
OF TEE FEDERAL RESERVE LEASED WISE SYSTEM FOR TEE MOJVTE OF FOVELiBER, 1934
Business
reported
by banks
From
Boston
17ew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas CityDallas
San Francisco
Total
32,o4o
149,635
25,228
44,076
45,996
45,732
75,395
58,791
33,876
58,960
49,872
81,094
700,715
F. R. Board business
Words sent by
ITew York chargeable to other
F. R. Banks (1)
1,617
-
1,739
1,576
1,622
1,542
1,976
1,809
1,501
1,723
2,097
3,107
20,309
2!et Federal
reserve
bank
business
4.67
20.75
3.74
6-33
6.60
6.56
10.73
8.40
4.91
8.42
7.21
11.68
100.00
33,657
149,635
26,967
45,652
47,618
47,274
77,371
60,600
35,377
60,703
51,969
84,201
721,024
317,744
1,038,768
Reimbursable business Incoming & Outgoing
Total words transmitted over main l i n e s
574,360
•
(*)
These percentages used in c a l c u l a t i n g the pro rata share of l e a s e d " i r e expense as shown
on the accompanying statement (X-9050-b)
(l)
Uumber of words sent by i'ew York to other F. R. Banks for t h e i r s o l e b e n e f i t charged to
banks indicated in accordance with action taken at Governors' conference
"ovenrber 2-4, 1925
Per cent of t o t a l
bank business (*)
1,613,128
O
Cv
41
X-5050-b
REPORT OF EXPENSE iO.117 LIMES
FEDERAL RESERVE LEASED WIRE SYSTEM, NOVEMBER, 1934.
Name of bank
Operators'
Salaries
Retirement
Contributions
$260.00
Boston
$ 23.40
121.12
$Tew York
1,345.80
Philadelphia
225.00
20.25
Cleveland
306.66
27.60
Richmond
190.00
17.10
Atlanta
270.00
24.30
Chicago
4,057.60 (#) 371.50
St. Louis
195.00
17.55
200.00
18.00
Minneapolis
Kansas City287.00
25.83
251.00
Dallas
22.59
San Francisco
380.00
34.20
Federal Reserve Bd.
Total
$7,968.06
$723.44
Operators 1
overtime
(&)
(#)
(*)
(a)
Main l i n e rental, Richmond--7a shington
Includes s a l a r i e s of Washington operators.
CreditAmount reimbursable to Chicago.
Total
expenses
$ -
$283.40
$737
1,466.92
3,276
245.25
• 59
334.26
999 .58
1,042 .22
230.00 (&)
437.10
294.30
1,035 .90
4,431.10
1,694
2.00
1,326
212.55
218.00
775 .34
312.83
1,329 .61
1,138
273.59
1,844
414.20
15,598.73
1?.598.73
=
$24,522.23 $15,791.15
$2.00 $15,828.73
$
Less Reimbursable Charges
Wire
rental
Pro rata
share of
total
expenses
:S
8,731.08
$15,791.15
Credits
Payable to
Federal
Reserve
Board
5283.40
1,466.92
245.25
334.26
437.10
294.30
4,431.10
212.55
218.00
312.83
273.59
4l4.20
$454.05
1,809.74
345.34
665.32
605.12
741.60
2,736.7l(*)
1,113.91
557.34
1,016.78
864.95
1,430.21
$8,923.50
$9,604.35
2,736.71(a)
$6,867.65
O
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9051
December 26# 1934.
SUBJECT: Minimum retirement allowances.
Dear Sir:
Bequests have "been received from two Federal Reserve tanks
for authority to grant retirement allowances to certain employees,
who have attained age 65, in excess of the allowances to which they
are e n t i t l e d under the provisions of Subsection 1 of Section 3 of
the Rules and Regulations governing the Retirement System of the
Federal Reserve banks.
The Board i s impressed with the d e s i r a b i l i t y of enabling the
Federal Reserve banks to make provision for minimum retirement allowances, somewhat in excess of those provided for in Subsection 1 of
Section 3, whenever i n the judgment of their d i r e c t o r s , a f t e r taking
into consideration the circumstances and conditions a f f e c t i n g the
personnel of their respective banks, i t i s desirable to do so, and
recognizes the f a c t that a minimum allowance that may be deemed s a t i s
factory for one bank may not be so for another bank.
In the circumstances and in order to allow s u f f i c i e n t f l e x i b i l i t y in t h i s matter without the n e c e s s i t y of action by the Federal
1-9051
—2—
Reserve Board separately for each Federal Reserve bank, the Board
hereby authorizes your bank to make such additional contributions to
cover the cost of allowances granted i n accordance with the l a s t paragraph of Section 9 of the Rules and Regulations of the Retirement
System as may be necessary to bring the minimum retirement allowance,
under the regular cash refund annuity plan, to employees r e t i r i n g
at or a f t e r age 65 up to such amount as the board of d i r e c t o r s of
your bank may allow, but not to exceed $30 per annum for each y e a r ' s
sorvico to a maximum of 16 years, or the a c t u a r i a l equivalent thereof i n one of the optional forms that the member may s e l e c t under
Subsection 6 of Section 3 of the Rules and Regulations.
In deter-
mining length of s e r v i c e for t h i s purpose any s e r v i c e rendered up
to the time of retirement may be counted, even though a portion of
such s e r v i c e may not be creditable s e r v i c e as defined i n Section 1
of the Rules and Regulations.
Very t r u l y yours,
Chester Morrill,
Secretary.
TO ALL GOVERNORS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9052
December 20, 1934#
Dear S i r :
The B o a r d ' s l e t t e r of A p r i l 29, 1933, X-7425, on t h e subj e c t of i n d e b t e d n e s s of o f f i c e r s and employees, s t a t e d t h a t t h e r e
should be a prompt r e p o r t t o t h e Board of any i n d e b t e d n e s s of t h e
kind r e f e r r e d t o i n t h e l e t t e r i n c u r r e d by t h e F e d e r a l r e s e r v e agent
or any member of h i s s t a f f a f t e r J u l y 1, 1933, and such r e p o r t
should c o n t a i n i n f o r m a t i o n s i m i l a r t o t h a t c a l l e d f o r i n t h e Board 1 s
l e t t e r w i t h r e s p e c t t o i n d e b t e d n e s s o u t s t a n d i n g on t h a t d a t e .
I t was s u g g e s t e d by t h e Board i n correspondence w i t h some
of t h e F e d e r a l r e s e r v e agents during the p a s t year t h a t t h e y r e p o r t
t o t h e Board, as i n c u r r e d , i n d e b t e d n e s s c r e a t e d by members of t h e
s t a f f of t h e a g e n t ' s department and t h a t a r e p o r t be s u b m i t t e d as
of J a n u a r y 1 and J u l y 1 of each year with r e g a r d t o t h e p r o g r e s s b e ing made i n t h e l i q u i d a t i o n of t h e i n d e b t e d n e s s p r e v i o u s l y r e p o r t e d .
F u r t h e r c o n s i d e r a t i o n has been given t o t h i s m a t t e r , and i t
w i l l be s u f f i c i e n t f o r t h e Board's purposes i f i n t h e f u t u r e a r e p o r t i s r e c e i v e d f r o m you as of January 1 and J u l y 1 of each year
g i v i n g t h e i n f o r m a t i o n r e q u e s t e d i n t h e second p a r a g r a p h of t h e
Board's l e t t e r of A p r i l 29, 1933, r e g a r d i n g t h e i n d e b t e d n e s s
408
X-9052
-2
i n c u r r e d by t h e F e d e r a l r e s e r v e agent and t h e members of h i s s t a f f
during t h e p r e c e d i n g s i x months ( e x c l u d i n g c u r r e n t b i l l s f o r ordinaryp e r s o n a l or household expenses b u t i n c l u d i n g o t h e r i n d e b t e d n e s s i n c u r r e d d u r i n g t h e s i x months' p e r i o d ) , and c o n t a i n i n g a s t a t e m e n t , i n
c o n n e c t i o n w i t h t h e e x i s t i n g i n d e b t e d n e s s of each i n d i v i d u a l , of t h e
program f o r the l i q u i d a t i o n of such i n d e b t e d n e s s .
I t w i l l be a p p r e -
c i a t e d i f you w i l l a r r a n g e t o submit r e p o r t s as of J a n u a r y 1 and
J u l y 1 of each year t o t h e Board i n accordance w i t h t h i s p r o c e d u r e .
A copy of t h e Board's l a t t e r of A p r i l 29, 1933, i s a t t a c h e d .
Very t r u l y - y o u r s ,
Chester M o r r i l l ,
Secretary*
Inclosure
TO ALL FEDERAL RESERVE AGE1ITS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7425
April 29, 1933.
SUBJECT:
Indebtedness of Officers and Employees.
Dear Sir:
Because of the special relationship that e x i s t s with member
banks and the high r e s p o n s i b i l i t y r e s t i n g upon the Federal reserve
banks i n connection therewith, the Board f e e l s that i t i s e s p e c i a l l y
important that the Federal Reserve Agents and their a s s i s t a n t s ,
including the members of their s t a f f s engaged in audits and examinat i o n s , should r e f r a i n from incurring any indebtedness, d i r e c t l y or
i n d i r e c t l y , to member banks, their subsidiaries or a f f i l i a t e s , or
otherwise placing themselves i n any p o s i t i o n which may result i n
questions being raised as to the independence of t h e i r judgment or
their disinterestedness i n the discharge of their r e s p o n s i b i l i t i e s
with respect to such banks under the Federal Reserve Act.
Further-
more, i n order to avoid the p o s s i b i l i t y of embarrassment i n connection
with the performance of their o f f i c i a l duties, i t i s the view of the
Board that they should r e f r a i n fro® incurring any indebtedness to
others except for legitimate and necessary purposes, and t h a t ,
whenever any indebtedness i s incurred by them (excluding, of course,
X-742S
— 2
—
current b i l l s f o r ordinary personal and household expenses, "but not
excluding indebtedness incurred to others to obtain funds for payment of such b i l l s ) , there should be prompt disclosure of a l l the
f a c t s to the Federal Reserve Board.
The Board desires that each Federal Reserve Agent prepare and
transmit to i t as promptly as p o s s i b l e a f t e r July 1, 1933, a report
showing as of that date any indebtedness of the agent and members of
h i s s t a f f (excluding, of course, current b i l l s for ordinary personal
and household expenses, but not excluding indebtedness incurred to
others to obtain funds for payment of such b i l l s ) .
The report should
set f o r t h the name of the person, firm, corporation, or i n s t i t u t i o n to
which the indebtedness i s due, the date on which i t was o r i g i n a l l y
incurred ( i n d i c a t i n g whether before or a f t e r such o f f i c e r or employee
entered the s e r v i c e ) , the maturity of the indebtedness, the unpaid
balance, a description of the security therefor, i f any, a b r i e f
statement of the purpose for which the indebtedness was incurred and
the progress being made i n liquidating i t , and any comment that the
Agent may wish to make i n connection therewith.
In addition, there
should be a prompt report to the Federal Reserve Board of any indebtedness of the kind referred to incurred by the Agent or any member of
his s t a f f a f t e r July 1, 1933, and such report should contain informat i o n similar to that called for above with respect to indebtedness
outstanding on that date.
The Board b e l i e v e s that the directors of the Federal reserve
banks w i l l f e e l that the same general principles should be applied t o
the members of the s t a f f s of the Federal reserve banks, p a r t i c u l a r l y
the o f f i c e r s , the heads of departments, and other employees occupying
X-7425
411.
- 3 responsible p o s i t i o n s , except that the reports mentioned would he made
to the Boards of Directors instead of to the Federal Reserve Board. It
requests, therefore, that t h i s l e t t e r be brought to the a t t e n t i o n of
the Board of Directors of each bank, with the suggestion that they
consider the a d v i s a b i l i t y of adopting these p r i n c i p l e s i f they have
not already been established, of taking appropriate steps to obtain
from such o f f i c e r s and employees information similar to that c a l l e d
for with respect to the Federal Reserve Agents and the members of their
s t a f f s , and of requiring a l l such o f f i c e r s and employees promptly to
report to the Board of Directors any indebtedness of the kind referred
to that may thereafter be incurred.
In t h i s connection, the Board desires to c a l l a t t e n t i o n to
i t s circular l e t t e r of May 7, 1924 (X-4048) which contains the following
statement;
n * * * the Federal Reserve Board b e l i e v e s i t w i l l be as
obvious to the directors of the Federal reserve banks as i t i s
to i t s e l f that the good conduct and repute of the Federal Reserve
System require that the o f f i c e r s of the reserve banks s h a l l give
their entire t i n e and a t t e n t i o n to the a f f a i r s of the banks and
not be i d e n t i f i e d with ary outside business i n t e r e s t s , "
The Board f e e l s confident that the directors of the Federal
reserve banks w i l l recognize the importance of s t r i c t conformity with
the p r i n c i p l e s set f o r t h i n that l e t t e r .
While i t r e f e r s p a r t i c u l a r l y
to the o f f i c e r s of Federal reserve banks, i t i s equally applicable to
heads of departments and employees occupying responsible p o s i t i o n s i n
the banks, as well as to the Federal reserve agents and the members of
their s t a f f s .
If any of then has any connection with a business con-
cern of any kind, tho Board requests that i t be promptly advised with
respect thereto.
1-7425
e—
—
The Board w i l l "be p l e a s e d to have an acknowledgment of the
r e c e i p t of t h i s l e t t e r , t o g e t h e r r i t h a statement of t h e a c t i o n
t h a t has "been or Trill be taken i n r e g a r d t o t h e s e m a t t e r s .
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
TO AGEHTS OF ALL F . R. BANKS.
413
4 1 3
X-9053
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e #
December 19, 1934#
A c o n f e r e n c e of t h e Chairmen of t h e I n d u s t r i a l Advisory Committ e e s was h e l d i n Washington on Monday and Tuesday, December 17th and
18th.
The c o n f e r e n c e was c a l l e d on November 28th f o r the purpose of
r eview ing t h e work done by t h e I n d u s t r i a l Advisory Committees during
t h e l a s t five months i n making recommendations t o t h e F e d e r a l Reserve
banks of t h e i r r e s p e c t i v e d i s t r i c t s under S e c t i o n 13b of t h e F e d e r a l
Reserve Act, and a l s o f o r the purpose of exchanging views and adopting
methods by means of which t o continue t h i s work i n t h e most e f f e c t i v e
manner p o s s i b l e i n accordance wi t h t h e p r o v i s i o n s of t h e law.
The f o l l o w i n g Chairmen were p r e s e n t s
Mr#
Mr.
Mr#
Mr#
Mr#
Mr#
Mr.
Mr *
Mr#
Mr *
Mr#
A. M# Creighton - Boston
William H. Pouch - New York
J . E. B u t t e r w o r t h - P h i l a d e l p h i a
F. A. Smythe - Cleveland
John Sanford - A t l a n t a
Max E p s t e i n - Chicago
Wm# K# N o r r i s - St* Louis
Sheldon V# Wood - Minneapolis
Walter J . Berkowitz - Kansas C i t y
Clarence Ousley - D a l l a s
Ralph Burnside - P o r t l a n d , Oregon.
A f t e r a complete d i s c u s s i o n of the s u b j e c t m a t t e r and a d o p t i o n of
a program f o r t h e f u t u r e , t h e Chairmen i s s u e d t h e f o l l o w i n g s t a t e m e n t :
11
At t h e i r meetings t h e l a s t two days, t h e chairmen of the
414
-2-
X-9053
I n d u s t r i a l Advisory Committees reviewed t h e p r o g r e s s made t h u s f a r i n
extending c r e d i t t o i n d u s t r y f o r working c a p i t a l purposes and c o n s i d e r e d
means of making b e t t e r known to bankers and b u s i n e s s men g e n e r a l l y t h e
advantages and b e n e f i t s which t h e i n d u s t r i a l l o a n p r o v i s i o n s of t h e Fede r a l Reserve Act open t o them.
"Under S e c t i o n 15b which was added to t h e F e d e r a l Reserve Act, on
June 19, 1934, member banks and other f i n a n c i n g i n s t i t u t i o n s which make
advances maturing i n f i v e y e a r s or l e s s t o e s t a b l i s h e d i n d u s t r i a l or
commercial e n t e r p r i s e s f o r t h e purpose of f u r n i s h i n g working c a p i t a l ,
may procure from t h e F e d e r a l Reserve banks commitments t o r e d i s c o u n t or
purchase such advances when r e q u e s t e d .
I n d u s t r i a l advances, covered by
such commitments, a r e among t h e most l i q u i d a s s e t s t h a t member banks can
hold.
I t i s a l s o provided by t h e Amendment t h a t i n e x c e p t i o n a l circum-
s t a n c e s t h e F e d e r a l Reserve banks may make d i r e c t advances of c r e d i t t o
/
e s t a b l i s h e d i n d u s t r i a l or commercial e n t e r p r i s e s which a r e unable t o
o b t a i n r e q u i s i t e f i n a n c i a l a s s i s t a n c e on a r e a s o n a b l e b a s i s f r o m t h e
usual sources.
"Experience brought out a t y e s t e r d a y ' s c o n f e r e n c e i n d i c a t e s t h a t
as a r e s u l t of t h e r e a d i n e s s of t h e F e d e r a l Reserve banks t o g r a n t commitments t o t a k e over such l o a n s , an i n c r e a s i n g number of b u s i n e s s e s
i n need of working c a p i t a l are f i n d i n g i t p o s s i b l e t o g e t t h e d e s i r e d
c r e d i t t h r o u g h t h e i r l o c a l banks•
This i s a h o p e f u l c o n d i t i o n ; and
s i n c e t h e p r o v i s i o n of t h e law a u t h o r i z i n g t h e F e d e r a l Reserve banks
t o make commitments t o banks 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 l i m i t s
-3-
^-9053
t h e r i s k t h a t need be assumed by t h e l a t t e r and g i v e s t o t h e advances
a l i q u i d c h a r a c t e r , i t i s t o be expected t h a t an i n c r e a s i n g number of
a p p l i c a n t s t o whom advances may be made on a sound and r e a s o n a b l e b a s i s
w i l l be able t o o b t a i n t h e i r re q u i rem en t s from t h e i r l o c a l i n s t i t u t i o n s •
!!
Up t o December 12, 1934, t h e I n d u s t r i a l Advisory Committees had
recommended approval of 1,055 a p p l i c a t i o n s f o r i n d u s t r i a l advances
amounting t o $51,000,000 most of which have been a c t e d on and approved
by t h e F e d e r a l Reserve b a n k s .
The a d d i t i o n a l working c a p i t a l t h u s p r o -
vided goes t o a v a r i e t y of i n d u s t r i e s , r e p r e s e n t i n g comprehensively t h e
whole f i e l d of e n t e r p r i s e .
S u b s t a n t i a l as t h e y a r e , i t i s n o t b e l i e v e d
t h a t advances t h u s f a r approved a r e f u l l y i n d i c a t i v e of the b e n e f i t s
which i n d u s t r y has d e r i v e d from t h e i n d u s t r i a l l o a n program of t h e
F e d e r a l Reserve System, f o r many of t h e s e b e n e f i t s a r e n o t of a n a t u r e
t o be d i s c l o s e d by t h e f i g u r e s of a p p l i c a t i o n s approved.
For example,
i n some c a s e s where an a p p l i c a t i o n i s made t o a F e d e r a l Reserve bank i n
t h e b e l i e f t h a t c r e d i t i s n o t a v a i l a b l e e l s e w h e r e , t h e Reserve bank has
been able to d i r e c t t h e a p p l i c a n t t o a l o c a l i n s t i t u t i o n w i l l i n g t o
supply h i s n e e d s .
In some cases a l s o where a d i r e c t advance has been
approved by a Reserve bank and i s about t o be made, a member bank or
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 w i l l decide t o t a k e t h e l o a n i t s e l f w i t h o u t
s e c u r i n g a commitment.
In o t h e r c a s e s , the g e n e r a l knowledge t h a t i n -
d u s t r i a l loans are being made by t h e F e d e r a l Reserve banks has encouraged
member banks 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 t o make advances t o i n d u s t r y on t h e i r own i n i t i a t i v e .
"Since t h e Chairmen of t h e I n d u s t r i a l Advisory Committees h e l d
-4-
X-9053-
t h e i r f i r s t c o n f e r e n c e i n Washington on September 27, t h e y have cooper-*
a t e d w i t h t h e F e d e r a l Reserve banks i n b r i n g i n g t o t h e a t t e n t i o n of
banks and t h e p u b l i c through correspondence, magazine a r t i c l e s , pamphlets,
r a d i o a d d r e s s e s and group meetings t h e advantages made a v a i l a b l e t o commerce and i n d u s t r y by t h e r e c e n t amendment t o t h e F e d e r a l Reserve Act#
The program adopted by t h e c o n f e r e n c e y e s t e r d a y p r o v i d e s f o r a c o n t i n u ance of t h e s e e f f o r t s .
!t
Attached i s a summary of t h e l a t e s t f i g u r e s on i n d u s t r i a l advances
approved by t h e I n d u s t r i a l Advisory Committees and t h e F e d e r a l Reserve
banks 1 1 .
INDUSTRIAL ADVANCES AMD COMMITMENTS UNDER SECTION 13-B OF THE FEDERAL RESERVE ACT
SUIZ'ARY BY FEDERAL RESERVE BANKS, JUNE 19 TO DECEMBER 12, 1934
B-8I7
i
(Amounts i n thousands of d o l l a r s )
(Not f o r p u b l i c a t i o n )
Federal
Reserve
Bank
Applications
received - net
Number
Amount
Applications
.under
consideration
Number Amount
Total applications
recommended f o r approval
by I n d u s t r i a l Advisory
Committee*
Number
Amount
Total" a p p l i c a t i o n s Advances
made
approved by F e d e r a l
Reserve Bank*
Number
Amount
Corami tments
outstanding
Boston
264
11,324
54
2,420
S3
5,831
52
3,996
1,677
1,244
New York
477
27,230
90
6,639
127
9,031
129
9,393
784
2,364
Philadelphia
32s
15,153
60
2,519
92
5,127
55
4,6o4
1,980
107
Cleveland
4l4
10,890
33
966
108
4,467
90
3,657
595
927
Ri chraond
271
9,922
30
1,551
74
5,148
72
5,046
1,367
204
Atlanta
351
.8,406
47
1,220
108
2,835
104
2,621
787
562
Chicago
727
37,227
46
9,309
75
5,288
46
2,754
800
S t . Louis
259
8,911
71
2,166
58
2,679
58
2,680
459
Minneapolis
6i4
12,823
112
2,426
137
3,637
120
2,990
1,306
Kansas City-
241
6,920
16
1,136
4i
2,179
36
1,894
262
192
Dallas
342
9,347
25
1,653
67
2,662
59
2,273
709
—
520
14,971
TOTAL
4,863
173,754
FEDEBAL RESERVE BOARD
DIVISION OF BANK OPERATIONS
DECEMBER 17, 1934.
220
804
7,255
39,260
85
2,503
72
250
1,055
51,387
893
2,216
44,124
San F r a n c i s c o
10,976
944
576
7,120
*With and without c o n d i t i o n s .
^
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9054
December 20, 1934.
Subject:
Issuance of Limited Voting Permits to
Holding Company A f f i l i a t e s i n connect i o n with Revision by Reconstruction
Finance Corporation of Dividend Rates
upon Preferred Stock.
Dear S i r :
The Federal Reserve Board has received advice that the
Reconstruction Finance Corporation has authorized a further r e v i s i o n
of the dividend r a t e s on preferred stock subscribed f o r or purchased
by the Corporation.
Certain banks are required to amend t h e i r char-
t e r s i n order to obtain t h e b e n e f i t of such r e v i s i o n , and other banks
may e l e c t whether or not they w i l l amend t h e i r charters i n connection
with such r e v i s i o n .
I t i s understood that such amendments are f o r
the purpose of bringing the charters of such banks i n t o conformity
with the present standard form of charter prescribed by the Reconstruct i o n Finance Corporation.
The f a c t s concerning such r e v i s i o n are s e t
out more f u l l y i n Reconstruction Finance Corporation Loan Agency B u l l e t i n No. 396 dated November 21, 1934, which has been placed i n the hands
of a l l Reconstruction Finance Corporation Agency Managers and Custodian Banks.
As you know, the Board addressed a l e t t e r dated November 10,
-3-
X-9054
1934 (X-9018) to a l l Federal Reserve Agents i n which i t stated that i t
would consider the issuance to holding company a f f i l i a t e s , upon compliance with certain minimum conditions, of limited voting permits for the
purpose of e l e c t i n g directors and acting upon routine matters at the
1935 annual meetings of their subsidiary member banks.
These purposes
were stated a f t e r the code word ANCILCO on page 7 of such l e t t e r .
Upon receipt of authority from the Board to i s s u e a limited voting permit for the purposes stated a f t e r the code word AUCILCO on page 7 of
the Board's l e t t e r to a l l Federal Reserve Agents dated November 10,
1934 (X-9018) (hereinafter referred to as organization purposes), and
upon compliance by the holding company a f f i l i a t e with the conditions
imposed by the Board upon the issuance of a permit for such organizat i o n purposes, you are hereby authorized, i n cases where the holding
company a f f i l i a t e so requests, to add to the statement o f the purposes
for which the permit i s issued the following words:
and to act thereat upon such amendments to the
(charter) of such (bank) as may be prescribed by
the Reconstruction Finance Corporation i n connect i o n with the revision of dividend r a t e s upon
preferred stock subscribed for or purchased by
such corporation, which amendments s h a l l be i n
form approved by the appropriate supervisory
authorities.
By way of i l l u s t r a t i o n , i n cases where a holding company a f f i l i a t e i s to be given permission to act upon the amendments prescribed by the Reconstruction Finance Corporation, the period at the
end of the statement of organization purposes should be changed to a
JS»
X-9054
comma, so that the entire statement of purposes i n the voting permit
w i l l read thus:
To e l e c t directors of such ("bank) at the annual
(meeting) of shareholders, or at any adjournments
thereof, at any time prior to April 1, 1935, and
to act thereat upon such matters of a routine
nature as are ordinarily acted upon at the annual
meetings of such (bank), and to act thereat upon
such amendments to the (charter) of such (hank) as
may "be prescribed by the Reconstruction Finance
Corporation i n connection with the r e v i s i o n of
dividend rates upon preferred stock subscribed f o r
or purchased by such corporation, which amendments
s h a l l be i n form approved by the appropriate supervisory authorities.
In some cases the Board has granted or w i l l grant authority
to vote for organization purposes at the 1935 annual meetings of the
subsidiary member banks by a telegram or l e t t e r to you which s t a t e s such
purposes at length instead of using the code word A1TCILC0.
In such
cases, as well as i n cases where the code word ANCILCO i s used, you
are authorized to add to the statement of organization purposes the
words set f o r t h i n the s i n g l e spaced passage on page 2 of t h i s l e t t e r .
A limited voting permit to vote upon the Reconstruction F i nance Corporation amendments should not be issued prior to the i s s u ance of a limited voting permit to vote for organization purposes, nor
before compliance with the conditions imposed by the Board upon the
issuance of a limited voting permit for organization purposes.
Per-
mission to vote upon the Reconstruction Finance Corporation amendments
may, however, be granted in the same permit which grants authority to
-4-
X-9054
vote for organization purposes, as outlined above.
In certain cases holding company a f f i l i a t e s may request a permit to vote upon the Reconstruction Finance Corporation amendments
a f t e r permits have "been issued to such holding company a f f i l i a t e s to
vote f o r organization purposes at the 1935 annual meetings of t h e i r subsidiary member banks.
In such cases, you are hereby authorized to i s s u e
a separate limited voting permit to vote upon the Reconstruction Finance
Corporation amendments, which limited voting permit s h a l l contain the
following statement of purposes:
To a c t , at any regular or special (meeting) of
shareholders of such (bank), or at any adjournments thereof, at any time prior to April 1,
1935 upon such amendments to the (charter) of
such (bank) as may be prescribed by the Recons t r u c t i o n Finance Corporation i n connection with
the r e v i s i o n of dividend rates upon preferred
stock subscribed for or purchased by such corpora t i o n , which amendments s h a l l be i n form approved
by the appropriate supervisory a u t h o r i t i e s .
Where the limited voting permit covers more than one subsidiary
member bank, p l e a s e use the plural instead of the singular of the appropriate words inclosed i n parentheses above.
I t w i l l be appreciated
i f you w i l l promptly forward to the Board two executed copies of any
limited voting permits issued by you under the authorization contained
in this l e t t e r .
I t i s understood, of course, that no permit to act upon the
Reconstruction Finance Corporation amendments w i l l be issued unless the
issuance of such permit meets with your approval.
I f , i n any case in—
X-9054
^
4,22
v o l v i n g t h e i s s u a n c e of such a l i m i t e d v o t i n g p e r m i t , c i r c u m s t a n c e s
a r e p r e s e n t which you "believe should be "brought t o i t s s p e c i a l a t t e n t i o n , t h o Board w i l l "be g l a d to c o n s i d e r t h e m a t t e r p r i o r t o t h e
i s s u a n c e of t h e l i m i t e d v o t i n g p e r m i t , i n t h e l i g h t of your comments
and recommendations.
Very t r u l y yours
Chester M o r r i l l ,
Secretary.
to a l l federal deserve agehts
X-9055
LE.R.I
2. A l l
IE
I E
®£.££.£.
STATElvGNT FOR TliE PRESS
For r e l e a s e a t 5:00 p# m»
December 20, 1954#
The F e d e r a l Reserve Board announces t h a t t h e F e d e r a l
Reserve Bank of Kansas C i t y 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 2 l / 2 per c e n t , e f f e c t i v e December 21, 1934 •
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9056
December 22, 1934
SUBJECT:
Code Word Covering New I s s u e of T r e a s u r y B i l l s .
Deer S i r ;
In connection with telegraphic 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 F e d e r a l r e s e r v e banks, t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of T r e a s u r y B i l l s ;
* "NOXPUT1' - T r e a s u r y B i l l s t o be d a t e d December
26, 1934, and t o mature June 2 6 , 1 9 3 5 .
This word should be i n s e r t e d i n t h e F e d e r a l Res e r v e Telegraph Code book, f o l l o w i n g t h e supplemental
code word "NOXPOL" on page 172.
Very t r u l y y o u r s ,
TO GOVERNORS OF ALL F.R.BANKS
4 2 5
X-9057
REMARKS OF MR. MARRINER S. ECCLES, GOVERNOR OP THE FEDERAL RESERVE
BOARD, AT A MEETING OF THE FEDERAL RESERVE BOARD WITH
REPRESENTATIVES OF THE INDUSTRIAL ADVISORY
COMMITTEES IN WASHINGTON ON DECEMBER 18,
1934
There a r e many who f e e l t h a t t h e making of d i r e c t loans t o i n d u s t r y does n o t belong i n t h e F e d e r a l r e s e r v e b a n k s .
There a r e o t h e r s
who f e e l t h a t t h e F e d e r a l Reserve System can perform a u s e f u l f u n c t i o n i n t h i s u n d e r t a k i n g , but whatever t h e opinions may be w i t h r e f e r ence t o t h e problem, Congress decided t h a t i s s u e l a s t s e s s i o n and
d e l e g a t e d t h e r e s p o n s i b i l i t y t o t h e F e d e r a l Reserve System of making
such l o a n s •
The I n d u s t r i a l Advisory Committees have been chosen t o
undertake t h i s i m p o r t a n t r e s p o n s i b i l i t y , and a r e i n a p o s i t i o n which
r e q u i r e s t h e p a t r i o t i c g i v i n g of t h e i r t i m e , e f f o r t and t h o u g h t w i t h out compensation i n t h i s emergency.
are g r e a t l y a p p r e c i a t e d by t h e Board.
Their e f f o r t s i n t h i s c o n n e c t i o n
The r e s u l t s up t o t h e p r e s e n t
time a r e i n d i c a t i v e of t h e f i n e work t h e committees have done i n t h e i r
r e s p e c t i v e communities, and while t h e r e s u l t s a r e d i s a p p o i n t i n g t o
some i t i s n o t t h e f a u l t of t h e I n d u s t r i a l Advisory Committees or of
t h e F e d e r a l r e s e r v e banks•
I t i s a d i f f i c u l t t h i n g t o c r e a t e c r e d i t where t h e r e i s no
basis for c r e d i t .
I t i s p e r f e c t l y n a t u r a l a f t e r f o u r or f i v e y e a r s
of t h e most d e v a s t a t i n g d e p r e s s i o n t h i s c o u n t r y has ever seen t h a t
t h e r e would be many b u s i n e s s e s i n a s t a t e of f i n a n c i a l c o l l a p s e , which
would immediately grasp a t e v e r y e f f o r t of t h e Government toward
426
-2-
X-9067
p r o v i d i n g c r e d i t , which e x p l a i n s t h e deluge of a p p l i c a t i o n s t h a t has
come t o t h e I n d u s t r i a l Advisory Committees•
I t i s f e l t t h a t while
t h e f i e l d f o r c r e d i t of t h i s kind i s much more l i m i t e d t h a n many
people thought p r i o r t o t h e passage of t h e l e g i s l a t i o n , t h e r e has
been much more good accomplished t h a n i s i n d i c a t e d by t h e a c t u a l
volume of loans approved.
The program of d i r e c t l e n d i n g has caused
t h e banks t o give more c o n s i d e r a t i o n t o c r e d i t s t h a n t h e y would have
been i n c l i n e d t o give i n t h e p a s t .
I t has a l s o tended t o r e l i e v e t h e
p r e s s u r e being e x e r t e d f o r t h e l i q u i d a t i o n of o u t s t a n d i n g c r e d i t s , so
t h a t i t i s d i f f i c u l t t o measure t h e amount of t o t a l c r e d i t t h a t has
been c a r r i e d t h a t o t h e r w i s e would have been r e t i r e d , or t h e amount of
new c r e d i t t h a t t h e banks have extended which p o s s i b l y would not have
been extended had i t not been f o r t h i s l e g i s l a t i o n .
There have been
a number of cases where t h e committees have done v e r y v a l u a b l e work
i n a d v i s i n g companies with r e f e r e n c e t o changes t h e y could make i n
management and p o l i c y .
All t h a t t h e committees can do i s t o do t h e b e s t t h e y can and
a t t e m p t t o develop as many loans i n t h e r e s p e c t i v e communities as i t
i s p o s s i b l e t o develop, being as l i b e r a l i n t h e i r i n t e r p r e t a t i o n of
e l i g i b l e c r e d i t as i t i s p o s s i b l e t o b e .
Inasmuch as t h e c o u n t r y i s
i n a c o n d i t i o n of g e n e r a l b u s i n e s s d e p r e s s i o n , an improvement i n b u s i n e s s volume, p r i c e s and p r o f i t s over a p e r i o d of time can be e x p e c t e d ,
t h e banks can be more l i b e r a l i n t h e e x t e n s i o n of c r e d i t t h a n t h e y
could be i f t h e c o u n t r y was a t t h e peak of p r o s p e r i t y f a c i n g t h e
X-9057
3c r e d i t dangers i n h e r e n t i n a p e r i o d of d e f l a t i o n *
I t would be b e t t e r
t o e r r on t h e s i d e of l i b e r a l i t y i n t h e p r e s e n t s i t u a t i o n t h a n on t h e
s i d e of c o n s e r v a t i s m .
While t h e banks do not want t o i n c u r l o s s e s
knowingly, i t i s n o t expected t h a t no l o s s e s w i l l r e s u l t .
The F e d e r a l
Reserve System should be p r e p a r e d t o show t h a t t h e i r p o l i c y has been
l i b e r a l , t h a t t h e borrower has been given t h e b e n e f i t of t h e doubt,
and t h a t t h e F e d e r a l r e s e r v e banks have been w i l l i n g t o assume e v e r y
reasonable r i s k .
Most i n d i v i d u a l banks cannot t a k e any s u b s t a n t i a l l o s s e s w i t h out becoming i n s o l v e n t and t h e e a r n i n g s of t h e banks a r e so low a t
t h e p r e s e n t time t h a t t h e y a r e n o t i n a p o s i t i o n t o t a k e l o s s e s ,
whereas the F e d e r a l r e s e r v e banks can, w i t h o u t d i s a s t e r , assume a
g r e a t e r r i s k t h a n t h e p r i v a t e bank.
I f l o s s e s do develop t h e y a r e
s o c i a l i z e d , and do n o t tend t o d e s t r o y t h e banking system as do t h e
l o s s e s i n i n d i v i d u a l banks which cause t h e banks t o c l o s e •
Bankers have a t h r e e f o l d d u t y .
They must s a f e g u a r d t h e f u n d s
of t h e i r d e p o s i t o r s , and t h e y must s a f e g u a r d t h e p r i n c i p a l and e a r n
dividends f o r t h e i r stockholders•
They a r e charged i n a v e r y l a r g e
measure w i t h a more i m p o r t a n t r e s p o n s i b i l i t y t h a n e i t h e r of t h e above,
t h a t of c r e a t i n g and e x t i n g u i s h i n g t h a t p a r t of t h e c o u n t r y 1 s money
supply r e p r e s e n t e d by checking a c c o u n t s .
munity a t l a r g e i s o f t e n o v e r l o o k e d .
