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FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9251
July 1, 1955
Dear Sir:
There are attached, for your information,
a copy of the minutes of the meeting of the Chairmen
of the Industrial Advisory Committees held in Washington on June 24, 1935, and a copy of a summary statement of the meeting of members of the Federal Reserve
Board and its staff with representatives of the Industrial Advisory Committees on June 25, 1955.
A
copy of the letter addressed by the Board today to
the Chairmen of the Industrial Advisory Committees,
or to the member representing the Committee at the
meetings, is also attached.
Very truly yours,
Chester Morrill,
Secretary.
Enclosures
TO FEDERAL RESERVE AGENTS AND GOVERNORS OF ALL FEDERAL
RESERVE BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9252
July 1, 1955,
Dear Sir:
There are attached a copy of the minutes of the meeting
of the Chairmen of the Industrial Advisory Committees held in
Washington on June 24, 1935, and a copy of a summary statement
of the meeting of members of the Federal Reserve Board and its
staff with representatives of the Industrial Advisory Committees
on June 25, 1935.
It will be appreciated if you will hand to the
other members of your Committee the extra copies of the minutes
and statement which are inclosed.
The only matter considered ty the Chairmen of the Industrial Advisory Committees which required action by the Federal
Reserve Board was the recommendation that a study be made of the
problem of furnishing to worthy industries such permanent capital
as in the judgement of the Board may be required, and on June 27,
1935, a letter was addressed to the Chairmen of the Industrial
Advisory Committees advising of a resolution adopted try the Board
in this connection.
The Federal Reserve Board is very grateful for the continued interest of the members of the Industrial Advisory Committees in the advancement of the industrial loan program and
X-9252
-2-
renews its assurance that it will be glad to be of assistance to
the Committees in the discharge of their responsibilities.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures«
THE ABOVE LETTER IS TO BE SENT TO THE FOLLOWING:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Albert M. Creighton
William H. Pouch
J. Ebert Butterworth
F. A. Smythe
J. G. Holtzclaw
W. A. Parker
Max Epstein
William K. Norris
Sheldon V. Wood
D. Bruce Forrester
Clarence Ousley
Ralph Burnside
(6 copies of minutes and statement to be inclosed with this letter.)
4
X-9252-a
Upon call of the Chairman, Mr. A. M. Crelghton, a supper meeting
of the Chairmen of the Industrial Advisoiy Committees was held at the
Carlton Hotel at seven o'clock - Monday, June 24, 1935, with the following present:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
A. M, Crelghton - Boston
Wm. H. Pouch - New York
J. E. Butterworth - Philadelphia
F. A. Smythe - Cleveland
W. A. Parker - Atlanta
Wm. K. Norris - St. Louis
S. V. Wood - Minneapolis
Clarence Ousley - Dallas
Ralph Burnside - San Francisco
Mr.
Mr.
Mr.
Mr.
Mr.
S.
J.
W.
B.
A.
Also present:
F.
W.
B.
P.
M.
Gilmore - St. Louis
Barton •- Minneapolis
Marsh - Dallas
Adams - Public Relations
Stone - Secretary to Mr. Szymczak
The following matters were presented and discussed:
1)
The Kopplemann Bill:
The committee consisting of Messrs. Smythe, Burnside and Parker
offered the following resolution:
The so-called Kopplemann Bill providing for the creation of an
Intermediate Industrial Credit Corporation undertakes to furnish to
industry and commerce financial credit practically identical in
character to that now made available by Federal Reserve Bank loans to
industry and commerce and that which is available through the Reconstruction Finance Corporation. It therefore represents very largely
if not altogether, a duplication of credit service which in our opinion
is not necessary nor demanded under existing conditions. It is our firm
belief that every application to Federal Reserve Banks has received
the consideration which it has merited and that loans have been approved
by the Federal Reserve Banks wherever such loans could be deemed sound
and reasonable. It is believed that a material proportion of the
requirements for credit assistance that are justifiable have been cared
for by the combined action of the two existing agencies and that the
organizations already set up and in operation for the investigation and
consideration of applications for loans are efficient, economical and
entirely without prejudice. The funds available are apparently sufficient
-2-
X-9252-a
to complete the task which has been undertaken. The creation
of another agency at this time would seem uncalled for.
2)
Mr. Creighton's report on his trip to Europe, on the
subject of industrial loans:
The committee consisting of Messrs. Norris, Pouch and Butter
worth offered the following resolution:
Having received and discussed the report made by Chairman Creighton dated June 4, 1935, entitled "Industrial Loans
Here and Abroad", the Committee desires to thank Chairman
Creighton for his personal study of European effort to relieve
industry in their respective countries and move that the report
be approved and spread on the minutes of this meeting as a permanent record and for future reference. That proper publication be given based upon this report. (A copy of the report
is attached as a part of the official record of this meeting.)
3)
Discussion of publicity and public relations of
present, past and plans for future:
Mr. Adams described publicity to date and was instructed
to prepare a statement for the press following the meeting of
the Charimen of the Industrial Advisory Committees on Tuesday June 25, 1935.
4)
Formulation of plans for future activity on industrial
loans:
There was no discussion on this point.
Upon motion of Mr. Pouch and seconded by Mr. Norris, Mr.
J. E. Butterworth was elected Treasurer for the Committee.
Motion approved.
X-9252-a
Mr. J. E. Butterworth presented the following resolution which
was unanimously approved:
Resolved that this committee is very sensible of the valuable
secretarial assistance given it by Mr. A. M. Stone, and takes this
opportunity to publicly express to him its sincere appreciation.
The meeting adjourned at 12;15 a. m.
(S) J. E. Butterworth
Secretary
Approved:
(S) A. M. Creighton
Chairman
INDUSTRIAL LOANS HERE AND ABROAD
Report Made ByAlbert M. Creighton,
Chairman, Industrial Advisory Committee
June 4, 1935
8
INDUSTRIAL LOANS HERE AND ABROAD
IN MAKING A RECENT INVESTIGATION OF WHAT SOME OF THE EUROPEAN
COUNTRIES HAVE DONE TO AID INDUSTRY, PARTICULARLY AS REGARDS THE MAKING
OF LOANS, EITHER SPONSORED OR GUARANTEED BY GOVERNMENTS, I HAVE VISITED
DURING THE PAST SIX WEEKS, ENGLAND, GERMANY, POLAND, AUSTRIA AND FRANCE.
IN THE FOLLOWING SUMMARY, I WILL GIVE A BRIEF OUTLINE OF WHAT HAS
BEEN ACCOMPLISHED IN EACH OF THESE COUNTRIES:
ENGLAND
THE ACTIVITIES OF ENGLAND'S INDUSTRIAL FINANCING CENTER AROUND THE
FOLLOWING INSTITUTIONS:
SECURITIES MANAGEMENT TRUST (SMT).
THE BANKERS INDUSTRIAL DEVELOPMENT COMPANY (BIDCO).
CREDIT FOR INDUSTRY, LTD. (CFI).
EXPORT CREDITS GUARANTEED DEPARTMENT.
THE SECURITIES MANAGEMENT TRUST.
IS A PRIVATE LIMITED COMPANY, WITH A NOMINAL CAPITAL HELD BY THE BANK
OF ENGLAND, AND MANAGED BY THE INDUSTRIALIST OF THE BANK - MR. BRUCE
GARDNER - WHO IS ALSO THE ACTIVE DIRECTOR OF THE BANKERS INDUSTRIAL
DEVELOPMENT COMPANY.
THIS SUBSIDIARY OF THE BANK OF ENGLAND OWES ITS ORGANIZATION TO
THE DECISION OF THE BANK TO DISCONTINUE COMMERCIAL ACCOUNTS.
THE PRIMARY
ACTIVITY OF THE SECURITIES MANAGEMENT TRUST HAS BEEN THE MANAGEMENT OF
THE REMAINDER OF THE COMMERCIAL INVESTMENTS OF THE BANK OF ENGLAND.
9
—2—
THE BANKERS INDUSTRIAL DEVELOPMENT COMPANY.
WAS FORMED IN 1930, UNDER THE AUSPICES OF THE BANK OF ENGLAND, WITH THE
OBJECT OF PROMOTING THE
RATIONALIZATION OF BRITISH INDUSTRY,
THIS IS
A PRIVATE LIMITED COMPANY, WITH ALL THE LEADING BANKS AND FINANCIAL
HOUSES AS SHAREHOLDERS, AND THE BANK OF ENGLAND AS THE CONTROLLING PARTNER.
IN THE BEGINNING THIS ORGANIZATION WAS FORMED FOR A PERIOD OF FIVE
YEARS - IT HAS ALREADY BEEN EXTENDED FOR A FURTHER PERIOD OF FIVE YEARS.
THE CAPITAL OF THE INSTITUTION IS $.6,000,000, ONE-QUARTER OF WHICH IS
OWNED BY THE BANK OF ENGLAND, AND THREE-QUARTERS BY THE JOINT STOCK
BANKS, AND ALL OF THE PRIVATE BANKING HOUSES.
BIDCO HAS DONE MUCH WORK FOR FOUR KEY INDUSTRIES.
FOR INSTANCE -
THE SHIPBUILDING INDUSTRY WAS HELPED TO FINANCE THE SCRAPPING OF REDUNDANT
YARDS THROUGH A VOLUNTARY LEVY ON THE TONNAGE PRODUCED BY THE REMAINING
YARDS.
HELP WAS ALSO GIVEN TO THE LANCASTER COTTON INDUSTRY, WHICH ELIM-
INATED TEN MILLION SPINDLES, THUS PUTTING THIS INDUSTRY, WHICH WAS PRACTICALLY WRECKED AT THE TIME, ON A STABLE FOUNDATION.
THE STEEL AND
WOOLCOMBING INDUSTRIES HAVE ALSO BEEN MUCH BENEFITED BY LOANS GUARANTEED
BY BIDCO.
BEHIND THE SCENE HOWEVER, IT IS BELIEVED THAT THE BANKERS INDUSTRIAL
DEVELOPMENT COMPANY HAS BEEN A VERY USEFUL INFLUENCE IN ENCOURAGING AND
BRINGING ABOUT AMALGAMATIONS AND MERGERS ON THE PART
OF PRIVATE CONCERNS,
RESULTING IN A GREATER EFFICIENCY OF PRODUCTION.
THROUGHOUT THE ENTIRE WORK OF BIDCO, THERE HAS BEEN AN ENDEAVOR TO
10
—3—
ELIMINATE THE INEFFICIENT PRODUCERS AND THE EXCESS ORGANIZATIONS, AS A
PART OF THIS BIG RATIONALIZATION PLAN.
CREDIT FOR INDUSTRY. INC..
IN JUNE, 1934, AT THE VERY TIME OF THE ADOPTION OF SECTION 13B OF
THE FEDERAL RESERVE ACT, CREDIT FOR INDUSTRY, INC., WAS ESTABLISHED.
ITS FUNCTIONS VERY NEARLY PARALLEL THE WORK OF THE INDUSTRIAL ADVISORY
COMMITTEE, AND OF THE FEDERAL RESERVE BANKS AS REGARDS THE MAKING OF
SOUND -LOANS TO INDUSTRY FOR WORKING CAPITAL PURPOSES.
IN ENGLAND, CAPITAL AS WELL AS WORKING CAPITAL LOANS MAY BE MADE
FOR A PERIOD NOT EXCEEDING TWENTY YEARS.
THERE WAS IN ENGLAND THE SAME
CRITICISM AS IN THE UNITED STATES - THAT THE SMALL BUSINESS MAN COULD
NOT SECURE LOANS FROM HIS BANKS.
IN THE BEGINNING THE CFI WAS INUNDATED
WITH APPLICATIONS FOR LOANS, BUT IN THE MAJORITY OF CASES IT WAS FOUND
THAT THE "WOULD-BE" BORROWER HAD NO SOUND OR REASONABLE BASIS FOR CREDIT.
MANY WERE NOT EVEN ACTUALLY ENGAGED IN BUSINESS.
MOST OF THEM FELT THAT
THEY COULD BUILD A BUSINESS IF SOMEONE ELSE WOULD PROVIDE THE MONEY.
THE COMMERCIAL BANKS DO NOT PARTICIPATE IN ANY LOANS GRANTED BY
THE CFI, BUT, IN ALL CASES, ONE OF THE CONDITIONS IS THAT THE BORROWER
SHOULD INFORM HIS BANK OF THE PROPOSED TRANSACTION IN ORDER THAT THE CFI
MAY BE CERTAIN THAT HIS NECESSARY AND ORDINARY BANKING FACILITIES ARE NOT
WITHDRAWN.
THE RESULT HAS BEEN THAT IN MANY CASES THE JOINT BANKS THEM-
SELVES HAVE MADE THE LOANS.
CFI IS OWNED 100% BY UNITED DOMINIONS TRUST, LTD., WHICH IN TURN IS
11
-4PARTIALLY OWNED BY THE BANK OF ENGLAND.
$.250,000.
THE CAPITAL AT PRESENT IS
OF THE LOANS ACTUALLY MADE TO DATE, SOME HAVE BEEN AS LOW
AS 1,100 Aim THE HIGHEST HAS NOT EXCEEDED $.30,000, ALTHOUGH THE COMPANY
IS PREPARED TO LOAN AS HIGH AS $.50,000.
THERE HAS BEEN A LIMITED SUM SPENT IN ADVERTISING, BUT ENORMOUS
FREE PUBLICITY HAS BEEN SECURED FROM THE EDITIORIAL COLUMNS OF THE
NATIONAL PRESS.
EXPERIENCE TO DATE PROVES THAT THE LEGITIMATE DEMAND
AT THE PRESENT MOMENT FOR THE KIND OF FINANCING WHICH CFI WAS ORGANIZED
TO EXTEND IS RELATIVELY SMALL.
HOWEVER, WITH ANY REAL REVIVAL IN IN-
DUSTRY, IT IS BELIEVED THAT THE DEMAND WOULD VERY MATERIALLY INCREASE.
SO FAR, ONLY ABOUT $1,500,000 HAS BEEN LOANED TO INDUSTRY BY CFI., INC.
THERE IS UNDOUBTEDLY A PLACE IN THE BRITISH BANKING SYSTEM FOR THIS
TYPE OF ORGANIZATION, BUT THE DEVELOPMENT WILL BE MUCH SLOWER THAN IT
HAS BEEN IN THE UNITED STATES.
DURING THE SAME PERIOD THAT THE CFI HAS BEEN IN OPERATION, OUR INDUSTRIAL ADVISORY COMMITTEES HAVE RECOMMENDED LOANS TOTALLING ABOUT
$90,000,000 FOR WORKING CAPITAL PURPOSES.
FURTHERMORE, THE R.F.C. HAS
MADE A SUBSTANTIAL AMOUNT OF LOANS TO SMALL AND MEDIUM SIZE ORGANIZATIONS,
EXPORT CREDITS GUARANTEED DEPARTMENT
THERE IS ALSO ONE OTHER ORGANIZATION KNOWN AS THE EXPORT CREDITS
GUARANTEED DEPARTMENT, WHICH PROVIDES MEDIUM-TERM CREDITS FOR PERIODS
OF TWO, FIVE, OR TEN YEARS, TO BUSINESSES CATERING TO THE EXPORT TRADE.
FORMERLY THE EXPORT CREDITS GUARANTEED BY THIS DEPARTMENT WERE NEARLY
ALL SHORT-TERM CREDITS, MOSTLY FOR THREE MONTHS AND SIX MONTHS (EXCEPTING ON RUSSIAN BUSINESS).
NOW, HOWEVER, THERE IS AN INCREASING AMOUNT
OF MEDIUM-TERM BUSINESS BEING DONE TO ASSIST THE
FINANCING OF IMPORTANT
CONSTRUCTION CONTRACTS IN FOREIGN COUNTRIES, i. e., THE BUILDING OF AN
ELECTRIC RAILWAY IN BRAZIL, AND IMPORTANT ELECTRICAL INSTALLATIONS IN
POLAND.
GERMANY
IN GERMANY, ALL CREDIT IS CONTROLLED BY THE GOVERNMENT.
THE METHODS UTILIZED TO SUPPORT INDUSTRY MAY BE CLASSIFIED UNDER
THREE MAIN HEADINGS:
1 — Direct subsidies have been issued. Especially was this
done in the case of the construction industries, and considerable money has been released for the repair of old
and the construction of new buildings.
2 — Indirect subsidies were also made use of to a great extent
in the form of lower freight rates, tax rebates on various
new investments such as the replacement of obsolete equipment, and reduction or even elimination of taxation on certain industrial products. The automobile and machinery
industries may be noted as examples of those particularly
benefiting from this type of subsidy.
3 — Finally, loans were granted outright or Government
guarantees of private loans were offered. Industries
assisted in this way seem to be primarily those engaged
in the manufacture of armaments,
IN THE ABSENCE OF OFFICIAL STATISTICS, IT IS DIFFICULT TO OBTAIN
ANY AUTHORITATIVE FIGURE AS TO THE AMOUNT EXPENDED THUS FAR FOR THESE
13
-6—
PURPOSES.
HOWEVER, IT IS ESTIMATED THAT AT THE END OF 1934 5,518
MILLION REICHMARKS HAD BEEN APPROPRIATED FOR THE GOVERNMENT'S CREATION
OF WORK PROGRAM - A FIGURE CONSIDERED EXTREMELY CONSERVATIVE IN MANY
WELL INFORMED QUARTERS.
OF THIS AMOUNT, A GREAT PROPORTION HAS CER-
TAINLY BEEN USED FOR SUBSIDIZING INDUSTRY IN THE WAYS INDICATED -ABOVE.
THE GOVERNMENT CONTROLS THE EXTENSION OF EXISTING INDUSTRIAL AND
COMMERCIAL ENTERPRISES, AND THE FORMATION OF NEW ENTERPRISES.
IT WILL
NOT PERMIT STARTING A NEW COMPANY IN A FIELD IN WHICH THERE IS OVERPRODUCTION.
ON THE OTHER HAND, IT IS FORCING PRIVATE INVESTMENT IN
THE PRODUCTION OF ARTIFICIAL RAW MATERIALS.
THE GOVERNMENT IS TRYING
TO FOSTER THE AUTOMOBILE EXPORT BUSINESS BY HAVING EVERY AUTOMOBILE
MANUFACTURER SUBSCRIBE TO A FUND TO FINANCE AUTOMOBILE EXPORTS, AND IS
TAKING SIMILAR ACTION TO ENCOURAGE OTHER EXPORTS.
MEDIUM TERM CREDIT IN GERMANY•BEFORE THE WAR WAS LARGELY IN THE
HANDS OF BANKS RECEIVING SAVINGS DEPOSITS.
BUT AFTER THE WAR, AND THE
CRASH OF THE GERMAN BANKING SYSTEM, SHORT AND MEDIUM-TERM CREDITS WERE
PRETTY WELL FROZEN.
BUT SEVERAL LARGE GERMAN BANKS DID MANAGE TO FUR-
NISH MEDIUM TERM CREDITS EITHER THROUGH FOREIGN CREDITS OR BY SELLING
BONDS, OR THROUGH THE LOANING OUT OF PUBLIC FUNDS.
PERHAPS THE NEAREST
THING TO THE INDUSTRIAL LOAN FUNCTION OF THE R.F.C. AND THE RESERVE
BANKS IS THAT OF THE INDUSTRIESAltfK. IT WAS STARTED IN 1924, TO COOPERATE IN RAISING REPARATION PAYMENTS.
AS PART OF ITS PRESENT WORK,
IT GRANTS CREDITS TO WORTHY SMALL-SIZED UNITS IN INDUSTRY AND COMMERCE.
14
-7THE MATURITY IS USUALLY FIVE YEARS, AND LOANS HAVE BEEN AS SMALL AS 500
REICHMARKS AND AS LARGE AS 500,000 REICHMARKS. CREDITS ARE USED TO PAY
OFF FROZEN SHORT-TERM LIABILITIES OR FOR WORKING CAPITAL.
ADEQUATE SECURITY.
THERE MUST BE
LOANS GRANTED SO FAR BY THE INDUSTRIEBANK HAVE
AMOUNTED TO MORE THAN 100 MILLION REICHMARKS.
FRANCE
IN FRANCE THERE HAS BEEN NO LEGISLATION ON THIS SUBJECT, ALTHOUGH
CERTAIN SPECIAL LOANS HAVE BEEN MADE TO KEEP A FEW IMPORTANT CONCERNS
(NOTABLY CITROEN AUTOMOBILE COMPANY) FROM LIQUIDATION.
POLAND - AUSTRIA
NOTHING WORTHY OF MENTION HAS BEEN DONE IN EITHER OF THESE
COUNTRIES TO ASSIST THE SMALL INDUSTRIALIST.
CONCLUSIONS
IN GENERAL, I FOUND THAT ALMOST WITHOUT EXCEPTION, AND PARTICULARLY
IN ENGLAND, THERE HAD BEEN NUMEROUS COMPLAINTS SINCE THE DEPRESSION BY
BUSINESS MEN AND INDUSTRIALISTS (MORE PARTICULARLY FROM THE SMALLER ORGANIZATIONS) THAT IT WAS NOT POSSIBLE FOR THEM TO SECURE LOANS FROM THE
BANKS.
IN MANY INSTANCES, THESE COMPLAINTS WERE SO NUMEROUS AND SO
FORCIBLY PRESENTED THAT THERE WAS MUCH.PRESSURE EXERTED UPON THE VARIOUS
ADMINISTRATIONS.
HOWEVER, IT HAS BEEN FOUND, AS IN THE UNITED STATES THAT THE CLAIMS
15
—8—
WERE MUCH EXAGGERATED, AND THAT, BARRING A SMALL PERCENTAGE OF EXCEPTIONS,
THE WORTHY BUSINESS MAN COULD BORROW FROM HIS BANKS, BUT NOT FOR CAPITAL
REQUIREMENTS.
AFTER THE VARIOUS EMERGENCY LOANING ORGANIZATIONS HAD BEEN ESTABLISHED, A LARGE PERCENTAGE OF THE APPLICANTS, ESPECIALLY IN ENGLAND,
WERE REPRESENTED BY THOSE WHO WERE FOUND UPON CAREFUL INVESTIGATION TO
BE UNWORTHY OF CREDIT AND BY THOSE WHO WANTED TO START NEW BUSINESSES,
ETC.
PERHAPS THE MOST SIGNIFICANT DIFFERENCE IN POINT OF VIEW IS THAT
THE EUROPEAN GOVERNMENTAL POLICY IS DEFINITELY DIRECTED TOWARD DISCOURAGING AID TO INEFFICIENT AND SUB-MARGINAL CONCERNS, AND IT IS EVEN DESIRED,
PARTICULARLY IN GERMANY AND ENGLAND, TO ELIMINATE THEM COMPLETELY, IN
THE INTEREST OF INDUSTRY AS A WHOLE.
THERE IS NO QUESTION THAT THE FEDERAL RESERVE BANKS UNDER SECTION
13B HAVE DONE FAR MORE FOR THE SMALL INDUSTRIALIST THAN HAS BEEN DONE
ANYWHERE IN EUROPE.
UNDER OUR SECTION 13b THE FEDERAL RESERVE BANKS ARE
GIVING QUICK, EFFICIENT, SYMPATHETIC SERVICE, AND ARE AIDING INDUSTRY
IN ACCORDANCE WITH THE WISHES OF THOSE WHO SPONSORED THE PASSAGE OF THIS
ACT.
THE SETUP, IN THE RESERVE BANKS AND IN THE R.F.C., COMPLETELY
COVERS THE NEEDS AND DESIRES OF AMERICAN BUSINESSES AND CAN PROVIDE
FOR ANY SOUND AND REASONABLE DEMAND, UNLESS IT IS DESIRED TO GO INTO
THE BUSINESS OF KEEPING ALIVE SUB-MARGINAL OR INEFFICIENT ORGANIZATIONS,
16
-9WHICH, X FEEL, WOULD NOT BE DESIRABLE.
THE FORMATION OF INTERMEDIATE
CREDIT BANKS OR OTHER AGENCIES, WILL GREATLY COMPLICATE THE SITUATION
AND DUPLICATE THE PRESENT ORGANIZATION.
FURTHERMORE, THERE IS A LARGER FUND AVAILABLE FOR THESE WORKING
CAPITAL LOANS THAN IN ANY OF THE OTHER COUNTRIES, AND THE AMOUNT THAT
MAY BE LOANED IN ANY CASE IS PRACTICALLY UNLIMITED IN THE UNITED STATES.
RECOMMENDATIONS
1.
THEREFORE, MY CONCLUSION IS THAT THE R.F.C. AND FEDERAL RESERVE
UNDER SECTION 13b SHOULD BE ALLOWED TO FUNCTION AS AT PRESENT,
WITH NO THOUGHT OF SUPPLEMENTING THIS WORK WITH ADDITIONAL PLANS
FOR THE MAKING OF SOUND LOANS TO INDUSTRY.
2.
I DO BELIEVE, HOWEVER, THAT THERE SHOULD BE MORE PUBLICITY
EMANATING FROM WASHINGTON.
THERE HAS BEEN A FAIR AMOUNT WITHIN
THE DISTRICTS, BUT THE NATIONAL PUBLICITY, SUPPLEMENTING THIS
WORK WILL BE PARTICULARLY HELPFUL IN THE FUTURE.
EVERY PROSPEC-
TIVE BORROWER IN THIS COUNTRY SHOULD KNOW ABOUT THE EXISTING
FACILITIES IN CONNECTION WITH INDUSTRIAL LOANS, AND SHOULD UNDERSTAND HOW TO TAKE ADVANTAGE OF THEM.
THIS CALLS FOR A DEFINITE
CAMPAIGN OF PUBLICITY FROM WASHINGTON, AS WELL AS FROM THE
RESPECTIVE RESERVE BANKS.
BUSINESS MEN, AS WELL AS BANKERS
THROUGHOUT THE COUNTRY, SHOULD BE MADE 13b CONSCIOUS.
APPENDIX
SUPPLEMENTING THIS REPORT, I HAVE DESCRIPTIVE LETTERS FROM THE FOLLOWING:
PROFESSOR CLAY, ECONOMIST OF THE BANK OF ENGLAND,
REGARDING INDUSTRIAL LOANS.
ALSO LETTERS FROM:
MR. JAMES SOMERVILLE, COMMERCIAL ATTACHE OF THE AMERICAN
EMBASSY IN LONDON, and
FREDERIC D. GRAB, COMMERCIAL ATTACHE OF THE EMBASSY
IN LONDON..
LETTER FROM - J. GIBSON JARVIE - TOGETHER WITH DETAIL EXPLANATIONS OF HIS
ORGANIZATION "MONEY FOR INDUSTRY, INC". (BOOKLETS ISSUED FOR DISTRIBUTION
ATTACHED).
REPORT FROM DR. BLESSING OF THE REICHSBANK.
CONFIDENTIAL REPORT - LETTER FROM MR. DOUGLAS JENKINS, AMERICAN CONSUL
GENERAL IN BERLIN.
AMONG MANY OTHERS, I TALKED WITH THE FOLLOWING OFFICIALS:
England
GOVERNOR NORMAN OF THE BANK OF ENGLAND.
MR. BRUCE.GARDNER, INDUSTRIALIST OF THE
BANK OF ENGLAND.
PROFESSOR CLAY, ECONOMIST.
MR. NIGEL CAMPBELL, CHAIRMAN OF THE BANKERS
INDUSTRIAL DEVELOPMENT CORP.
MR. J. GIBSON JARVIE, THE HEAD OF CREDITS FOR
INDUSTRY, INC.
MR. JAMES SOMERVILLE, AMERICAN COMMERCIAL ATTACHE,
LONDON.
MR. FREDERIC GRAB, AMERICAN COMMERCIAL ATTACHE,
LONDON.
18
APPENDIX - CONTINUED
Germany
MR. DOUGLAS JENKINS, AMERICAN CONSUL GENERAL.
DR. BLESSING OF THE REICHSBANK.
Poland
MR. CROSBY, COUNCILLOR OF THE U.S.-EMBASSY IN WARSAW.
Austria
DR. KIENBACK, PRESIDENT OF THE OESTBRREICHISCHE BANK,
NATIONAL BANK OF AUSTRIA.
-1-
X-9252-b
At the meeting held in Washington on June 25, 1955, at 10 a. m.
of members of the Federal Reserve Board and members of its staff with
representatives of the Industrial Advisory Committees, the following
individuals were present:
Mr. M. S. Szymczak, Member, Federal Reserve Board
Mr. A. C. Miller, Member, Federal Reserve Board
Mr. George R. James, Member, Federal Reserve Board
Messrs. Albert M. Creighton, William H. Pouch,
J. Ebert Butterworth, F. A. Smythe, William K.
Norris, Sheldon V. Wood and Clarence Ousley,
Chairmen of the Industrial Advisory Committees
of the First, Second, Third, Fourth, Eighth,
Ninth and Eleventh Federal Reserve Districts,
respectively.
Messrs. Wm. A. Parker, Will B. Marsh and Ralph
Burnside, Members of the Industrial Advisory
Committees of the Sixth, Eleventh and Twelfth
Federal Reserve Districts, respectively.
Messrs. A. L. Wilson and J. W. Barton, Secretary
of the Industrial Advisory Committee of the
Seventh Federal Reserve District, and manager
of the Industrial Loan Department of the Federal
Reserve Bank of Minneapolis, respectively.
Mr. Chester Morrill, Secretary, Federal Reserve Board
Mr. L. P. Bethea, Assistant Secretary, Federal Reserve
Board
Mr. S. R. Carpenter, Assistant Secretary, Federal
Reserve Board
Mr. Lawrence Clayton, Assistant to the Governor,
Federal Reserve Board
Mr. Elliott Thurston, Special Assistant to the
Governor, Federal Reserve Board
Mr. Walter Wyatt, General Counsel, Federal Reserve Board
Mr. E. L. Smead, Chief, Division of Bank Operations,
Federal Reserve Board
Mr. Bray Hammond, Division of Bank Operations, Federal
Reserve Board
Mr. H. F. Conniff, Deputy Governor, Federal Reserve
Bank of Atlanta
Mr. S. F. Gilmore, Controller, Federal Reserve Bank
of St. Louis
Mr. B. P. Adams, Federal Reserve Board
X-9252-b
—2—
Mr. Creighton stated that at a supper meeting on the evening of
June 24, 1935, the following matters were discussed in detail:
The Kopplemann Bill
Report of the Advisory Council of the Department
of Commerce
Mr. Creighton's report on his trip to Europe
Publicity and public relations of the past and
present and plans for future
Preparation of a statement for the press
Other matters of importance to the Chairmen
He called attention to the fact that the Industrial Advisory
Committees had been in existence approximately one year and referred
briefly to the industrial loan applications approved and under consideration by the Committees.
The minutes of the meeting of the Chairmen of the Industrial
Advisory Committees held in Washington on December 18, 1934, were read
by Mr. J. Ebert Butterworth, Secretary of the meeting, and approved by
the representatives of the Industrial Advisory Committees present.
Mr. Butterworth stated that advice had been received that the
Industrial Advisory Committees of the Fifth and Tenth Federal Reserve
Districts would not be represented at this meeting and that Mr. A. L.
Wilson would represent the Industrial Advisory Committee for the Seventh
Federal Reserve District.
Mr. Szymczak then addressed the meeting on the subject of industrial loans and a copy of his statement is attached as exhibit A.
Mr. Pouch moved that a vote of thanks and
appreciation be extended to Mr. Szymczak for his
statement.
Mr. Pouch's motion was approved unanimously
21
X-9252-b
-3by the representatives of the Industrial
Advisory Committees.
At the conclusion of Mr. Szymczak's statement, Mr. Miller left
the room.
Mr. James stated that he desired to express to the representatives
of the Industrial Advisory Committees his appreciation of their efficient
and faithful service in connection with the industrial loan program.
He
said that he felt that the spirit of cooperation which they were evidencing
would be a contribution to the movement of recovery of the country from the
depression.
Mr. Creighton read and elaborated briefly upon the report prepared
by him following his return from a trip to Europe where he made an investigation of what some of the European countries have done through banking
channels to aid industry, particularly as regards the making of loans.
A
copy of Mr. Creighton's report has been made a part of the minutes of the
meeting of the Chairmen of the Industrial Advisory Committees on June 24,
1985.
Mr. Norris read the following resolution which was offered at the
supper meeting of the Chairmen of the Industrial Advisory Committees yesterday evening:
"Having received and discussed the report made by Chairman
Creighton dated June 4, 1935 entitled 'Industrial Loans Here
and Abroad', the Committee desires to thank Chairman Creighton
for his personal study of European effort to relieve industry
in their respective countries and move that the report be approved and spread on the minutes of this meeting as a permanent
record and for future reference. That proper publication be
given based upon this report."
X-9252-b
-4Upon motion by Mr. Ousley, the resolution was
unanimously adopted by the representatives of the
Industrial Advisory Committees.
Mr. Szymczak stated that the Federal Reserve Board and the Federal
Reserve System appreciated very much the fact that Mr. Creighton at his
own expense had made this trip to Europe and had studied the industrial
loan situation in European countries.
Mr. Creighton stated that at the supper meeting of the representatives of the Industrial Advisory Committees yesterday evening a detailed
discussion wais had of the so-called Kopplemann Bill (H.R, 5918), and that
a committee consisting of Messrs. Smythe, Burnside and Parker was appointed to draft a resolution which would express the attitude of the meeting
toward the bill.
Mr. Smythe read the following resolution which had been offered by
his committee at the supper meeting yesterday evening:
"The so-called Kopplemann Bill providing for the creation of an
Intermediate Industrial Credit Corporation undertakes to furnish
to industry and commerce financial credit practically identical
in character to that now made available by Federal Reserve Bank
loans to industry and commerce and that which is available
through the Reconstruction Finance Corporation. It therefore
represents very largely, if not altogether, a duplication of
credit service which in our opinion is not necessary nor demanded
under existing conditions. It is our firm belief that every
application to Federal Reserve Banks has received the consideration which it has merited and that loans have been approved by
the Federal Reserve Banks wherever such loans could be deemed
sound and reasonable. It is believed that a material proportion
of the requirements for credit assistance that are justifiable
have been cared for by the combined action of the two existing
agencies and that the organizations already set up and in operation for the investigation and consideration of applications for
loans are efficient, economical and entirely without prejudice.
The funds available are apparently sufficient to complete the task
X-9252-b
-5"which has been undertaken. The creation of another agency
at this time would seem uncalled for."
Mr. Smythe also made a statement outlining the considerations upon which
the conclusion set forth in the resolution was based.
Mr. Szymczak inquired whether the representatives of the Industrial
Advisory Committees have observed any indication as to whether applicants
have any preference for the Federal reserve banks or the Reconstruction
Finance Corporation in filing their applications.
Mr. Smythe expressed the opinion that the applicants prefer to
apply at the Federal reserve banks because of the possibility of obtaining
quicker action on their applications, but that inasmuch as the Federal
reserve banks are authorized to make loans only for working capital, the
Federal reserve banks were without authority to consider applications for
certain loans which could be made by the Reconstruction Finance Corporation
This matter was discussed briefly and it was indicated as the consensus of
the representatives of the Industrial Advisory Committees present that
there is not a clear distinction in the public mind between the Federal
reserve banks and the Reconstruction Finance Corporation, and that applications are most apt to be filed with the agency first coming to the attention of the applicant.
Mr. Smythe moved adoption of the resolution
read by him with regard to the Kopplemann Bill.
Mr. Smythe's motion was unanimously approved
by the representatives of the Industrial Advisory
Committees.
Mr. Burnside called attention to the reference in Mr. Szymczak1s
X-9252-b
-6-
statement to the desirability of having the industrial loan activities of
the Federal reserve banks take the form of commitments to financing institutions wherever possible rather than the form of direct loans to
industry and he related an incident in his district where a bank which
had refused to participate in industrial loans had, for the first time,
investigated the industrial loan program in connection with an application
for a loan from one of its directors, and had reached the conclusion that
the industrial loan program offered it an opportunity to be of assistance
to its customers.
He said that be felt there were other banks which would
find in the industrial loan program a means by which they would be able to
come to the aid of their customers.
Mr. Szymczak stated that an industrial loan by a financing institution with a commitment from a Federal reserve bank was desirable because
it protected the bank and permitted it to make a profit on the loan, and,
what was more important, established or preserved the relationship between
the bank and the customer, the natural result of which would be, when more
nearly normal conditions were attained, for the bank to make loans to the
customer without going to the Federal reserve bank for a commitment.
Following an inquiry by Mr. Norris with regard to cooperation between the Federal reserve banks and the agencies of the Reconstruction
Finance Corporation, the representatives of the Industrial Advisory Committees indicated that there is close cooperation between the banks and
the agencies in all districts.
Mr. Norris pointed out that the Reconstruc
tion Finance Corporation is authorized by law to make certain industrial
X-9252-b
-7loans which the Federal reserve banks cannot make and stated that it had
been the practice in his district xdien an application for such a loan was
received by the committee to refer the applicant to the Reconstruction
Finance Corporation.
He also stated that it had come to his attention that
certain applicants were aware that industrial loans could be made both by
the Federal reserve banks and the Reconstruction Finance Corporation and
were filing applications in both places, and that he felt close cooperation
should be maintained between the banks and the Reconstruction Finance Corporation agencies to prevent any possibility of unnecessary duplication of
effort in the investigation of applications.
Mr. Szymczak inquired as to the reaction of applicants when they
learn that their applications are considered first by the Industrial Advisory Committees, and the representatives of the Industrial Advisory
Committees present expressed the opinion that the reaction is a favorable
one because of the fact that the committees are composed of active
industrialists.
Mr. Szymczak stated that he had attended a meeting of the board of
directors of a Federal reserve bank and had inquired of one of the Class A
directors whether his bank would be willing to make industrial loans and
that the banker had raised the question whether, in the event his bank
should make such a loan with a commitment from the Federal reserve bank
and should find it necessary to rediscount the loan, such action would be
a reflection on the member bank.
Mr. Szymczak said that it should be made
clear to all financing institutions that the rediscounting of industrial
35
—0—
X-9252-b
loans with the Federal reservp banks would not be considered in any sense
as a reflection upon the institution.
Mr. Creighton read comparative figures of loans made by the Federal
Reserve Bank of Boston and the Reconstruction Finance Corporation in the
First Federal Reserve District and stated that he felt there was some
criticism of the Reconstruction Finance Corporation because of delay in
handling applications.
In this connection, Mr. Morris expressed the opin-
ion that if something could be done to expedite consideration of applications by the Reconstruction Finance Corporation which is authorized under
the law to make capital loans to industry, all of the objectives sought by
the Kopplemann Bill could be achieved under existing legislation.
Mr. Pouch made the suggestion that very desirable results would be
obtained if officers of local banks were invited to attend meetings of the
Industrial Advisory Committees at which industrial loan applications were
considered. He stated that in his district the committee had invited
officers of banks to meet with the members of the Industrial Advisory
Committee at luncheon and attend the meetings of the committee in order
that they may observe at first hand how the committee functions, how information regarding applications is obtained, and the extent to which the
committee investigates loans, and that the results obtained from this
approach had been very satisfactory.
Mr. Wood inquired whether it is the practice of some Federal reserve banks to make commitments for the entire life of the loan and it was
pointed out that a majority of commitments are for periods of six months to
a year.
Mr. Wood stated that there is considerable difference between the
8?
X-9252-b
-9amount of commitments made by the Federal Reserve Bank of Minneapolis and
other Federal reserve banks and that he was wondering whether this difference was due in part to the fact that some of the other Federal reserve
banks might be making commitments for the entire term of the lean.
He also
raised the question as to the desirability of having all commitments run
for the entire term.
This matter was discussed briefly but no conclusions
were reached.
Mr. Creighton stated that Mr. Pouch, Chairman of the Committee on
Public Relations, would lead a discussion on the subject of publicity, public -relations and plans for the future.
Mr. Pouch said that Mr. B. P. Adams
has been making a study of publicity for the industrial loan program and
that he would make a statement to the meeting.
Mr. M a m s expressed the opinion that there was a demand on the
part of the public for more information on the industrial loan program
and that, in addition, steps must be taken to correct any misinformation
given to the public with regard to industrial loans.
He outlined in con-
siderable detail the steps which he was taking to make available to trade
papers and magazines and other periodicals information with regard to the
industrial loan program and for the publication in such periodicals of
articles relating to industrial loans.
He also outlined his ideas with
regard to the use of radio addresses and stated that, on the basis of the
inquiries received following Mr. Szymczak's address before the Illinois
Bankers Association, he felt there is a large number of people who have
not been reached by the industrial lo&n publicity and that until an effort
was made to reach each group of business men and industrialists, the System
X-9252-b
-10-
could not be certain that the publicity activities with regard to industrial loans had effectively been completed. He also stressed the desirability of making it known that the Federal reserve banks are willing to
discuss the financial problems of applicants even though no loans are made.
He concluded with the statement that he desired to get all the suggestions
and help he could from the members of the Industrial Advisory Committees
with regard to the problem of publicity.
Mr. Smythe inquired whether the Industrial Advisory Committees
would be advised of the appearance of articles in trade and other magazines and suggested that such advice would be helpful as it would enable
the committees to call such articles to the attention of interested parties
in the various Federal reserve districts. Mr. Szymczak stated that arrangements would be made to advise the Industrial Advisory Committees and
the Federal reserve banks of the appearance of important articles.
Mr. Creighton advised that the Committee on Public Relations
would issue a statement to the press along the lines outlined at the
supper meeting yesterday evening.
(A copy of the press statement issued
is attached as exhibit B.)
Mr. Szymczak stated that the publicity program outlined by Mr.
Adams was not conceived with the idea of soliciting anyone to borrow
under the industrial loan program but to make certain that effective information with regard to industrial loans is made available to everyone
who might be interested in order that they may make applications for loans
should they desire to do so.
Mr. Szymczak then read a letter received by
:
29
X-9252-b
-lithe Federal Reserve Bank of New York from counsel for an industrial borrower expressing appreciation of the treatment accorded the borrower by
the Federal reserve bank.
Mr. Szymczak stated that the Federal reserve
banks have received a number of such letters which indicate that the purposes of section 15b of the Federal Reserve Act are being attained at least
in part.
Mr. Creighton requested Mr. Szymczak to discuss the report made to
the Secretary of Commerce by the Buiness Advisory Council for the Department of Commerce on the subject of credit and capital requirements of
small industry and to what extent the rediscounting authority of the
Federal reserve banks would be enlarged by the passage of the proposed
Banking Act of 1935.
Mr. Szymczak stated that the Board was familiar with
the body of the report of the Business Advisory Council before it was
issued but was surprised by the last paragraph of the summary of the report
which recommends an immediate study by the Reconstruction Finance Corpora^
tion, the Federal Reserve Board, and the Securities Exchange Commission, in
cooperation with the investment bankers of the country, to the end that
facilities be offered sound, small industries for the acquisition of needed
capital.
He said that the recommendation had been discussed with representa-
tives of the Council and that it appeared that the Council had no specific
data on which to base its recommendation or specific suggestions as to the
nature of the study which should be undertaken.
the Council is attached as exhibit C.)
(A copy of the report of
X-9252-b
-12-
Mr. Szymc zak also stated that the Banking Act of 1935 would permit
any Federal reserve bank, subject to such regulations as to maturities and
other matters as the Federal Reserve Board may prescribe, to rediscount
for member banks any commercial, agricultural or industrial paper and to
make advances to any member bank on its promissory notes secured by any
sound assets of such member bank, and under this authority the Federal
reserve banks would be able to rediscount longer term paper than is now
possible.
Mr. Creighton stated that at the supper meeting yesterday evening the representatives of the Industrial Advisory Committees had considered informally a resolution prepared by a committee consisting of
Messrs. Wood, Norris and Ousley with regard to the report of the Business
Advisory Council and that Mr. Wood would make a statement regarding the
matter.
Mr. Wood said that the discussion of the report had led to the
consideration of the difference between working capital and investment
capital and that the question had been raised as to whether there was any
possibility of doing something under new legislation which the Federal reserve banks and the Reconstruction Finance Corporation are not authorized
to do under present law.
Mr. Szymczak stated that he did not see what could be accomplished by the study recommended in the report of the Business Advisory
Council and that if the representatives of the Industrial Advisory Committees had anything to suggest as to what could be accomplished, he felt
their suggestions should be specific in character.
X-9252-b
-13Mr. Ousley called attention to the paragraph in the summary
of the report of the Business Advisory Council reading as follows:
"As a matter of fact, long-term financing for small
industry has always been difficult. It is not simply a depression problem. Through private investment bankers, it
has been available only to concerns of sufficient size and
standing to warrant the investment bankers in bringing out an
issue as small as, for instance, $1,000,000. So it may be
said that this facility has been practically denied to smaller
concerns. Such enterprises have been obliged to develop their
capital structures gradually out of undistributed earnings or
to attract the participation of individual capitalists. They
have not received the benefits of recourse to the capital
markets for their long-term requirements.11
He referred to the difficulty experienced try small concerns in obtaining
capital as a pre-depression problem, and suggested that the report consider o the Reconstruction Finance Corporation as a temporary emergency
agency and that the recommendation of the Council was made with the idea
of developing some permanent means by which the capital needs of small
industries may be met.
Mr. Norris suggested that the Council may have had in mind
that the Securities Exchange Act of 1934 acts as a deterrent to the acquisition of necessary capital funds by small industries and that it
might be of assistance to work out a solution to that problem.
During the discussion of the matter Mr. Wood read the following resolution offered by his committee at the supper meeting yesterday
evening:
"We recommend that the Federal Reserve Board in cooperation
with such other credit and investment agencies as they may
select make an early study of the problem of furnishing to
worthy and needed industries such permanent capital as may
in their judgment be required."
Mr. Clayton stated that it would appear that the resolution as
offered carries the implication that the existing agencies can supply
X-9252-b
-14the capital requirements of industry without additional legislation and
he suggested that if the resolution were adopted by the representatives
of the Industrial Advisory Committees it might be well to incorporate a
suggestion that the study recommended include a suggestion that the need
for additional legislation should be studied.
Mr. Wood stated that it was not the intention of the committee
that its resolution should carry the implication referred to by Mr.
Clayton.