This l a s t duty t o t h e com-
A c o n t r a c t i o n of loans and i n -
vestments which may be d e s i r a b l e on i n d i v i d u a l grounds, may be undes i r a b l e from t h e viewpoint of t h e c o u n t r y as a whole f o r t h e r e a s o n
4,2
-4-
X-9057
t h a t a c o n t r a c t i o n of l o a n s i n v o l v e s a l s o a c o n t r a c t i o n of d e p o s i t
money or d e p o s i t currency*
I n t h e p r o c e s s of l i q u i d a t i o n from 1929
t o 1933 a p p r o x i m a t e l y o n e - t h i r d of t h e t o t a l d e p o s i t s of t h e c o u n t r y
was so e x t i n g u i s h e d #
The p r o c e s s of r e c o v e r y r e q u i r e s t h a t a sub-
s t a n t i a l p a r t of t h i s l o s t d e p o s i t currency be r e p l a c e d .
This can be
done i f t h e banking system as a whole w i l l expand i t s loans and i n v e s t ments.
I n t h e event t h a t t h e banking system f a i l s t o do t h i s t h e
Government i s t h e n f o r c e d t o supply t h e d e f i c i e n c y .
That can be sup-
p l i e d through Government f i n a n c i n g and b u d g e t a r y d e f i c i t s , t h e banks
c o n s t a n t l y i n c r e a s i n g t h e i r investments i n Government bonds.
If the
banks f a i l t o t a k e Government bonds, and f a i l t o i n c r e a s e loans and
i n v e s t m e n t s , t h e d e f i c i e n c y must be s u p p l i e d e i t h e r t h r o u g h t h e Fede r a l Reserve System buying such bonds as a r e r e q u i r e d , t h e c r e a t i o n of
a c e n t r a l bank upon t h e f a i l u r e of t h e F e d e r a l r e s e r v e banks t o t a k e
t h e bonds, or t h e i s s u a n c e of c u r r e n c y by the Government.
The d e s i r -
a b l e way i s t o do i t through the p r i v a t e banking system t o t h e g r e a t e s t
e x t e n t p o s s i b l e , b u t i t cannot be done and i t w i l l not be done i f t h e
bankers f e e l t h a t t h e banks a r e unsound u n l e s s t h e y a r e l i q u i d .
We
found i n t h e d e p r e s s i o n t h a t t h e r e i s no such t h i n g as l i q u i d i t y except i n t h e case of paper which can be converted i n t o c u r r e n c y t h r o u g h
r e d i s c o u n t i n g w i t h t h e F e d e r a l r e s e r v e banks, and what appeared t o
be a sound bond w i t h an $85,000,000,000 n a t i o n a l income appeared t o
be p e r f e c t l y unsound w i t h a $50,000,000,000 income•
Bankers have i n s i s t e d , and t h e r e can be no q u e s t i o n of t h e i r
X-9057
-5
s i n c e r i t y , t h a t t h e y a r e w i l l i n g and anxious t o make good commercial
loans.
But t h a t i s n o t enough.
We must f r a n k l y f a c e the f a c t t h a t
t h e s u p p l y of such loans i s n o t s u f f i c i e n t both t o o f f s e t t h e l i q u i d a t i o n of old loans and t o b r i n g about t h e r e q u i s i t e expansion of t o t a l
a s s e t s and d e p o s i t s .
Even i n 1929 commercial loans e l i g i b l e f o r r e -
d i s c o u n t i n g a t t h e F e d e r a l r e s e r v e banks comprised only 12.7% of t h e
member b a n k s ' t o t a l e a r n i n g a s s e t s .
8/&.
At t h e p r e s e n t t h e y a r e l e s s t h a n
Bankers cannot c o n f i n e themselves t o such loans and s t i l l supply
an adequate amount of d e p o s i t c u r r e n c y .
In o t h e r words# i f t h e bank-
e r s of t h i s c o u n t r y a r e t o perform t h e i r money s u p p l y i n g f u n c t i o n s
s a t i s f a c t o r i l y t h e y must be p r e p a r e d t o i n c r e a s e t h e i r e a r n i n g a s s e t s
o t h e r t h a n commercial l o a n s .
I t i s t r u e t h a t t h e banks have i n c r e a s e d
t h e i r h o l d i n g s of Government s e c u r i t i e s by a p p r o x i m a t e l y f i v e b i l l i o n
d o l l a r s , however, even with t h i s i n c r e a s e t h e c o n t r a c t i o n of a l l l o a n s
and i n v e s t m e n t s has been about $18,000,000,000 s i n c e 1929.
I should,
however, l i k e t o see banks i n c r e a s e t h e i r h o l d i n g s of o t h e r i n v e s t ments, sound r e a l e s t a t e mortgage loans and l o c a l loans of good s e c u r i t y b u t w i t h a m a t u r i t y much longer t h a n s i x months.
I would n o t make t h e s u g g e s t i o n i f I t h o u g h t t h a t i t would
prove d e t r i m e n t a l to t h e i n t e r e s t s of t h e d e p o s i t o r s or s t o c k h o l d e r s
of b a n k s .
I a p p r e c i a t e t h o r o u g h l y t h e harrowing n a t u r e of t h e bank-
e r s ' experiences with frozen a s s e t s i n the p a s t .
I t is possible,
however, t h a t wrong l e s s o n s a r e b e i n g drawn f r o m our 1929 t o 1933
banking e x p e r i e n c e s .
S u p e r f i c i a l l y , t h e t r o u b l e may have appeared
X-9057
6
t o have been l a c k of s u f f i c i e n t l i q u i d i t y #
But no banking system can
be both l i q u i d enough t o pay o f f any s u b s t a n t i a l amount of i t s d e p o s i t s
a t a momentT s n o t i c e and a t t h e same time s e r v e t h e c o u n t r y by p r o v i d i n g t h e amount of money n e c e s s a r y f o r b u s i n e s s s t a b i l i t y .
Funda-
m e n t a l l y , t h e r e a l t r o u b l e l a y i n t h e circumstances t h a t gave r i s e
t o t h e need of g r e a t l i q u i d i t y .
These c i r c u m s t a n c e s a r e now h a p p i l y
p a s t and hence t h e need of g r e a t l i q u i d i t y i s o b v i a t e d .
The i n s u r a n c e
of bank d e p o s i t s i s designed t o p r o t e c t t h e banks from r u n s •
Banks
may l o s e d e p o s i t s t o o t h e r banks, but as a system t h e y a r e going t o
gain r a t h e r than lose d e p o s i t s .
We have t h e w i l l and, we b e l i e v e ,
p o s s e s s t h e power t o p r e v e n t t h e r e c u r r e n c e of widespread l i q u i d a t i o n
and t h e c o l l a p s e of v a l u e s t h a t have c h a r a c t e r i z e d r e c e n t y e a r s .
If we can g e t t h e p r i v a t e c r e d i t system t o f u n c t i o n i n t h e
f i e l d of mortgage l o a n s , we w i l l go a long way toward c a u s i n g t h e
p r i v a t e banking s t r u c t u r e t o occupy 'the p l a c e t h a t i t was designed
t o occupy.
If t h e banks f a i l t o do t h a t , t h e n i t becomes i n e v i t a b l e
t h a t t h e Government must c o n t i n u e i n t h e f i e l d of p r o v i d i n g p r i v a t e
c r e d i t as t h e y have been doing i n t h e p a s t .
I f t h i s t e n d e n c y i s not
s t o p p e d , i t w i l l only be a s h o r t time b e f o r e we have s o c i a l i z e d and
n a t i o n a l i z e d t h e c r e d i t s t r u c t u r e of America.
And t h i s i s a s i g n i f i -
cant and dangerous t r e n d t h a t many bankers a r e e n t i r e l y unaware o f .
The a d m i n i s t r a t i o n cannot be blamed f o r t h a t development because
t h e p o l i t i c a l p r e s s u r e and c i r c u m s t a n c e s t h a t have developed have
f o r c e d t h e a d m i n i s t r a t i o n i n t o t h e c r e d i t f i e l d on an u n p r e c e d e n t e d
431
-7-
X-9057
s c a l e and i t becomes t h e duty of a l l of us t o t r y t o d i v e r t so f a r as
we p o s s i b l y can i n t o p r i v a t e channels t h e c r e d i t f u n c t i o n s •
With be-
tween ^13,000,000,000 and v l 5 , 0 0 0 , 0 0 0 , 0 0 0 of time d e p o s i t s i n t h e
banks, t h e r e should be no h e s i t a n c y on t h e p a r t of t h e banks t o e n t e r
t h e mortgage f i e l d .
E i t h e r t h a t should occur or time d e p o s i t s should
be divorced from commercial d e p o s i t s so t h a t time d e p o s i t s can be
used i n t h e f i e l d i n which t h e y were designed t o be u s e d .
The Board a p p r e c i a t e s t h e time t h a t you have given t o come t o
Washington t o d i s c u s s t h e problems p e r t a i n i n g t o i n d u s t r i a l loans
and t h e i n t e r e s t t h a t you have shown and t h e c o o p e r a t i o n t h a t you
have given*
The Board pledges i t s support t o t h e I n d u s t r i a l Advisory
Committees i n t h e i r work.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9058
December 24, 1934
SUBJECT:
Holidays during January, 1935.
Dear Sir:
On Hew Year*8 Day the o f f i c e s of the Federal Reserve Board
and a l l Federal reserve "banks and "branches w i l l "be c l o s e d .
The Board i s advised that the f o l l o w i n g holidays w i l l a l s o
"be observed "by Federal reserve "banks and "branches during the month
of January:
Tuesday, January 8
Hew Orleans
Anniversary of B a t t l e
of Hew Orleans
Saturday, January 19
Ei chmond
Charlotte
Anniversary of Birthday
of General Robert E. Lee
Atlanta
Birmingham
Hashville
Jacksonville
Louisville
Memphis
Dallas
El Paso
Houston
San Antonio
Monday, January 28
Havana Agency Anniversary of Birthday
of Jose Marti
-2-
On t h e d a t e s given the o f f i c e s mentioned w i l l not p a r t i c i p a t e
i n e i t h e r t h e t r a n s i t or t h e F e d e r a l r e s e r v e n o t e c l e a r i n g through
t h e Gold S e t t l e m e n t Fund.
Please include t r a n s i t c l e a r i n g c r e d i t s
f o r t h e 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 w i t h your c r e d i t s
f o r t h e f o l l o w i n g b u s i n e s s day.
Ho d e b i t s covering shipments of
F e d e r a l r e s e r v e n o t e s f o r the head o f f i c e s concerned should be i n cluded i n your n o t e c l e a r i n g of Saturday, J a n u a r y 19.
Please n o t i f y branches.
Very t r u l y y o u r s ,
J . C. H o e l l ,
Assistant Secretary
TO GOVEEHORS OF ALL F . E. BAMS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-9060
December 26, 1934
SUBJECT:
Amendments t o c h a r t e r s
S t a t e member b a n k s .
Dear S i r ;
There i s i n c l o s e d f o r your i n f o r m a t i o n and
guidance a copy of a l e t t e r which t h e F e d e r a l Reserve
Board has a d d r e s s e d t o one of t h e F e d e r a l Reserve Agents
with r e g a r d t o t h e f o r w a r d i n g t o the Board of c o p i e s of
amendments t o t h e c h a r t e r s of S t a t e member b a n k s .
Very t r u l y y o u r s ,
hf~)cnsuJf
Chester M o r r i l l ,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS
435
C0F>Y
X-9060-a
December 26, 1934
Mr. J . N . P e y t o n ,
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of Minneapolis,
M i n n e a p o l i s , Minnesota
Dear Mr. Peyton:
R e c e i p t i s acknowledged of Mr. B a i l e y ' s l e t t e r of October 13,
1934, i n c l o s i n g a c e r t i f i e d copy of the amended a r t i c l e s of i n c o r p o r a t i o n of t h e S a u l t Savings Bank, S a u l t S a i n t e Marie, Michigan, executed
i n c o n n e c t i o n w i t h t h e r e c e n t r e d u c t i o n i n the b a n k ' s common c a p i t a l
s t o c k and t h e s a l e by i t of p r e f e r r e d s t o c k A and p r e f e r r e d s t o c k b.
This document i s somewhat voluminous,
and Mr. B a i l e y
has r e q u e s t e d
advice as t o whether t h e Board d e s i r e s documents of t h i s kind t o be
submitted t o i t i n c o n n e c t i o n with s i m i l a r t r a n s a c t i o n s a f f e c t i n g
S t a t s member b a n k s .
As you know, when a S t a t e member bank a p p l i e s f o r a d m i s s i o n
t o membership i n the F e d e r a l Reserve System, a copy of t h e c h a r t e r of
t h e bank, t o g e t h e r w i t h a l l amendments t h e r e t o , i s forwarded t o t h e
Board f o r i t s i n f o r m a t i o n and r e c o r d s .
The Board a l s o d e s i r e s t h a t
any amendments t o a s t a t e b a n k ' s c h a r t e r , while i t remains a member of
t h e F e d e r a l Reserve System, s h o u l d be f u r n i s h e d t o t h e Board f o r i t s
i n f o r m a t i o n and i n o r d e r t h a t i t s r e c o r d s r e g a r d i n g t h e c o r p o r a t e powers
and s t a t u s of t h e bank may be complete.
I t w i l l be a p p r e c i a t e d i f i n
each case you w i l l submit t h e amendment t o t h e counsel f o r your bank,
4 3 6
X-9060-a
Mr. J . N . P e y t o n — 2
i n o r d e r t h a t he may be s a t i s f i e d a s t o a l l t h e l e g a l a s p e c t s i n v o l v e d ,
and a d v i s e t h e Board of t h e o p i n i o n of your counsel when t h e copy of
t h e amendment i s forwarded t o t h e Board.
Of c o u r s e , i n any such case
tho o p i n i o n of your counsel should c o n t a i n advice a s t o whether a l l
r e q u i r e m e n t s of t h e S t a t e law have been complied w i t h .
I f i n any case
i t appears t h a t a c o r r e c t i o n i n t h e p r o c e e d i n g s i s n e c e s s a r y , i t i s
assumed t h a t you w i l l t a k e a p p r o p r i a t e s t e p s i n o r d e r t h a t t h e n e c e s s a r y c o r r e c t i o n may be e f f e c t e d .
While i n some e a s e s i t may bo d e s i r a b l e f o r t h e F e d e r a l
r e s e r v e bank t o o b t a i n c o p i e s of u n d e r l y i n g documents showing t h e a c t i o n
t a k e n by t h o s t o c k h o l d e r s a n d / o r d i r e c t o r s of t h e i n s t i t u t i o n involved
l o a d i n g up t o t h e amendment t o i t s c h a r t e r , i n o r d e r t h a t t h o counsel
f o r t h e F e d e r a l r e s e r v e bank may be s a t i s f i e d a s t o tho l e g a l a s p c c t s
of t h e m a t t e r , c o p i e s of such u n d e r l y i n g documents need not be forwarded
t o t h e Board f o r i t s r e c o r d s .
In t h i s c o n n e c t i o n , t h e Board f e e l s t h a t
t h e q u e s t i o n as t o what u n d e r l y i n g documents, i f any, need be o b t a i n e d
i n any p a r t i c u l a r case i s a q u e s t i o n which must be determined i n view
of t h e c i r c u m s t a n c e s involved i n each case and t h a t t h i s q u e s t i o n should
be determined by t h e F e d e r a l Reserve Agent and counsel f o r t h e F e d e r a l
r e s e r v e bank i n t h e e x e r c i s e of a r e a s o n a b l e d i s c r e t i o n i n each c a s e .
I t i s assumed t h a t , i n t h e absence of s p e c i a l c i r c u m s t a n c e s , t h e counsel
f o r t h e F e d e r a l r e s e r v e bank w i l l r e l y i n each case upon i n f o r m a t i o n
r e c e i v e d from the S t a t e s u p e r v i s o r y a u t h o r i t i e s t h a t a p p r o p r i a t e a c t i o n
has been t a k e n by t h e s t o c k h o l d e r s a n d / o r d i r e c t o r s l o o k i n g toward t h e
amendment of t h e c h a r t e r of t h e bank.
X-9060-a
Mr. J.N.Peyton — 3
In r e p l y t o Mr. B a i l e y ' s s p e c i f i c i n q u i r y with r e g a r d t o
whether t h e Board d e s i r e s copies of amendments t o c h a r t e r s of S t a t e
member banks covering t h e r e d u c t i o n of c a p i t a l s t o c k and t h e i s s u a n c e
of p r e f e r r e d s t o c k , you are advised t h a t the Board would l i k e t o r e ceive copies of any such amendments which should be submitted i n t h e
manner d e s c r i b e d i n d e t a i l above with r e g a r d t o amendments t o t h e
c h a r t e r of a S t a t e member bank.
In t h i s connection, i t may be noted
t h a t , under t h e p r o v i s i o n s of s e c t i o n 9 of the Federal Reserve Act
as amended, the terms " c a p i t a l " and " c a p i t a l s t o c k " , f o r the purposes
of membership of S t a t e banks i n t h e F e d e r a l Reserve system, s h a l l
include t h e amount of o u t s t a n d i n g c a p i t a l notes and d e b e n t u r e s l e g a l l y i s s u e d by t h e applying bank and purchased by t h e R e c o n s t r u c t i o n
Finance C o r p o r a t i o n .
I t i s understood t h a t i n most cases no amend-
ment to t h e c h a r t e r of a S t a t e member bank i s n e c e s s a r y f o r t h e i s suance of such c a p i t a l n o t e s or d e b e n t u r e s , b u t , i n view of t h e f a c t
t h a t such c a p i t a l n o t e s and debentures a r e under t h e law considered
c a p i t a l and c a p i t a l s t o c k f o r membership purposes, t h e Board i n each
case would l i k e t o r e c e i v e a copy of t h e agreement of t h e bank covering t h e i s s u a n c e of such c a p i t a l n o t e s or d e b e n t u r e s , t o g e t h e r with
advice of the counsel f o r t h e Federal r e s e r v e bank t h a t he i s s a t i s f i e d as t o t h e l e g a l a s p e c t s i n v o l v e d .
I n any case i n which t h e Board has not h e r e t o f o r e been
f u r n i s h e d with copies of amendments t o t h e c h a r t e r of S t a t e member
banks or c o p i e s of agreements covering the i s s u a n c e of c a p i t a l n o t e s
X-9060-a
438
Mr. J . N . P e y t o n — 4
or d e b e n t u r e s s o l d t o t h e R e c o n s t r u c t i o n Finance C o r p o r a t i o n , i t w i l l
be a p p r e c i a t e d i f , when such a f a c t comes t o your a t t e n t i o n , you w i l l
o b t a i n c o p i e s of such documents and forward them t o t h e Board, w i t h
a p p r o p r i a t e advice a s t o whether your counsel i s s a t i s f i e d a s t o t h e
legal aspects involved.
As a m a t t e r of convenient p r o c e d u r e , i n t h i s
c o n n e c t i o n , and i n c o n n e c t i o n with any f u t u r e amendments t o c h a r t e r s
or agreements c o v e r i n g t h e i s s u a n c e of c a p i t a l n o t e s or d e b e n t u r e s t o
t h e R e c o n s t r u c t i o n Finance C o r p o r a t i o n , you may wish t o c o n s i d e r t h e
a d v i s a b i l i t y of having t h e examiner f o r t h e F e d e r a l r e s e r v e bank d e t e r mine a t t h e time of examination of each S t a t e member bank whether t h e r e
have been any amendments t o i t s c h a r t e r , or agreements c o v e r i n g t h e
i s s u a n c e of c a p i t a l n o t e s or d e b e n t u r e s s o l d t o t h e R e c o n s t r u c t i o n
Finance C o r p o r a t i o n , c o p i e s of which have not p r e v i o u s l y been forwarded
t o t h e Board, r a t h e r t h a n t o make s p e c i a l i n q u i r i e s of member s t a t e banks
in t h i s connection.
I n t h e s p e c i f i c case r e f e r r e d t o by Mr. B a i l e y , i t i s assumed
t h a t your c o u n s e l was s a t i s f i e d a s t o t h e l e g a l a s p e c t s of t h e amendments t o t h e a r t i c l e s of i n c o r p o r a t i o n of t h e S a u l t Savings Bank, but 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 f u r n i s h t h e Board w i t h d e f i n i t e advice
on t h i s p o i n t .
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9061
December 26, 1934
Dear S i r :
There a r e a t t a c h e d c o p i e s of t h e minutes of t h e meetings
of t h e Chairmen of t h e I n d u s t r i a l Advisory Committees h e l d i n
Washington on December 17 and 18, 1934.
There i s a l s o a t t a c h e d
a summary s t a t e m e n t of t h e meeting of t h e members of t h e F e d e r a l
Reserve Board w i t h r e p r e s e n t a t i v e s of t h e i n d u s t r i a l Advisory
Committees on t h e norning of December 18, 1934.
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 hand t o t h e o t h e r members of your comm i t t e e t h e e x t r a c o p i e s of t h e minutes and s t a t e m e n t which are
enclosed.
You w i l l be advised i n due cqurse of any a c t i o n t a k e n
by t h e Board i n c o n n e c t i o n w i t h t h e r e s o l u t i o n s adopted a t t h e
December 18 meeting of t h e Chairmen,
The F e d e r a l Reserve Board wishes a g a i n to e x p r e s s i t s
a p p r e c i a t i o n of T.he c o o p e r a t i o n of t h e r e p r e s e n t a t i v e s of che
I n d u s t r i a l Advisory Committees i n p a r t i c i p a t i n g i n t h e cons i d e r a t i o n of t h e q u e s t i o n s involved i n the i n d u s t r i a l l o a n
X-9061
—2«~
a c t i v i t y * and a s s u r e s you of i t s d e s i r e t o be of any a s s i s t a n c e
i t can t o t h e committees i n c a r r y i n g on t h e i r work.
Very t r u l y y o u r s ,
-tfatfiAZZv IY) oiAdi{
Chester M o r r i l l ,
Secretary.
Inclosures
TO ALL REPRESENTATIVES OF INDUSTRIAL ADVISORY COMMITTEES WH0
ATTENDED MEETINGS IN WASHINGTON ON DEC.3fffl.iiE 17, and 13, 1934,
AND ALSO TO MR. J . B. H0LTZCLAT7, CHAIRMAN OF RICHMOND COMMITTEE.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9062
December 26, 1934
Dear S i r :
There a r e a t t a c h e d , f o r your i n f o r m a t i o n , c o p i e s
of the minutes of t h e meetings of t h e Chairmen of t h e i n d u s t r i a l Advisory Committees h e l d i n Washington on December
17 and 18, 1934, and a copy of a summary s t a t e m e n t of t h e
meeting of t h e members of t h e F e d e r a l Reserve Board w i t h
r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees on
t h e morning of December 18, 1934.
A copy of a l e t t e r
a d d r e s s e d by t h e Board today t o each of t h e members of t h e
I n d u s t r i a l Advisory Committees who a t t e n d e d t h e s e meetings
is also enclosed.
Very t r u l y yours
Chester M o r r i l l
Secretary.
Inclosures
TO AIL FEDERAL RESERVE AGENTS AMD GOVERNORS
442
X-9063
Upon c a l l of t h e Chairman, Mr. A. M. C r e i g h t o n , a supper meeting
of t h e Chairmen of t h e I n d u s t r i a l Advisory Committees was h e l d a t t h e
C a r l t o n Hotel a t seven o ' c l o c k - Monday, December 17, 1934 with t h e
following present:
Mr,
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
A. M. Creighton - Boston,
William H. Pouch - New York,
J . S. Butterworth ~ P h i l a d e l p h i a ,
F. A« Smythe - Cleveland,
John Sanford - A t l a n t a ,
Max E p s t e i n - Chicago,
Wm. E. N o r r i s - S t . Louis,
Sheldon V. Wood - M i n n e a p o l i s ,
Clarence Ousley - D a l l a s ,
Ralph H. Burnside - P o r t l a n d , Oregon,
S. F. Gilmore - S t . L o u i s ,
W. M. Hale - San F r a n c i s c o .
Upon motion duly p r e s e n t e d and seconded t h e f o l l o w i n g o f f i c e r s
were e l e c t e d :
Mr. A. M. Creighton - Chairman
Mr. William H. Pouch - Vice Chairman
Mr. J . E. Butterworth - S e c r e t a r y
Upon motion d u l y p r e s e n t e d and seconded t h e f o l l o w i n g answers given
below are the unanimous consensus of o p i n i o n of t h e m e e t i n g , w i t h except i o n s n o t e d where t h e y o c c u r :
QUESTIONS
1.
ANSWERS
What i s f e e l i n g i n r e g a r d t o
o p e r a t i o n of S e c t i o n 13b by
t h e F e d e r a l r e s e r v e banks,
(a)
Among i n d u s t r i a l i s t s ,
whether p o t e n t i a l borrowers
or n o t ?
(a)
Where t h e y a r e a c q u a i n t e d , or
have a knowledge of t h e law,
they are f a v o r a b l e .
Among o t h e r b u s i n e s s
leaders?
(b)
Same answer as above.
X-9063
-2-
ANSWERS
QUESTIONS
(c)
2.
3«
Among f i n a n c i a l i n s t i t u tions?
(c)
F i n a n c i a l i n s t i t u t i o n s which
are a c q u a i n t e d w i t h t h e law
a r e f a v o r a b l e ; our g r e a t d u t y
i s t o a c q u a i n t more w i t h t h e
r e a l p o s s i b i l i t i e s under t h e
law*
Need f o r working c a p i t a l f o r
i n d u s t r y and commerce•
(a)
Has e x p e r i e n c e i n d i c a t e d
t h a t t h e r e was a s u b s t a n t i a l need n o t being met
t h r o u g h u s u a l sources of
credit?
(a)
Yes. While t h e need a p p a r e n t l y i s n o t as g r e a t as a t f i r s t
t h o u g h t , t h e r e i s need and t h i s
p r e s e n t law t a k e s c a r e of i t ,
a l l of which i s supported by
the number of loans t h a t have
been made i n t h e s h o r t p e r i o d
we have been o p e r a t i n g .
(b)
I f such need now e x i s t s
can i t be a d e q u a t e l y met
under t h e p r e s e n t S e c t i o n
13b?
(b)
Yes. We f e e l t h a t p r a c t i c a l l y
a l l worthy cases so f a r p r e s e n t e d have been t a k e n c a r e of
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
and e x i s t i n g needs can be t a k e n
care of i n t h e f u t u r e •
Assuming t h a t t h e r e w i l l be a
c o n t i n u i n g need f o r 13b advanc e s or c omrni t m e n t s ,
(a)
W i l l a p p l i c a t i o n s f o r the
most p a r t t a k e t h e form o f ;
( l ) Applications for
d i r e c t advances•
( 3 a - l ) At t h e p r e s e n t time most of
the applications are f o r dir e c t advances i n most of t h e
Federal reserve d i s t r i c t s
although t h e p e r c e n t a g e v a r i e s
considerably,
(2) A p p l i c a t i o n s i n v o l v ing s e p a r a t e advances
by the F e d e r a l r e s e r v e
bank and by f i n a n c i n g
i n s t i t u t i on, or'
(3a~2) There i s no g e n e r a l r u l e
throughout t h e e n t i r e System.
A p p l i c a t i o n s d i r e c t t o Fede r a l r e s e r v e banks a r e dec r e a s i n g and t h o s e t o t h e
444
-3«*
1-9063
QUESTIONS
AHSHERS
l o c a l banks a r e i n c r e a s i n g i n
t h e m a j o r i t y of t h e d i s t r i c t s •
Most members of t h e Committee
f e e l t h a t a p p l i c a n t s should
be encouraged t o make a p p l i c a t i o n s t h r o u g h t h e l o c a l banks,
which should be encouraged as
i t i s most advantageous f o r
the l o c a l banks.
(b)
4e
(3) A p p l i c a t i o n s from
financing i n s t i t u t i o n s f o r commitments
c o v e r i n g proposed
advances•
(3a-3) If f i n a n c i n g i n s t i t u t i o n s r e f e r s t o F a c t o r and Finance
Companies, t h e r e has been
v e r y few c a s e s of t h i s k i n d ,
Should t h e r a t e s charged
by t h e F e d e r a l r e s e r v e
banks be so f i x e d as t o
encourage a p p l i c a t i o n s
under 1, 2 or 3 above?
(b)
I t seemed t o be t h e consensus
of o p i n i o n t h a t t h e p r e s e n t
r a t e s were s a t i s f a c t o r y and
should be c o n t i n u e d . Such
r a t e s should encourage t h e
l o c a l banks t o c o o p e r a t e •
Recognizing t h a t s u b s e c t i o n
!,
a" of S e c t i o n 13b i s designed
t o meet emergency s i t u a t i o n s ,
should i t be a permanent p r o v i s i o n of law, and i f so,
should i t be amended as r e g a r d s :
(a)
Requirement t h a t a p p l i c a n t
be unable t o o b t a i n r e q u i s i t e a s s i s t a n c e from u s u a l
sources •
(b)
Requirement t h a t loans be
f o r working c a p i t a l p u r poses.
(c)
Requirement t h a t loans be
made on a r e a s o n a b l e and
sound b a s i s •
(d)
Requirement t h a t loans be
confined to established
businesses.
The Committee f e e l s t h a t s e c t i o n
13b should be c o n t i n u e d i n i t s
p r e s e n t form a s l o n g a s t h e
emergency e x i s t s and t h a t subd i v i s i o n s a , b , c and d be cont i n u e d . Two Members b e l i e v e d
t h a t b^ might be broadened t o
include proprietary c a p i t a l .
445
X-9063
QUESTIONS
5*
AKSWERS
Should s u b s e c t i o n "b" of Sect i o n 13b be a permanent prov i s i o n of law, and i f so,
should i t be amended as
(a)
A u t h o r i z a t i o n of advances
through f i n a n c i n g i n s t i t u t i o n s o t h e r t h a n member
banks.
(b)
Amount of o b l i g a t i o n as t o
loss sustained.
(c)
A u t h o r i z a t i o n of s e p a r a t e
loans by F e d e r a l r e s e r v e
banks and by a f i n a n c i n g
i n s t i t u t i o n on which r e payments are made pro r a t a ,
6.
Would t h e making of l o a n s f o r
working c a p i t a l purposes p r e sumably have been conducted
more e f f e c t i v e l y i f I n t e r m e d i a t e C r e d i t Banks a f f i l i a t e d
w i t h t h e F e d e r a l r e s e r v e banks
had been s e t up f o r t h i s p u r pose as provided i n t h e f i r s t
b i l l proposed by t h e F e d e r a l
Reserve Board? I f so, why?
7.
What has boon e x p e r i e n c e as
regards applications?
I t was t h e consensus of o p i n i o n
t h a t s u b s e c t i o n !f b" of S e c t i o n
13b should be r e t a i n e d and a, b
and c be n o t changed i n t h e law.
The Committee f e l t t h a t t h e
answer to t h i s q u e s t i o n i s NO;
the Chicago Chairman d i s s e n t i n g ,
(a)
Extent t o which f e a r of
r e j e c t i o n and of p o s s i b l e
adverse e f f e c t upon a p p l i c a n t ' s c r e d i t standing
has d i s c o u r a g e d submission
of a p p l i c a t i o n s .
(a)
I t i s n o t f e l t t h a t f e a r of r e j e c t i o n and adverse e f f e c t upon
an a p p l i c a n t ' s c r e d i t has d i s couraged a p p l i c a t i o n s i n more
t h a n a few i n s t a n c e s •
(b)
E x t e n t of and r e a s o n s f o r
withdrawal of a p p l i c a t i o n s •
(b)
Negligible,
the reason
found t h a t
needed, or
from u s u a l
and u s u a l l y f o r
t h a t a p p l i c a n t has
f u n d s would n o t be
has o b t a i n e d f u n d s
banking s o u r c e s .
446
X-9063
ANSWERS
vui^STIGUS
(c)
I s c h a r a c t e r of a p p l i c a t i o n s improving? I s t h e
p r o p o r t i o n of a p p l i c a t i o n s
f o r d i r e c t advances declining?
(c)
Character of a p p l i c a t i o n s i s
improving and v a r y i n g . The
p r o p o r t i o n of a p p l i c a t i o n s f o r
d i r e c t advances i s c o n t i n u i n g
in varying proportions•
(d)
Has t h e r e been any subs t a n t i a l number of comp l a i n t s of a l a c k of
c o u r t e s y on t h e p a r t of
t h e Committee or of o f f i c i a l s or employees of
F e d e r a l r e s e r v e banks?
(d)
We a r e n o t aware of any comp l a i n t of l a c k of c o u r t e s y on
the p a r t of t h e Committee or
o f f i c i a l s or employees of t h e
F e d e r a l r e s e r v e banks•
(e)
I s t h e r e any evidence
t h a t F e d e r a l r e s e r v e banks
a r e r e q u i r i n g an e x c e s s i v e
amount of c o l l a t e r a l t o
s e c u r e loans ?
(e)
There i s no evidence t h a t Fede r a l r e s e r v e banks a r e r e q u i r ing an e x c e s s i v e amount of
c o l l a t e r a l t o secure l o a n s .
On t h e o t h e r hand, every e f f o r t
i s b e i n g made t o make loans
when t h e s e c u r i t y may be regarded
as r e a s o n a b l e .
(f)
I s t h e r e evidence of any
o t h e r ground f o r c r i t i c i s m
of e i t h e r t h e committees
or t h e banks ?
(f)
There i s no e v i d e n c e of any
o t h e r ground f o r c r i t i c i s m of
e i t h e r t h e Committees or t h e
F e d e r a l r e s e r v e banks•
Assuming t h a t more p a r t i c i p a t i o n s by and commitments t o
f i n a n c i a l i n s t i t u t i o n s are
d e s i r a b l e , what i s your r e c ommend a t i on as t o how t o b e s t
o b t a i n t h e c o o p e r a t i o n of
financial institutions to
t h i s end?
8.
I t i s t h e consensus of o p i n i o n
t h a t more p a r t i c i p a t i o n s by and
commitments t o f i n a n c i a l ins t i t u t i o n s a r e d e s i r a b l e , and t h i s
can be b e s t o b t a i n e d by d i r e c t
c o n t a c t w i t h t h e a p p l i c a n t s and
the banks. Further t h a t the
p r e s e n t p u b l i c i t y be c o n t i n u e d
w i t h i n each d i s t r i c t and t h a t
t h i s be supplemented by p u b l i c i t y
of a n a t i o n a l c h a r a c t e r and t h a t
t h e a i d of t h e F e d e r a l Reserve
Board be s o l i c i t e d i n t h i s connection.
Has t h e F e d e r a l r e s e r v e bank
t a k e n adequate measures t o
b r i n g to t h e a t t e n t i o n of
f i n a n c i a l i n s t i t u t i o n s , and
9.
I t i s t h e o p i n i o n t h a t t h e Reserve banks have made d i l i g e n t
e f f o r t s to acquaint a l l financing
i n s t i t u t i o n s , p a r t i c u l a r l y member
447,
*• G™
;:,UE3T10HS
p a r t i c u l a r l y of member "banks,
the advantages t o them of a c t i v e l y seeking out commercial
and i n d u s t r i a l e n t e r p r i s e s i n
t h e i r t e r r i t o r y i n need of add i t i o n a l working c a p i t a l and
f u r n i s h i n g such c a p i t a l under
t h e p r o t e c t i o n of a commitment
from t h e F e d e r a l r e s e r v e bank?
X-9063
AK'SVYERS
banks, wi t h the advantages t o
them of a c t i v e l y seeking out
commercial and i n d u s t r i a l e n t e r prises in their t e r r i t o r y in
need of a d d i t i o n a l working c a p i t a l and f u r n i s h i n g such c a p i t a l
"by commitment from t h e F e d e r a l
r e s e r v e banks• At t h e same time
we submit t h a t such e f f o r t s
might w e l l be i n t e n s i f i e d and
we e s p e c i a l l y recommend t o t h e
s e v e r a l Reserve banks t h e a c t i o n
of t h e Mew York Reserve Bank i n
engaging t h e s e r v i c e s of a p r a c t i c a l and w e l l known banker f o r
a p e r i o d of s e v e r a l months ( t h e
banker t o be w e l l known i n t h e
d i s t r i c t ) t o v i s i t banks and
p e r s o n a l l y d i s c u s s wi t h them
and with borrowers i n a r r e a r s
or i n temporary embarrassment
t h e wisdom of n e g o t i a t i n g loans
under t h e terms of S e c t i o n 13b#
10. "What, i n your e x p e r i e n c e , has
been t h e most i m p o r t a n t s e r v i c e r e n d e r e d i n d u s t r y and
commerce under S e c t i o n 13b?
10# In our o p i n i o n t h e most i m p o r t a n t
s e r v i c e s r e n d e r e d t o i n d u s t r y and
commerce under S e c t i o n 13b are
( a ) Accommodation t o i n d u s t r i a l
and commercial e n t e r p r i s e s t h a t
could n o t be o b t a i n e d o t h e r w i s e .
(b) the s t i m u l a t i o n of c r e d i t
c o n f i d e n c e and accommodation t o
i n d u s t r i a l and commercial e n t e r p r i s e s by o t h e r banks, many of
which have changed t h e i r c r e d i t
p o l i c i e s since the administrat i o n of S e c t i o n 13b began, and
( c ) t h e e n l i g h t e n m e n t of many
a p p l i c a n t s concerning t h e i r own
a f f a i r s and p o s s i b i l i t i e s a f f o r d e d
by t h e e x p e r t a n a l y s i s and advice
of t h e Advisory Committees and
Federal reserve o f f i c e r s •
11.
11. The f a v o r a b l e recommendation of
loans by t h e s e v e r a l F e d e r a l r e s e r v e banks has i n f l u e n c e d many
Has t h e a d m i n i s t r a t i o n of
S e c t i o n 13b t o d a t e had any
e f f e c t n o t shown i n r e g u l a r
^
X-9063
-7ANSWERS
QUESTIONS
12 •
4 4 8
r e p o r t s of F e d e r a l r e s e r v e
banks on t h e e x t e n s i o n of
c r e d i t through r e g u l a r and
u s u a l channels t o i n d u s t r y and
commerce by p r i v a t e f i n a n c i n g
institutions?
l o c a l banks t o t a k e over l o a n s ,
extending c r e d i t where t h e y
would n o t have done so o t h e r wise#
Recommendations 5 n o t covered
e l s e w h e r e , on t h e s u b j e c t of
t h e a d m i n i s t r a t i o n of S e c t i o n
13b.
12. I t i s f e l t wise t o c o n t i n u e
t h i s a c t as an emergency measure#
I t w i l l n o t b r i n g back p r o s p e r i t y ,
b u t i t w i l l be a m a t e r i a l h e l p
t o many who cannot s e c u r e n e c e s s a r y c a p i t a l f o r two t o f i v e
y e a r s . This w i l l b r i d g e t h e gap
where t h e c a p i t a l market should
function.
Messrs. Smythe, Burnside and E p s t e i n were a p p o i n t e d as a committee
t o f o r m u l a t e a r e s o l u t i o n f o r p r e s e n t a t i o n a t t h e a f t e r n o o n meeting r e q u e s t i n g t h a t some p r o v i s i o n be made f o r a l t e r n a t e s to r e g u l a r members of
t h e I n d u s t r i a l Advisory Committees.
Messrs. Pouch, Sanford and Burnside were a p p o i n t e d as a committee
t o c o n f e r w i t h members of t h e s t a f f of t h e F e d e r a l Reserve Board f o r t h e
purpose of working out p l a n s f o r n a t i o n a l p u b l i c i t y i n c o n n e c t i o n w i t h t h e
a c t i v i t i e s of t h e I n d u s t r i a l Advisory Committee.
Mr. H o r r i s and Mr. Wood were r e q u e s t e d t o p r e p a r e a r e s o l u t i o n f o r
t h e meeting tomorrow a f t e r n o o n with r e f e r e n c e t o the r e l e a s e of October
29, 19 34, of t h e Department of Commerce and s u g g e s t i n g t h a t t h e F e d e r a l
Reserve Board c o u n t e r a c t i n an a p p r o p r i a t e manner and a t t h e proper time
t h e e f f e c t s of t h i s r e l e a s e , and t o a c q u a i n t t h e p u b l i c w i t h t h e e f f e c t i v e
work done by t h e F e d e r a l Reserve System under t h e p r o v i s i o n s of S e c t i o n 13b,
l e a v i n g i t t o t h e d i s c r e t i o n of t h e F e d e r a l Reserve Board as t o what a c t i o n t h e y should t a k e •
449
-8-
X—9063
Mr• Pouch t h e n moved, which was duly seconded and c a r r i e d u n a n i mously, t h a t t h e Committee e x p r e s s i t s deep a p p r e c i a t i o n f o r t h e c o u r t e s y
and e n t e r t a i n m e n t shown i t t o n i g h t by t h e Chairman.
The meeting a d j o u r n e d a t 12:20 a . m*
(Signed)
Approved:
(Signed)
A. M. Creighton
Chairman.
J * E. B u t t e r w o r t h
Secretary.
450
X-9064
A meeting of the Chairmen of t h e I n d u s t r i a l Advisory Committees
was h e l d i n Washington on Tuesday, December 18, 1934 a t 2:00 p . m*
PRESENT:
Mr.
Mr .
Mr .
Mr.
Mr.
Mr.
Mr.
lor.
Mr.
Mr.
Mr.
Mr•
A. M. Creighton, Boston
• II. Pouch, New York
J . E. B u t t e r w o r t h , P h i l a d e l p h i a
F. A# Smythe, Cleveland
John Sanford, A t l a n t a
Max E p s t e i n , Chicago
W. K. Morris, S t . Louis
S. V. Yvood, Minneapolis
W. J . Berkowitz, Kansas C i t y
Clarence Ousley, D a l l a s
Ralph H. Burnside, P o r t l a n d
J . S. Walden, J r . , C o n t r o l l e r ,
F e d e r a l Reserve Bank of Richmond
Mr. S. F. Gilmore, C o n t r o l l e r , F e d e r a l
Reserve Bank of S t . Louis
Mr. Wo M. Hale, C a s h i e r , F e d e r a l Reserve
Bank of San F r a n c i s c o .
Mr. E. L. Smead, C h i e f , D i v i s i o n of Bank
Operations of t h e F e d e r a l Reserve Board
Mr. S. R. C a r p e n t e r , A s s i s t a n t S e c r e t a r y
of t h e F e d e r a l Reserve Board
Mr. A. M. Stone, S e c r e t a r y t o Mr. Szymczak.
Mr. Sanford moved t h a t t h e minutes of t h e meeting of t h e r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees held on September 27,
1934, and t h e minutes of t h e supper meeting of t h e Chairmen of t h e
I n d u s t r i a l Advisory Committees held a t t h e C a r l t o n Hotel on t h e evening of December 17, 1934 be approved.
Mr. S a n f o r d ' s motion was unanimously c a r r i e d .
Mr. Smythe p r e s e n t e d t h e f o l l o w i n g r e s o l u t i o n which was unanimously
adopted:
"Resolved t h a t inasmuch as paragraph (d) of S e c t i o n 13-B
of t h e F e d e r a l Reserve Act as amended e s t a b l i s h e s i n each F e d e r a l
Reserve D i s t r i c t an I n d u s t r i a l Advisory Committee of n o t l e s s
-2-
X-9064
" t h a n t h r e e or more t h a n f i v e members, and inasmuch as t h e Fede r a l Reserve Banks r e q u i r e t h e recommendations of a p p l i c a t i o n s
f o r loans by a m a j o r i t y of t h e members of such I n d u s t r i a l Adv i s o r y Committees, and inasmuch as i t i s a t times i m p o s s i b l e
t o s e c u r e t h e a t t e n d a n c e of a m a j o r i t y of t h e Committee, i t i s
d e s i r a b l e t h a t such a c t i o n be a u t h o r i z e d as w i l l p e r m i t t h e
appointment of a l t e r n a t e s i n each F e d e r a l Reserve D i s t r i c t t o
s e r v e when and i f t h e n e c e s s a r y m a j o r i t y cannot be p r e s e n t a t
any meeting . "
Mr# Morris o f f e r e d t h e f o l l o w i n g r e s o l u t i o n which, a f t e r some
d i s c u s s i o n , was adopted, Mr. E p s t e i n v o t i n g "No.11
"Whereas t h e i s s u e of Dr. Theodore N. Beckman, Chief
Economist i n Charge of Survey, U. S. Department of Commerce
dated October 29th, has been brought t o the a t t e n t i o n of t h e
I n d u s t r i a l Advisory Committee, i t i s f e l t t h a t t h e F e d e r a l
Reserve Board should t a k e a c t i o n when t h e y thought a p p r o p r i a t e
t o a c q u a i n t t h e p u b l i c w i t h the e f f e c t i v e work done by t h e
F e d e r a l Reserve System under t h e p r o v i s i o n s of S e c t i o n 13-B,
l e a v i n g i t t o t h e d i s c r e t i o n of t h e F e d e r a l Reserve Board as
t o what a c t i o n t h e y should t a k e . "
Mr. Pouch moved t h e adoptio n of t h e f o l l o w i n g r e s o l u t i o n , and
h i s motion was c a r r i e d unanimously.
11
The Committee on P u b l i c i t y recommends t h a t t h e F e d e r a l
Reserve Board be r e q u e s t e d t o t a k e such s t e p s as may be n e c e s s a r y t o ^ive adequate p u b l i c i t y :
l l ) To t h e work of t h e F e d e r a l Reserve Banks and t h e
I n d u s t r i a l Advisory Committees i n e x t e n d i n g l o a n s i n a c cordance w i t h S e c t i o n 13-B of t h e F e d e r a l Reserve Act; and,
(2) To t h e o p p o r t u n i t i e s a f f o r d e d by S e c t i o n 13-B of
t h e F e d e r a l Reserve Act f o r i n d u s t r i a l and commercial e n t e r p r i s e s t o i n c r e a s e t h e i r working c a p i t a l upon advantageous
terms and f o r banks 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 t o
i n c r e a s e t h e i r e a r n i n g a s s e t s t h r o u g h loans t h a t combine a
high degree of s a f e t y and l i q u i d i t y w i t h a s u b s t a n t i a l
yield.
"The Committee on P u b l i c i t y e s p e c i a l l y has i n mind such
a r t i c l e s i n n a t i o n a l , l o c a l , or t r a d e p u b l i c a t i o n s as may be
of p a r t i c u l a r i n t e r e s t t o i n d u s t r i a l and commercial concerns
and f i n a n c i a l i n s t i t u t i o n s , and a l s o such a r t i c l e s as may t e n d
t o r e f u t e f a l s e i m p r e s s i o n s t h a t may be c r e a t e d by c r i t i c s of
t h e F e d e r a l Reserve banks and t h e I n d u s t r i a l Advisory Committees
in relation to their loans-to-industry a c t i v i t i e s . "
4 5 2
-3-
X-9064
The q u e s t i o n was t h e n r a i s e d as t o what, i f any, p u b l i c i t y should
be given t o t h e meetings of t h e chairmen of t h e i n d u s t r i a l a d v i s o r y
committees i n Washington y e s t e r d a y and t o d a y , and Mr. Szymczak was i n v i t e d i n t o t h e meeting t o p a r t i c i p a t e i n t h e d i s c u s s i o n .
At t h e c o n c l u s i o n of t h e d i s c u s s i o n , upon motion
by Mr• N o r r i s , t h e q u e s t i o n of p u b l i c i t y was r e f e r r e d
t o t h e p u b l i c i t y committee and Mr• Szymczak w i t h t h e
u n d e r s t a n d i n g t h a t a p u b l i c s t a t e m e n t would be i s s u e d i n
t h e i r d i s c r e t i o n as soon as p o s s i b l e c o n s i s t e n t w i t h t h e
circumstances•
Reference was made t o t h e supplementary l i s t of t o p i c s s u g g e s t e d
f o r d i s c u s s i o n by members of t h e i n d u s t r i a l a d v i s o r y committees, and
i t was agreed t h a t inasmuch as t h e t o p i c s had been covered l a r g e l y by
t h e a c t i o n t a k e n a t t h e meeting y e s t e r d a y evening, no f u r t h e r d i s c u s s i o n a t t h i s time was n e c e s s a r y .
I n connection w i t h t h e second t o p i c ,
however, Mr. Pouch l e d a b r i e f d i s c u s s i o n on b o r d e r l i n e c a s e s .
Mr. Pouch i n q u i r e d as t o t h e o p i n i o n of t h e o t h e r r e p r e s e n t a t i v e s
p r e s e n t on t h e q u e s t i o n whether a l i m i t should be p l a c e d by t h e i n d u s t r i a l a d v i s o r y committees on t h e amount of t h e advance recommended i n
any i n d i v i d u a l c a s e .
I t was e x p r e s s e d as t h e g e n e r a l consensus t h a t
no l i m i t should be a p p l i e d .
The t h r e e r e s o l u t i o n s r e f e r r e d t o above were read f o r Mr. Szymczak*s
information.
Mr. Szymczak e x p r e s s e d on b e h a l f of himself and t h e o t h e r members
of t h e Board, t h e i r a p p r e c i a t i o n of t h e work b e i n g done by t h e i n d u s t r i a l a d v i s o r y committees and t h e s a c r i f i c e s which t h e y a r e making and
X-9064
4-
t h e time t h e y a r e spending i n c a r r y i n g on t h e work of t h e committees .
He s t r e s s e d t h e f a c t t h a t t h e Board i s very much s a t i s f i e d w i t h t h e
committees * work and i f i t f e e l s any disappointment i n c o n n e c t i o n w i t h
t h e i n d u s t r i a l loan a c t i v i t i e s , i t i s i n t h e t o t a l amount of l o a n s and
c ommitment s made.
Mr. N o r r i s s t a t e d t h a t t h e Chairmen of t h e i n d u s t r i a l a d v i s o r y
committees f e e l t h a t a g r e a t d e a l of good i s accomplished by t h e i r
meetings i n Washington and he e x p r e s s e d t h e o p i n i o n t h a t the meetings
should be c o n t i n u e d , p o s s i b l y on a q u a r t e r l y b a s i s a t a time m u t u a l l y
a g r e e a b l e t o t h e F e d e r a l Reserve Board and t h e chairmen of t h e committees •
Upon motion by Mr. Ousley, t h e f o l l o w i n g r e s o l u t i o n was adopted
unanimously:
"We wish t o record our h i g h a p p r e c i a t i o n of t h e i n f o r m a t i o n and i n s p i r i n g a d d r e s s e s of Governor E c c l e s , M e s s r s .
Szymczak, Hamlin, Thomas, M i l l e r and James of t h e F e d e r a l
.Reserve Board and Comptroller O'Connor, and of t h e g r a c i o u s
c o u r t e s i e s extended t o us by members of t h e F e d e r a l Reserve
Board S t a f f • We e s p e c i a l l y acknowledge t h e h e l p f u l s e c r e t a r i a l s e r v i c e of Messrs• Stone and C a r p e n t e r . "
Thereupon t h e meeting a d j o u r n e d .
(Signed)
J . E. B u t t e r w o r t h
Secretary*
APPROVED:
(Signed)
A. M. Creighton
,
- ~ Chairman.
X-9065
At t h e meeting h e l d i n Washington on December 18, 1934, a t
10 a.m. of members of t h e F e d e r a l Reserve Board and members of i t s
s t a f f w i t h r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory committees of
t h e twelve F e d e r a l r e s e r v e d i s t r i c t s , t h e f o l l o w i n g i n d i v i d u a l s were
present:
Mr. M a r r i n e r S. E c c l e s , Governor, F e d e r a l
Reserve Board
Mr. J . J . Thomas, Vice Governor, F e d e r a l
Reserve Board
Mr. C h a r l e s S. Hamlin, Member, F e d e r a l
Reserve Board
Mr. A. C. M i l l e r , Member, F e d e r a l Reserve
Board
Mr. George R. James, Member, F e d e r a l Reserve
Board
Mr. M. S. Ssymczak, Member, F e d e r a l Reserve
Board
Mr, J . F. T. O'Connor, Comptroller of t h e
Currency and ex o f f i c i o member of t h e
F e d e r a l Reserve Board
Messrs. A l b e r t M. Croightoji,
H. Pouch,
J . Ebert B u t t e r w o r t h , F . A. Smythe, John
S a n f o r d , Max E p s t e i n , Wm. K. N o r r i s ,
Sheldon V. Wood and Clarence Ousley,
Chairmen of the I n d u s t r i a l Advisory
Committees of the F i r s t , Second, T h i r d ,
F o u r t h , S i x t h , Seventh, E i g h t h , Ninth
and Eleventh F e d e r a l Reserve D i s t r i c t s ,
respectively,
Messrs. Walter J , Berkowitz and Ralph B u r n s i d e ,
members of the I n d u s t r i a l Advisory Committees
of t h e Tenth and T w e l f t h F e d e r a l Reserve
Districts, respectively.
Mr. Chaster M o r r i l l , S e c r e t a r y , F e d e r a l Reserve
Board
Mr. L. P. Bethea, A s s i s t a n t S e c r e t a r y , F e d e r a l
Reserve Board
Mr. 3 . R. C a r p e n t e r , A s s i s t a n t S e c r e t a r y , F e d e r a l
Reserve Board
Mr. E. L. Smead, Chief of t h e D i v i s i o n of Bank
O p e r a t i o n s , F e d e r a l Reserve Board
x-9065
:
455
—
Mr. '.'/alter Wyatt, General Counsel, F e d e r a l
Reserve Board
Mr. George B. V e s t , A s s i s t a n t Counsel,
F e d e r a l Reserve Board
Mr*. C. R. McKay, Deputy Governor, F e d e r a l
Reserve Bank of Chicago
Mr. J . S . Walden, J r . , C o n t r o l l e r ,
F e d e r a l Reserve Bank of Richmond
Mr. S. F . Gilmore, C o n t r o l l e r , F e d e r a l
Reserve Bank of S t . Louis
Mr. w. M. H a l e , C a s h i e r , F e d e r a l Reserve
Bank of San F r a n c i s c o
Mr. C r e i g h t o n s t a t e d t h a t a meeting of the Chairmen and r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees was h e l d y e s t e r d a y
evening and t h a t t h e a c t i o n t a k e n a t t h a t time would be r e p o r t e d t o
t h e Board a t t h i s m e e t i n g .
He t h e n c a l l e d upon t h e i n d i v i d u a l members
of t h e F e d e r a l Reserve Board t o a d d r e s s t h e m e e t i n g .
The s u b s t a n c e of Governor E c c l e s f s t a t e m e n t was a s f o l l o w s ;
There a r e many who f e e l t h a t t h e making of d i r e c t l o a n s t o i n d u s t r y does not b e l o n g i n the F e d e r a l r e s e r v e banks. There a r e o t h e r s
who f e e l t h a t t h e F e d e r a l Reserve System can p e r f o r m a u s e f u l f u n c t i o n
i n t h i s u n d e r t a k i n g , but whatever t h e o p i n i o n s may be w i t h r e f e r e n c e
t o t h e problem, Congress decided t h a t i s s u e l a s t s e s s i o n and d e l e g a t e d t h e r e s p o n s i b i l i t y t o t h e F e d e r a l Reserve System of making such
l o a n s . The I n d u s t r i a l Advisory Committees have been chosen t o u n d e r t a k e t h i s important r e s p o n s i b i l i t y , and a r e i n a p o s i t i o n which r e q u i r e s t h e p a t r i o t i c g i v i n g of t h e i r t i m e , e f f o r t and t h o u g h t without
compensation i n t h i s emergency. T h e i r e f f o r t s i n t h i s c o n n e c t i o n a r e
g r e a t l y a p p r e c i a t e d by t h e Board. The r e s u l t s up t o t h e p r e s e n t time
a r e i n d i c a t i v e of t h e f i n e work t h e committees have done i n t h e i r
r e s p e c t i v e communities, and while t h e r e s u l t s a r e d i s a p p o i n t i n g t o
some i t i s not t h e f a u l t of t h e I n d u s t r i a l Advisory Committees or of
the Federal reserve banks.
I t i s a d i f f i c u l t t h i n g t o c r e a t e c r e d i t where t h e r e i s no
b a s i s f o r c r e d i t . I t i s p e r f e c t l y n a t u r a l a f t e r f o u r or f i v e y e a r s
of t h e most d e v a s t a t i n g d e p r e s s i o n t h i s country has e v e r seen t h a t
t h e r e would be many b u s i n e s s e s i n a s t a t e of f i n a n c i a l c o l l a p s e ,
which would immediately g r a s p a t every e f f o r t of t h e Government
toward p r o v i d i n g c r e d i t , which e x p l a i n s t h e deluge of a p p l i c a t i o n s
t h a t has come t o t h e I n d u s t r i a l Advisory Committees. I t i s f e l t
t h a t while t h e f i e l d f o r c r e d i t of t h i s kind i s much more l i m i t e d
X-9065
-3t h a n many people thought p r i o r t o t h e passage of t h e l e g i s l a t i o n ,
t h e r e has been much more good accomplished t h a n i s i n d i c a t e d by
t h e a c t u a l volume of l o a n s approved. The program of d i r e c t l e n d ing has caused t h e banks t o give more c o n s i d e r a t i o n t o c r e d i t s
t h a n t h e y would have been i n c l i n e d t o g i v e i n t h e p a s t . I t has
a l s o tended t o r e l i e v e t h e p r e s s u r e b e i n g e x e r t e d f o r t h e l i q u i d a t i o n of o u t s t a n d i n g c r e d i t s , so t h a t i t i s d i f f i c u l t t o measure
t h e amount of t o t a l c r e d i t t h a t has been c a r r i e d t h a t otherwise
would have been r e t i r e d , or t h e amount of new c r e d i t t h a t the
banks have extended which p o s s i b l y would not have been extended had
i t not been f o r t h i s l e g i s l a t i o n . There have been a number of c a s e s
where t h e committees have done very v a l u a b l e work i n a d v i s i n g
companies w i t h r e f e r e n c e t o changes t h e y could make i n management
and p o l i c y .
A l l t h a t t h e committees can do i s t o do t h e b e s t t h e y can and
attempt t o develop a s many l o a n s i n t h e r e s p e c t i v e communities a s
i t i s p o s s i b l e t o d e v e l o p , being a s l i b e r a l i n t h e i r i n t e r p r e t a t i o n
of e l i g i b l e c r e d i t a s i t i s p o s s i b l e t o b e . Inasmuch as t h e c o u n t r y
i s i n a c o n d i t i o n of g e n e r a l b u s i n e s s d e p r e s s i o n , an improvement i n
b u s i n e s s volume, p r i c e s and p r o f i t s over a p e r i o d of t i m e can be exp e c t e d , t h e banks c a n be more l i b e r a l i n t h e e x t e n s i o n of c r e d i t
t h a n t h e y could be i f t h e c o u n t r y was a t t h e peak of p r o s p e r i t y f a c i n g
t h e c r e d i t dangers i n h e r e n t i n a p e r i o d of d e f l a t i o n . I t would be
b e t t e r t o e r r on t h e s i d e of l i b e r a l i t y i n t h e p r e s e n t s i t u a t i o n
t h a n on t h e s i d e of c o n s e r v a t i s m . While t h e banks do n o t want t o
i n c u r l o s s e s knowingly, i t i s n o t expected t h a t no l o s s e s w i l l r e s u l t . The F e d e r a l Reserve System should be p r e p a r e d t o show t h a t
t h e i r p o l i c y has been l i b e r a l , t h a t t h e borrower has been given t h e
b e n e f i t of t h e d o u b t , and t h a t t h e F e d e r a l r e s e r v e banks have been
w i l l i n g t o assume every r e a s o n a b l e r i s k .
Most i n d i v i d u a l banks cannot t a k e any s u b s t a n t i a l l o s s e s without
becoming i n s o l v e n t and t h e e a r n i n g s of t h e banks a r e so low a t t h e
p r e s e n t time t h a t t h e y a r e not i n a p o s i t i o n t o t a k e l o s s e s , whereas
t h e F e d e r a l r e s e r v e banks can, without d i s a s t e r , assume a g r e a t e r
r i s k t h a n t h e . p r i v a t e bank. If l o s s e s do develop t h e y a r e s o c i a l i z e d , and do not t e n d t o d e s t r o y t h e banking system a s do t h e l o s s e s
i n i n d i v i d u a l banks which cause t h e banks t o c l o s e .
Bankers have a t h r e e - f o l d d u t y . They must s a f e g u a r d t h e f u n d s
of t h e i r d e p o s i t o r s , and t h e y must s a f e g u a r d t h e p r i n c i p a l and e a r n
d i v i d e n d s f o r t h e i r s t o c k h o l d e r s . They a r e charged i n a v e r y l a r g e
measure with a more important r e s p o n s i b i l i t y t h a n e i t h e r of t h e above,
t h a t of c r e a t i n g and e x t i n g u i s h i n g t h a t p a r t of t h e c o u n t r y ' s money
supply r e p r e s e n t e d by checking a c c o u n t s . T h i s l a s t duty t o t h e com-
X-9065
-4munity a t l a r g e i s o f t e n overlooked. A c o n t r a c t i o n of l o a n s and
i n v e s t m e n t s which may be d e s i r a b l e on i n d i v i d u a l grounds, may be
u n d e s i r a b l e from the viewpoint of t h e country a s a whole f o r t h e
r e a s o n t h a t a c o n t r a c t i o n of l o a n s i n v o l v e s a l s o a c o n t r a c t i o n
of d e p o s i t money or d e p o s i t c u r r e n c y . In t h e p r o c e s s of l i q u i d a t i o n from 1929 t o 1933 approximately o n e - t h i r d of t h e t o t a l d e p o s i t s of t h e c o u n t r y was so e x t i n g u i s h e d . The p r o c e s s of r e covery r e q u i r e s t h a t a s u b s t a n t i a l p a r t of t h i s l o s t d e p o s i t
c u r r e n c y be r e p l a c e d . T h i s can be done i f t h e banking system
as a whole w i l l expand i t s l o a n s and i n v e s t m e n t s . In t h e event
t h a t t h e banking system f a i l s t o do t h i s t h e Government i s t h e n
f o r c e d t o supply t h e d e f i c i e n c y . That can be s u p p l i e d t h r o u g h
Government f i n a n c i n g and b u d g e t a r y d e f i c i t s , t h e banks c o n s t a n t l y
i n c r e a s i n g t h e i r i n v e s t m e n t s i n Government bonds. I f t h e banks
f a i l t o t a k e Government bonds, and f a i l t o i n c r e a s e l o a n s and
i n v e s t m e n t s , t h e d e f i c i e n c y must be s u p p l i e d e i t h e r t h r o u g h t h e
F e d e r a l Reserve System buying such bonds a s a r e r e q u i r e d , t h e
c r e a t i o n of a c e n t r a l bank upon t h e f a i l u r e of t h e F e d e r a l r e s e r v e banks t o t a k e t h e bonds, or t h e i s s u a n c e of c u r r e n c y by
t h e Government. The d e s i r a b l e way i s t o do i t through t h e p r i v a t e
banking system t o t h e g r e a t e s t e x t e n t p o s s i b l e , but i t cannot be
done and i t w i l l not be done i f t h e bankers f e e l t h a t t h e banks
are unsound u n l e s s t h e y a r e l i q u i d . We found i n t h e d e p r e s s i o n
t h a t t h e r e i s no such t h i n g as l i q u i d i t y except i n t h e case of
paper which can be c o n v e r t e d i n t o c u r r e n c y through r e d i s c o u n t i n g
w i t h t h e Federal, r e s e r v e banks, and what appeared t o be a sound
bond w i t h an §85,000,000,000 n a t i o n a l income appeared t o be p e r f e c t l y unsound w i t h a $50,000,000,000 income.
Bankers have i n s i s t e d , and t h e r e can be no q u e s t i o n of t h e i r
s i n c e r i t y , t h a t t h e y a r e w i l l i n g and anxious t o make good commercial
l o a n s . But t h a t i s n o t enough. We must f r a n k l y f a c e t h e f a c t t h a t
t h e supply of such l o a n s i s not s u f f i c i e n t both t o o f f s e t t h e l i q u i d
a t i o n of old l o a n s and t o b r i n g about t h e r e q u i s i t e e x p a n s i o n of
t o t a l a s s e t s and d e p o s i t s . Even i n 1929 commercial l o a n s e l i g i b l e
f o r r e d i s c o u n t i n g a t t h e F e d e r a l r e s e r v e banks comprised only 12.7%
of t h e member b a n k s ' t o t a l e a r n i n g a s s e t s . At t h e p r e s e n t t h e y a r e
l e s s t h a n 8%. Bankers cannot c o n f i n e t h e m s e l v e s t o such l o a n s and
s t i l l s u p p l y an adequate amount of d e p o s i t c u r r e n c y . In o t h e r words
i f t h e bankers of t h i s c o u n t r y a r e t o p e r f o r m t h e i r money s u p p l y i n g
f u n c t i o n s s a t i s f a c t o r i l y t h e y must be p r e p a r e d t o i n c r e a s e t h e i r
e a r n i n g a s s e t s o t h e r t h a n commercial l o a n s . I t i s t r u e t h a t t h e
banks have i n c r e a s e d t h e i r h o l d i n g s of Government s e c u r i t i e s by
approximately f i v e b i l l i o n d o l l a r s , however, even «srith t h i s i n c r e a s e t h e c o n t r a c t i o n of a l l l o a n s and i n v e s t m e n t s has been about
J>18,000,000,000 s i n c e 1929. I s h o u l d , however, l i k e t o see banks
i n c r e a s e t h e i r h o l d i n g s of o t h e r i n v e s t m e n t s , sound r e a l e s t a t e
mortgage l o a n s and l o c a l l o a n s of good s e c u r i t y but w i t h a m a t u r i t y
much l o n g e r t h a n s i x months.
Z-9005
-5I would not make t h e s u g g e s t i o n i f I thought t h a t i t would
prove d e t r i m e n t a l t o t h e i n t e r e s t s of t h e d e p o s i t o r s or s t o c k h o l d e r s of b a n k s . I a p p r e c i a t e thoroughly t h e harrowing n a t u r e
of t h e b a n k e r s ' e x p e r i e n c e s w i t h f r o z e n a s s e t s i n t h e p a s t . I t
i s p o s s i b l e , however, t h a t wrong l e s s o n s a r e b e i n g drawn from
our 1929 t o 1933 banking e x p e r i e n c e s . S u p e r f i c i a l l y , t h e t r o u b l e
may have appeared t o have been l a c k of s u f f i c i e n t l i q u i d i t y . But
no banking system can be both l i q u i d enough t o pay o f f any subs t a n t i a l amount of i t s d e p o s i t s a t a moment's n o t i c e and a t t h e
same time s e r v e t h e c o u n t r y by p r o v i d i n g t h e amount of money
n e c e s s a r y f o r b u s i n e s s s t a b i l i t y . Fundamentally, t h e r e a l t r o u b l e
l a y i n t h e c i r c u m s t a n c e s t h a t gave r i s e t o t h e need of g r e a t
l i q u i d i t y . These c i r c u m s t a n c e s a r e now h a p p i l y p a s t and hence
the need of g r e a t l i q u i d i t y i s o b v i a t e d . The i n s u r a n c e of bank
d e p o s i t s i s d e s i g n e d t o p r o t e c t t h e banks from r u n s . Banks may
l o s e d e p o s i t s t o o t h e r banks, but as a system t h e y a r e going t o
g a i n r a t h e r t h a n l o s e d e p o s i t s . We have t h e w i l l and, we b e l i e v e ,
p o s s e s s t h e power t o prevent t h e r e c u r r e n c e of widespread l i q u i d a t i o n and t h e c o l l a p s e of v a l u e s t h a t have c h a r a c t e r i z e d r e c e n t
years.
I f we can g e t t h e p r i v a t e c r e d i t system t o f u n c t i o n i n t h e
f i e l d of mortgage l o a n s , we w i l l go a long way toward c a u s i n g t h e
p r i v a t e banking s t r u c t u r e t o occupy t h e p l a c e t h a t i t was designed
t o occupy. I f t h e banks f a i l t o do t h a t , t h e n i t becomes i n e v i t a b l e
t h a t t h e Government must continue i n t h e f i e l d of p r o v i d i n g p r i v a t e
c r e d i t a s t h e y have been doing i n t h e p a s t . If t h i s tendency i s not
stopped, i t w i l l only be a s h o r t time b e f o r e we have s o c i a l i z e d and
n a t i o n a l i z e d t h e c r e d i t s t r u c t u r e of America. And t h i s i s a s i g n i f i cant and dangerous t r e n d t h a t many bankers a r e e n t i r e l y unaware o f .
The a d m i n i s t r a t i o n cannot be blamed f o r t h a t development because the
p o l i t i c a l p r e s s u r e and c i r c u m s t a n c e s t h a t have developed have f o r c e d
t h e a d m i n i s t r a t i o n i n t o t h e c r e d i t f i e l d on an u n p r e c e d e n t e d s c a l e
and i t becomes t h e duty of a l l of us t o t r y t o d i v e r t so f a r as we
p o s s i b l y can i n t o p r i v a t e c h a n n e l s t h e c r e d i t f u n c t i o n s . With b e tween $13,000,000,000 and $15,000,000,000 of time d e p o s i t s i n t h e
banks, t h e r e should be no h e s i t a n c y on t h e p a r t of t h e banks t o e n t e r
t h e mortgage f i e l d . E i t h e r t h a t should occur or time d e p o s i t s should
be divorced f r o m commercial d e p o s i t s so t h a t time d e p o s i t s can be
used i n t h e f i e l d i n which t h e y were designed t o be u s e d .
The Board a p p r e c i a t e s t h e time t h a t you have given t o come t o
Washington t o d i s c u s s t h e problems p e r t a i n i n g t o u n d u s t r i a l l o a n s
and t h e i n t e r e s t t h a t you have shown and t h e c o o p e r a t i o n t h a t you
have g i v e n . The Board p l e d g e s i t s support t o t h e I n d u s t r i a l Adv i s o r y Committees i n t h e i r work.
Upon r e q u e s t from Mr. Ousley f o r a s t a t e m e n t of Governor
c c l e s ' remarks, t h e Governor s a i d t h a t he had no o b j e c t i o n t o such
-6-
a s t a t e m e n t b e i n g i n c l u d e d i n t h e s t a t e m e n t of t h i s meeting provided
i t i s t r e a t e d a s c o n f i d e n t i a l by t h o s e p r e s e n t .
At t h e c o n c l u s i o n of h i s s t a t e m e n t t h e Governor l e f t t h e room
to attend another meeting.
Mr. O'Connor reviewed t h e s i t u a t i o n concerning n a t i o n a l banks,
g i v i n g s t a t i s t i c s w i t h r e g a r d t o t h e p r o g r e s s made i n c o n n e c t i o n w i t h
t h e reopening of u n l i c e n s e d banks f o l l o w i n g t h e banking h o l i d a y , t h e
i s s u a n c e of p r e f e r r e d s t o c k by n a t i o n a l banks, and t h e l i q u i d a t i o n of
d e p o s i t s i n n a t i o n a l banks i n r e c e i v e r s h i p .
He r e f e r r e d t o t h e s t a t e -
ment which has been made t h a t banks i n t h e United S t a t e s a r e s u b j e c t
t o examination by as many as t h r e e s u p e r v i s i n g a g e n c i e s and s t a t e d t h a t
n a t i o n a l banks a r e examined only by n a t i o n a l bank examiners, and t h a t
t h e r e i s no d u p l i c a t i o n i n examination by F e d e r a l a g e n c i e s of S t a t e
banks.
In connection w i t h t h e s t a t e m e n t t h a t banks a r e not making l o a n s
because of t h e c r i t i c a l a t t i t u d e of n a t i o n a l bank examiners, Mr. O'Connor
s t a t e d t h a t i n October, 1933, a l l n a t i o n a l bank examiners were i n s t r u c t e d
t o a p p r a i s e a s s e t s of banks on an i n t r i n s i c v a l u e b a s i s r a t h e r t h a n on t h e
b a s i s of a d i s t r e s s e d market v a l u e , and t h a t an a n a l y s i s of t h e examinat i o n r e p o r t s r e c e i v e d i n h i s o f f i c e showed t h a t of t h e t o t a l l o a n s and
i n v e s t m e n t s of n a t i o n a l banks only 3% had been c l a s s i f i e d a s l o s s , 4% a s
d o u b t f u l , and 27% a s slow.
He a l s o r e f e r r e d t o t h e i n s t r u c t i o n s i s s u e d
by h i s o f f i c e t o examiners t o make a s e p a r a t e . c l a s s i f i c a t i o n of i n d u s t r i a l
l o a n s i n t h e examination r e p o r t s and t o c l a s s i f y such l o a n s a s l o s s e s
only when l o s s e s have a c t u a l l y been d e t e r m i n e d .
X-9065
-7Following h i s s t a t e m e n t , Mr. O'Connor l e f t t h e m e e t i n g .
Mr. M i l l e r ' s s t a t e m e n t was s u b s t a n t i a l l y a s f o l l o w s :
The Board had p l e n t y of evidence t h a t t h e p r e s s u r e of t h e d e p r e s s i o n had made v e r y deep i n r o a d s i n t o t h e working c a p i t a l of
i n d u s t r i a l c o n c e r n s , even i n t h o s e c a s e s t h a t had enjoyed f o r y e a r s
b e f o r e t h e d e p r e s s i o n a h i g h r a t i n g . That b e i n g s o , i t appeared
t h a t t h e r e might be an o p p o r t u n i t y t o r e l i e v e t h e p r e s s u r e of a
s l e n d e r supply of working c a p i t a l upon t h e morale and psychology
of b u s i n e s s t h r o u g h opening a source of supply f o r t h i s purpose
through t h e F e d e r a l r e s e r v e banks, and might i n time be e x p e c t e d
t o show r e s u l t s i n a c c e l e r a t i n g b u s i n e s s r e c o v e r y and i n d u s t r i a l
production.