Mr. James suggested that the need of the small industry is primarily the creation of some authority which would pass upon the financial status of the small industrial enterprise and place a value thereon which would be made available to investors, who would then be able
to determine whether or not they desired to invest in the enterprise.
He stated that in his opinion an arrangement of this character would
do much to enable the worthy small industries to obtain additional capital when needed.
At the conclusion of the discussion, Mr. Wood
submitted the following resolution for consideration
of the representatives of the Industrial Advisory
Committees:
"We recommend that the Federal Reserve Board make an early
study of the problem of furnishing to worthy industries
such permanent capital as may in their judgment be required."
Mr. Norris moved that the resolution be amended
to read as follows:
"Recognizing that there is nothing in the present act
governing the industrial loans of the Federal reserve
banks which would permit us to take care of capital loans,
we recommend that the Federal Reserve Board make an early
study of the problem of furnishing to worthy industries
such permanent capital as may in their judgment be required ."
-15-
X-9252-b
Mr. Morris* motion was approved and the resolution in its amended form was adopted unanimously by
the representatives of the Industrial Advisory Committees.
At this point Governor Eccles joined the meeting and stated
that he regretted that, because of other engagements, he had been unable to attend the meeting.
He expressed appreciation of the effi-
cient and effective manner in which the Industrial Advisory Committees
were assisting in making the industrial loan program successful.
He
said that while there were some who questioned the advisability of the
Federal reserve banks making direct loans to industry, the Federal Reserve Board and the Federal reserve banks had taken the position that
as Congress had passed the legislation authorizing the banks to make
such loans it was the duty of everyone concerned to do everything possible to carry out the provisions of the law, and that the Board felt
that through the cooperation of the Industrial Advisory Committees a
record has been made which was a full justification of the activities
of the Federal Reserve System.
The Governor then referred briefly to
the status of the proposed Banking Bill of 1935 and expressed the
opinion that if it is passed it will contribute toward the expansion
of private credit with a corresponding contraction of Government lending.
Mr. Szymczak suggested that the Governor express his opinion
as to whether the enlarged authority of the Federal reserve banks to
rediscount paper for their member banks would aid in making working
capital available to industry.
Governor Eccles said that the banks
have an abundance of funds at the present time and there is no occasion for them to borrow from the Federal reserve banks, but that he
felt that the enlarged rediscounting powers which would be given to
X-9252-b
-16-
the Federal reserve banks by the Banking Bill of 1935 would assist in
the removal of the "liquidity complex" of bankers and focus their attention upon the fundamental soundness of assets rather than primarily
on maturities, because in times of depression the only assets, whether
in the nature of loans or investments, that are really liquid are assets which can be rediscounted at the central bank.
He also stated
that in his opinion it is desirable that the law be changed as contemplated by the Banking Bill of 1935 to permit banks to invest time
and savings funds in long term amortized real estate mortgages, and
he outlined briefly his views as to the effect of the passage of the
Banking Bill of 1935 on short and long term money rates.
Mr. Ousley moved adoption of the following resolution:
"We record our appreciation of the courtesies, facilities
and services afforded us by Governor Eccles, the members
and employees of the Federal Reserve Board for our
accommodation and comfort."
The resolution was approved by all of the
representatives of the Industrial Advisory
Committees present.
During the meeting there were distributed copies of a statement
of industrial advances and commitments under Section 13B of the Federal
Reserve Act made by Federal reserve banks to June 19, 1935.
Thereupon the meeting adjourned.
Secretary.
Approved:
Chairman, Executive Committee
DISCUSSION OF INDUSTRIAL LOANS
by
M. S. SZYMCZAK
at a meeting of
CHAIRMEN OF THE INDUSTRIAL ADVISORY COMMITTEES
Washington, D. C.
Julie 25, 1935
36
-1 Gentlemen}
A year ago last Wednesday the Act was approved which authorizes the
Federal Reserve bar 1-3 to make industrial loans; and a year ago today there
was a conference of chairmen and governors of the Federal Reserve banks
here in Washington at which means of implementing the Act were discussed.
A draft of Regulation "$' had been prepared which, after discussion at the
conference, vras adopted by the Board and released. At the same tine it
was announced that Industrial Advisory C o m 5 ttees were being selected and
that the Reserve banks were ready to consider applications for loans.
Shortly after that meeting I made a visit to three Federal Reserve
Districts to discuss with the directors and officers of the banks and
bankers of those districts the subject of industrial 3cans,
I returned
about the middle of July, reported the result of ny efforts to the Board
and proceeded again on the first of August to cover the rest of the districts. By the middle of September I had covered all but three of the
districts.
These were visited in December, January and February,
On
these trips I discusfed industrial loans under Section ljb not only with
the directors and officers of the Federal Reserve banks, but with bankers,
industrialists and businessmen.
To date, I have visited every Federal
Reserve bank and about $0 per cent of the branches at least once in connection with the industrial loans program, and I have visited some of the
districts several tines. On May 20, at the meeting of the Illinois Bankers
Association at Decatur, I gave an address on the subject.
The Federal Advisory Council at its meeting in Washington on September 17-18, 1934, discussed the subject of industrial loans in detail;
and at several of its meetings since that date the Advisory Council has,
upon the request of the Board, discussed the cooperation of member banks
with the Federal Reserve banks in this matter.
On September 27 a conference of the Chairmen of the Industrial
Advisory Committees was held in Washington for consideration of the provisions of Section 13b. By this time the administration of the section
had been under way for some weeks and it was possible to consider the
program in the light of actual experience. Among other things, as you
remember, consideration was given at this conference to the report that
many member banks were reluctant to make industrial loans because they
were uncertain of the attitude that might be taken by bank examiners
toward such loans when found in the bank's portfolio.
It was recommended
that a definite announcement be made as to the policy to be followed by
examiners,
In compliance with this suggestion the Federal Reserve Board on
October 6 issued instructions as to the manner in which industrial loans
should be included in condition reports arid examination reports. About
the same time the Comptroller of the Currency issued corresponding instructions.
The purpose of these statements by the Board and by the Comptroller
was to clear up such doubt as might exist as to the classification of such
loans and the net effect was to assure member banks that industrial loans
with long maturities which were covered by commitments from the Federal
Reserve banks or the Reconstruction Finance Corporation would not be classified as "slow".
On December 11 and 12 a Conference of representatives of the Federal
Reserve banks, the Industrial Advisory Committees and the Federal Reserve
Board was held at Cleveland to consider the procedure being followed by
38
- 3 the "banks and the committees in passing on applications, for ituvaa reaii*6A :
that much of the success of the program depended upon a smooth and expeditious handling of applications.
On December 19 another conference of the Chairmen of the Industrial
Advisory Committees was held in Washington to review the work done by the
Industrial Advisory Committees and to consider means of furthering the
program.
In addition to all these conferences and to continuous study of the
situation the Federal Reserve banks, as you know, have actively canvassed
their districts in order to inform financing institutions and prospective
borrowers of tho new provisions of the law.
Constant effort has been made
through pamphlets, letters, addresses, personal calls and even by radio to
make the new functions of the Federal Reserve banks widely Izrovn,
Very shortly after tho Board's issuance of Regulation " 5 a year
ago tomorrow, and of its announcement that the Reserve banks were ready to
consider applications for loans under the terms of Section 13b, applications
began to be submitted.
On August 1 the first loan was approved, and a month later 2,662
applications amounting to $89,000,000 had been received. Up to that time
2U7 applications amounting to $14,000,000 had been reeorxxmded for approval
by the Industrial Advisory Committees, and l6U applications amounting to
$7,000,000 had been approved by the Federal Reserve banks.
To June 19 (last Wednesday) applications had been received to the
number of 6,571 in the amount of $260,000,000,
Of these 1,798 amounting
to olOl, 000,000 had been approved by the Industrial Advisory
Committees and
1,636
applications amounting to $ 88,600,000
had been approved by the Federal Reserve banlra.
The activity -up to June 19, the latest reporting date, is indicated in
the v/all chart which shows cumulatively the applications approved by the
Federal Reserve banks, the amount of advances and commitments made, and the
amount under consideration.
The chart shows that the totals have continued to nount.
The increase
in approved loans, however has not been uniform at all Federal Reserve banks.
During a recent period of five weeks one Industrial Advisory Committee &td
not approve an application, and another Committee approved only one*
In the
same period one Federal Reserve bank did not approve a singlo application,
and two Reserve banks approved only one each.
In the week ending June 5 nine Advisory Committees and eight Reserve
banks approved no applications; the other four Reserve banks approved only
l4.
These l4 applications amounted-to $520,000,
Eleven banks received
payments on loans and at nine banks these repayments for the week exceeded
new loans made.
The other three banks advanced enough in excess of repay-
ments to make the loans outstanding for the twelve banks increase that
week by only $45*000,
During the same week commitments increased $263,000, but this increase
was accounted for by five banks; at the other seven banks commitments
either decreased or stood still.
In other respects the recent figures have shorn considerable activity.
Applications under consideration have turned up vigorously after a long decline.
40
- 5 The average amount of applications received per week in May was $3,800,000.
This was the highest of any month this year; it was almost twice what was
received in April and was over twice what was received in January. The
average applications per week for each month since September are as follows:
APPLICATIONS RECEIVED - NET
Number
Amount
September, 193^
177
4,806,000
October
184
6,891,000
November
124
7,085,000
December
105
5,316,000
January, 1935
46
1,603,000
February
78
2,468,000
March
76
3,o44,ooo
April
58
2,036,000
May
60
3,836,000
So far this month the average per week is
$$,100,000.
This volume is
due principally to applications received at two Federal Reserve banks.
The figures indicate therefore that there is still a substantial demand for
the industrial credit authorized by Section ljb. There is also other evidence
of this demand.
On May 20, as I have already said, I addressed the Illinois Bankers
Association on the subject of industrial loans.
The address was reported in
the press and it was also mentioned in one of the Kiplinger letters. To
date over eleven hundred requests for that address have been received. They
have come from every State in the Union, except North Dakota and South Carolina, and from Hawaii. A hundred of them came from banks; in fact every
41
WN
•»
Federal Reserve district "but one was represented by. these requests from banks±
A great majority came from industrial and commercial concerns * Many of these
requests were doubtless made by people who already had some knowledge of the
V
subject or interest in it, but it is difficult to imagine why there was such
an interest in the address unless a large number who wrote in for it wanted
to knoW how to get credit.
This is confirmed by the fact the most of the
requests seem to have beeq. instigated by the Kiplinger Washington letter, which
in its issue of May 18, described tersely and clearly the industrial loans
program of the Federal Reserve banks, and suggested that copies of the address
be asked for, since it gave information as to how loans were being made.
As you know, we have had experience in the past with publicity which
was not selective and which brought in a large number of applications that had
to be rejected,
I feel, however, that these inquiries which we received as
a result of the Kiplinger publicity represent to a large extent prospective
borrowers with some credit standing* And I feel, in view of this response
that there is still a potential and legitimate demand for industrial credit
which we can supply.
longer exists.
We cannot accept the idea that an effective demand no
Yet in spite of everything we have done, the fact that the
Federal Reserve banks are in a position1to make industrial credit available
remains too little known*
It is evident that a demand by prospective bor-
rowers of good standing still exists, and that we still have to solve the
problem of how to reach potential borrowers.
This is something upon which both the Reserve banks and the Board must
work together, And in this connection you will be interested in knowing that at
the suggestion of Mr. Pouch and Mr^ Creighton the Board has temporarily retained
Mr. B. P. Adams of New York to work on the problem of publicity. Mr* Adams is preparing articles particularly with a view to publication in trade journals. The
- 7 -
4 2
Federal Reserve Bank of St. Louis recently reported to the Board an opportunity
to have information about industrial loans published in the official journal of
the National Automobile Dealers Association, and Mr. Adams is reviewing the
draft of an article for this purpose in order to adapt it as fully as possible
to the interests of the publication's readers.
He is also preparing material
which it is hoped will appeal especially to member banks and stimulate their interest in industrial loans.
You will hear from Mr. Adams later.
As you know, it has been our policy all along to encourage local banks to
make these loans under protection of commitments from the Federal Reserve banks,
As you also know, the effort has not been conspicuously successful. At the
present time (June 19) loans by the Federal Reserve banks outstanding are
$27,000,000, and commitments are only $20,000,000.
It would seem, of course, that banks would find it substantially advantageous to make loans which the Federal Reserve banks will take over on request
without recourse as to 80 percent of any loss.
The fact remains that they do
not do so - at least to the extent to be expected.
reasons for this.
There are probably two
One is that the banks do not understand that the arrange-
ment means what it says, but think that they are simply being asked to make
capital loans.
The other reason is that the Federal Reserve banks probably find
it difficult to encourage an arrangement which is distinctly less profitable
to them than making loans direct or that is definitely unprofitable.
In grant-
ing a commitment they have the same expense of investigation as if a direct
have
loan were being made, they/either greater risk if they leave the servicing of
the loan to the bank making the loan, or else equal expense if they service it
themselves, and they get say 1 percent per annum instead of 4 to 6 percent.
It was not the idea of the Act, however, to provide sources of revenue for
the Federal Reserve banks.
The idea was that credit should be made available to
43
— 55 —
industries which were in need of it, preferably from the usual sources, but if
it were not available from the usual sources then, in exceptional circumstances,
it was to be furnished by the Federal Reserve banks direct. We are under obligation -to carry out the obvious intent of the Act.
The fact that at several of the Reserve banks commitments exceed direct
loans indicates that this can be done. At two of the Reserve banks, St. Louis
and San Francisco, commitments are about three times as large as direct loans.
One Reserve Bank, as I understand, does not talk to member banks about participations and commitments simply in general terms.
It takes up every loan appli-
cation which has merit with some member bank and tries to get the bank to
handle the loan.
It points out in concrete terms the advantage to the bank
of carrying the loan on a commitment basis.
to which the bankertirustsay yes or no.
It makes a specific proposition
The banker may decide that he does not
want the loan, but at any rate he has a definite idea of what industrial loans
and commiianents are, and the next time he may be more willing. Meanwhile, the
Reserve bank tries another banker, and if necessary still another.
We most remember that these industrial loans are something that bankers
hatfe been trained to avoid.
When one is suggested they react from habit.
The
idea that objectionable features have been removed by the Federal Reserve bank
commitment does not register.
terms.
They must be told over and over again in specific
The members of the Industrial Advisory Committees are in a position to
understand this difficulty better than the bankers can; and when you are considering applications I hope you will give consideration not merely to the
question whether the loan should be made, but also to the possibility that a
member bank may be induced to take it under Federal Reserve commitment.
You
are interested in having the local banks perform their normal function, and
your point of view should be valuable to the Federal Reserve bank in getting
member bank cooperation.
It will be extremely helpful, accordingly, if you
as industrialists assisting the Federal Reserve System in this program, will
do what you can to bring the local banks more and more into the picture*
As of May "SI,
the accrued earnings of the twelve Federal Reserve banks
from industrial loans and commitments were $704,000.
accrued expense chargeable thereto was $930,000.
On the same date, the
There was, therefore, irre-
spective of any losses that may be sustained, an accrued deficit of $234,000
covering the period since the industrial loans program began.
This deficit was not shared by all the banks, however; three banks
showed
a profit.
Moreover the figures have shifted from the red to the black so far as
momth to month operations are concerned. Beginning with November they are as
follows for all the Reserve banks combined:
November
Loss
$ 65,400
December
n
44,400
January
ii
10,600
February
n
100
March
Gain
17,100
April
ii
42,4oo
May
»
52,000
45
-10In April all but two "banks showed a profit on the month's operations,
and in May all but four showed a profit.
The total amount which the Federal Reserve banks have available for
industrial loans and conmitments under the law is $2771683,000,
amount the Federal Reserve
Of this
banks as of June 19 had outstanding in the
form of loans and commitments $47,790*000 or 17.2 percent.
The percentages
outstanding of the total available for each Federal Reserve bank were as
follows:
Richmond
53.7
Minneapolis
30.5
Dallas
27.1
Boston
25.3
St, Louis
23,5
Kansas City
17.6
Atlanta
16.8
New York
16.8
Philadelphia
15.2
San Francisco
13.6
Cleveland
10.8
Chicago
6.1
As industrialists you are interested, I imagine, in the figures which we
have compiled as to the kinds of business represented by the loans that have
been approved.
These figures were given in full in my address before the
Illinois Bankers Association. As of May 1, out of a total of $83,000,000,
approved, $12,000,000 was for the automobile industry.
Next came machinery
46
- ii and machine tools, $7,000,000, and metals another $7,000,000; then textiles
$6,000,000, and lumber $5I500,000.
Most loans have been for manufacturing, which accounts for $62,000,000
out of the total of $83,000,000.
Wholesale and retail trades have obtained
$12,000,000 and miscellaneous lines of business, such as construction, printing and publishing, mines and quarries, hotels, etc., have $8,500,000,
The largest number of applications has been approved for manufacturers of
food products, namely, 95* Manufacturers of machinery and tools, follow with
84 applications approved, manufacturers of wearing apparel 82, dealers in
lumber and builders supplies 82, and wholesalers and retailors of food 80.
The smallest loan made so far is one for $250 to a manufacturer of cut
glass in the Dallas district.
The largest is one for $6,000,000 to the Hudson
Motor Car Company which was participated in by the Federal Reserve banks of New
York and Chicago and by the Commercial Investment Trust of New York,
You will also be interested in the classification of outstanding loans
according to size. As of May 31, the Reserve banks had 633 loans outstanding;
these loans amounted to $27,000,000. Very nearly half of them (302) were of
$10,000 or under. All but $4 were of $50*000 or less, and only 48 exceeded
$100,000,
The figures are as follows:
.47
— 12 -
dumber
[ Amoxint
$
18,078
1,000
27
1,000
10,000
275
1,292,716
10,001
25,000
l4l
2,530*996
25*001
50,000
96
3*627*843
50,001
100,000
46
3,431,252
100,001
300,000
39
6»96I,713
300,001
500,000
4
1,619,333
500,001
1,000,OC0
3
2,219,236
More than
1,000,000
2
5,266,359
Total
633
$26,967,526
Less than
You probably have heard something about a bill that has been introduced
in Congress (H.B.591S) to provide for the creation of an Intermediate Industrial
Credit Corporation to aid in financing small and medium sized commercial and
industrial establishments.
This corporation would rediscount obligations the
proceeds of which have been advanced or used originally for any industrial or
commercial purpose, and would lend directly to borrowers engaged in producing or
marketing goods or services on the security of warehouse receipts , shipping
documents, mortgages or "other evidences of probability of repayment of the loan
when due".
The loans and discounts would have maturities of not less than six
months nor more than five years, but the corporation could grant renewals up to
ten years from the date the loans were originally made.
The capital of the
corporation would be $100,000,000 owned by the United States, and it would be
authorized to have bonds outstanding not to exceed $1,000,000,000 fully and
unconditionally
guaranteed by the Federal Government.
48
- 13 If banks wanted to use the facilities of the proposed Intermediate Industrial
Credit Corporation they would have to have a separate and distinct department
for their time deposits and subject such department to the supervision of the
Intermediate Industrial Credit Corporation.
On April 15, the Business Advisory Council for the Department of
Commerce submitted a report based on several months of study of the
small industries situation through the country.
The Council stated
that it was particularly impressed with the zeal and energy shown
by the Federal Reserve Board in exercising the powers granted by
the Act of June 19, 193^ •
The report of the Council indicated that
the credit requirements of industrial concerns which cannot be
satisfied from normal sources are not so large as they appeared to be
six months ago, and that the credit needs of small industries are being
more adequately met by commercial banks and other financial institutions,
Notwithstanding this indication, the Council "strongly recommended
an immediate study by the Reconstruction Finance Corporation, Federal
Reserve Board, and Securities and Exchange Commission in cooperation
with the investment bankers of the country, to the end that facilities
be offered sound, small industries for tho acquisition of needed capital."
49
- l4 During a trip to Europe from which he returned a few weeks ago, Mr.
Creighton made inquiry as to what was being done in England, France, Germany,
Poland and Austria in the way of providing working capital to industry. He
found that in England especially efforts were being made to provide credit,
but they were part of a program of rationalization which generally sought elimination of inefficient units and rehabilitation of specific lines of industry.
In the other countries comparatively little even along this line was being done.
The aims and the means adopted in Europe and America
differ widely, but there
seems to be nothing in European experience to throw any doubt upon the desirability of such a program as we have.
We continue to pioneer.
You will hear
frbm Mr, Creighton personally on this matter.
It is obvious to me that we have not yet done all that we can or all that
is expected of us.
for credit*
Congress has given us the task of meeting a very real demand
We are expected moreover to meet that demand in a way that utilizes
local and existing facilities as much as possible.
We are not expected to en-
courage the Federal Reserve System to encroach on the field of private- financing.
In carrying out its task in the way it was intended to be carried out,
the Federal Reserve System has been provided with the assistance of the Industrial Advisory Committees,and the System is grateful to you for the service you
have been and are rendering without compensation. The function of these
committees of which you gentlemen are chairmen is not merely to make
50
- 15 recommendations regarding one loan application after another.
The
Industrial Advisory Conmittees were established, in the words of the
law, "for the purpose of aiding the Federal Reserve banks in carrying
out the provisions" of Section Ijb*
That language is comprehensive.
It seems clearly to contemplate a general situation where the bankers1
point of view alone is inadequate, and where the industrialists' is
indispensable, and it does not seem to be limited to passing on applications,
Moreover your power of recommendation is not restricted.
I know that you feel it part of your duty to consider now how local
credit agencies may be stimulated to cooperate with the Federal Reserve
banks in making industrial loans, and that both in general and in connection with specific applications you will offer your recommendations as to
the steps that may be taken by your Federal Reserve bank to enlist local
bank cooperation.
51
Exhibit B
STATEMENT FOR THE PRESS
BY MR. W. H. POUCH FOR THE INDUSTRIAL ADVISORY COMMITTEES OF THE
FEDERAL RESERVE BANKS.
For release in the Morning Papers,
Wednesday, June 26, 1935.
June 25, 1955.
Much more is being done to aid the small business man in this country
than anywhere else in the world; and existing facilities here are fully
capable of meeting the demand for credit to industry.
This is, in brief,
the conclusion reached by Mr. Albert M. Creighton of Boston after visiting
England, Germany, Poland, Austria and France.
Mr. Creighton is Chairman of the Chairmen of the Industrial Advisory
Committees in the twelve Federal reserve districts, which aid in the making
of direct loans to industry by the Federal reserve banks.
The meeting of
these Chairmen yesterday in Washington was in the nature of an anniversary.
Section 13b, providing for loans to industry, was enacted June 19, 1934,
and $280,000,000 was made available through the Reserve banks.
Exactly one
year later, June 19, 1955, there had been received 6,571 loan applications
totaling $260,373,000; the Advisory Committees had approved 1,798 loans
totaling $100,751,000; the Federal reserve banks had approved 1,656 loans
totaling $88,601,000; advances made totaled $51,447,000, with commitments
of $20,404,000, or $51,851,000 altogether.
Mr. Creighton presented a report on credit facilities abroad in
which he stated that "almost without exception, and particularly in
England, there have been numerous complaints since the depression by
business men and industrialists that it was not possible for them
to secure loans from the banks", but as various emergency loaning organizations had been established, it was found that the claims were much
52
— 2 —
exaggerated and that a large percentage of the applicants really wanted to
start new businesses or were found on investigation to be unsatisfactory credit
risks.
It was pointed out that, in England especially, credit needs of industry
were being considered as part of a program of rationalization which generally
sought elimination of inefficient units and rehabilitation of specific lines
of industry.
There is a much larger fund available in the United States for loans to
industry than in any other country, and there is no question, said Mr.
Creighton, "that the Federal reserve banks under Section 15b have done far
more for the small industrialists than has been done anywhere in Europej under
Section 15b the Federal reserve banks are giving quick, efficient, sympathetic
service and are aiding industry in accordance with the wishes of those who
sponsored the passage of this Act."
Mr. Creighton believes that the Reserve banks and the Reconstruction
Finance Corporation under present legislation can provide for any sound and
reasonable demand for credit to industry.
He therefore reaches the conclusion
that "the Reconstruction Finance Corporation and the Federal Reserve System
under Section 15b should be allowed to function as at present with no thought
of supplementing this work with additional plans for the making of sound loans
to industry."
In other v.ords, the formation of such additional agencies, as
Intermediate Credit Banks, would merely duplicate already existing facilities.
The immediate need is that "every prospective borrower in this country should
know about the existing facilities in connection with industrial loans and
should understand how to take advantage of them."
INDUSTRIAL ADVANCES AND COMMITMENTS UNDER SECTION IJb OF THE FEDERAL RESERVE ACT
SUMMARY BY FEDERAL RESERVE B A M S , JUNE 19, 1934 TO JUKE 19, 1935
(Amounts in thousands of dollars)
Federal
Reserve
Bank
Applications
received - net
Number Amount
Total applications
recommended for approval
by Industrial Advisory
Committee*
Amount
Number
Applications
under
cons ideration
Amount
Number
B-8I7
Total applications Advances
made
approved by Federal
Reserve Bank*
Amount
Huaiber
Commitments
outstanding
Boston
379
21,133
24
3,389
129
9,163
85
6,389
2,4<.0
2,869
New York
769
59,265
40
5,777
275.
23,265
287
25,159
6,943
8,146
Philadelphia
442
27,265
17
7,306
143
14,102
110
9,533
5,022
733
Cleveland
515
14,611
14
-477
144
5,897
126
5,134
1,702
1,491
Richmond
449
16,986
8
459
139
8,439
139
8,338
4,696
1,511
Atlanta
431
10,645
18
233
145
3,773
139
3,527
1,377
672
38,338
30
2,233
115
8,692
90
6,071-.
2,318
499
Chicago
867
St. Louis
291
10,479
3
133
99
4,883
98
4,892
711
1,794
Minneapolis
880
16,631
43
1,002
240
5,735
214
4,627
2,438
77
Kansas City-
318
10,619
7
2,129
71
5,456
63
3,367
1,226
227
Dallas
404
10,517
12
565
95
3,838
90
3,634
1,838
400
San Francisco
826
23,884
69
3,638
203
7,508
195
7,880
716
1,985
6,571 260,373
FEDERAL RESERVE BOARD
DIVISION OF BANK OPERATIONS
JUNE 24, 1935.
285
27,341
1,798
100,751
1,636
88.601
21,447
20.404
TOTAL
*With and without conditions.
g,
CO
•
54
X-9252-C
Exhibit C
April 15, 1935.
CREDIT AND CAPITAL REQUIREMENTS OF SMALL INDUSTRY
Summary of Report to the Secretary of Commerce by the Business Advisory Council
for the Department of Commerce.
At the outset of its study of the credit difficulties of small manufacturers,
the Council found itself faced with a paucity of direct and up-to-date information
as to the character and prevalence of the difficulties of individual concerns.
To obtain a factual basis for its study a survey was made, on behalf of the
Council, by the Bureau of the Census of the Department of Commerce.
Question-
naires prepared by that Bureau were sent, with few exceptions, to manufacturers
employing an average of from SO to 190 wage earners in 1935j but for the final
tabulations, returns
from concerns employing not less than 21 nor more than 250
wage earners were included.
Of the 16,500 firms to which questionnaires were
sent, 7,669, or over 46 percent, submitted returns.
Of these, 6,158 were found
to be suitable for tabulation.
Of the 6,158 concerns covered in this Survey, 4,387, or 71 percent, were
classified as borrowers and 1,771 or 29 percent, as non-borrowers or as concerns
with no credit experience.
Of the 4,387 reported borrowing concerns, 1,964, or
45 percent, reported credit difficulties.
These however, constituted only 32 per-
cent of the total number of the concerns covered.
Of the 1,964 concerns reporting credit difficulties, 1,872 indicated the
sources customarily used by them.
Of this number about 82 percent reported that
they depended normally upon commercial banks for credit for working capital purposes.
55
- 2-
X-9252-c
Of the 2,423 concerns reporting no credit difficulty, 2,217 indicated their
customary sources of credit, 90 percent of these stating that banks were the
normal source of their working capital loans•
Nearly two-thirds of the manufacturers reporting credit difficulty (1,255
of the 1,964) estimated that they would need $50,915,000 during 1954 to meet
maturing obligations. Uneasiness over the disinclination of banks to renew outstanding obligations was unquestionably vdde spread in the summer of 1954, when
the returns to the Census questionnaire were made.
Banks generally had relaxed
but little their efforts to achieve greater liquidity and were still under pressure from official examiners to reduce the proportion of slow or bad loans and
to be "realistic" in the valuation of their assets.
Regarding the attitude of the banks at that time, it should be recalled that
many of them had only recently emerged from the difficulties that culminated in
the closing of all of the banks of the country in March 1953.
Many banks failed
to reopen after this "bank holiday" and a considerable number that resumed operations had to be extremely cautious for a long period.
Thousands of banks had
failed or suspended operations in previous years and concerns that relied on
these banks for credit accommodation found it difficult to establish new banking
connections.
Although the facts regarding the progress of the depression are generally
known, it might be well to review briefly the effects of the depression on the
banks.
The decline in commodity prices which began in the summer of 1929, pro-
ceeded with but few interruptions until March 1933, when it assumed almost
catastrophic proportions.
bank loans —
This decline impaired the value of the security behind
not merely the loans collateralled by commodities but also those
56
- g -
X-9252-c
based on the earning capacity of the borrowers, the value of whose inventories declined correspondingly and whose margin of profit was either sharply reduced or
wiped out.
Moreover, as prices declined, the tendency on the part of all classes
of buyers to defer purchases increased and production fell off.
Railroad move-
ment of freight became lower and lower and the earnings of railrodads reached
their lowest levels in years.
As large holders of railroad bonds, many banks
were seriously affected by the ensuing decline in the prices of their securities,
which they were obliged to sell in order to obtain funds to meet increasing withdrawals of deposits.
The calling of loans against securities which had been ex-
panded greatly during the boom also added to the difficulties of the banks, since
it resulted, of course, in the lowering of the value not only of the collateral
behind such loans but also of the securities held by the banks for their own account.
Thus, the vast majority of banks were caught in a destructive downward
spiral and were practically powerless to extricate themselves.
The establishment
of the Reconstruction Finance Corporation in 1932 was a splendid effort to arrest
these depressive forces but it proved to be somewhat belated.
It is not surprising, therefore, that as late as the summer of 1954 most of
the banks were still putting their houses in order, either on their own initiative
or at the behest of bank examining authorities who had been sharply criticized
for their previous disinclination to force banks to call slow loans or write off
doubtful ones.
What is surprising, in view of the conditions existing in the
middle of 1934, is that go large a proportion of the reported borrowing concerns
included in the Census survey, 2,423 out of 4,387, reported no credit difficulty,
although 90 percent of them stated that banks were the normal source of their
working capital loans, whereas only 82 percent of the concerns reporting credit
57
- 4 -
X-9252-c
difficulty stated that they relied on banks for such accommodation.
Another fact to be borne in mind in considering the statistics based upon
the returns to the Census questionnaire is that the great bulk of these returns
were made within two or three months after the passage of the Act of June 19,
19*34, which authorized the Federal Reserve banks and the Reconstruction Finance
Corporation to make direct loans to industry. This legislation, it should be
noted in passing, was a clear recognition of the inability of the banks as a whole
to finance industry as freely as could be desired.
The Council is particularly impressed with the zeal and energy shown by the
Federal Reserve Board in exercising the power granted by the Act of June 19, 1954,
and feels that a special tribute should be paid to the late Eugene Black, who was
then Governor of the Reserve Board, for the inspiring enthusiasm and the tireless
energy he poured into this activity of the Federal Reserve system.
But despite
the evident desire to cut corners and eliminate red tape, several months were required before the Industrial Advisory Committees of the several Federal Reserve
banks could begin to function effectively.
A certain minimum period of time is
required to organize, and to establish a working procedure for, an undertaking
which involves the loaning of many millions.
In view of what has been accomplished by the Federal Reserve banks and the
Reconstruction Finance Corporation under the Act of June 19, 1934, it may well be
- that a considerable proportion of the concerns that reported credit difficulty at
the time they made their returns to the Census questionnaire, were subsequently
accommodated by these agencies.
Since the summer of 1934 the policies of the federal examining authorities
have become more liberal with respect to "slow" loans.
The problem of the proper
- 5 -
X-9252-C
treatment of "slow" loans was considered at a meeting of the chief examiners of
the federal examining agencies on September 10 and 11, 1954.
Subsequently, the
Comptroller of the Currency instructed national bank examiners that real estate
and capital loans were not to be classified as "slow", if there was reasonable assurance of repayment, and that working capital loans with maturities up to five
years were not to be so classified, if covered by commitments from Federal Reserve banks,
the Federal Deposit Insurance Corporation likewise instructed its
examiners to differentiate between "slow" loans which were sound because adequately secured or because collectible ultimately and "slow" loans which were unsound.
On January 14, 1935, the Reconstruction Finance Corporation announced a
liberalization of its policies with respect to direct loans to industry. To
quote, "one change provides that consideration will be given to applications where
a * substantial * rather than •incidental1 portion of the proceeds is to be used
to satisfy or compromise existing indebtedness. The second modification, designed
to be of assistance in the stimulation of demand for capital goods, provides for
the consideration of applications where the money is to be used principally for
the replacement and modernization of plant and equipment,"
Still more recently the statutory regulations governing the direct lending
activities of the Reconstruction Finance Corporation were amended in important
particulars by act of Congress. A bill finally approved on January 51, 1955,
extended the life of the Corporation for two years from that date and provided,
among other things, that the Corporation could make industrial loans so secured
as reasonably to assure repayment; and that the Corporation could make loans or
renewals up to January 51, 1945, instead of to January 51, 1940, as previously
stipulated.
This act also authorized the Corporation to purchase stock in-mortgage
59
— 0 —
X—9252—c
loan institutions for the purpose of the re-establishment of a normal mortgage
market.
The first of these provisions makes possible a continuation of the direct
lending activities of the Corporation? the second relieves it of the "adequate
security" requirement for loans to industry, a requirement which had seriously
curtailed the number and the amount of its loans; the third makes possible the
authorization of loans which can be repaid only over a term of years; and the
last facilitates the securing of long-term credit by business concerns through
the pledging of fixed assets.
There has been a pronounced extension of the direct lending activities of the
Federal Reserve banks with the able and vigorous assistance of the Industrial
Advisory Committees.
In spite of this fact, both the number of applications re-
ceived per week and the amount of the loans applied for continue at a low level.
This evidence, as well as that afforded by the total number of applications received and the total amount applied for, suggests that the credit requirements
of industrial concerns which cannot be satisfied from normal sources are not so
large as they appeared to be six months ago, and that the credit needs of small
industry are being more adequately met by commercial banks and by other financial
institutions.
The total amount of credit made available to manufacturing concerns through
the activities of the direct lending agencies is substantial. To the amount of
the loans approved by the Federal Reserve banks ($56,000,000 to February 27, 1935)
must be added the loans and commitments authorized by the Reconstruction Finance
M
Corporation ($55,800,000 as of February 20, 1955).
The actual disbursements of
these agencies are much less than the amount of the loans approved.
Nevertheless,
1 7 These figures exclude advances and commitments made to miscellaneous concerns
and those in the wholesale and retail trades.
60
X-9252-c
- 7 -
when account is taken of the loans made or renewed by commercial banks and other
financial institutions as a result of the change in their policy induced by the
efforts of the Industrial Advisory Committees, the total credit made available
to industry through the activities of the direct lending agencies may have satisfied a large proportion of the legitimate needs.
Between June 19, 1954, and February 27, 1955, the Federal Reserve banks had
received 5,595 applications for advances under the Act of June 19, 1954, in
amounts totaling #205,580,858, distributed by principal groups of applicants as
follows:
Class of borrower.
: Number of
:applications
(net)
:
Wholesale and retail trades
Miscellaneous
:
2,573
2,054
988
5.595
Amount applied for.
#140,224,668
56,184,876
29.171.514
#205.580.858
The number of applications approved by the Federal Reserve Banks with and
without conditions and the amount of the commitments and advances thus provided
for were as follows:
Commitments
: Advances
Number : Amount
:Number : Amount
266 :#25,425,440: 448 :#50,597,167
Manufacturers
Wholesale and retail trades.
113 : 4,204,400: 256 : 4,915,200
49 : 2.830.500: 136 : 4.551.200
Total
428 : 32,460,540: 840 : 40,063,567
Class of borrower
In other words, the Federal Reserve banks had approved 1,268, or nearly 23
percent, of the applications made to February 27, 1955.
The amounts covered by
the applications approved totaled #72,525,907, or slightly more than 35 percent
of the total amount applied for on the total number of applications.
X-9252-c
Limiting our observations to applications of manufacturers, it will be noted
that of the 2,573 applications from concerns in this classification, 714 were approved. The applications approved called for advances and commitments aggregating
$56,022,607.
Thus, nearly 28 percent of the applications from manufacturers were
approved and the loans so approved constituted about 40 percent of the total
amount applied for by all applicants.
Of the $40,063,567 which the Federal Reserve banks had agreed to advance to
all classes, $21,729,054 had actually been loaned to February 27, 1935, —
$353,791 for 3 months or less; $3,236,777 for 3 to 6 months; $2,849,984 for 6 to
12 months; and the balance, $15,288,502, for one to 5 years, as much as $9,258,417
being loaned for 4 to 5 years.
There is a tendency in some quarters to minimize the results obtained by the
Federal Reserve banks by stressing the figure of $21,729,054.
But such criticism
ignores the fact that a large part of the advances which those banks agreed to
make had not been availed of and the fact that the banks had agreed to assume
$32,460,340 of loans made by commercial banks under the commitments they had
taken.
Incidentally it should be noted that the proportions of approved loan applications in the case both of the wholesale and retail trades and of the miscellaneous group were very much lower, both in number and in amounts, than in the
case of applications from manufacturers«
That the great bulk of the advances made by the Federal Reserve banks were for
periods of more than 6 months, more than one-half of the total advanced being
v
«loaned for from 4 to 5 years, confirms the impression held by well-informed persons
that a pressing need of industry was for a type of loan which commercial banks
could not, or should not, make, even in normal times.
It also serves to support
the view of those who assert that at the present stage in the prolonged depression
a large number of the smaller industrial concerns must strengthen their capital
structures#
No data are available as to the usance of the loans on which the Federal
Reserve banks have taken commitments.
It is fair, however, to assume that, al-
though the bulk of them run for periods longer than the loaning banks would
wish to provide under existing conditions, they are, on the average, for much
shorter periods than the advances made by the Federal Reserve banks directly.
They are probably more in the nature of working capital loans.
The Reconstruction Finance Corporation also has been far more active in
making advances under the authority conferred by the Act of June 19, 1954, than
is generally believed.
To February 20, 1935, the Corporation had received 1,717
applications for loans or commitments involving a total of $156,896,599, and had
approved 790 applications in the total amount of $42,852,759.
Of the loans ap-
proved, 625 were for manufacturing concerns, the total of such loans amounting
to $35,821,524, or about $57,300 per application approved.
Incidentally, it might be noted that the Reconstruction Finance Corporation
catered more largely to the textile, food, and lumber industries, nearly onehalf of its loans and commitments being made to concerns in these groups.
On
the other hand, nearly 22 percent of the advances and commitments of the Federal
Reserve banks were made for the account of concerns manufacturing automobiles,
trucks, and accessories; about 11.5 percent, for concerns producing machinery
and machine toolsj and nearly 11 percent, for manufacturers of metals.
In view
of the rapid rise in the production of automobiles and trucks since last November,
63
- 10 -
X-9252-c
the latter figures appear significant.
Loans by the Reconstruction Finance Corporation to concerns making iron and
steel and their products, machinery, and transportation equipment and by the
Federal Reserve banks to textile and food manufacturers were also important.
With the continued restoration of business activity the need of small industry for intermediate and long-term capital has become increasingly urgent.
There seems to be little doubt- that a large number of the smaller manufacturing
concerns have been able to withstand the effects of the long-drawn-out depression in part, through sharp curtailment of expenditures on repairs of building
and equipment and, in part, through the reduction of inventories of raw materials,
parts and supplies to a hand-to-mouth basis.
Not only is existing equipment
wearing out at a rapid rate but it is also becoming obsolete.
The necessity for
buying raw materials, etc., in limited quantities prevents concerns from
acquiring them at satisfactory prices.
Both factors operate to increase manu-
facturing costs and to reduce profits.
It is clear that the capital structure of American industry as a whole has
been impaired by these and other factors and the ability of the smaller industrial
concerns, in particular, to borrow from the banks for working capital purposes
has been correspondingly lowered.
In this connection, the Council has been
greatly impressed by the fact that the bulk of the advances and commitments made
by the Federal Reserve banks have been for periods of more than one year.
The inability of the smaller concerns to modernize thier machinery and equipment explains in no small measure the continued depression in many of the capital
goods industries.
The need for long-time capital on the part of small industries is quite
64
- 11 -
X-9252-c
evident from the Council's study of the facts disclosed in the Census survey, in
the survey made by the Treasury Department of conditions in the Seventh Federal
Reserve District (the Viner-Hardy report), and in a survey made by the National
Industrial Conference Board, and of the results of the operations of the Federal
Reserve banks and the Reconstruction Finance Corporation under the act of June
19, 1934, as well as from its consideration of the testimony of individual leaders
and bankers.
As a matter of fact, long-term financing for small industry has always been
difficult.
It is not simply a depression problem.
Through private investment
bankers, it has been available only to concerns of sufficient size and standing
to warrant the investment banker in bringing out an issue as small as, for instance, $1,000,000.
So it may be said that this facility has been practically
denied to smaller concerns.
capital structures
Such enterprises have been obliged to develop their
gradually out of undistributed earnings or to attract the
participation of individual capitalists.
They have not received the benefits
of recourse to the capital markets for their long-term requirements.
Since small industry plays a very important part in the economic life of
the nation and since its activities contribute so much to those of the larger
plants, it would seem the part of wisdom to provide the smaller, sound industrial
concerns with the long-term credit facilities which they require.
This would
make for safer commercial banking as well as for cheaper and better financing
for industry as a whole.
This is and should be a natural function of the investment banker acting as
the channel for the safe investment of private funds in small enterprises.
65
- 12 -
X-9252-c
At the moment, this channel is blocked by the too rigid requirements of the
Securities Act; by a general fear of the future on the part of investment
bankers; and by the waiting attitude of the investing public.
The need exists and is of paramount importance to recovery.
investment need, rather than a credit need.
Mainly it is an
It should be filled.
The Council strongly recommends an immediate study by the Reconstruction
Finance Corporation, Federal Reserve Board, and Securities and Exchange Commission in cooperation with the investment bankers of the country, to the end
that facilities be offered sound, small industries for the acquisition of
needed capital.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9253
July 1, 1935.
Subject:
Acceptance of Deposits of
Uninvested Trust Funds byFederal Reserve Banks
Dear Sir:
Inclosed herewith is a copy of a letter to Mr. Ira
Clerk, Deputy Governor of the Federal Reserve Bank of San
Francisco, relating to the question whether Federal Reserve
banks should accept deposits of uninvested trust funds from
their member banks.
In view of the suggestion that this
matter be placed on the program for the next meeting of the
Governors' Conference, it is believed that you and the counsel
for your bank should give careful consideration to the practical
and legal aspects of the problem involved.
Very truly yours
Chester Morrill,
Secretary.
Inclosure
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
67
X-9253-a
July 1, 1935.
Mr. Ira Clerk, Deputy Governor,
Federal Reserve Bank of San Francisco,
San Francisco, California,
Dear Mr. Clerk:
Receipt is acknowledged of your letter of June 4, 1935, in
which, pursuant to an inquiry from The Bank of California National
Association, San Francisco, California, you request a ruling as to
whether it is proper and desirable for Federal Reserve banks to accept
deposits of uninvested trust funds from their member banks.
During the past year the Board has received similar inquiries
from three other Federal Reserve banks.
This question was first con-
sidered by the Board in connection with an inquiry made by the Federal
Reserve Bank of Richmond.
That bank advised the Board that its counsel
doubted whether the bank had the power to receive such a deposit which
could not be counted as a part of the member bank's reserve and could
not be applied on the liabilities of such bank.
The bank further ad-
vised the Board that it felt that, in view of the legal and practical
questions involved, it would be undesirable to accept such deposits.
In these circumstances, the Board expressed the opinion that
since it was doubtful whether the receipt of uninvested trust funds
from member banks by Federal Reserve Banks falls within the purposes
of the Federal Reserve banks, and since such deposits could not be
counted as a part of the depositing member bank's reserve balance, and
in view of the legal responsibilities which might be assumed by the
:
Mr. Ira Clerk, Deputy Governor - 2
X-9253-a
Federal Reserve bank in accepting such deposits, it would not be advisable for Federal Reserve banks to receive uninvested trust funds
from member banks.
Subsequently, the Governor of the Federal Reserve bank of
Minneapolis, after having advised a member bank that he doubted whether
the Federal Reserve banks are authorized to accept such deposits, discussed this question informally with the Board's counsel and was advised
concerning the views expressed by the Board in connection with the inquiry from the Federal Reserve Bank of Richmond.
Recently the Board was advised that the Federal Reserve
Bank of Dallas desired to accept such a deposit from one of its member
banks and that it had been advised by its counsel that it could lawfully accept and handle such an account and could properly and safely
perform this service.
In a conference with a representative of the
member bank in question, members of the Board's staff were advised that,
while the bank preferred to deposit such funds with the Federal Reserve
bank, the circumstances were such that it could solve its problem by
depositing the funds in other banks.
In these circumstances, the Board advised the Federal Reserve Bank of Dallas concerning the views which it had previously expressed and stated that it felt that it should take no further action
without obtaining the views of the other Federal Reserve banks.
It
was suggested that if, after further consideration of the practical
and legal aspects of the matter, the Federal Reserve Bank of Dallas
still believed that it should accept the proposed account, the Board
6 8
Mr. Ira Clerk, Deputy Governor - S
X-9255-a
would communicate with the other Federal Reserve banks and, after
obtaining their views, give further consideration to the matter; or
that perhaps the bank would desire to have the matter discussed as a system matter at the next conference of Governors or Federal Reserve agents#
The Board has since been informed that, in view of the advice received
from the Board and the possibility that the acceptance of such an account
might involve the bank in unanticipated legal complications, the Federal
Reserve Bank of Dallas has decided to withdraw its tentative consent to
handle the deposit and that it will not be necessary for the Board to
give further consideration to the matter.