<•
I n o r d e r t h a t t h e problem should be p r o p e r l y c o n c e i v e d , i n d u s t r i a l Advisory Committees were s e t up t o f u n c t i o n i n c o n n e c t i o n
with t h e F e d e r a l r e s e r v e banks because t h e problem was viewed as
a b r o a d e r , more d i f f i c u l t and more novel one t h a n merely a banking
problem, and one t h a t might r e q u i r e a judgment d i f f e r e n t i n many
p a r t i c u l a r s from t h e judgment of even t h e s k i l l e d b a n k e r s . I t i s
p r i m a r i l y a b u s i n e s s problem; a problem of re-awakening b u s i n e s s
through t h e e f f e c t i v e use of t h i s new i n s t r u m e n t a l i t y of c r e d i t
and t h e judgment of a c t i v e b u s i n e s s men i s d e s i r a b l e t o broaden
t h e approach t o t h e problem. The F e d e r a l r e s e r v e banks have
s e l e c t e d t h e members of t h e I n d u s t r i a l Advisory Committees t o p e r form t h i s r a t h e r vague but n e v e r t h e l e s s tremendously i m p o r t a n t t a s k .
Underlying t h e whole m a t t e r of i n d u s t r i a l c r e d i t through t h e
F e d e r a l r e s e r v e banks was t h e f e e l i n g t h a t i t i n v o l v e d a r i s k t o o
l a r g e t o be u n d e r t a k e n by i n d i v i d u a l banks no m a t t e r what t h e i r
a t t i t u d e might b e . I t was a r i s k g e n e r a l and s o c i a l i n c h a r a c t e r ,
a r i s k t h a t had t o be u n d e r t a k e n by some agency t h a t could a f f o r d
t o t a k e t h e l o s s and could a f f o r d t o t a k e a generous a t t i t u d e i n
t h e a c t i v i t y because i f t h e v e n t u r e succeeded t h e r e s u l t s would
f a r outweigh t h e l o s s e s i n c u r r e d .
The r e s u l t s have been d i s a p p o i n t i n g t o t h e c o u n t r y , and even
t o t h o s e who have been t h o r o u g h l y sympathetic with t h e F e d e r a l
Reserve System. They have been s u r p r i s e d t h a t t h e r e has not been
more a l a c r i t y shown on t h e p a r t of b u s i n e s s i n a v a i l i n g i t s e l f of
t h i s new r e s o u r c e . One of t h e f u n d a m e n t a l r e a s o n s f o r t h e small
amount of l o a n s approved i s t h a t commercial and i n d u s t r i a l conc e r n s have not been i n c l i n e d t o seek c r e d i t . The concerns t h a t
a r e good c r e d i t r i s k s have not wanted t o borrow, but have been
as anxious t o keep out of debt as t h e banker i s t o keep h i s i n s t i t u t i o n l i q u i d . But t h e problem of p r o v i d i n g c r e d i t i s s t i l l
460
X*906#
-8-
p r e s e n t and one of t h e primary f u n c t i o n s of t h e I n d u s t r i a l Adv i s o r y Committees i s t o t r y t o induce a b e t t e r a t t i t u d e of mind
on t h e p a r t of banker and b u s i n e s s man and p a r t i c u l a r l y t o s e e
what can be done t o b r i n g t h e banker and t h e b u s i n e s s man t o g e t h e r and t o c r e a t e an atmosphere conducive t o growth of a
s p i r i t of e n t e r p r i s e . The committees w i l l f u n c t i o n b e s t when
t h e y make t h e c o n t r i b u t i o n of optimism t o t h e b u s i n e s s psychology
of t h e c o u n t r y . That i s not e a s i l y done, but i f t h e committees
can accomplish i t t h e y w i l l j u s t i f y t h e i r e x i s t e n c e many t i m e s over
and t h e time t h e y have given t o t h e work w i l l be a v e r y g r e a t s e r vice to the country.
The r e s u l t s may have been d i s a p p o i n t i n g a l s o f o r t h e r e a s o n
perhaps t h a t i t was not p o s s i b l e i n t h e c i r c u m s t a n c e s t o accomp l i s h v e r y much t h r o u g h t h e i n d u s t r i a l l o a n f a c i l i t y . But p o s s i b l y more could be accomplished i f t h e r e were a more a c u t e p e r c e p t i o n of t h e l a r g e r purpose behind t h e a c t i v i t y and what t h e
p a r t i c u l a r r e s p o n s i b i l i t y at' t h e committees i s . These committees,
perhaps more t h a n any o t h e r group i n t h i s c o u n t r y , should h e l p
t o c r e a t e an atmosphere of optimism, because t h e y have an
o f f i c i a l s t a t u s , t h e y have a r i g h t t o speak f o r b u s i n e s s America
i n t h e p r e s e n t emergency. As t h e y themselves develop i n d i v i d u a l l y and c o l l e c t i v e l y an a t t i t u d e of c o n f i d e n c e i n t h e f u t u r e of
t h e c o u n t r y , i t w i l l be an i n d i c a t i o n of what t h e a t t i t u d e of
b u s i n e s s should be i n h a n d l i n g t h e emergency. The problem i s
a l a r g e r one t h a n t h a t of merely p a s s i n g on l o a n s . The problem
i s much l a r g e r . I t i s a problem of l e a d e r s h i p . What we need
most i n t h e p r e s e n t emergency i s an a t t i t u d e of f a i t h i n t h e
America of t h e f u t u r e .
A f t e r h i s s t a t e m e n t Mr. M i l l e r l e f t t h e m e e t i n g .
Mr. Hamlin s t a t e d t h a t he a p p r e c i a t e d t h e d i f f i c u l t i e s conf r o n t i n g t h e I n d u s t r i a l Advisory Committees.
He s a i d w h i l e t h e com-
m i t t e e s could not recommend l o a n s when worthy b o r r o w e r s a r e not making
a p p l i c a t i o n s , t h e y should go over t h e ground and be s u r e t h a t a l l such
borrowers a r e a c q u a i n t e d w i t h t h e i n d u s t r i a l l o a n a c t i v i t y .
He added
t h a t he c o n s i d e r e d t h e Advisory Committees as a kind of s p e c i a l j u r y
r e p r e s e n t i n g t h e p u b l i c i n t e r e s t , and i n t h e i r d e l i b e r a t i o n s t h e y
should not be w o r r i e d about t h e banking problems as t h e banks would
apply t h e r e g u l a r banking t e s t s .
The good t h a t t h e committees have
X-9065
-9—
done cannot be measured because much t h a t t h e y have accomplished
i s not a m a t t e r of r e c o r d .
Mr. Hamlin withdrew f r o m t h e meeting a t t h i s p o i n t .
Mr. James e x p r e s s e d t h e thought t h a t perhaps some of t h e d e l a y
i n making i n d u s t r i a l l o a n s r e s u l t s from a t o o t e c h n i c a l c o n s i d e r a t i o n
of what t h e law i n t e n d e d , and t h a t i n h i s o p i n i o n t h e I n d u s t r i a l Adv i s o r y Committees and t h e F e d e r a l r e s e r v e banks a r e j u s t i f i e d i n cons i d e r i n g l a r g e l y t h e r e a s o n a b l e soundness of t h e l o a n r a t h e r t h a n
t e c h n i c a l i n t e r p r e t a t i o n s of t h e law.
Mr. Thomas s a i d t h a t s t a t i s t i c s a s t o t h e amount of i n d u s t r i a l
l o a n s made a r e no f a i r measure of what has been accomplished by t h e
I n d u s t r i a l Advisory Committees, and t h a t t h e i r g r e a t e s t c o n t r i b u t i o n
i s the immeasurable i n f l u e n c e t h e y have e x e r t e d i n t h e b u s i n e s s w o r l d .
He s t a t e d t h a t one g r e a t h i n d r a n c e t o r e c o v e r y i s t h e f e e l i n g of u n c e r t a i n t y and f e a r a s t o t h e f u t u r e , which a p p l i e s as much t o t h e
prudent borrower as t o t h e banker; t h a t when economic t r o u b l e s come
s e l f - i n t e r e s t prompts t h e i n d i v i d u a l t o s a f e g u a r d himself by l i q u i d a t i o n which means d e f l a t i o n , and d e f l a t i o n means more l i q u i d a t i o n , and
t h u s we go on t h e downward s p i r a l ; and t h a t i n o r d e r t o b r e a k t h i s
d e s c e n t and r e v e r s e i t s d i r e c t i o n , government c r e d i t has come t o t h e
rescue.
He a l s o added t h a t by making l o a n s t o i n d u s t r y t h e I n d u s t r i a l
Advisory Committees and F e d e r a l r e s e r v e banks not only a i d p r o d u c t i o n
but g i v e courage t o o t h e r s , t h e borrower as w e l l as t h e l e n d e r , and
t h a t , t h e r e f o r e , t h e committees should not be d i s c o u r a g e d by what may
X*9065
f 463
-10-
seem d i s a p p o i n t i n g amounts, a s t h e y a r e p e r f o r m i n g a v a l u a b l e s e r v i c e and a r e t o be comnended f o r t h e i r d e v o t i o n and s e l f - s a c r i f i c e .
Mr. Szymczak s t a t e d t h a t m a t e r i a l had been p rep ared which
he would hand t o Mr. Creighton f o r use i n p r e p a r i n g a s t a t e m e n t f o r
t h e p r e s s should i t be decided t o i s s u e such a s t a t e m e n t ,
He a l s o
s a i d t h a t m a t e r i a l i s b e i n g prepared so t h a t a complete r e p o r t of
i n d u s t r i a l l o a n s may be ready i n J a n u a r y of next y e a r and, i n t h i s
c o n n e c t i o n , he r e f e r r e d t o t h e pamphlet on i n d u s t r i a l l o a n s p r e p a r e d
by Mr. C r e i g h t o n and d i s t r i b u t e d i n t h e F i r s t F e d e r a l Reserve D i s t r i c t and s a i d t h a t t h e o t h e r committees might use i t , or t h e m a t e r i a l
f o r a pamphlet now being p r e p a r e d by t h e Board, i n t h e p r e p a r a t i o n of
a pamphlet f o r use 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 .
Mr. Szymczak's s t a t e m e n t then continued along t h e f o l l o w i n g
lines:
The r e l e a s e t o t h e p r e s s and t h e appearance i n t h e morning
p a p e r s of t h e s o - c a l l e d Viner r e p o r t , which c o n t a i n e d t h e s u g g e s t i o n t h a t t h e I n d u s t r i a l Advisory Committees might be e l i m i n a t e d and t h a t i t would be b e t t e r not t o have t h e F e d e r a l r e s e r v e
banks make i n d u s t r i a l l o a n s , was of course w i t h o u t the a p p r o v a l
of t h e Board which was not c o n s u l t e d a s t o t h e d a t e of t h e r e l e a s e , nor was t h e Board asked t o approve or d i s a p p r o v e t h e cont e n t of t h e r e p o r t .
One might t h i n k from a p r e l i m i n a r y survey of t h e s i t u a t i o n
t h a t a much l a r g e r t o t a l amount of i n d u s t r i a l l o a n s would have
been made by t h e F e d e r a l r e s e r v e banks, but when t h e r e i s p e r sonal c o n t a c t w i t h t h e type of a p p l i c a t i o n t h a t i s r e c e i v e d a t
t h e F e d e r a l r e s e r v e bank t h e i n d i v i d u a l g e t s an e n t i r e l y d i f f e r e n t p o i n t of view. T h i s i s an e n t i r e l y new f i e l d of endeavor,
new t o t h e I n d u s t r i a l Advisory Committees, t o t h e F e d e r a l r e s e r v e
banks, and t o t h e c o u n t r y as a whole. C e r t a i n l y no one thought
twenty y e a r s ago t h a t t h e F e d e r a l r e s e r v e banks would be making
t h i s k i n d of l o a n .
X-9065 '
464
-11-
The number of complaints r e c e i v e d d i r e c t l y and i n d i r e c t l y by
t h e Board f r o m a p p l i c a n t s f o r l o a n s because of t h e r e f u s a l of t h e
a p p l i c a t i o n or d i s s a t i s f a c t i o n with t h e terms imposed, has been
r e l a t i v e l y s m a l l , two such complaints b e i n g r e c e i v e d i n J u l y ,
f o u r t e e n i n August, t w e n t y - t h r e e i n September, twelve i n O c t o b e r ,
t w e n t y - s i x i n November, and t h r e e i n December, or a t o t a l of
eighty.
The number of a p p l i c a t i o n s approved i n each d i s t r i c t i s not
an i n d i c a t i o n of t h e work done by t h e a d v i s o r y committees but of
t h e c h a r a c t e r of t h e a p p l i c a t i o n s r e c e i v e d . A l l of t h e committees
a r e doing s p l e n d i d work and t h e Board a p p r e c i a t e s t h e i r e f f o r t s .
At t h e September meeting i t was p o i n t e d out t h a t t h e a d v i s o r y committee i s a s t a t u t o r y body. The purpose of c r e a t i n g
t h i s committee was t o t u r n over t o i t a l l a p p l i c a t i o n s r e c e i v e d
by t h e banks f o r c o n s i d e r a t i o n and recommendation t o t h e bank
a f t e r o b t a i n i n g such f a c t s a s a r e n e c e s s a r y . The c o m m i t t e e ' s
work has been of such importance t h a t F e d e r a l r e s e r v e bank o f f i c e r s i n many c a s e s have seen f i t t o a t t e n d meetings of t h e comrm i t t e e . The committees may want t h e advice of t h e bank, b u t f r o m
t h e s t a n d p o i n t of t h e law which i s very c l e a r , t h e a d v i s o r y comm i t t e e s have t h e r e s p o n s i b i l i t y of making independent recommendat i o n s and t h e y , t h e r e f o r e , have t h e power t o d i r e c t t h e employees
engaged i n work f o r t h e committee n o t w i t h s t a n d i n g the f a c t t h a t
t h e r e i s no power under t h e law t o p r o v i d e a budget t o cover t h e
expenses of p e r s o n s working f o r t h e committee, and t h e s a l a r i e s
of such p e r s o n s a r e paid by t h e F e d e r a l r e s e r v e b a n k s . I t should
be made c l e a r a t a l l t i m e s , p a r t i c u l a r l y t o t h e a p p l i c a n t f o r a
l o a n , t h a t t h e committee has not t u r n e d over t o t h e bank any of
i t s f u n c t i o n s , but as a s t a t u t o r y body has c o n s i d e r e d t h e a p p l i c a t i o n and made i t s recommendation i n d e p e n d e n t l y . The f u n c t i o n
of t h e bank i s t o a c t a f t e r i t r e c e i v e s t h e c o m m i t t e e ' s recommendation.
There i s a l s o t h e thought t h a t perhaps each member of t h e comm i t t e e should r e c e i v e compensation f o r h i s work. The Board has
c o n s i d e r e d t h a t m a t t e r v e r y c a r e f u l l y and i t has been s t u d i e d by
t h e F e d e r a l r e s e r v e banks, but t h e law i s p l a i n t h a t t h e members
s h a l l r e c e i v e no compensation, although i t p r o v i d e s f o r t h e payment of t h e expenses i n c u r r e d by t h e members i n p e r f o r m i n g t h e i r
work or a per diem allowance i n l i e u t h e r e o f . The s u g g e s t i o n h a s
been made t h a t t h e Board should have i n t e r p r e t e d t h e law d i f f e r e n t l y , but a f t e r a v e r y c a r e f u l s t u d y of t h e m a t t e r i t r e l u c t a n t l y f e l t compelled t o r e a c h t h e d e c i s i o n t h a t has been r e a c h e d
and of which t h e committees have been a d v i s e d . The work t h a t t h e
members of t h e committees a r e doing and t h e time t h e y a r e t a k i n g
from t h e i r own b u s i n e s s e s cannot be measured i n f e e s of $5.00 or
-12-
,'•.10.00 or even :)25.00, and t h e Board f e e l s t h a t if any r e a s o n able f e e were t o be allowed i t could not s t a r t at a p o i n t below
)50.00. The work t h a t t h e committees are performing i s a s e r v i c e which only t h e y can perform i n a time of emergency, and i f
t h e Board f e e l s any disappointment i t i s not i n connection with
the work of t h e committees, but i n t h e t o t a l amount of l o a n s made.
During Mr. Szymczak's statement Governor Martin of t h e F e d e r a l
Reserve Bank of S t . Louis and Mr. Goldenweiser, D i r e c t o r of t h e Div i s i o n of Research and S t a t i s t i c s of t h e F e d e r a l Reserve Board, e n t e r ed t h e room, and Mr. James l e f t t h e meeting,
Mr. 7/alden s t a t e d t h a t Mr. J . G. Holtzclaw, because of t h e
n e c e s s i t y of h i s being i n New York today, had r e q u e s t e d Mr. George E.
P r o b e s t , J r . , one of t h e o t h e r members of t h e I n d u s t r i a l Advisory
Committee f o r t h e F i f t h F e d e r a l Reserve D i s t r i c t , to a t t e n d t h i s meeting; t h a t Mr. Probest had found i t necessary t o go t o P i t t s b u r g h , and
t h a t he (Mr. Walden) was a t t e n d i n g t h e meeting at t h e r e q u e s t of the
o t h e r two members of t h e I n d u s t r i a l Advisory Committee r e s i d i n g i n
Richmond f o r t h e purpose of l i s t e n i n g t o t h e d i s c u s s i o n .
Mr. Creighton expressed t h e a p p r e c i a t i o n of t h e r e p r e s e n t a t i v e s
of the I n d u s t r i a l Advisory Committees of t h e s t a t e m e n t s made by the
Bombers of t h e F e d e r a l Reserve Board.
He t h e n p r e s e n t e d a statement of t h e a c t i o n s t a k e n by t h e c h a i r men and r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees a t t h e
meeting y e s t e r d a y e v e n i n g .
The t o p i c s discussed a t t h a t meeting and
the d e c i s i o n s reached are s e t f o r t h below.
Topics 1 and 2 were p r e -
sented by Mr. Morris, t o p i c s 3 and 4 by Mr. Pouch, t o p i c s 5 and 6 by
Mr. E p s t e i n , t o p i c s 7 and 8 by Mr. Sanford, t o p i c s 9 and 10 by Mr. Ousley,
3CR«Q<5«
-13and t o p i c s 11 and 12 by Mr. B u t t e r w o r t h ;
ANSWERS
QUESTIONS
1.
2.
what i s f e e l i n g i n r e g a r d t o
o p e r a t i o n of S e c t i o n 15b by
t h e F e d e r a l Reserve banks,
(a)
Among i n d u s t r i a l i s t s ,
whether p o t e n t i a l borrowe r s or n o t ?
(a)
Where t h e y a r e a c q u a i n t e d ,
or have a knowledge of t h e
law, t h e y a r e f a v o r a b l e .
(b)
Among o t h e r b u s i n e s s
leaders?
(b)
Same answer a s above.
(c)
Among f i n a n c i a l i n s t i t u tions?
(c)
F i n a n c i a l i n s t i t u t i o n s which
a r e a c q u a i n t e d w i t h t h e law
a r e f a v o r a b l e ; our g r e a t duty
i s t o a c q u a i n t more w i t h t h e
r e a l p o s s i b i l i t i e s under t h e
law.
Need f o r working c a p i t a l f o r
i n d u s t r y and commerce.
(a)
(b)
3.
Has e x p e r i e n c e i n d i c a t e d
t h a t t h e r e was a s u b s t a n t i a l need not b e i n g met
t h r o u g h u s u a l s o u r c e s of
credit?
I f such need now e x i s t s can
i t be a d e q u a t e l y met under
t h e p r e s e n t S e c t i o n 13b?
(a)
(b)
Yes. While t h e need a p p a r e n t l y i s n o t as g r e a t a s
at f i r s t thought, there i s
need and t h i s p r e s e n t law
t a k e s c a r e of i t , a l l of
which i s s u p p o r t e d by t h e
number of l o a n s t h a t have
been made i n t h e s h o r t p e r i o d
we have been o p e r a t i n g .
Yes. we f e e l t h a t p r a c t i c a l l y
a l l worthy c a s e s so f a r p r e s e n t e d have been t a k e n c a r e
of 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 and e x i s t i n g needs
can be t a k e n c a r e of i n t h e
future,
Assuming t h a t t h e r e w i l l be a cont i n u i n g need f o r 13b advances or
commitments,
(a)
Will applications for the
most p a r t t a k e t h e form o f ;
(l)Applications for direct
advances.
( 3 a - l ) At t h e p r e s e n t time
4 6 7
-14ANSWERS
QUE8TI0NS
( 3 a - l continued)
most of t h e a p p l i c a t i o n s
a r e f o r d i r e c t advances i n
most of t h e F e d e r a l Reserve
D i s t r i c t s although the
percentage v a r i e s considerably.
(b)
(2)
Applications involving
s e p a r a t e advances by
t h e F e d e r a l Reserve
bank and by f i n a n c i n g
i n s t i t u t i o n , or
(3a-2) There i s no g e n e r a l r u l e
throughout t h e e n t i r e s y s tem. A p p l i c a t i o n s d i r e c t
t o F e d e r a l Reserve banks
a r e d e c r e a s i n g and t h o s e t o
t h e l o c a l banks a r e i n creasing in the majority
of t h e d i s t r i c t s . Most memb e r s of t h e Committee f e e l
t h a t a p p l i c a n t s should be
encouraged t o make a p p l i c a t i o n s through t h e l o c a l
banks, which should be encouraged as i t i s most advantageous f o r t h e l o c a l
banks.
(3)
A p p l i c a t i o n s from f i nancing i n s t i t u t i o n s
f o r commitments coveri n g proposed advances.
(3a-3) i f f i n a n c i n g i n s t i t u t i o n s
r e f e r s t o F a c t o r and F i nance Companies, t h e r e have
been very few c a s e s of t h i s
kind.
Should t h e r a t e s charged by
t h e F e d e r a l Reserve banks be
so f i x e d as t o encourage
a p p l i c a t i o n s under 1, 2 or
3 above?
Recognizing t h a t s u b s e c t i o n "a"
of S e c t i o n 13b i s designed t o meet
emergency s i t u a t i o n s , should i t
be a permanent p r o v i s i o n of law,
and i f so, should i t be amended
as r e g a r d s :
(b)
I t seemed t o be t h e consensus
of opinion t h a t t h e p r e s e n t
r a t e s were s a t i s f a c t o r y and
should be c o n t i n u e d , such
r a t e s should encourage the
l o c a l banks t o c o o p e r a t e .
2£w9©65
-15-
ANSWERS
OJLJESTIONS
5.
(a)
Requirement t h a t a p p l i c a n t
be unable t o o b t a i n r e q u i s i t e
assistance from usual sources.
(b)
Requirement t h a t l o a n s be f o r
work!ng c a p i t a l p u r p o s e s .
(c)
Requirement t h a t l o a n s be made
on a reasonable and sound
basis.
(d)
Requirement t h a t l o a n s be confined to established businesses,
The Committee f e e l s t h a t
S e c t i o n 13b should be cont i n u e d i n i t s p r e s e n t form
as long as t h e emergency
e x i s t s and t h a t s u b d i v i s i o n s
a , b , c and d be c o n t i n u e d .
Two Members b e l i e v e d t h a t
b_ might be broadened t o i n clude p r o p r i e t a r y c a p i t a l .
Should s u b s e c t i o n "b" of S e c t i o n
13b be a permanent p r o v i s i o n of
law, and i f so, should i t be
amended as r e g a r d s ;
(a)
A u t h o r i z a t i o n of advances
through f i n a n c i n g i n s t i t u t i o n s o t h e r t h a n member
banks.
(b)
Amount of o b l i g a t i o n as t o
loss sustained.
(c)
A u t h o r i z a t i o n cf s e p a r a t e
l o a n s by F e d e r a l Reserve
banks and by a f i n a n c i n g
i n s t i t u t i o n on which r e p a y ments a r e made ,>ro r a t a .
6,
Would t h e making of l o a n s f o r worki n g c a p i t a l purposes presumably
have been conducted more e f f e c t i v e l y i f I n t e r m e d i a t e C r e d i t Banks
a f f i l i a t e d with t h e F e d e r a l Reserve
banks had been s e t up f o r t h i s p u r pose as provided i n t h e f i r s t b i l l
proposed by t h e F e d e r a l Reserve
Board? I f s o , why?
7.
What has been experience a s r e g a r d s
applications?
(a)
Extent t o which f e a r of r e j e c t i o n and of p o s s i b l e a d v e r s e e f f e c t upon a p p l i c a n t ' s
I t was t h e consensus of
opinion t h a t s u b s e c t i o n "b"
of S e c t i o n 13b should be r e t a i n e d and a , b and c be not
changed i n t h e law.
6.
The Committee f e l t t h a t t h e
answer t o t h i s q u e s t i o n i s NO;
the Chicago Chairman d i s s e n t ing.
(a)
I t i s not f e l t t h a t f e a r of
r e j e c t i o n and adverse e f f e c t
upon an a p p l i c a n t ' s c r e d i t has
X-9065
; 469
-16-
ANSWERS
QUESTIOHS
discouraged a p p l i c a t i o n s i n
more t h a n a few i n s t a n c e s .
c r e d i t s t a n d i n g has d i s couraged submission of a p p l i cations.
8.
Extent of and r e a s o n s f o r
withdrawal of a p p l i c a t i o n s .
(c)
I s c h a r a c t e r of a p p l i c a t i o n s im- (c)
proving? i s t h e p r o p o r t i o n
of a p p l i c a t i o n s f o r d i r e c t
advances d e c l i n i n g ?
C h a r a c t e r of a p p l i c a t i o n s i s
improving and v a r y i n g . The
p r o p o r t i o n of a p p l i c a t i o n s
f o r d i r e c t advances i s continuing in varying proportions.
(d)
Has t h e r e been any s u b s t a n t i a l number of complaints of
a l a c k of c o u r t e s y on t h e
p a r t of t h e Committee or of
o f f i c i a l s or employees of
F e d e r a l Reserve banks?
(d)
We a r e not aware of any comp l a i n t of l a c k of c o u r t e s y on
t h e p a r t of t h e Committee or
o f f i c i a l s or employees of t h e
F e d e r a l Reserve b a n k s .
(e)
i s t h e r e any evidence t h a t
F e d e r a l Reserve banks are r e q u i r i n g an e x c e s s i v e amount of
c o l l a t e r a l to secure loans?
(e)
There i s no evidence t h a t
F e d e r a l Reserve banks a r e r e q u i r i n g an e x c e s s i v e amount
of c o l l a t e r a l t o s e c u r e l o a n s .
On t h e o t h e r hand, every e f f o r t
i s b e i n g made t o make l o a n s when
t h e s e c u r i t y may be r e g a r d e d as
reasonable.
(f)
I s t h e r e evidence of any o t h e r
ground f o r c r i t i c i s m of e i t h e r
t h e committees or t h e banks?
(f)
There i s no evidence of any
o t h e r ground f o r c r i t i c i s m of
e i t h e r t h e Committees or t h e
F e d e r a l Reserve b a n k s .
Assuming t h a t more p a r t i c i p a t i o n s by
and commitments t o f i n a n c i a l i n s t i t u t i o n s a r e d e s i r a b l e , what i s
your recommendation a s t o how t o
b e s t o b t a i n t h e c o o p e r a t i o n of f i n a n c i a l i n s t i t u t i o n s t o t h i s end?
(b)
N e g l i g i b l e , and u s u a l l y f o r
the reason t h a t applicant has
found t h a t f u n d s would not be
needed, or has o b t a i n e d f u n d s
from u s u a l banking s o u r c e s .
(b)
8.
I t i s t h e consensus of o p i n i o n
t h a t more p a r t i c i p a t i o n s by and
commitments t o f i n a n c i a l i n s t i t u t i o n s a r e d e s i r a b l e , and t h i s
can be b e s t o b t a i n e d by d i r e c t
c o n t a c t w i t h t h e a p p l i c a n t s and
the banks. Further t h a t the
p r e s e n t p u b l i c i t y be continued
w i t h i n each d i s t r i c t and t h a t
X-9065
-17QUESTIONS
470
ANSWERS
t h i s be supplemented by p u b l i c i t y
of a n a t i o n a l c h a r a c t e r and t h a t
t h e a i d of t h e F e d e r a l Reserve
Board be s o l i c i t e d i n t h i s connection.
Has t h e F e d e r a l Reserve bank taken
adequate measures t o b r i n g t o t h e
a t t e n t i o n of f i n a n c i a l i n s t i t u t i o n s ,
and p a r t i c u l a r l y of member banks,
t h e advantages t o them of a c t i v e l y
seeking out commercial and i n d u s t r i a l enterprises in their t e r r i t o r y i n need of a d d i t i o n a l working
c a p i t a l and f u r n i s h i n g such c a p i t a l
under t h e p r o t e c t i o n of a commitment from t h e F e d e r a l Reserve bank?
T/hat, i n your e x p e r i e n c e , has
been t h e most important s e r v i c e
rendered i n d u s t r y and commerce
under S e c t i o n 13b?
I t i s t h e opinion t h a t t h e Reserve banks have made d i l i g e n t
e f f o r t s t o acquaint a l l f i n a n c i n g
i n s t i t u t i o n s , p a r t i c u l a r l y member
banks, with t h e advantages t o
them of a c t i v e l y seeking out
commercial and i n d u s t r i a l e n t e r p r i s e s i n t h e i r t e r r i t o r y i n need
of a d d i t i o n a l working c a p i t a l and
f u r n i s h i n g such c a p i t a l by commitment from t h e F e d e r a l Reserve
banks. At t h e same time we submit t h a t such e f f o r t s might well
be i n t e n s i f i e d and we e s p e c i a l l y
recommcnd t o t h e s e v e r a l Reserve
banks t h e a c t i o n of t h e New York
Reserve Bank i n engaging t h e s e r v i c e s of a p r a c t i c a l and w e l l
known banker f o r a period of
s e v e r a l months (the banker t o be
w e l l known i n t h e d i s t r i c t ) t o
v i s i t banks and p e r s o n a l l y d i s cuss with them and with borrowers
i n a r r e a r s or i n temporary embarrassment t h e wisdom of
n e g o t i a t i n g l o a n s under t h e terms
of S e c t i o n 13b.
10.
i n our opinion t h e most important
s e r v i c e s r e n d e r e d t o i n d u s t r y and
commerce under s e c t i o n 13b a r e
(a) Accommodation t o i n d u s t r i a l
and commercial e n t e r p r i s e s t h a t
could not be o b t a i n e d o t h e r w i s e ,
(b) t h e s t i m u l a t i o n of c r e d i t
confidence and accommodation t o
i n d u s t r i a l and commercial e n t e r p r i s e s by o t h e r banks, many of
which have changed t h e i r c r e d i t
p o l i c i e s since the administrat i o n of Section. 13b began, and
(c) t h e enlightenment of many
X-9065
471
-18-
ANSWERS
QUESTIONS
a p p l i c a n t s concerning t h e i r own
a f f a i r s and p o s s i b i l i t i e s a f f o r d ed by t h e e x p e r t a n a l y s i s and a d v i c e of the Advisory committees
and F e d e r a l Reserve o f f i c e r s .
11.
Has t h e a d m i n i s t r a t i o n of Sect i o n 13b t o d a t e had any e f f e c t
not shown i n r e g u l a r r e p o r t s of
Federal Reserve banks on t h e
e x t e n s i o n of c r e d i t through
r e g u l a r and u s u a l channels t o
i n d u s t r y and commerce by p r i vate financing i n s t i t u t i o n s ?
11.
The f a v o r a b l e recommendation of
l o a n s by t h e s e v e r a l F e d e r a l Reserve banks has i n f l u e n c e d many
l o c a l banks t o t a k e over l o a n s , ext e n d i n g c r e d i t where t h e y would
not have done so o t h e r w i s e .
12.
Recommendations, not covered e l s e where, on t h e s u b j e c t of the adm i n i s t r a t i o n of S e c t i o n 13b.
12,
I t i s f e l t wise t o c o n t i n u e t h i s
act as an emergency measure. i t
w i l l not b r i n g back p r o s p e r i t y ,
but i t w i l l be a m a t e r i a l h e l p t o
many who cannot secure n e c e s s a r y
c a p i t a l f o r two t o f i v e y e a r s .
This w i l l b r i d g e t h e gap where t h e
c a p i t a l market should f u n c t i o n .
During t h e d i s c u s s i o n of t h e t o p i c s , Mr. John N. Peyton, Chairman
and F e d e r a l Reserve Agent a t the F e d e r a l Reserve Bank of Minneapolis, and
Mr. Daiger of t h e B o a r d ' s s t a f f , j o i n e d t h e m e e t i n g .
At t h e conclusion of t h e d i s c u s s i o n t h e meeting a d j o u r n e d with t h e
understanding t h a t t h e r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Comm i t t e e s would meet again i n s e p a r a t e s e s s i o n t h i s a f t e r n o o n .
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e
December 26, 1934.
Governor E c c l e s of t h e F e d e r a l Reserve Board today i s s u e d t h e
following statement:
A m i s a p p r e h e n s i o n has a r i s e n w i t h r e s p e c t to t h e scope of and
t h e a u t h o r i t y f o r t h e a c t i o n r e c e n t l y t a k e n by t h e F e d e r a l Reserve Board
l i m i t i n g a f t e r F e b r u a r y 1, 1935, t h e maximum r a t e of i n t e r e s t t h a t may
be p a i d on t i m e and s a v i n g s d e p o s i t s by member banks t o 3 - 1 / 3 ^ .
The
m i s u n d e r s t a n d i n g a p p e a r s t o have a r i s e n b e c a u s e t h e s t a t e m e n t announcing t h e B o a r d ' s a c t i o n a l s o c a r r i e d w i t h i t a r e f e r e n c e t o t h e a c t i o n
taken by the F e d e r a l Deposit I n s u r a n c e C o r p o r a t i o n r e d u c i n g t h e time
d e p o s i t r a t e f o r i n s u r e d non-member banks and t r u s t companies t o
2-1/2fo.
The B o a r d ' s s t a t e m e n t c a r r i e d t h i s r e f e r e n c e b e c a u s e t h e r e
was abundant r e a s o n f o r b e l i e v i n g t h a t b o t h member banks and t h e i r
d e p o s i t o r s would be v i t a l l y concerned by t h e r a t e s of i n t e r e s t which
might be p a i d by competing non-member b a n k s .
The a c t i o n t a k e n by t h e F e d e r a l Reserve Board i n l i m i t i n g t h e
r a t e of i n t e r e s t t h a t banks might pay on d e p o s i t s was t ak en i n a c c o r dance w i t h t h e p r o v i s i o n of t h e Banking Act of 1933 r e q u i r i n g t h e
F e d e r a l Reserve Board from time to time t o " l i m i t by r e g u l a t i o n t h e
r a t e of i n t e r e s t which may be p a i d by member banks on time d e p o s i t s . "
I t s r e c e n t a c t i o n , l i k e s i m i l a r a c t i o n t a k e n on August 29,
1933, r e l a t e d only to member banks.
The F e d e r a l Reserve Board has
never assumed t h a t i t had a u t h o r i t y t o r e g u l a t e t h e r a t e of i n t e r e s t
r 473
X-9067 '
—3—
p a i d "by non-member "banks.
I t c l e a r l y has no a u t h o r i t y t o do s o .
Such
j u r i s d i c t i o n a s t h e F e d e r a l G-overnment e x e r c i s e s over t h e non-member i n s u r e d
"banks r e s t s w i t h t h e F e d e r a l Deposit I n s u r a n c e C o r p o r a t i o n .
On Decem-
ber 15 t h e F e d e r a l Reserve Board was a d v i s e d t h a t t h e Board of
D i r e c t o r s of t h e F e d e r a l Deposit I n s u r a n c e C o r p o r a t i o n had reduced t h e
maximum time d e p o s i t r a t e f o r i n s u r e d non-member banks and t r u s t
companies to 3 - 1 / 2 $ .
The a c t i o n of t h e F e d e r a l Reserve Board i n r e d u c i n g i n t e r e s t
r a t e s f o r member banks and t h e a c t i o n o f t h e F e d e r a l D e p o s i t I n s u r a n c e
C o r p o r a t i o n i n r e d u c i n g the i n t e r e s t r a t e s f o r i n s u r e d non-njember banks
were t a k e n s e p a r a t e l y , not j o i n t l y .
The r e c e n t a c t i o n of t h e F e d e r a l Deposit I n s u r a n c e C o r p o r a t i o n
was s i m i l a r i n c h a r a c t e r to t h e a c t i o n i t took on J a n u a r y 1 , 1934, when
i t i s s u e d a r e g u l a t i o n l i m i t i n g t o 3$ t h e maximum r a t e of i n t e r e s t which
might be p a i d by any non-member bank whose d e p o s i t s were i n s u r e d by
that Corporation.
I n t h e summer of 1934, i n view of the f a c t t h a t the t r e n d of
i n t e r e s t r a t e s had been s t e a d i l y downward, the Board u n d e r t o o k a f u r t h e r review of i n t e r e s t r a t e s i n accordance w i t h t h e d u t y imposed upon
i t by t h e Banking Act of 1933.
B e f o r e t a k i n g a c t i o n t h e Board
communi-
c a t e d w i t h a l l t h e F e d e r a l r e s e r v e banks i n o r d e r t o have t h e b e n e f i t
X-9067
*•3""
of t h e i r views as to t h e a d v i s a b i l i t y of a f u r t h e r r e d a c t i o n of t h e
deposit r a t e .
The r e p l i e s r e c e i v e d from t h e r e s e r v e "banks were almost
unanimous to t h e e f f e c t t h a t a r e d u c t i o n of d e p o s i t r a t e t o 2 - 1 / 2 $
would "be i n t h e p u b l i c i n t e r e s t .