It is noted that you had previously intended to have this question considered by the Governors' Conference.
In the light of the facts
stated above, the Board believes that this should be done before any further action is taken and it is suggested
that Governor Calkins, as Chair-
man of the Governors' Conference, place this matter on the program for
the next meeting.
In the meantime, it is believed that careful considera-
tion should be given to the practical aspects of the problem and that you
should secure your counsel's opinion as to whether the Federal Reserve
banks have the power to accept such deposits and whether the banks might
incur legal liabilities in connection with such deposits which would make
it undesirable to accept them.
Copies of this letter are being sent to
the Governors of the other Federal Reserve banks so that they and their
counsel may study this problem prior to its consideration by the Governors'
Conference.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill
Secretary.
7 0
X-9254
July 1, 1935
Dear Sir:
Recently the board of directors of one of the Federal reserve
banks approved a plan for the curtailment of salary expenditures for
the purpose of reducing the staff of the bank to operating requirements.
In submitting the plan to the board of directors of the bank
the executive committee stated that;
"Experience has demonstrated that giving an employee
advance notice of the termination of his employment with
salary for a stated period, during which period the employee
remains at work, iy not satisfactory either to the employee
or to the bank. In the discussion of this situation, it developed that in some industries where it is necessary to release an employee who has served over a considerable period
of time, the employee leaves his work at or about the time of
notification but is given what in industry is called a 'dismissal wage1, payable monthly for a stated term, this wage
continuing for the period agreed upon even though the employee
may find other employment before the expiration of the period.
11
This procedure# it was believed, would bolster the
morale of those employees who are not affected by the plan.
It would also make it possible to reinstate capable employees
should an increase in the volume of work occur during the
period the 'dismissal wage' is being paid, making it necessary for us again to augment our forces. It is understood,
of course, that in such case the 'dismissal wage' would cease
upon an employee's being restored to the regular pay roll."
The plan as adopted by the Federal reserve bank incorporated
a schedule of salary allowances which provided that the bank could
X-9254
-2-
continue to pay an employee's salary at the current rate for a period
up to a maximum of six months from the date of the termination of his
employment by the bank.
The maximum of six months was applicable
only to employees who had had more than five years of service, and,
for employees with service of five years or less, salary payments for
periods of less than six months from date of termination of employment
were provided, depending upon the length of service.
The plan was submitted to the Federal Reserve Board with the
request that the Board approve the schedule of salary payments after
termination of employment, contemplated in the plan.
The request was
considered by the Board in the light of the considerations advanced
by the executive committee of the bank quoted above, and in the light
of the action taken at the recent Governors' Conference which voted
it to be the sense of the conference that the boards of directors of
the Federal reserve banks should be permitted, in their discretion, to
pay up to six months salary to officers or employees upon thoir involuntary separation from the service.
The Board is in general agreement
with the considerations which prompted the adoption of the plan by the
Federal reserve bank referred to and has authorized all Federal reserve
banks, upon appropriate affirmative action by the boards of directors
of the respective banks, to pay salary at current rates for a period
up to a maximum of six months to employees whose services are terminated
by the bank, it being understood that the maximum of six months salary
X-9254
-3-
may be allowed only to employees who have served five years or more,
and that the allowance for employees who have served less than five
years may be for a lesser period bearing some reasonable relationship
to the length of service, but that no allowance may be made to employees dismissed for cause.
The Federal Reserve Board feels that any action taken by the
board of directors of a Federal reserve bank under the authority above
referred to should be on the basis of a careful survey of the situation at the bank and with a view to the maintenance of a high degree
of efficiency and economy in the operation of the bank, as well as a
high degree of morale and loyalty among the employees.
It will be appreciated if you will present this letter at the
next meeting of your board of directors and advise the Board of any
action taken with regard thereto.
Very truly yours,
Chester Morrill,
Secretary.
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
F E D E R A L
R E S E R V E
B O A R D
FOR THE PRESS
FOR IMMEDIATE RELEASE
Statement of Governor Eccles on Title II
of the Banking Act of 1935 as reported
by the Banking and Currency Committee of
the Senate.
X-9255
Title II of the Banking Bill of 1955 as recommended by the
Administration proposed to place responsibility for the exercise of three
existing, but badly set up, monetary powers in one body removed from the
pressures of partisan, political or private banker influences.
Its funda-
mental purpose was to vest that body with full authority to use these
powers in fostering recovery and then in maintaining stability of business and employment.
Furthermore, experience over a long period of years
had demonstrated the need for various administrative improvements and for
the removal of certain hampering restrictions*
As rewritten and reported by the Senate Committee on Banking
and Currency, Title IIgrepresents a significant and important recognition
of the fundamental principles and purposes of the banking bill as proposed.
Therefore, I believe that in its most vital respects it is a distinct
advance in the direction of centralized responsibility and authority for
the exercise of monetary powers.
First, open market powers are concentrated in a central body
composed of the entire Federal Reserve Board together with five governors
of the reserve banks who must be representative of the various sections
of the country.
Complete authority is given to this body to initiate and
enforce open market operations; whereas, at present the Board has no power
either to initiate or enforce, and only the negative power of veto.
Second, the Board is given a broad authority to change reserve
requirements of member banks.
Under existing law, this power can only be
used after the declaration by the President of an emergency every time a
change is necessary, for all practical purposes an unworkable arrangement.
75
X-9255
Third, the power to determine and make effective discount rates
remains with the Board.
It is evident that this represents a substantial improvement
over the existing situation.
It would make it possible for the Board
and the open market committee to function in the national interest byusing these powers so far as they may be effective towards the achievement of stability in our economic system and the avoidance of disastrous
inflationary and deflationary cycles.
This is a long step in the direction
of intelligent management of our monetary system.
Furthermore, the bill as reported by the Senate Committee recognizes the need for broadening and liberalizing the eligibility provisions of existing law which are entirely unsuited to meet present day
conditions.
Likewise, the real estate loan provisions of the national
banking act are substantially improved.
In addition, the Board which now has no voice in the selection
of the governors of the reserve banks is given the authority to approve
or disapprove of their appointment.
In less fundamental respects I believe that Title II, as reported by the Senate Committee, could and should be improved upon in
the interest of practical administration and greater efficiency.
As be-
tween the bill as enacted by the House and as proposed by the Senate Committee, I have every reason to believe that a reasonably satisfactory
measure will be worked out.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9256
July 6, 1935.
SUBJECT:
Code Words Covering New
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities between Federal reserve banks,
the following code words have been designated to cover
new issues of Treasury Bills:
"NOXVIM" - Treasury Bills to be dated July 10,
1935, and to mature November 20, 1955.
"NOXVOK" - Treasury Bills to be dated July 10,
1935, and to mature April 8, 1936.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental
code word "NOXVEE" on page 172.
Very truly yours,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
77
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9257
July 8, 1935.
SUBJECT:
Discounts for Individuals, Partnerships and Corporations.
Dear Sir:
The authority granted by the Federal Reserve Board to all Federal
reserve banks in its circular of July 26, 1932 (X-7215-a), as amended by
its letter of January 8, 1935 (X-9081), to discount eligible notes, drafts
and bills of exchange for individuals, partnerships and corporations, subject to the provisions of the law, the Board's regulations, and that circular, will expire at the close of business on July 31, 1935.
The Board has
decided to extend such authorization for an additional six months, and, accordingly has amended section II of its circular of July 26, 1932 (X-7215-a),
to read as follows:
"AUTHORIZATION BY THE FEDERAL RESERVE BOARD.
The Federal Reserve Board, pursuant to the power conferred upon it by the amendment hereinbefore quoted, hereby
authorizes all Federal reserve banks, for a period ending at
the close of business on January 31, 1936, to discount eligible
notes, drafts and bills of exchange for individuals, partnerships and corporations, subject to the provisions of the law,
the Board's regulations and this circular."
Very truly yours,
hn<n<u£f
Chester Morrill,
Secretary.
TO CHAIRMEN AND GOVERNORS OF ALL F. R. BANKS.
X-9258
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For immediate release
July 8, 1955.
RECORD TO BE KEPT IN SPECIAL CASH ACCOUNT
Ruling No. 45 interpreting Regulation T.
The Federal Reserve
Board, in reply to inquiries regarding the provisions of section 6
of Regulation T, as amended May 10, 1935, rules that a debit entry
made by a broker in accordance with common practice in a customer's
"special cash account" as of the day on which the broker, in accordance with the usual custom of the trade and in the absence of
"failures to receive", would ordinarily receive and pay for securities
which have been purchased for the customer in such account, shall be
deemed, for the purposes of the third paragraph of section 6, to constitute the required record of "the date of payment by the creditor"
for such securities in all cases except those in which the broker,
having in fact received and paid for the securities on a later day,
shall have recorded such later day in such account as the date of payment by the creditor.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9259
July 9, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Notes.
Dear Sir:
In connection with telegraphic transactions
between Federal reserve banks covering Government
securities, the following code word has been designated to cover a new issue of Treasury Notes.
"KOWKOP" - 1 5/8$ Treasury Notes, Series
B-1939, to be dated July 15, 1935
and to mature December 15, 1939.
This word should be inserted in the Federal
Reserve Telegraph Code book, on page 172.
Very truly yours,
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-9261
July 13, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills:
"NOXVUA" - Treasury Bills to be dated
July 17, 1935, and to mature
April 15, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOXVOK" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
81
X-9262
F E D E R A L
R E S E R V E
B O A R D
STATEMENT FOR THE PRESS
For immediate roleese
July 13, 1935.
TRANSFER OF TRANSACTIONS FROM CASH ACCOUNTS
AFTER EXTENSION OF TIME.
Ruling No. 46 interpreting Regulation T.
In reply to an inquiry
of a business conduct committee of a national securities exchange regarding the provisions of the fourth paragraph of section 6 of Regulation T, the Federal Reserve Board rules that such a committee, having,
on proper application, granted to a "creditor", as defined in Regulation T, an extension of time in which to receive payment from a
customer who has purchased registered securities in a bona fide cash
transaction, may, on further application of the creditor and before
the expiration of the extension, authorize the creditor to transfer
the transaction from the customer's special cash account to his margin
account, making appropriate entries in both accounts, and to extend
credit on such securities in the margin account subject to the provisions of Regulation T:
Provided. That the committee shall be satisfied
that the transaction was a bona fide cash transaction, that the creditor
is acting in good faith in making the application, and that the circumstances warrant such action.
82
FEDERAL RESERVE BOARD
washington
July 16, 1935.
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
SUBJECT:
X-9263
Holidays during August, 1935;
Dear Sir:
The Federal Reserve Board has been advised that the following holidays will be observed by Federal reserve banks and branches
during the month of August:
Thursday, August
1,
Denver
Colorado Day
Havana Agency
Anniversary of Fall of
Machado Government.
Monday,
August 12,
Tuesday,
August 15,
San Francisco
Los Angeles
Special Election Day,
California.
Saturday
August 24,
Dallas
El Paso
Houston
San Antonio
Special Election Day,
Texas.
On the dates given the offices mentioned will not participate
in either the transit or the Federal reserve note clearing through the
Gold Settlement Fund. Please include transit clearing credits for the
offices concerned on each of the holidays with your credits for the
following business day. No debits covering shipments of Federal reserve
notes for account of the head offices named should be included in your
note clearings of August 15 and 24.
Please notify branches.
ALL GOVERNORS.
Digitized forTO
FRASER
fey truly yours,
J. C. Noell,
Assistant Secretary.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9264
July 17, 1955
Dear Sir:
There are enclosed herewith copies of
statements rendered by the Bureau of Engraving
and Printing, covering the cost of preparing
Federal reserve notes for the period June 1 to
June 27, 1935.
Very truly yours,
0. E. Foulk
Fiscal Agent,
Enclosure
TO ALL FEDERAL RESERVE AGENTS
84
X-9264-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
June 1 to 27, 1955.
Federal Reserve Notes. Series 1928
8,OCX) sheets, $20 Cleveland, @ $88.00 per M,
$
704.00
I
Federal Reserve Notes. Series 1954
$5
New York,
Philadelphia,.
Cleveland,....
Richmond,
Atlanta,
St. Louis,....
Minneapolis,..
50,000
10,000
-
#10
47,000
40,000
20,000
9,000
20,000
10,000
40,000
15.000
8,000
14.000
125.000
158.000
—
S20
Total Sheets
58,000
12,000
—
12,000
—
—
—
62.000
545,000 sheets, @ $88.00 per M,
Amount
47,000
128.000
42,000
9,000
52,000
10,000
48,000
27.000
S 4,156.00
11,264.00
5,696.00
792.00
2,816.00
880.00
4,224.00
2.576.00
545.000
S50.184.00
& 50.184.00
& 50.888.00
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9265
July 20, 1935
SUBJECT:
Code Word Covering New
Issue of Treasury Bills
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills:
"NOXWAG" - Treasury Bills to be dated
July 24, 1.935, and to mature
April 22, 1956.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOXVUA" on page 172,
Very truly yours
J. C. Noell
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9266
July 23, 1955.
SUBJECT:
Classification of Loans under
Title I of the National Housing
Act.
Dear Sir:
This supplements the Board's letter of September 4, 1954
(X-7997) relative to the classification of loans under Title I of
the National Housing Act.
The inclosure with that letter contained
the following statement:
"The Board feels that the examiners for the Federal
Reserve Banks should be instructed that no part of
the loans made under the provisions of Section 2,
Title I ox the National Housing Act should be classified as slow, doubtful, or loss so long as the insurance provided by the Federal Housing Administration adequately covers the loans or portions thereof
which might otherwise be so classified."
The principle expressed above applies to all loans insured
under the provisions of Section 2 of Title I of the National Housing
Act, including loans in excess of $2,000 but not in excess of $50,000
for which provision was made in the amendment to the National Housing
Act approved May 28, 1955.
In this connection, however, it should be noted that the regulations issued by the Federal Housing Administration provide for the
segregation of insurance reserves calculated on advances of credit
X-9266
not exceeding ^2,000 from those calculated on advances of credit
from $2,000 to &50,000, and that claims for loss on either class of
notes will be paid only out of the respective insurance reserves.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9267
July 24, 1955.
SUBJECT:
Expense, Main Lines, Leased
Wire System, June, 1935.
Dear Sir:
Inclosed herewith you will find two mimeographed statements, X-9267-a and X-9267-b, covering
in detail operations of the main lines Leased Wire
System, during the month of June, 1955.
Please credit the amount payable by your
bank for your share of the expense of the Leased
Wire System, to the Federal Reserve Bank of Richmond in 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 credit.
Very truly yours,
Deputy Fiscal Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS.
88
X-9267-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED TORE SYSTEM FOR THE MONTH OF JUNE, 1935.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. JLouis
Min&a&polis
Kansas City
Dallas
San Francisco
Total
28,435
133,439
25,483
39,696
46,786
43,834
74,108
60,193
32,363
57,399
50,326
82.519
674,581
F. R. Board business
Reimbursable business Incoming & Outgoing
Words sent by
New York chargeable to other
F. R. Banks (1)
1,188
—
1,336
1,322
1,333
1,217
1,818
1,472
1,169
1,155
2,041
2.754
16,805
.
Net Federal
Reserve
bank
business
29,623
133,439
26,819
41,018
48,119
45,051
75,926
61,665
33,532
58,554
52,367
85.273
691,386
. . . . . . . . . . . . . .
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-9267-b).
(1) Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance with action taken at Governors' Conference
November 2-4, 1925.
4.29
19.30
3.88
5.95
6.96
6.52
10.98
8.92
4.85
8.47
7.57
12.33
100.00
311,851
Total words transmitted over main lines
(*)
Per cent of total
bank business (*•)
1,003,237
...
616.914
1,620,151
X-9267-b
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, JUNE, 1935.
Name of bank
Operators1
Salaries
Retirement
Contributions
$ 260 .00
Boston
f> 24 .65
1,558 .29
122 .79
New York
20 .25
Philadelphia
225 .00
506 .66
27 .60
Cleveland
579 .00
17 .55
Richmond
270 .00
22 .14
Atlanta
Chicago
4,324 •23(#) 540 .75
195 .00
17 .45
St. Louis
18 .02
Minneapolis
200 .08
Kansas City
287 .00
25 .85
Dallas
251 .00
22 .54
San Francisco
580 .00
52 .05
Federal Reserve Bd.
Total
#8,456 .26
#691 .18
Operators'
overtime
#5.00
2.00
-
—
—
$7.00
Less Reimbursable Charges
(&)
(#)
(*)
(a)
Main line rental, Richmond-Washington.
Includes salaries of Washington operators.
Credit.
Amount reimbursable to Chicago.
Total
expenses
Wire
rental
289.65
1,483 .08
245 .25
554 .26
626 .55
230.00 (&)
292 .14
4,664 .98
212 .45
218 .10
312 .85
275 .54
412 .05
15.291.55
15.291 .55
$15,521.35
i124,655 .79
$
~~
1|-
-
-
—
—
—
—
9.588.52
$15,267.47
Pro rata
share of
total
expenses
I
654 .97
2,946 .62
592 .38
905 .56
1,062 .62
995 .44
1,676 .57
1,561 .86
740 .47
1,295 .15
1,155 .75
1,882 .48
Credits
289 .65
1,485 .08
245 .25
334 .26
626 .55
292 .14
4,664 .98
212 .45
218 .10
512 .85
275 .54
412 .05
365.32
1 ,463.54
347.13
571.10
436.27
705.50
2 ,988.61(*)
1 ,149.43
522.37
980.52
882.41
1 ,470.45
$
1
$9,364 .44
$8 ,391.64
—
$15,267 .47
Payable to
Federal
Reserve
Board
—
2.988.61(a)
£5,905.05
91
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
X-9269
July 25, 1935
Deposits of Funds Paid into
Federal Courts Pending the
Outcome of Litigation.
Dear Sir:
For the information of your bank, there are
inclosed herewith a copy of a letter received by the
Board from the Federal Reserve Bank of Atlanta, a copy
of an informal memorandum prepared by the Chief of the
Division of Deposits of the Treasury Department, and a
copy of the Board's telegram in reply to the letter
from the Federal Reserve Bank of Atlanta, with regard
to a proposal to deposit in the Federal Reserve Bank
of Atlanta funds paid into the registry of a United
States District Court pending a final decision in a
suit brought to enjoin the collection of processing
taxes.
Very truly yours,
hr)o^M
Chester Morrill,
Secretary.
Inclosures
To the Governors of all Federal Reserve Banks
except Atlanta.
92
X-9269-a
COPY
FEDERAL RESERVE BANK
OF ATLANTA
Office of
Governor
July 20, 1935
Federal Reserve Board,
Washington, D. C.
Dear Sirs:
The Clerk of the United States District Court for the
Middle District of Georgia called me today by telephone from Macon
stating that Judge Deaver of that court had heard an application
for injunction filed by various textile manufacturers against Federal officials seeking to enjoin the further collection of processing taxes. I am not familiar with the case except insofar as I
have read newspaper accounts of the same and as was disclosed to me
today by the Clerk.
I understood from my telephone conversation that the
court proposes to grant an injunction upon certain conditions, including the condition that pending a final determination of the
litigation, processing taxes will be paid into the registry of the
court at weekly intervals by any one seeking the benefit of the
injunction.
The statement was made to me that the processing taxes
so paid into the registry of the court might easily aggregate in
excess of one million dollars and that neither of the two commercial
banks in Macon would be in position to accept such payments as the
depositary of the court and furnish the necessary bond or security
for such deposits. It was further stated that the Judge would not
wish the funds deposited in any commercial bank outside of the
district. Macon is the largest city in the district.
The Judge wishes these funds to be placed on deposit with
the Federal Reserve Bank, to be withdrawn only after final decree
rendered in the cause, and then only upon order of the court, countersigned by the Clerk.
The matter seems to be one of considerable importance,
for which reason it is being submitted to you. It is conceivable
that other suits may be brought or that other manufacturers may
93
X-9269-a
—2*~
intervene in the pending action, thus augmenting the funds as to
which the court may wish to give similar direction.
Ordinarily, of course, we would not wish to accept deposits
of funds impounded in litigation. However, in the instant case we
recognize that funds which may be decreed to belong to the United
States are involved, and we have every wish to cooperate with the
Treasury Department• While the funds as deposited would not be the
property of the United States and we could not, therefore, accept
the same as Fiscal Agent, but only as a depositary designated by the
court for the receipt of funds paid into the court's registry, still
the funds would be affected with an inchoate public interest and
might be decreed to be the property of the Government. For these
reasons our Counsel feels that the acceptance of the deposits might
not be ultra-vires, although that question is not free from doubt.
At any rate, if the Federal Reserve Board were to desire us to accept
such deposits we would, of course, do so, and if the Treasury Department were to desire us to accept as a depositary and the Board
should interpose no objections thereto, we would want to comply with
the wishes of the Department.
I have adverted to the possibility of other similar suits
in this state and in other states of the district. I have, of
course, no information as to whether any other such suit is in contemplation. I feel, however, as though the instant case would not
necessarily constitute a precedent since the circumstances which
have influenced the Judge in the present case, to submit his inquiry
to the Federal Reserve Bank, would not necessarily exist in other
cases where larger commercial banks might be available for the purpose.
I have told the Clerk of the District Court that I hoped
to be in position to give him a final answer by Monday, or by Tuesday at the latest; naturally the situation is somewhat urgent.
Very truly yours,
(Signed)
Oscar Newton
Oscar Newton,
Governor.
94
COPY
TREASURY DEPARTMENT
X-9269-b
Office of the Secretary
WASHINGTON
Division of Deposits
July 23, 1935.
To Mr. Vests
Reference is made to the copy of letter of the Governor of the
Federal Reserve Bank of Atlanta concerning the designation of that
bank as depositary for receipt of court funds, which funds represent
processing taxes which it is contemplated will be paid into the registry
of the court pending final determination. I have investigated the
matter and I understand that the Clerk of the United States District
Court at Macon has advised the Department of Justice of the situation
and that Department has arranged by telegraph to have the funds carried
on the books of the Treasurer of the United States. The funds will be
carried in a special deposit account, and disbursements made by check
drawn on the Treasurer of the United States. It is also my understanding that similar arrangements have been made both in Omaha, Nebraska,
and St. Louis, Missouri, covering processing taxes paid into the
registry of the Court at those points.
As to the designation of Federal Reserve Banks to act as depositaries for moneys paid into the United States Courts, your attention
is invited to the statute governing such deposits, found in Title 28,
section 851, U. S. Code, which provides:
"All moneys paid into any court of the United States,
or received by the officers thereof, in any cause pending
or adjudicated in such court, shall be forthwith deposited
with the Treasurer, or a designated depositary of the
United States, in the name and to the credit of such court
This office is not aware of any decision or ruling as to whether or
not, under the provisions of section 15^ as amended, Federal Reserve
Banks may legally be designated as depositaries for moneys paid into
the court. As a matter of fact, it is not necessary, inasmuch as
the deposits may be carried on the books of the Treasurer of the
United States, and have been in many instances in the past.
* Federal Reserve Act.
X-9269-b
-2-
A memorandum addressed to you under date of April 26, 1935, In
connection with the letter of Mr. Sid B. Redding, Clerk, United
States District Court, Eastern District of Arkansas, addressed to
Governor Eccles, contained the following statement:
"With respect to the general question raised by Mr.
Redding, namely, that the Federal Reserve Banks be authorized to carry any and all court funds on their books, I
desire to point out that the individual bankruptcy accounts
would run into the thousands in every district and I should
presume that many of these accounts are rather active
checking accounts. Furthermore, should the Federal Reserve
Board permit Federal Reserve Banks to carry checking accounts of this character, pressure probably would be brought
to bear later for the establishment of many official checking accounts of postmasters and other government officers
and agencies throughout the country."
(Signed)
E. D. Batchelder
Chief, Division of Deposits
96
X-9269-c
COPY
TELEGRAM
FEDERAL RESERVE BOARD
WASHINGTON
July 23, 1935.
NEWTON
ATLANTA
Your letter of July 20 re deposits of funds paid into United States
District Court for Middle District of Georgia.
We have conferred
informally with representatives of the Treasury Department who state
that they understand that clerk of court at Macon has advised Department of Justice of situation and latter department has arranged by
telegraph to have funds carried on books of Treasurer of United
States in a special deposit account, disbursements to be made by
check drawn on the Treasurer.
It is also understood that similar
arrangements have been made both in Omaha, Nebraska, and St. Louis,
Missouri, covering processing taxes paid into the registry of the
court at those points.
It is assumed that arrangement described
takes care of situation and that there is now no necessity for acceptance of deposits of funds in question by your bank.
not the case, however, please advise.
(Signed)
Chester Morrill
MORRILL
If this is
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9270
July 26, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills
"NOXWET" - Treasury Bills to be dated
July 51, 1935, and to mature
April 29, 1956.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOXWAG" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
98
FEDERAL RESERVE BOARD
X-3271
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
July 26, 1935
Dear Sir
As you know, since July, 1935, funds of the Federal Reserve Board
have been deposited with the Federal Reserve Bank of Richmond. Under an
arrangement made with the Federal Reserve Bank of Cleveland for a period
ending June 50, 1956, the books of the Board1s Fiscal Agent are audited
four times each year by the Auditor of the Cleveland bank.
The suggestion has been made that the Federal reserve banks would
be interested in knowing how these audits are conducted, and, for the purpose of advising the banks in this connection, Mr. F. V. Grayson, Auditor
of the Federal Reserve Bank of Cleveland, has prepared the attached summary
of audit procedure and certificate covering the audit of the Fiscal Agent's
books as of June 29, 1935.
In order that the Federal reserve banks may be informed as to the
results of future audits of the Board's accounts, an arrangement has been
adopted under which a copy of the auditor's certificate will be furnished
to each bank.
Very truly yours,
Chester Morrill
Secretary.
Inclosure
THE CHAIRMEN
Digitized forTO
FRASER
OF ALL FEDERAL RESERVE BANKS.
C O P !
X-927l_a
9*
FEDERAL RESERVE BANK OF CLEVELAND
AUDIT DEPARTMENT
Report of Examination of
Accounts of the
Fiscal Agent
Federal Reserve Board
Federal Reserve Board,
Washington, D. C.
Gentlemen:
Since the funds of the Board were ordered deposited
with the Federal Reserve Bank of Richmond, Richmond, Virginia
(effective July 1, 1933) the accounts of the Board and its
Fiscal Agent have been audited eight times in accordance with
established procedure. The eighth of these audits was made as
of June 29, 1935.
A resume of how these audits are conducted is given
for your information.
RECONCILEMENTS
The balances in the four accounts now carried with
the Richmond bank as reported to your auditor by the auditor
of the Richmond bank at the close of each month are reconciled
with the balances as shown by the Fiscal Agent's books and on
June 29, 1935 the totals of these accounts were:
Fiscal Agent's books
Checks outstanding
Federal Reserve Bank of Richmond
$ 376,186.18
S7.877.50
$ 434,063.48
Transfers of funds from one account to another are
checked to see that they bear the authorization of a member of
your Executive Committee.
RECEIPTS
Funds are received by an administrative officer of
the Board or are received direct by the Federal Reserve Bank
of Richmond in accordance with established routine or as
directed by the Board. The funds are checked from schedules
originating in an administrative office and from assessments
levied by the Board as prepared by divisions of the Board to
the daily statements rendered by the Richmond bank. This
method provides an independent check on the Fiscal Agent as
no funds are originally received by his office.
100
-2-
X-9271-a
DISBURSEMENTS
Disbursements, voucher by voucher, are checked to
the Fiscal Agent's books and must bear an administrative
officer's approval and be in conformity to applicable contracts or agreements entered into by the Board.
All of the checks issued by the Fiscal Agent which
must be countersigned by an administrative officer are checked
against the vouchers to ascertain if they were issued in the
proper amounts and to the proper payees.
All payroll sheets are checked to ascertain that new
names are bona fide employees; that all salary payments were
as approved; that proper deduction has been made from the
salary of each member of the Retirement System and of each
member of the Civil Service Retirement Fund and that these
deductions and the amount to be paid to the Retirement System
and Civil Service Retirement Fund by the Board are disposed of
properly.
CONTRACTS
Contracts and agreements entered into by the Board
are checked to see that they are in order and bear the approval
of the Board's counsel.
COMMITMENTS
The known and estimated commitments of the Board are
recorded and checked through to see that proper disbursements
are made.
SURETY BONDS
Bonds covering Fiscal Agent, 0. E. Foulk and Deputy
Fiscal Agent, J. E. Lally for $40,000 each are checked to see
that they are in force and bear the approval of the Board's
counsel.
COMMENTS
There is every indication that the funds of the Board
are being disbursed ift conformity to Government regulations in
practically the same manner as when the funds were being audited
by the Comptroller General of the United States.
The books and records maintained by the Assistant
Secretary and the Fiscal Agent which reflect the Receipts and
Disbursements of the Board bear evidence of the thoroughly efficient manner in which these items are being checked and handled.
The auditors receive most considerate cooperation
during the audits.
101
X-9271-a
-3-
I, F. V. Grayson, hereby certify;
(a)
That a complete audit has been made of all entries
in the accounts, "Federal Reserve Board-Special Fund,"
"Federal Reserve Board-Building Account," "Federal
Reserve Board-Fiscal Agent," and "Federal Reserve BoardFiscal Agent Building Account," for the period July 1,
1935 to June 29, 1935, inclusive.
(b)
That all cash receipts received by the Board as
shown by the "Collection Schedules" furnished the Fiscal
Agent by the Secretary's office have been deposited by
the Fiscal Agent, and properly credited by the Federal
Reserve Bank of Richmond, in the account, "Federal
Reserve Board-Special Fund."
(c)
That all remittances made direct to the Richmond
bank for the account of the Federal Reserve Board by the
Federal reserve banks and others, in compliance with the
Board's instructions have been properly credited in the
accounts "Federal Reserve Board-Special Fund," and
"Federal Reserve Board-Building Account."
(d)
That each expenditure made by the Fiscal Agent was
properly authorized by an administrative officer of the
Board.
(e)
That the items of receipts and expenditures shown
by the books of the Fiscal Agent have been reconciled
with the items shown in the statements of the Federal
Reserve Board's accounts prepared by the Federal Reserve
Bank of Richmond.
(f)
That the balances in each account as shown by the
books of the Fiscal Agent have been reconciled with the
balances standing to the credit of the Federal Reserve
Board on the books of the Federal Reserve Bank of
Richmond as certified by the auditor of that bank.
(g)
That all "Transfers of funds" have been properly
authorized by a member of the Board's Executive Committee.
Respectfully submitted,
(Signed) F. V. Grayson,
Auditor.
July 18, 1935
102
X-9272
F E D E R A L
RES E R I E
B O A R D
STATEMENT FOR THE PRESS
For immediate release
July 29, 1955.
AMENDMENT OF REGULATION T
Amendment No. 5 of Regulation T - Effective August 8. 1955.
Subsection (e) of section 8 of Regulation T is hereby amended
by adding at the end thereof a new paragraph reading as follows:
"In the event of the transfer of an account from
one customer to another, such account may be treated by
the creditor for the purposes of this regulation as if
it had been maintained for the transferee from the date
of its origin; Provided. That, if the account be a restricted account, the creditor shall have filed a report
with any regularly constituted committee of a national
securities exchange having jurisdiction over the business
conduct of its members, of which exchange the creditor
is a member or through which his transactions are effected, reciting the circumstances of the transfer arid
stating, as of the time of the transfer, the adjusted
debit balance of the account and the maximum loan value
of the securities in the account."
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9273
July SO, 1935.
Dear Sir:
For your information, there is
attached a copy of a letter being addressed today to the members of the
Industrial Advisory Committees of the
various Federal reserve districts calling their attention to articles which
have appeared recently in periodicals on
the subject of industrial loans.
Very truly yours,
S. R. Carpenter
Assistant Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
washington
X-9274
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
July 30, 1935.
Dear Sir:
At the recent meeting of the Chairmen of the Industrial
Advisory Committees held at Washington on June 24 and 25, it was
suggested that each member of the Industrial Advisory Committees
be advised from time to time of articles and notices on industrial
loans appearing in trade and other magazines.
The following have recently appeared:
Business Week, May 25, page 26
Business Week, June 15, page 8
Factory Management and Maintenance, July, page 285
Financial Age, May 25, page 341
Literary Digest, June 1, page 57
Literary Digest, July 13, page 37
Nation's Business, June, page 23
The National Provisioner, July 20
In addition a large number of news accounts have appeared
in daily newspapers of local and general circulation.
TO ALL
Assistant Secretary.
INDUSTRIAL ADVISORY COMMITTEE MEMBERS
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
^ 9275
August 3, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills:
"NOXWIN" - Treasury Bills to be dated
August 7, 1935, and to mature
May 6, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOXWET" on page 172.
ry truly yours
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
X-9276
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT!
August 6, 1935
Confidential character of reports of Special
Agents of the Federal Bureau of Investigation
Dear Sir:
There is inclosed a copy of a letter dated July 26, 1955,
from the Attorney General of the United States in which he stresses
the fact that reports made by Special Agents of the Federal Bureau
of Investigation in connection with the investigation of complaints
referred to the Department of Justice are to be deemed confidential.
It will be appreciated if you will bring this matter to the
attention of all officers and employees of your bank who may have
occasion to handle reports of Special Agents of the Federal Bureau
of Investigation and request them to exercise extreme care in the
matter of handling such reports in order that no information contained therein will be disclosed to persons not entitled thereto.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS.
X-9276OFFICE OF THE ATTORNEY GENERAL
WASHINGTON, D. C.
July 26, 1935.
Federal Reserve Board,
Washington, D. C.
Gentlemen:
In connection with the investigation of complaints
referred to this Department by other Departments and Independent
Establishments of the Government it has been the practice to
furnish, for the information of the Department or Establishment
in which the complaint originated, copies of the reports made
by Special Agents of the Federal Bureau of Investigation. One
instance has been called to my attention in which the information contained in such reports has been disclosed to persons not
entitled to the same, which prompts me to write you and the
Heads of the other Departments stressing the fact that reports
of Special Agents are to be deemed confidential, inasmuch as
the Agents will have great difficulty in procuring information
if their reports are made available to persons under investigation or to those not officially entitled to the same.
I shall appreciate it if you will bring this matter
to the attention of those in your Office who have occasion to
handle reports of the above character.
Sincerely yours,
(Signed)
HOMER CUMMINGS
Attorney General.
108
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
Subject;
X-9277
August 7, 1935.
Proposed regulation relating to loans
to executive officers of member banks.
Dear Sir:
There are inclosed herewith six copies of a tentative draft
of regulation relating to loans to executive officers of member banks.
It will be appreciated if you and the officers of your bank will study
this regulation and give the Federal Reserve Board your comments and
suggestions thereon at the earliest practicable date, not later than
thirty days from the date of this letter.
The draft of regulation is based upon the provisions of section
326(c) of the Banking Act of 1955 (H. R. 7517) as it passed the House
of Representatives.
Inasmuch as no substantial change has been made
in this section by the Senate it is felt that some progress can be
made at this time in the drafting of this regulation.
Of course, the
regulation will not be issued unless the Banking Act of 1935 is finally
enacted into law.
Very truly yours
- t y - t U t z i A , )'V
Chester Morrill,
Secretary.
Inclosures.(L - 101)
TO ALL FEDERAL
RESERVE AGENTS.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9279
August 10, 1935.
SUBJECT;
Code Word Covering New
Issue of Treasury Bills
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has boen
designated to cover a new issue of Treasury Bills
"NOXWOa" - Treasury Bills to be dated
August 14, 1935, and to mature
May 13, 1956.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOXVvIN" on page 172.
ry truly yours,
J. C. Nocll,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9280
August 10, 1955
Dear Sir:
There are enclosed herewith copies
of statement rendered by the Bureau of Engraving and Printing, covering the cost of preparing
Federal reserve notes for the month of July,
1935
Very truly yours
0. E. Foulk
Fiscal Agent
Enclosure
TO ALL FEDERAL RESERVE AGENTS
Ill
N
X-9280-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
July 1 to 31, 1955.
Series 1928
1935
July 1-31
Boston,
Cleveland,
Atlanta,
Kansas City,
Dallas
San Francisco,
$5
$10
-
-
-
21,000
-
-
13,000
15.000
28.000
,#20
Total Sheets
10,900
18,000
10,000
18,000
21,000
10,000
15,000
15.000
—
10,000
-
—
—
-M
21.000
38.000
Amount
$
860.00
1,548.00
1,806.00
860.00
1,118.00
1.290.00
87.000
7.482.00
87,000 sheets, 0 #86.00 per M,
$ 7,482.00
Series 1934
#5
Boston,
New York,
Philadelphia,
Cleveland,
Richmond,
Atlanta,
Chicago,
St. Louis,
Minneapolis,
Kansas City,
-
38,000
-
41,000
-
44,000
12,000
—
135.000
610
54,000
140,000
33,000
47,000
31,000
—
139,000
23,000
10,000
20.000
497.000
$20
$1000
10,000
10,000
-
22,000
-
10,000
—
—
—
—
800
—
—
-
-
—
—
52.000
684,800 sheets, @
800
Total Sheets
Amount
54,000
150,000
81,000
47,000
53,000
41,800
159,000
77,000
22,000
20.000
$ 4,644.00
12,900.00
6,966.00
4,042.00
4,558.00
3,594.80
11,954.00
6,622.00
1,892.00
1.720.00
684.800
$58,892.80
$86.00 per M,
TOTAL . . . .
58.892.80
$66,374,80
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9281
August 12, 1935
SUBJECT:
Coin and Currency Shipments.
Dear Sir:
There is inclosed a copy of a letter received from
the Third Assistant Postmaster General, together with a copy
of the Board's reply thereto, with reference to affording
the maximum protection available for coin and currency shipments valued at $250,000 or more, made from Washington to
Federal Reserve banks and branches.
The matter is brought
to your attention for your information and consideration in
connection with the protection of your bank under any policy
of insurance covering the shipments referred to.
Very truly yours,
YY)ovkM!
Chester Morrill
Secretary.
Inclosures
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
113
COPY
X-9281-a
POST OFFICE DEPARTMENT
THIRD ASSISTANT POSTMASTER GENERAL
WASHINGTON
July 10, 1935.
The Federal Reserve Board,
Washington, D. C.
Gentlemen;
With a view to affording the maximum protection available for
coin and currency shipments val'ued at §250,000 or more, made from
Washington by the Treasury Department, mainly addressed to Federal Reserve Banks and branch Federal Reserve Banks, including Federal Reserve funds mailed by the Treasury Department on orders from the Federal Reserve Board, and inclosed in direct pouches closed with rotary
locks of special combination, the Department is contemplating the inauguration of an arrangement whereby the postmaster at Washington, or
his authorized representative, will be given information, at the time
of mailing, when such shipments of coin and currency valued at
$250,000 or more, are made.
It is expected that in turn the postmaster at Washington, or his
authorized representative, will inform the Superintendent of the Third
Division, Railway Mail Service, at Washington, or his authorized representative, as to these mailings valued at #250,000 or more, and that
the Superintendent of the Third Division, Railway Mail Service, will
when considered advisable cause such telegraphic advance notice to
be given, in a confidential manner, of these particular mailings, as
will result in the shipments being accorded the maximum protection
available en route and between the railway stations and the post office after the shipments reach their destinations.
The proposed arrangement has been made the subject of an investigation by a post office inspector, who has recommended in part as
follows:
' "2. That the Custodian of the Federal Reserve
Vault and the Foreman in Charge of the Treasury Branch
of the Registry Section, notify the Assistant Superintendent of Mails in charge of that Section, of shipments of
currency to the value of $250,000 or more."
It is understood that at present the Bureau of Engraving and
Printing furnishes the postmaster at Washington, D. C., such bills or
X-9281-a
— 2 —
lists of the Federal Reserve^mailings as enable the Washington, D. C,,
office to determine the value of any particular shipment. It will
therefore be a simple matter for the postmaster at Washington to furnish information to the Superintendent of the Third Division, Railway
Mail Service, or his authorized representative, when a shipment to
any particular consignee is valued at $250,000 or more.
As the proposed arrangement has for its object, as stated, the
more adequate protection of registered mail of large value during the
course of its transportation, through advance notice, in a confidential
manner, of the dispatch of the matter from Washington, it is presumed
that the proposed arrangement will be viewed with favor by you; however, if you desire to submit any comments or suggestions regarding
the matter, they will receive careful consideration.
An early reply will be appreciated.
Very truly yours,
(Signed)
C. B. Eilenberger
Third Assistant Postmaster General.
115
COPY
X-9281-b
August 12, 1955.
Mr. C. B. Eilenberger,
Third Assistant Postmaster General,
Post Office Department,
Washington, D. C.
Dear Mr. Eilenberger;
This refers to your letter of July 10, 1935 and to a letter from
the Acting Third Assistant Postmaster General of July 24 with reference to affording the maximum protection available for coin and currency shipments valued at $250,000 or more, made from Washington to
Federal Reserve banks and branches, and to our acknowledgement thereof
dated July 50.
It is noted from your letter that the Department is contemplating the inauguration of an arrangement whereby the postmaster at
Washington, or his authorized representative, will inform the Superintendent of the Third Division, Railway Mail Service, at Washington, or
his authorized representative, as to mailings of Federal Reserve notes
valued at $250,000 or more, and that the Superintendent of the Third
Division, Railway Mail Service, will when considered advisable cause
such telegraphic advance notice to be given, in a confidential manner,
of these particular mailings, as will result in the shipments being
accorded the maximum protection available en route and between the
railway stations and the post offices after the shipments reach their
destinations.
It is noted also that the postmaster at Washington, D. C.,
is now furnished information that enables him to determine the value
116
Mr. C. B. Eilenberger - #2.
X-9281-b
of any particular shipment, and that it would, therefore, be a simple
matter for him to furnish such information to the Superintendent of
the Third Division, Railway Mail Service.
You state in your letter that it is presumed the proposed arrangement will be favored by the Board but that you will give careful
consideration to any comments or suggestions regarding the matter
the Board may wish to submit.
The Board feels that the extent to
which information regarding valuable mail shipments furnished to the
Post Office Department is used by it for the protection of such shipments while in its possession is a matter for the determination by the
Post Office Department.
It, therefore, has no suggestions to offer
in connection with the proposed procedure, but it is assumed that utmost care will be exercised to see that advice of such shipments is
furnished only to such person or persons as may be necessary to insure the proper handling and protection of the shipments while they
are in the possession of the Department.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
X-9283
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 14, 1935.
Subject:
Distribution of Handbook for
Trust Examiners to Supervisory
Banking Authorities.
Dear Sir:
There is inclosed herewith for your information and
guidance a copy of a letter which the Federal Reserve Board
has addressed to the Federal Reserve Agent at the Federal Reserve Bank of Minneapolis with regard to the distribution of
a Handbook for Trust Examiners to banking authorities as a
step towards the attainment of substantial uniformity in examinations of trust departments of institutions exercising
fiduciary powers.
Your cooperation with the Federal Reserve
Agent at the Federal Reserve Bank of Minneapolis in this matter will be greatly appreciated.
Very truly yours,
~Q&l/sxx»)Y)/rVu^>
Chester Morrill,
Secretary.
Inclosure.
TO ALL
FEDERAL RESERVE AGENTS.
118
X-9285-a
August 14, 1935.
Mr. J. N. Peyton,
Federal Reserve Agent,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Mr. Peyton:
Receipt is acknowledged of your letter of August 2, 1935, to
Mr. Paulger requesting advice as to whether there would be any objection
to the furnishing of copies of the Handbook for Trust Examiners which
has been prepared under your direction to the banking authorities of the
several States.
The Board feels that, as you suggested, it would be desirable
for examinations of trust departments of institutions exercising trust
powers throughout the United States to be on a substantially uniform
basis.
The furnishing of copies of the Handbook your office has prepared
to the various State banking authorities would be a constructive step
towards attaining uniformity in trust department examination procedure,
and the Board feels that it would be desirable to furnish the banking
authorities of the various States with copies of the Handbook.
It is understood that, in the course of the preparation of the
Handbook, suggestions and criticisms were obtained from each of the Federal Reserve banks and suggestions were also obtained from members of the
Board's staff.
Therefore, while the Board has not attempted to approve
the Handbook as an official document of the Board, the Handbook may properly be considered to represent the composite thought of the System based
on its comparatively brief experience in active examinations of trust
119
—2—
departments.
X-9283—A.
In the circumstances, it is suggested that, in submitting
the Handbook to the banking authorities of the various States, attention
be called to these facts and any suggestions which the experience of any
such authorities indicates is desirable be requested, in order that eventually the Handbook may be made as complete and useful as practicable.
In this connection, specific attention should be called to the fact that
it is not contemplated that the Handbook will be used by institutions exercising trust powers as a manual covering the administration of trusts,
but that it is designed merely for the information and assistance of
examiners in determining whether or not trust departments are being conducted in accordance with sound practices and for the assistance of examiners in obtaining a correction of any unsound practices.
Accordingly,
it might be suggested to the State banking authorities that they not distribute the Handbook to institutions exercising trust powers.
As you know, it is the practice of each of the Federal Reserve
banks to keep in close touch with the banking authorities of the various
States in their respective districts and to cooperate with such authorities in connection with examinations of member banks.
In view of these
facts and in view of possible local questions in particular Federal Reserve districts, it would seem desirable that the Handbook be distributed
directly by you to the banking authorities of the States in your district
and that you furnish copies to each of the other Federal Reserve banks
and request that consideration be given to the desirability of each of
such banks distributing copies to the banking authorities of the various
States in their respective districts on the basis discussed in this letter.
120
-5-
X-9283-a
It is also suggested that copies of the Handbook be furnished
to the chief national bank examiners in the various Federal Reserve districts for their information and for such suggestions as they may deem
desirable.
It is contemplated that the distribution to the chief national
bank examiners will be made through the various Federal Reserve banks on
the same basis as the distribution to the banking authorities of the various States.
When you have forwarded printed copies of the Handbook to
the Board, it will be glad to forward a copy to the Comptroller of the
Currency for his information and for such suggestions as he may deem advisable .
As a matter of information in connection with a possible further revision of the Handbook, in the light of any suggestions which may be
received, it would also seem desirable that you request each of the Federal Reserve banks to forward your office any suggestions received, together with any comments which the Federal Reserve bank may desire to
make in connection therewith.
In view of the fact that the Handbook was
prepared by your office, it is assumed that, in the event any revision
should be necessary, it will be
prepared by your office.
A copy of this letter is being forwarded to each of the Federal
Reserve banks for their information and guidance.
ttie Board has requested me to express to you its appreciation
of your constructive work in this connection.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
121
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9284
August 16, 1955.
Subject:
Charges for examinations
of State member banks.
Dear Sir:
There is attached for your information and
guidance copy of a letter addressed by the Board under
date of August 16, 1935, to the Assistant Federal Reserve
Agent at the Federal Reserve Bank of San Francisco with
regard to charges for examinations of State member banks
and their affiliates.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS
X-9284—a
COPY
August 16, 1935.
Mr. S. G. Sargent,
Assistant Federal Reserve Agent,
federal Reserve Bank of San Francisco,
San Francisco, Calif.
Dear Mr. Sargent:
Reference is made to your letter of July 13, 1935, regarding
the cost of examination of affiliates of State member banks.
You state that it has been your practice to assess the cost
of examinations of affiliates only in cases where the examination was
made solely for the purpose of making recommendation for action in
connection with applications for voting permits and that where examinations of affiliates have been made in connection with your regular
examination of State member banks no charge had been made.
You ask
whether a charge should be made in such cases and whether you have
authority to make such a charge without first referring the matter to
the Federal Reserve Board for approval.
The Board feels that, as a general rule, if the costs of examination of a member bank are assessed against the bank, such costs
should include the costs of examinations of the bank's affiliates,
and that, if the costs of the examinations are not assessed against the
bank, costs of examinations of the affiliates should not be assessed;
and you are authorized to assess costs of examinations of affiliates on
this basis.
The Board feels, however, that the policy which you have
Mr. S. G. Sargent - 2.
X-9284~a
followed is proper and that the costs of examinations of affiliates made
solely for the purpose of making recommendations in connection with
applications for voting permits may properly be assessed, but in such
cases it is suggested that the matter be referred to the Board before
any assessment for costs of such examinations is made.
The question of uniform charges for examinations has been the
subject of consideration by the Federal Reserve Agents and the Board for
some time.
As you were advised in a letter dated November 3, 1934,
X-9011, the Board believed it advisable to defer action on the question
of general uniform charges for examinations until after completion of
examinations made in connection with certifications to the Federal Deposit Insurance Corporation and to continue in effect until July 1, 1955,
the instructions regarding charges for examinations contained in the
Board's letter of March 2, 1934, X-7010-a.
Further action on the general question of charges for examinations will be deferred awaiting the outcome of pending banking legislation.
It is suggested, therefore, that for the time being, except in
unusual circumstances and after submitting the matter to the Board, no
change be made in the existing practice with respect to assessment of
costs of examinations.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9285
August 17, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal reserve banks, the following code word has been designated to cover a new issue of Treasury Bills:
"NOYABE"
- Treasury Bills to be dated
August 21, 1935, and to
mature May 20, 1936. .
This word should bo inserted in the Federal Reserve Telegraph Code book, following the supplemental code word "NOXWOA" on page 172.
Very truly yours,
L. P. Bethea,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9286
August 17, 1955.
SUBJECT:
Proposed revision of Regulation I
relating to increase or decrease of
capital stock of Federal Reserve banks.
Dear Sir:
There are inclosed herewith six copies of a tentative draft (L-104) of a revision of Regulation I relating
to increase or decrease of capital stock of Federal Reserve
banks, together with six copies each of applicable forms
in connection with such regulation and a tentative draft of
instructions relating to the chocking and handling of applications for the issuance and cancelation of Federal Reserve
bank stock.
It will bo appreciated if you and the officers
of your bank will study these inclosures and give the Federal
Reserve Board your comments and suggestions thereon at the
earliest practicable date, not later than thirty days from
the date of this letter.
The draft of regulation, forms and instructions are
based upon the applicable provisions of the Federal Reserve
Act, as tliey would be amended by the provisions of the Banking Act of 1935 (H. R. 761?) if enacted in the form in which
-
2
X-9286
-
it passed the House of Representatives.
Inasmuch as no sub-
stantial change has been made in the applicable provisions
of the Banking Act of 1955 by the Senate, it is felt that
some progress can be made at this time in the drafting of
the regulation, forms and instructions.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures. (L - 104)
TO ALL FEDERAL RESERVE AGENTS
127
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
August 8, 1935.
(TENTATIVE DRAFT)
SUBJECT:
Instructions relating to the checking and handling of applications for
issuance and cancelation of Federal
Reserve bank stock.
Dear Sir:
In connection with the revised procedure of handling applications for the issuance and cancelation of Federal Reserve bank
stock as contemplated ty Regulation I, Revised, Effective _____________
1935, such applications should no longer be sent to tho Board for approval, and Federal Reserve bank stock may be issued and canceled by
Federal Reserve banks as soon as the appropriate applications are
found to be correct and in proper form, except in the ease of applications of State banks for admission to membership.
For guidance in
this connection, the following instructions are set forth covering
the principal points to be kept in mind in the checking and handling
of applications and related matters.
1.
Care should be exercised to see that all such applica-
tions are properly executed by persons duly authorized, that the figures
of capital and surplus appear to be correct according to available data,
138
- 2 -
that the number of shares of Federal Reserve bank stock which
the applying bank is required to hold, subscribe for or surrender
has been correctly computed, and that the application conforms in
all respects to the provisions of the law and the Board's regulations and rulings.
The capital and surplus of national banks as
shown in applications should be checked against the notices received from the Comptroller's office and against condition reports.
The capital structure in the case of State member banks, and total
deposit liabilities in the case of mutual savings banks, should be
checked against reports of condition and other available data.
2.
If there is any doubt whether an application is properly
executed, or as to the number of shares of Federal Reserve bank stock
which the applying bank is required to hold, subscribe for or surrender,
the matter should be taken up with counsel for the Federal Reserve bank
and, if necessary, the question should be referred to the Federal Reserve Board.
3.
In connection with the organization of national banks,
the Comptroller of the Currency should be advised direct by telegraph
as soon as an application for the issuance of Federal Reserve bank
stock has been received and found in proper form and the required payment has been received on the bank's subscription to Federal Reserve
bank stock.
This advice should be given by using the new code word
"NARRkTEMENT",
the meaning of which will be as follows;
129
— 3~
"Application for Federal Reserve bank stock to be
issued to the organizing national bank hereafter
named has been found to be in proper form, the
required payment has been received on the applicant's
subscription for the number of shares of Federal
Reserve bank stock hereafter shown, and such stock
will be issued to the organizing national bank as
of the date on which it is authorized by your office
to commence business:
(name and location of organiz-
ing national bank, and number of shares of Federal
Reserve bank stock applied for.)"
Upon the issuance of Federal Reserve bank stock to a newly
organized national bank, the Board should be advised thereof try telegraph using the new code word
, the meaning of
which will be as follows:
"Federal Reserve bank stock has bean issued today
to the following newly organized national bank:
(give name and location of organizing national bank)."
If, because of a delay in the receipt of the notice of the
chartering of the bank, the stock is issued as of a previous date, that
fact should be indicated in the telegram.
130
i*4—
4.
Upon cancelation of a member bank's entire holdings
of Federal Reserve bank stock and cessation of its membership, the
Federal Reserve Board should be advised by telegraph, using as at
present code word "NAVIFORM", the meaning of which is as follows:
"Refund of capital stock payment has today been
made on account of the (give name and location of bank)."
5.
Whenever a State member bank has been placed in the
hands of a conservator or other State official acting in a capacity
similar to that of conservator, it may wish to file a notice of intention to voluntarily withdraw from membership in the Federal Reserve System in the manner provided in section 9 of the Federal
Reserve Act, as amended, and the Board's Regulation H, and request
the Federal Reserve Board to permit withdrawal immediately, waiving
the six months' notice.
In any such case the conservator must join
in such notice of intention to vdthdraw and request for waiver.
Upon receipt of advice that you have received such notice and request for waiver and that your counsel is satisfied as to the
legal aspects of such notice and request for waiver, together with
your recommendation in the matter, the Board will take action as
soon as possible.
6.
As soon as practicable after February 1 and August 1,
respectively, of each yeary each member bank's required holdings of
Federal Reserve bank stock should be computed on the basis of its
latest condition report.
If the computation shows that its holdings
131
-5-
of Federal Reserve bank stock are cither greater or less than the
amount required by law, the bank should be requested to file en
application (Form 56) for on adjustment in its holdings of Federal
Reserve bank stock.
More frequent adjustments may be required in
the event of substantial changes in a member bank's capital and
surplus.
Adjustments at the request of a member bank .nay, of course,
be made at any time that it chengos the amount of its aggregate
capital and surplus.
7.
It will no longer bo necessary to furnish the Comp-
troller of the Currency semi-annual certificates of increases and
decreases of Federal Reserve bank stock on Forms 58 and 59.
In lieu
thereof, please furnish a report to the Board as of the end of June
and December of each year showing the following information:
1.
Number of shares of Federal Reserve bank stock
outstanding at beginning of the semi-annual period
2.
Number of shares issued during the period to
(a) Nov member banks
(b) Existing uembcr banks
(c)
Total issued
5.
Number of shares of Federal Reserve bank stock
canceled during the period on account of
(a) Cessations of membership
(b) Surrender of stock by continuing member
banks
(c)
Total canceled
4.
Number of shares of Federal Reserve ba#k stock
outstanding at end of semi-annual period
132
-6-
5.
Number of mcnber banks at end of semi-annual period
National banks
State banks
(a) Active
(b) Inactive (banking
operations discontinued)
__
In connection with items 2a and 5a above, attach e list
showing the name and location of each bank, number of shares issued
or canceled, and date issued or cancoled.
With respect to items
2b and 3b, above, Federal Reserve bank stock canceled and reissued
under the provisions of Section X of Regulation I should be excluded.
In support of item 5b, dhow the naue and location of each bank, the
date on which banking operations were discontinued, the date placed
in liquidation or in the hands of a receiver, if this has been done,
and the status of the application, if filed, for cancelation of'Federal
Reserve bank stock.
Very truly yours.
Chester Mbrrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
133
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
*
X-9288
August 20, 1935.
SUBJECT:
Holidays during September, 1935.
Dear Sir:
On Monday, September 2, Labor Day, the offices of the Federal
Reserve Board and all Federal Reserve banks and branches will be closed.
The Board is advised that the following holidays will also be
observed during September:
Head office and direct settling branches:
Monday,
September 9,
Thursday,
September 12
San Francisco
Los Angeles
(Admission Day
(in California
Baltimore
(Defenders Day
(in Maryland
Oklahoma City
(Special election
Other branches:
Tuesday,
September 24
On the dates given the offices mentioned will not participate in
either the transit or the Federal Reserve note clearing through the Gold
Settlement Fund.
Please include transit clearing credits for the head of-
fice and direct settling branches on each of the holidays with your credits
for the following business day.
No debits covering shipments of Federal
Reserve notes for account of the Federal Reserve Bank of San Francisco
134
—
2
**
should be included in your note clearing of September 9.
Please notify branches.
Very truly yours,
L. P, Bethea,
Assistant Secretary.
TO GOVERNORS OF ALL FRBABKS.
X-9288
X-9289
BOARD OF GOVERNORS
OF THE
FEDERAL
RESERVE
SYSTEM
FOR THE PRESS
For release in Morning Papers of Saturday, August 24, 1935.
Statement
of
Governor Eccles
on signing of the
Banking Act of 1955.
1 3 5
. 136
X-9289
In my judgment the banking bill now signed by the
President marks an important advance in the development of the
country's banking system and the adaptation of monetary administration to present day conditions and national needs.
It was realized
at the outset that the measure was far from being the last word in
creating a perfect banking system.
It was also realized that wide-
spread controversy was unavoidable, as it always has been, whenever proposals have been
put forth involving material changes in
the banking and monetary system.
The function of banking and
money is perhaps the most important of all in our entire economy..
It is at the very foundation of our interdependent industrial
society.
The subject is complicated and difficult to understand.
It always has been and presumably always will be beset by sharply
conflicting theories and opinions.
In view of the inevitable clash of divergent viewpoints,
and the initial opposition to any Federal Reserve legislation at
this time, the resultant measure seems to me to be a most satisfactory accomplishment upon which the members of the Banking and
Currency Committees of the Senate and House and the conferees, who
have worked tirelessly and conscientiously to reconcile different
points of view in accordance with what they believed to be in the
public interest, are to be congratulated.
Considering the objectives and purposes of the legislation
as originally proposed and as finally enacted, I am very well
\
-
2
-
X-9289
satisfied with the outcome. By providing for a centralized authority
over and fixed responsibility for monetary management, for a broadening of the basis for credit extension by the banking system, and
for better organization of the Federal Reserve System, a large contribution has been made to the solution of one of the most important
problems confronting the country today.
138
FEDERAL RESERVE BOARD
WASHINGTON
X-9290
AUgUS"b 22# 1955 i
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
Subject:
Proposed revision of Regulation H relating to membership in the Federal Reserve
System of State banks under provisions af
section 9 of the Federal Reserve Act.
Dear Sir:
There are inclosed herewith six copies of a tentative draft
(ir*120) of a revision of Regulation H relating to membership in the
Federal Reserve System of State banks under the provisions of section
9 of the Federal Reserve Act, together with six copies each of applicable forms in connection with such regulation.
It will bo appreciated
if you and the officers of your bank will stucfy these inclosures and
forward to the Board your commonts and suggestions thereon at the
earliest practicable date, not later than thirty days from the date
of this letter.
The tentative draft of the regulation and forms have
been prepared by the Board's staff but not considered by the Board and,
in order to expedite the natter and with the permission of the Board,
are being sent to you at the same time that they are being submitted
to members of the Board for consideration.
Very truly yours,
hf)cnAsJ-P
Inclosures. (L - 120)
TO ALL FEDERAL
RESERVE AGENTS
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9291
August 22, 1935.
SUBJECT:
Proposed Revision of Regulation P
Relating to Holding Company Affiliates
and the Granting of Voting Permits.
Dear Sir:
There are inclosed herewith six copies of a tentative
draft (L-121) of a revision of Regulation P relating to holding
company affiliates and the granting of voting permits, together
with six copies each of a tentative draft of a revision of Form
P-3 (exhibit I.), alternative tentative drafts of a revision of
Form P-4 (exhibit N), and a tentative draft of a letter containing instructions concerning the preparation of the exhibits accompanying applications for voting permits for which there are
no printed forms.
It is not contemplated that the other printed
forms in connection with this regulation will be revised at this
time.
It will be appreciated if you and the officers of your bank
will study the inclosures and give the Board your comments and
suggestions thereon at the earliest practicable date and not later
than thirty days from the date of this letter.
With reference tc the alternative drafts of Form P-4,
it will be observed that draft "A" contains a narrower authorization for the interchange of reports and information than draft "B"
-
or the present printed form.
2
X-9291
-
In some cases organizations subject
to the supervision of authorities of one jurisdiction have objected
to consenting that information concerning their affairs might be
furnished to supervisory authorities of other jurisdictions and,
in view of this fact, draft "A" has been prepared.
On the other
hand, it has been suggested that in obtaining cooperation from
supervisory authorities having jurisdiction of certain organizations in a holding company affiliate group, it is desirable for the
Federal Reserve agents to be in a position to furnish to such authorities information concerning organizations in the same group
which are subject to the supervision of other authorities.
Accord-
ingly, it will be appreciated if particular consideration is given
to the alternative drafts of Form P-4 in view of all the circumstances involved.
The tentative draft of the regulation has been prepared
by the Board's staff but not considered by the Board and, in order
to expedite the natter and with the permission of the Board, is
being sent to you at the same time that it is being submitted to
the members of the Board for consideration.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures (L - 121)
10 ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
washington
X-9292
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 22, 1935.
Subject: Proposed Revision of Regulation Q.
Dear Sir;
There are inclosed herewith six copies of a tentative draft
of a revision of Regulation Q.
It will be appreciated if you will
study this regulation and furnish to the Board your comments and
suggestions thereon at the earliest practicable date, not later than
thirty days from the date of this letter.
Your special attention is invited to the definition of savings deposits in subsection (e) of section II of the inclosed draft
of the regulation. As you know, the Banking Act of 1933 prohibited
the payment of interest on demand deposits and the payment of time
deposits before maturity but did not make these restrictions applicable to savings deposits.
Accordingly, savings deposits are a favor-
ed class of deposits which offer the greatest temptation for improper
classification because they are the only deposits with respect to
which member banks have the privilege of making payment on demand
with interest and, at the same time, of carrying reserves of only 3
per cent.
It is believed that the vagueness of the present definition
facilitates improper classification to a certain extent.
The re-
quirement that savings deposits consist of funds accumulated for
"bona fide thrift purposes" has not proved satisfactory from a
practical standpoint because of the great difficulty of determining whether this requirement is met by the facts of particular
cases.
In addition to the improper classification of demand deposits and time deposits as savings deposits, there has been considerable abuse of savings deposits in certain sections of the
country by using them as checking accounts through the method of
drawing negotiable or non-negotiable orders on such deposits payable to third parties, and sending such orders through the regular
banking channels for collection without the presentation of the
pass book.
This abuse has usually been coupled with the practice
of leaving the pass book with the depository bank, despite the
Board's ruling that a deposit may not be classified as a savings
deposit if the pass book is retained by the bank.
On April 12, 1955, the Board addressed an inquiry (X-9176)
to the chairmen of all the Federal Reserve banks requesting their
views as to whether some modification should be made in the ruling
that savings pass books may not be retained by the depository bank.
The replies to this inquiry disclosed a wide divergence of opinion
regarding this question but all of the banks stated that they felt
that certain exceptions to the rule should be made.
For many years the Board has endeavored unsuccessfully to
prevent the evasion of the reserve requirements through the device
143
- 3 -
X-9292
of classifying interest bearing personal checking accounts as savings deposits.
Since the enactment of the statute prohibiting the
payment of interest on demand deposits the temptation to evade the
law in this manner is much greater and will become increasingly
greater as business revives and competition for bank deposits becomes more active.
For these reasons it would seem especially desirable to
have a definition of savings deposits which can be effectively enforced and which will close the door to abuses.
The present would seem to be an especially favorable time to
accomplish these objectives because there is less competition for
time deposits than normally and because there is every reason why
the banks should be glad to be relieved of paying interest on personal checking accounts.
Moreover, with the present large amount
of excess reserves it would cause no sudden hardship to force deposits which have heretofore been classified for reserve purposes as
time deposits to be classified as demand deposits.
The definition contained in the attached draft of the regulation has been prepared in an endeavor to meet the evasions and
abuses mentioned above and to provide a workable and effective basis
of classification of savings deposits.
It will be noted that the re-
quirement that savings deposits shall consist of funds accumulated
for "bona fide thrift purposes" has been omitted from the definition
and that there has been substituted a requirement that savings deposits
X-9292.
- 4 -
shall consist of funds of one or more Individuals or of an organization not operated for profit.
It is hoped that this restriction
upon the class of depositors whose funds may be classified as savings deposits may eliminate most of the cases in which funds have been
improperly classified as savings deposits.
Paragraph (l) of the new definition is essentially the same as
paragraph (2) of the existing definition.
Paragraphs (2) and (3) of
the new definition are designed to liberalize the requirement that
the pass book must be presented whenever a withdrawal is made and the
Board's ruling that the pass book may not be retained by the bank, so
as to care for certain cases of hardship and inconvenience which
would be caused by a rigid enforcement of such requirements, and
still to place such restrictions on the making of withdrawals as will
prevent the use of savings deposits as checking accounts.
It should
be noted that paragraph (3) prohibits the making of withdrawals from
savings deposits by negotiable instruments payable to or indorsed to
a third party.
The only exception to this prohibition is in cases
where a depositor makes a withdrawal through the agency of a bank, in
which case, the collecting bank may be the payee of a negotiable instrument drawn upon the depository bank.
In connection with the proposed definition of savings deposits
which has been incorporated in the draft of Regulation Q sent you
herewith, the Board will be glad to receive your comments as to the
desirability of changing the period at the end of paragraph (3) of
X - 9 2 9 B
-
5
-
the definition to a semicolon and adding, with the appropriate number,
either or both of the following two paragraphs:
PARAGRAPH A
If more than one withdrawal be made from such deposit
during any one calendar week, no interest shall be paid
on any part of such deposit for the calendar month in
which Saturday of such week falls.
PARAGRAPH B
The amount in such deposit plus the amount in any
other savings deposit belonging to the same depositor in
the same bank does not exceed #0,000.
paragraph A would be inserted for the purpose of preventing
the classification as savings deposits of deposits which have a large
amount of activity.
In some cases several withdrawals a week are
made from savings accounts.
It would seem that such accounts should
be classified as demand checking accounts but if they are classified
as savings deposits the proposed paragraph would prevent the payment
of interest during the month in which the excessive number of withdrawals is made.
It is believed that the proposed limitation of not
more than one withdrawal during any one calendar week would be sufficiently liberal to accommodate persons who find it necessary to draw
upon their savings accounts and who are accustomed to paying their
bills on a weekly basis.
However, if you should feel that the prin-
ciple of limitation upon the number of withdrawals during a given
period would be desirable but believe that a different number of withdrawals during a particular period would be more satisfactory, please
submit your opinion upon this matter to the Board.
-
6
X-9292
-
Paragraph B, which limits the amount in a savings deposit to
$10,000, would supplement the limitation upon the class of depositors who may maintain savings deposits by adding en amount limitation
on such deposits.
Although any such limitation is open to the crit-
icism that the amount is arbitrary, the question arises whether
such a limitation might be of some value in preventing the classification as savings deposits of deposits which do not consist of
funds of the type which it is believed Congress had in mind in enacting the provisions regarding savings deposits.
If you believe that
such an amount limitation is desirable but think that a different
amount would be mare advisable, your suggestions regarding the
matter will be appreciated.
As indicated above, however, your comments and suggestions will
be appreciated not only with regard to the draft of the definition
of savings deposits but also with regard to the other provisions of
the inclosed tentative form of the regulation.
The tentative draft of the regulation has been prepared by the
Board's staff but not considered by the Board and, in order to expedite the matter and with the permission of the Board, is being sent
to you at the same time that it is being submitted to the members of
the Board for consideration.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures. (L - lis)
Digitized forTO
FRASER
ALL FEDERAL
RESERVE AGENTS
f
147
BOARD OF G O V E R N O R S
OF THE
*******
FEDERAL RESERVE SYSTEM
WASHINGTON
X-9295
August 2?., 1955.
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
Subject;
Revision of Regulation D Relating
to Reserves of Member Banks.
Dear Sirs
There are inclosed herewith six copies of a tentative revision
of Regulation D relating to reserves of member banks.
It will be appre-
ciated if you and the officers of your bank will study this regulation
and give the Federal Reserve Board your comments and suggestions thereon
at the earliest practicable date, not later than thirty days from the
date of this letter.
In a letter recently sent to you with copies of a proposed
revision of Regulation Q relating to the payment of interest on deposits,
there is an explanation of the reasons why it is thought advisable to
revise the definition of "savings deposits" which now appears in Regulation Q and the similar definition of "savings accounts" which now appears
in Regulation D.
In connection with the proposed definition of "savings
deposits" which has been incorporated in the draft of Regulation D sent
you herewith, the Board will be glad to receive your comments as to the
desirability of changing the final period of paragraph (3) of the definition to a semicolon and adding, with the appropriate number, either or
both of the following two paragraphs:
148
X-9S95
To All Federal Reserve Agent
Paragraph A*
"If more than one withdrawal is made from
such deposit during any one calendar week, the entire deposit shall be classified, for the purpose
of computing the bank's required reserves, as a
demand deposit during bhe whole of the calendar
month following the calendar month in which Saturday of such week falls."
Paragraph B.
"The amount in such deposit plus the amount
in any other savings deposit belonging to the same
depositor in the same bank does not exceed Ten
Thousand Dollars ($10,000)
In the event that you believe that some such addition to the
proposed definition is desirable your further comments are invited with
respect to the language used, the limitation on the number of permitted
withdrawals and the amount allowed as the maximum in any savings deposit.
The tentative draft of the regulation has been prepared by the
Board's staff bub not considered by the Board and, in order to expedite
the matter and with the permission of the Board, is being sent to you at
the same time that it is being submitted to the members of the Board
for consideration*.
Vciy truly yours
Inclosures. (L- 119)
TO ALL FEDERAL RESERVE AGENTS..
Chester Morrill,
Secretary.
149
FEDERAL RESERVE BOARD
WASHINGTON
X-9294
august 24, 1935.
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
SUBJECT:
Reprinting and revision of
Board1s regulations.
Dear Sir:
In view of the amendments to the law contained in the Banking
Act of 1955, the Board is having revisions of the following regulations
prepared:
Regulation A - Discounts under Sections 13 and 13a.
(Will also include provisions re advances under Section 10(b) as amended.)
Regulation D - Reserves of member banks.
Regulation H - Membership of State banks and trust companies.
Regulation I - Increase or decrease of capital stock of Federal Reserve banks and cancellation of old
and issue of new stock certificates.
Regulation L - Interlocking bank directorates and other
relationships under the Clayton Act.
Regulation P - Holding company affiliates - voting permits.
Regulation Q - Payment of interest on deposits.
Regulation R - Relationships with dealers in securities.
It will also be necessary to issue an entirely new regulation
regarding loans to executive officers.
Drafts of some of the above regulations have already been sent
to the Federal Reserve banks with requests that they give the Board the
150
— 2 —
X—9294
benefit of their criticisms and suggestions and drafts of the others listed
above will be sent to them as soon as they are ready*
In view of the fact that the Banking Act of 1935 changed the
Board's name to "Board of Governors of the Federal Reserve System", the
Board is also considering the advisability of reprinting all of its other
regulations but knows of no special reason for amending or revising them
at this time.
However, the Board would appreciate advice from you at your
earliest convenience as to whether you or the officers of your bank know of
any important reason why any of the existing regulations other than those
listed above should bo amended or revised before they are reprinted.
If
you feel that any of them should be amended or revised, the Board would be
glad to receive your suggestions as to the respects in which they should
be changed.
Of course Regulation M will be superseded by a new regulation to
be issued by the Federal Open Market Committee after March 1, 1956.
Very truly yours,
Chester Morrill,
Secretary.
TO CHAIRMEN OF ALL FEDERAL RESERVE BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9295
August 25, 1955
SUBJECT:
Code Word Covering New
Issue of Treasury Bills
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal reserve banks, the following code word has been designated to cover a new issue of Treasury Bills:
"NOYACK" - Treasury Bills to be dated
August 28, 1955, and to
mature May 27, 1956.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental code word "NOYABE" on page 172.
Very truly yours,
L. P. Bethea
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9297
August 26, 1935.
Dear Sir:
Section 319 of the Banking Act of 1935 approved August 23,
1935, provides that "Any member bank which holds capital stock of a
Federal Reserve bank in excess of the amount required on the basis of
six percentum of its paid-up capital stock and surplus shall surrender
such excess stock".
Accordingly, it is requested that a check-up be
made of each member bank's holdings of Federal Reserve bank stock,
using the June 29, 1935 condition reports as a basis, and that any
member bank holding stock in excess of six per cent of its aggregate
paid-up capital stock, capital notes and debentures sold to the Reconstruction Finance Corporation, and surplus, including reserve for
dividends payable in common stock described in the Board's letter of
May 20, 1935 (x-9215), be requested to submit an application for
cancelation of its excess holdings.
The attached application form, a
supply of which should be prepared locally, should be used for this
purpose.
When an application in any such case has been found to be
correct and in proper form the Federal Reserve bank stock may be canceled without submitting the application to the Federal Reserve Board.
153
-2-
X-9297
As you know, the draft of the proposed revision of Regulation
I provides that applications for issuance and cancelation of Federal
Reserve bank stock, except incident to applications for membership,
shall be handled at the Federal Reserve banks without submission to the
Board.
Although the revised regulation has not been approved by the
Board, until further notice it will not be necessary to submit to the
Board applications for cancelation of Federal Reserve bank stock on
account of excess holdings thereof, even though such holdings of Federal Reserve bank stock may have become excessive subsequent to the
date of the enactment of the Banking Act of 1935.
Pending the issuance
of revised Regulation I, please furnish the Board at the end of each
month with a statement showing, by banks, the number of shares of Federal Reserve bank stock canceled on applications submitted on the
inclosed form.
Very truly yours,
Jb&uD&u
Chester Morrill,
Secretary.
Inclosure.
To all Federal Reserve Agents.
154
X-9297-a
FEDERAL RESERVE BOARD
Form 60 - Temporary
(August 1935)
NOTE:
This application should be sent to the
Federal Reserve Bank of your district,
APPLICATION FOR REDUCTION IN HOLDINGS OF FEDERAL RESERVE BANK STOCK
(Date of Application)
Under the terms and provisions of the Federal Reserve Act, this Bank hereby
makes application for the adjustment shown below in its holdings of the capital'
stock of the
FEDERAL RESERVE BANK OF
The capital and surplus of this Bank, on date of this application, is as
follows:
Capital notes or debentures sold to Reconstruction
Finance Corporation
$.
Capital stock (par value, unless not fully paid in,
in which case show amount paid in);
First preferred
«...
Second preferred
.
Common
Surplus
Reserve for dividends payable in common stock . .
TOTAL
Six per cent of the above capital and surplus, including NUMBER OF SHARES
reserve for dividends payable in common stock, amounts to
...., and the number of shares of Federal Reserve
I
bank stock of the par value of $100 each which this bank is
required to hold is 1/ .
Federal Reserve bank stock now held
This bank, therefore, hereby makes application for the
cancelation of
shares of Federal R e s e r v e bank stock.
The above action will be reported to the Board of Directors of this Bank
at its next meeting.
(Legal name of bank)
(City or town and State)
By
(Charter number)
(SEAL OF BANK)
(President)
ATTEST:
(Cashier or Secretary)
1/
If 6 per cent of the capital and surplus, including reserve for dividends
payable in common stock, amounts to a sum not divisible by 100, the bank
should hold one additional share of stock for any excess or fractional
part of $100.
(OVER)
155
(Reserve side of Federal Reserve Board Form 60 - Temporary)
X-9297-a
CERTIFICATE OF CANCELATION OF FEDERAL RESERVE BANK STOCK
shares of Federal Reserve bank stock were canceled
and refund made thereon on
(Date)
(Deputy Governor)
#
156
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9299
August 27, 1935.
SUBJECT:
Interpretations of Federal Reserve Act
as Amended and the Board's Regulations.
Dear Sir:
The Board expects to include in the next number of the Federal
Reserve Bulletin a suggestion that any requests for interpretations of
the Federal Reserve Act, as amended by the Banking Act of 1935, and of
the regulations of the Board which may be made by member banks and
others be submitted by them to the Federal Reserve Agents.
It will be
recalled that a similar statement was included in the Federal Reserve
Bulletin for December, 1953, at page 768, and it will be helpful in
this connection if the officers of the Federal Reserve banks will encourage member banks and others, whenever opportunity presents itself,
to submit such inquiries with respect to the lav/ and the regulations to
the Federal Reserve Agents rather than to the Board of Governors of the
Federal Reserve System.
As indicated in the statement in the 1933 Bulletin, it is expected that a Federal Reserve Agent will answer any such inquiry himself
unless the matter is one which should be referred to the Board of
Governors of the Federal Reserve System for consideration.
In the
latter event the Agent should forward the inquiry to the Board with
X-9299
-2-
all information necessary to enable the Board to answer it.
In accord
with the procedure regarding interpretations and rulings issued following the enactment of the Banking Act of 1933, the Board expects to
furnish to all Federal Reserve banks copies of interpretations and
rulings of general interest which it may issue under the law as amended
by the Banking Act of 1935 or the regulations of the Boai*d pursuant
thereto.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
158
FEDERAL RESERVE BOARD
WASHINGTON
X-9300
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 27, 1935
SUBJECT:
Penalties for Deficiencies
in Member Bank Reserves
Dear Sir:
You will recall that by letter dated April 14, 1933 (X-7411),
addressed to the Governors of all Federal Reserve banks, the Board prescribed certain rules to be followed by the Federal Reserve banks in
refraining in certain enumerated cases from the assessment of penalties
against member banks for deficiencies in reserves.
The Board will be
pleased to consider any comments which you may care to submit with respect to the rules referred to or the specific classes of cases in
which penalties need not be assessed.
The Board will also be glad to
receive your views as to the advisability of incorporating in Regulation D, which is now in process of revision, either a reference to such
rules or an indication that in exceptional cases some relaxation of the
provisions of the regulation may be possible.
TO ALL FEDERAL
Very truly yours,
}Y)vvuUl
Chester Morrill
Secretary.
RESERVE AGENTS.
159
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9301
August 28, 1955.
SUBJECT:
Tentative Draft of Revision of
Regulation A.
Dear Sir:
There are inclosed herewith six copies of a tentative
draft of a revision of Regulation A»
It will be appreciated if you
and the officers of your bank will study this regulation and furnish
to the Board your comments and suggestions thereon at the earliest
practicable date, not later than thirty days from the date of this
letter.
It has been suggested that there be included at an appropriate place in the regulation a paragraph reading substantially as
follows:
"Additional or marginal security. ~ Nothing contained
in this regulation shall be deemed to prevent a Federal Reserve bank, in connection with any advance or discount under
this regulation, from requiring such additional or marginal
security as it may deem necessary over and above security,
if any, required in such case by the other provisions of
this regulation, and the requirements in this regulation
with respect to the kinds of security shall not be applicable with respect to such additional or marginal security.
In no case, however, without the consent of the Board of
Governors of the Federal Reserve System, shall the face
amount of all assets of the member bank required as collateral security in connection with any advance or discount
under the provisions of this regulation exceed 150 per cent
of the amount of the advance or 50 per cent of the amount of
the paper discounted, as the case may be."
-
X-9501
2 -
It is requested that you include with your comments and
suggestions upon the regulation your views as to the advisability
of the inclusion of such a paragraph or a substantially similar
provision.
The tentative draft of the regulation has been prepared
by the Board's staff but not considered by the Board and, in order
to expedite the matter and with the permission of the Board, is
being sent to you at the same time that it is being submitted to
the members of the Board for consideration.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
. 125)
TO ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9302
August 29, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between
Federal reserve banks, the following code
word has been designated to cover a new issue
of Treasury Bills:
"NOYADO" - Treasury Bills to be dated
September 4, 1955, and to
mature June 5, 1936.
This word should be inserted in the
Federal Reserve Telegraph Code book, following
the supplemental code word "NOYACK" on page 172.
Very truly yours
¥
L. P. Bethea,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
161
162
BOARD OF G O V E R N O R S
O F T H E
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
X-9503
August 29, 19165.
SUBJECT:
Expense, Main Lines, Leased
Wire System, July, 1955.
Dear Sir:
Inclosed herewith you will find two mimeographed statements, X-9505-a and X-9503-b, covering
in detail operations of the main lines Leased Wire
System, during the month of July, 1935.
Please credit the amount payable by your
bank for your share of the expense of the Leased
Wire System, to the Federal tieserve Bank of uichmond
in your daily statement of credits through the Gold
Settlement Fund for the account of the Board of Governors of the Federal Heserve System, and advise the
Federal Reserve Bamc of Richmond by wire the amount
and purpose of the credit.
Very truly yours,
Fiscal Agent.
Inclosures.
V
TO GOVERNORS OF ALL F. R. BaKKS.
X-S503-a
CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JULY, 1935.
Words sent by
New York chargeable to other
F. R. Banks (1)
Business
reported
bv banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San ^rancisco
Total
50,964
142,619
- 26,475
59,672
49,540
48,769
82,603
63,406
32,567
62,611
55,180
83,191
717,597
1,143
52,107
142,619
27,665
40,851
50,700
49,982
85,934
64,862
53,765
63,845
56,801
36,085
755,210
-
1,188
1,179
1,360
1,213
1,351
1,456
1,198
1,252
1,621
2,892
15,813
F. R. Board business
Reimbursable business Incoming & Outgoing
Net Federal
Reserve
baak
business
.
267,051
„
Total words transmitted over main lines
(je)
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-9303-b).
(1)
Number of words sent by New York to other F. R. Banks for their sole benefit, charged to
banks indicated in accordancc with action taken at Governors' Conference
November 2—4, 1925.
Per cent of total
bamc business (*)
4.58
19.45
5.77
5.57
6.91
6.82
11.45
8.85
4.60
8.71
7.75
11.74
100.00
1,000,261
669,551
1,669,612
8
X-9503-b
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, JULY, 1935.
Name of bank
Boston
Sew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas CityDallas
San Francisco
Board
Total
Operators'
salaries
|
Retiremerit
Gontributions
# 24.65
260.00
122.79
1,358.29
20.25
225.00
27.60
306.66
17.35
225.00
21.52
262.50
4,382.43(#) 535.99
17.45
195.00
17.10
199.98
25.83
287.00
22.34
251.00
32.03
380.00
Operators'
overtime
S
~
1.00
—
—
—
—
-
—
$8,352.86
$685.88
—
$1.00
Less Reimbursable Charges
(&)
(#)
(*j
(a)
Fire
rental
$
—
Total
expenses
$
284.65
1,482.08
245.25
334.26
472.35
250.00(&)
284.02
4,719.42
212.43
217.08
512.85
275.54
412.03
15.254.75
15.254.75
$24,484.47
$15,464.73
-
—
-
-
-
—
-
-
—
9,815.87
$14,668.60
Pro rata
share of
total
expenses
$
642.48
2,855.04
555.01
817.04
1,015.60
1,000.40
1,679.55
1,298.17
674.76
1,277.64
1,156.82
1,722.09
-
#14,668.60
Credits
Payable to
Board
557.83
284.65 |
1,570.96
1,482.08
507.76
245.25
482.78
534.26
541.25
472.55
716.58
284.02
5,059.87(*)
. 4,719.42
1,085.74
212.45
457.68
217.08
964.81
512.85
863.48
273.54
1,510.06
412.05
, |
-
$9,249.74
-
$8,458.75
5,059.87(a)
$5,418.86
Main line rental, Richmond-Washington.
Includes salaries of Washington operators.
Credit
Amount reimbursable to Chicago.
2
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9504
August 29, 1935.
SUBJECT:
New Issue of Federal Farm
Mortgage Corporation Bonds.
Dear Sir:
In connection with telegraphic transactions between
Federal reserve banks covering Government securities,
the following code word has been designated to cover a
new issue of Federal Farm Mortgage Corporation Bonds;
"NOWCOKE" - Federal Farm
Ijgjo Bonds of
September 3,
September 1,
Mortgage Corporation
1959, to be dated
1955, and to mature
1939.
This code word should be inserted in the Federal Reserve Telegraph Code book on page 172.
Very truly yours,
L. P. Bethea,
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-9305
September 3, 1935,
Dear Sir:
The Federal Deposit Insurance Corporation has requested that the following provisions of paragraph (1) of
subsection (1) of section 12B of the Federal Reserve Act as
amended by the Banking Act of 1935 be called to the special
attention of all State member banks to which they are
applicable:
"On and after the effective date, the Corporation shall insure the deposits of all insured
banks as provided in this section: Provided,
That the insurance shall apply only to deposits of
insured banks which have been made available since
March 10, .1955, for withdrawal in the usual course
of the banking business: Provided further, That
if any insured bank shall, without the consent of
the Corporation, release or modify restrictions on
or deferments of deposits which had not been made
available far withdrawal in the usual course of the
banking business on or before the effective date,
such deposits shall not be insured."
It will be appreciated, therefore, if you will call
such statutory provisions to the attention of all State member
banks in your district having deposits which, because of their
restricted status or deferred maturity, are not insured under
X-9305
subsection (1) quoted above.
Please advise the Board of the
name of each such bank, together with the amount of restricted
or deferred deposits as of August 25, 1935, the effective date
of the Banking Act of 1935, and the terms of such restrictions
or deferments.
Very truly yours
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
168
BOARD OF GOVERNORS
O F T H E
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
fc'&as
OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
September 4, 1955.
SUBJECT:
Interpretation of Section 5204
of the Revised Statutes.
Dear Sirs
There is inclosed for your information a copy
of a letter from Mr. R. L. Austin, Federal Reserve
Agent at the Federal Reserve Bank of Philadelphia,
which presents certain questions regarding the classification of certain obligations as "bad debts" under
section 5204 of the United States Revised Statutes.
Since that statute relates by its terms to national
banks, Mr. Austin's letter was referred to the Comptroller of the Currency for his consideration, and
there is also inclosed a copy of a letter received
from the Comptroller of the Currency in this connection.
Very truly -yours,
ZZO }y)<ruii£^
Chester Morrill,
Secretary.
Inclosures.
TO ALL FEDERAL RESERVE AGENTS EXCEPT
FEDERAL RESERVE AGENT AT PHILADELPHIA
169
COPY
X-9506-a
FEDERAL RESERVE BANK OF PHILADELPHIA
925 CHESTNUT STREET
November 7, 1954.
Federal Reserve Board,
Washington, D. C.
Subjects
Request for interpretation
of Section 5204, U.S.
Revised Statutes.
Dear Sirs:The provisions of Section 9 of the Federal Reserve Act require State member banks, among other things, to conform to those
provisions of law imposed on national banks which relate to the payment
of unearned dividends.
Section 5204 of the United States Revised
Statutes states that no dividends may be paid by a national banking
association in an amount greater than its net profits on hand, deducting therefrom losses and bad debts, the latter being defined as "all
debts due to any association, on which interest is past due and unpaid
for a period of six months, unless the same are well secured, and in
process of collection".
In interpreting the definition of "Bad debts" as given in
Section 5204 in connection with our examinations of state bank members
we are in doubt as to the applicability thereto of two classes of debts,
viz., First, demand loans, the payment of the principal of which has
not been formally requested, but which are in arrears as to interest
X-9306-a
-2-
for a period of six months or more from the time when such interest
is due in accordance with the bank's policy of sending out interest
billsj and second, bonds, in default of interest for six months or
more, the principal of which has not matured either by reason of the
original terms of the obligations or through formal declaration by the
corporate trustee following default in the payment of interest.
In
defining "bad debts" reference is made in Section 5204 to all debts
due to any association", and it is not clear whether debts which have
not matured are "due" within the meaning of that section of the
statutes.
In order that we may furnish proper instructions to our
examiners governing their appraisal and classification of the assets
of state bank members we would appreciate receiving an expression of
your opinion as to whether or not the two classes of obligations referred to above should be regarded as "bad debts" as referred to in
Section 5204.
Very truly yours,
(Signed)
R. L. AUSTIN
Chairman of the Board, and
Federal Reserve Agent.
171
COPY
FR
X-9506-b
TREASURY DEPARTMENT
COMPTROLLER OF THE CURRENCY
WASHINGTON
August 27, 1935.
Secretary,
Federal Reserve Board,
Washington, D. C.
Dear Sir:
Reference is had to your letter of February 14, referring
to our reply of December 19, 1954, to your letter of December 15, 1954,
regarding the classification of certain obligations as "bad debts" under
Section 5204, United States Revised Statutes.
This is to confirm your understanding of the construction
to be placed upon our letter in the following respects;
If a note or bond is well secured and in the process of
collection, this office would not classify it as a bad debt in any
event.
In so far as bonds are concerned, it is understood that
a bond is not classified as a statutory bad debt, unless the actual
maturity has been reached or the bond has matured according to its terms
through some default and, in addition, the interest thereon is past due
and unpaid for a period of six monthsj and all or part of this six
months' period might have run before the bond matured.
In connection with notes payable on demand, it is understood that in the absence of State law fixing the date of maturity, it
is our position that such notes fall due within a reasonable time which
is held, further, to be the time for which the bank usually draws its
paper, and ordinarily not over six months; and that such notes are not
classified as statutory bad debts until, in addition to having matured
as outlined above, payment of interest has become due in accordance
with the terms of the instrument or the- custom of the bank and such ••
interest has been unpaid for a period of six months from the time when
payment of such interest thus became due, but that all or part of this
last mentioned six months' period might have run before the note matured.
For example, if a bank, following its custom of presenting bills for
interest quarterly, presents for payment on April 1, a bill for interest
172
-2-
X-9506-b
accrued to that date on a demand note dated January 1 which does not
expressly provide for interest payment dates, and such interest remains
past due and unpaid, the note would not become a statutory bad debt
until after October 1, and would not then be so classified if amply
secured and in process of collection.
It is understood, further, that ample security may consist
of good collateral or indorsements which can bo readily realized upon to
the full extent of the debt, and that an obligation is not considered
"in process of collection" merely because a demand, for payment has been
made without further steps to enforce collection in accordance with the
terms of the instrument or by due process of law.
Very truly yours,
(Signed)
J. F. T. O'CONNOR
J. F. T. O'CONNOR
Comptroller
X-9307
"LOANS TO INDUSTRY AND BUSINESS BY THE FEDERAL RESERVE BANKS"
Radio Address
by
MR. M. S. SZYMCZAK, GOVERNOR,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
National Broadcasting Company System,
Thursday,
September 5, 1955,
6:45 P.M. Eastern Standard Time.
Released for Publication
September 5, 1955
After 6:45 P.M.
174
X-9507
Let me thank the National Broadcasting Company for extending me
the privilege of addressing the country upon the subject of "Loans to
Industry and Business by the Federal Reserve Banks".
The occasion reminds me of a time more than twelve years ago when
radio speeches were in their infancy, and when regularly each week I
traveled to a North Side radio station in Chicago to deliver talks on
educational topics.
This evening the topic I shall speak on over this
national hookup is a quite different one, and yet in a sense what I
said then on economic-philosophic subjects involves the same fundamentals as what I have to say tonight on the subject of credit.
By way of preamble, let me say that it is difficult, to say the
least, for anyone to state the principles upon which solution of our
economic problems is possible.
No economist and no expert has been
able-to state the remedy clearly and persuasively.