In view of t h e s e r e p l i e s and i t s
own independent a n a l y s i s and study of t h e s i t u a t i o n t h e F e d e r a l
Reserve Board determined t h a t a f u r t h e r r e d u c t i o n of l / 2 of lff> i n
t h e r a t e which might "be p a i d "by member "banks on time d e p o s i t s would
"be a d v i s a b l e .
I t i s worth n o t i n g i n t h i s connection t h a t t h e maximum r a t e
on time d e p o s i t s i n Canada a t t h e p r e s e n t time i s 2 per cent and i n
England i t i s 1 / 2 p e r cent i n London and 1 - 1 / 2 p e r cent i n the c o u n t r y .
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9068
December 27, 1934
SUBJECT:
Code Word Covering New I s s u e
of T r e a s u r y 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 F e d e r a l r e s e r v e b a n k s , t h e
f o l l o w i n g code word has been d e s i g n a t e d t o cover a new
i s s u e of Treasury B i l l s :
"NOXQUE" - Treasury B i l l s t o be d a t e d
January 2, 1955, and t o mature
J u l y 5, 1955
This word should be i n s e r t e d i n t h e F e d e r a l Reserve
Telegraph Code book, f o l l o w i n g t h e supplemental code word
"NOXFUT" on page 172.
Vferv t r u l y your;
J . C. t J o e l l ,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
( 476
FEDERAL RESERVE BOARD
X-9069
WASHINGTON
DSCenibSI* 28, 1934.
address official correspondence t o
the federal reserve board
SUBJECT:
E x p e n d i t u r e s of F e d e r a l Reserve Banks
Dear S i r :
The Board has reviewed t h e p o r t i o n of i t s c i r c u l a r l e t t e r of
October 20, 1932 (X-7276), which p e r t a i n s t o minor e x p e n d i t u r e s by
F e d e r a l r e s e r v e banks f o r memorials, t e s t i m o n i a l s , f l o r a l o f f e r i n g s ,
and s i m i l a r p u r p o s e s , and, s i n c e t h e r e s p o n s i b i l i t y f o r making e x p e n d i t u r e s of t h i s c h a r a c t e r r e s t s i n t h e f i r s t i n s t a n c e w i t h t h e
management of each r e s e r v e bank, t h e Board b e l i e v e s t h a t t h e b o a r d
of d i r e c t o r s or e x e c u t i v e committee of each r e s e r v e bank should be
f r e e t o e x e r c i s e i t s d i s c r e t i o n : i n a u t h o r i z i n g such e x p e n d i t u r e s ,
a f t e r c o n s i d e r i n g t h e a d v i s a b i l i t y t h e r e o f i n eaeh c a s e , w i t h o u t t a k i n g
t h e m a t t e r up w i t h t h e Board.
T h e r e f o r e , t h e Board h e r e a f t e r w i l l not r e q u i r e t h e submission
of such c a s e s t o i t f o r a p p r o v a l , but w i l l r e l y upon i t s examiners
t o note such e x p e n d i t u r e s d u r i n g t h e course of t h e i r r e g u l a r examinat i o n s and t o i n c l u d e t h e f a c t s i n t h e i r r e p o r t s .
I f i n t h e review
of any such r e p o r t i t appears t h a t a p a r t i c u l a r e x p e n d i t u r e i s
q u e s t i o n a b l e , t h e Board w i l l t h e n t a k e t h e m a t t e r up w i t h t h e
p a r t i c u l a r bank e o n c e r n e d .
http://fraser.stlouisfed.org/
TO GOVERNORS
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary
OF ALL FEDERAL RESERVE BANKS
\
477
FEDERAL RESERVE BOARD
WASHINGTON
X-9070
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e to
the federal reserve board
December 28,1934
Dear S i r :
There i s a t t a c h e d h e r e t o a copy of a s e l f e x p l a n a t o r y l e t t e r which t h e F e d e r a l Reserve Board has
a d d r e s s e d t o t h e F e d e r a l Reserve Agent a t P h i l a d e l p h i a
i n r e g a r d t o p e r m i t t i n g r e p r e s e n t a t i v e s of t h e F e d e r a l
Deposit I n s u r a n c e C o r p o r a t i o n t o see examination r e p o r t s
of S t a t e member b a n k s .
Very t r u l y yours
v%iQjjxuh O m A ^
Chester Morrill
Secretary
Inclosure
TO ALL FEDERAL RESERVE AGENTS EXCEPT THE FEDERAL RESERVE AGENT
AT PHILADELPHIA
478
X-9070-a
December 28, 1934
Mr. Richard L» A u s t i n ,
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of P h i l a d e l p h i a ,
Philadelphia, Pennsylvania
Dear Mr. A u s t i n :
Receipt i s acknowledged of your l e t t e r of October 29,1934,
i n which you s t a t e t h a t you a n t i c i p a t e t h a t you w i l l r e c e i v e r e q u e s t s
from examiners of t h e F e d e r a l Deposit Insurance C o r p o r a t i o n f o r p e r mission t o p e r u s e r e p o r t s of examination of some of t h e s t a t e member
banks i n your d i s t r i c t .
You r e q u e s t t o be advised whether you may
l a w f u l l y allow duly a c c r e d i t e d r e p r e s e n t a t i v e s of t h e F e d e r a l Deposit
Insurance C o r p o r a t i o n t o see such examination r e p o r t s and, i f s o , you
ask t h a t t h e Board a u t h o r i z e you t o make t h e r e p o r t s a v a i l a b l e t o such
representatives.
As you know, s e c t i o n 9 of t h e F e d e r a l Reserve Act p r o v i d e s
t h a t c o p i e s of t h e r e p o r t s of examination of S t a t e member banks "may,
i n the d i s c r e t i o n of t h e F e d e r a l Reserve Board, be f u r n i s h e d t o t h e
S t a t e a u t h o r i t i e s having s u p e r v i s i o n of such banks, t o o f f i c e r s ,
d i r e c t o r s , o r r e c e i v e r s of such banks, and t o any o t h e r p r o p e r p e r sons".
S e c t i o n 12B(k) of t h a t Act p r o v i d e s t h a t t h e F e d e r a l Deposit
Insurance Corporation "with t h e consent of any F e d e r a l r e s e r v e bank
or of any board * * * may a v a i l i t s e l f of t h e use of i n f o r m a t i o n ,
s e r v i c e s , and f a c i l i t i e s t h e r e o f i n c a r r y i n g out t h e p r o v i s i o n s of
479
X-9070—a
Mr. Richard L» A u s t i n - 2
this section".
Although t h e F e d e r a l Reserve Board f e e l s t h a t i n f o r m a t i o n
concerning t h e c o n d i t i o n of S t a t e member banks i s p r i m a r i l y intended
f o r t h e c o n f i d e n t i a l u s e of t h e Board and t h e F e d e r a l r e s e r v e banks
and t h a t extreme c a u t i o n should be e x e r c i s e d i n making any o t h e r use
of t h i s i n f o r m a t i o n , i t i s the view of t h e Board t h a t t h e p r o v i s i o n s
of law t o which r e f e r e n c e has been made j u s t i f y i t i n p e r m i t t i n g r e p o r t s of examination of s t a t e member banks t o be made a v a i l a b l e t o
t h e F e d e r a l Deposit Insurance Corporation and i t s duly a u t h o r i z e d
r e p r e s e n t a t i v e s f o r use i n t h e d i s c h a r g e of t h e i r o f f i c i a l d u t u e s .
Consequently, t h e Board consents t o your f u r n i s h i n g r e p o r t s of examinat i o n of S t a t e member banks t o examiners of the F e d e r a l Deposit i n s u r a n c e
C o r p o r a t i o n f o r t h e i r c o n f i d e n t i a l and o f f i c i a l use whenever you cons i d e r i t d e s i r a b l e t o do s o .
In any such c a s e , i t i s assumed t h a t
a t t e n t i o n w i l l be c a l l e d t o the f a c t t h a t t h e r e p o r t of examination i s
s o l e l y f o r t h e c o n f i d e n t i a l use of t h e examiner of t h e F e d e r a l Deposit
Insurance C o r p o r a t i o n and t h a t such o t h e r s t e p s w i l l be t a k e n as may
be n e c e s s a r y t o p r o t e c t t h e c o n f i d e n t i a l n a t u r e of t h e i n f o r m a t i o n
contained t h e r e i n .
Very t r u l y y o u r s ,
(signed) Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
480
X-9071
INDUSTRIAL ADVISORY COMMITTEE
SECOND FEDERAL RESERVE DISTRICT
FEDERAL RESERVE BANK OF NEW YORK
Name
Business A f f i l i a t i o n
v.illiam H. Pouch, Chairman
P r e s i d e n t , Concrete S t e e l Company,
New York, N,Y.
John A. H a r t f o r d , Vice Chairman
P r e s i d e n t , Great A t l a n t i c and P a c i f i c
Tea Company,
New York, N. Y»
John B« Clark
Chairman, The Executive Committee,
C/o The Spool Cotton Company,
350 F i f t h Avenue, New York, N. Y*
A l b e r t A. Hopeman
A. W# Hopeman and Sons,
Rochester, N. Y,
C» R» Palmer
P r e s i d e n t , C l u e t t Peabody and Company,
Troy, N. Y.
December 28, 1934
FEDERAL RESERVE BOARD
WASHINGTON
x-eora
December 29, 1934
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e *fo
the federal reserve board
SUBJECT:
Assessment f o r General Expenses of the
F e d e r a l Reserve Board, J a n u a r y 1 June 30, 1935, and f o r Other P u r p o s e s •
Dear S i r s
I n c o n f i r m a t i o n of my telegram, of December 29, 1934, t h e r e
i s a t t a c h e d a copy of a r e s o l u t i o n adopted by t h e F e d e r a l Reserve
Board l e v y i n g an assessment upon t h e v a r i o u s F e d e r a l r e s e r v e banks
i n an amount e q u a l t o f i v e hundred s e v e n t y - s i x t h o u s a n d t h s of one
per c e n t (•00576) 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
( S e c t i o n 7 and S e c t i o n 13b) of the Federal r e s e r v e b a i k s as of
t h e c l o s e of b u s i n e s s December 31, 1934, t o d e f r a y t h e e s t i m a t e d
expenses and s a l a r i e s of t h e members and employes of t h e Board from
J a n u a r y 1 t o June 30, 1935, t o g e t h e r w i t h $1,000,000 t o be a p p l i e d
upon t h e c o s t of t h e purchase of a s i t e and t h e e r e c t i o n of a
b u i l d i n g f o r t h e F e d e r a l Reserve Board*
The r e s o l u t i o n a l s o confirms t h e i n s t r u c t i o n s c o n t a i n e d i n
t h e t e l e g r a m w i t h r e g a r d t o t h e manner i n which t h e payments on t h e
assessment s h a l l be d e p o s i t e d with t h e F e d e r a l Reserve Bank of
Richmond•
http://fraser.stlouisfed.org/
To Chairmen
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
0 . E. Foulk,
F i s c a l Agent
of a l l F e d e r a l Reserve Banks
4 8 1
X-9072-a
RESOLUTION LEVYING ASSESSMENT.
1/HEREAS, S e c t i o n 10 of t h e F e d e r a l Reserve Act, as amended,
contains the following provisions:
"The F e d e r a l Reserve Board s h a l l have power 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 stock and s u r p l u s , an assessment 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 expenses and t h e s a l a r i e s of i t s memb e r s and employees f o r t h e h a l f year succeeding t h e l e v y ing 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
forward from t h e p r e c e d i n g h a l f y e a r , and such a s s e s s m e n t s
may i n c l u d e amounts s u f f i c i e n t t o p r o v i d e f o r t h e a c q u i s i t i o n
by t h e Board i n i t s own name of such s i t e or b u i l d i n g i n
t h e D i s t r i c t of Columbia as i n i t s judgment alone s h a l l
be n e c e s s a r y f o r t h e purpose of p r o v i d i n g s u i t a b l e and
adequate q u a r t e r s f o r t h e performance of i t s f u n c t i o n s .
A f t e r approving such p l a n s , e s t i m a t e s , and s p e c i f i c a t i o n s
as i t s h a l l have caused t o be p r e p a r e d , t h e Board may,
n o t w i t h s t a n d i n g any o t h e r p r o v i s i o n of law, cause t o be
c o n s t r u c t e d on the s i t e so a c q u i r e d by i t a b u i l d i n g
s u i t a b l e and adequate i n i t s judgment f o r i t s purposes
and proceed t o t a k e all..-such s t e p s as i t may deem n e c e s sary or a p p r o p r i a t e i n c o n n e c t i o n w i t h t h e c o n s t r u c t i o n ,
equipment, and f u r n i s h i n g of such b u i l d i n g # The Board
may m a i n t a i n , e n l a r g e , or remodel any b u i l d i n g so a c q u i r e d
or c o n s t r u c t e d and s h a l l have s o l e c o n t r o l of such b u i l d i n g
and space t h e r e i n #
**
11
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The Board s h a l l determine and p r e s c r i b e t h e manner
i n which i t s o b l i g a t i o n s s h a l l be i n c u r r e d and i t s d i s bursements and expenses allowed and p a i d , and may l e a v e
on d e p o s i t i n t h e F e d e r a l r e s e r v e banks the proceeds of
assessments l e v i e d upon them t o d e f r a y i t s e s t i m a t e d
expenses and t h e s a l a r i e s of i t s members and employes,* * *
and f u n d s d e r i v e d from such assessments s h a l l n o t be
c o n s t r u e d t o be Government f u n d s or a p p r o p r i a t e d moneys •"
4 8 3
-2-
WHEREAS, f i f t y - e i g h t and one-half per c e n t of t h e a s s e s s ment l e v i e d upon t h e F e d e r a l r e s e r v e banks on June 27, 1934, ( t h e
p o r t i o n of t h e a s s e s s m e n t r e p r e s e n t i n g t h e amount -which, i n t h e j u d g ment of t h e Board, might have been needed d u r i n g t h e s i x months p o r i o d
beginning J u l y 1, 1934, t o provide f o r t h e c o s t s , or p a r t t h e r e o f , of
t h e a c q u i s i t i o n of a s i t e and e r e c t i o n of a b u i l d i n g t h e r e o n s u i t a b l e
and adequate f o r t h e Board 1 s q u a r t e r s ) was not c a l l e d f o r payment by
t h e Board d u r i n g t h e s i x months p e r i o d beginning J u l y 1, 1934; and,
WHEREAS, i t appears from a c o n s i d e r a t i o n of t h e e s t i m a t e d
expenses of t h e F e d e r a l Reserve Board f o r t h e s i x months p e r i o d b e g i n n i n g
January 1, 1935 and of t h e amounts which i n t h e judgment of t h e Board
may be needed d u r i n g such p e r i o d t o p r o v i d e f o r t h e c o s t s , or p a r t
t h e r e o f , of t h e a c q u i s i t i o n of a s i t e and e r e c t i o n of a b u i l d i n g t h e r e on s u i t a b l e and adequate f o r t h e B o a r d ' s q u a r t e r s , t h a t i t i s n e c e s s a r y t h a t a f u n d e q u a l t o f i v e hundred s e v e n t y - s i x t h o u s a n d t h s of one
per cent ( . 0 0 5 7 6 ) of the 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
( S e c t i o n 7 and S e c t i o n 13b) 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 such p u r p o s e s , e x c l u s i v e of the 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, THEREFORE, BE IT RESOLVED BY 1LE FEDERAL RESERVE
BOARD, T h a t :
(1) There i s h e r e b y l e v i e d upon the s e v e r a l F e d e r a l r e s e r v e
banks an assessment i n an amount equal t o f i v e hundred s e v e n t y - s i x
t h o u s a n d t h s of one per c e n t (#00576) 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 ( S e c t i o n 7 and S e c t i o n 13b) of each such bank a t t h e c l o s e
of b u s i n e s s December 31, 1934#
(2) Twenty-one per c e n t of such assessment s h a l l be p a i d i n
on January 2, 1935, twenty-one per c e n t t h e r e o f s h a l l be p a i d i n on
March 1, 1935, and t h e remainder ( f i f t y - e i g h t per c e n t ) s h a l l be p a i d
a t such t i m e s and i n such amounts as t h e Board may c a l l f o r t h e payment t h e r e o f d u r i n g such s i x months p e r i o d b e g i n n i n g J a n u a r y 1, 1935#
(3) Every F e d e r a l r e s e r v e bank e x c e p t t h e Federal Reserve
Bank of Richmond s h a l l pay such assessment by t r a n s f e r r i n g t h e amount
t h e r e o f on t h e d a t e s as above provided through t h e Gold S e t t l e m e n t Fund
t o t h e F e d e r a l Reserve Bank of Richmond f o r c r e d i t t o t h e account of
t h e Federal Reserve Board on t h e books of t h a t bank, w i t h t e l e g r a p h i c
advice t o Richmond of t h e purpose and amount of t h e c r e d i t , and t h e
F e d e r a l Reserve Bank of Richmond s h a l l pay i t s assessment by c r e d i t ing t h e amount t h e r e o f on i t s books t o t h e F e d e r a l Reserve Board on
t h e d a t e s as above provided*
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
July 3, 1934.
B-993.
SUBJECT:
Member Bank Call Report
f o r March 5, 193I+.
Dear S i r :
We are forwarding to you under separate cover
copies of the Board's Member Bank Call Report
ITo. 6l, showing the condition of l i c e n s e d member banks
on March 5> 193*+ •
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 des i r e to receive copies of c a l l reports as i s s u e d .
Very truly yours
E. L. Smead, Chief,
D i v i s i o n of Bank Operations.
TO AIL FEDERAL RESERVE AGENTS*
1
FEDERAL RESERVE BOARD
WASHINGTON
July 5, I93U.
B-995.
address official correspondence t o
t h e federal reserve board
SUBJECT:
^
Working Capital f o r Industry!
Dear S i r :
Section IJb, added to the Federal Reserve Act by the Act approved on
June 19 t 193^i provides i n subsection (e) that i n order to enable the Federal
Reserve banks to make the loans, discounts, advances, and purchases provided
f o r i n such s e c t i o n , tho Secretary of the Treasury i s authorized to pay to
each Federal Reserve bank not to exceed such p o r t i o n of the sum of
$139,299,557 as may be represented by the par value of the holdings of each
Federal Reserve bank of Federal Deposit Insurance Corporation stock, and i t
i s understood that the Secretary of the Treasury w i l l make such payments to
the Federal Reserve banks from time to time as they make the loans, d i s c o u n t s ,
advances and purchases authorized by Section 13b.
I t i s a l s o provided that,
within the meaning of such s e c t i o n , the sum so paid to each bank by the
Secretary of the Treasury s h a l l become a part of the surplus fund of the
Federal Reserve bank,
In the weekly condition statement, however, the amount of surplus derived
from net earnings of the Federal Reserve banks w i l l be shown a g a i n s t the capt i o n "Surplus ( S e c t i o n 7)". and the amount of surplus r e s u l t i n g from payments
by the Secretary of the Treasury against the caption "Surplus ( S e c t i o n 13b)".
The amount of l o o n s , discounts, advances and purchases under S e c t i o n 13b of
the Federal Reserve Act w i l l be shown in the weekly condition statements of
-
48G
2 -
the Federal Reserve "banks a g a i n s t the c a p i t i o n "Industrial advances",
immediately f o l l o w i n g the item " B i l l s bought in. open market".
Inasmuch as S e c t i o n 12B of the Federal Reserve Act provides that Class
B stock i n the Federal Deposit Insurance Corporation h e l d "by the Federal
Reserve "banks s h a l l not be e n t i t l e d to payment of dividends, and a s payments
r e c e i v e d from the Secretary of the Treasury to enable the Federal Reserve
banks to make i n d u s t r i a l advances w i l l be included i n the Federal
Reserve banks' surplus accounts, the Board f e e l s t h a t , beginning with July
1, 193^. the r e s e r v e s s e t up at the time the Federal Reserve banks made
t h e i r f i n a l payment on the s u b s c r i p t i o n to the stock of the Federal Deposit
Insurance Corporation should be considered as v a l u a t i o n r e s e r v e s and deducted
from the book value of the stock i n s e l f .
Accordingly, the item "Fed.Dep.Ins.
Corp. stock" w i l l be eliminated from the weekly condition statement of the
Federal Reserve banks, the amount of reserves s e t up on such stock w i l l be
eliminated from the item "Reserves (F. D. I . C. stock, s e l f insurance, e t c . ) " ,
and the l a t t e r caption w i l l be changed to read "Reserves f o r contingencies"•
You w i l l note from subsection ( e ) of S e c t i o n 13b that b e f o r e payments
are made to the Federal Reserve banks they must execute agreements to hold
the stock of the Federal Deposit Insurance Corporation unencumbered and to
pay to the United S t a t e s a l l dividends, a l l payments on l i q u i d a t i o n , and a l l
other proceeds of such s t o c k , f o r which dividends, payments and proceeds the
United S t a t e s s h a l l be secured by sti.ch stock i t s e l f up to the t o t a l amount
p aid to each Federal Reserve bank by the Secretary of the Treasury under
such s e c t i o n , and, that each Federal Reserve bank, i n a d d i t i o n , s h a l l agree
that i n the event such dividends, payments and other proceeds i n any calendar
year do not aggregate two per centum of the t o t a l payments made by the
Secretary of the Treasury under such s e c t i o n , i t w i l l pay to the United
S t a t e s i n such year such further amount, i f any, up to two per centum of the
said t o t a l payment as s h a l l be covered by the net earnings of the bank f o r
that year derived from the use of the sum so paid by the Secretary of the
Treasury.
I t w i l l be necessary, therefore, for the Federal Reserve banks
to keep a l l income received from the use of the sum so paid by the Secretary
of the Treasury, and a l l expenses and l o s s e s incurred i n connection therewith,
under S e c t i o n 13b of the Federal Reserve Act, separate and d i s t i n c t from the
other earnings, expenses and l o s s e s of the bank, i n order to determine what,
i f any, payments s h a l l be made to the Secretary of the Treasury i n the event
the dividends, payments and other proceeds of the Federal Deposit Insurance
Corporation stock do not aggregate i n any calendar year two per centum of
the t o t a l payments made by the Secretary of the Treasury under Section 13b.
You w i l l be advised a t a l a t e r date in regard to the manner i n which the net
earnings of the Federal Reserve banks, derived from operations under Section
13b, are to be compiled and reported to the Federal Reserve Board and to the
Secretary of the Treasury.
On Form 3^ p l e a s e report "Industrial advances", code TURK, f o l l o w i n g
item Federal Land Bank bonds; item "Surplus ( S e c t i o n 13b)", code TALC, f o l l o w ing the item Surplus ( S e c t i o n 7)? and "Industrial commitments11, code MEKTT, on
the reverse s i d e of the form.
Very t r u l y yours
Chester M o r r i l l ,
Secretary.
TO ALL FEDERAL RESERVE CHAIRMEN*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
J u l y 5, 1934.
B-996.
Dear S i r :
In view of the i n t r o d u c t i o n of the now (193*0
s e r i e s s i l v e r c e r t i f i c a t e s , which may "be i s s u e d i n denominat i o n s up to and i n c l u d i n g $100, i t i s requested that, b e g i n ning with the month of J u l y , reports on Form l 6 0 showing
s i l v e r c e r t i f i c a t e s s e p a r a t e l y from other forms of United
S t a t e s currency be submitted f o r the head o f f i c e and f o r
each "branch, i f any.
Very t r u l y y o m a # # » - y
E. L. Smead, C h i e f ,
D i v i s i o n of Bank Operations.
TO AIL GOVERNORS*
489
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
SUBJECT:
July 16, 193%,
B-997.
Net earnings on funds r e c e i v e d from
the Secretary of the Treasury under
S e c t i o n 13b of the Federal Heserve Act,
Dear S i r :
The agreement r e c e n t l y entered i n t o with the Secretary of the
Treasury, i n accordance with the p r o v i s i o n s of s u b s e c t i o n ( e ) of S e c t i o n
13b of the Federal Reserve Act, provides that your bank s h a l l pay to the
United S t a t e s a l l dividends, a l l payments on l i q u i d a t i o n , and a l l other
proceeds of i t s stock i n the Federal Deposit Insurance Corporation, f o r
which dividends, payments, and other proceeds the United S t a t e s s h a l l be
secured by such stock i t s e l f up to the t o t a l amount p a i d to the bank by
the Secretary of the Treasury under S e c t i o n 13b; that i n the event such
dividends, payments, and other proceeds i n any calendar year do not aggregate 2 per centum of the t o t a l payment made by the Secretary of the Treasury
under S e c t i o n 13b, your bank w i l l pay to the United S t a t e s i n such year
such f u r t h e r amount, i f any, up to 2 per centum of s a i d t o t a l payment a s
s h a l l be covered by the n e t earnings of the bank f o r that year derived from
the use of the sum so paid by the Secretary of the Treasury; and that your
bank w i l l continue such payments u n t i l the f i n a l l i q u i d a t i o n of s a i d s t o c k .
The agreement a l s o provides that a l l funds p a i d to your bank by the
Secretary of the Treasury and not i n v e s t e d i n l o a n s , d i s c o u n t s , advances or
purchases under S e c t i o n 13b of the Federal Reserve Act w i l l , i n s o f a r as
p r a c t i c a b l e , be i n v e s t e d i n any other income producing investments lawf u l f o r a Federal Reserve tank.
In order to carry out the p r o v i s i o n s of the Federal Reserve Act and
the agreement with the Secretary of the Treasury, i t w i l l be necessary
f o r your bank to keep such accounting records as w i l l enable i t to d e t e r mine the net earnings of the bank derived from the use of the funds p a i d
to the bank by the Secretary of the Treasury under S e c t i o n 13b.
The n e t
earnings from such funds should be determined i n the f o l l o w i n g manner:
From the t o t a l earnings derived from the use of the funds r e c e i v e d
from the Secretary of the Treasury s h a l l be deducted:
( 1 ) Outside expenses ( i . e . , expenses other than o f f i c e expenses
and expenses of the advisory committee) incurred i n connection with the
making or c o l l e c t i n g of s p e c i f i c l o a n s , d i s c o u n t s , advances and purchases
out of such funds, except such expenses as are p a i d by the borrowers.
( 2 ) Such percentage of expenses of the advisory committee, of
outside expenses not provided f o r i n item 1, and of t o t a l o f f i c e expenses
of the u n i t handling l o a n s , d i s c o u n t s , advances, purchases, and commitments under S e c t i o n 13b as the average d a i l y holdings of such l o a n s ,
d i s c o u n t s , advances and purchases made out of funds r e c e i v e d from the
Secretary of the Treasury bear to the t o t a l average d a i l y h o l d i n g s of
l o a n s , d i s c o u n t s , advances, purchases and commitments made by such u n i t
under S e c t i o n 13b.
O f f i c e expenses should comprise a l l expenses (other
than expenses of the advisory committee and outside expenses) i n connect i o n with the making of l o a n s , d i s c o u n t s , advances, purchases and commitments under S e c t i o n 13b, i n c l u d i n g s a l a r i e s of employees and of o f f i c e r s
i n d i r e c t charge of the u n i t making such l o a n s , d i s c o u n t s , advances, purchases, and commitments and a f a i r charge f o r r e n t , l i g h t , h e a t , power,
491
- 3 water, j a n i t o r s e r v i c e , elevator and cleaning s e r v i c e , r e p a i r s and a l t e r a t i o n s , and r e n t a l of furniture and equipment.
(3) Actual expense., of making the income producing investments
referred to a t the end of paragraph 3 of the agreement with the Secretary
of the Treasury.
( 4 ) Losses on l o a n s , discounts, advances and purchases made out
of the funds p a i d to your bank by the Secretary of the Treasury under S e c t i o n 13b» charged o f f with the approval of the Federal Reserve Board,
If
expenses and l o s s e s charged o f f exceed income the excess thereof over i n come should be deducted from the amount received from the Secretary of the
Treasury as reported on the bank's d a i l y balance sheet, item "Surplus
( S e c t i o n 13b)".
Recoveries on l o s s e s previously charged o f f should be
credited to current net earnings on funds received from the Secretary of
the Treasury i f the l o s s e s to which the recoveries r e l a t e were charged to
current n e t earnings.
I f the l o s s e s to which the r e c o v e r i e s r e l a t e were
charged to "Surplus ( S e c t i o n 13b)" the recoveries should be credited to
that account.
There i s i n c l o s e d herewith a supply of Fonn B-20 f o r your use i n
submitting an annual statement r e l a t i n g to the employment of funds paid to
your bank by the Secretary of the Treasury under Section 13b of the Federal
Reserve Act.
This statement should be transmitted i n d u p l i c a t e to the
Federal Reserve Board within 10 days from the end of the calendar year,
one copy of which, when approved by the Federal Reserve Board, w i l l be
delivered t o the Secretary of the Treasury.
492
- 4 -
The Board understands that the Treasury Department has i n course
of preparation r e g u l a t i o n s governing payments to the Federal Reserve
banks under S e c t i o n 13b of the Federal Reserve Act, and pending complet i o n of such r e g u l a t i o n s the Treasury Department has not p a s s e d upon the
i n s t r u c t i o n s contained h e r e i n or the accompanying form B - 2 0 .
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosures
TO AIL GOVERNORS*
if 493
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
SUBJECT:
July 16, 1934.
B-998
Monthly reports of earnings, expenses
and l o s s e s on i n d u s t r i a l advances.
Dear S i r
With reference to the Board's l e t t e r of t h i s date i n regard to the
method of determining net earnings on funds paid to your bank by the Secretary of the Treasury under Section 13b of the Federal Reserve Act and the
annual statement on form B-20 to be submitted i n connection therewith, you
are a l s o requested to submit monthly to the Federal Reserve Board reports
on forms B-18 and B-19, a supply of which i s i n c l o s e d .
I t w i l l be noted that forms B-18 and B-19, which cover income, expenses,
and l o s s e s , c a l l f o r separate f i g u r e s i n regard to net earnings on loans, d i s counts, advances and purchases from funds received from the Secretary of the
Treasury under Section 13b and from the bank's own funds i n v e s t e d under that
Section and that outside expenses chargeable to a s p e c i f i c loan, discount,
advance or purchase are to be shown separat@3y.frxa other expenses.
Reports on forms B-18 and B-19 should be submitted promptly a f t e r the
end of each month and should include expenses incurred a t the branches, i f
any, as well as at the head o f f i c e .
Very truly yours
Chester Morrill
Secretary.
Inclosures.
TO AIL GOVERNORS*
494
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
J u l y 18, 1934
B-999
Dear S i r :
On March 23. 193*+, Governor Black, In t e s t i f y i n g before the
Committee on Banking and Currency of the United S t a t e s Senate, r e newed on behalf of the Federal Reserve Board the recommendation of
the Board f o r l e g i s l a t i o n e s t a b l i s h i n g a system of member bank r e serve requirements based not only on the volume of deposits but a l s o
on t h e i r turnover.
This system of reserves was f i r s t recommended by
the Federal Reserve System Committee on Member Bank Reserves in 1931.
As you know, the Federal Reserve System Committee on Member Bank
Reserves submitted i t s recommendations a f t e r extended research and i n vestigation.
In the course of that i n v e s t i g a t i o n i t was necessary to
estimate on the b a s i s of e x i s t i n g data what the required reserves of
a l l member banks as a whole would have been under the Committee's
plan had i t been i n e f f e c t during e a r l i e r p e r i o d s .
I t has now been
decided t o extend the scope of that i n v e s t i g a t i o n somewhat i n an
e f f o r t to obtain information for individual banks and for groups of
banks regarding changes i n reserves required under the committee's
proposal compared with changes i n reserves required under the p r e sent law.
I t i s d e s i r e d to determine with respect t o such banks (a)
the extent to which required reserves under the proposed plan would
495
2 —
B-999
f l u c t u a t e during d i f f e r e n t seasons of the y e a r , compared with changes
i n present required r e s e r v e s , (b) the extent t o which required r e s e r v e s
under t h e present and proposed plans f l u c t u a t e with changes i n b u s i n e s s
and c r e d i t c o n d i t i o n s , and ( c ) the extent t o which the burden of r e serves would be increased, decreased, or s h i f t e d among banks by the
proposal.
In connection with t h i s study we should l i k e t o have you e n l i s t
the cooperation of r e p r e s e n t a t i v e groups of member banks, as i n d i c a t e d
below, i n supplying the necessary data f o r determining what required
r e s e r v e s would have been under the Board's proposal over a p e r i o d e x tending back through 1928.
I t would be very h e l p f u l a l s o i f the
necessary data could be obtained f o r 1924 - 1927 f o r at l e a s t some of
the banks.
The groups of banks f o r which we should l i k e t o obtain the data
are:
1 . Weekly f i g u r e s from member banks that now submit weekly
condition reports.
2 . Monthly f i g u r e s from other banks i n groups l o c a t e d i n or s e r v ing communities or regions whose c h i e f economic a c t i v i t i e s may be
characterized by the production of s p e c i f i c commodities or by t h e
dominance of a p a r t i c u l a r type of industry such a s :
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Cotton growing
Tobacco growing
Wheat r a i s i n g
Corn growing
Livestock
Dairying and poultry r a i s i n g
F r u i t s and vegetables
Mixed farming
Lumbering and logging
Oil producing
:* 496
- 3 k.
1.
m.
n.
B-999
Coal mining
Iron ore mining
Other mineral producing
I n d u s t r i a l and commercial
The data required for our purposes are i n d i c a t e d by the f o l l o w ing i n c l o s u r e s :
1 . Form 234 - For obtaining currently commencing with
September 1934. monthly data from s e l e c t e d
banks other than those that now submit
weekly condition r e p o r t s .
2 . Form 235 - Tor obtaining monthly data for back periods
from such banks.
3 . Form 235a- For obtaining weekly data f o r back periods
from s e l e c t e d reporting member banks.
4 . A statement explaining the forms.
5 . A suggested form of l e t t e r to be sent to the member
banks whose cooperation i s to be s o l i c i t e d
i n securing back f i g u r e s .
In the case of weekly reporting member banks i t i s proposed to
c o l l e c t the required current data in connection with a revised form
of weekly condition report about which you are being advised i n a
separate l e t t e r .
I t would be d e s i r a b l e to have whatever back data may be o b t a i n able on Forms 235 and 235a i n your p o s s e s s i o n i n time for you to comp l e t e the compilations on these forms f o r individual banks and groups
of banks by the end of October.
The current data on Form 234 i t i s
contemplated should be c o l l e c t e d commencing with September 1934 and
t h e r e a f t e r u n t i l otherwise advised.
I t i s thought that i f the required data f o r p r i o r periods can
be obtained for approximately 10 percent of the member banks i n each
d i s t r i c t , properly d i s t r i b u t e d , such a sample w i l l make p o s s i b l e a
s a t i s f a c t o r y t e s t , representative of a l l member banks i n the d i s t r i c t .
- 4 -
B-999
However, i n s e l e c t i n g the "banks whose cooperation i s t o be e n l i s t e d
i n the study, i t would be d e s i r a b l e to take only such banks as had been
l i c e n s e d by the end of June, 1933« and whose past records are known t o
bo w e l l k e p t ,
In order to avoid any b i a s i n s e l e c t i n g the banks i t
would be p r e f e r a b l e , wherever p r a c t i c a b l e , t o i n c l u d e a l l r e p r e s e n t a t i v e
member banks i n s e l e c t e d economic a r e a s , and t o c o n f i n e the l i s t of
banks from which back data are requested to banks which are a l s o b e i n g
asked t o supply current data.
Such data as are c o l l e c t e d should be transcribed at your bank t o
Forms 236 and 236a, copies of which are a l s o i n c l o s e d , the information
c a l l e d f o r i n columns 8 and 11 added and the c a l c u l a t i o n s i n d i c a t e d on
these forms made,
You w i l l be advised l a t e r i n what form to transmit
the data to the Board.
I t i s e s s e n t i a l that the f i g u r e s of "daily
average required r e s e r v e s during week (month) under present law" c a l l e d
f o r i n column 8 and of "average borrowings from Federal Reserve bank
during week (month)" c a l l e d f o r i n column 11 bo comparable with the f i g ures i n the other columns.
Accordingly, s p e c i a l care should be taken
i n the case of the f i g u r e s f o r any bank that absorbed or merged with
one or more other banks during the p e r i o d to insure t h a t the f i g u r e s
supplied from the records of the Reserve bank represent the same banking u n i t s as do those furnished by the member bank.
I t w i l l be appreciated i f you w i l l f u r n i s h u s , as soon as p r a c t i c a b l e , with a l i s t of the reporting member banks and other banks i n
your d i s t r i c t from which you propose to obtain back data, the banks t o
be grouped i% the manner i n d i c a t e d on page 2 of t h i s l e t t e r .
Please
show i n t h i s l i s t the t o t a l d e p o s i t s of each such bank a t the end of
1933 and the population of the c i t i e s i n which the s e l e c t e d banks are
- 5 -
b-999
l o c a t e d , and the r a t i o s of the aggregate deposits and population f o r
a l l s e l e c t e d banks and c i t i e s to the t o t a l s for your d i s t r i c t .