That is because
each economist and expert sees the situation from his own point of
view, and his point of view is based on opinions he has already expressed, especially if he has written a book or two.
ing disparagingly of economists and experts.
them and know they have contributed much.
I am not speak-
I think very highly of
But I too have studied and
taught economics, and therefore know its limitations as well as its
possibilities.
Personally, however, I believe that the beginning of a solution of
our troubles lies in a full realisation that selfishness is at the bottom of them.
If we could, without appearing to preach, or lecture,
speak so as to move the heart as well as the mind of man for and in
-
X-9307
2 -
behalf of his fellow man, we would be racking a real step in the direction of a permanent solution of our economic perplexities.
It is humanly difficult, however, for us to see anybody else's
needs and sufferings but our own.
What is worse, perhaps, it is hard
for us to realize that our own welfare rests on what we are willing to
do for others.
In human relations, repayment in kind is inevitable.
We get back, with interest, exactly what we give out to others - good
or bad.
You have heard this often and much more ably said than I can say
it.
Yet you may be inclined to feel that it is too easy and can not be
true.
You may feel that problems so intricate as ours can not be solved
by so simple a method - that there must be some formula much more complex
than just this simple formula of charity - real charity.
We are inclined in our own human way to be much impressed by things
we do not understand - like the boy who came home from school one afternoon, and. all out of breath said to his mothers
professor teaching us physics this afternoon.
"We had a very brilliant
He took the place of the
regular professor who is sick, and he talked to us all afternoon and nobody in class could understand a thing he said.
many of us are just like that boy.
It was wonderful."
How
We look for complex and mysterious
remedies for our ills, and we place on a pedestal the individual whose
words are big and whose theories are beyond our mental
grasp.
176
t
~ 5 -
let in fact truth is simple.
X-9307
It is here - there - every-
where . We could see it if it were not for the fog of prejudice
and ignorance in which we live.
Occasionally the fog lifts and then
we see the truth that was there all the time.
It tiay be astounding, -
it may even be shocking, but seeing it we accept it, for the light
of truth is its own evidence, and the mind can not resist it, ncr
remain dark when penetrated by its beams.
difficulties.
So it is with our economic
The solution of these problems rests in simple truths
that are all around us - truths in whose midst we have our dwelling truths which are near at hand and everlasting - truths which distinguish right from wrong in the relation of man to man.
These are the principles upon which to base the solution of
our economic problems; and yet, because the statement of them is so
simple, I dare say you are smiling at this moment and saying, "Physician - heal thyself."
But no one can do it alone.
The problem is
collective as well as individual, and the solution must be collective
as well as individual.
The correction of evils, economic or social, must begin with
a sincere and frank admission of our own limitations - our failures
to see the truth.
From that point on we can begin to live a new
life for the good of society.
Once we have begun our new economic
and social life based upon these fundamental principles, we can proceed courageously without even the smallest fraction of a fraction
of fear, and going forward we become leaders - others follow.
The
177
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X-9507
world never follows one who is afraid or uncertain.
I have mentioned these general and fundamental considerations
because they are the essential background to my subject.
What I am
to speak of is only one of the simple measures that we have adopted
in order to meet our difficulties.
It is a measure for the lending
of money to established industrial and commercial enterprises whose
working capital has become depleted.
It is not a measure intended
to dispel all our economic difficulties.
But it is helpful, and for
that reason I want to explain it so that every business man to whom
it may be of benefit may know of its provisions and how he may avail
himself of them.
An outstanding fact about the present business situation is
that the banks of the countiy have an abundance of money to lend.
There are two main reasons why this money is not being used by borrowers.
The first and most important probably is that responsible
business men do not want to borrow unless they are confident that
they can make a profitable use of the funds.
The second is that
bankers do not want to lend unless they too are confident that the
borrowers can make a profitable use of the funds.
But credit is neces-
sary for business, and no effort is to be spared in removing obstacles
to the availability of credit whenever and wherever credit can profitably be used.
Accordingly, the Federal reserve banks have been au-
thorized to make a distinct departure from their established practice.
178
- 5 -
X-9507
They have been authorized under certain cirdumstances to guarantee
loans which local banks may not be willing otherwise to make# and
in exceptional circumstances, to make such loans themselves.
Briefly, the conditions are as follows:
A Federal reserve
bank will either cooperate with a local bank in making a loan to a
commerci&l Or industrial borrower, or it will make the loan direct.
This provision applies, however, first, only to lo&ns to established
industrial and commercial businesses; second, only to loans which
are for working capital purposes: third, only to loans which have
maturities of not more than five years; fourth, only to loans which
can be made on a reasonable and sound basis.
In administering the law the effort has been to avoid narrow interpretations.
The question whether or not a business is an
established one is interpreted as liberally as possible, though
the law can not by any stretch of interpretation be held to authorize the making of loans to people who wish to start up a new
business.
Similarly, the term "working capital" can not be stretched
to cover loans made for the purpose of the erection of buildings, the
purchase and installation of permanent equipment, or the refinancing
of existing indebtedness.
Such uses of credit are desirable and may
be taken into consideration incidentally in passing upon applications
for loans to provide working capital, but they do not come within
the primary purpose of this law, which applies instead to funds required for current operations.
179
- 6 -
X-9307
The requirement that loans have maturities of not to exceed
five years is a very generous one.
It gives the ordinary business
man ample time in which to restore his working capital".' He can
meet his successive payrolls, purchase his materials, renew his
inventories, and turn over his stock again and again before his
loan has finally to be liquidated.
Generally the loan is made pay-
able in easy installments.
In imposing the requirement that the loans be made on a
reasonable and sound basis. Congress has left it to the judgment of
the Federal reserve banks as to what security should be required in
individual cases.
The types of business covered by these loans are
of the utmost variety, and for that reason standard requirements as
to security can not be made in detail.
It can only be required that
the security offered, whatever its nature, be adequate.
The Fed-
eral reserve banks have on occasion accepted real estate mortgages,
chattel mortgages, stock and bond collateral, pledge of accounts
receivable, endorsement, assignment of life insurance policies, etc.
No business man who has assets of value to offer as security need
hesitate merely because they do not conform to the types of collateral which banks usually require.
The Federal reserve banks are not in competition with local
banks in making loans..
On the contrary, the idea is that the Reserve
banks should cooperate with local banks, which are the proper
agencies to supply credit to their communities.
Accordingly, the
- 7 -
X-9307
first step for any prospective borrower is to go to his local bank
and state his needs.
He should say to his banker that he is not seek-
ing an ordinary short-term extension of credit, but a loan under the
terms of Section 13b of the Federal Reserve Act.
know at once what he is talking about.
His banker should
If he does not, the borrower
should tell him what he has heard me say; he should tell the banker
that under the provisions of Section 13b of the Federal Reserve Act the
Federal reserve banks are authorized to cooperate with local bank3 in
making loans for working capital purposes.
In case the banker is not
familiar with this fact he should ask him to communicate with the Federal reserve bank of his district ahd find out the particulars.
the local banker should be glad to do it.
And
Ordinarily, of course, he does
not want to make long-term loans; he thinks of the depositors who may at
any time demand their money, and he wants his funds where he can call
then in quickly if he is subjected to such a demand.
But the banker
need not worry about the long maturity, for under Section 13b the Federal reserve bank will grant him a commitment to take the loan off his
hands during the period of the commitment.
That commitment makes the loan
as liquid as anything the banker can have in his bank.
Furthermore, in
taking over the loan, the Reserve bank will assume as much as four-fifths
of any loss.
It makes no difference whether the local bank is a member
of the Federal Reserve System or not.
The borrower will probably find, however, that his banker already knows all this; and if the applicant's credit is good and the loan
is one that the banker is justified in making he will be very glad to
place his funds in use under an arrangement which assures him perfect liquidity and guarantees him that his loss will not exceed 20 percent of the
- 8 -
X-9507
If, however, the banker does not respond, the borrower should communicate directly with the Federal reserve bank of his district.
The
Federal reserve banks are authorized to make the loans direct only in
exceptional circumstances and when credit is not available from the usual
sources.
The loan should be adequately secured and there should be a rea-
sonable prospect that it can be repaid from the operations of the business
The loan is not a gift.
Applications are acted on as promptly as possible
They are not referred to Washington.
They are passed on in the districts
where they originate, and each Federal reserve bank has final authority
to reject or approve the loans for which it receives applications.
Let me describe a typical loan.
A varnish manufacturer with a
plant in a medium sized industrial city needed $25,000 working capital.
He needed it for a longer time than his local bank cared to lend without
provision for liquidity.
Accordingly> an application was made by the
local bank, to the Federal reserve bank for a commitment.
After investiga
tion of the business and the security offered tiie application for the commitment was approved.
A loan of $25,000 was made by the local bank repay-
able in equal semi-annual installments, the last installment becoming due
in four years.
The security comprised a lien on plant and equipment, as-
signment of stock in another corporation and assignment of two life insurance policies.
Covering this loan the Federal reserve bank gave the
local bank a commitment to take over the loan at the local bank's request
any time within twelve months.
Before the end of the twelve months it
can either procure a commitment for a further period, or ask the Federal
reserve bank to take the loan off its hands.
The local bank is thus en-
abled to hold a loan of which the liquidity is assured, and on which its
- 9 -
X-9507
1 $ 2
proportion of loss, if any, will not exceed 20 percent
i'ho proviolcac ox' Suction 15b of the Federal Reserve Act have been
in actual operation for more than a year.
In that time the Federal re-
serve banks have approved nearly 1800 applications, aggregating about
$107,000,000.
As of June 50, the automobile industry was using over $7,000,000
of this credit.
Manufacturers of metals were using over $5,000,000.
The machinery and machine tool industry was using over $5,000,000.
tiles were using $2,500,000.
Tex-
Food products, furniture, hardware, grain,
feed, and seeds, paper, rubber, stone, clay and glass products, hides
and leather, chemicals, jewelry, clothing, among many others, are also
represented.
Loans have been made in all amounts.
The smallest so far is a loan
of $250.00, the largest a loan of $6,000,000.
It should be clear, there-
fore, that the program is one which is open to all business men, large or
small, whose businesses are established and whose prospects are such that
loans can be justified.
The measure I have described, Section 15b of the Federal Reserve Act,
is a simple one - like those truths I mentioned in the beginning.
Its pur-
pose is to aid business and industry and to maintain and increase employment.
For further information and for application forms, ask your banker,
or write to the Federal reserve bank of your district.
Thank you, and good night.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9508.
September 5, 1954.
SUBJECT; Code Words Covering New Issues of
Treasury Notes and Treasury Bonds.
Dear Sir:
In connection with telegraphic transactions between
Federal reserve banks covering Government securities, the
following code words have been designated to cover new issue
of Treasury Notes and Treasury Bonds:
"NOWKOR"
1 l/2% Treasury Notes, Series C-1939,
to be dated and to bear interest from
September 16, 1935, and to mature
March 15, 1939.
"NOWCOM"
2 5/4% Treasury Bonds of 1945-47 to be
dated and to bear interest from September 16, 1955, and to mature September
15, 1947.
These code words should be inserted in the Federal
Reserve Telegraph Code book, on page 172.
truly yours
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-9309
September 6, 1935.
SUBJECT:
Changes in Inter-district
Time Schedules.
Dear Sir:
Upon agreement between the Federal Reserve
banks affected, the Board of Governors of the Federal
Reserve System has approved the following changes in
the inter-district time schedules for cash items:
From
To
Minneapolis to Omaha
2 days
1 day
Minneapolis to Atlanta
5 days
2 days
Minneapolis to Birmingham
5 days
2 days
Minneapolis to Dallas
3 days
2 days
Minneapolis to Portland, Ore.
4 days
5 days
Very truly yours,
} Y)ovu£4.
Chester Morrill,
Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
185
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9310,
September 6, 1935.
The following telegram was sent to all Federal Reserve Agents today:
TRANS. NO. 2504
Since Banking Act of 1955 amended subsection (d) of
section 14 of Federal Reserve Act by adding at the end thereof the words
"but each such bank shall establish such rates every fourteen days, or
oftener if deemed necessary by the Board", the definition of code word
"MAR300N" has been changed effective immediately from "no change in
existing schedule of rates" to "Federal reserve bank has today established without change the rates of discount and purchase in existing
schedule".
New definition should be inserted in Federal Reserve Tele-
graph Code Book.
Morrill.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9311
September 7, 1935
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills
"NOYAFT" - Treasury Bills to be dated
September 11, 1935, and to
mature June 10, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "N0YAD0" on page 172.
Very truly yours,
J. *C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
187
BOARD OF G O V E R N O R S
O F
T H E
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
X-9312
September 9, 1935.
Dear Sir
Under the terms of an amendment to Section 21 of the Federal
Reserve Act the Board of Governors of the Federal Reserve System and
the Comptroller of the Currency are authorized to waive the requirement for the submission of reports of affiliates of State member banks
and National banks, respectively, where such reports are not necessary
to disclose fully the relations between the bank and the affiliate and
the effect thereof upon the affairs of the bank.
Pursuant to this
authorization the Board has adopted the following terms of waiver.
Pursuant to Section 21 of the Federal Reserve Act, as amended,
the Board of Governors of the Federal Reserve System waives the requirement for the submission of reports of affiliates (other than of holding
company affiliates, as defined in section 2 (c) of the Banking Act of
1935, as amended) of State bank members of the Federal Reserve System,
except:
a.
Where the affiliation exists by reason of control by
the member bank as defined in Section 2(b)(1) of the
Banking Act of 1935, as amended, which provision
reads as follows: \
"Except where otherwise specifically provided,
the term 'affiliate' shall include any corporation, business trust, association, or other
similar organization—
"Of which a member bank, directly or indirectly,
owns or controls either a majority of the
188
X-9312
voting shares or more than 50 per centum
of the number of shares voted for the
election of its directors, trustees, or
other persons exercising similar functions
at the preceding election, or controls in
any manner the election of a majority of
its directors, trustees, or other persons
exercising similar functions."
b.
Where the affiliate has been indebted to the member
bank for more than six months in the twelve
months preceding the report date in an amount in
excess of 1 percent of the bank's unimpaired capital and surplus or §5,000, whichever amount is
the smaller, regardless of whether the affiliate
is so indebted on the report date.
c.
Where the affiliate on the report date is indebted
to the member bank or the member bank owns obligations of or an interest in said affiliate on said
date and the aggregate amount of such indebtedness,
obligations, ahd interest is in excess of 1 percent
of the member bank's unimpaired capital and surplus
or $5,000, whichever amount is the smaller.
The Board of Governors of the Federal Reserve System also
waives the requirement for the submission of reports of affiliates in
all cases where the affiliate relationship is based solely on ownership
or control of any voting shares of the affiliate by a member bank as
executor, administrator, trustee, receiver, agont, depositary, or in
any other fiduciary capacity, except where such shares are held for the
benefit of all or a majority of the stockholders of such member banks.
The above provisions with respect to the waiving of the requirements for submission of reports of affiliates are subject to change
whenever deemed advisable by the Board, of Governors of the Federal Reserve System in order to require the submission of reports which are
necessary to disclose fully relations between member banks and their
affiliates and the effect thereof upon the affairs of member banks.
The foregoing terms of waiver do not apply to reports of holding
company affiliates, which, under the terms of the law, must in all cases
be submitted.
As the term "holding company affiliate", under Section
2 (c) of the Banking Act of 1955, as amended by Section 501 of the
189
5-
X-9312
Banking Act of 1955, does not include organizations which have been
determined by the Board of Governors of.the Federal Reserve System not
to be engaged, directly or indirectly, as a business in holding the
stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies, reports of such organizations, of course,
do not have to be submitted.
The above terms will be set forth in the printed instructions
which will go out at the time of the next call for reports of State
member banks and their affiliates.
In the meantime, it is suggested
that you inform the State member banks in your district of the terms of
waiver.
The Comptroller of the Currency is advising all National banks
to the same effect.
Very truly yours,
7M>
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
190
FEDERAL RESERVE BOARD
WASHINGTON
X-9315,
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
September 3.0, 1955
Dear Sir:
There is inclosed, for your information, a copy of a letter
dated September 4, 1935, received by the Board from Mr. Guy T.
Helvering, Commissioner of Internal Revenue, requesting the Federal
Reserve banks to carefully examine the October 15, 1935 coupons from
all $10,000 U. S. Treasury 4;|$ Bonds, series 1947-1952, presented for
payment, and to mark end. retain the envelopes containing coupons from
bonds numbered J-00017449 and F-00065816, if found.
The Board will appreciate it if you will make the arrangements
referred to in Mr. Helvering1s letter and, as requested, immediately
notify Mr. Elmer L. Irey, Chief of the Intelligence Unit, Bureau of
Internal Revenue, Washington, D. C., if coupons from either of the
above described bonds are located.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
TO GOVERNORS OF ALL F. R. BANKS
C O P Y
X—9513—a
TREASURY DEPARTMENT
Washington
Office of
Commissioner of Internal
Revenue
September 4, 1935
The Board of Governors of the
Federal Reserve System,
Washington Building,
Washington, D. C.
Gentlemen:
The Intelligence Unit of this Bureau has under investigation an important case involving income tax liability and
possible fraudulent evasion of payment of tax. In this connection it is essential to identify and locate the owner of
two #10,000 United States Treasury
Bonds, series 1947-1952,
numbers J-00017449 and F-00065816, on which semiannual coupons
may be cashed October 15th.
It is requested that instructions be issued to all Federal
Reserve Banks to have coupon tellers carefully examine the contents of each coupon envelope as they are received from the
banks around October 15th and mark and retain the envelope in
which coupons from either of the above numbered bonds are found
so that inquiries may be made at the respective bank by agents
of this Service.
It will be appreciated if you will kindly notify Mr. Elmer
L. Irey, Chief of the Intelligence Unit, Bureau of Internal
Revenue, Washington, D. C., immediately if coupons from either
of the above described bonds arc located.
Respectfully,
(Signed)
Guy T. Helvering,
Commissioner.
X-9314
Memorandum for the Board
From Mr. Morrill
September 12,
1935.
The last paragraph of section 10 of the Federal Reserve Act as
amended ty the Banking Act of 1955, approved August 23, 1955, reads as
follows:
"The Board of Governors of the Federal Reserve System
shall keep a complete record of the action taken by the
Board and ty the Federal Open Market Committee upon all
questions of policy relating to open-market operations
and shall record therein the votes taken in connection
with the determination of open-market policies and the
reasons underlying the action of the Board and the Committee in each instance. The Board shall keep a similar
record with respect to all questions of policy determined
by the Board, and shall include in its annual report to
the Congress a full account of the action so taken during
the preceding year with respect to open-market policies
and operations and with respect to the policies determined
by it and shall include in such report a copy of the records required to be kept under the provisions of this
paragraph."
This provision of law became effective on August 25, 1955, the
date of its approval by the President, and placed upon the Board the responsibility beginning with that date of keeping certain new records.
As a basis for the discussion of the procedure to be followed
in compliance with this provision of law it should be observed that it provides for three records, as follows:
(1) A complete record of the actions taken ty the Board of Governors of the Federal Reserve System upon all questions of policy relating
to open market operations and with respect to all other questions of policy
determined by the Board. This record is required to be kept of all actions
taken by the Board on questions of policy determined since the enactment of
the Banking Act of 1955.
(2) A complete record of the actions taken by the Federal Open
Market Committee as constituted until March 1, 1956, upon all questions of
policy relating to open market operations. This record is required to be
kept by the Board as to all actions taken by the committee after the enactment of the Banking Act of 1955, notwithstanding the fact that the members
of the Board are not members of the committee.
(5) A complete record of the actions taken by the Federal Open
Market Committee which is to come into existence on March 1, 1956, under
the terms of the Banking Act of 1955, upon all questions of policy relating to open market operations. This record is required to be kept by the
Board of all actions on questions of policy taken by the committee, notwithstanding the fact that the actions taken will be those of the Committee
192
193
- 2 -
X - 9 3 1 4
as such and not of the Board as such.
Inasmuch as the procedure to be followed by the Board with respect to all questions of policy determined by it* regardless of whether
they relate to open market operations or not, is the one of immediate
importance in point of time, it will be taken up first in this memorandum.
1.
Board's record of its own actions.
It will be noted that the Board as such is required
(1) to keep a record of the actions taken by it upon all questions of policy relating to open market operations and on all other questions of policy determined by it in which shall be set forth (a) the votes
taken in connection with the determination of such policies and (b) the
reasons underlying the action in each instance;
(2) to publish in its annual report a full account of the actions so taken during the preceding year; and
(3) to include in such annual report a copy of the records
required to be kept under the new provision of law.
The official minutes of the Board are prepared in sufficient
detail to show, in connection with each entry of action taken with respect
to any question of policy determined by the Board, the votes taken and
the reasons given as underlying the action taken; However, the minutes
of the Board are not confined to such questions. They include many details
and a great deal of routine business. There are also minutes of executive
committee meetings in addition to those of Board meetings. For these
reasons, and in order to carry out the new requirements of law, it is contemplated that a separate record shall be established entitled "Record of
Actions on Questions of Policy by Board of Governors of the Federal Reserve
System required by the last paragraph of section 10 of the Federal Reserve
Act as amended by the Banking Act of 1955". This will be in addition to the
Board's minutes which will be kept in accordance with existing procedure.
In this new record would be incorporated entries of all actions
taken by the Board on questions of policy determined by it, showing the
votes taken and the reasons given as underlying the actions taken. These
entries would not necessarily be as detailed or voluminous as the minutes
but would contain the required information and be entirely in harmony with
the minutes.
In this connection special consideration should be given to the
procedure to be followed with respect to actions taken when a quorum of
the Board is not actually present. These actions are taken by the executive committee or an interim committee pursuant to the provisions of the
Board's bylaws. However, it is believed that such actions, when they constitute actions or questions of policy, should be incorporated currently
194
-5-
X-9314
in the new record, showing, as in the case of Board meetings, the members
who took the action, without waiting until the date on which the minutes
containing such action are approved at a meeting of the Board at which a
quorum is present.
While it is believed that in order to comply with the new provision of law every action of the Board taken subsequent to August 25, 1955,
making any change in existing policy as well as every action establishing
any new policy should be included in this record, it is believed unnecessary to include entries of actions taken subsequent to the enactment of the
Banking Act of 1955 which merely carry out or conform to policies adopted
by the Board prior to the enactment of the Banking Act of 1955, without
change in such policies. For example the grant of permission to exercise
trust powers or the issuance of a temporary limited voting permit would not
ordinarily be regarded as the determination of a question of policy. It
may be proper also to omit from this record actions recorded in the minutes
which merely permit exceptions in particular instances to general policies
previously adopted, without the determination by the Board of any change
therein or of any new policy. In addition, the issuance by the Board of
rulings merely interpreting the law or the Board's regulations in accordance
with the opinion of the Board's counsel would not be regarded as action on
questions of policy, in the absence of special circumstances.
Specific reference in entries in the official minutes of the
Board to the names of individuals, banks, corporations and other organizations would be eliminated in the new record (unless necessary for a proper
understanding of the record) through appropriate substitutions for such
references, such as the words "an individual" for the name of a person, the
words "a State member bank" or "a national bank" for the name of a specific
member bank, etc. Portions of the discussion referring to the internal administration of the Board's affairs and other details in the entries of the
official minutes which are not considered to be necessary for a proper understanding of the action taken and the underlying reasons therefor would also
be eliminated.
A proposed title page and fly leaf of the new record to be kept
by the Board and samples of extracts from the minutes which it is proposed
to place in the record are attached.
Under the present procedure, as soon as the official minutes of
the Board have been drafted a copy is circulated among the members for
their approval and initials. In order to facilitate the preparation of the
new record it is contemplated that there would be included in the covering
circulation sheet accompanying each copy of the minutes a list briefly describing the items to be incorporated in the separate record. A sample of
such a circulation -sheet is attached. It would be considered that the
initials on this circulation slip would not only constitute approval of the
draft of the minutes but also approval of the inclusion in the record of
the items referred to in the list. It is assumed that the Board will wish
also to have a copy of the record as thereafter prepared in accordance
195
•»4""
X-9314
with this procedure circulated for approval and initials in the same manner as copies of the minutes are now circulated.
With respect to the record two forms might be established, the
first of which would contain the entries in chronological ot*der as they
appear in the minutes. The other form might be one in which the entries
would be classified and grouped according to subject matter. However, in
view of the fact that the law requires that an account of all actions on
questions of policy be included in the Board's annual report and that in
such account the discussion is likely to be in narrative form, primarily
according to subject matter, it would seem that the record in chronological
order which could be kept up to date currently, together with an index
which would classify and group the entries according to subject matter,
would be sufficient without the second form of record above mentioned.
2.
Board's Record of Actions Taken by Existing
Federal Open Market Committee.
As previously indicated, the Board is required to keep a record
of the actions taken by the Federal Open Market Committee as now constituted until it is replaced by the Federal Open Market Committee created
by section 12A of the Federal Reserve Act as amended effective March 1,
1936.
The legal requirements which must be met in this connection are
the same as those set forth on pages 1 and 2 of this memorandum with respect to the Board's record of its own actions. It is believed that the
meaning of the requirements that the Board shall keep the record and that
it shall record therein certain matters is that the Board is expected to
make the record and that mere acceptance, and custodianship of a record prepared
the committee of meetings at which the Board was not present or
represented would not suffice. The question of procedure therefore requires
special consideration because the membership of the present Federal Open
Market Committee does not include any member of the Board of Governors and
it has been the practice for the committee to hold meetings and take action
at such meetings when the Board is neither present nor represented in any
way. As a rule the Board has been dependent upon the oral reports of the
chairman of the committee after it has held its separate meetings and taken
action thereat. The formal minutes of the open market committee have been
received by the Board at a considerably later date. The requirements of
the law now suggest the necessity of giving consideration before the next
meeting of the Federal Open Market Committee to the question of the attendance of the Board and its secretarial staff. The law provides that
meetings of this committee may, in the discretion of the Board, be attended
by members of the Board.
196
-5-
X-9514
In this connection it may be pointed out that there have been onlytwo meetings this year of the Federal Open Market Committee and that in order
to comply with the law there should be two more meetings at Washington during
the remaining months of this calendar year.
In view of the exceptional importance that might attach to actions
taken by the Federal Open Market Committee the question which has been discussed heretofore should be determined definitely whether stenographic, verbatim reports should be made of such meetings. It is not considered that such
a report is contemplated by the law, which requires a record only of the actions
taken on questions of policy, of the votes taken in connection therewith, and
of the underlying reasons for such actions. However, in some circumstances a
stenographic report might be useful for reference purposes and as a basis for
the record which the Board is required to establish. The possible effect of
the making of a stenographic report upon the extent and freedom of discussion
will of course be a factor in determining this question. In any event the
stenographic report would not be treated as the "record" and would only be placed
in the Board's files for purposes of reference in the discretion of the Board.
If such a report should be desired it will be necessary either to
make arrangements with an outside expert stenographic reporter for services to
be rendered from time to time as needed or to employ and carry an expert stenographic reporter regularly on the payroll of the Board. If an expert stenographic reporter were employed and carried regularly on the payroll of the
Board it is likely that there would not be sufficient stenographic reporting
work to keep him constantly in good training, and there would be difficulty in
getting a competent person to accept employment in such circumstances. If an
arrangement were made with an outside stenographic reporter consideration should
be given to the desirability of requiring that his transcriptions be made at
the offices of the Board and that his stenographic notes as well as transcriptions be left in the offices of the Board's Secretary staff. Such a person
not only must be unquestionably competent but also one who can be relied upon
not to give any information to any one regarding the meetings which he attends.
In recognition of the fact that at present the Governors of the Federal reserve banks constitute the membership of the Federal Open Market Committee and that, in order to insure the correctness of the record with special
reference to the statement of the underlying reasons for actions taken, some
plan should be adopted for avoiding delay in obtaining their approval of the
record as well as that of the Board of Governors of the Federal Reserve System,
it would seem desirable that consideration be given to the establishment of a
procedure to be followed by the committee and the Board, before adjournment of
the meetings of the Federal Open Market Committee, for determining the contents
of the record. One suggestion that has been made is that a special sub-committee
might be appointed for this purpose.
This record should bo similar in form to the Board's record of its
own actions and it is suggested that it be entitled "Record of Actions on questions of policy by the Federal Open Market Committee, required by the last paragraph of section 10 of the Federal Reserve Act as amended by the Banking Act
of 1955".
X-9314
-6-
3. Board's Record of Actions Taken by Federal
Open Market Committee Established effective
March 1. 1936.
When the new Federal Open Market Committee created effective
March 1, 1936, begins to hold meetings and take actions the Board will be
required to keep a record of such actions and to meet the same legal requirements which must be met in connection with the actions of the present
Federal Open Market Committee and the Board's own actions. These requirements are set forth on pages 1 and 2 of this memorandum with respect to
the Board's record of its own actions.
The questions to be considered in connection with this committee
are different only in that the members of the Board of Governors of the
Federal Reserve System will also be members of the Federal Open Market
Committee, but the duty under the law of making the record of the actions
of the committee is cast upon the Board of Governors as such and not merely
upon the Federal Open Market Committee. Aside from this, the experience
that will have been gained prior to March 1 in complying with the requirements of the law will very likely dispose of virtually all questions of
procedure with respect to the actions of this committee.
Board's Annual Report
One of the requirements of the law is that the Board shall include in its annual report to the Congress a full account of the actions
taken "during the preceding year with respect to open market policies and
operations and with respect to the policies determined by it and shall include in such report a copy of the records required to be kept".
For this purpose it is assumed that the records kept in compliance with this requirement of the law should be attached to the annual report as appendices and that the account of the actions taken will be a
narrative in orderly form which will be included in the text of the annual
report and will be based upon and refer to the records included in the appendices. While it may be open to question whether the account in the next
annual report, which will be submitted in 1936 for the calendar year 1935,
is technically required to cover the entire year 1935 or only the period
subsequent to August 23, 1935, it would not seem necessary to give serious
consideration to this question as there would seem to be no undue difficulty
in making the account cover the entire year and it is assumed that the
Board will desire to do so.
Summary
Summarizing the foregoing matters the points to be decided by
the Board cover the determination of the following matters $
1. The approval of the proposed procedure and forms for keeping
the record of the Board's actions.
-7-
X-9514
2. The procedure and form for keeping the separate record of
the actions of the Federal Open Market Committee as now constituted, including the question of attendance of the Board and its secretarial staff
at meetings of the committee, and the matter of a stenographic verbatim
report of all proceedings.
5. The procedure and form for keeping the separate record of
the actions of the Federal Open Market Committee created effective March 1,
1956, including the question of attendance of the Board's secretarial staff
at meetings of the committee, and the matter of a stenographic verbatim report of all proceedings.
X-9314-
Tentative circulation slip to
accompany Board's minutes.
X
^Attached is a copy of the minutes of the meeting of the Executive Committee of the Board of
Governors of the Federal Reserve System held on
August 25, 1955.
It is proposed that extracts of the entries
in this set of minutes commencing on the pages, and
dealing with the subjects, referred to below will
be placed in the separate record required to be kept
under the provisions of Section 10 of the Federal
Reserve Act.
Page 1.
"
7.
Service of Mr. Harrison as director of
the B. I. S.
Letter re deposit of The Security Bank
and Trust Company, VJharton, Texas.
If you approve these minutes and the foregoing
list, please initial below;
Mr.
Thomas
Mr. Hamlin
Mr. Miller
Mr. James
Mr. Saymczak
Mr. Clayton
X
~*Tho minutes referred to are not attached as this is
merely a draft of the proposed form.
200
X-9314-b
Tentative cover for
Board's record
Record of Actions on Questions of Policy
by the
Board of Governors of the Federal Reserve System
Required by the
Last paragraph of Section 10
of the
Federal Reserve Act as amended
try the
Banking Act of 1955
X
801
X-9514-c
Tentative fly leaf
in Board's record
This record has been prepared pursuant to the last paragraph of Section 10 of the Federal Reserve Act, as amended by
the Banking Act of 1935, which reads as follows:
"The Board of Governors of the Federal Reserve
System shall keep a complete record of the action
taken by the Board and by the Federal Open Market Committee upon all questions of policy relating to
open-market operations and shall record therein the
votes taken in connection with the determination of
open-market policies and the reasons underlying the
action of the Board and the Committee in each instance.
The Board shall keep a similar record with respect to
all questions of policy determined by the Board, and
shall include in its annual report to the Congress a
full account of the action so taken during the preceding year with respect to open-market policies and
operations and with respect to the policies determined
by it and shall include in such report a copy of the
records required to be kept under the provisions of
this paragraph."
X
302
Sample entries in the Board's roeord.
X-3514-d
Meeting of Executive Committee on Friday, August £3, 1955.
PRESENT;
Mr.
Mr.
Mr.
Mr.
Eccles, Chairman
Thomas, Vice Chairman
Hainlin
Miller
The Chairman reported that he had discussed with the Treasury
Department the proposed service of Mr. Harrison, Governor of the Federal Reserve Bank of New York, as a director of the Bank for International Settlements, that he had pointed out that it was felt that
there were important questions of policy as well as law upon which
the Administration should be fully advised before reaching a conclusion
on the matter, and that he had submitted to the Secretary of the Treasury copies of a memorandum on this subject and an opinion of the Board's
counsel, which he had been assured would receive careful consideration.
He stated that, in view of the fact that he expected to leave Washington tomorrow, August 24, for the West and would be absent during most
of the month of September, he desired to recommend that if, during his
absence, the question of Mr. Harrison's service as a director of the
Bank for International Settlements be presented again, action on the
matter be deferred. He suggested, however, that, if in the meantime
the Board were advised that it had been found to be desirable from the
standpoint of the Administration to have Mr. Harrison attend the October meeting of the board of directors of the Bank for International
Settlements as an unofficial observer, the Board grant permission to
Mr. Harrison tv do so, with the understanding that he would report
to the Board fully in writing in accordance with the requirements of
the provisions of section 14(g) of the Federal Reserve Act.
The matter was discussed, and it was moved.
(1) that, if the question of Mr. Harrison's
service as a director of the Bank for International
Settlements be presented to the Board during Mr.
Eccles' absence, action on the matter be deferred
and;
(2) that if the Board bo advised that it is
considered by the Administration desirable for Mr.
Harrison to attend the October meeting of the board
of directors of the Bank for International Settlements in an unofficial capacity, the Board be prepared to grant permission to Mr. Harrison, as it
did upon the occasion of his attendance at a meeting of the board of directors of the Bank for
International Settlements in 1954, with the understanding that Mr. Harrison will submit a report to
the Board in writing in accordance with the requirements of section 14(g) of the Federal Reserve Act.
The motion was put by the chair and
was carried unanimously.
X-9614-e
Meeting of Executive Committee on Monday, August 26, 1955.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Thomas, Vice Chairman
Hamlin
Miller
James
Letter to the Federal reserve agent of a Federal reserve bank,
calling attention to the analysis of the report of examination of a
State nember bank as of June 1, 1955, in which reference was made to
an "excess balance" being carried by the member bank with an unincorporated firm of private bankers and in connection with which the question was raised whether the provisions of Section 19 of the Federal
Reserve Act, restricting deposits by a member bank with a non-member
"State bank or trust company" to a sum not in excess of ten per cent
of the member bank's capital and surplus is applicable to a deposit by
a member bank with such a firm of private bankers. The letter stated
that, in view of the terms of the limitation contained in Section 19,
it appears that such limitation is not applicable to a deposit by a
member bank with an unincorporated firm of private bankers; that the
Board had heretofore considered circumstances having a bearing on this
conclusion in connection with other provisions of the Federal Reserve
Act, and had reached the conclusion (in a ruling published at page 693
of the Federal Reserve Bulletin for September, 1917) that the Federal
reserve banks are not authorized to receive deposits from unincorporated
private bankers under the provisions of Section 15 of the Federal Reserve Act and (in a ruling published at page 108 of the Federal Reserve
Bulletin for February, 1955) that amounts due to and from private bankers may not be included ty member banks in amounts due to and from
"other banks" in computing the reserves required to be maintained by
member banks under the provisions of Section 19 of the Federal Reserve
Act.
The letter stated further that, however, the purpose of the
provision referred to is obviously to restrict the amount of deposits
of member banks in banking institutions which are not members of the
Federal Reserve System and that, therefore, it is felt that the carrying of the balance in question is contrary to the spirit and purpose
of the Federal Reserve Act and should be discouraged, even if it is
not technically in violation of the letter of the law, and it is suggested that the agent advise the member bank accordingly.
Unanimously approved.
303
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9315
September 12, 1935.
SUBJECT:
Code Word Covering Discount Earned on
Investments through Foreign Banks.
Dear Sir:
In order to reduce phraseology in telegrams sent
by the Federal Reserve Bank of New York to other Federal reserve banks on the last day of each month advising their
share of discount earned on investments through Foreign
Banks during each month, the following code word has been
designated for use effective September 50, 1955:
CORRUPTIVE:
We credit you today $_
representing your share of discount
earned on Investments through Foreign
Banks for the current month.
This word should be inserted in the Federal Reserve
Telegraph Code book, following the code word "Corruption"
on page 59.
Very truly yours
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X - 9 3 1 6
September 13, 1935
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills
"NOxAMP" - Treasury Bills to be dated
September 18, 1935, and to
mature June 17, 1956.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word
"KOYAFI"
on page
Very truly yours,
J. C. Noell,
Noell
Assistant Secretary
TO GOVERNORS OF ALL F. R. BaNKS
1 7 2 .
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9317
September 13, 1935.
SUBJECT:
Proposed Revision of Regulation
L Relating to Interlocking Bank
Directorates under the Clayton Act.
Dear Sir:
There are inclosed six copies of a tentative draft (L-175)
of a revision of Regulation L relating to interlocking bank directorates under section 8 of the Clayton Act, together with six copies of
a tentative draft of letter to all Federal Reserve Agents regarding
the procedure to be followed in enforcing the soction.
It will be
appreciated if you and the officers and counsel of your bank will
study these inclosures and forward your comments and suggestions
thereon to the Board at the earliest practical date, not later than
thirty days from the date of this letter.
The tentative draft of regulation and letter have been prepared by the Board's staff but have not been considered by the Board,
and, in order to expedite the matter and with the permission of the
Board, are being sent to you at the same time that they are being
submitted to members of the Board for consideration.
The tentative
draft of regulation and letter are not for publication.
207
-2-
X-9317
There are also inclosed six copies of a resolution of the
Board, adopted on September 12, 1955, granting permission in certain
types of cases until the adoption of general regulations by the Board
or until March 1, 1936, whichever is the earlier.
In submitting
your comments and suggestions regarding the inclosed tentative draft
of regulation and letter, it will be appreciated if you will also
give consideration to the desirability of including in the regulation
a provision granting permission until March 1, 1936 in cases of the
kind to which the resolution refers.
Very truly yours
L. P. Bethea,
Assistant Secretary.
Inclosures.
(L - 173)
TO ALL FEDERAL RESERVE AGENTS
308
BOARD OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
X-9318
September 16, 1935
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
Sub j ec t: Clayton Act - "lawfully serving" on
date of enactment of Banking Act of
1935.
Dear Sir:
As you know, section 8 of the Clayton Antitrust Act as •
amended by section 329 of the Banking Act of 1955 contains the
following provision:
"Until February 1, 1939, nothing in this section
shall prohibit any director, officer, or employee of
any member bank, of the Federal Reserve System, or any
branch thereof, who is lawfully serving at the same time
as a private banker or as a director, officer, or employee of any other bank, banking association, savings
bank, or trust company, or any branch thereof, on the
date of enactment of the Banking Act of 1935, from continuing such service."
The Board's attention has bdeti called to a case where on
August 23, 1935, the date of the enactment of the -Banking Act of
1955, a person was serving, under a permit issued by the Board,
two banks coming within the provisions of the Clayton Act and also
was serving a third bank which at that time came within the prohibitions of the Clayton Act.
At the time of the granting of the
permit, the service of the third bank was not prohibited by the
309
\
X-9318
-2-
Clayton Act and the service of such bank was not covered by the
permit issued by the Board.
After careful consideration of
these circumstances it was the view of the Board that the person
was "lawfully serving" the two banks covered by the Board's permit in the capacities named in that permit on the date of the
enactment of the Banking Act of 1935, and, therefore, under the
provision of the Clayton Act, as amended by the Banking Act of
1935 quoted above, could continue such service until February 1, .
1939.
The Board's decision in this matter is called to your at-
tention for your information in the event that cases involving similar circumstances come to your attention. It will be understood,
of course, that in any case where the service of a bank which is
not covered by the permit issued by the Board is prohibited under
the Clayton Act, as amended by the Banking Act of 1935, the service
of such bank must be terminated.
Very truly yours,
Assistant Secretary
TO ALL FEDERAL RESERVE AGENTS
210
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9319
September 17, 1935.
Dear Sir:
There ere enclosed herewith copies of
statement rendered by the Bureau of Engraving
and Printing, covering the cost of preparing
Federal reserve notes for the month of August,
1935.
Very truly yours
0. E. Foulk,
Fiscal Agent.
Enclosure.
TO ALL FEDERAL RESERVE AGENTS
211
X-9319-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
August 1 to 31, 1935.
1935
August 1 to 31,
Federal Reserve Notes for Federal Reserve Board
Series 1928
$10
Boston,
Cleveland,
Atlanta,
Kansas City,
Dallas,
San Francisco,
9,000
8,000
120.
95.000
$
860.00
10,000
18,000
10,000
18,000
8,000
9,000
8,000
8,000
101.000
1,548.00
774.00
36.000
154.000
813.244.00
15.000 86.000
23.000
Amount
Total Sheets
688.00
688.00
8.686.00
$ 13,244.00
154,000 sheets, @ $86.00 per M,
Series 1934
S5
Boston,
New York,
Philadelphia,
Cleveland,
Richmond,
Atlanta,
Chicago,
St. Louis,
Minneapolis,
Kansas City,
Dallas,
—
38,000
—
—
41,000
-
44,000
12,000
-
5.000
140,000
£10
54,000
301,000
33,000
47,000
31,000
12,000
139,000
23,000
10,000
20,000
—
670.000
S20
10,000
10,000
-
22,000
-
10,000
-
2,000
—
54.000
Total Sheets
Amount
54,000
311,000
81,000
47,000
53,000
53,000
139,000
77,000
22,000
22,000
5,000
$ 4,644.00
26,746.00
6,966.00
4,042.00
4,558.00
4,558.00
11,954.00
6,622.00
1,392.00
1,892.00
430.00
864,000
S74.304.00
864,000 sheets, ® $86.00 per M,
74.504.00
& 87.548.00
313
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9520
September 17, 1935
SUBJECT:
Holidays during October, 1935
Dear Sir:
The Board of Governors of the Federal Reserve System is advised that on Thursday, October 10, the Havana Agency will be
closed in observance of the anniversary of the Revolution of Yara.
On Saturday, October 12, Columbus Day, there will be neither
transit nor Federal Reserve note clearing and the books of the
Board's Gold Settlement Fund will be closed*
The offices of the
Board and the following Federal Reserve banks and branches will be
open for business as usual?
Charlotte
Atlanta
Nashville
St. Louis
Little Rock
Memphis
Minneapolis
Detroit
Kansas City
Oklahoma City
Please notify branches.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
213
INTERPRETATION
BANKING ACT OF 1955
X-9321
September 14, 1935
(Copies to be Sent to All Federal Reserve Banks)
Mr. R. L. Austin,
Federal Reserve Agent,
Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania.
Dear Mr. Austin:
Mr. Hill's telegram of September 5, 1935, asks
whether State banking authorities are authorized to examine
the books, records, and assets of the trust departments of national banks which possess fiduciary powers in view of the amendment to the third paragraph of section 11(k) of the Federal Reserve Act made by section 342 of the Banking Act of 1935.
Prior to the enactment of the Banking Act of 1935,
the paragraph in question provided that the books and records
of national banks relating to their fiduciary business should be
open to inspection by the State authorities to the same extent as
the books and records of corporations organized under State law
which exercise fiduciary powers, but the provision of section 11(k)
relating to this matter has been amended to provide as follows:
"The State banking authorities may have access to
reports of examination made by the Comptroller of
the Currency insofar as such reports relate to the
trust department of such bank, but nothing in this
Act shall be construed as authorizing the State
banking authorities to examine the books, records,
and assets of such bank."
Mr. R. L. Austin —
2
X-9321
In the circumstances, it is clear that State banking authorities are not authorized to examine the books, records, and assets of the trust departments of national banks
which possess fiduciary powers; although the State banking authorities are given access to reports of examination made by
the Comptroller of the Currency in so far as such reports relate to the trust departments of national banks.
In this con-
nection, there is inclosed a copy of a circular dated September
6, 1935, which has been sent by the office of the Comptroller
to each national bank and to the Banking Department of each
State.
Very truly yours,
(Signed) L. P. Bethea,
L. P. Bethea,
Assistant Secretary.
X-9521-fe
COPY
TREASURY DEPARTMENT
Office of Comptroller of the Currency
\
215
Washington
September 6, 1935
TO THE CASHIER OP EACH NATIONAL BANK:
Dear Sir:
The following copy of letter written to the Banking Department of each
state is submitted for your information:
"In view of the fact that the Banking Act of 1935, which became effective
on August S3, contains an amendment to the statute covering trust powers, I
wish to call your attention to the part affecting the authority granted to
the states thereunder. Section 11-k of the Federal Reserve Act, as amended
September 26, 1918, contained the following proviso:
National banks exercising any or all of the powers enumerated
in this'" subsection shall segregate all assets held in any fiduciary
capacity from the general assets of the bank and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of thi6 subsection.
Such books
and records shall be open to inspection by the State authorities to
the same extent as the books and records of corporations organized
under State law which exercise fiduciary powers, but noth.bg in this act
shall be construed as authorizing the State authorities to examine the
books, records, and assets of the national bank which are not held in
trust under authority of this subsection.
The Banking Act of 1935 amends this provision insofar as the last sentence is
concerned, which now reads as follows:
* * * The State banking authorities may have access to reports of examination made by the Comptroller of the Currency insofar as such reports relate to the trust department of such bank, but nothing in this Act
shall be construed as authorizing the State banking authorities to
examine the books, records, and assets of such bank.
Copies of reports of examination of trust departments will be found on
file in the banks having trust departments, and an inspection thereof may also
be had in the office of the Chief National Bank Examiner for each Federal Reserve District.
The law, of course, does not prohibit a bank from permitting an inspection of its records by anyone it desires, but does prohibit compulsory inspection.
All of the above is submitted in a spirit of helpfulness for your convenient reference."
Very truly yours,
J. F. T . O'CONNOR
Comptroller
216
INTERPRETATION
X-9322
BANKING ACT OF 1955
(Copies to be sent to all Federal Reserve Banks)
September 11, 1935
Mr. J. H. Case,
Federal Reserve Agent,
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Case:
Reference is made to your letter dated November 23,
1934 and inclosures contained therein, requesting an expression of the
Board's views as to whether "A" Trust Company,
lawfully continue to hold certain
, New York, may
Corporation notes
either as "investment securities", under the provisions of paragraph
Seventh of section 5136 of the Revised Statutes and section 9 of the
Federal Reserve Act, or in the bank's loan account. As you have already
been advised, the Board communicated with the Comptroller of the Currency
with regard to the question whether these notes are to be regarded as
investment securities and, after his views wore received, a further reply
to your letter was delayed pending the enactment of the Banking Act of
1935 which contains provisions affecting this question.
From the information submitted in your letter, it appears
that on or about November 5, 1934, "A" Trust Company, a State member bank,
purchased _______________ Corporation 2|- per cent Serial Notes in the
amount of $900,000, such notes being a part of a $9,000,000 issue, onethird of which matures annually on November 1, 1935, 1936, and 1937.
It
also appears that the notes purchased by "A" Trust Company consist of
$300,000 of each of the three maturities.
It is understood that all the
217
- 2 ~
X-9522
notes were originally issued in denominations of $100,000 and #50 ,000
but are interchangeable for notes of smaller denominations.
You state
that "A" Trust Company paid for the notes by check payable to
Corporation.
It is also understood that "A" Trust Company and the
other 18 purchasers of the issue stated that thqy purchased the notes
for their own account for the purpose of investment and not for distribution and that, since the securities were offered to not in excess of
25 purchasers, the securities were not registered under the Securities
Act of 1953.
It appears that the notes are not actively dealt in on
any market although other securities of
Corporation
are actively traded in and are widely held.
An examination of the form of the definitive notes and
of the printed trust agreement discloses that the notes are in the usual
form of a corporate note or bond and are issued pursuant to the terms
of a trust agreement under which
Corporation obligates
itself to the trustee, "B" Trust Company, to pay the interest on and the
principal of the notes.
The notes may be registered as to principal or
payable to bearer, and the notes carry interest coupons payable to
bearer.
Although the notes are unsecured, the trust agreement contains
covenants limiting the right of ______________ Corporation and its subsidiary companies to make mortgages, pledges or other incumbrances while
the notes remain unpaid.
The first question presented by your letter is whether
the notes in question are "investment securities" as defined in paragraph
218
- 3 -
X-9322
Seventh of section 5156 of the Revised Statutes and the regulations of
the Comptroller of the Currency issued pursuant thereto on February 25,
1927 and December 27, 1934.
In response to the Board's inquiry to the
Comptroller he stated that, in his opinion, the notes were not "investment securities" within the meaning of his regulation on the subject
because of the fact that they do not have such public distribution as
to insure the marketability of the issue.
The Board agrees with the
opinion of the Comptroller of the Currency upon this point and, accordingly, it will be appreciated if you will advise "A" Trust Company
that the notes may not lawfully be held as "investment securities" under
the provisions of paragraph Seventh of section 5156 of the Revised Statutes and section 9 of the Federal Reserve Act.
You also request an expression of the Board's views as to
whether the notes may be held by "A" Trust Company in its loan account
as evidence of a loan by the bank to
Corporation.
The
notes in question appear to constitute securities, but as above stated
are not "investment securities" within the meaning of that term as used
in section 5136 of the Revised Statutes. Under the provisions of that
section as amended by section 308 of the Banking Act of 1935, it is
clear that a national bank may not purchase for its own account notes
such as those under consideration which are securities but not "investment securities", and the provisions of section 9 on this subject are
clearly intended to place State member banks on a basis of equality with
national banks with respect to investments in securities.
Accordingly,
it is the view of the Board that a State member bank may not, since the
319
- 4 -
X-9322
enactment of the Banking Act of 1935, purchase for its own account
notes of the type here under consideration.
In view of the amendment to the law the Board believes
that it is unnecessary for it to determine the question presented in
your letter under the provisions of the law as it existed prior to the
enactment of the Banking Act of 1955, and the Board will raise no objection to the continued holding by "A" Trust Company of the notes in
question which were purchased prior to the enactment of that Act.
It will be appreciated if you will advise "A" Trust
Company of the Board's views in this matter.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
. I
X-9323
(Superseding X-9153)
FEDERAL RESERVE SYSTEM
The Federal Reserve System was established pursuant to
authority contained in the Act of Congress approved December 23,
1913, known as the Federal Reserve act, the purposes of which, as
stated in the preamble, are "To provide for the establishment of
Federal reserve banks, to furnish an elastic currency, to afford
means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes. 11
The system comprises the Board of Governors of the Federal
Reserve System, which exercises supervisory functions, the Federal
Advisory Council, which acts in an advisory capacity to the Board of
Governors, the Federal Open Market Committee, the twelve Federal reserve banks situated in different sections of the United States, and
the member banks, which include all national banks in the United
States and such State banks and trust companies as have voluntarily
applied to the Board of Governors for membership and have been admitted to the System.
The Federal reserve banks are located in Boston, New York,
Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis,
Minneapolis, Kansas City, Dallas and San Francisco.
There are also
in operation twenty-five branches and two agencies of the Federal reserve banks, all of which are located in other cities of the United
-
2
-
X-9323
States, except one agency in Havana, Cuba.
The capital stock of the Federal reserve banks is entirely owned by the member banks and may not be transferred or
hypothecated.
Every national bank in existence in the United
States at the time of the establishment of the Federal Reserve
ESystem was required to subscribe to the capital stock of the Federal reserve bank of its district in an amount equal to six per
cent of the subscribing bank's paid-up capital and surplus.
A
like amount of Federal reserve bank stock must be subscribed for
by every national bank in the United States organized since that
time and try every State bank or trust company (except mutual savings banks) upon becoming a member of the Federal Reserve System;
and, when a member bank increases or decreases its capital or surplus, it is required to alter its holdings of Federal reserve bank
stock in the same proportion.
A mutual savings bank which is ad-
mitted to membership in the Federal Reserve System must subscribe
for Federal reserve bank stock in an amount equal to six-tenths
of one per centum of its total deposit liabilities; and thereafter such subscription must be adjusted semiannually on the same
percentage basis.
One half of the subscription of each member
bank must be fully paid and the remainder is subject to call by
the Board of Governors of the Federal Reserve Eastern; but call
for payment of the remainder has not been made.
322
- 3 -
X-9323
After all necessary expenses of a Federal reserve
bank have been paid or provided for, its stockholding member
banks are entitled to receive an annual dividend of six per
cent on the paid-in capital stock, which dividend is cumulative.
After these dividend claims have been fully met, the net earnings
are paid into the surplus fund of the Federal reserve bank.
Fed-
eral reserve banks, including the capital stock and surplus therein
and the income derived therefrom, are exempt from Federal, State
and local taxation, except taxes upon real estate.
The board of directors of each Federal reserve bank is
composed of nine members, equally divided into three classes, designated
Class A, Class B and Class C.
Directors of Class A are
representative of the stockholding member banks.
Class B must be actively engaged in their district
Directors of
in commerce,
agriculture or some other industrial pursuit, and may not be officers, directors or employees of any bank.
Class C directors may
not be officers, directors, employees, or stockholders of any bank.
The six Class A and B directors are elected by the stockholding
member banks, while the Board of Governors of the Federal Reserve
System appoints the three Glass C directors.
The term of office
of each director is three years, so arranged that the term of one
director of each class expires each year.
One of the Class C directors appointed by the Board is
- 4 -
X-9325
designated as chairman of the board of directors of the Federal
reserve bank and as Federal reserve agent, and in the latter
capacity he is required to maintain a local office of the Board
on the premises of the Federal reserve bank.
Another Class C
director is appointed by the Board as deputy chairman.
After
March 1, 1956, each Federal Reserve bank will have as its chief
executive officer a President appointed every five years by its
board of directors with the approval of the Board of Governors
of the Federal Reserve System.
There will also be a first vice-
president appointed in the same manner and for the same terra.
Federal reserve banks are authorized, among other
things, to discount for their member banks notes, drafts, bills
of exchange and bankers' acceptances of short maturities arising
out of commercial, industrial or agricultural transactions, and
short term paper secured by obligations of the United States; to
make advances to their member banks upon their promissory notes for
periods not exceeding ninety days upon the security of paper eligible for discount or purchase and for periods not exceeding fifteen days upon the security of obligations of the United States
and certain other securities; to make advances upon security
satisfactory to the Federal Reserve banks to member banks for
periods not exceeding four months at a rate of interest at least
one-half of one per cent higher than that applicable to discounts
- 5 -
X-9325
and advances of the kinds mentioned above; in certain exceptional
circumstances and under certain prescribed conditions, to make
advances to groups of member banks; under certain prescribed
conditions, to grant credit accommodations to furnish working
capital for established industrial or commercial businesses
for periods not exceeding five years, either through the medium
of financing institutions or, in exceptional circumstances, directly to such businesses, and to make commitments with respect
to the granting of such accommodations; in unusual and exigent
ciraumstanc.es when authority has been granted by at least five
members of the Board of Governors, to discount for individuals,
partnerships or corporations, under certain prescribed conditions
notes, drafts and bills of exchange of the kinds and maturities
made eligible for discount for member banks; to make advances
to individuals, partnerships or corporations upon their promissory notes secured by direct obligations of the United States
for periods not exceeding ninety days; to purchase and sell in
the open market bankers' acceptances and bills of exchange of
the kinds and maturities eligible for discount, obligations of
the United States and certain other securities; to receive and
hold on deposit the reserve balances of member banks; to issue
Federal reserve notes and Federal reserve bank notes; to act as
clearing houses and as collecting agents for their member banks,
and under certain conditions for nonmember banks, in the
— 6 —
X-9323
collection of checks and other instruments; to act as depositaries and fiscal agents of the United States; and to exercise
other banking functions specified in the Federal Reserve Act.
Federal reserve notes are a first and paramount lien
on all the assets of the Federal reserve banks through which
they are issued and are also obligations of the United States.
They are issued against the security of gold certificates and
of commercial and agricultural paper discounted or purchased
by Federal reserve banks, and, until March 5, 1957, when authorized by the Board of Governors may also be secured by direct obligations of the United States.
Every Federal reserve
bank is required to maintain reserves in gold certificates of
not loss than forty per cent against its Federal reserve notes
in actual circulation and is also required to maintain reserves
in gold certificates or lawful money of not less than thirtyfive per cent against its deposits.
Federal reserve bank notes are the obligations of the
Federal reserve bank procuring them and are redeemable in lawful money of the United States on presentation at the United
Status Treasury or at the bank of issue.
They may be issued
against the security of direct obligations of the United States
in an amount equal to the face value of such obligations and
against the security of notes, drafts, bills of exchange or bankers' acceptances in an amount equal to not more than ninety per
- 7 -
cent of the estimated value thereof.
X-9323
Each Federal reserve bank
must maintain on deposit in the Treasury of the United States
in lawful money a redemption fund equal to five per cent of its
liability on Federal reserve bank notes in actual circulation,
or such other amount as may be required by the Treasurer of the
United States with the approval of the Secretary of the Treasury,
and is required to pay a tax of one-fourth of one per cent each
half year upon the average amount of its Federal reserve bank
notes in circulation.
No such Federal reserve bank notes may be
issued after the President shall have declared by proclamation
that the emergency recognized by him in his proclamation of
March 6, 1955, has terminated.
Broad supervisory powers are vested in the Board of
Governors of the Federal Reserve System which has its offices
in Washington.
After February 1, 1956, the Board of Governors
will be composed of seven members appointed by the President
with the advice and consent of the Senate.
In selecting these
seven members, the President is required to have due regard to
a fair representation of the financial, agricultural, industrial
and commercial interests, and geographical divisions of the
country.
No two members may be from the same Federal reserve
district.
Among the more important duties of the Board of Governors is the review and determination of discount rates charged
—
8
—
X-9323
by the Federal reserve banks on their discounts and advances.
After March 1, 1936, each member of the Board of Governors will
also be a member of the Federal Open Market Committee whose membership, in addition, will include five representatives of the
Federal Reserve banks, each such representative being elected
annually by the boards of directors of certain specified Federal Reserve banks.
After March 1, 1936, open-market operations
of the Federal Reserve banks will be conducted under regulations
adopted by the Committee with a view to accommodating commerce
and business and with regard to their bearing upon the general
credit situation of the country; and no Federal Reserve bank
may engage or decline to engage in open-market operations except in accordance with the direction of and regulations adopted
by the Committee.
In connection with its supervision of Federal reserve
banks the Board of
Governors is also authorized to make examina-
tions of such banks; to require statements and reports from such
banks; to require the establishment or discontinuance of branches
of such banks; to supervise the issue and retirement of Federal
reserve notes; and to exercise special supervision over all relationships and transactions of the Federal reserve banks with
foreign banks or bankers.
For the purpose pf preventing the excessive use of
credit for the purchase or carrying of securities, the Board of
.228
- 9 -
X-9323
Governors is authorized to regulate the amount of credit that
may be initially extended and subsequently maintained on any
security (with certain exceptions) registered on a national
securities exchange.
Certain other.powers have been conferred
upon the Board which are likewise designed to enable it to prevent an undue diversion of funds into speculative operations.
The Board of Governors also passes on the admission
of State banks and trust companies to membership in the Federal
Reserve System and on the termination of membership of such
banks; it has the power to examine member banks and affiliates
of member banks; it receives condition reports from State member banks and their affiliates; it limits by regulation the
rate of interest which may be paid by member banks on time and
savings deposits; it is authorized, in its discretion, to issue
voting permits to holding company affiliates of member banks entitling them to vote the stock of such banks at any or all meetings of shareholders of the member bank; it may issue general
regulations permitting interlocking relationships in certain cir- .
cumstances between member banks and organizations dealing in securities or, under the Clayton Antitrust Act, between member banks
and other banks; it has the power to remove officers and directors
of a member bank for continued violations of lav/ or unsafe or unsound practices in conducting the business of such bank; it may,
in its discretion, suspend member banks from the use of the credit
-
10 -
X-9323
facilities of the Federal Reserve System, for making undue use
of bank credit for speculative purposes or for any other purpose inconsistent with the maintenance of sound credit conditions; it may, within certain limitations and in order to prevent injurious credit expansion or contraction, change the requirements as to reserves to be maintained by member banks
against deposits; it passes on applications of State member
banks to establish out-of-town branches; it passes on applications of national banks for authority to exercise trust powers
or to act in fiduciary capacities; it may grant authority to national banks to establish branches in foreign countries or dependencies or insular possessions of the United States, or to
invest in the stock of banks or corporations engaged in international or foreign banking; and it supervises the organization
and activities of corporations organized under Federal law to
engage in international or foreign banking.
Another function
of the Board is the operation of a settlement fund, by which
balances due to and from the various Federal reserve banks arising out of their own transactions or transactions of their member banks or of the United States Government are settled in
Washington through telegraphic transfer of funds without physical
shipments of currency.
In exercising its supervisory functions over the Federal reserve banks and member banks, the Board of Governors
- 11 -
X-*9323
promulgates regulations, pursuant to authority granted by the
law, governing certain of the above-mentioned activities of
Federal reserve banks and member banks.
To meet its expenses
and to pay the salaries of its members and its employees, the
Board makes semiannual assessments upon the Federal reserve
banks in proportion to their capital stock and surplus.
The
Board keeps a complete record of all action taken by it and
by the Federal Open Market Committee on any question of policy,
and in the annual report which it makes to the Speaker of the
House of Representatives for the information of Congress as required by law, it includes a full account of all such action and
also a copy of the records required to be kept in that connection.
The Federal Advisory Council acts in an advisory
capacity, conferring with the Board of Governors on general
business conditions and making recommendations concerning matters within the Board's jurisdiction and the general affairs of
the Federal Reserve System.
The Council is composed of twelve
members, one from each Federal reserve district being selected
annually by the board of directors of the Federal reserve bank
of the district.
The Council is required to meet in Washington
at least four times each year and oftener if called by the Board
of Governors.
September 20> 1935.
231
BOARD OF GOVERNORS
D F T H E
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
X-9324
September 20, 1955.
Subject;
Basis of issuance of Federal
Reserve bank stock.
Dear Sir:
There is inclosed herewith for your information and
guidance, in the event that cases involving similar circumstances como to your attention, a copy of a letter to the
Federal Reserve Agent at the Federal Reserve Bank of New
York regarding the basis of subscriptions to Federal Reserve
bank stock.
Very truly yours
L. P. Bethea
Bethea,
Assistant Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS EXCEPT dER YORK
232
C O P Y
X-9324-a
September 20, 1955.
Mr. J. H. Case,
Federal Reserve Agent,
Federal Reserve Bank of New York,
New York, N. Y.
Dear Mr. Ce.se:
Reference is made to Mr. Dillistin's letter of June 20, inquiring
whether, in view of the facts outlined, The
Bank,
,
, should apply for additional Federal Reserve bank stock on the basis
of the par value of the outstanding preferred and common stock and of its surplus as shown try- its books, or whether such book surplus should be ignored in
making application for additional stock.
It appears from Mr. Dillistin's letter that the bank has capital
stock with an aggregate par value of $575,000 and that its surplus on March 30,
1935, according to its books was $£4,000, on the basis of which it would be required and entitled to hold 240 shares of Federal Reserve bank stock, or 132
shares more than it now holds.
It further appears that, although the bank's
books showed a surplus on March 50, 1955 of $24,000, the bank at the same time
had a deficit of $122,695.91 in its profit, and loss account.
In this connec-
tion, we have been informally advised by the Office of the Comptroller of the
Currency that in its June 29, 1935 condition report the bank showed the net
book value of its capital stock as $280,504.84 and no surplus, but that its
report of earnings and dividends for the first half of 1935 shows a surplus
of $24,860 at the end of the period (including $860 added to surplus during
the period) and a deficit in undivided profits account of $119,555.16.
Mr • J • H» Case ——2.
X-9324-a
The Board stated in its letter X-7459 of June 19, 1933, that
while any impairment in a member bank's capital stock or surplus should
be corrected as soon as possible, its holdings of Federal Reserve bank
stock should be based upon the amount of issued and outstanding capital
stock and surplus as shown on its books, rather than upon unimpaired
capital and surplus.
If, however, the aggregate of the capital accounts
as shown by its books and reports of condition is no greater than the par
value of its outstanding capital stock and capital notes and debentures,
the bank has no surplus and the amount of any surplus shown on the books
of the bank should not be included in determining its required Federal
Reserve bank stock holdings. Likewise, if the bank's books show a deficit
in its undivided profits account not in excess of the amount of surplus
shown by its books, the amount of the deficit should be deducted from the
amount of the surplus shemn by the books, in determining the basis for
required Federal Reserve bank stock holdings.
In the circumstances and in
view of the facts involved in the case of The
Bank, the
application of that bank for an adjustment in its holdings of stock of the
Federal Reserve Bank of New York should be based only upon the par value
of its outstanding capital stock and the bank should, therefore, apply for
117 additional shares of such stock.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9325
September 20, 1935
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills:
"NOYAPE" - Treasury Bills to be dated
September 25, 1935, and to
mature June 24, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOYAMP" on page 172.
Very truly yours,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
235
X-9326
"THE BANKING ACT OF 1955"
Address
by
M. S. SZYMCZAK, MEMBER,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
before the
Essex County Bankers Association,
Newark, New Jersey
Thursday, September So, 1935
6:30 P. M.
Released for Publication
September 26, 1935
After 6:30 P. M.
236
X-9326
A little more than three months ago I had the privilege of speaking
before the New York Bankers Association at Lake George, and my subject
then was the same as it is today - The Banking Act of 1955.
however, the Act was not law.
Today it is.
At that time,
Accordingly, it is possible
to discuss it again, but from a different point of view - to speak not of
what its provisions may be, but of what they are.
I wish first to take
up the changes made by the Act in the general organization of the Federal
Reserve System, and then certain changes which most directly affect your
operations as bankers and as members of the Federal Reserve System.
The changes that the law makes in the organization of the System may
be described as fundamental, but not revolutionary.
They are changes
which closely follow the dictates of experience, and they are adaptations
to present day needs which are too well supported by realities to be
called experimental.
Many conceptions which formerly prevailed have
undergone a great change as a result of what has happened in more than
twenty years of actual operation under the Federal Reserve System.
In
consequence, Congress has amended the law and certain readjustments have
been made in the organization of the System.
To make clear the purposes
behind these changes let me mention some of the things we have learned
from experience.
To begin with, we recognize today that the elasticity of the currency,
while it is important, is not a governing factor in the supply of credit.
-
2
X-9326
-
When people borrow they do not usually want currency, and when they want
currency they do not always borrow to obtain It.
Fluctuations in currency
demand, except when there is hoarding, are largely seasonal, and reflect
seasonal changes in the volume of retail trade and of payrolls.
To meet
currency requirements is not a major problem, for deposits have largely
taken the place of currency, and the duties of the Federal Reserve System
can not be regarded as entirely discharged merely by supplying commerce,
industry and agriculture with the cash they require for retail transactions and payrolls.
That is merely a beginning.
The real tasks of the
System are much greater and more complex.
Again, the idea that the Reserve banks lend to one bank the funds
deposited by another is now found to be quite inaccurate.
The lending
power of the Reserve banks docs not arise from the receipt of member bank
deposits, except to the extent that those deposits consist of gold.
On
the contrary, member bank deposits with the Reserve banks are created
by the Reserve banks.
The reserve banks rediscount paper or purchase
bills or securities and enter corresponding credits to the accounts of the
member banks.
The lending of funds and the creation of deposits is not
dependent, therefore, on the previous deposit of funds.
It depends upon the
power of the Reserve banks to acquire assets by purchase or discount, and
their power to issue notes or create deposits in payment for those assets.
Furthermore, the idea was once held that a discount by the Federal
Reserve bank, say of $1,000, for example, made it possible for the member bank
238
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X-9526
to extend that much more credit and only that much.
If this were true the
control of credit expansion would be a relatively simple matter.
not true.
But it is
A thousand dollars borrowed and placed to the credit of a member
bank enlarges its reserves by only that much, but it makes possible a much
larger expansion of member bank loans and deposits.
This is because the
bank's reserves need be only a fraction of its deposits.
In practice it
works out that on the average, member banks need borrow only about onefifteenth of what they create in deposits by loans to their customers.
Again, there is no necessary, direct connection between any particular
piece of discounted paper and the use to which the proceeds thereof are
placed.
Yet this connection was formerly assumed to exist and it was con-
sidered an important factor of credit control.
The thought was that the
Reserve banks would shut off speculation by refusing to discount the notes
of speculators.
Of course, that is very far from the facts.
In the first
place, as I just said, you bankers do not borrow at the Reserve bank in
order to lend, and even if you did, the kind of paper you borrowed on
wouldn't necessarily indicate what kind of loan you expected to make.
The fact that a banker borrowed on bills of lading would give the Reserve
bank no assurance that he did not on the same day buy some mortgages or
lend to a stockbroker, or employ his funds in some other way that might
at the moment be contrary to general policy.
You are entirely familiar with these commonplace facts about your own
business, for they have been repeatedly demonstrated in banking operations
as you have known them under the Federal Reserve System.
But they are things
that could not be seen so clearly until we had the actual experience.
In the
absence of that experience it was natural to suppose that member banks would
239
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X-9326
deposit their funds in the Reserve banks, that the receipt of those funds would
give the Reserve banks power to lend, that as the demand for money increased
member banks would borrow of the Reserve banks to meet that demand, that they
would draw out currency for the purpose, that loans would be repaid by currency,
and that the Reserve banks fcy discounting only commercial paper would insure that
Reserve bank credit was being used for the legitimate requirements of commerce
and not for speculation.
As a result of experience, however, it has become clear that things do
not work just that way.
The relationships and the sequences are different.
Accordingly, our legislation has had to be amended.
A good many minor changes
have been made in the Federal Reserve Act over a long period of time, but in
the last few years circumstances have demanded more thorough revisions of the
original Act than before.
Congress has made these revisions in the Banking Act
of 1933 and in the Banking Act of 1955.
These two measures, without any
violent break with the past, but in obedience to economic developments, have
adapted the original Reserve System legislation to the needs of the present,
and also to the needs of the future, insofar as those needs can be foreseen.
The effort has been to modify the mechanism so that it may perform the functions which time and change have thrust upon it.
It has been recognized that
in meeting the requirements of contemporary business life the Federal Reserve
System can not rely principally on the power to furnish currency when it is needed
and to retire it when it is not; nor can it rely on discrimination against one
class of paper or another - when and if offered for discount - on the theory
that by so doing it is diverting credit away from speculative uses and toward
commerce.
It has been recognized that the Federal Reserve System's power over
credit lies primarily not in the things I have mentioned, but arises chiefly out
of its ability to influence the total volume of bank deposits.
And it has been
? : 840
-5-
X-9526
recognized that the System must not be thought of as waiting more or less
passively, like the fire department, until a crisis arises and it receives
an application for help.
of these facts.
The Banking Act of 1955 is based on a recognition
Perhaps the most important thing attempted in it is a more
definite fixing of responsibility for the country's credit policy.
If the
System is expected to act, it must be given the power to act effectively.
This principle has been followed in the authorization of a new Open Market
Committee.
Open Market Operations are, of course, not new, but they were not of
established or recognized importance when the Federal Reserve Act was adopted.
For years, ever since the war, they have had a powerful and direct bearing on
the volume and cost of money.
They are the means of controlling, in the mass
and in the most practicable way, the credit operations of the banks of the
country.
Until the new law was adopted, however, the machinery for the formu-
lation., and execution of open-market policies was ineffective.
The Open Market
Committee, comprising representatives of the 12 Reserve banks, might propose
purchases or sales of United States Government securities in the open market,
and the Board might approve those proposals; but any Reserve bank night refuse
to participate in the proposed program.
A policy might be adopted, but its
execution depended on the independent action of twelve boards of directors
comprising in the aggregate 108 persons.
Such an arrangement was likely to
result in delay and to afford opportunities for obstruction in matters
where prompt and decisive action was required in the public interest.
Under the Act of 1955, beginning March 1, 1956, authority over open market
operations will be vested in a new Open Market Committee consisting of the
seven members of the Board of Governors of the Federal Reserve System and five
241
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X-9326
representatives of the Reserve banks selected regionally:
one from the Boston
and New York districts, one from the Philadelphia and Cleveland districts, one
from the Richmond, Atlanta, and Dallas districts, one from the Chicago and St.
Louis districts, and one from the Minneapolis, Kansas City and San Francisco
districts.
The Reserve banks will have representation on the Committee, but a
majority of the Committee will be made up of Board members.
Open market trans-
actions, as under the old Act, are to "be governed with a view to accommodating
commerce and business and with regard to their bearing upon the general credit
situation of the country".
The Committee, in the language of the new act, is
to "consider, adopt, and transmit to the seVeral Federal Reserve banks, regulations relating to the open market transactions of such banks".
Not only will
Federal Reserve banks be forbidden to engage in open market operations, except
in accordance with the regulations of the Committee, but they also will be
forbidden to "decline to engage" in such operations except in accordance with
the directions and regulations of the committee.
Open Market policy will now be
determined, therefore, by a responsible statutory body, able to give it the
consistency and definiteness that the importance of the function makes necessary.
It is also required by the law that complete records be kept of the
action taken ty the Board and by the Committee in all matters of policy.
These records are to show the underlying reasons for the action, and are to
be published in the annual reports of the Board.
They will give the public
an opportunity to study the decisions of the Federal Reserve System, in much the
same way that Supreme Court opinions may be studied.
This opportunity should
be extremely helpful in clarifying the public discussions of national credit
policy.
It will also accentuate the individual sense of responsibility, for
242
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X-9326
members will be called on not only to take firm positions on matters of
national policy, but to explain those positions to the public.
In the matter of discount rates, the law prescribes a new procedure
under which rates must come up for consideration by the Reserve banks and
by the Board every fourteen days or oftenor.
In effect this means that
rates must be newly established every two wjeks at least, though the new rates
may, of course, be the same as the old.
Under the now law, the authority of the Board to alter the amount of reserves which member banks must carry against their demand and time deposits
is restated in clearer terms than before.
The old law authorized the Board
to change required reserves only when an emergency existed as a result of
credit expansion, and the approval of the President of the United States was
necessary.
The new law authorizes the Board to make changes on the vote of
four of its seven members "in order to prevent injurious credit expansion or
contraction".
The legal reserves can not in any event, however, be reduced
below present requirements, nor can they be increased to more than twice what
they now are.
Since the Board of Governors constitutes a majority of the Open Market
Committee, and since it also has authority over discount rates, over member
bank reserve requirements, and over margin requirements on securities loans,
it is under more definite responsibility with respect to the national credit
policy than ever before.
At the same time, the law preserves the regional
autonomy of the Reserve banks in their relations with member banks.
Generally
speaking, it leaves the Reserve banks with responsibility for member bank
-
8
X-9326
-
relations, and gives the Board, with the help of representatives of the Reserve banks, responsibility for national credit and monetary policies.
The law also makes important changes in the constitution of the governing body of the Federal Reserve System, which is no longer known as the Federal Reserve Board, but as the Board of Governors of the Federal Reserve
System.
The Secretary of the Treasury and the Comptroller of the Currency
cease to be ex officio members February 1, 1936, and thereafter the Board
is to consist of seven members appointed by the President.
fice is to be fourteen instead of twelve years.
The term of of-
As at present, not more than
one member may be appointed from any one Federal Reserve district, and the
President, in selecting the members, is to "have due regard to a fair representation of the financial, agricultural, industrial and commercial interests and
geographical divisions of the country".
After March 1, 1936, the chief executive officer of each Federal Reserve
bank will be a "president", instead of a governor, and the title "vicepresident" will replace that of deputy governor.
I think I have covered sufficiently the more prominent changes which
the Banking Act of 1935 makes in the organization of the Federal Reserve System.
Those changes in general tend to place more definite responsibility
where it belongs.
Changing conditions in our economic life have thrown
greater responsibilities upon the System; and in order to meet those responsibilities in a direct and positive way, the System's organization has been
made more closely knit and more effective.
I wish to speak now of those features of the Banking Act of 1935 which
more directly affect your individual operations as bankers.
244
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X—9326
The first of these is the broadened lending powers which the Act gives
you, both directly and indirectly.
Indirectly, the Act tends to broaden your powers by giving the Reserve
banks authority to make advances to member banks on any satisfactory security.
The former provisions still stand as to the character of paper that is eligible
for discount - paper that must originate in connection with industrial, commercial or agricultural transactions - and they also still stand as to advances
to member banks on notes secured by Government obligations or by eligible
paper.
them.
The new provisions do not alter the old ones, except by adding .to
The only conditions aside from the requirement that advances under the
new law be secured to the satisfaction of the Reserve bank, are that they bear
a rate of interest at least one-half percent above the Reserve bank's discount
rate and have maturities of not more than four months.
At a time like the
present, when you have excess reserves, this new provision in the law may not
seem very important.
But tines may change.
If they do, this new provision
means that, assuming your assets are good, the Federal Reserve bank will be
able to advance you money on them, no matter what the type of paper, or in
what kind of transaction they originated.
Borrowing from the Federal Reserve
bank is now possible on other than technical conditions of eligibility alone.
And this is very important.
Many banks in recent years would have had much
less trouble if they could have taken to the Reserve bank some of their
assets which were good, but not legally eligible, instead of having to sacrifice them on a demoralized market.
Apart from its practical bearing upon what paper individual banks may
use in borrowing at the Reserve bank,
the new provision of the law is sig-
nificant in that it recognizes an actual condition of American banking.
This
245
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X-9526
is that American banks do not specialize in one type of credit as against
another.
They deal in credit of all sorts.
term functions.
They combine long term and short
They cannot confine themselves to short term commercial paper,
for there is not enough of such paper to fill more than a small part of their
portfolios.
They accept the savings and time deposits of their communities
and under such circumstances it must be oxpectcd that they will also hold
the long term obligations of their communities.
To disregard these living
facts of American banking is futile; and the new provisions for eligibility
simply make the Federal Reserve Act cognizant of the realities and adapt
the powers of the Reserve banks to those realities.
In a more direct way, the new Act broadens your powers by liberalizing
the conditions under which National banks may make real estate loans.
The
old stipulation that the real estate upon which such loans are made must bo
situated in the bank's Federal Reserve district or within a hundred miles of
the bank, is removed; and loans which are amortized are permitted in amounts
up to 60 percent of the appraised value of the property and for as much as
ten years, provided installment payments are sufficient to repay at least 40
percent of the principal in ten years.
The permissible aggregate of real estate loans which a national bank
may hold is changed by the now law from 25 percent of its capital and surplus or .50 percent of its savings deposits, whichever was greater, to 100
percent of its capital and surplus or 60 percent of its time and savings deposits, whichever is greater.
In general connection with this subject of enlarged lending powers I
wish to mention.also the provisions of section 15b of the Federal Reserve
346
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X-9526
Act relating to loans which you may make for working capital purposes.
This section is a year older than the new act, but its provisions belong
logically with these more recent ones I have just been discussing.
Under this section you may make loans with maturities not exceeding
five years to established industrial and commercial businesses in need of
working capital.
serve bank.
These loans are eligible for discount at the Federal Re-
Nor is that all.
If you wish to hold the loan yourself, but
wish to be assured that you can dispose of it at any time if need be, you
can procure a commitment binding the Federal Reserve bank to take it off
your hands.
Moreover, if and when you dispose of the loan you can do so
without recourse for as much as 80 percent# <1 In other words you have a
loan which is insured 100 percent
loss.
as to liquidity and 80 percent
as to
This arrangement is not restricted to member banks; it is open to non-
members as well.
As of September 11, the Federal Reserve Bank of New York had received
and acted on 881 applications for working capital loans aggregating $65,000,000.
Of these, 350, aggregating ^£9,000,000, had been approved.
Of the amounts
outstanding, $7,500,000 was in the form of loans made by the Federal Reserve
Bank itself direct to the industrial or commercial borrower, because you
local bankers refused to make them.
There was also outstanding about
$10,000,000, which local banks and other financing institutions in the Second
Federal Reserve District had made, and which were protected by the commitments
I have just described.
These loans have been made to all kinds of enterprises, industrial
and commercial.
In many cases they have been loans which bankers have not
been accustomed to making, and which would not be made were it not for the
-
1 2
-
1 - 9 3 2 6
fact that the Reserve bank stands behind the bank which makes them.
2
But as
it is, they constitute secure and liquid assets, yielding a good rate of
interest.
Here again as in the case of the advances made by the Reserve banks on
any good assets, and as in the case of real estate loans, the present legislation recognises two important principles.
One is that the local bank may
be called on to meet the general credit needs of the community; the other is
that the assets the local bank acquires should meet the general criterion of
soundness, rather than technical limitations as to maturity, origin, and
nature of the underlying transaction.
I think I have now covered the changes of most general interest, that
have been brought about by the Banking Act of 1935, but there are numerous
other provisions that it may bo worth while to run through even though you
may be familiar with them.
First there is tho matter of deposit insurance, which is continued on
what was originally intended as the temporary plan.
Insured banks are sub-
ject to an annual assessment at a fixed rate - one-twelfth of 1 percent of '
deposits - instead of being under an unlimited liability as would have been
the case under the old permanent plan.
Insurance covers deposits up to
$5,000 for any one depositor, instead of $10,000, as the old permanent plan
contemplated.
After July 1, 1942, no state bank with average deposits of #1,000,000
or more may bo an insured bank without becoming a member of the Federal Reserve System.
This postpones required membership for seven years.
In this
connection the term "state bank" does not include mutual savings banks or
Morris Plan banks.
4
7
248
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X-9326
The former prohibition agaipst a member bank's purchasing and holding
more than 10 percent of a particular issue of investment securities has
been eliminated, but the total of the obligations of one obligor which
may be purchased and held by a member bank is reduced from 15 percent
of the
bank's capital and 25 percent of its surplus to 10 percent of its capital
and surplus.
Banks are not required to dispose of securities lawfully
held at the time the law was enacted.
It is also made clear,in conformity
with previous rulings of the Board and of the Comptroller of the Currency,
that member banks may purchase and sell stocks for the account of their
customers.
They may not purchase and sell stocks for their own accounts.
There are several important provisions in the new Act with respect
to affiliates and holding company affiliates.
the original requirements.
These modify considerably
When the first legislation defining affiliates
and requiring reports of them was adopted in the Banking Act of 1933, it
was undoubtedly directed primarily at securities affiliates and affiliates
formed for the purpose of engaging in activities in which member banks
were not authorized to engage or for the purpose of supplementing the activities of member banks.
The definitions, however, were made extremely
comprehensive, and as a result a very large number of organizations were
caught in a net that was never intended for them.
It frequently happened
that banks were surprised to discover that under the law they had "affiliates", when as a matter of fact no such idea was in their minds.
A
bank might find that it had as an affiliate a corporation which belonged
to an estate of which it was trustee; or it might find that it had as an
affiliate a corporation whose stock was accidentally owned by the bank's
own stockholders.
There might be no financial connection between the two
249
X-9326
- 14* -
and yet at every call date a report would have to be procured from the affiliate and published.
The original purpose of the law had been accomplished
so far as securities affiliates were concerned, for they all disappeared,
but the number of other affiliates reported to the Board was increasing not because banks were forming new affiliations, but because unknown and unintended affiliations, quite accidental in fact, were constantly coming to
light.
The effect of the new provisions of the law will be to exclude a
large number of such organizations from the requirement imposed originally.
The Board and the Comptroller of the Currency are now authorized to waive reports which are not necessary to disclose fully the relations between a member
bank and its affiliate, and the effect thereof upon the affairs of the bank,
and the conditions of waiver have been announced. Roughly speaking, organizations which are affiliates under the terms of the law need not submit reports
unless they are indebted to the affiliated member bank or unless the member
bank owns their stock or other obligations.
Reports of affiliations which
have arisen as a result of ownership or control of an organization's stock
by a member bank in a fiduciary capacity are also waived.
This, it is be-
lieved, will be welcome news to many banks.
In addition, organizations which own or control the stock of a bank,
but are found by the Board of Governors of the Federal Reserve System not
to be engaged as a business in holding bank stock, are exempted by the new
law from the requirements imposed on holding company affiliates except as
to indebtedness of affiliates to member banks.
This provision makes possible
a distinction between holding companies organized for the purpose of holding
bank stock, and companies which happen to own control of a bank, though their
real business lies in a different field.
250
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X-9326 .
The Banking Act of 1935 ended double liability on National bank stock
issued after June 16, 1933.
Under the new Act National banks are permitted
to terminate the double liability on stock issued prior to that date.
After
July 1, 1937, therefore, it is possible that all shareholders of active
National banks may be relieved of personal liability on their shares.
At
the same time National banks are required to accumulate a surplus equal to
the amount of their common capital.
This change should be better both for
bank shareholders and for the public.
Personal liability for bank shares
has never been a satisfactory protection to depositors, and it has placed
a burden on shareholders of banks not borne by shareholders of other corporations.
There are several provisions which are of importance in connection
with deposits and the interest payable thereon.
In the first place, the
rate of interest paid by the Postal Savings system is not to exceed that
paid on savings deposits by member banks in the same place; and postal savings depositories may deposit funds on time with member banks subject to the
provisions of the Federal Reserve Act and regulations of the Board of Governors
of the Federal Reserve System regarding payment of interest on time deposits.
In addition, the Federal Deposit Insurance Corporation is required to forbid
the payment of interest on demand deposits by insured non-member banks, and
to regulate the rate of interest paid on time and savings deposits by insured
non-members.
This provision explicitly gives the Federal Deposit Insurance
Corporation authority similar to that which the Board of Governors of the
Federal Reserve System has.
In the same general connection, the definitions
of deposits in the old Act are stricken out and the Board of Governors is
251
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X-9326
authorized to define various types of deposits, and to determine what is to
be deemed a payment of interest.
For purposes of computing the reserves
member banks are required to carry, amounts due from other banks (except
Federal Reserve banks and foreign banks) and cortain cash items in process of
collection may be deducted from gross demand deposits.
Formerly amounts due
from other banks could be deducted only from amounts due to other banks.
This
will place country banks which have no balances of other banks, on a basis of
equality in this respect with city banks that carry a large volume of bank
balances.
I think it is not necessary to go further into details of the new
banning legislation.
I have described the major changes effected in the
organization of the Federal Reserve System and I have mentioned certain
provisions which affect you most directly as bankers.
You will realize from this partial account that a large number of
changes have had to be made in the Board's regulations.
This work has
been pushed as rapidly as possible, but it will be some weeks before the
Board will be able to complete the publication of all regulations in
revised form.
Personally I feel that the new Act places us on a better footing
than we have ever been on before.
To be sure, it involves many points of
compromise, as is inevitable in a democracy, and no two people will agree
that it is perfect.
Moreover, it is to be expected that unforeseen prob-
lems will arise, and that our resources and ingenuity will be taxed to
meet them.
But perhaps the greatest virtue of the Banking Act of 1955
is that it confers more definite responsibilities and more flexible powers.
We are better prepared than in the past to meet the unexpected.
252
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X-9326
In particular I trust that membership in the System will be more
valuable to you bankers under the new Act and more highly esteemed by
you than ever
before.
I trust that you will find yourselves better able
to meet the credit needs of your communities, and better able to maintain
profitable operations.
that easier to do.
The new Act, as I have described it, should make
The Federal Reserve Bank has broader powers than ever
before to discount your paper and to lend to you.
In the case of industrial
loans for working capital purposes authorized by Section 13b it has the very
unusual power to grant you commitments under which you may be assured of
the perfect liquidity of your loan and have it virtually guaranteed up to
80 percent.
I suggest that, considering the idle funds you have, you
fully acquaint yourselves with what the Federal Reserve Bank is able and
glad to do in cooperation with you, and that you canvass your territories
for loans which you might formerly have felt were outside your field, but
which you may now make with safety and profit.
I thank you for this op-
portunity to discuss with you measures and matters of such moment to us all.
253
!
INTERPRETATION
X-9327
BANKING ACT OF 1955
(Copies to be sent to all Federal Reserve Banks)
September 20, 1955.
Mr. Eugene at. Stevens,
Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Mr. Stevens2
This refers to your letter dated September 12, 1935, regarding the question whether loans made by a Federal Reserve bank under
. section 10(b) of the Federal Reserve Act, as amended,, would be eligible
as collateral for Federal Reserve notes or for Federal Reserve bank
notes.
The Board is of the opinion that notes evidencing advances
made under section 10(b) of the Federal Reserve Act, as amended, may
not be accepted by Federal Reserve Agents as collateral for Federal
Reserve notes, but such notes are available as collateral for Federal
Reserve bank notes which, under the law, may be issued against the
security of any notes, drafts, bills of exchange, or banker's acceptances acquired under the provisions of the Federal Reserve Act to an
amount equal to not more than 90 per cent of the estimated value of
such security.
As you suggest, such Federal Reserve bank notes would,
of course, be subject to the tax provided by law.
Very truly yours,
(Signed) E. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9329
September 27, 1935.
SUBJECT:
Expense, Main Lines, Leased
Wire System, August, 1935.
Dear Sir:
Inclosed herewith you will find two mimeographed statements, X-95?.9-a and X-9329-b, covering
in detail operations of the main lines Leased Wire
System, during the month of August, 1955.
Please credit the amount payable by your
bank for your share of the expense of the Leased
Wire System, to the Federal Reserve Bank of Richmond
in your daily statement of credits through the Gold
Settlement Fund for the account of the Board of Governors of the Federal Reserve System, and advise the
Federal Reserve Bank of Richmond by wire the amount
and purpose of the credit.
Very truly yours,
Fiscal Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS.
254
X-9329-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1935.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
29,856
127,924
27., 617
42,449
47,614
47,903
82,459
35,255
37,320
64,171
53,325
81.868
705,741
Board business .
Words sent by
New York chargeable to other
F . R. Banks (l)
925
-
1,131
924
1,035
901
1,090
1,324
862
317
1,466
2.385
12,958
Net Federal
reserve
bank
business
50,781
127,924
28,748
43,373
48,649
48,804
83,549
64,559
38,182
65,088
54,791
84.251
718,699
• • 299,795
Reimbursable business Incoming & Outgoing
Total words transmitted ewer main lines.
(*)
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-9323-b).
(l)
Number of words sent by New York to other F. R. Banks for their sole benefit charged to
hmnk-R indicated in accordance with action taken at Governors' Conference
November 2-4, 1925.
Per cent of total
bank business (*)
4.28
17.80
4.00
6.04
6.77
6.79 ~
11,63
8.98
5.31
9.06
7.62
11.72
100.00
1,018,494
721.752
1,740,246
1
fO
Or
>
X-9329-b
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, AUGUST, 1955
Name of bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas CityDallas
San Francisco
Board
Total
Operators'
Salaries
1
Retirement
Contributions
260.00
$ 24.65
1,558.29
122.79
225.00
20.25
306.66
27.60
190.00
17.35
262.50
21.52
4,317.16(#) 336.15
195.00
17.43
198.73
16.99
287.00
25.83
251.00
22.34
380.00
32.05
-
#8,231.34
$684.93
Main line rental, Richmond-Washington
Includes salaries of Washington operators
Credit
Amount reimbursable to Chicago
$
Wire
Rental
-
-
-
-
-
-
230.00(&)
—
—
-
- -
-
-
-
—
-
-
-
-
-
—
Less Reimbursable Charges
(&)
(#)
(*)
(a)
Operators11
overtime
-
-
15,115.70
|15,345.70
Total
expenses
Pro rata
share of
total
expenses
$
284.65 #
607.74
2,527.52
1,481.08
567.68
245.25
857.65
334.26
437.35
961.31
284.02
964.15
4,653.31
1,651.41
212.43
1,275.12
215.72
753.99
312.85
1,286.48
273.34
1,082.00
412.03
1,664.18
15,115.70
^24,261.97
$14,199.53
—
10,062.44
$14,199.53
Credits
$
Payable to
Board
284.65 $ 323.09
1,481.08
1,046.44
245.25
322.73
334.26
523.39
437.35
523.96
284.02
680.13
4,653.31
3,00!.90(*)
212.43
1,062.69
215.72
538.27
312.83
973.65
275.34
808.66
412.03
1,252.15
—
$9,146.27
—
$8,055.16
5,001,90(a)
#5,055,26
8
X-9330
INTERPRETATION
BANKING ACT OF 1955
(Copies to be sent to all Federal reserve banks)
September 25, 1955
Mr. Eugene M. Stevens,
Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Mr. Stevens:
This refers to your letter of September 17, 1955, relating to section 501 of the Banking Act of 1935 and to the Board's
telegram of September 13, 1955 (Trans. £505) outlining the proce—
dure to be followed in those cases in tehich a determination by the
Board pursuant to such section is desired.