The
l i s t w i l l be examined and you w i l l be advised whether we have any
suggestions to make i n regard t h e r e t o .
A supply of the forms referred to herein w i l l be sent you i n due
course.
Very truly yours,
hrjoiAZuLf
Chester M o r r i l l ,
Secretary.
Incloeures.
TO ALL FEDERAL
RESERVE AGENTS*
Form 23U
Federal Reserve Board
June 1934
499
Report on D e p o s i t s , Debits, and Vault Cash f o r the month of
(Name of bank)
(City)
(State)
. 193_«
F.R.Dist.No.
Enter a l l f i g u r e s
i n even d o l l a r s —
omit cents
1.
Total d e p o s i t s at end of month
_____________________
2.
Deductions: Amounts due from member banks, items
i n process of c o l l e c t i o n , exchanges f o r c l e a r i n g
house, checks on l o c a l and outside banks, and other
cash items payable on presentation i n the United
S t a t e s , at end of month
2a. Net deposits at end of month ( 1 - 2 )
____________________
Debits (Charges)during month to deposit accounts:
3.
Own c e r t i f i e d and o f f i c e r s ' checks paid
___________________
4.
Other d e b i t s to deposit accounts
___________________
5.
Cash i n vault and i n t r a n s i t to and from Federal
Reserve Bank at end of month
6.
Debits t o individual deposit accounts during
month (comparable to weekly f i g u r e s reported
to clearing house or other reporting agency)
___________________
-
Signed
(Cashier or Treasurer)
NOTE: Numbering on t h i s form
i s same as on form 235
(b-999)
Form 235
Federal Reserve Board
June 193^
Report on D e p o s i t s , Debits? and Vault Cash
(Name of tank)
(City)
(State)
I n t e r a l l f i g u r e s i n even d o l l a r s — omit cents
Year
and
month
Total
deposits
(end of month)
Deductions: Amounts due
from member banks, items
D e b i t s { c h a r g e s ) t o deposit
i n process of c o l l e c t i o n ,
accounts during tho month
exchanges f o r c l e a r i n g
Our c e r t i f i e d
house, checks on other
and o f f i c e r s ' Other d e b i t s
banks and other cash items
checks
to d e p o s i t
payable on p r e s e n t a t i o n
paid
accounts
i n the United S t a t e s
(end of month)
2
•For comparative purposes. Figures reported i n column 4 w i l l ,
of course, include d e b i t s to i n d i v i d u a l deposit accounts.
Cash i n v a u l t
and i n t r a n s i t
to and from
F. R. Bank
(end of month)
Debits to i n d i vidual d e p o s i t
accounts during
the month (comparable to weekly
f i g u r e s reported
to c l e a r i n g house
or other r e p o r t ing agency)
6*
Ul
©
^
(B-999)
Form 235a
Federal Reserve Board
June 1934
Report on D e p o s i t s , D e b i t s , and Vault Cash
(Name of Bank)
(City)
(State)
Enter a l l f i g u r e s i n even d o l l a r s — omit c e n t s
Week endi n g Wednesday
( I n d i c a t e year,
month, and
day of month)
Total
deposits
(end of week)
Deductions: Amounts due
Debits ( c h a r g e s ) t o d e p o s i t
from member banks, items
accounts during the week
i n process of c o l l e c t i o n ,
Our c e r t i f i e d
exchanges f o r c l e a r i n g
house, checks on other
and o f f i c e r s ' Other d e b i t s
checks
to d e p o s i t
banks and other cash items
paid
payable on p r e s e n t a t i o n
accounts
i n the United S t a t e s
(end of week)
2
Cash i n v a u l t
and i n t r a n s i t
to and from
F . R. Bank
(end of week)
Debits to i n d i vidual d e p o s i t
accounts during
the week
(as reported to
c l e a r i n g house)
6*
CR
P
•For comparative purposes. Figures reported i n column 4 w i l l ,
of course, include d e b i t s to individual d e p o s i t accounts.
(B-999)
r 502
REQUIRED RESERVES UNDER PROPOSED LAW
B-999
Summary of Federal Reserve Board 1 s Recommendati on to Congress
Required r e s e r v e s
1 . 5# of average d a i l y net d e p o s i t s during
a . Week i f i n Federal Reserve bank or branch c i t y ,
b . 4 weeks or month i f outside Federal Reserve bank or
branch c i t y .
plus
50$ of average d a i l y d e b i t s to d e p o s i t accounts during
a . Preceding g weeks, requirements to change weekly i f
i n Federal Reserve bank or branch c i t y ,
b . Preceding 8 weeks or 2 months, requirements to change
every 4 weeks or month i f outside Federal Reserve
bank or branch c i t y ,
2 . 15$ of average d a i l y gross d e p o s i t s i f t h i s amount i s l e s s than
the sum of two amounts determined as i n 1 above.
Reserve balances
1 , In Federal Reserve bank or branch c i t y *
a . Balance with Federal Reserve bank, not l e s s than
/
4 / 5 of requirements,
b . Cash i n v a u l t and i n t r a n s i t to and from Federal
Reserve bank, up to 1 / 5 of requirements.
2 . Outside Federal Reserve bank or branch c i t y *
a . Balance with Federal Reserve bank, not l e s s than
2 / 5 of requirements.
b . Cash i n vault and i n t r a n s i t to and from Federal
Reserve bank, up to 3 / 5 °f requirements.
Gross d e p o s i t s
Total d e p o s i t s as d e f i n e d i n c a l l r e p o r t .
Deductions from g r o s s d e p o s i t s
A l l c o l l e c t e d balances due from member banks, items i n p r o c e s s of c o l l e c t i o n , exchanges f o r c l e a r i n g house, and checks on l o c a l and o u t s i d e banks and other cash items payable on p r e s e n t a t i o n i n the
United S t a t e s . Collected balances due from banks not members of the
Federal Reserve System would not be d e d u c t i b l e . Deductions to be
made from gross d e p o s i t s , not from due to banks.
*See paragraph (h) of Committee's proposed amendment to S e c t i o n 1$.
-
Total d e b i t s
2 -
bSF
Debits or charges to a l l d e p o s i t accounts included i n gross d e p o s i t s
except d e b i t s r e s u l t i n g from the payment of the bank's own c e r t i f i e d and
c a s h i e r ' s checks.
Form 235 ( 2 3 5 - a ) U
Although the Board's proposal c a l l s f o r a reserve of 5$ a g a i n s t a v e r age d a i l y n e t d e p o s i t s at the opening of b u s i n e s s , f o r the purpose of t h i s
study i t i s b e l i e v e d that an average of d e p o s i t s at the beginning and at
the c l o s e of the month (week) 1 / w i l l be s u f f i c i e n t l y accurate to g i v e an
i n d i c a t i o n of the e x t e n t to which the proposal would a f f e c t the r e s e r v e
p o s i t i o n s of i n d i v i d u a l member banks. Form 235 ( 2 3 5 - a ) 2 / , t h e r e f o r e , does not
c a l l f o r average d a i l y d e p o s i t s .
Col. 2 . C o l l e c t e d balance* due from banks not members of the Federal
Reserve System should be excluded i n column 2 .
Col. ,-3» In t h i s column should be shown the aggregate amount of c e r t i f i e d . and c a s h i e r ' s or t r e a s u r e r ' s checks cashed or p a i d during the month
(week)ly— not the amount of such checks i s s u e d . The amount charged a g a i n s t
d e p o s i t o r s ' accounts f o r c e r t i f i e d and c a s h i e r ' s or t r e a s u r e r ' s checks
issued should be included i n column 4 .
Col. 4 . In t h i s column should be shown the aggregate amount d e b i t e d
or charged during the month (week)]J to a l l d e p o s i t accounts, e x c l u s i v e only
of the amount of c e r t i f i e d and c a s h i e r ' s or t r e a s u r e r ' s checks cashed or
paid during the month (week)U, i . e . , d e b i t s to accounts of i n d i v i d u a l s ,
p a r t n e r s h i p s , corporations, domestic and f o r e i g n banks, the United S t a t e s
and S t a t e , municipal and f o r e i g n governments, including withdrawals from
savings accounts, payments from trust accounts, and c e r t i f i c a t e s of d e p o s i t
paid.
Col. 6 . This i s a memorandum item to be f i l l e d i n only by banks that
now report d e b i t s to i n d i v i d u a l accounts to the l o c a l c l e a r i n g house, or
other l o c a l agency, f o r transmission to the Federal Reserve bank. The
amount of such d e b i t s to i n d i v i d u a l accounts, as shown i n t h i s column, w i l l ,
of course, be included a l s o i n column 4 as a p a r t of "other d e b i t s to d e p o s i t
accounts".
Form 235 (235-a) 1/should be f i l l e d i n by the member bank and returned 60
as to be i n the p o s s e s s i o n of the Federal Reserve bank not l a t e r than
October 1, 1934.
Form 234&/
The items i n t h i s form are ' i d e n t i c a l with the corresponding columns i n
Form 235•
l/*Omitd,E3511 and"tttonth"in l e t t e r s to weekly reporting member banks, and omit
11235-a" and "week" i n l e t t e r s to other banks,
2/-Omit the paragraph r e l a t i n g to Form"234" In l e t t e r t o weekly repon±in&
member banks*
i
504
B-999
Dear S i r ;
As s t a t e d on page 205 of the April 1934 i s s u e of the Federal Reserve
B u l l e t i n , Governor Black of the Federal Reserve Board, i n t e s t i f y i n g bef o r e the Committee on Banking and Currency of the United S t a t e s Senate on
March 23, 1934, renewed the Board's recommendation f o r l e g i s l a t i o n establ i s h i n g a system of member bank reserve requirements based not only on the
volume of d e p o s i t s but a l s o on t h e i r a c t i v i t y .
This system of r e s e r v e s
was f i r s t recommended by the Board to Congress in March'1932, the proposed
amendment to the Federal Reserve Act being printed on pages 215-216 of the
April 1932 i s s u e of the Federal Reserve B u l l e t i n .
The recommendation f o r a change in the method of determining reserve
requirements was made a f t e r extended research and i n v e s t i g a t i o n by the
Federal Reserve System Committee on Member Bank Reserves, in the course of
which the required r e s e r v e s , on the proposed b a s i s , were c a l c u l a t e d f o r
each member bank i n d i v i d u a l l y during one month (May 1931) and were e s t i mated f o r a l l member banks and f o r important groups of banks over a period
of time and compared with required reserves on the present b a s i s .
The Fed-
e r a l Reserve Board would now, however, l i k e to make a study of present r e quired reserves and of proposed required r e s e r v e s f o r individual banks and
f o r a number of small groups of banks over a period of time, with the view
p a r t i c u l a r l y of determining f o r these banks (a) the extent to which required
r e s e r v e s under the proposed plan would f l u c t u a t e during d i f f e r e n t seasons of
the year, compared with present required r e s e r v e s , and (b) the extent to which
B_99p^
— 2 —
required r e s e r v e s under the present and proposed plans f l u c t u a t e with changes
i n business c o n d i t i o n s .
In order that such a study may be made i t has been decided to ask f o r
the cooperation of a s e l e c t e d group of member banks from which i t i s desired
to obtain current data, as well as any corresponding back data that may be
a v a i l a b l e , with r e s p e c t to d e p o s i t s , d e b i t s , e t c .
Your bank has been t e n t a t i v e l y s e l e c t e d as r e p r e s e n t a t i v e of banks
l o c a t e d in a ( g i v e the economic c l a s s i f i c a t i o n ) region, and i t w i l l be
g r e a t l y appreciated i f you w i l l cooperate with us in the study.
For t h i s
purpose i t i s d e s i r e d that you f u r n i s h the data c a l l e d f o r in the i n c l o s e d
Form 335 (235a)^ as of the end of each month (week)^ f o r the period January
1924 to August 1934, or f o r any part thereof f o r which the data can be comp i l e d r e a d i l y from your records, (and also that you report monthly beginning with September 1934 the data c a l l e d f o r by Form 234 u n t i l fu rth er
n o t i c e — probably for a year) .
After the compilations based on those
data have been completed at t h i s bank, we s h a l l be glad, i f you d e s i r e , to
f u r n i s h you a copy of the part thereof r e l a t i n g to your bank.
For your
f urt h er information, there i s i n c l o s e d a memorandum o u t l i n i n g the proposed
reserve requirements together with i n s t r u c t i o n s f o r the preparation of
reports on Forms 234 and 235 (Form 235a)1.
I t w i l l be appreciated i f you w i l l kindly l e t us know whether you w i l l
be able to cooperate i n compiling the data desired f o r back periods and, i f
1J Omit"235", "month", and "Forms 234 and 235" in l e t t e r s to
r e p o r t i n g member banks, and omit "235a", "week", and "Form
235a" in l e t t e r s to other banks.
2/ Omit clause i n c l o s e d i n parentheses in l e t t e r to reporting
member banks.
X
506
3-999
— 3 —
so, how rnuch thereof can. be furnished and when the f i g u r e s may "be expected,
( i n any event, v.e should l i k e to have you f u r n i s h us current monthly r e ports on Form 234 u n t i l further n o t i c e .
Very t r u l y yours,
Federal Reserve Agent.
3/ Or.it from l e t t e r to reporting raercber banks.
507
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
July 18, 1934
B-1000
SUBJECT:
R e v i s i o n of Weekly Reporting Member
Bank Report Form.
Dear S i r :
For some time i t has been evident that the s e l e c t e d items i n cluded i n the weekly report of condition of member banks i n l e a d i n g
c i t i e s are not as informative as they should be, p r i n c i p a l l y b e cause loans are not c l a s s i f i e d as between open-market loans and
customer loans and because the deposit f i g u r e s r e l a t e not t o a c t u a l
d e p o s i t s but t o c e r t a i n s p e c i a l c a t e g o r i e s n e c e s s i t a t e d by the
present method of computing reserve requirements.
In order t o ob-
t a i n data which w i l l enable the System t o b e t t e r appraise the e x t e n t
and character of current changes i n the condition of the weekly r e p o r t i n g member banks, the form ( S t . 51a) used by them i n submitting
t h e i r reports has been r e v i s e d i n accordance with t h e sample i n closed.
I t i s suggested that t h i s form be printed l o c a l l y , i n
accordance with the procedure h e r e t o f o r e followed, and t h a t member
banks be requested to submit reports i n accordance therewith b e ginning Wednesday, Septeiaber 5« 193%*
I t w i l l be noted that the r e v i s e d form provides f o r a balanced
statement and a l s o f o r c e r t a i n information regarding d e b i t s t o
508
— 2 -•
d e p o s i t accounts.
The debit f i g u r e s , a l s o the data on d e p o s i t s ,
w i l l be used i n connection with tho study of the proposed change i n
member bank reserve requirements r e f e r r e d t o i n the Board's l e t t e r
of t h i s d a t e .
I t i s not intended f o r the present t o change the form
i n which t h e f i g u r e s are p u b l i s h e d .
Very t r u l y yours
~0>gesQjZv
Chester M o r r i l l
Secretary.
Inclosures
TO ALL FEDERAL RESERVE AGENTS*
)rT\cnAi
i 509
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
B - l t i O l *
#
leaser m l BeposiUry t f a u u , '
Dear Sir:
The minute* of the conmittee meeting on aecemtisg held in Chicago
on June 2? and June 28,
c^atain tfage 7) the following paragr#@#
"It was considered %y the deeedttee that s##y benefits
had been derived from the facts replied on form
ae
retpeeted by
federal leeerte Board »aad i t was their
opinion that the federal reserve bank* <w*dd be requested
to submit r##r%s eewwatiag f i s c a l Agency operations for
the f i r s t half of
on forme need for the laet half of
1933 with modifications recommended by the Committee,*
In accordance with the committee's suggestion we have prepared
the attached fonts on Wich 1$ is requeeted that the federal Besenre
Wmks report
their ea#ewe# Wring the f i r s t telf ef 1934 in connec-
tion with their fiscal agency and depositary operations, these forms
are similar to the ones need for the last half ef 1$33 with certain
modifications recommended by the Committee ^
A email ###&y of # e forms i s inclosed and we will be pleaaed
to furaieh additional oepiee "upon request.
Very truly youra,
C^/
J. B. Van foeeen+Aest. Chief*
Division of Bank Operations,
Incloeores.
http://fraser.stlouisfed.org/
TO ALX, OOVIIB©**
Federal Reserve Bank of St. Louis
FEDERAL RESERVE BOARD
510
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
J u l y 25, 1934.
B-1002.
'
Dear S i r :
For your information and f o r v e r i f i c a t i o n , there are i n c l o s e d the
f o l l o w i n g l i s t s of bank c l o s i n g s f o r your d i s t r i c t , based on reports
received from your bank, and, i n the case of n a t i o n a l banks, from the
Comptroller of the Currency's o f f i c e : .
1 . Banks suspended, January 1 to March 15, 1933*
2 . Licensed banks suspended, p l a c e d i n l i q u i d a t i o n ,
or p l a c e d on a r e s t r i c t e d b a s i s , March 16,
1933. to June 30, I93U.
3 . Ron-licensed banks p l a c e d i n l i q u i d a t i o n or r e c e i v e r s h i p , March 16, 1933 to June 30, 193^*
In the case of the banks included i n the second l i s t , i t w i l l be
appreciated i f you w i l l a s c e r t a i n and inform us which of the banks c l o s e d
on accdunt of f i n a n c i a l d i f f i c u l t i e s , which were p l a c e d on a r e s t r i c t e d
b a s i s , and which were placed i n voluntary l i q u i d a t i o n .
In l i e u of information on c l o s e d banks now being telegraphed
under codes SAVE, SBHV and SIMM, p l e a s e wire currently h e r e a f t e r ,
a g a i n s t the code words shown below, the name and l o c a t i o n of each
l i c e n s e d bank which terminates e x i s t e n c e as such and/or d i s c o n t i n u e s
banking operations:
-
2
-
B-1002.
Code
SUPP — Suspended a l l banking operations on account of f i n a n c i a l
difficulties.
REVE — License revoked and/or p l a c e d on a r e s t r i c t e d b a s i s on
account of f i n a n c i a l d i f f i c u l t i e s .
LIKK — Placed i n voluntary l i q u i d a t i o n .
VERT — Converted i n t o or succeeded by another bank. Give f i r s t
the name of the bank terminating e x i s t e n c e , then code
word VERT, and then the name of the s u c c e s s o r bank.
SOBB — Absorbed by or c o n s o l i d a t e d or combined with another bank.
Give f i r s t the name of the bank terminating e x i s t e n c e ,
then code word SOBB, and then the name of the absorbing
or continuing bank.
If use of the appropriate code word does not adequately describe
the circumstances of c l o s i n g i n any i n s t a n c e , p l e a s e i n d i c a t e any
s p e c i a l circumstances i n connection with the bank's c l o s i n g of which
you may be a d v i s e d .
Very t r u l y yours,
S
TO ALL FEDERAL RESERVE AGENTS*
J , R, Van Fossen, A s s t . C h i e f ,
D i v i s i o n of Bank Operations.
- 512
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
J u l y 25, 193^.
B-1003.
SUBJECT:
Beport of Commltmonts Under
S e c t i o n 13b.
Dear S i r :
In order that the Board may have i n i t s f i l e s data with regard
to commitments made by your bank under S e c t i o n 13b of the Federal
Reserve Act, i t i s requested that a statement be submitted i n the
case of each such commitment showing the f o l l o w i n g information:
1 . Name of p r o s p e c t i v e borrower,
2 , Name of f i n a n c i n g i n s t i t u t i o n i f commitment i s to a
financing institution.
3* I f commitment i s to a f i n a n c i n g i n s t i t u t i o n , the p r o p o r t i o n of l o s s on the p r o s p e c t i v e t r a n s a c t i o n to be
assumed by the f i n a n c i n g i n s t i t u t i o n .
4 . Amount of commitment.
5 . Period covered by commitment,
6 . Maturity of proposed t r a n s a c t i o n s .
7 . Commitment f e e or charge (Bate and amount),
8 . General d e s c r i p t i o n of proposed s e c u r i t y , i n c l u d i n g
names iof any p r o s p e c t i v e i n d o r s e r s .
513
2 -
I t i s requested that the statements r e f e r r e d to above be numbered
s e r i a l l y , and that a t the end of each month a l i s t of outstanding i n d u s t r i a l advances and commitments under S e c t i o n 13b be furnished showing the f o l l o w i n g :
Name of borrower or p r o s p e c t i v e borrower,
Name of f i n a n c i n g i n s t i t u t i o n i f transaction i s with a
financing i n s t i t u t i o n .
Amounts of outstanding advances.
Amounts of outstanding commitments.
Very t r u l y yours
Chester M o r r i l l ,
Secretary,
TO ALL GOVERNORS*
X
: 5i4
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
J u l y 25, 1934.
B-1004.
SUBJECT:
Daily Schedules of I n d u s t r i a l
Advances Under S e c t i o n 13b.
Dear S i r :
In order that the Board may have s u f f i c i e n t data with regard
to the l o a n s , d i s c o u n t s , advances and purchases made by your bank
under S e c t i o n 13b of the Federal Reserve Act from funds p a i d to your
bank by 'the Secretary of the Treasury under s u b s e c t i o n ( e ) of that
s e c t i o n and out of the bank's own funds, i t i s requested that i n the
d a i l y schedules furnished the Board such t r a n s a c t i o n s be reported
s e p a r a t e l y and that the f o l l o w i n g information be shown with r e s p e c t to
each such tr ansac tion:
1 . Name of borrower.
2 . Name of f i n a n c i n g i n s t i t u t i o n i f t r a n s a c t i o n i s with
a financing i n s t i t u t i o n .
3 . If t r a n s a c t i o n i s with a f i n a n c i n g i n s t i t u t i o n , the
proportion of l o s s thereon assumed by the f i n a n c i n g
institution.
515
-
2 -
*+. Amount of t r a n s a c t i o n .
5.
Net proceeds, i f taken on a discount b a s i s .
6.
Maturity.
T.k Kate, and whether discount or i n t e r e s t .
8.
General d e s c r i p t i o n of s e c u r i t y .
9.
Indorsers on o b l i g a t i o n s acquired.
P l e a s e show under remarks column or otherwise any a d d i t i o n a l
data necessary to g i v e the Board adequate information regarding each
transaction.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
TO ALL GOVEBUOBS*
516
FEDERAL RESERVE BOARD
WASHINGTON
J u l y 26, I93U
B-1005
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
Dear S i r :
In order t h a t t h e Board and the Treasury may have a v a i l a b l e
s t a t i s t i c a l data on the amount of new loans made by member banks during
the present year and on the amount of loans p a i d or w r i t t e n o f f , i t
w i l l be appreciated i f you w i l l obtain from every l i c e n s e d member bank
i n operation on June 3 0 , 193^» a, report i n accordance with t h e attached
form, which i t i s suggested be p r i n t e d l o c a l l y .
P l e a s e advise member
banks t o prepare the report i n d u p l i c a t e and t o send the o r i g i n a l to you,
r e t a i n i n g the d u p l i c a t e i n t h e i r f i l e s .
I t i s f u r t h e r requested t h a t the reports be tabulated a t your
bank so as t o obtain t o t a l s , corresponding t o t h e f i g u r e s reported by
each bank, f o r the f o l l o w i n g groups of (a) National banks and (b) S t a t e
bank members:
1.
2.
3.
Central Reserve c i t y banks,
Reserve c i t y banks i n each r e s e r v e c i t y ,
Country banks i n each s t a t e or p a r t of s t a t e .
Only the summaries need be forwarded t o t h e Board f o r t h e p r e s e n t ,
the reports of the i n d i v i d u a l member banks t o be r e t a i n e d a t your bank
u n t i l such time as they may be c a l l e d f o r by the Board.
I f there should be any delay i n t h e r e c e i p t of the r e p o r t s of
some of the smaller member banks, p l e a s e f u r n i s h t h e Board with p r e l i m i n a i y
** 2
summaries, t o be f o l l o w e d with f i n a l summaries when a l l of the r e p o r t s
have been r e c e i v e d and t a b u l a t e d .
Very t r u l y yours,
-Hbfosfcju
h0<7wjef
Chester M o r r i l l ,
Secretary.
TO ALL TBDBBAL HBSBRVB A&BNTS*
c
I 518
Form B~1005a
Federal Reserve Board
J u l y , 1934
REPORT OF KEW LOA2IS MADE AMD OF LOANS PAID OR WRITTEN OFF, EXCLUSIVE OF LOANS
TO OTHER BANKS AND TO BROKERS AND DEALERS IN SECURITIES, OF ACCEPTANCES
OF OTHER BANKS AND OF 0OMMERCIAL PAPER BOUGHT IN OPEN MARKET
(Include only loans reported against items 5~c a 6--a, 6~b, 7 and 8 of
Schedule E i n t h e c a l l c o n d i t i o n report)
Month
Outstanding at
beginning of
monthZ&
(IIn thousands ol* dollars)
New
Loans paid off
loans
including
made (k
curtaiDments/c
Loans
written
off
Outstanding
at end of
monthZ&
193W a n .
Feb.
Mar,
Apr.
May
June
a / The amount outstanding at the beginning of January should agree with the t o t a l
reported a g a i n s t items 5~ c » 6 - a , 6-b, 7 and 8 of Schedule E i n the bank's
c a l l condition report f o r Dec. 30, 1933» and the amount outstanding at t h e end
of June should agree with t h e t o t a l reported against items $ - c , 6-a* 6 - b , 7
and 8 of Schedule E i n the bank's c a l l condition report f o r June 30, 193&.
b / Do not include renewals made by the e x e c u t i o n of new n o t e s .
c / I f a loan i s c u r t a i l e d through the execution of a new note f o r a l e s s e r amount
than t h e old n o t e , include i n t h i s column only the amount of the c u r t a i l m e n t .
Z
(Name of member bank)
(City)
Signed.
(Cashier or Treasurer)
(State)
(F.R.Dist.
number)
519
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
July 30, 1934.
B-1006.
SUBJECT:
Audit of Reserve Stock of Incomplete
Federal Reserve Notes and Federal
Reserve Bank B o t e s .
Dear S i r :
For your information there i s i n c l o s e d a copy of the r e c a p i t u l a t i o n s of an a u d i t of the stock of incomplete Federal Reserve
n o t e s and Federal reserve bank notes h e l d a t the Bureau of Engraving and P r i n t i n g as of c l o s e of "business June 30, 193^» forwarded
to the Secretary of the Treasury "by Mr. M. R, Loafman, Chief,
D i v i s i o n of P u b l i c Debt Accounts and A u d i t .
In h i s l e t t e r forwarding the report of the audit to the
Secretary of the Treasury, Mr. Loafman s t a t e d that; "The a u d i t
extended from June 28 to J u l y 11, 193^» i n c l u s i v e , and c o n s i s t e d
of a p i e c e count of the e n t i r e stock of f a c e s of both c l a s s e s and
a package count of the uniform backs a l l o c a t e d to Federal reserve
notes.
In view of the f a c t that a r e c e n t p i e c e count has been
made by t h i s o f f i c e of the e n t i r e stock of each denomination of
uniform backs on hand i n the Bureau, a package count and i n s p e c -
w
2 —
t i o n of the uniform backs a l l o c a t e d to Federal reserve n o t e s was
deemed s u f f i c i e n t a t t h i s time.
The t o t a l s h e e t s of Federal reserve
notes, f a c e s and "backs, were found to be i n excess of the required
r e s e r v e of 4,250,000 s h e e t s , as authorized in the l e t t e r of the
Governor of the Federal Reserve Board to the Under Secretary of the
Treasury dated December 2 , 1939•"
Very truly yours,
J . R. Van Fossen, A s s i s t a n t Chief,
D i v i s i o n of Bank Operations.
Inclosures.
TO ALL FEDERAL RESERVE AGENTS*
521
FEDERAL RESERVE BOARD
WASHINGTON
August 6, 193^
B-1007.
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
Dear S i r :
There i s i n c l o s e d f o r your information a
copy of a memorandum r e c e n t l y prepared i n the
Board's D i v i s i o n of Bank Operations with regard
to branch banking in the United S t a t e s .
A copy
of t h i s memorandum i s a l s o being furnished to
the governor of your bank.
Very t r u l y yours
Chester Morrill
Secretary.
Inclosures
TO ALL FEDERAL RESERVE AGENTS* (Copy f o r Governors of a l l
Federal Reserve Banks)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 3 , 1934.
B-100S.
SUBJECT:
Preliminary c l a s s i f i c a t i o n of
l o a n s , investments, and d e p o s i t s
of member "banks as of June 30, 193^*
Dear S i r :
There i s i n c l o s e d f o r your information and c o n f i d e n t i a l
u s e , a copy of a memorandum and statement prepared f o r t h e
Board with respect to changes i n l o a n s , investments and
d e p o s i t s of member banks between March 5 and June 30, 193^«
and during the year ended June JO, 193^» "based upon a p a r t i a l preliminary t a b u l a t i o n of the June 3® member bank c a l l
reports.
Very t r u l y yours,
J . R. Van Fossen, A s s t . Chief,
D i v i s i o n of Bank Operations.
Inclosure.
TO A H GOVERNORS AMD FEDERAL RESERVE AGENTS*
523
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 1, 1934.
B-1009.
SUBJECT:
Daily condensed condition report
of Federal Reserve "banks.
Dear S i r :
Under separate cover we are forwarding today a supply
of r e v i s e d Form B - l , "Condensed statement of c o n d i t i o n of Federal
Reserve bank", f o r use i n wiring c o n d i t i o n f i g u r e s of your bank
to the Federal Reserve Board.
I t i s requested that code words MIRE, LUST, MA.ZE, MAJST
and MOSS, which have h e r e t o f o r e been included on Form B - l , be
telegraphed i n the f u t u r e a s of Wednesdays only, covering
t r a n s a c t i o n s f o r the week ending Wednesdays as f o l l o w s :
MIRE
Hew loans made during week under S e c t i o n 1 0 ( b ) .
MIST
Payments during week of loans made under S e c t i o n 1 0 ( b ) .
MAZE
Renewals during week of S e c t i o n 10(b) l o a n s .
MART
B i l l s discounted during week f o r i n d i v i d u a l s , p a r t nerships and corporations under S e c t i o n 13.
. MOSS
Payments during week of b i l l s discounted f o r
i n d i v i d u a l s , partnerships and corporations under
S e c t i o n 13.
http://fraser.stlouisfed.org/
TO ALL GOVERNORS*
Federal Reserve Bank of St. Louis
Very t r u l y yours,
0 / (
(7^
j / J . R. Van Fossen, A s s t . Chief,
D i v i s i o n of Bank Operations.
FEDERAL RESERVE BOARD
i
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 25, 193^•
B-1010.
SUBJECT:
Condition of l i c e n s e d member banks.
Dear S i r :
There i s i n c l o s e d , f o r use pending the p r i n t i n g
of Member Bank Call Report No. 62, a statement showing
the a s s e t s and l i a b i l i t i e s and a c l a s s i f i c a t i o n of l o a n s ,
investments, and d e p o s i t s on June J O , 193^» of a l l
l i c e n s e d member banks, together with corresponding data
by Federal Reserve d i s t r i c t s and by c l a s s e s of banks.
Very truly yours,
7
/I
i: > •/ y .
E. L. Smead, Chief,
D i v i s i o n of Bank Operations
Inclosure
TO ALL GOVERNORS AND F. R, AGENTS
524
FEDERAL RESERVE BOARD
i 525
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
August 18, 1934
B—1011
10 THE MEMBER BANK ADDRESSED:
Sirs:
The Government of the Union of S o v i e t S o c i a l i s t Republics, at
the time of i t s r e c o g n i t i o n "by the United S t a t e s , assigned t o our
Government various c l a s s e s of a s s e t s and claims of t h e S t a t e of R u s s i a .
In order to carry out c e r t a i n undertakings made at t h i s time by the
United S t a t e s Government, the Secretary of the Treasury has requested
the Federal Reserve Board to obtain from s t a t e "bank and t r u s t company
members of the Federal Reserve System in the l a r g e r c i t i e s t h e . i n formation c a l l e d f o r i n the attached questionnaire.
You are accordingly requested to f i l l out and e x e c u t e t h i s
questionnaire and to return one copy to the Federal Reserve Board at
your e a r l i e s t opportunity.
Your cooperation i n f u r n i s h i n g the d e s i r e d
information promptly w i l l be g r e a t l y appreciated.
An addressed envelope, requiring no postage, i s i n c l o s e d f o r your
reply.
Very t r u l y yours,
Chester Morrill,
Secretary.
Inclosures
Please answer "yes" or "no" i n the squares o p p o s i t e each question and^C)
return one copy of t h i s form t o the agency from which you w i l l r e c e i v e i t .
(1)
Do you a t the
present time
have, or have
you at any
time s i n c e November 7, 1917,
had a cash dep o s i t on your
books to the
credit of:
(2)
Do.you a t p r e sent hold, or
have you at any
time s i n c e November 7, 1917,
h e l d , any tangible a r t i c l e f o r
account or on
behalf o f :
(3)
Are you a t t h e p r e s e n t , o r
have you been a t any time
s i n c e November 7, 1917,
the a s s i g n e e of or the
p o s s e s s o r of a l e g a l or
e q u i t a b l e i n t e r e s t i n any
chose i n a c t i o n i n which
a l e g a l or e q u i t a b l e i n t e r e s t was at any t i n e
s i n c e November 7, 1917,
p o s s e s s e d or claimed by:
( a ) The Imperial Government
b f Russia, or t h e P r o v i s i o n a l Government of Russia?
( b ) The Government of the
y n i o n of S o v i e t S o c i a l i s t
Republics?
( c ) The Government of Admir a l Kolchak; the P r o v i s i o n a l
Government of t h e Northern
Regions; the A l l - R u s s i a n
Government at Omsk; the Prov i s i o n a l Government of Autonomous S i b e r i a ; t h e Government of General Horvat; the
Government of General
Semenov; or any other organi z a t i o n purporting t o exerc i s e governmental power i n
R u s s i a during the C i v i l War
i n that country during the
y e a r s 1917-1920, i n c l u s i v e ?
(d) Any corporation, company,
a s s o c i a t i o n or partnership
at the time t h i s information
i s furnished or at any p r e v i o u s time organized under
the laws of any of the
governments described under
the headings ( a ) , ( b ) , or
( c ) , above?
(State)
(City)
(Name of Bank)
(Signed)
Date
{President or C a s h i e r ) /
• 527
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
September 1, 193^
B-1012
Dear Sir:
In order that the Board may be kept currently informed as to
the a c t i v i t i e s of your bank with regard to applications r o r indust r i a l advances or for commitments to make industrial advances, i t
will be appreciated i f you will submit to the Board reports as of
close of business each Wednesday on Forms B-22 and B-22a, a supply
of which i s inclosed.
In addition to the information required to be shorn on BD-4
schedules covering industrial advances and commitments, outlined
in the So&rd's lettersB-l003 and B-1004 of J u l y 25, please show in
the case of each advance and each commitment the character of
business of the borrower and the gross business receipts of the
borrower during each of the past f i v e years.
Please also furnish
the Board with corresponding data covering loans and commitments
for which schedules have already been sent to the Board.
It w i l l also be appreciated if you will furnish the Board a
statement showing the following information as of close of business
Wednesday, September 5, for each advance (as distinguished from
commitment) which has been approved by your bank but under which no
£ 538
2
disbursements have been made:
-
( l ) Name and location of borrower,
(2) character of business, (3) amount to be advanced by Federal Reserve tank, (4) whether the advance i s to be made direct or through a
financing institution, (5) gross business receipts during each of past
f i v e years,
It i s further requested thet yon submit a report as of
each Wednesday thereafter showing similar information for each advance
approved during the week but on which no disbursements have been made.
In order that the Board may be more f u l l y advised as to the
effect which the a c t i v i t i e s of the Federal Reserve banks under Section
13b are having on the general credit situation, i t will be appreciated
i f you will write the Board a l e t t e r as of each Wednesday night giving
such details as are available regarding each industrial loan or commitment made by financing institutions that would probably not hpve
been made had the Reserve banks no authority to make industrial loans.
Kindly also include in this l e t t e r such additional information as you
have been in the habit of sending the Board on Saturdays in response
to the Board's telegram Trans 2044 of July 21.
The Board would appreciate receiving the reports and information
called for above on the Monday morning following the Wednesday report
date.
Very truly yours,
ho
Chester Morrill,
Secretary.
Inclosures
TO ALL
F. B. AGENTS*
FEDERAL RESERVE BOARD
WASHINGTON
September 13, 193*+
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
B-1013
Dear Sir:
In the Board's l e t t e r B-999 of July IS, in connection
with the investigation pertaining to member bank reserve requirements, i t was stated that you would be advised in what
form to transmit to the Board the data c o l l e c t e d and compiled
on the subject.