The Board is of the opinion that section 501 of the
Banking Act of 1355 does not affect the holding company affiliate
status of an organization until the Board determines that such organization is not engaged, directly or indirectly, as a business in
holding the stock of, or managing or controlling, banks, banking
associations, savings banks, or trust companies.
That section
does not exclude from the definition of the term "holding company
affiliate" (for all purposes other than section 25A of the Federal
Reserve Act) all organizations which are not engaged, directly or
indirectly, as a business in holding the stock of banks, banking
associations, savings banks, or trust companies.
Instead, it ex-
cludes such organizations as the Board shall determine not to be
258
-2-
X-9350
so engaged and it appears clear that there must be a determination
by the Board with reference to each such organization.
Accordingly, the procedure outlined in the abovementioned telegram should be followed in any case in which a holding company affiliate desires to take advantage of the provisions
of section 301 of the Banking Act of 1955 and does not have a voting permit application pending before the Board.
The information
accompanying a request for a determination by the Board should include the following items in addition to any other facts which you
or the holding company affiliates may deem pertinent:
(1) A statement showing the purpose for which the
holding company affiliate was organized and the nature and
purpose of its present activities.
(2) A current financial statement of the holding company affiliate showing the nature and value of the various
classes of assets owned by it.
(3) A statement giving the name and address of each
subsidiary of, or other organization affiliated with, the
holding company affiliate and showing the nature of the
relationship and the character of tho business or other
activities of each such organization.
(4) A detailed list of all bank stocks owned or controlled, directly or indirectly, by the holding company
affiliate, showing the number and value of the shares
owned or controlled of each bank, the total number of outstanding shares of each bank, and the manner in and purpose
for which such stock, or control thereof, was acquired and
is held.
Of course, a request for determination should not be forwarded to the Board unless, in the opinion of your counsel, the
organization involved is a holding company affiliate under the
I
259
X-0530
provisions of section 2(c)(1) or 2(c)(2) of the Banking Act of
1933 or would be such upon the admission of a bank which has filed,
or contemplates filing, an application for membership in the Federal Reserve System.
Moreover, it is trusted that you will be able
to dispose of any cases in which it is obvious to you and your
counsel that the organizations involved are engaged, directly or
indirectly, in holding stock of, or managing or controlling, banks,
banking associations, savings banks, or trust companies.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
,
260
X - 9 5 3 1
INTERPRETATION
BANKING ACT OF 1955
(Copies to bo sent to all Federal reserve banks)
September 25, 1935
Mr.
.
Assistant Vice President,
Dear Sir:
®iis refers to your letter of September 18, 1955, in which
you inquire whether, in view of the amendments to section 22 of the
Federal Reserve Act by the Banking Act of 1955, your bank may lawfully renew a note of an examiner of the Federal Deposit Insurance
Corporation.
The provisions of section 22(a) of the Federal Reserve
Act, as amended by the Banking Act of 1955, prohibiting member
banks and insured banks from making loans to any bank examiner or
assistant examiner who examines or has authority to examine such
banks, provide a penalty of fine or imprisonment for violations
and the determination of whether a particular transaction is a
violation is a matter entirely within the jurisdiction of the Department of. Justice.
The Board of Governors of the Federal Reserve
System is not specifically authorized to prescribe regulations on
this subject; and, in the circumstances, an expression of opinion
by the Board that the renewal of a note, under the circumstances
. 261
-2-
X-9351
described in your letter, would not be a loan within the meaning
of such provision would not afford protection from criminal prosecution if the Department of Justice should take the position that
the transaction was within the statute and should feel it necessary
to prosecute for violation of this provision.
Accordingly, the
Board does not feel that it would be appropriate to undertake to
express an opinion upon a question of this kind.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
268
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X - 9 3 3 2
September 27, 1935
Dear Sir:
There Is attached a copy of a letter addressed
by the Board of Governors of the Federal Reserve System
to Mr. Allan Sproul, Assistant to the Governor of the
Federal Reserve Bank of New York, advising of approval by
the Board of the action of the board of directors of the
bank in authorizing the officers to open and maintain an
account on the books of the bank in the name of the Banco
Central de la Republica Argentina.
As stated in the letter to Mr. Sproul, the Board
approves the acceptance by your bank, should it desire
to do so, of participation in the account if and when
established by the New York bank.
Very truly yours
L. P. Bethea
Assistant Secretary
Inclosure.
TO CHAIRMAN OF ALL F. R. BANKS EXCEPT NEW YORK
(No copy of letter to governors and no extra copies to banks)
263
COHt
X-9552-a
September 27, 1935.
Mr. Allan Sproul,
Assistant to the Governor,
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Sproul;
The Board of Governors of the Federal Reserve System has received your letter of September 20, 1935, and approves the action
of your directors in authorizing the officers of the Federal Reserve
Bank of New York to open and maintain an account on the books of
the bank in the name of the Banco Central de la Republica Argentina
and to cariy out operations in this market for that bank along substantially the same general lines and subject to substantially the
same terms and conditions as for other central banks having accounts
with you.
It is assumed that the action of your directors contemplates
restricting the relations to be established with the Banco Central
de la Republica Argentina to the opening of a one way account, and
it will be appreciated if you will forward to the Board, for its
records, a copy of your letter to the Banco Central de la Republica
Argentina setting forth the terms and conditions upon which the account with that institution will be opened and maintained, together
with a copy of the bank's acceptance of such conditions.
Your letter states that, if the opening of the account is
X-9332-a
-2-
approved, your bank will offer a participation in the account to
the other Federal Reserve banks.
The Board of Governors of the Fed-
eral Reserve System approves the participation in the account by
any of the Federal Reserve banks which may desire to do so, and
letters are being addressed today to the chairmen of the banks advising them to this effect.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
265
X-9335
INTERPRETATION
BANKING ACT OF 1955
(Copies to be sent to all Federal reserve banks)
September 25, 1935.
SARGENT
SAN FRANCISCO
Retel September 17, 1935.
Assuming your first inquiry relates
to an indebtedness of executive officer of member bank to
liquidator or receiver of State or national bank arising out
of a pre-existing indebtedness to bank it is the view of the
Board that such indebtedness should be reported to the board
of directors of the member bank of which he is an executive
officer.
However, indebtedness of an executive officer of
member bank on account of assessment of statutory double liability on shares of stock held by him of another bank which
has gone into liquidation or receivership is not indebtedness
to another bank within meaning of section 22(g) and therefore
is not required to be reported to the board of directors of
the member bank of which he is an executive officer.
(Signed)
Bethea
BSTHEA
FEDERAL RESERVE BOARD
washington
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9334
September 28, 1955.
SUBJECT:
Code Words Covering New
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYAGH" - Treasury Bills to be dated October
2, 1955, and to mature March 16,
1956.
"NOYASY" - Treasury Bills to be dated October
2, 1955, and to mature July 1,
1956.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYAPE" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
267
BOARD OF G O V E R N O R S
D F T H E
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
I
9»
»
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
X-9355
September 30, 1935.
SUBJECT:
Contacts with Nonmember Banks to
Obtain Membership Applications, and
Waiver of Eligibility Requirements,
Dear Sir:
There is inclosed herewith for your information a copy of a letter which the Board has
addressed to the Federal Reserve Agent at the
Federal Reserve Bank of Chicago with regard to
obtaining from nonmember banks applications for
admission to membership in the Federal Reserve
System and also relating to waiver of eligibility
requirements for admission to membership.
Very truly yours
L. P. Bethea,
Assistant Secretary
Inclosure.
TO ALL FEDERAL RESERVE AGENTS
X-9335-a
COPY
September 30, 1955.
Mr. Eugene M. Stevens,
Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Mr. Stevens:
Receipt is acknowledged of your letter of August 21, 1935,
in which you suggested that it would be desirable at this time for
an active campaign to be undertaken to obtain applications from nonmember banks for admission to membership in the Federal Reserve System.
It is the view of the Board that the Federal Reserve banks
should at all times keep in touch with eligible nonmember banks and
call to the attention of such banks, whenever practicable, the desirability of applying for admission to membership in the System, and it
has been the Board's understanding that it is the general practice of
the Federal Reserve banks to contact eligible nonmember banks from
time to time with a view to obtaining their applications for membership.
In this connection, as you will recall, the Board, in 1954,
approved a pamphlet on the Federal Reserve System prepared by a committee of the Federal Reserve Agents' Conference which, among other
things, described the advantages and privileges of membership.
in a letter of January 16, 1935, addressed to the Governor
Also,
of the
Federal Reserve Bank of Chicago, a copy of which was forwarded to all
of the Federal Reserve Agents on January 21, 1935 (X-9100), the Board
269
X-9555-S
suggested that, in contacting nonmember banks, the representatives
of the Federal Reserve banks should, among other things, discuss membership in the Federal Reserve System.
The Board further feels, as
you suggested, that in view of the passage of the Banking Act of 1935,
it would be desirable to make snecial efforts at this time to contact
eligible nonmember banks with a view to obtaining thoir applications
for admission to membership.
Contacts with such banks by representa-
tives of the Federal Reserve bank in person, or where this is not
practicable by correspondence, would seem to be the most desirable
means at this time of bringing the matter to their attention.
As you know, section 202 of the Banking Act of 1955, as
passed by the House of Representatives, would have authorized the
Board, in the case of banks which had been admitted to the benefits
of insurance, to waive in whole or in part the eligibility requirements for the admission of such banks to membership in the Federal
Reserve System.
However, section 202 of the Banking Act of 1955, as
finally enacted, limits the right of the Board to waive eligibility
requirements for admission to membership in the System to those banks
which are required, under subsection (y) of section 12B of the Federal
Reserve Act, to become members of the Federal Reserve System in order
to be insured banks or continue to have any part of their deposits
insured under section 12B.
Subsection (y) provides that, with certain
specified exceptions, no State bank which "during the calendar year
~6—
X-9335-a
1941 or any succeeding calendar year shall have average deposits of
$1,000,000 or more" shall be an insured bank or continue to have any
part of its deposits insured after July 1 of the year following any
such calendar year during which it shall have had such amount of
average deposits, unless such bank shall be a member of the Federal
Reserve System.
In view of these provisions of subsection (y), it
cannot be determined prior to the end of 1941 whether any specific
bank mast be admitted to membership in the Federal Reserve System
in order to be an insured bank or to continue to have any part of
its deposits insured.
Therefore, it is the view of the Board that
it is not authorized, under the provisions of section 202 of the
Banking Act of 1935, to waive eligibility requirements for admission
to membership until the end of the year 1941.
However, in the case
of any bank which will apparently require the waiver of certain
eligibility requirements in order to become a member of the System
and retain its deposit insurance after July 1, 1942, there would be
no objection to such bank filing its application for membership prior
to the end of the year 1941 in order that consideration may be given
to all of the facts involved and its admission to membership be
expedited in so far as practicable after the end of the year 1941.
Your attention is called to "the following provisions contained in section 545 of the Banking Act of 1935 relating to the
factors which, under certain circumstances, are to be taken into consideration in determining whether the capital of a bank is impaired:
3 7 1
X-9535~a
"Sec. 345. If any part of the capital of a national
bank, State member bank, or bank applying for membership in
the Federal Reserve System consists of preferred stock, the
determination of whether or not the capital of such bank is
impaired and the amount of such impairment shall be basted
upon the par value of its stock even though the amount which
the holders of such preferred stock shall be entitled to receive in thte event of retirement or liquidation shall be in
excess of the par value of such preferred stock. If any
such bank or trust company uhall have outstanding any capital notes or debentures of the type which the Reconstruction
Finance Corporation is authorized to purchase pursuant to
the provisions of section 504 of the Emergency Banking and
Bank Conservation Act, approved Mnrch 9, 1935, as amended,
the capital of such bank may be deemed to be unimpaired if
the sound value of its assets is not less than its total
liabilities, including capital stock, but excluding such
capital notes or debentures and any obligations of the bank
expressly subordinated thereto. * * -x-»
You will observe that under the provisions of section 545,
above quoted, certain banks which may have heretofore been ineligible
for admission to membership in the Federal Reserve System because of
an impairment in their capital stock may now be eligible for admission.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary,
272
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9336
October 2, 1955.
SUBJECT: Clayton Act — "Lawfully Serving"
on Date of the Enactment of the
Banking Act of 1955.
Dear Sir;
There is inclosed for your information a copy of
the Board's letter of this date with further reference
to the subject discussed in the Board's letter of September 16, 1955 (X-9518), namely, the conditions under which
an individual should be regarded as having been "lawfully
serving" banking institutions on the date of the enactment of the Banking Act of 1955 within the meaning of
the provision in section 8 of the Clayton Act as amended
by the Banking Act of 1955 which permits such service to
continue until February 1, 1939.
Very truly yours,
L. P. Be+hea,
Assistant Secretary
Inclosure
TO ALL FEDERAL RESERVE AGENTS
X-9356-a
COPY
October 2, 1955,
Mr. L. M. Clark,
Assistant Federal Reserve Agent,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr. Clark:
In your letter of September 20, 1935, with reference to the
last sentence of the Board's letter of September 16, 1935 (X-9318), you
ask for confirmation of your understanding that that sentence is not to
be interpreted as implying that relationships which were not prohibited
by the Clayton Act immediately prior to the enactment of the Banking
Act of 1935 may not lawfully continue until February 1, 1959.
Your understanding in this connection is correct, since, as
indicated in section 11(c) of the tentative draft of Regulation L which
was forwarded to you with the Board's letter of September 13, 1935
(X-9317), any relationship involving a member bank, which was in existence on August 25, 1935, and which at that time was lawful under the
Clayton Act" either because it was authorized by a permit then in effect
or because it was otherwise not subject to the prohibitions contained
in the Clayton Act prior to its amendment by the Banking Act of 1935
on that date, is not prohibited until February 1, 1939, in view of the
provisions of the paragraph immediately following the numbered paragraphs in section 8 as amended, even though such relationship would
otherwise be prohibited by the Clayton Act as amended.
Very truly yours,
(Signed) L. ?. Bethea
L. P. Bethea,
Assistant Secretary.
X-9337
INTERPRETATION
BANKING ACT OF 1955
(Copies to be sent to all Federal reserve banks)
October 2, 1935.
Mr. F. J. Zurlinden, Deputy Governor,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Dear Mr. Zurlinden:
This refers to your letter dated September 20, 1955, regarding advances under section 10(b) of the Federal Reserve Act, as
amended by section 204 of the Banking Act of 1955.
In view of the provisions that such advances nay be made
"under rules and regulations prescribed by the Board of Governors
of the Federal Reserve System", you present the question whether
such advances can be made prior to the issuance of regulations upon
the subject by the Board. As you know, the Board is now engaged in
a revision of Regulation A which deals with this subject, and it is
hoped that such regulation can be issued in the near future. However,
pending the promulgation df such regulation, the Board will not object to the making by Federal Reserve banks of advances under section
10(b) which are in conformity with the provisions of such section.
You also ask to be advised as to the proper basis for establishment of the rate to be charged on advances under section 10(b).
Prior to the enactment of the Banking Act of 1935, section 10(b) contained a provision regarding the rate on advances which was the same
as that contained in the present section except that the rate was to
be not less than 1 per cent higher, instead of not less than one-half
375
X-9337
of 1 per cent higher, than the highest discount rate in effect at
the Federal Reserve bank.
Section 10(b) was first enacted on February 27, 1932, and
at that time the only discount rates in effect were those applicable
to discounts for member banks under the provisions of sections 15
and 13a of the Federal Reserve Act. However, on July 21, 1932, Congress
amended section 13 by adding the third paragraph thereof providing for
discounts of eligible paper for individuals, partnerships, and corporations. On March 9, 1933, Congress again amended section 13 by
adding the last paragraph thereof providing for loans to individuals,
partnerships, ahd corporations on the security of direct obligations
of the United States. Later, on June 19, 1934 > section 13(b) was
enacted providing for loans to industry. Although discounts under the
provisions of these later acts have been made at a rate higher than
that applicable to discounts for member banks under sections 13 and
13a, it was not believed that Congress intended in the enactment of
these provisions to bring about an increase in the rate applicable to
loans under section 10(b) and, accordingly, the words "the highest discount rate in effect" have uniformly been interpreted during all the
period in which section 10(b) has been in effect as meaning the highest
rate applicable to discounts for member banks under the provisions of
sections 13 and 13a and not the highest discount rate applicable to
loans under the provisions of the third or last paragraph of section
13 or the provisions of section 13(b).
—3—
X-9337
When the substance of section 10(b) was reenacted in
permanent form by section 204 of the Banking Act of 1935, it is believed that Congress intended to adopt the construction which had
previously been placed upon such section. Accordingly, the Board is
of the opinion that the rate at which advances may be made under the
provisions of section 10(b) shall be not less than one-half of 1 per
cent per annum higher than the highest rate applicable to discounts
for member banks under the provisions of sections 13 and 15a of the
Federal Reserve Act in effect at the Federal Reserve bank making the
advance on the date of the note evidencing such advance.
I sincerely hope that the above is the information which you
desire, and that you will feel free to call upon me at any time when
you think I may be of assistance.
Very truly yours,
(Signed) M. S. Szymczak
M. S. Szymczak.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9336
October 5, 1955.
SUBJECT: Code Words Covering New
Issues of Treasury Bills,
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYATH" - Treasury Bills to bo dated
October 9, 1955, and to mature
March 16, 1956.
"NOYAVO" - Treasury Bills to be dated
October 9, 1955, and to mature
July 8, 1956.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYASY" on page 172.
Very truly yours
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9359
October 5, 1935.
SUBJECT: Changes in Inter-district
Time Schedules.
Dear Sir:
Upon agreement between the Federal Reserve banks
affected, the Board of Governors of the Federal Reserve
System has approved the following changes in the interdistrict time schedules for cash items:
From
To
Kansas City to New York
3 days
2 days
Kansas City to Seattle
4 days
days
Denver to Charlotte
4 days
5 days
Denver to Minneapolis
3 days
2 days
Omaha to Helena
5 days
2 days
Very truly yours,
E. P. Bethea,
Assistant Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9340
October 10, 1935.
Dear Sir:
There are enclosed herewith copies of
statement rendered by the Bureau of Engraving
and Printing, covering the cost of preparing
Federal reserve notes for the month of September, 1955.
Very truly yours,
0. E. Foulk,
Fiscal Agent.
Enclosure.
TO ALL FEi)ERaL RESERVE AGENT*
280
X-93i|0-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
September 3 to 30, 1935.
Federal Reserve Notes for Federal Reserve Board
Series 1928
Boston,
Cleveland,
Atlanta,....... San Francisco,. 15,000
18.000
$10
&20
Total Sheets Amount
5,000.
10,000
14,000
10,000
-
10,000
14,000
10,000
20,000
G 860.00
1,204.00
860.00
1,720.00
5,000
54,000
54,000
$4,644.00
54,000 sheets, @ $86.00 per M,
$ 4,644.00
Series 1954
Sio
$5
Boston,
New York,.....
Philadelphia,. 38,000
—
Cleveland,
—
Richmond,
41,000
—
St. Louis,..#. 44,000
Minneapolis,.. 12,000
Kansas City,..
Dallas,....... 13,000
San Francisco,
—
148,000
54,000
556,000
35,000
47,000
31,000
2.1,000
112,000
25,000
10,000
20,000
—
119.000
806,000
$20
Total Sheets Amount
54,000 y: 4,644.00
556,000 28,896.00
6,966.00
81,000
4,586.00
51,000
4,558.00
55,000
5,552.00
62,000
9,652.00
112,000
6,622.00
77,000
2,752.00
52,000
2,580.00
50,000
1,118.00
15,000
119.000 10.234.00
—
10,000
4,000
22,000
-
-
10,000
10,000
10,000
—
66,000
1,020,000
1,020,000 sheets, @ $86.00 per M,
87,720.00
87,720.00
ft 92.564.00
FEDERAL RESERVE BOARD
WASHINGTON
X-9341
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 11, 1935
Subject:
Clayton Act — "contiguous or adjacent
thereto".
Dear Sir:
There Is inclosed for your information a copy
of the Board's letter of this date regarding the meaning
of the phrase "contiguous or adjacent thereto" in paragraph (5) of section 8 of the Clayton Act as amended by
the Banking Act of 1935.
Very truly yours,
L. P. Bethea,
Assistant Secretary.
Inclosuro.
TO ALL FEDERAL RESERVE AGENTS
283
X-9341-a
October 11, 1935.
Mr. S. G. Sargent,
Assistant Federal Reserve Agent,
Federal Reserve Bank of San Francisco,
San Francisco, California.
Dear Mr. Sargent;
Consideration has been given to the inquiry contained in
your telegram of September 10, 1935, regarding the meaning of the
phrase "contiguous or adjacent thereto" contained in paragraph (5)
of section 8 of the Clayton Act as amended by section 329 of the
Banking Act of 1935. In this connection you refer to the definitions
of the phrase "territory contiguous thereto" contained in the Board's
resolution of November 7, 1923, and to further definitions of that
phrase contained in its letter of January 24, 1924, dealing specially
with San Francisco and Los Angeles. In the event that those definitions are not to be used as a basis for determing what is "contiguous or adjacent thereto" within the meaning of the Clayton Act,
you request a definition of the phrase in the Clayton Act.
The definition contained in the Board's resolution of November 7, 1923, was made as a part of a statement of administrative policy
by the Board regarding the operation of branches by State member banks,
and the special definitions contained in its letter of January 24, 1924,
amended that definition with respect to two particular situations.
283
X-9341-a
Mr. S. G. Sargent —
2
Furthermore, these definitions referred to "contiguous territory",
whereas the Clayton Act refers to cities, towns, and villages which
are "contiguous or ad.iacont". Therefore, these definitions cannot be
used as a basis for determining what cities, towns, and villages are
"contiguous or adjacent" within the meaning of the Clayton Act.
However, the Board believes that the word "contiguous" in the
Clayton Act may be given a similar interpretation to that given it in
the Board's resolution and that it should be defined as referring to
cities, towns, and villages whose corporate limits touch or coincide
at some point.
The Board believes that the word "adjacent" in the Clayton
Act was intended to refer to cities, towns, and villages which, although not actually "contiguous" within the above definition of that
word, are located in such close proximity and are so readily accessible
to each other as to be in practical effect a single city, town, or
village, as for example, cities, towns, or villages separated only by
a water-course, or a suburb of a city separated from that city by an
intervening suburb.
In any case in which there is doubt as to the applicability
of this provision of the Act in the light of the definitions given
above, it is believed that consideration may properly be given to the
question whether there is any substantial conflict of competitive interest between the banks of one city, town, or village and the banks
384
X-9341-a
Mr. S. G. Sargent — 5
of the other, since, as you knov:, the underlying purpose of the Clayton
Act is to prevent monopolies and substantial lessening of competition,
and since, in using the phrase "contiguous or adjacent", it seems
probable that Congress was describing cities, towns, and villages in
which it felt that such conflict of competitive interest would exist.
If in any case you are not able with the assistance of your
counsel to determine to your own satisfaction whether or not the exception contained in paragraph (5) of section 8 is applicable, it is suggested that you refer the question to the Board, furnishing it with
full information, together with a statement of your views and those of
your counsel and such recommendation as you may wish to make.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9342
October 12, 1955,
SUBJECT; Code Words Covering New
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOIAWE" - Treasury Bills to be dated
October 16, 1935, and to mature
March 16, 3.936.
"NOYBAD" - Treasury Bills to be dated
October 16, 1955, and to mature
July 15, 1956.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYAVO" on page 172.
Very truly yours,
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-9343
October 19, 1935.
SUBJECT: Code Words Covering New
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYBEN" - Treasury Bills to be dated
October 23, 1935, and to mature
March 16, 1956.
"NOYBIT" - Treasury Bills to be dated
October 23, 1935, and to mature
July 22, 1936.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYBAD" on page 172.
Very truly yours,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
/
X-9344
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For release in morning papers on
Monday, October 21, 193$.
October 19, 1935
AMENDMENT OF REGULATION T
Amendment No. 6 of Regulation T - Effective October 29. 1955.
Section 3 of Regulation T is hereby amended by adding at
the end thereof a new subsection reading as follows:
"(i) Warrants. - Notwithstanding any other provision of this regulation, the maximum loan value of any
warrant or certificate which evidences a right to subscribe to or otherwise acquire any security and which
by its terms expires within ninety days of issuance
shall be nothing: Provided. That in any $ase in which
an account contains, in addition to such warrant or
certificate, the security in respect of which such
warrant or certificate has been issued, the Current
market value of such security shall, for the purpose of
calculating its maximum loan value, be increased by
the current market value of such warrant or certificate."
288
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9345
October 81, 1935.
SUBJECT: Holidays During November, 1935.
Dear Sir:
The Board of Governors of the Federal Reserve System is advised that the New Orleans Branch of the Federal Reserve Bank of
Atlanta will be closed on Friday, November 1, in observance of All
Saints Day.
The Board is further advised that on Tuesday, November 5,
Election Day, the following head offices and branches will be closed:
Direct Settling Offices:
New York
Philadelphia
Richmond
Cleveland (at 1:00 p. m. Eastern
Standard Time. Will participate in transit clearing.)
Other Offices:
Buffalo
Pittsburgh
Cincinnati (at 1:00 p. m. Eastern
Standard Time.)
On the dates given the offices mentioned will not participate in either the transit or the Federal Reserve note clearing
through the Gold Settlement Fund. Please include transit clearing
credits for the offices mentioned on each of the holidays with your
credits for the following business day. No debits covering shipments
of Federal Reserve notes for account of the head offices named should
be included in your Federal Reserve note clearing of Tuesday, November 5.
289
X-9545
On Monday, November 11, Armistice Day, and Thursday, November 28, Thanksgiving Day, all Federal Reserve banks and branches
will be closed and there will be neither transit nor Federal Reserve
note clearing through the Gold Settlement Fund.
The offices of the Board of Governors of the Federal Reserve
System will be open for business on Monday, November 11.
Please notify branches
Very truly yours,
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
390
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9346
October 21, 1935
Dear Sir:
Under date of October 17, 1935, there were forwarded to you
a complete set of mimeographed copies of the letters received from
the twelve Federal reserve banks in regard to the tentative drafts
of the Board's proposed Regulations A, D, H, I, L, P, and Q, and
the proposed regulation regarding loans to executive officers o2
member banks.
There have now been prepared memoranda covering the recommendations made by the Board's staff with respect to the principal
suggestions of the Federal reserve banks in connection with the
drafts.
Three sets of these memoranda are inclosed. It will be
appreciated if you will hand the extra sets to the officers of your
bank, and in the event there are any further comments that you or
the officers of the bank wish to make with regard to the proposed
regulations, the Board requests that you forward your comments so
as to reach this office not later than October 51, 1935, using air
mail if necessary for that purpose.
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-9347
October 26, 1935.
SUBJECT: Code Words Covering New
Issues of Treasury Bills.
Dear Sir;
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYBLE" - Treasury Bills to be dated
October 30, 1935, and to mature
March 16, 1956.
"NOYBOB" - Treasury Bills to be dated
October 30, 1955, and to mature
July 29, 1936.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYBIT" on page 172.
Very truly yours
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9349
October 26, 1935.
SUBJECT: Expense, Main Lines, Leased
Wire System, September, 1935.
Dear Sir:
Inclosed herewith you will find two mimeographed statements, X-9549-a and X-9349-b, covering
in detail operations of the main lines Leased Wire
System, during the month of September, 1935.
Please credit the amount payable by your
bank for your share of the expense of the Leased
Wire System, to the Federal Reserve Bank of Richmond
in your daily statement of credits through the Gold
Settlement Fund for the account of the Board of Governors of the Federal Reserve System, and advise the
Federal Reserve Bank of Richmond by wire the amount
and purpose of the credit.
Very truly yours,
Fiscal Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS.
292
REPORT SHOWING CLASSIFICATION AND NUMBER Of" WORDS TRANSMITTED OVER MAIN LINES
Or THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF SEPTEMBER, 1935.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Board business
Total
28,433
126,316
25,899
40,185
32,551
43,537
74,108
56,651
31,657
58,034
48,711
81.058
647,140
. . . . . .
Words sent by
New York chargeable to other
F. it. Banks (l)
1,544
1,671
1,649
.1,-540
1,560
2,152
1,884
1,582
1,748
2,717
3.352
21,399
Net Federal
reserve
bank
business
29,977
126,316
27,570
41,834
34,091
45,097
76,260
58,535
33,239
59,782
51,428
84.410
668,539
Per cent of total
bank business (*)
*
. . . . . 273,010
Reimbursable business Incoming & Outgoiig
Total words transmitted over main lines
X—9349—8
4.48
18.89
4.12
6.26
5.10
6.75
11.41
8.76
4.97
8.94
7.69
12.63
100.00
941,549
561,645
....
....
1,505,194
(&) These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-9349-b).
(l) Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance with action taken at Governors' Conference.
November 2-4, 1825.
JO
X-9349-b
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, SEPTEMBER, 1935.
Name of bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Sju -Louis
Minneapolis
Kansas CityDallas
San Francisco
Board
Total
Retirement
Operators' Contributions
Salaries
$ 260.00
$ 24.65
1,358.29
122.79
20.25
225.00
306.66
27.60
190.00
17.35
262.50
21.52
4,145.10(#) 528.97
195.00
17.43
201.23
17.21
25.83
287.00
251.00
22.34
380.00
32.03
—
#8,059.78
—
$677.97
Operators1
overtime
s -
Total
expenses
s
$ 284.65 $>
671.17
1,489.08
2,829.99
245.25
617.24
334.26
957.84
230.03(&)
437.35
764.05
1,011.25
284.02
8.00
4,480.07
1,709.58
212.43
1,512.37
218.44
744.58
312.83
1,339.34
1.50
274.84
1,152.07
412.03
1,892.15
14,952.76
14.932.76
$17.50 $15,162.76
125,918.01 #14,981.43
8.00
Less Reimbursable Charges
(&)
(#)
(*)
(a)
Wire
Rental
Pro rata
share of
total
expenses
—
-
-
-
-
-
—
-
-
-
-
-
-
-
-
-
-
-
—
—
3.356.58
*14,981.43
Credits
Payable to
Board
| 284.65 # 386.52
1,489.08 1,540.91
245.25
371.99
605.58
354.26
326.70
437.55
284.02
727.23
4,480.07 2,770.69(*)
212.43 1,099.94
218.44
526.14
312.85 1,026.51
274.84
877.23
412.03 1,480.12
—
#8,985.25 #8,766.87
2.770.69(a)
$5,996.18
Main line rental, Richmond-Washington
Includes salaries of Washington operators
Credit
Amount reimbursable to Chicago
*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9350
October 28, 1935.
SUBJECT: Review of Outstanding
Clayton Act Permits.
Dear Sir:
In its letter of May 1, 1933 (X-7426), the Board suggested
that each Federal reserve agent adopt the practice of making an
annual review of outstanding Clayton Act permits in his district
and of submitting his recommendation in each case in which he felt
that consideration should be given to the revocation of the permit.
In its telegram of March 5, 1935 (Trans. %225), the Board suggested
that the submission of such reports be deferred in view of the
pending amendments to the Clayton Act.
Further, in several instances, the Board has requested a
Federal reserve agent to make a review at some specified date or
dates of the circumstances in connection with a particular permit
and to furnish the Board with his recommendation as to whether it
should be revoked.
In view of the amendments to the Clayton Act made by the
Banking Act of 1935 which repealed the provisions relating to the
issuance and revocation of individual permits by the Board, it will
—2—
X-9350
not be necessary for you to make any such review, report, or recommendation.
As you know, a revised procedure in connection with the enforcement of the Clayton Act is under consideration, and in this
connection a tentative draft of letter (L-173-ra) has been sent to
you with the Board's letter of September 13, 1935 (X-9517).
Very truly yours,
L. P. Bethea,
Assistant Secretary*
TO ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9551.
October 29, 1955
Subject:
Change in inter-district time schedule
Dear Sir:
Upon agreement between the Federal Reserve banks
affected, the Board of Governors of the Federal Reserve System has approved the following change in the inter-district
time schedule for cash items:
From
New York to Kansas City
5 days
Very truly yours,
Chester Morrill,
Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
To
2 days
298
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X — 9 3 5 2
October 50, 1935.
Dear Sir:
As indicated in the minutes of the Personnel Classification Plan Conference held in Chicago on April 17, 1955, pursuant
to the Board's letter, B-1071, of April 1, 1955, certain topics on
the program of that conference were referred to a sub-committee
consisting of Mr. J. S. Walden, Jr., Deputy Governor, Federal Reserve Bank of Richmond (Chairman), Mr. W. W. Paddock, Deputy Governor, Federal Reserve Bank of Boston, and Mr. L. F. Sailer, Deputy
Governor, Federal Reserve Bank of New York.
At the request of Mr. 0. M. Attebery, Deputy Governor,
Federal Reserve Bank of St. Louis, who was chairman of the Chicago
conference, the sub-committee has submitted its report, dated October 15, 1955, direct to the Board.
Two copies of the report are
inclosed.
It will be appreciated if you will furnish the Board at an
early date with any comments or suggestions that you may care to make
in regard to the report in order that the Board may have your views
with respect thereto before it takes formal action on the report.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL GOVERNORS
Inclosures.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9353
October 30,
1935.
SUBJECT: Code Words Covering Hew
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasuiy Bills.
"N0YBR0" - Treasury Bills to be dated November 6, 1935, and to mature
March .16, 1936.
"NOYBUL" - Treasury Bills to be dated November 6, 1935, and to mature
August 5, 1936.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "N0YB0B" on page 17%.
Very truly yours,
Assistant Secretary
10 GOVERNORS Oi ALL
ii, BANKS
.300
y
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9354
October 51, 1955.
Dear Sir:
There is inclosed for your information
a copy of a letter which is being sent today to
the Governor of the Federal Reserve Bank of Cleveland with regard to the procedure to be followed in
the future in the establishment of rates of discount and purchase by the Federal reserve banks.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure,
TO ALL F. R. AGENTS.
301
X-9354-a
October 31, 1935.
Mr. M. J. Fleming, Governor,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Dear Governor Fleming:
Reference is made to your letter of October 7, 1955, from
which it is noted that your directors, on October 4, 1935, established
rates of discount and purchase for a period of fourteen days commencing
October 5, and that your bank had been advised by its counsel that it
was at least open to question whether the rates of discount and purchase
fixed by your bank on September 20, 1935, and approved by the Board of
Governors of the Federal Reserve System, continued in effect until the
rates fixed by your board at its meeting on October 4, 1935, were reviewed and determined by the Board of Governors of the Federal Reserve
System as provided in subsection 14(d) of the Federal Reserve Act, as
amended by the Banking Act of 1935, and you had received advico of the
Board's approval thereof.
Your letter suggests that, in view of this opinion, the Board
establish a procedure whereby advice of the Board's action on rates
established by your directors will be sent to your bank on the date
L
of receipt by the Board of information from the bank as to rates fixed
for a future period, in order that there shall be at all times rates
of discount and purchase for the bank without any possibility of question
"
as to the validity of rates in effect.
302
- 8 -
X-9554-a
It has been the experience of the Board in the past that, because of the important questions of policy involved in rate changes,
it was not always possible to reach a decision on rates submitted to
it by a Federal reserve bank on the date advice of the bank's action
was received. In view of the increased responsibilities placed upon
the Board by the Banking Act of 1955, there undoubtedly will be occasions in the future when the Board will require more than one day in
which to review all of the important factors which must be taken into
account. For this reason, the Board believes that it would not be
advisable to set up a procedure which would require it to pass upon
rates of discount established by the banks upon the date upon which
advice of the bank's action is received.
The only change in subsection 14(d) of the Federal Reserve Act
as amended by the Banking Act of 1935 is the addition of a provision
by which the Federal reserve banks are required to establish their rates
of discount every fourteen days, or oftener if deemed necessary by the
Board. Therefore, the Board takes the position that when a bank has
established rates of discount in accordance with this requirement upon
which action by the Board is pending, the existing rates continue in
effect until rates subsequently established with the approval of the
Board become effective. This is on the assumption, of course, that the
language used by the bank in establishing the existing rates did not
otherwise limit the period for which they were to be in effect. In this
connection, the Board feels that it would be preferable for the bank not
303
- 3 -
X-9354-a
to place a limitation on the time during which rates established are to
remain in effect.
Of course, the Board will consider rates of discount submitted
to it by the Federal reserve banks, and will act thereon and advise
the banks of its action, as promptly as possible in the circumstances.
Very truly yours,
(Signed Chester Morrill
Chester Morrill,
Secretary.
X-9356
"THE FEDERAL RESERVE SYSTEM AND THE BANKING ACT OF 1935."
Address by
M. S. SZYMCZAK, MEMBER
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
before the
Cleveland Chapter,
American Institute of Banking,
Cleveland> Ohio.
Thursday, November 7, 1935
6:15 p. m.
Ball Room, Carter Hotel
Released for Publication
November 7, 1935
After 6:15 p. m.
305
X-9356
I am glad of this opportunity to be with you this evening, for most of
you I understand are students of banking, and that is what I am myself. No
matter what our positions in the banking world, we are still students of banking if we are sincere. For banking is not a simple thing, and its principles
cannot be understood without experience and patient study.
Speaking personally, I have always found that in the process of studying any institution, or function, or problem, it is important to keep referring
back to fundamentals. Otherwise it is easy to go wandering off into details
without knowing what they are all about. For that reason, I should like to
review a few basic things in spite of the fact that we are all familiar with
them. I should like to brush away the great mass of details for a little while
and discuss some of the elementary facts about the Federal Reserve System and
the functions it performs for the country. I believe it is particularly worth
while to do this before considering the new and important legislation in the
Banking Act of 1935.
The Federal Reserve Act, which in 1913 established the Federal Reserve
System, is one of the most important pieces of financial legislation ever passed
in this country. It represented the decision reached after many years of dissatisfaction with our banking and currency facilities, brought to a head by
the panic of 1907j after a thorough study of banking here and abroad by a
National Monetary Commission established by Congress in 1908; and after long
and earnest public discussions of banking reform over a period of twenty years
or- more.
Since 1913, on the basis of actual experience and in response to new
developments, numerous amendments have been made to the original Federal Reserve
Act. During the depression changes were made by the Glass-Steagall Act of 1932,
- 2 -
X-9356
the Emergency Banking Act, the Banking Act of 1933, the Gold Reserve Act of 1934,
and other acts. The most recent as well as the most important of these is the
Act approved August 23, 1935.
Federal Reserve banks
The work of the System may be considered first from the point of view of
the Federal Reserve banks in their relations with the banking institutions of the
country, and then from the point of view of the broader responsibilities for
credit policy which come under the central organization in Washington, now known,
under the Banking Act of 1935, as the Board of Governors of the Federal Reserve
System.
The location of the Federal Reserve banks was not determined by Congress,
but by the Secretary of the Treasury, the Secretary of Agriculture, and the
Comptroller of the Currency acting as the Reserve Bank Organization Committee.
To this Committee Congress delegated the authority to designate not less than
eight nor more than twelve reserve cities and to divide the continental United
States into a corresponding number of reserve districts. These districts,
according to the law, were to be apportioned with due regard to the convenience
and customary course of business. They may be readjusted by the Board of
Governors of the Federal Reserve System. In addition to the twelve reserve banks
there are now in all twenty-five branches and two agencies. The Federal Reserve
Bank of Cleveland has a branch in Cincinnati and one in Pittsburgh.
All National banks were required to become members of the System, subscribing to the capital stock of the Reserve banks, and depositing their reserves therein. State banks were permitted to become members on similar terms,
provided they fulfilled certain requirements as to capital structure and as to
the general nature of their business. This division of the banks of the country
into National and State banks, with different laws, powers, and supervisory
307
-3-
X-9356
authorities, was a basic condition upon which the Federal Reserve System was
superimposed, and it is a basic condition to which its operations have always
had to be adjusted.
About forty percent of the banks in the country now belong to the Federal Reserve System and these banks account for about seventy percent of the
country's banking resources. The member banks .include 5,425 national banks and
985 State banks and trust companies. The State banking institutions which are
still outside the System are for the most part small. There are about 9,000
non-members; about 1,400 of them have deposits of less than $100,000, and about
2,600 have deposits of less than $250,000.
Under provisions of the Banking Act of 1935 State non-member banks, with
certain exceptions, having average deposits of $1,000,000 or over, must become
members of the System after July 1, 1942 or lose the right of having their deposits insured with the Federal Deposit Insurance Corporation.
The Federal Reserve banks differ from ordinary commercial banks in both
their organization and their functions. Generally speaking, as you know, they do
not deal directly with the public. Their customers are the member banks who make
deposits with them and secure credit or currency just as the public does with
the local banks. The capital stock of the Federal Reserve bank is owned by the
member banks, which are required-by law to subscribe to capital stock equal to
six percent of their capital and surplus. One-half of such subscription is paid
in cash and the other half is subject to call. The management of the reserve
bank is in the hands of a board of directors which represents not only the member
banks but other business interests of the community. Of the nine directors of
each Federal Reserve bank, three known as Class C directors are selected by the
Board of Governors of the Federal Reserve System and six are selected by the ,
308
-4-
X-9356
member banks, three known as Class A directors representing the stock holding
member banks, and three known as Class B directors representing commerce, agriculture, or industry in the district. The chief executive officer of the bank,
designated as president under the new banking act, is appointed by the board
of directors of the bank subject to the approval by the Board of Governors of
the System. The legal requirements for ownership and management of the Reserve
banks, therefore, recognize that their functions must be performed in the public
interest and that their management must take account of both the banking and
the general business interests of the region.
Holding member bank reserves
One of the purposes of the Federal Reserve Act was to provide institutions
which would hold the reserves of the nation's banking system. It is necessary
for all banks to keep a certain proportion of their deposits available to meet
the current demands of their sustomers. Before the establishment of the Federal
Reserve System, National banks were required to keep part of their reserves in
their own vaults and part on deposit in other banks, usually metropolitan banks.
Banks in the central reserve cities, however, of which there were then three,
New York, Chicago and St. Louis, had to hold all their reserves in cash. When
there was a general and heavy demand for funds, especially at crop moving times,
for example, and country banks everywhere drew down their balances with their
city correspondents, a situation was developed in which a currency and credit
crisis of greater or less magnitude might readily occur. Country banks then
had difficulty in getting money from the city banks, and the public in turn ha4
difficulty in getting money from the country banks and from the city banks as
well.
309
-5-
X-9S56
Now all member banks are required by law to keep their reserves on
deposit in the Federal Reserve bank of their district and it is the business
of the Reserve banks to supply member banks with credit or cash in such emergencies.
The required reserves vary with the type of deposit and the class of
bank. Banks in central reserve cities, which now are only New York and Chicago, are required by law to maintain reserves equal to thirteen percent
of demand deposits, that is, deposits which can be withdrawn without advance
notice. For example, if a customer of a Chicago bank borrows $1,000, his
deposit balance is credited with $1,000 and the bank in turn must provide
for Si30 of reserve deposit at the Federal Reserve Bank of Chicago, unless
prior to the loan it already had excess reserves of that amount or more.
Banks in so-called reserve cities, of which there are about sixty, are required to maintain reserves of ten percent against demand deposits, and all
other banks are required to maintain reserves of seven percent. Reserves of
three percent against time deposits are required to be maintained ty all banks.
Member bank reserve balances on deposit with the twelve Reserve banks amount
today to over $5,600,000,000. Because of unusual conditions, the total of
these balances is about twice as much as the banks are required to have,
The Reserve banks serve as the credit reservoirs of our banking system. Local banks no longer need have any fear that they will be unable to
draw on their reserves when needed, as used to be the case before the Reserve System was established. Accordingly, one important risk has been
eliminated from commercial banking.
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Loans to member banks
Equally important with their function of holding member bank
reserves is the power of the Reserve banks to make loans to member banks.
Through these loans the member banks are able to increase their deposit
balances and thus provide the reserves necessary for the expansion of
credit. The Reserve banks may supply funds to member banks by rediscounting paper or by making advances to member banks, as provided by law and
Board regulations, or by purchasing bills and securities, and entering
corresponding credits to the account of the member banks, thus increasing
their reserve balances. Member banks in turn can increase their loans
to the public in the aggregate by an amount several times the amount of
the additional reserves.
The Federal Reserve Act, however, places limitations on the character of paper on which loans may be obtained from the Reserve banks. For
many years Reserve banks have had the power to discount only short-term
self-liquidating commercial paper, that is notes, drafts, bills of exchange
and bankers' acceptances arising out of commercial, industrial and agricultural transactions, and to make advances to member banks on their promissory notes backed by paper eligible for discount or purchase or ty United
States Government obligations. They were not authorized to make advances
on a wide range of other assets which made up an important part of the
total earning assets of banks. These included real estate loans, securities other than those of the United States Government, and loans to business
men which did not meet the requirements of the narrowly-defined eligible
commercial paper.
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As a result of many developments in our financial organization,
paper which qualified for borrowing from the Reserve banks has constituted a constantly decreasing proportion of the total assets of member
banks ever since the System was established. In 1929 it was only about
twelve percent of total loans and investments of such banks, and in 1934
it was but eight percent. Consequently, in 1931 and 1952 when the great
liquidation occurred, many banks with assets which were good but technically ineligible for borrowing at Reserve banks, were obliged either
to dump them on a falling market, suffer severe loss and contribute to
the deflation in values or to close their doors.