There i s attached hereto a memorandum out-
lining the procedure to be followed in that connection.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO ALL FEDERAL RESERVE AGENTS
J 530
DATA OH FORMS 236 AND 2 3 6 a TO BE COMPILED AT THE FEDERAL RESERVE BAMS IE
ACCORDANCE WITH FEDERAL RESERVE BOARD'S LETTER B-999 OF JULY 18, 1934
1. Preparation of work sheets, Forms 236 and 236a. for individual banks.
(a) The name and location of hank, d i s t r i c t number, class of bank, and
economic c l a s s i f i c a t i o n should be shown in the space provided for the purpose,
The class of bank, according to i t s reserve status, should be in-
dicated by sytiibols as follows:
Symbol
Class of bank
CR
Central Reserve city bank
FR
Reserve city bank i n a Federal
Reserve bank or branch city
FC
Country bank in a Federal Reserve
bank or branch city
R
Reserve c i t y bank o u t s i d e a Fede r a l Reserve bank or b r a n c h c i t y
C
Country bank o u t s i d e a F e d e r a l
Reserve bank or branch city
The economic c l a s s i f i c a t i o n should be that given in the l e t t e r submitting the l i s t of selected banks to the Board.
(b) The figures in the following columns of forms 236 and
236a
are
to be copied directly from the banks' reports on Forms 235 and 235a:
Figures reported on
Forms 215 and 235a
To be entered on Forms 236
and 236a
Column 1
Column 1
Column 4
Column 4
Column 5
Column 7
Column 6
Column 12
(c) The excess of the figures shown in column 1 over those i n
column 2, of forms 235 and 235a, should be entered in column 2 of forns
B-1013a
2>b and 23ba, r e s p e c t i v e l y .
,<
(d) Columns 8 and 11 should be entered from the records of the Federal
Reserve tank.
Column 8 should be computed in the manner indicated in the
Board's telegram Trans 206$ of September 7» 193^ •
Column 11 should be com-
puted by dividing the aggregate of the daily figures of borrowings (figures
preceding Sundays and holidays to be repeated) by the number of calendar days
in the week or month.
(e) Columns 3» 5» 6, 9 and 10 should then be calculated fr'om the figures
entered in the other columns, in accordance with the instructions contained in
in the captions and footnotes.
( f ) Annual daily averages should be computed for columns 1, 2, 4, 7* 9» 10
and 11 and e n t e r e d f o l l o w i n g the monthly or weekly f i g u r e s f o r each y e a r .
On
form 236a, the annual d a i l y average should a l s o be computed f o r column 1 2 .
In
the case of columns 4 and 12 the daily average debits should be obtained by
for
dividing the aggregate for the 12 months, or/52 or 53 weeks, by the number of
calendar days.
In the case of columns 1, 2, %, 9> 10 and 11 the daily average
should be obtained by dividing the sum of the monthly or weekly figures by the
number of months or weeks.
(g) If i t a p p e a r s , upon i n s p e c t i o n of the completed work s h e e t f o r any
bank, t h a t the f i g u r e s shown i n column 10 may exceed 15 p e r c e n t of t o t a l d e p o s i t s
as shown i n column 1, then t h e r e should be shown i n t h e a v a i l a b l e space p r e c e d i n g
column 1, a f i g u r e r e p r e s e n t i n g 15 p e r c e n t of t o t a l d e p o s i t s , the maximum p o s s i b l e
r e q u i r e d r e s e r v e on t h e proposed b a s i s .
In the case of such banks t h i s maximum
should be u s e d i n any c o n s o l i d a t i o n s t h a t may be made i n l i e u of f i g u r e s shown
i n column 1 0 .
2 . C o n s o l i d a t i o n s of work s h e e t s . Form 236.
The completed work s h e e t s f o r i n d i v i d u a l banks should f i r s t be
s o r t e d a c c o r d i n g to economic c l a s s i f i c a t i o n , e . g . , c o t t o n growing, t o bacco growing, e t c . , and t h e n , i f t h e r e i s more than one c l a s s of banks
( e . g . , r e s e r v e c i t y banks and country banks) i n a given economic
B-1013b
532
c l a s s i f i c a t i o n , according to the class of bank within such economic group.
The monthly figures shown in columns 1, 2, 4, 9» 10 and 11 should then be
consolidated for each economic group (or for each class of banks in such
economic group), i . e . , totals for each month should be obtained corresponding to the figures shown in columns 1, 2, 4, 9» 10 and 11 on the work
sheets for the individual banks.
Annual averages should also be shown on
the consolidated sheets for these s i x columns.
If a bank's reserve status was changed at any time during the period
covered by the compilation on Form 236, that fact should be indicated on
i t s work sheet and an appropriate note should be appended to the consolidated sheet in which the bank i s included.
For the purpose of consolida-
tions the bank should be classed according to i t s current reserve status.
It i s not essential for the study that every bank be included in the
consolidated t o t a l sheets for i t s economic group throughout the period
covered by the study, inasmuch as comparisons w i l l be made chiefly between
reserves of the group of banks on the present basis and on the proposed
basis.
Every total sheet should be accompanied with a memorandum showing
just what banks are included therein and the period for which they are i n cluded, or i f convenient this information may be shown on the face or the
reverse side of the sheets themselves.
3. Consolidation of work sheets. Form 236a.
The procedure should be the same as in connection with the consolidations of work sheets form 236, except that the work sheets of the individual
banks on form 236a should be sorted according to classes of banks in each
c i t y , and a consolidation should be made of the figures in columns 1, 2, 4,
9, 10, 11 and 12 for each class of bank in each c i t y .
B-1013C
The compilations for ind.ivid.xial banks on Forms 236 and
236a
should,
be sent to the Board., together with the requested, consolidations, as soon
as the figures for a number of the groups have been consolidated, i . e . ,
without waiting for the completion of the entire job.
In transmitting
the data any observations bearing on the problem that may have been made
in the course of compilation of the data should be brought to the Board's
attention.
In order to avoid correspondence a l l compilations should be
carefully checked and the results scrutinized before the data arc transmitted to the Board.
B-1013d
534
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
SUBJECT:
September 14, 193^
B-10l4.
Charge for printing Federal Reserve
notes during the f i s c a l year ending
June 30, 1935.
Dear Sir:
Under date of September 8, the Bureau of Engraving
and Printing advised the Federal Reserve Board that, e f f e c tive July 1, 193^. the charge for printing Federal Reserve
notes during the f i s c a l year ending June 30, 1935
was
in-
creased from $82.50 to $86.00 per thousand sheets; the i n crease "being due to a 10 per cent pay restoration, to the
adoption of a 40-hour week for printers, pressmen and others,
and to higher material prices.
Very truly yours,
Chester Morrill
Secretary.
$0 GOVERNORS OF ALL FEDERAL RESERVE BA11KS
\
FEDERAL RESERVE BOARD
V
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
September 1$, 193*+
B-1016.
Industrial Advances and Commitments.
Dear Sir:
There i s inclosed for your information a tabular statement
showing for each Federal Reserve bank a summary of applications
for industrial advances under Section IJb of the Federal Reserve
Act to September 12, 19 3^" •
The statement shows for each Federal
Reserve d i s t r i c t the number and amount of applications, approvals,
commitments, advances and rejections.
There i s also inclosed
a summary of rejected applications according to reasons for rejection*
The figures were compiled from reports received from
the Federal Reserve banks on Forms B-22 and B-22a.
the statement i s being furnished the Governor.
Very truly yours
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGEFTS.
A copy of
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
September 21, 1934
B-1017
Dear Sir:
Referring to the next to l a s t paragraph of our l e t t e r
of May 7, 1934 (B-9S1), regarding reimbursement for extraordinary expenses incurred by Federal Reserve banks during
and immediately a f t e r the banking holiday, there are enclosed,
for your information, a copy of a l e t t e r dated September 17,
1934, addressed to Governor Schaller at Chicago, and a copy
of his reply thereto dated September 19.
Very truly yours,
E. L. Srnead, Chief,
Division of Bank Operations,
Enclosures
TO ALL GOVERNORS
V
cj3_E_r
5 0 7
FKDERfil RESERV3 BA1K OF CHICAGO
September 19, 1934
Office of the Governor
Mr. E. L.Smead, Chief
Division of Bank Operations
Federal Reserve Board
Washington, D. C.
Dear Mr. Smead:
This will acknowledge receipt of your l e t t e r of September
17 regarding reimbursement by the Treasury Department in the amount
of $61,285.37 for extraordinary expenses incurred during and immediately following the banking holiday.
It i s noted that you have requested the detail regarding
the nature of the expenses for which reimbursement was received,
and also with respect to the items aggregating $63.81 which were
rejected.
The amount for which reimbursement was received covered
telegraphic expense in making available to banking institutions
in this d i s t r i c t proclamations, orders, regulations, and interpretations thereof; also, notifications to banks in this d i s t r i c t regarding the licensing of benks. The amount rejected consisted of
errors in computing rates, messages sent by Western Union which
should have been sent by Postal Telegraph, and charges which were
not supported by copies of original messages. The telegraph companies have since reimbursed us for the amount disallowed.
For your further information, we have from time to tine
submitted claims for reimbursement covering printing and mailing
costs in connection with circulars sent to banking institutions
in this d i s t r i c t , regarding the banking holiday, regulations issued
subsequently, and for transportation charges paid by this bank on
shipments of gold coin and gold c e r t i f i c a t e s received in accordance
with the Executive Orders, which for the most part have been paid
or have been administratively approved for payment.
Your cooperation in effecting these settlements i s very
much appreciated.
Very truly yours,
(Signed) Geo. J. Schaller
G
Governor
538
COPY
FEDERAL RESERVE BOARD
WASHINGTON
September 17, 193^
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
Mr. G. J. Schaller, Governor,
Federal Reserve Bank of Chicago,
Chicago, 111.
Dear Governor Schaller:
We have been informally advised by the Treasury Department
that yourbank has recently been reimbursed in the amount Of
$61,285.37 for extraordinary expenses incurred during and immediately
after the banking holiday.
We are also informed that the Comptroller
General disallowed or suspended payment on items t o t a l l i n g $63.81.
In order that we may be in a position to advise the Federal Reserve
banks of the action taken by the Comptroller General on vouchers
covering banking holiday expenses in accordance with the next to l a s t
paragraph of Board's l e t t e r 3-981 of May 7, 193^, i t will be appreciated i f you will advise us in detail regarding the nature of the
expenses for which reimbursement was received and el so with respect
to the items disallowed.
Very truly yours,
(Signed)
E. L. Smead
E» L. Smead, Chief,
Division of Bank Operations.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
September 27. 193^»
B-1020.
SUBJECT: Member Bank Call Report
for June 30, 193^»
Dear Sir:
We are forwarding to you • under separate cover
copies of the Board's Member Bank Call Report
No, 62, showing the condition of licensed member banks
on June 30, 193^•
Please forward a copy to each
member bank in your d i s t r i c t that has expressed a des i r e to receive copies of c a l l reports as issued.
Very truly yours,
E» L. Smead, Cnief,
Division of Bank Operations.
TO AIL FEDERAL RESERVE AGENTS
540
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
September 2% 193^
3-813
SUBJECT:
Functional Expenses,
F i r s t H a l f , 1934
Dear S i r :
There a r e enclosed h e r e w i t h
copies
of the 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 t h e h a l f y e a r ending June 30, 193^.
A copy
of the e x h i b i t i s a l s o b e i n g mailed t o t h e
Governor of t h e bank.
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
LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BAM
541
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
October 3» 193*+
B- 1022
Dear S i r :
In accordance with a recommendation made by the representatives
of the Industrial Advisory Committees at their conference in Washington on Thursday, September 27, there i s inclosed a summary
statement showing the number and amount of applications received
for industrial advances under Section l3"b of the Federal Reserve
Act and the number and amount of such applications approved, rejected and s t i l l under consideration.
Your name has been p l a c e d on our m a i l i n g l i s t to r e c e i v e
c o p i e s of t h i s s t a t e m e n t r e g u l a r l y each week as i s s u e d .
Very t r u l y y o u r s ,
•y^y\JZ
E. L. Smeaa, 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 .
Inclosure
TO EACH MEMBER OF EACH INDUSTRIAL ADVISORY COMMITTEE
542
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
October 10, 1934
B-1023
Dear Sir:
Referring to the l a s t paragraph of our l e t t e r of May 7. 1934
(B-981), regarding reimbursement for extraordinary expenses incurred by
Federal Reserve banks during and immediately after the banking holiday,
at the l a s t Governors' Conference Mr. James read en extract from a paragraph relating thereto contained in the "Emergency Appropriation Act,
f i s c a l year 1935". approved June 19, 1934, and you were advised that a
copy of this paragraph would be furnished you at a later date.
The
paragraph referred to reads as follows:
"Expenses, Emergency Banking Act of 1933. Gold Reserve
Act of 1934, and Silver Purchase Act of 1934: For any purpose in connection with the carrying out of the provisions
of any Executive orders and proclamations regarding the bank
holiday, any regulations issued thereunder, and the provisions
of the Emergency Banking Act, approved March 9. 1933 (48 Stat.
1), the Gold Reserve Act of 1934, approved January 30, 1934
(Public, Numbered 87, Seventy-third Congress), and section 3653
of the Revised Statutes, including costs of transportation,
insurance, and protection of srold coin, gold bullion, and gold
c e r t i f i c a t e s transferred to Federal Reserve banks and branches,
United States mints and assay o f f i c e s , end the Treasury, after
March 9.1933? losses sustained by Federal Reserve banks due to
abrasion of gold coin, and reimbursement to Federal Reserve
banks and branches for expenses incurred by them in carrying
out instructions issued by the Secretary of the Treasury after
March 4, 1933; and to cover any deficiency in the accounts of
548
— 2
—
the Treasurer of the United States, including interest, as
authorized by the Act of March 26, 193*+ (Bublic, Numbered 129,
Seventy-third Congress), arising out of the arrangement
approved by the President on July 27, 1933; for any purpose
in connection with carrying out the Silver Purchase Act of
1934, f i s c a l year 1935, $4,500,000, to be expended under the
direction and in the discretion of the President and to be
immediately avai1able."
The Treasury Department has informally asked that requests of
Federal Reserve banks for reimbursement for losses sustained by them due
to abrasion of gold coin received during and after the banking holiday
show the following information:
( l ) face value of coins, (2) value allowed
by mint, (3) date shipped to mint, (4) Treasurer's transfer advice number,
and (5) statement certifying to period during which coin was received.
Very truly yours
E. L. Suead, Chief,
Division of Bank Operations.
LETTER TO ALL ^0V3RN0R3
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 12, 193^ •
3-1024.
Dear Sir:
On October 9 we mailed to the Chairman and Governor
of each Federal Reserve bank and to each member of the Indust r i a l Advisory committees a copy of a statement showing, for
the period up to October 3» the number of applications for
industrial advances under Section ljb of the Federal Reserve
Act and the number and amount of such applications approved,
rejected and s t i l l under consideration.
There are now inclosed 12 additional copies of the
statement and i t i s suggested that a copy be furnished each
director of your bank.
This number of extra copies will be
forwarded to you regularly each week hereafter.
Very truly yours,
S. L. Smead, Chief,
Division of Bank Operations.
Inclosures.
TO ALL FEDERAL RESERVE CHA.IRHEN EXCEPT RICHMOND
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
October 23, 193^
B-1025
SUBJECT:
Call Condition Reports of State Bank
Members and their A f f i l i a t e s
Dear Sir:
There have been forwarded to you today under separate cover the
indicated number of copies of the f i v e forms and schedules attached
hereto, for the use of State bank members and their a f f i l i a t e s in submitting reports as of the next c a l l date:
Number of
copies
Form
Form 105, Report of condition of State bank member.
Schedule "0", Loans and advances to a f f i l i a t e s and
irvAstmmnts in and loans secured by obligations
of a f f i l i a t e s .
Form 220; Report of a f f i l i a t e or holding company
affiliate.
Form 220a, Publisher's copy of report of a f f i l i a t e
or holding company a f f i l i a t e .
Form 220b, Instructions for preparation of reports
of a f f i l i a t e s and holding company a f f i l i a t e s .
Kindly mail to each State bank member that has not been formally
placed in liquidation or receivership or possession of which has not
been taken by a conservator or other State o f f i c i a l 3 copies of Form
- 2-
; 546
105 and Schedule "0" and an appropriate number of Forms 220, 220-a" acid
220-b, based on the number required at the time of the l a s t c a l l f o r
r e p o r t s , with the request that the forms and the accompanying schedule
be held pending a c a l l for reports thereon.
Member banks should be
i n s t r u c t e d to submit the reports i n d u p l i c a t e , both the o r i g i n a l and
d u p l i c a t e copies to be signed and f u l l y executed.
The o r i g i n a l s of
the reports should be r e t a i n e d f o r the f i l e s of your bank and the
copies forwarded to the Federal Reserve Board.
A number of changes have been made i n Form 105, a l l of which a r e
b e l i e v e d t o be s e l f - e x p l a n a t o r y .
However, i t i s s u g g e s t e d t h a t , i n
t r a n s m i t t i n g t h e forms t o S t a t e bank members, you c a l l t h e i r a t t e n t i o n
to the following:
Item 3 of A s s e t s has been amended t o r e a d "United S t a t e s Government o b l i g a t i o n s , d i r e c t a n d / o r f u l l y g u a r a n t e e d " .
As i n d i c a t e d by
Schedule F, t h e i t e m should i n c l u d e not only t h e d i r e c t o b l i g a t i o n s of
t h e United S t a t e s Government h e r e t o f o r e r e p o r t e d as U n i t e d S t a t e s
Government s e c u r i t i e s , but a l s o o b l i g a t i o n s of t h e R e c o n s t r u c t i o n F i n ance C o r p o r a t i o n , t h e F e d e r a l Farm Mortgage C o r p o r a t i o n , and t h e Home
Owners Loan C o r p o r a t i o n , g u a r a n t e e d by t h e U n i t e d S t a t e s Government as
t o b o t h i n t e r e s t and p r i n c i p a l .
Home Owners Loan C o r p o r a t i o n 4 p e r c e n t
bonds, which a r e g u a r a n t e e d by t h e United S t a t e s Government as t o i n t e r e s t only, should be i n c l u d e d i n Asset item 4 and shown a g a i n s t item
1 - a of Schedule G.
L i a b i l i t y item 23, " O b l i g a t i o n s on i n d u s t r i a l advances t r a n s f e r r e d
t o F e d e r a l Reserve bank", has been added, a g a i n s t which S t a t e bank memb e r s should r e p o r t t h e i r l i a b i l i t i e s on i n d u s t r i a l advances d i s c o u n t e d
- 3-
:
517,
with or sold to the Federal Reserve bank under the provisions of Section 13b of the Federal Reserve Act, as amended June 19, 193*+. Det a i l e d instructions regarding the reporting of such l i a b i l i t i e s were
contained in the Board's l e t t e r X-80U6 of October 6, 1 9 3 w h i c h you
were requested to send to a l l State bank members.
Liability item 29, "Dividends declared but not yet payable, and
amounts set aside for dividends not declared and for accrued interest
on capital notes and debentures", has been added, against which should
be reported:
(1) Dividends declared on or before the date of the call
report but not payable until after such date, which have heretofore
been required to be included in "Other l i a b i l i t i e s " ; and (2) Amounts
that have been set aside from undivided profits for dividends not yst
declared either on preferred or common stock and/or for accrued interest on capital notes and debentures.
Item 6 of Schedule S has been amended so as to provide that loans
described in Section 50^b of the National Housing Act should not be
classed as real estate loans for the purpose of condition reports on
Form 105.
Such loans should be included in "All other loans", item 8
of Schedule E.
The pertinent provision of Section 505b of the National
Housing Act reads as follows:
"Loans made to finance the construction of residential or
farm buildings and having maturities of not to exceed s i x months,
whether or not secured by a mortgage or similar l i e n on the real
estate upon which the residential or farm building i s being
constructed, shall not be considered as loans secured by real
estate within the meaning of this section but shall be classed as
ordinary commercial loans".
The item "Deposits the payment of which has been deferred beyond
the time originally contemplated, either by agreement with depositors
- 4-
a 548
or otherwise", which appeared in Schedule L of the last condition report, has been eliminated.
Any such deposits held by a State bank
member should be included in the aporcoriate item of Schedule J , K
or L, depending on their character and maturity on the date of the
condition report.
It i s requested that as promptly as practicable after the issue
of the call you inform the Board, with respect to each State whose
capital city l i e s in your d i s t r i c t , whether or not State authorities
issued a call for condition reports as of the same date as the c a l l
issued by the Board, and, i f not, the date of the nearest call thereto
issued by the State authorities.
In case reports submitted in response
to such calls were not required to be published, information i s requested as to the nearest date when publication of such reports was
required.
If you are s a t i s f i e d that additional time i s needed for the preparation of the report of any a f f i l i a t e , you are authorized on behalf
of the Federal Reserve Board to grant an extension of not to exceed
20 days, in addition to the original period of 10 days from the receipt
by the member bank of the c a l l for the report.
Please furnish the
Board with a copy of each l e t t e r granting an extension of time.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO ALL F3DERAL
HESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
October 3°, 1934
B-1027
SUBJECT: Weekly report of 13b loans and commitments.
Dear Sir:
In view qf the changes that have been made in Forms B-22
and B-22a covering weekly resorts of industrial advances and
commitments and of the d i f f i c u l t i e s experienced in making out
these reports, i t has been thought desirable to revise the forms
and a supply thereof, as revised, i s inclosed.
There i s also inclosed a memorandum in explanation of
certain items for your guidance in preparing the re-ports.
The revised forms should be used in submitting reoorts
beginning November 7. 1934.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
Inclosures
TO ALL AGENTS
; 550
EXPLANATION OF CERT AIM ITEMS 03 FORMS B-22 AH) B-22a, WEEKLY REPORTS
OF INDUSTRIAL ADVA1MCES AMD COMMITMENTS MD APPLICATIONS THEREFOR
The following paragraphs relate to certain items, the captions of
which i t i s thought possibly need some explanation in order to insure the
compilation of reports on a uniform basis "by a l l Federal Reserve banks.
FORM B-22
Item 1.
Applications received by Industrial Advisory Committee.
All written applications received either on a preliminary or final form
should be reported against this item whether or not formally presented to
the Industrial Advisory Committee.
Item 3-b. Reductions in amounts applied for before f i n a l action
by Industrial Advisory Committee.
This item should represent reductions
in amounts applied for made at the instance of, or with the consent of,
the applicants.
Item 5.
Action on applications by Industrial Advisory Committee.
If an application i s recommended for approval by the Industrial Advisory
Committee in an amount l e s s than that applied for, the amount of the
advance recommended should be reported in item 5~£ or 5-b and the remainder
of the amount applied for in item 5-c unless the amount applied for was
reduced at the request of, or with the consent of, the applicant.
Item 5-d
should include any applications received but not yet formally presented to
the Industrial Advisory Committee as well as applications actually received
by the Committee on which no recommendations hnve yet been made.
B-1027a
2
551
-
An application recommended for approval with conditions should he
reported agcinst item 5-b, "Conditional tprrovc-l recommended", and the
amount of such application should not be taken out of item $-b in subsequent reports, whether or not the conditions ere accepted by the applicant,
unless the application i s referred back to the Committee for reconsideration
and i t changes i t s recommendation.
If a rejected application i s resubmitted in the original amount and
the Committee changes i t s former action, item 5-c should he reduced and a
corresponding increase made in item 5-a or 5~b.
If a rejected application i s resubmitted in a reduced amount and the
Committee changes i t s former action, item 5-c should he reduced by the
amount of the previous rejection, the reduction in the amount applied for
should be reported against item 3~b, and the amount of the resubmitted
application should be reported in item
Item 8-b.
or 5-b.
Reductions in amounts applied for before f i n a l action
by Federal Reserve bank.
This item should represent reductions in amounts
applied for, after action by the Industrial Advisory Committee, made at
the instance of, or with the consent of, the applicants.
Item 10-a.
Applications approved.
This item should include a l l
advances and commitments approved by the Federal Reserve bank without conditions or with conditions agreed to by the applicant either before or
after approval by the Federal Reserve bank.
B-1027a
i 552
- 3 Item 1 0 - b .
C o n d i t i o n a l l y approved.
Any a p p l i c a t i o n approved
"by the Federal Reserve bank s u b j e c t to the a c c e p t a n c e of c e r t a i n cond i t i o n s by the a p p l i c a n t should be i n c l u d e d i n t h i s item, u n l e s s and
u n t i l the p r e s c r i b e d c o n d i t i o n s have been a c c e p t e d , when t h e a p p l i c a t i o n
should be t r a n s f e r r e d from item 10-b to item 1 0 - a .
If an a p p l i c a t i o n r e p o r t e d a g a i n s t t h i s c a p t i o n i s r e s u b m i t t e d
i n a reduced amount and i s then approved w i t h o u t c o n d i t i o n s , i t e m 10-b
should be reduced by the amount p r e v i o u s l y i n c l u d e d t h e r e i n , item 10-a
should be i n c r e a s e d by the amount of the rpprovod amended a p p l i c a t i o n ,
and the amount of th$ r e d u c t i o n should be i n c l u d e d i n i t e m 8 - b .
Any c o n d i t i o n a l l y approved a p p l i c a t i o n which i s u n d er cons i d e r a t i o n by the a p p l i c a n t should be shown i n the memorandum item
M
Conditional a p p r o v a l s under c o n s i d e r a t i o n by a p p l i c a n t 1 1 .
Any con-
d i t i o n a l l y approved a p p l i c a t i o n w i t h r e s p e c t to which t h e a p p l i c a n t
has e x p r e s s l y i n d i c a t e d t h a t the c o n d i t i o n s a r e not a c c e p t a b l e , or
where f a i l u r e on h i s p a r t to a c c e p t c o n d i t i o n s w i t h i n a r e a s o n a b l e
time w a r r a n t s the assumption t h a t they w i l l not be a c c e p t e d , should
be r e p o r t e d i n memorandum item " C o n d i t i o n a l a p p r o v a l s , nonacceptance
indicated".
Item 1 0 - c .
Rejected.
If a r e j e c t e d a p p l i c a t i o n i s r e s u b m i t t e d i n
the o r i g i n a l amount and the F e d e r a l Reserve b r n k changes i t s former a c t i o n ,
B-1027a
-
4
553
-
i t e n 10-c should be reduced, and a c o r r e s p o n d i n g i n c r e a s e made i n item 1 0 - a
or 1 0 - b .
If a r e j e c t e d a p p l i c a t i o n i s r e s u b m i t t e d i n a reduced amount and t h e
F e d e r a l Reserve bank changes i t s former a c t i o n , i t e m 10-c should be reduced
by the amount of t h e p r e v i o u s r e j e c t i o n , the r e d u c t i o n i n t h e amount a p p l i e d
f o r should be r e p o r t e d a g a i n s t i t e ^ 8 - b , and the amount of t h e r e s u b m i t t e d
a p p l i c a t i o n should be r e p o r t e d a g a i n s t item 10-a or 1 0 - b .
FORM B-22a
Item 1 - a .
T o t a l a p p l i c a t i o n s approved (Commitments').
Amounts r e -
p o r t e d i n column 1 should r e p r e s e n t t o t e l a p p l i c a t i o n s approved, even
though the commitments have not been executed, end. shovld i n c l u d e p a r t i c i p a t i o n s , i f any, by f i n a n c i n g i n s t i t u t i o n s .
Amounts r e p o r t e d i n column 2
should r e p r e s e n t commitments to make advances d i r e c t to b o r r o w e r s , e x c l u s i v e
of commitments u n d e r which a f i n a n c i n g i n s t i t u t i o n i s to advance a p o r t i o n
of t h e r e q u i r e d f u n d s .
Amounts r e p o r t e d i n column 3 should r e p r e s e n t ( a )
commitments to f i n a n c i n g i n s t i t u t i o n s and (b) commitments to borrowers where
f i n a n c i n g i n s t i t u t i o n s a l s o make commitments under which advances made by
t h e F e d e r a l Reserve banks and t h e f i n a n c i n g i n s t i t u t i o n s a r e to be cons i d e r e d a s s i n g l e advances and repayments made pro r a t a .
The amount, i f
any, which a f i n a n c i n g i n s t i t u t i o n i s to f u r n i s h i n c o n n e c t i o n w i t h a
commitment should be r e p o r t e d i n column 4 and t h e p o r t i o n of an advance
under a commitment to a f i n a n c i n g i n s t i t u t i o n on which t h e f i n a n c i n g i n s t i t u t i o n o b l i g a t e s i t s e l f f o r any l o s s s u s t a i n e d should be r e p o r t e d i n
column 5.
Item 2 - a , T o t a l a p p l i c a t i o n s approved (Advances).
Amounts r e p o r t e d
i n column 1 should r e p r e s e n t t o t a l advances approved i n c l u d i n g p a r t i c i
B-1027&
-5 pations, if any, "by financing institutions.
£ 554
Amounts reported, in colurrn 2
should represent total approvals of advances direct to borrowers, exclusive
of those made or to be made in participation with one or more financing institutions.
Amounts reported in column 3 should represent (a) approved
advances to financing institutions &.id (b) errroved advances, direct to
borrowers, in connection with which a financing institution i s to furnish,
or has furnished, a portion of the needed funds.
The amount, i f say, of
the participation of financing institutions in advances direct tc borrowers
snould be reported in column 4, ena the portion of approved advances to
financing institutions on which such financing institutions oblisr-te
themselves for any loss sustained thereon should be reported in column 5.
The above i n s t r u c t i o n s supersede a l l i n s t r u c t i o n s p r e v i o u s l y i s s u e d .
FEDERAL RESERVE BOARD
DIVISION OF BANK OPERATIONS
OCTOBER 30, 1934
B-1027*
555
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
October 31,• 193^
B-1028
Dear Sir:
With further reference to our l e t t e r of May 7, 1934 (B-981),
regarding reimbursement for extraordinary expenses incurred by
Federal Reserve banks during and immediately after the banking
holiday, there i s inclosed, for your information, copy of a l e t t e r
dated October 29, 1934, received from Mr. J. M. Rice, Assistant
Deputy Governor, Federal Reserve Bank of New York, relating to
reimbursement of expenses incident to obtaining, analyzing, and
reporting data, relative to foreign exchange transactions in
accordance with the President's Executive Orders.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
Inclosure
TO ALL GOVERNORS EXCEPT NEW YORK
556
4
COPY
FEDERAL BES3RV3 BAl-T OF NEW YORK
October 29, 1934
Attention of Mr. E. L. Sroead. Chief. Division of Bank Operations
S i r s :
We have today received from the United States Treasury
payment of $49,244.20, representing reimbursement for expenses
incurred by us in connection with Foreign Exchange Control
for the period from March 6, 1933 to January 31, 193*+.
This payment covers salaries of employees assigned to
our Foreign Exchange Control unit, end a l l other out-of-pocket
expenses incurred by us in connection with this work.
Respectfully,
(Signed)
J. M. Rice
J. M. Rice,
Assistant Deputy Governor
Federal Reserve Board,
Washington, D. C.
B-1028a
FEDERAL RESERVE BOARD
557,
WASHINGTON
address official correspondence t o
the federal reserve board
November 10, 193*+
B-1030
SUBJECT:
F u n c t i o n a l Expense 'Reports
Dear S i r :
The m i n u t e s of t h e committee m e e t i n g on a c c o u n t i n g held, a t t h e
F e d e r a l Reserve Bank of Chicago on June 27 and. 28, 193^. c o n t a i n the
f o l l o w i n g r e s o l u t i o n which was adopted by t h e Committee:
" I t was moved by Mr. Fleming and seconded by Mr. G-ilmore
t h a t a Committee be a p p o i n t e d f o r t h e p u r p o s e of r e v i s i n g t h e
f u n c t i o n a l expense r e p o r t Form E so t h a t i t w i l l shoF t h e u n i t
c o s t f o r a l l s e r v i c e s f o r which a h a n d l i n g c h a r g e might be
found n e c e s s a r y , and a l s o t h a t i t should b e . r e v i s e d so a s t o
p r o v i d e an a c c u r a t e comparison of a l l o t h e r c o s t s of F e d e r a l
Reserve bank o p e r a t i o n s . "
While no f o r m a l committee was a p p o i n t e d , Mr. Myrick of t h e D i v i s i o n
of Bank O p e r a t i o n s h a s p r e p a r e d , w i t h the a s s i s t a n c e of M e s s r s . E a r h a r t
and Mangels of t h e F e d e r a l Reserve Bank of San F r a n c i s c o , a t e n t a t i v e r e v i s i o n of t h e f u n c t i o n a l , expense r e p o r t , Form E, i n a c c o r d a n c e w i t h t h e
above quoted r e s o l u t i o n , and of t h e Manual of I n s t r u c t i o n s g o v e r n i n g i t s
preparation.
A copy of t h e r e v i s e d Form end Manual and of an e x p l a n a t o r y
memorandum p r e p a r e d by Mr. Myrick i s i n c l o s e d .
Mr. Walden, C o n t r o l l e r ,
F e d e r a l Reserve Bank of Richmond, h a s reviewed t h e r e v i s e d Form and Manual
of I n s t r u c t i o n s ana has made a number of s u g g e s t i o n s i n r e g a r d t h e r e t o .
-
2
f 558
-
His s u g g e s t i o n s and. o t h e r s winch have "been made a r e s e t f o r t h "below
f o r your c o n s i d e r a t i o n a l o n g w i t h the Manual and Form E a s r e v i s e d .
(1) That t h e f u n c t i o n a l expense r e p o r t s "be r e v i s e d a l o n g t h e l i n e s
i n d i c a t e d i n t h e proposed i n s t r u c t i o n s so a s t o p r o v i d e f o r o b t a i n i n g
u n i t c o s t s f o r a l l s e r v i c e s f o r which a s e r v i c e charge may "be found nece s s a r y , "but t h a t t h e a c t u a l r e d i s t r i b u t i o n of c e r t a i n g e n e r a l expenses
to such expense u n i t s be d e f e r r e d u n t i l such time a s i t a p p e a r s t h a t the
l e v y i n g of s e r v i c e charges i s imminent.
(2)
That p r o v i s i o n be made i n t h e p r o v i s i o n of Space f u n c t i o n f o r
i n c l u d i n g d e p r e c i a t i o n c h a r g e s on bank b u i l d i n g s and on f i x e d machinery
and equipment.
If t h i s s u g g e s t i o n i s adopted, t h e amount of d e p r e c i a t i o n
c h a r g e s would n o t be i n c l u d e d in c u r r e n t expenses on Form 96 b u t would be
shown a t t h e bottom of page 1 e.n Form S f o r r e c o n c i l e m e n t p u r p o s e s .
(3) That a p r o p o r t i o n of t h e expenses of the P r o v i s i o n of Space
f u n c t i o n , i n c l u d i n g d e p r e c i a t i o n charges on bank b u i l d i n g s and on f i x e d
machinery and equipment, be r e d i s t r i b u t e d to t h o s e f u n c t i o n s and expense
u n i t s f o r which more a c c u r a t e c o s t f i g u r e s a r e t o be o b t a i n e d i f s e r v i c e
c h a r g e s a r e to be i n s t i t u t e d i n s t e a d of showing the f a i r r e n t a l v a l u e of
the space occupied by such u n i t s a s a memorandum i t e m .
I f t h i s change
i s to be made, t h e Manual might p r o v i d e t h a t t h e p r o v i s i o n of space
expenses c h a r g e a b l e to a g i v e n f u n c t i o n or expense u n i t should r e p r e s e n t
t h e same p r o p o r t i o n of t h e t o t a l c o s t of the p r o v i s i o n of Space f u n c t i o n
as t h e number of square f e e t of o p e r a t i n g or o f f i c e and v a u l t f l o o r
space occupied by such f u n c t i o n o r expense u n i t r e p r e s e n t s of t h e t o t a l
number of square f e e t of such space i n the bank.
The term " v a u l t f l o o r '
B-1030
559
3
space" as h e r e used i s i n t e n d e d t o comprise t h e t o t a l f l o o r space i n s i d e
the v a u l t i n c l u d i n g t h a t occupied by v a u l t compartments or c h e s t s .
(4)
That p r e s e n t i n s t r u c t i o n s r e l a t i n g to expenses i n c u r r e d i n
c o l l e c t i n g paper of closed "banks "be not changed as recommended i n the
minutes (page 9) of the committee meeting on a c c o u n t i n g , h e l d i n Chicago
on June 2~J and 28, 193^.
(5) That t h e Manual of I n s t r u c t i o n s be changed on page 42 so as
to p r o v i d e f o r the r e d i s t r i b u t i o n of p r o t e c t i o n expense
only
i n the case
cf guards who have r e g u l a r assignments to the f u n c t i o n s and expense u n i t s
shown t h e r e o n .
(6) That t h e second p a r a g r a p h under "Stock of s u p p l i e s " f u n c t i o n
on page 48 of the Manual be changed so as to p r o v i d e t h a t t h e c o s t of the
s u p p l i e s purchased f o r d i r e c t
delivery
to a n o t h e r u n i t may be charged
d i r e c t l y to t h a t u n i t .
(7) That p r o v i s i o n be made f o r c h a r g i n g o b s o l e t e forms to the
expense u n i t s f o r which they were o r i g i n a l l y purchased a s o t h e r w i s e the
c o s t of o b s o l e t e forms would remain i n the s t o c k r e c o r d s .
(8) That t h e Manual of I n s t r u c t i o n s be changed on page 24 so as
to p r o v i d e f o r t h e complete d i s t r i b u t i o n of Retirement System expenses
to t h e v a r i o u s expense u n i t s and f u n c t i o n s of t h e bank.
(9) That i n s t e a d of showing the e s t i m a t e d expense of m i s c e l l a n e o u s
a c t i v i t i e s ( c a f e t e r i a expense, medical expense, e t c . ) as a memorandum a t
the end of c e r t a i n f i s c a l agency u n i t s , the c o s t of such m i s c e l l a n e o u s
a c t i v i t i e s be shown as an a d d i t i o n to the c o s t charged d i r e c t l y to such
u n i t s i n the manner i l l u s t r a t e d below f o r U. S. Government I s s u e s , page
20 of Form E.
B-1030
4
560
-
TOTAL, U.S.GOVEBNMSNT ISSUES (Exc l u s i v e of c o s t of o t h e r a c t i v i t i e s
snown below)
Aver. Number Reimburs- Exp. not
able
ReimO f f i - Employcers
Expense b u r s a b l e
ees
*
*
ADD
Cost of o t h e r a c t i v i t i e s #
P r o v i s i o n of space
P r o v i s i o n of p e r s o n n e l
Othi r ( s p e c i f y on r e v e r s e s i d e )
*
TO?AX COST OF U.S.GO VERMEL ISSUES
*Sum of items narked, w i t h an a s t e r i s k should be shown as "TOTAL COST OF
U.S.UCVEKHbStiT ISSUES"
ffAny expenses of " o t h e r a c t i v i t i e s " which a r e r e i m b u r s a b l e should be
charged d i r e c t to the a p p r o p r i a t e u n i t of the " F i s c a l Agency,
C u s t o d i a n s h i p , and D e p o s i t a r y " f u n c t i o n end l i s t e d on t h e r e v e r s e s i d e .
The above supplementary items would n o t , of c o u r s e , be i n c l u d e d i n the
r e c a p i t u l a t i o n of expenses of page 1 of Form 5 .
I n a l l o c a t i n g expenses to
t h e s e items the method proposed to be followed i s t h a t i n d i c a t e d i n the
Manual f o r a l l o c a t i n g s i m i l a r expenses to c e r t a i n u n i t s f o r which a s e r v i c e
charge may be found n e c e s s a r y .
I f the above s u g g e s t i o n i s adopted a number
of changes w i l l , of course, be n e c e s s a r y i n the Manual of I n s t r u c t i o n s .
C e r t a i n changes a r e a l s o suggested i n t h e d a t a c a l l e d f o r on space
occupied by t h e f i s c a l agency f u n c t i o n as i n d i c a t e d below;
MEMORANDA -
BAM IMG HOUSE SPACE UTILIZED
O f f i c e space r e g u l a r l y a s s i g n e d ;
Number of s q . f t .
F a i r r e n t a l v a l u e f o r six-month p e r i o d a t
$
p e r s q . f t . p e r annum
Reimbursement r e c e i v e d f o r six-month p e r i o d
$
$
B-1030
MSMORAKDA -
5
561
-
BAiSKHJG HOUSE SPACE UTILIZED ( C o n t ' d )
Vault space r e g u l a r l y a s s i g n e d ;
Cubic f t . c o n t e n t s of compartments
F a i r r e n t a l v a l u e f o r six-month p e r i o d a t
$
p e r cu. f t . p e r annum
Reimbursement r e c e i v e d f o r six-month p e r i o d
$
$
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 be good enough t o have the t e n t a t i v e r e v i s i o n of the Manual and Form E and t h e above s u g g e s t i o n s r e viewed end f u r n i s h the Board w i t h your recommendations i n r e c a r d t h e r e t o
and w i t h r e s p e c t to any o t h e r changes you would l i k e to have made i n t h e
Manual and Form E.
I t i s hoped t h a t i t w i l l be p o s s i b l e to have the
Manual pnd Form E p r i n t e d s h o r t l y a f t e r the f i r s t of the y e a r end, accordi n g l y , i t w i l l be a p p r e c i a t e d i f your r e p l y to t h i s l e t t e r i s mailed to
the Board as soon a s p r a c t i c a b l e .
Very t r u l y y o u r s ,
E. L. 8mead, 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 .
Inclosures.
TO ALL GOVERNORS
B-1030
k..
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
November 10, 1934
B-1031
SUBJECT:
Forms f o r use dxiring 1935.
Dear S i r :
I t w i l l be a p p r e c i a t e d i f you w i l l a d v i s e t h e Board t h e number of
c o p i e s of the forms l i s t e d below t h a t w i l l be r e q u i r e d by y o u r bank
( i n c l u d i n g b r a n c h e s , i f any) d u r i n g the c a l e n d a r y e a r 1935:
Form
34
Title
D a i l y b a l a n c e s h e e t . ( P l e a s e s t a t e the number r e q u i r e d
f o r t h e head o f f i c e raid each b r a n c h s e p a r a t e l y , end
i n d i c a t e any s p e c i a l punching t h a t may be d e s i r e d ) .
F.R.A.-5
F e d e r a l Reserve n o t e s - Daily s t a t e m e n t of F e d e r a l Reserve
Agent.
F.R.A.-6
F e d e r a l Reserve Bank n o t e s - Daily s t a t e m e n t of F e d e r a l
Reserve Agent.
38
C l a s s i f i c a t i o n of d i s c o u n t e d and purchased b i l l s h e l d a t
t h e end of t h e month.
44
Monthly r e p o r t of F e d e r a l Reserve n o t e s showing t h e number
of each denomination and a g g r e g a t e amount r e c e i v e d , issued
to bank, and r e t u r n e d to t h e C o m p t r o l l e r of t h e Currency.
95
Monthly r e p o r t of e a r n i n g s ,
96,
Monthly r e p o r t of c u r r e n t expenses.
l6o
Monthly r e p o r t of r e c e i p t s end payments of ppt>er c u r r e n c y .
563
-
Form
19^
•E
2
-
B-1031
Title
Monthly r e p o r t of Federal Reserve n o t e s r e c e i v e d and
i s s u e d ; a l s o s t o c k on hand at "beginning and end of
month.
Semiannual f u n c t i o n a l expense r e p o r t .
P l e a s e show s e p a r a t e l y the number of c o p i e s of each form,
except forms 3^ end F.R.A.-6, r e q u i r e d i f r e v i s e d and t h e number i f
not r e v i s e d .
Very t r u l y y o u r s ,
J . R. V>n Fossen, A s s i s t a n 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 .
TO ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December 7, 193*+
B-1032
SUBJECT:
1935 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 n accordance w i t h your usual p r a c t i c e , a statement
of t h e "budget f o r t h e S t a t i s t i c a l and A n a l y t i c a l f u n c t i o n
of your bank ( i n c l u d i n g b r a n c h e s , i f a n y ) , f o r t h e c a l e n d a r y e a r 1935 should be f o r w a r d e d to t h e F e d e r a l R e s e r v e
Board es soon a f t e r J e n u r r y 1 as p r a c t i c a b l e .
The b u d g e t
should be p r e p a r e d i n a c c o r d a n c e w i t h t h e a t t a c h e d f o r m .
Very t r u l y y o u r s
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS
565
B-l'032n
FEDERAL RESERVE BAH OF
(Including branches)
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 ( a s d e f i n e d i n
t h e Manual of I n s t r u c t i o n s c o v e r i n g f u n c t i o n a l expense r e p o r t s , Form E)
(All 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 , c e n t s o m i t t e d )
BUDGET
for
-1211.
EXPENSES
during
1934'
BUDGET
for
1935
ADMINISTRATION:
Salaries - officers
S a l a r i e s - employees
T r a v e l i n g expenses
P r i n t i n g , s t a t i o n e r y and o t h e r s u p p l i e s
Telephone and t e l e g r a p h
All o t h e r *
TOTAL
STATISTICAL:
S a l a r i e s - employees
T r a v e l i n g expenses
P r i n t i n g , s t a t i o n e r y and o t h e r s u p p l i e s
Telephone and t e l e g r a p h
Postage
All o t h e r *
TOTAL
MONTHLY LETTER:
P r i n t i n g and s t a t i o n e r y
Postage
TOTAL
LIBRARY:
S a l a r i e s - employees
T r a v e l i n g expenses
P r i n t i n g , s t a t i o n e r y and o t h e r s u p p l i e s
Telephone and t e l e g r a p h
News s e r v i c e - s u b s c r i p t i o n s to
periodicals, etc.
Books
All o t h e r *
TOTAL
GRAND TOTAL
MEMORANDA
Number of c o p i e s of monthly l e t t e r -printed, December 193^
R e c e i p t s from monthly l e t t e r s s o l d :
Year 193^
Estimated, Year 1935
• C l a s s i f y , i f i n excess of $100.
$
$
Do not d e -
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December
7, 193^
B-1033
SUBJECT:
Summary Statement of Federal Reserve
Bank Personnel.
Dear Sir:
In accordance with the usual p r a c t i c e , p l e a s e f u r n i s h
the Board with a summery statement showing the number and s a l a r i e s
of o f f i c e r s and employees of your bank ( i n c l u d i n g "branches, i f
any) as of December 31# 193^* and January 1, 1935, made out i n
accordance with the attached form.
The f i g u r e s f o r December 31,
1934, which should not include any changes in e i t h e r the number
or s a l a r i e s of o f f i c e r s or employees that become e f f e c t i v e on
January 1, 1935, w i l l be published i n the Board 1 s 193*+ annual
report.
The f i g u r e s f o r January 1, 1935, should represent the
number and annual s a l a r i e s of o f f i c e r s and employees a f t e r a l l
ch&nges e f f e c t i v e as of January 1 have been made.
Very t r u l y yours,
Chester Morrill,
Secretary.
Inclosure
L3TTZR TO ALL CHAIRMEN
567,
NUMBER AMD SALARIES OF OFFICERS Al© EMPLOYEES OF THE
FEDERAL RESERVE SAHK OF
(INCLUjISS BRANCHES)
Dec. 31. 1914
Jph. 1. 1935
Annual s a l a r y of Chairman and F e d e r a l Reserve Agent
$
lj>
Governor
$
$
$
$
$
$
$
$
Other o f f i c e r s :
Number
Annual s a l a r i e s
Employees, b o t h permanent and temporary,
( e x c e p t t h o s e whose s a l a r i e s a r e
reimbursed to bf-nk):
Number
Annual s a l a r i e s
Employees, b o t h permanent and temporary,
whofee s a l a r i e s a r e reimbursed to
bf-nk:
Number
Annual s a l a r i e s
3-1033a
568
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December %, 193*+
B-1034
SUBJECT:
1935 Budget f o r F e d e r a l Reserve Bank
Dear S i r :
I t w i l l be a p p r e c i a t e d i f you w i l l forward t o the Board, a s
soon a f t e r J a n u a r y 1 as p r a c t i c a b l e , a s t a t e m e n t of t h e budget approved
f o r t h e head o f f i c e and each of i t s branches, i f any, f o r t h e c a l e n d e r
y e a r 1935 w i t h s e p a r a t e f i g u r e s f o r the f i r s t h p l f end t h e second h a l f
of t h e y e a r .
I f any m a t e r i a l changes a r e s u b s e q u e n t l y mr-de i n t h e
budget f o r t h e second h a l f of t h e y e a r the Board should be advised of
such changes on or about J u l y 1, 1935.
The budget s t a t e m e n t a s submitted to t h e Boprd should be p r e p a r e d
i n accordance w i t h t h e sample form a t t a c h e d end should show t o t a l s f o r
each s e p a r a t e u n i t ( d e p a r t m e n t , d i v i s i o n , s e c t i o n o r expense u n i t ) f o r
which s e p a r a t e f i g u r e s a r e shown i n t h e budget approved by t h e b a n k ' s
budget committee.
Very t r u l y yours
Chester Morrill,
Secretary.
Inclosure
TO CHAIRMEN OF THE SEDERAL RESERVE BAMS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
December 7» 193*+
B-1035
SUBJECT:
S a l a r i e s of o f f i c e r s of
F e d e r a l Reserve Banks
Dear S i r :
In ac ce rdance w i t h t h e u s u a l p r a c t i c e , a s t a t e m e n t showing
t h e 1935 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 i n J a n u a r y f o r each o f f i c e r of your bank and b r a n c h e s , i f
any, s u b j e c t to t h e approval of t h e F e d e r a l Reserve Board, should
be forwarded to t h e Board as e a r l y i n J a n u a r y as p r a c t i c a b l e .
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 i n t h e manner i n d i c a t e d i n t h e a t t a c h e d form.
In case t h e b a n k ' s counsel i s not an
o f f i c e r of t h e 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 y o u r s
Chester Morrill,
Secretary.
Inclesure
TO CHAIRMAN OF EACH FEDERAL RESERVE BANK
ftlt
570
SALARIES OF OFFICERS OF THE FEDERAL RESERVE BASK OF
AMD ITS BRANCHES* IF ANY, FOR THE YEAR 1935 AS PROVIDED BY THE
BOARD OF DIRECTORS SUBJECT TO APPROVAL BY THE FEDERAL RESERVE BOARD
Name
Departments or
f u n c t i o n s superv i s e d (Form A
c l a s s i f 1 c a t ion)
Title
Total,
Annual Salary
1935, f o r
Dec. 31,
approval of
1934
F.R.Board
officers
B-1035a
FEDERAL RESERVE BOARD
WASHINGTON
December
B-1036
address official correspondence t o
t h e federal reserve board
SUBJECT:
7, 1934
S a l a r i e s of employees of
F e d e r a l Reserve Banks
Deer S i r :
P l e a s e f u r n i s h t h e Board a s e a r l y i n J a n u a r y e s p r a c t i c a b l e
a s t a t e m e n t showing the name of each employee of your "bank and i t s
b r a n c h e s ( i f any) on J a n u a r y 1, 1935, end t h e s a l a r y p a i d t o each
as of January 1, 193^ end J a n u a r y 1, 1935.
The l i s t should be p r e -
p a r e d i n accordance w i t h t h e sample form, B-1036a, a t t a c h e d i n
o r d e r to f a c i l i t a t e checking w i t h t h e 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.
I t i s a l s o r e q u e s t e d t h p t a summary s t a t e m e n t showing t h e
number of employees a s of J a n u a r y 1, 193^> and as of J a n u a r y 1, 1935.
and s a l p r y changes s i n c e J a n u a r y 1, 193%, by s a l a r y groups be subm i t t e d i n accordance w i t h a t t a c h e d sample form, B-1036b.
As i n t h e p a s t the s c h e d u l e s should cover e l l employees on
t h e b p n k ' s p a y r o l l i n c l u d i n g t h o s e whose s a l ; r i e s are reimbursed t o
t h e bank i n whole or i n p a r t .
Very t r u l y y o u r s
Inclosures
TO ALL CHAIRMEN
Chester M o r r i l l ,
Secretary.
EMPLOYEES OF THE FEDERAL RESERVE BAivE OF
AND ITS
572
BRANCHES ( I F AMY) OH JANUARY 1, 1935
Name of employee
Classifi• cation
symbol
T i t l e of job
Salary
range
S a l a r y on J a n . 1
1934*
1935
Employees should be l i s t e d by f u n c t i o n s or d e p a r t m e n t s and the p o s i t i o n s or
.jobs a r r a n g e d i n t h e same o r d e r a s they appear i n t h e -personnel c l a s s i f i c a t i o n -plan. Form A. on f i l e w i t h the F e d e r a l Reserve Board. The t o t a l number
of employees i n c l u d i n g 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 paid should be shown f o r each
f u n c t i o n or d e p a r t m e n t . E x t r a h e l p or temporary employees should be
l i s t e d w i t h the r e g u l a r employees of t h e bank and d e s i g n a t e d by t h e l e t t e r
"T" a f t e r t h e c l a s s i f i c a t i o n symbol. In c a s e of employees on a. p e r diem
or h o u r l y b a s i s , t h e 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 d u r i n g 1934, p l e a s e show the i n i t i a l s a l a r y .
B-1036a
NOTE:
t.,
'
/
-u
1
.
'
/
f
*
SALARIES OF EL5PL0YE5S OF FEDERAL RESERVE BAH OF
(INCLUDING BRANCHES)
ON JANUARY 1, 1935 AND SALARY CHANGES SINCE JANUARY 1, 1934
Salaries
under
$1500
Salaries
from
$1500
t o $2499
Salaries
from
$2500
t o &3A99
Salaries
of $4000
and
over
Total
Number of employees:
1 . On r o l l on J a n u a r y 1, 193^
2 . On r o l l on J a n u a r y 1, 1935
3 . Removed(a) f r o m r o l l i n 193^
4 . Added(Td) t o r o l l d u r i n g 1934
Salaries:
5 . T o t a l on J a n u a r y 1, 193*+
6 . T o t a l on J a n u a r y 1, 1935
7 . Average on J a n u a r y 1, 1934
8 . Average on J a n u a r y 1, 1935
Salary changes(c):
9. Salaries increased a . Number of employees
b . Aggregate i n c r e a s e
c . S a l a r i e s on J a n u a r y 1 , 1935
10. S a l a r i e s reduced a . Number of employees
b. Aggregate reduction
c . S a l a r i e s on J a n u e r v 1, 1935
1 1 . S a l a r i es unchanged
a . Number of employees
b . S a l a r i e s on J a n u a r y 1, 1935
( a ) E x c l u s i v e of p e r s o n s s u b s e q u e n t l y r e s t o r e d to r o l l .
(b) E x c l u s i v e of p e r s o n s s u b s e q u e n t l y removed from r o l l .
( c ) Of employees on r o l l on J a n u a r y 1 of 1934 %rtd 1935. The t o t a l of items 9 a i 10a, end 11a s h o u l d
equal i t e m 2 l e s s i t e m 4 .
http://fraser.stlouisfed.org/
4* >
Federal Reserve Bank of St. Louis
(
B-l 036^5
r
w
FEDERAL RESERVE BOARD
574
WASHINGTON
address official correspondence t o
t h e federal reserve board
November 27, 1934
B-1037
Dear S i r :
I n c o n n e c t i o n w i t h the B o a r d ' s l e t t e r of October 31. 193^.
X-9004, r e g a r d i n g t h e p a r t i c i p a t i o n of a l l F e d e r a l Reserve banks
i n t h e o p e r a t i o n of t h e Havana Agency, t h e a t t a c h e d statement
showing t h e e a r n i n g s and expenses of the Havana Agency of the
F e d e r a l Reserve Bank of A t l a n t a may be of i n t e r e s t to yon.
As
you know, d u r i n g t h e p e r i o d from September 1, 1923 to December
31, 1926, the F e d e r a l Reserve Bank of Boston a l s o o p e r a t e d an
agency a t Havana,
T o t a l expenses of t h a t Agency d u r i n g the
p e r i o d amounted to $55,509.82 and t o t a l e a r n i n g s t o $229,759.78.
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
Inclosure
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BAMS
(NO COPY TO GOVERNOR OR EXTRA COPIES TO BANKS)
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
November 24, 193^
B - 1038
SUBJECT:
F e d e r a l Reserve Banlc Balance S h e e t ,
Form 34, f o r use during 3-935 •
Dear S i r :
There i s i n c l o s e d , f o r your i n f o r m a t i o n , an
u n r u l e d p r o o f copy of the 1935 e d i t i o n of the d a i l y
b a l a n c e s h e e t , Form 3 4 .
Your b a n k ' s supply of the
form f o r u s e d u r i n g 1935 w i l l be forwarded to you
by r e g i s t e r e d m a i l a s soon as r e c e i v e d from the
printer.
Very t r u l y y o u r s ,
S . 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
Inclosure.
TO ALL G0VEEU0BS
(Mo copy to Agent or e x t r a c o p i e s to banks)
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
November 28, 193^
B-1039.
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 l o a n s and
i n v e s t m e n t s of member banks a s of
October 17, 193^*
Dear S i r :
There i s i n c l o s e d f o r your i n f o r m a t i o n and c o n f i d e n t i a l
u s e a copy of a s t a t e m e n t p r e p a r e d f o r the Board g i v i n g 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 i n v e s t m e n t s of
member banks on October 1%, 193^» "based upon d a t a submitted
by the F e d e r a l Reserve a g e n t s , i n comparison w i t h c o r r e s p o n d i n g f i g u r e s f o r June JO, 193^»
an(
^ October 25, 1933*
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
Inclosure
TO ALL GOVERNORS AND FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
337,
WASHINGTON
address official correspondence t o
the federal reserve board
November 28, 193^
B-IO4O
SUBJECT:
Net e a r n i n g s under S e c t i o n 13b
Dear S i r :
R e f e r e n c e i s made to t h e B o a r d ' s l e t t e r s B - 9 9 7 and 3 - 9 9 8 of J u l y l 6 ,
1934, r e l a t i n g t o n e t e a r n i n g s on i n d u s t r i a l advances and r e p o r t s t h e r e o f
to be s u b m i t t e d t o t h e F e d e r a l Reserve Board.
P a r a g r a p h numbered 6 on page 9 of t h e r e g u l a t i o n s i s s u e d by t h e
S e c r e t a r y of t h e T r e a s u r y p u r s u a n t to s u b s e c t i o n (e) of S e c t i o n 13b of
t h e F e d e r a l Reserve Act, as amended, which were i n c l o s e d w i t h t h e Board 1 s
l e t t e r X-8034 of October 3» 193^, r e a d s as f o l l o w s :
"The amounts of a l l payments to be made to the
U n i t e d S t a t e s by t h e Reserve Bank p u r s u a n t to t h e p r o v i s i o n s of s u b s e c t i o n ( e ) of S e c t i o n 13b of t h e F e d e r a l
Reserve Act s h a l l be computed i n t h e manner p r e s c r i b e d
by the F e d e r a l Reserve Board i n agreement w i t h t h e
S e c r e t a r y , There s h a l l be such an apportionment i n
d e t e r m i n i n g t h e net e a r n i n g s of t h e Reserve Bank f o r a
c a l e n d a r y e a r d e r i v e d from t h e u s e of t h e sum p a i d by
t h e S e c r e t a r y t o t h e Reserve Bank u n d e r S e c t i o n 13b, a s
t h e F e d e r a l Reserve Board and t h e S e c r e t a r y s h a l l deem
j u s t and f a i r . "
You w i l l n o t e f r o m t h e above quoted p a r a g r a p h t h a t t h e amounts of a l l
payments to be made t o the U n i t e d S t a t e s under t h e p r o v i s i o n s of s u b s e c t i o n
-
B-IOI§78
2
X
( e ) of Section 13b a r e to be computed in t h e manner p r e s c r i b e d by the
F e d e r a l Reserve Board i n agreement with t h e S e c r e t a r y of t h e T r e a s u r y .
<
Pending such agreement, i t i s r e q u e s t e d t h a t r e p o r t s of n e t e a r n i n g s
on i n d u s t r i a l advances and commitments be f u r n i s h e d the Boprd c u r r e n t l y
each month, i n d u p l i c a t e , on Form B-23, one
d e l i v e r e d to t h e T r e a s u r y Department.
copy of which w i l l be
A copy of Forn> 3-23 i s a t t a c h e d ,
and a supply i s b e i n g mailed you under s e p a r a t e c o v e r .
Reports on Forms 3 - 1 8 , 3 - 1 9 end 3-20, i n c l o s e d w i t h t h e B o a r d ' s
l e t t e r s of J u l y l 6 , may be d i s c o n t i n u e d .
Expenses r e p o r t e d on Form 3-23
should i n c l u d e an e q u i t a b l e p r o p o r t i o n of t h e expenses of t h e p r o v i s i o n
of space f u n c t i o n , r e n t a l of f u r n i t u r e end equipment (whether owned by
F e d e r a l Reserve bank or r e n t e d from o u t s i d e a g e n c i e s ) , r e t i r e m e n t system
c o n t r i b u t i o n s a t t h e f u l l r a t e , and a l l o t h e r expenses i n c u r r e d i n conn e c t i o n Kith the making of i n d u s t r i a l advances and commitments under
S e c t i o n 13b, except such expenses as a r e paid by the a p p l i c a n t s f o r l o e n s .
I t i s r e q u e s t e d t h a t , i n a d d i t i o n to r e r o r t s on Form B-23, e a r n i n g s on i n d u s t r i a l advances, and on commitments to make such advances,
be r e p o r t e d a s s e p a r a t e i t e m s on Form 95 f o l l o w i n g items 2 and 6, r e s p e c t i v e l y , and t h a t a l l expenses i n c u r r e d in c o n n e c t i o n w i t h i n d u s t r i a l
advances and commitments under S e c t i o n 13b, o t h e r than t h o s e p a i d by
a p p l i c a n t s f o r advances, be i n c l u d e d i n t h e a p p r o p r i a t e expense items on
Form 96.
V
Expenses or p e r diem allowances paid members of t h e I n d u s t r i a l
Advisory Committee should be r e p o r t e d f o l l o w i n g i t e m 7 on Form 96.
Very t r u l y y o u r s ,
Inclosure
http://fraser.stlouisfed.org/
TO ALL GOVERNORS
Federal Reserve Bank of St. Louis
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December
7» 193^
B-1041
SUBJECT:
O r g a n i z a t i o n Che r t s .
Dear S i r :
R e f e r r i n g to t h e B o a r d ' s l e t t e r B-620 of December
23: 1931. i n case the o r g a n i z a t i o n c h e r t s f o r your bank
and f o r each of i t s "branches, i f any, l a s t f u r n i s h e d
the Board do not r e f l e c t t h e s i t u a t i o n as of J a n u a r y 1,
1935, i t w i l l be a p p r e c i a t e d i f you w i l l k i n d l y f u r n i s h
the Board w i t h two c o p i e s of r e v i s e d c h a r t s showing a s
of t h a t d a t e the name and t i t l e of each o f f i c e r and t h e
departments or f u n c t i o n s s u p e r v i s e d .
Very t r u l y y o u r s
Chester Morrill
Secretary.
TO .ALL CHAIRMEN"
579
FEDERAL RESERVE BOARD
580
WASHINGTON
address official correspondence t o
the federal reserve board
December 12, 193^•
B-1042.
Dear S i r :
In order to provide captions f o r p r e f e r r e d stock and
f o r c a p i t a l n o t e s or debentures sold to the Reconstruction
Finance Corporation and t o f a c i l i t a t e the checking of
a p p l i c a t i o n s f o r a d d i t i o n a l Federal Reserve bank s t o c k ,
Form 56, A p p l i c a t i o n f o r Additional Stock, has been r e v i s e d
i n accordance with the copy attached h e r e t o , and a supply
of the r e v i s e d form has been forwarded to you under separate
cover.
I t i s suggested that a l l future a p p l i c a t i o n s f o r
a d d i t i o n a l Federal Reserve bank stock be submitted on the
r e v i s e d form.
Very t r u l y yours,
S. R. Carpenter
Assistant Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AG-EFTS
581
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December l 4 , 1934
B-1043
SUBJECT:
F i s c a l Agency and DepositaryExpenses
Dear S i r :
There i s i n c l o s e d , f o r your information, a f o l d e r cont a i n i n g p h o t o s t a t i c c o p i e s of the f i s c a l agency, custodianship
and depositary expense statements f o r the s i x months ended
June 30, 1934 submitted i n response to the Board's l e t t e r of
J u l y 21, 1934, B-1001.
Statements showing system f i g u r e s
f o r each of the various operations shown in the e x h i b i t s and
a summary t h e r e e f are a l s o i n c l o s e d i n the f o l d e r .
Very t r u l y yours
E. 1 . Smead, Chief,
D i v i s i o n o f Bank Operations.
Inclosure
TO ALL GOVERNORS
582
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December 20, 193^
B-1044
Dear S i r :
The Board i s in r e c e i p t of a, l e t t e r from a F e d e r a l Reserve bank s t a t i n g t h a t i t has an a p p l i c a t i o n to open a c l e a r i n g account f o r a nonmember
"bank not e l i g i b l e , under p r e s e n t p o l i c i e s , f o r membership i n t h e F e d e r a l
Reserve System.
I t appears t h a t i n t h i s p a r t i c u l a r case t h e nonmember
bank d e s i r e s to o b t a i n c l e a r i n g p r i v i l e g e s at the F e d e r a l Reserve Bank f o r
t h e purpose of a v o i d i n g exchange and c o l l e c t i o n charges now made by i t s
c i t y correspondent.
In t h i s c o n n e c t i o n , the Board n o t e s from the b a l a n c e s h e e t of your
bank t h a t i t shows an amount a g a i n s t the i t e m "Nonmembers - clearingaccount" i n t h e d e p o s i t block and, a c c o r d i n g l y , the Board w i l l a p p r e c i a t e
r e c e i v i n g a s t a t e m e n t showing t h e name of each nonmember bank which maint a i n s a c l e a r i n g account w i t h your bank, t h e average amount of the account
i n November 193^» the g e n e r a l e x t e n t to which the account i s used., and the
d a t e on, and c i r c u m s t a n c e s under which, i t was opened.
a p p r e c i a t e r e c e i v i n g a f u l l s t a t e m e n t of the p o l i c y
The Board w i l l a l s o
f o l l o w e d by your bank,
and the r e a s o n s t h e r e f o r , i n a c c e p t i n g or r e f u s i n g to a c c e p t c l e a r i n g
a c c o u n t s from nonmember b a n k s .
Very t r u l y y o u r s .
TO ALL CHAIRMEN EXCEPT CHICAGO
WITH COPY TO MR. STEVENS
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
December 21, 193^«
B-1046.
address official correspondence t o
t h e federal reserve board
SUBJECT:
Earnings and Dividends reports of S t a t e
Bank Members, Form 10J.
Dear S i r :
There have "been forwarded to you today under separate
cover
c o p i e s of Form 10/ to be used by State bank members
in submitting t h e i r reports of earnings and dividends f o r the s i x
months ending December J>1, 193^•
In the examination of the reports on Form 107, i t i s suggested that p a r t i c u l a r a t t e n t i o n be paid to the reconcilement of
the c a p i t a l accounts as shown against items l 4 to 17 with the
corresponding items as shown in condition reports on Form IO5.
Very t r u l y yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
583
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December 26, 193^«
B-ioUy.
SUBJECT:
C a l l Condition Reports of S t a t e Bank
Members and t h e i r a f f i l i a t e s .
Dear S i r :
There have been f o r w a r d e d t o you today under s e p a r a t e cover the i n d i c a t e d number of c o p i e s of t h e seven forms a t t a c h e d h e r e t o , f o r t h e u s e of
S t a t e bank members and t h e i r a f f i l i a t e s i n s u b m i t t i n g r e p o r t s a s of the
next c a l l date:
Number of
copies
Form
Form IO5, Report of c o n d i t i o n of S t a t e bank member.
Form IO5—0 (Schedule "0")i Loams and advances to
a f f i l i a t e s and i n v e s t m e n t s i n and l o a n s s e c u r e d
by o b l i g a t i o n s of a f f i l i a t e s .
Form 220, Report of a f f i l i a t e or h o l d i n g company
affiliate.
Form 220a, p u b l i s h e r ' s copy of r e p o r t of a f f i l i a t e
or h o l d i n g company a f f i l i a t e .
Form 220b, I n s t r u c t i o n s f o r p r e p a r a t i o n of r e p o r t s
of a f f i l i a t e s and h o l d i n g company a f f i l i a t e s .
Form B~3 ( A g r i c u l t u r e ) , Farm l o a n s .
Form 2034 ( F e d e r a l Housing A d m i n i s t r a t i o n ) ,
Loans on r e a l e s t a t e o t h e r than f a r m l a n d .
P l e a s e h o l d the "blank forms a t your bank p e n d i n g r e c e i p t of t e l e g r a p h i c a d v i c e from the Board g i v i n g the d a t e on which the forms should
reach t h e S t a t e bank members.
Upon r e c e i p t of such t e l e g r a p h i c a d v i c e
k i n d l y m a i l to each S t a t e bank member t h a t h a s n o t been f o r m a l l y p l a c e d
i n l i q u i d a t i o n o r r e c e i v e r s h i p o r p o s s e s s i o n of which has not been taken
by a c o n s e r v a t o r or o t h e r S t a t e o f f i c i a l 3 c o p i e s of Form 105, 2 c o p i e s
each of Form B-3 ( A g r i c u l t u r e ) and Form 2034 ( F e d e r a l Housing A d m i n i s t r a t i o n ) , and an a p p r o p r i a t e number of Forms 105-b, 220, 220-a and 220-b
based on the number r e q u i r e d a t the t i n e of the l a s t c a l l f o r r e p o r t s ,
w i t h the r e q u e s t t h a t the forms be h e l d p e n d i n g a c a l l f o r r e p o r t s t h e r e o n .
Member banks should be i n s t r u c t e d to submit a l l of the r e p o r t s i n
d u p l i c a t e , b o t h the o r i g i n a l and d u p l i c a t e c o p i e s to b e s i g n e d and f u l l y
e x e c u t e d , w i t h t h e e x c e p t i o n of the r e p o r t s on Form B-3 ( A g r i c u l t u r e ) and
Form 2034 ( F e d e r a l Housing A d m i n i s t r a t i o n ) , of which o n l y the o r i g i n a l
should be s u b m i t t e d by the b a r k .
The r e p o r t s on Forms B-3 and 2034
should be t r a n s m i t t e d to t h e F e d e r a l Reserve Board, and t h e o r i g i n a l s of
t h e o t h e r r e p o r t s should be r e t a i n e d f o r the f i l e s of your bank and t h e
c o p i e s forwarded to the Board.
In t r a n s m i t t i n g the b l a n k forms to S t a t e bank members p l e a s e a d v i s e
them t h a t the d a t a c a l l e d f o r on Form B-3 ( A g r i c u l t u r e ) and Form 2034
( F e d e r a l Housing A d m i n i s t r a t i o n ) a r e r e q u i r e d f o r s p e c i f i c p u r p o s e s a t
t h i s time and t h a t t h e y w i l l n o t be asked f o r r e g u l a r l y a s a p a r t of t h e
c a l l report„
Upon r e c e i p t a t your bank the r e p o r t s on Forms B-3 and
2034 should be checked a g a i n s t the c o n d i t i o n r e p o r t Form 105 i n s o f a r a s
the data correspond.
P l e a s e f u r n i s h the Board w i t h a copy of t h e l e t t e r t r a n s m i t t i n g the
586
- 3 form^ to S t a t e bank members and a l i s t of t h e S t a t e bank members on which
the c a l l i s made.
I t i s r e q u e s t e d t h a t a s promptly a s p r a c t i c a b l e a f t e r t h e i s s u e of
the c a l l you inform the Board, w i t h r e s p e c t to each S t a t e whose c a p i t a l c i t y
l i e s i n your d i s t r i c t , whether o r n o t S t a t e a u t h o r i t i e s i s s u e d a c a l l f o r
c o n d i t i o n r e p o r t s a s of t h e same d a t e a s the c a l l i s s u e d by the Board, and,
i f n o t , the d a t e of t h e n e a r e s t c a l l t h e r e t o i s s u e d by t h e S t a t e . a u t h o r i ties,
In c a s e r e p o r t s s u b m i t t e d i n r e s p o n s e t o such c a l l s were n o t r e -
q u i r e d to be p u b l i s h e d , i n f o r m a t i o n i s r e q u e s t e d a s to t h e n e a r e s t d a t e
when p u b l i c a t i o n of such r e p o r t s was r e q u i r e d .
I f you a r e s a t i s f i e d t h a t a d d i t i o n a l time i s needed f o r the p r e p a r a t i o n of the r e p o r t of any a f f i l i a t e , you a r e a u t h o r i z e d on b e h a l f of the
F e d e r a l Reserve Board to g r a n t an e x t e n s i o n of n o t to exceed 20 d a y s , i n
a d d i t i o n to t h e o r i g i n a l p e r i o d of 10 days from the r e c e i p t by the member
bank of t h e c a l l f o r t h e r e p o r t .
P l e a s e f u r n i s h t h e Board w i t h a copy of
each l e t t e r g r a n t i n g an e x t e n s i o n of t i m e .
In a c c o r d a n c e w i t h t h e u s u a l p r a c t i c e , p l e a s e have compiled from t h e
n e x t c a l l r e p o r t s (of b o t h n a t i o n a l and S t a t e bank members) and m a i l e d or
wired i n time to r e a c h t h e Board w i t h i n 3 weeks of the d a t e on which the
c a l l i s made, i f p r a c t i c a b l e , a s t a t e m e n t showing the amount of ( l )
eacli
c l a s s of l o a n s and d i s c o u n t s as shown a g a i n s t i t e m s 1 t o S of Schedule E,
(2) t o t a l d i r e c t o b l i g a t i o n s of U n i t e d S t a t e s Government, s u b - t o t a l of
i t e m one i n Schedule P , (3) t o t a l o b l i g a t i o n s g u a r a n t e e d by U n i t e d S t a t e s
Government a s to i n t e r e s t and p r i n c i p a l , s u b - t o t a l of item two i n Schedule
F , and (4) t o t a l o t h e r bonds, s t o c k s and s e c u r i t i e s , a s shown a g a i n s t
A s s e t i t e m f o u r ( t o t a l of Schedule G).
S e p a r a t e f i g u r e s should be
s
587
Y
-
u
-
f u r n i s h e d f o r c e n t r a l r e s e r v e c i t y member b a n k s , r e s e r v e c i t y member
b a n k s , and c o u n t r y member b a n k s .
Very t r u l y y o u r s ,
h r ) oixuj?
*
Chester M o r r i l l ,
Secretary.
%
Inclosure.
*
TO ALL FEDERAL RESERVE AG3MTS.
@FedFRASER