The new banking act corrects this situation. It authorizes the
Reserve banks to make advances to member banks for periods not exceeding four months on any security satisfactory to the Reserve bank, at a
rate of interest at least one-half of one percent above the highest
discount rate in effect at the particular Reserve bank. This amendment
modifies and makes permanent the emergency legislation which it was necessary to pass in 1932.
In addition to the foregoing general powers of discount and purchase the Federal Reserve banks have special powers with respect to loans
to commerce and industry for working capital purposes. These powers are
granted by Section 13b of the Act. Under this section the Reserve banks
are authorized to discount loans made by member banks and other financing
institutions to established industrial and commercial businesses for the
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purpose of supplying working capital. Such loans are to have maturities of not to exceed five years. The Reserve banks are authorized to
discount these loans without recourse for as much as 80 percent of
any loss thereon. The Reserve banks also have authority to grant commitments to discount such loans. This makes it possible for a member
bank to hold in its portfolio loans which the Reserve bank is under
V
obligation to take over upon request, and upon which the Reserve bank
assumes 80 percent of any loss. In other words the member bank has an
earning asset which is insured 100 percent as to liquidity and 80 percent as to loss. This arrangement is not restricted to member banks;
it is open to non-members as well.
Under the same section the Reserve banks are authorized in exceptional cases, and when credit is not available from the usual sources,
to make such loans for working capital purposes direct to the borrower.
As of October 25, the Federal Reserve Bank of Cleveland had received 553 applications for working capital loans aggregating #17,000,000.
Of these, 141, aggregating #6,300,000, had been approved. The Reserve
bank's outstanding advances on that date were $1,800,000 and at the same
time it had commitments outstanding for another $1,800,000.
These loans have been made to all kinds of enterprises, industrial and commercial. In many cases they have been loans which bankers
have not been accustomed to making, and which would not be made were it
not for the fact that the Reserve bank stands behind the bank which makes
them. But as it is, they constitute secure and liquid assets, yielding
a good rate of interest.
X-9356
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313
Currency issued by Reserve banks
Another activity of the Reserve banks is the issuance of Federal Reserve notes. These constitute the paper money authorized by the Reserve
Act for the purpose of supplying the country an elastic currency - that is,
a currency whose volume can be readily increased or decreased according to
the public demand for it.
Federal Reserve notes are obligations of the United States and are
secured by specific collateral pledged by the Reserve bank. The bank is
required to keep reserves in gold certificates at least equal to forty
percent of the notes in actual circulation.
The Federal Reserve banks, of
course, do not supply the entire currency of the country. The Government
issues silver dollars, minor coin and some paper money and, until July of
this year, the National banks continued to have the privilege of issuing
National bank notes.
The larger part of money in circulation, however,
consists of Federal Reserve notes.
A member bank that has satisfactory assets can always secure all
the currency that it needs. If it has a demand for more cash than it has
in its vault, it can readily obtain Federal Reserve notes at its Reserve
bank. It can borrow and take the proceeds in notes or it can draw against
its account and, if necessary, restore the account to the required level by
borrowing. If it receives on deposit from its customers more currency than
it needs to keep on hand for current requirements, it can send the excess
to the Reserve bank to be added to its reserve balance.
The function of supplying elastic currency is important, but it is less
important than the lending power, because, as you know, currency does not
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play a major role in present-day business transactions. About ninety
percent of our business is conducted by the use of checks. Currency is
used, for example, for purchases at retail stores and filling stations,
for car fare, and for payrolls, but such uses account for only about
ten percent of the total monetary transactions in the country. Such fluctuations in the demand for currency as appear regularly on pay days, during the period of Christmas shopping, and near holidays, are met completely
by the machinery provided by the Federal Reserve Act.
Other activites of Reserve banks
Beside their work in holding the banking reserves of the country, in
making loans to member banks, and in supplying currency when needed, the
Reserve banks have other important functions which facilitate the
smoother working of our financial machinery.
The Reserve banks have greatly simplified the procedure whereby banks
collect checks drawn on other banks. This has been very useful to business in general because it has permitted more prompt and cheaper settlement of monetary transactions. The Reserve banks in effect act as a nationwide clearing house, not only for checks, but for other credit items such
as notes, drafts, bonds and coupons.
In order to effect the prompt transfer of funds from one part of the
country to another without actual movement of currency, the System maintains
an inter-district Gold Settlement Fund in Washington. The fund was established by deposits of the twelve Federal Reserve banks, and transfers
from one district to another are made daily by debits and credits to the
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respective accounts of the Reserve banks.
The Federal Reserve System has centralized the work of the fiscal
agencies of the United States Government. The Reserve banks act as fiscal agents in connection with the issue and retirement of Government debt
and as depositaries of Government funds in administering deposit accounts
of the Government in the Reserve banks.
Central control of. credit policy
I wish to turn now from this discussion of the functions which the
Federal Reserve banks perform for the local banks and consider how these
activities tie in with the general responsibility of the System, through
its Board of Governors, for the nation's credit policy.
When the Federal Reserve System was established it was realized
that for certain activities, particularly those related to local banking
conditions, a regional organization was necessary. Only in this way
could the System meet local bank needs in a country as large as the United
States, with economic conditions varying so much from one section to another.
Each regional bank would have intimate knowledge of developments in agriculture, commerce and industry in its district and of the district's special
credit needs and problems. The principle was also established ty the
original Federal Reserve Act that under the authority of the Act and of regulations of the Board in Washington the Reserve banks should have final responsibility in their dealings with member banks.
At the same time, it was also realized that the credit policy of
the different Federal Reserve banks must be coordinated so that policies
adopted in one district would not be harmful to another. More than that,
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there should be a credit policy for the country as a whole which would
take account of general business and credit conditions. The direction
of this policy is the duty of the Board of Governors of the Federal Reserve System, which is the central organization located in Washington.
The Board is aided by other organizations which work closely with it,
the Federal Advisory Council and the Federal Open Market Committee.
Board of Governors of the Federal Reserve System
Experience has indicated that this power of the Board to affect
the expansion and contraction of the general supply of credit is of vital
importance to the country, since the volume of credit is a factor in
determining the course of business, and proper changes in the cost and
volume of credit may tend to moderate excessive expansion or contraction
of business, or, in other words may reduce the danger of inflation and
deflation.
The Board's ability to influence the volume of credit rests on
three important powers: the power to determine discount rates, the power
to change reserve requirements, and the power, exercisable through its
majority of members on the Federal Open Market Committee, to determine
open-market policies.
Discount rates
Discount rates are the rates charged by the Federal Reserve banks
on loans to member banks. These rates determine the cost of borrowing
by member banks and consequently have a bearing on the cost at which the
public can borrow from these banks. Indirectly they affect other rates
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in the money market. Under the Federal Reserve Act changes in discount
rates are made by the various Federal Reserve banks but are subject to
review and determination by the Board of Governors. This gives the Board
final responsibility over the discount rates, and enables it to keep the
cost of borrowing in the different sections of the country consistent
with general credit conditions for the country as a whole.
The new banking act strengthens the Board's power to control
these rates by making the further provision that discount rates must be
submitted to the Board of Governors every fourteen days. This insures
frequent review of the rates.
Reserve requirements
The Board of Governors also has the power to change the reserve
requirements of member banks. The volume of credit which any member
bank may extend is limited by the amount of reserves which are required
by law to be maintained against its dbposit liabilities. An increase in
the reserve requirements reduces and a decrease increases the potential
volume of member bank credit. Consequently the power to change reserve
requirements gives the Board an important means of controlling the general
volume of credit. Formerly this power could be exercised only in the
event of an emergency arising out of credit expansion and then only with
the approval of the President of the United States. Under the new act
these conditions are omitted. The power is to be exercised in order to
prevent injurious credit expansion or contraction, provided that reserve
requirements may not be reduced below the present requirements specified
in the law nor increased to more than twice the amount of these legal requirements .
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Open-market operations
The third important means of control over the supply of credit are
the so-called open-market operations, responsibility for which under the new
banking act will be vested in a new Federal Open Market Committee. This committee will consist of the seven members of the Board of Governors and five
representatives of the Reserve banks selected by the Reserve banks in different regions.
Open-market operations consist of the purchase and sale by Reserve
banks of certain classes of securities, chiefly Government obligations. These
operations have the effect of increasing or decreasing the supply of credit
available in the market. By selling securities the Reserve banks withdraw
funds from the market and there is a decrease in the supply of credit.
Through a purchase of securities a Reserve bank puts funds into the market,
thus tending to ease credit conditions.
Purchases and sales of securities by the Reserve banks were unimportant
in the early days of the System. It was not until 1922 that they were large
enough to affect the money market. At that time it became necessary to take
steps to coordinate purchases and sales so that credit conditions for the
country as a whole would not be adversely affected. Gradually these purchases
and sales have become one of the most important means whereby the System can
take the initiative in influencing credit conditions.
The responsibility for determining what security transactions should
be undertaken and the authority for enforcing a program were not clearly defined by law until the new banking act. At the time this act was passed an
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Open Market Committee consisting of representatives of the twelve Reserve
banks was authorized to propose purchases and sales. Its proposals were then
submitted to the Federal Reserve Board, which had the authority to approve
or disapprove but not to initiate a policy. Even after purchases or sales by
the Reserve banks had been agreed upon by the committee and the Board, the
boards of directors of the twelve Federal Reserve banks throughout the country
could frustrate the policy by refusing to participate in its execution.
The new act clearly plaqfps responsibility for determining open-market
transactions on the new Open Market Committee and directs the Reserve banks to
carry out the transactions determined by this committee. This is one of the
most important changes in the Federal Reserve System which the new act introduces .
Other work of the Board
The Board of Governors has a variety of other duties which tie in with
its general responsibility for supervision of the System. These include the
examination of Reserve banks, passing on applications of State banks and trust
companies for membership in the System, obtaining condition reports from State
member banks, administration of those provisions of the Clayton Anti-trust Act
which relate to interlocking bank directorates, regulation of the maximum rate
of interest to be paid by member banks on time and savings deposits, regulations
under the Security and Exchange Act governing the margin requirements for loans
on securities listed on the stock exchanges, and maintenance and operation of
the inter-district Gold Settlement Fund.
In carrying out its responsibilities it is essential that the Board
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X-9556
keep in touch with banking developments in different parts of the country.
In the organization of the System provision was made for regular contacts between the Board and the various Federal Reserve districts. One of the class
C directors at each Reserve bank, designated by law as the Federal Reserve
agent, represents the Board at the bank and maintains an office of the Board
at the bank. The Federal Advisory Council, also provided by law, is made up
of representatives of each Federal Reserve district and meets at least four
times a year in Washington to confer with the Board and to make recommendations.
The Board also has meetings in Washington with the chief executive officers of
the Federal Reserve banks and with the Federal Reserve agents.
Information bearing on credit policy
It has always been a part of the System's work to watch credit trends
and to develop a better general understanding of the facts bearing upon credit
policy. Information bearing on banking conditions throughout the country and
on production, employment, trade and prices, has been regularly collected. In
its monthly publication, the Federal Reserve Bulletin, and in its Annual Reports, the Board has undertaken from the beginning to give the public a comprehensive view of current banking and financial developments at home and abroad
and also to furnish detailed information on conditions of banks throughout the
country and on the business situation. Each of the Federal Reserve banks also
publishes a monthly review of the business and banking conditions in its district.
There is no central bank in the world which makes available such exhaustive information on domestic banking and business developments and on the
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X-9556
formulation of its credit policy as that which is published by the Federal Reserve System.
The new act still further increases the publicity given to the System's
operations. It provides that records shall be kept of the actions of the Federal Open Market Committee and of the Board on all questions of policy. This
information, together with the underlying reasons, is to be published in the
Annual Reports of the Board so that the public may be able to study the reasons
for the Board's decisions.
This should create better understanding and
facilitate general cooperation in support of credit policies.
In the foregoing description of the .System and its functions I have
had occasion to mention most of the important changes effected by the Banking
Act of 1935, but I think it is desirable to summarize them for the spke of
completeness. I omit reference to Title I of the Act, for it deals exclusively
with deposit insurance. I also omit reference to Title III, for the changes
it effects are mainly technical and by way of clearing up previously existing
provisions. The following changes are summarized from Title II:
1. On March 1 next the chief executive, officer of each Federal
Reserve bank will be designated president instead of governor, and the deputy
governors will be designated as vice presidents.
2. The Board is given authority to waive in whole or in part the
statutory requirements relating to the admission of State members to the Federal Reserve System, if such waiver is necessary to facilitate the admission
of any State bank which is required to become a member in 1942 in order to
be an insured bank or to continue to have its deposits insured.
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X-9356
5. The old designation of the Board as the Federal Reserve Board is
changed to Board of Governors of the Federal Reserve System, At the same time
an important change in the composition of the Board is brought about, to become
effective February 1, next year. The Secretary of the Treasury and the Comptroller of the Currency then cease to be members of the Board, and the number
of members is changed from eight to seven. Thereafter the regular term of a
member will be fourteen years, and no member having served a complete term of
fourteen years can be reappointed. On Februaiy 1, the terms of all present
members of the Board cease under the Act, so that the President must by that
time make appointments of all members of the newly constituted Board. The
title of the chief executive officer of the Board is changed from Governor to
Chairman.
4. The Board is required to keep a complete record of the action
taken by the Board and by the Open Market Committee upon all questions of policy
and of the reasons underlying such action and shall include a copy of the
records in its annual report.
5. The Federal Reserve banks may make advances to member banks with
maturities of not to exceed four months, secured to the satisfaction of the
Reserve bank, and at a rate of interest not less than 1/2 percent higher than
the Reserve bank's discount rate. This is the authorization I have already
discussed which enables member banks to borrow from the Reserve bank tiot merely
on so-called eligible paper, but on any good assets.
6. The Open Market Committee is made to consist of the members of the.
Board and of five representatives of the Reserve banks, and is given definite
authority over the open market operations of all the Reserve banks.
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X-9356
7. The express stipulation is made that direct obligations of the
United States and obligations which are fully guaranteed by the United States
may be bought and sold by Reserve banks without regard to maturities, but
only in the open market. This is to prevent direct purchases of issues of
government securities from the Treasury.
8. Federal Reserve bank discount rates are required to be established
every fourteen days, or oftener if deemed necessary by the Board.
9. The Board of Governors, on the affirmative vote of four of its
members may by regulation change the requirements as to reserves to be maintained against time and demand deposits by member banks; but the change shall
not make the required reserves less than now established by law nor more than
twice that now required. Formerly the existence of an emergency and the approval of the President were necessary conditions of such action by the Board.
10. National banks may make real estate loans up to 50 percent of the
appraised value of the mortgaged property for periods not exceeding five yearsj
except that if the loan is on an amortization basis it may be made up to 60
percent of appraised value and for a term of not longer than ten years. Real
estate loans must not exceed the capital and surplus of the bank, or 60 percent
of the bank's time and savings deposits, whichever is greater.
There are two important changes effected under the new banking legislation, and I should like in conclusion to emphasize them.
First there are the provisions that fix responsibility more definitely
for the determination and direction of national credit policy through control
of open market operations, of discount rates, and of reserve requirements.
Second there are the provisions that broaden the classes of member bank
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X-9356
assets eligible as security for loans from Reserve banks, and encourage local
banks to meet a wider range of credit needs in their communities.
It must be recognized, however, that if the System is to achieve as
much as we all hope, it will need more than these new provisions. It will
need the cooperation of business men, bankers, and the general public. For
that reason I appreciate tho opportunity I have had this evening of discussing
with you the System's powers and purposes.
FEDERAL RESERVE BOARD
WASHINGTON
X-9357
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
November 5, 1935.
Dear Sir:
With the Board's letter of July 26, 1955, X-9271,
there were sent to you a summary prepared by the Auditor
of the Federal Reserve Bank of Cleveland of audit procedure and a copy of certificate covering the audit of
the accounts of the Fiscal Agent of the Board of Governors
of the Federal Reserve System as of June 29, 1935.
In
that letter you were advised that e copy of the certificate received from the auditor in connection with future
audits would be sent to each Federal reserve bank.
An audit of the Board's accounts was ma.de as
of October 19, for the period from July 1 to October 19,
1935, and a copy of the auditor's certificate is attached.
Very truly yours,
Chester Morrill,
Secretary.
Attachment
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS,
C 0 £ t
X-9357-a
I, F. V. Grayson, hereby certify:
That a complete audit has been made of all entries in
the accounts, ,"Board of Governors of the Federal Reserve
System-Special Fund", "Board of Governors of the Federal
Reserve System-Building Account", "Board of Governors of
the Federal Reserve System-Fiscal Agent" and "Board of
Governors of the Federal Reserve System-Fiscal Agent Building Account", for the period July 1 to October 19, 1955
inclusive.
That all cash receipts received by the Board as shown
by the "Collection Schedules" furnished the Fiscal Agent
by the Secretary's office have been deposited by the Fiscal
Agent and properly credited by the Federal Reserve Bank of
Richmond in the account, "Board of Governors of the Federal
Reserve System-Special Fund" except schedules No. 750 for
11.20 and No. 751 for $82.49 which were forwarded with
deposit letter dated October 21, totaling $231.51 which was
credited by the Richmond bank on October 25, 1955.
That all remittances made direct to the Richmond bank
for the account of the Board of Governors of the Federal
Reserve System by the Federal Reserve Bank and others in (
compliance with the Board's instructions have been properly
credited in the accounts, "Board of Governors of the
Federal Reserve System-Special Fund" and "Board of Governors
of the Federal Reserve System-Building Account."
That each expenditure made by the Fiscal Agent was
properly authorized by an administrative officer of the
Board.
That the items of receipts and expenditures shown by
the books of the Fiscal Agent have been reconciled with the
items shown in the statements of the Board of Governors of
the Federal Reserve System's accounts prepared by the
Federal Reserve Bank of Richmond.
That the balances in each account as shown by the
books of the Fiscal Agent have been reconciled with the
balances standing to the credit of the Board of Governors
of the Federal Reserve System on the books of the Federal
Reserve Bank of Richmond as certified by the auditor of
that bank.
That all "Transfers of funds" have been properly
authorized by a member of the Board's Executive Committee.
Respectfully submitted,
October 31, 1955
(Signed)
F. V. Grayson
Auditor
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
November 7, 1935.
SUBJECT: Code Words Covering New
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYCAT" - Treasury Bills to be dated November 15, 1955, and to mature
March 16, 1936.
"NOYCEN" - Treasury Bills to be dated November 15, 1955, and to mature
August 12, 1956.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYBUL" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9359
November 7, 1935.
Dear Sir:
Due to recent changes in the issues of government
securities, the translation of the code word "NAPPINTLE"
used by the Federal Reserve Bank of New York weekly in advising other Federal Reserve banks of their participation
in holdings of government securities in the System Special
Investment Account has been changed, effective immediately,
to read as follows:
"For use in your press statement your participation at the close of business today in
U. S. securities held in the System Special
Investment Account is $
, consisting of
S
Certificates of Indebtedness, &
Treasury Notes,
Treasury Bonds, and
I
Treasury Bills."
Please have this change made in the Federal Reserve
Telegraph Code book on page 166.
Very truly yours, •
%
*" <J . C • tio^
Assistant Sec
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
329
*
B O A R D OF G O V E R N O R S
• F THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD
X-9360
November 9, 1935
SUBJECT:
Issuance of General Voting Permits
Dear Sir:
The Board of Governors has for some time been giving consideration to the determination of the conditions under which general voting
permits may be issued to holding company affiliates of member banks pursuant to section 5144 of the Revised Statutes and secoion 9 of the Federal Reserve Act.
ject.
Much thought and effort have been devoted to this sub*
Special consideration has been given to the intent of Congress in
placing upon the Board the responsibility with respect to the issuance of
voting permits and in providing that the Board shall consider the financial condition of the applicant, the general character of its management
and the probable effect of the granting of such permit upon the affairs
of its subsidiary member banks and that it may, in its discretion, grant
or withhold such permit as the public interest may require.
In this connection, the Board has had an examination made of
the history of this legislation, including the debates and other relevant
matters; and there is attached a memorandum summarizing in a concise manner material which it is believed throws considerable light upon the purpose that Congress had in view.
In the endeavor to carry out what appears to have been the intent of Congress, it has been proposed that the following standard
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2
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X-9360
conditions be prescribed in connection with the issuance of general vot
ing permits, in addition to such special conditions as may be warranted
by the facts of individual cases:
1.
That, as soon as practicable and, in any event, within
two years from the date such voting permit is granted,
the undersigned will charge off or otherwise eliminate
from its assets, (a) the part of the carrying value on
its books of its investments in stocks of subsidiary
and/or affiliated organizations which is in excess of
the adjusted value of such stocks, after effect shall
have been given to the deduction of all estimated losses
of such subsidiary and/or affiliated organizations, all
depreciation in stocks and defaulted securities, and all
depreciation in all other securities not of the four
highest grades, as classified by a recognized investment
service organization regularly engaged in the business
of rating or grading securities, as shown by the latest
available reports of examination of such organizations by
the appropriate supervisory authorities and/or as shown
by the latest appraisal of their assets by other examiners
auditors or appraisers satisfactory to the Federal Reserve
Agent, (b) all depreciation in securities not of the four
highest grades, as classified by a recognized investment
service organization regularly engaged in the business of
rating or grading securities, (c) all losses in all other
assets as shown by such reports of examination and/or appraisals, (d) all other known losses;
2.
That the undersigned will take such action within its
power as may be necessary to cause each of its subsidiary
State banking institutions to charge off or otherwise
eliminate from its assets as soon as practicable and, in
any event, within two years from the date such voting
permit is granted, (a) all estimated losses in loans
and discounts, (b) all depreciation in stocks and defaulted securities, (c) all depreciation in securities
not of the four highest grades, as classified by a recognized investment service organization regularly engaged
in the business of rating or grading securities, (d) all
other losses, all such charge-offs or eliminations to be
based upon the latest available reports of examination
of the banks by the appropriate supervisory authorities;
331
X-9560
5.
That the undersigned will take such action within its
power as may be necessary to cause each of its subsidiary banking institutions to maintain a sound financial
condition end to cause the net capital and surplus
funds of each such subsidiary banking institution to
be adequate in relation to the character and condition
of its assets and to the deposit liabilities and other
corporate responsibilities of such subsidiary banking
institution;
4.
That the undersigned will take such action within its
power as may be necessary to cause each subsidiary
national bank or affiliate thereof to comply with the
recommendations or suggestions of the Comptroller of
the Currency based upon any report of examination of
such bank or affiliate made to him pursuant to authority
conferred by law and to comply with the regulations or
requirements of the Board of Governors of the Federal
Reserve System made pursuant to authority vested in it
by lawj
5.
That the undersigned will take such action within its
power as may be necessary to cause each subsidiary
State banking institution or affiliate thereof to
comply with the recommendations or suggestions of the
Board of Governors of the Federal Reserve System or
its designated representative in the district in
which the institution is located based upon any report
of examination of such institution or affiliate made
pursuant to authority conferred by law and to comply
with the regulations or requirements of the Board of
Governors of the Federal Reserve System made pursuant
to authority vested in it by law;
6.
That the undersigned will not make, and will take all
necessary action within its power to prevent any of
its subsidiaries and any other organizations with
which the undersigned or any of its subsidiaries is
affiliated from making, any loans or extensions of
credit to, or purchases of securities under repurchase
agreements from, the undersigned or any of its subsidiaries or any other organizations with which the
undersigned or any of its subsidiaries is affiliated,
or any investments in, or advances against, securities
of the undersigned or any of its subsidiaries or any
other organisations with which the undersigned or any
of its subsidiaries is affiliated, except within the
333
4* —
X-9360
same limitations and subject to the same conditions
and provisions as are applicable under section 25A of
the Federal Reserve Act to such transactions involving
member banks and their affiliates; except that this
paragraph shall not apply to loans or extensions of
credit by any organization to its own subsidiaries,
or the purchase of securities under repurchase agreements by any organization from its own subsidiaries,
or the investment by any organization in the securities of its own subisdiaries, where such transactions
would not otherwise be subject to the limitations,
conditions and provisions of section 25A of the Federal Reserve Act;
That the management of the undersigned and its subsidiaries will be conducted under sound policies
governing their financial and other operations, including statements issued relating thereto; that the undersigned will maintain a sound financial condition; that
its net capital and surplus funds shall be adequate
in relation to the character and condition of its assets and to its liabilities and other corporate responsibilities; and that, except with the permission of the
Board of Governors of the Federal Reserve System, it
shall not cause or permit any change to be made in the
general character of its business or investments.
Before taking final action upon the proposed standard conditions,
the Board desires to give the applicants an opportunity to present their
views in writing.
You are, therefore, requested to transmit to each hold-
ing company affiliate in your district -whose application is still pending
a copy of this letter and a copy of the inclosed memorandum, in order that
it may have an opportunity to submit to you in writing such constructive
criticisms and suggestions as it may desire to have considered by the
Board.
Please transmit such criticisms and suggestions to the Board as
promptly as possible, and in all events not later than fifteen days from
the date of this letter, together with your own comments.
-333
- 5 -
X-9360
It is the Board's desire to issue general voting permits
before the next annual meetings of stockholders in all cases where the
circumstances warrant such action; and the Board will do everything in
its power to accomplish this result.
If it be found that in some in-
stances it is not possible to do so, the Board contemplates that, in the
absence of exceptional circumstances, it will issue limited voting permits to enable the applicants to vote upon the election of directors and
routine matters at such meetings.
In order that this work may be expedited, your cooperation in
obtaining the views of the applicants and transmitting them to the Board
with your comments at the earliest possible date will be greatly appreciated.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
334
X-9560-a
RESPONbXBILITIEti OF BO*RD IN GMti'litG
GENERAL VOTING PERMITS TO HOLDING C O M P L Y AFFILIATES
The Banking Act of 1955 provided for the regulation of
holding company affiliates of member banks and made it necessary
for such organizations to obtain voting permits from the Federal
Reserve Board (now Board of Governors of the Federal Reserve System
and hereinafter referred to as the "Board") in order to vote stock,
which they own or control of member banks.
This was an entirely
new field of legislation and numerous questions have arisen concerning the Board's powers, duties and responsibilities in administering the law and in acting upon applications for voting permits.
In order to clarify this matter, this memorandum will review the
legislative history of the pertinent statutory provisions and discuss
the Board's powers, duties and responsibilities in the light thereof.
The Banking Act of 1933 contained the pertinent provisions
of law in substantially their present form.
Such provisions, except
certain minor amendments made by the Banking Act of 1935, are set
out in full in the Board's Regulation P, a copy of which has been
furnished to each holding company affiliate.
However, at the outset,
attention is directed to the following provision:
"Any such holding company affiliate may make application
to the Board of Governors of the Federal Reserve System
for a voting permit entitling it to vote the stock controlled by it at any or all meetings of shareholders of
such bank or authorizing the trustee or trustees holding
the Stock for its benefit or for the benefit of its shareholders so to vote the same. The Board of Governors of
the Federal Reserve System, may, in its, discretion, grant
or withhold s.uch permit, as, the public, .interest, may .require.
335
T-2-
X-9360-a
In acting upon such application, the Board shall consider
the financial condition of tho applicant, the general character of its management f and the probable effect of the
granting of such permit upon tho affairs of such bank, but
no such permit shall be granted except upon the following
conditions:" (Section 5144, Revised Statutes, as amended
by Banking Acts of 1955 and 1935.)
EARLY LEGISLATIVE HISTORY
Agitation for banking legislation had resulted in the introduction of a number of bills in Congress and an investigation by
the House of Representatives prior to 1950.
The original. Glass
Bill (8.4725), introduced on June 17, 1930, during the Second session
of the 71st Congress, became the basis for an extensive investigation
of the national and Federal reserve banking systems by a sub-committee of the Senate Committee on Banking and Currency (pursuant to
Senate Resolution 71 of that Congress).
One of the subjects of the
investigation was group and chain banking and in this connection several representatives of large bank holding companies appeared before
the Committee.
This bill and the investigation by the Senate Commit-
tee was the basis of the Banking Act of 1955.
The original Glass Bill contained a provision that no corporation, association or partnership should vote the stock of a national
bank but did not contain a similar provision with regard to stock of
State member banks*
During the investigation it developed that it was
impractical to terminate the holding company affiliate relationships
immediately and that the then proposed legislation probably would result
in holding companies terminating the charters of their national banks
1
336
*
X-9§60-a
'.-J'
-3-
a,nd reorganizing them as State banks in order to avoid the effect
of such legislation.
The representatives of the holding companies
themselves suggested various forms of Regulation to which their
companies might properly be subjected.
(See Report of Hearings
Pursuant to Senate Resolution 71.)
On January 21, 1932, Senator Glass introduced a revised
draft of his bill (S.5215) which incorporated new provisions suggested by the information secured by the investigation.
This bill
provided that no affiliate or corporation, association or partnership owning more than 10 per cent of the stock of any national
bank should vote the stock of such bank.
However, in another
section it provided for the issuance of voting permits to such
organizations by the Comptroller of the Currency.
This section
provided that the Comptroller might, in his discretion, grant or
withhold such permits as the public interest might require but
that no permit should be granted except upon certain specific conditions.
Under this bill the Board would have had no connection
whatsoever with the issuance or revocation of such permits.
Neither
this draft nor the next contained provisions relating to the voting
of stock of State member banks.
On March 14, 1932, Senator Glass introduced a further
revision of his bill (S.4115) which became the basis for further
hearings by the Senate Committee on Banking and Currency.
Under
337
-4-
X-9550-a
this bill the actual issuance and revocation of voting permits
was to be handled by the Board but all other functions in connection with voting permits (relating to examinations and the filing
of agreements) ware placed in the hands of the Comptroller of the
Currency.
In testifying before the Senate Committee, the Comptroller of the Currency objected to the regulation of holding company affiliates of national banks without similar regulation of
holding company affiliates of State banks on the ground that such
regulation would force banks out of the national bank system.
During the hearings some objection VJ&S also made to thu provisions
giving the Board the right to grant or withhold and to revoke
voting permits at its discretion.
(See Report of Hearings on
•S. 4115.)
SUBSTITUTE PROPOSAL OFFERED BY THE BOARD
During the hearings on this bill the Board unanimously
recommended to the Senate Committee two entirely new sections as
substitutes for these then in the bill relating to the regulation
of holding company affiliates.
The outstanding features of this
proposal were as follows:
1.
Holding company affiliates of State member banks as
well as those of national banks were to be regulated.
2.
The regulation of holding company affiliates of
national banks was to be placed solely in the hands of the Comptroller
338
_g_
X— &£' O 0—8.
of the Currency and the regulation of holding company affiliates of
State member banks was to be handled by the Board.
3•
The issuance of voting permits was to be eliminated,
the right to vote bank stock was to be made solely dependent upon the
filing of certain agreements with the Gomptroll .;r or the Board as the
case might bo. and the Comptroller and the Board were to bo given no
right to use their discretion in granting or withholding the right to
vote bank stock.
This substitute proposal offered by the Board is of particular significance because the Senate Committee rejected it and
incorporated in the next draft of the bill only the first of the
above listed features of the proposal.
PROVISIONS AS E M O T E D .
On April 18, 1952, Senator Glass introduced a new draft of
his bill (8.4412) in which the provisions with reference to the issuance of voting permits were in substantially the same form as the provisions of the Banking Act of 1935.
Holding company affiliates of
State member banks wore made subject r.-.; the same provisions as holding
company affiliates of national banks and the issuance and revocation
of all voting permits was placed solely in the hands of the Board.
Despite the objections made at the hearings, the Board was directed
to issue or withhold voting permits as the public interest might
require.
For the first time the following language appeared in the bill:
—
6
X-9560-a
—
"In acting upon such application, the Board snail consider
the financial condition of the applicant, the general character
of its management, and the probable effect of the granting of
such permit upon the affairs of such bank * * * *"
This provision was obviously inserted to supply the Board with
a guiding principle to follow in exercising its discretion in the issuance of permits.
As more fully discussed hereinafter, this provision
was very similar to the provision in section 9 of the Federal Reserve
Act relating to applications of banks for membership in the Federal Reserve System, the references to financial condition and management being
almost identical.
In this draft of the bill, the agency granting the voting permit was for the first tiue limited in the exercise of. its discretion in
revoking such permit by the provision that a permit might be revoked "if
at any time it shall appear to the Board that any holding company affiliate has violated any of the provisions of the Banking Act of 1953 or of
any agreement made pursuant to this section."
A marked similarity may
be noted between this provision and the provision in section 9 of the
Federal Reserve Act relating to forfeiture of membership in the Federal
Reserve System.
This bill also contained the definition of holding company affiliate which appears in the Banking Act of 1955 and provided that voting
permits should be required only of such organizations.
There were copied
into the bill the provisions contained in the previous drafts to the effect that no voting permit should be issued except upon certain conditions
relating principally to examinations, building up of reserves for stock
340
•
- 7 -
X-9360-a
liability and divorcement of security affiliates.
This draft of the Glass bill underwent many further revisions
and was debated at length in Congress 5 but the provisions concerning
holding company affiliates and the issuance of voting permits were
not substantially modified.
They passed virtually unmentioned during
the debates, and the Committee Reports supply little information concerning their intended interpretation.
Group banking v/as discussed
on the floors of Congress primarily in connection with the proposed
provisions relating to oranch banking»
Regulation of holding company
affiliates was not a controversial question since group banking systems
apparently had no friends in Congress and t,he bill prepared by the
Committee was apparently accepted by Congress without any substantial
questions being raised.
ATTITUDE OF CONGRESS TOWARDS
REGULATION OF HOLDING COMPANY AFFILIATES
As previously noted, the regulation of bank holding companies was an entirely new field for legislation.
Congress was
dealing with a subject about which it had little familiarity and
Congressional leaders fully realised this fact.
They anyHrentJj;- felt
that there were evils to be corrected but that to a considerable extent they were groping in the dark in preparing legislation on the
subject.
This is demonstrated by the extensive investigation under-
taken and the numerous revisions of the proposed bill.
It is further
shown by the fact that these provisions were the subject of virtually
— 3—
no discussion on the floors of Congress.
X-9360-a
Congress was apparently
willing to leave this problem to the committees and its technical
advisers and to the sound judgment of the members of the Board
who were to have charge of the regulation of such companies.
As
stated by Senator Norbeck, a member of the Committee on Banking
and Currency (Congressional Record, Vol. 75, p. 10532, daily publication) ;
"The new system of banking in the Northwest, •
commonly referred to as chain, is, of course, the
group system of banking, controlled by the holding
companies. It has been quite a problem with this committee to know what to do with this new system of banking, which had no foundation in law or in experience.
The committee was of the view that strict regulations
should be enforced, but reached the conclusion that it
was impossible then to enforce very strict regulations.
They did not want to assume the responsibility for important changes in times like these."
However, there is no doubt that Congress desired as
strict regulation of bank holding companies as might prove practicable.
Congressional leaders started out with the idea that
such companies should be completely abolished.
The majority report
of the Senate Committee filed in connection with Senate bill 4412
criticised the group banking system but said that practical considerations made control preferable to complete abolition.
The
minority report filed by Senator Norbeck referred to group banking
as an evasion if not a violation of the law.
On the floor of the Senate, Senator Glass stated that it
was hoped that the strict regulation of the bank holding companies
343
— 9 —
would cause then to go out of business.
X-9o60~a
During the debates on
Senate bill 4412, he said;
"Somewhat akin to investment bank affiliates, we undertake to deal with the question of holding companies, the
system of holding companies being one species of what
is known as chain banking. It is a species of chain
banking that is largely devoid of responsibility. * *
* * But the committee was convinced that they needed
pretty severe supervision, restraint, and examination,
and I '.ant to say for those officials that they were
cheerfully willing that that should be provided. We
have incorporated in that provision of the bill many
of the suggestions made by them not because they were
made by them, but in spite of the fact, because all of
us were very suspicious when w© entered upon the consideration of that phase of banking. * * *
Therefore we have undertaken to encompass them with such
restrictions and restraints and requirements of examination and report as, we hope, may induce them perhaps
to go out of that sort of banking at their convenience."
(Congressional Record, Vol. 75, p. 10202 - 10205, daily
publication.)
Later during the debates in May, 1955, he said:
"V,e deal with holding companies, and we deal with them
so severely — but, I am frank to say, with their consent — that they expect to dissolve within the 5-year
period given them; * *
(Congressional Record, 75rd Cong., 1st Session, p. 5819 daily publication.)
Senator '-.'heeler's attitude was shown by the following
reference to one holding company during debates on branch banking
provisions:
"It might be called to the attention of the Senate that
this corporation, as a matter of fact, was nothing more
nor less than a promotion scheme by a few men in the
Northwest who went out and took a lot of sound, safe
banks in the Northwest and. poured into their corporation a tremendous lot of watered stock and unloaded it
343
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X-9560-a
upon the directors, stockholders, and other citizens
of the Northwest.
"The reason why some of those banking institutions
are not in the shape that they should be today is
not, because they have not been part of a branchbanking system but because of poor management and
because they are loaded up with stocks and bonds
which have little or no value today, if ever."
(Congressional Record, Vol. 76, p. 2154 - daily
publication.)
In supporting the branch banking provisions Senator
Vandenberg expressed his views regarding group banking:
"All of the vices, if there be vices, that are
conjured against branch banking already exist in
the theory of group and chain banking. The alleged vices exist without the offsetting advantages
of common, open, and mobile responsibility which
exists in branch banking."
(Congressional Record, Vol. 78, p. 1495 - daily
publication.)
CONGRESS INTENDED BOARD TO EXERCISE ITS DISCRETION
There can be no question but that Congress intended the
issuance and revocation of voting permits to be a discretionary
matter.
Every draft of the bill providing for voting permits
contained express provisions to this effect and stated that
voting permits were to be granted or withheld as the "public
interest" might require.
The Board urged the adoption of its
A-9360-a
-11-
substitute proposal which would have entirely eliminated, the
elements of discretion and would have given the holding company affiliates the power to vote bank stock as a matter of
right upon filing agreements to comply with certain requirements written into the Act, but this proposal was rejected by
the Senate Committee.
The Board did not want this discretionary
power and representatives of some of the holding companies objected to the Board being given such power; but Congress insisted upon granting it.
CONGRESS WAS CONCERNED WITH FUTURE
OPERATIONS OF HOLDING COMPANY AFFILIATES
Congressional leaders were not only interested in the
present operations of the various bank holding companies but
were also interested in future operations.
Representatives
of some of the companies went to considerable length to show
that the operations of their companies were not harmful to the
public interest.
Senator Glass and Mr. Willis, technical adviser
to the committee, on several occasions suggested by their questions that the high character of the present management was no
guarantee or protection against future mismanagement. (See Record of
- 12 -
Hearings Pursuant to Senate Resolution 71.)
X-9360-a
The representative of one
of the large holding companies, in admitting that such was the case,
stated that that was one reason why his company desired regulation.
.During the debates, Senator Glass
said:
"Some of these holding companies have been admirably managed,
managed by bankers of character, long experience, and great
skill. Many of them have done no great harm. In fact, they
will tell you that they have done great good.
* * * There is
this to be said, that if one of those holding companies — as
some of then have — should come under the administration of
unscrupulous persons, the amount of harm that might ensue is
hard to conceive."
(Cong. Record, Vol. 75, p. 10202-10203, daily publication.)
INTENT OF CONGRESS REGARDING THE PRESCRIBING OF CONDITIONS
Certain conditions to the granting of voting permits were prescribed in the Act, but the language indicates that they are only basic
or minimum requirements designed to correct evils definitely established and known to Congress, and it is apparent that Congress intended that the Board should further regulate holding company affiliates
of member banks.
The Congressional investigation extended into many
features of holding company affiliate relationships and it is indicated
that members of the Senate Committee felt than there wore other evils
inherent in the group banking system with which they were not specifically dealing but with which they expected the Board to deal in acting upon
applications for voting permits.
As indicated by Senator Norbeck's
comments quoted above, the Senate Committee in drafting the bill did
not deem it practical in the circumstances to write into the bill as
X-9360-a
- 15 -
strict regulations as many desired and insisted on vesting the Board
with discretionary power in order that it might make such further
requirements as circumstances should justify or demand.
As previously noted, the draft of the Glass Bill
which, for
the first time vested in the Board complete jurisdiction over
and sole
responsibility for the regulation of holding company affiliates of member banks, provided that the Board, in acting upon applications for
voting permits,
should;
•I-::- -* :$• consider the financial condition of the applicant,
the general character of its management, and the probable
effect of the granting of such permit upon the affairs of
such bank,
.
The
obvious purpose of this provision was to give the Board a
guiding principle to follow in exercising its discretion with reference to the issuance of voting permits.
It is very significant that
this guiding principle is very similar to, and apparently was copied
fr'om, the following guiding principle contained in section 9 of the
Federal Reserve
Act with reference to the admission of State banks to
membership:
"In acting upon such application the Board of Governors of
the Federal Reserve System shall consider the financial condition
of the applying bank, the general character of its management, and
whether or not the corporate powers exercised are consistent with
the purposes of this act."
In adopting a similar guiding principle governing the issuance
of voting permits, Congress knew that for
many years it had been the
practice of the Board in admitting State banks to membership in the Federal Reserve System to prescribe conditions of membership designed to
347
14 -
X-9560-a
require such banks to create and maintain a sound financial condition
and good management, and not to change the general character
their business without the prior approval of the Board.
of
These con-
ditions of membership included both conditions precedent and conditions of a continuing nature.
As recently as 1927 this practice of
the Board had been the subject of much discussion in Congress; the practice and the reasons for it had been explained at length, and Congress
had specifically rejected a proposal which would have taken away from
the Board the power to prescribe conditions of -nembership for State
banks.
At thv time of the enactment of the Banking Act of 1933 the
Board was following the policy of prescribing a dozen or more standard
conditions in connection with all applications for membership.
In view of its knowledge of the Board's practice with respect
to the admission of
State member banks and in view of its action in
prescribing a guiding principle with respect to the issuance of voting
permits vgry similar to that previously prescribed with respect to
admission of State banks to membership, it seems reasonable to assume
that Congress intended the Board to follow with respect to the issuance of voting permits practices and policies very similar to those
which it had followed for many years with respect to the admission of
State banks to membership., -
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9361
November 11, 1955
Dear Sir:
There are enclosed herewith copies of statement rendered by the Bureau of Engraving and Printing,
covering the cost of preparing Federal reserve notes
for the month of October, 1935.
Very truly yours,
0. E. Foulk,
Fiscal Agent
Enclosure
TO ALL FEDERAL RESERVE AGENTS
349
X-936iUa
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
October 1 to 31, 1935.
Series 1928
Boston,
Atlanta,
San Francisco, 10.000
_E2_
Total Sheets
4,000
4,000
10,000
10.000
10,000
10.000
24.000
Amount
$
344.00
860.00
860.00
2.064.00
| 2,064.00
24,000 sheets, <3 #86.00 per M,
Series 1954
S5
Boston,
New York,
Philadelphia,
Cleveland,
Richmond,
Atlanta,
Chicago,
St. Louis,
Minneapolis,
Kansas City,
Dallas,
San Francisco,
-
58,000
—
-
41,000
-
44,000
12,000
—
S10
&20
Total Sheets
Amount
54,000
259,000
33,000
47,000
31,000
21,000
166,000
23,000
10,000
20,000
6,000
10,000
10,000
18,000
22,000
60,000
269,000
81,000
65,000
53,000
62,000
166,000
77,000
32,000
30,000
13,000
173.000
$ 5,160.00
23,134.00
6,966.00
5,590.00
4,558.00
5,332.00
14,276.00
6,622.00
2,752.00
2,580.00
1,118.00
14.878.00
1.081.000
S92.966.00
19,000
5.000 168.000
-
153.000 832.000
—
-
10,000
10,000
10,000
—
-
96.000
1,081,000 sheets, @ $86.00 per M,
92.966.00
$95,030.00
350
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-9362
November 15, 1935.
SUBJECT:
Proposed Revision of Regulation F
Relating to Exercise of Fiduciary
Powers by National Banks.
Dear Sir:
There are inclosed herewith six copies of a tentative draft
(L-549) of a revision of Regulation F relating to the exercise of fiduciary powers by national banks under the provisions of section ll(k)
of the Federal Reserve Act, together with six copies each of applicable
forms in connection with such regulation.
It will be appreciated if
you and the officers and counsel of your bank will study these inclosures and forward to the Board your comments and suggestions thereon
at the earliest practicable date and not later than thirty days from
the date of this letter.
The tentative drafts of the regulation and
forms have been prepared by the Board's staff but not considered by the
Board, and, in order to expedite the matter and with the permission of
the Board, are being sent to you at the same time that they are being
submitted to members of the Board for consideration.
As you know, a conference of the trust examiners for the various Federal Reserve banks will be held in Washington on November 18th.
It is suggested that any comments you may wish to forward to the
Board be withheld until you have considered with the trust examiner
-2-
X-9362
for your bank any suggestions which may have arisen out of a discussion of tho revision of Regulation F by the trust examiners at tho
conference of November 18th.
Your especial attention is called-(l) to the provisions contained in the first paragraph of subsection (b) of section 9 of the
proposed revision of the regulation which eliminate the provisions of
section VIII(b) of the Board's present Regulation F with specific
reference to the deposit of trust funds awaiting investment or distribution in the commercial or savings department of a national bank
acting as fiduciary and to the provisions contained in the last paragraph of such subsection (b) which are designed to prohibit the deposit
of trust funds in the banking department of the national bank as an
investment, (2) to the provisions in section 14 prohibiting the retention of trust fees by officers or employees of a national bank when
acting as co-fiduciary with the national bank, and (3) to the provisions of section 15 relating to exemptions from liability by a national
bank when acting as fiduciary. The provisions referred to are not
necessarily recommended by the staff but have been incorporated in
the revised draft of the regulation for purposes of discussion; and
any suggestions regarding the desirability of such provisions or any
modifications thereof will be particularly appreciated. There is inclosed a copy of a memorandum prepared in the Office of the Comptroller
of the Currency furnishing the reasons for the elimination of the
352
-3-
X-9362
provisions now contained in section VIII(b) of the Board's present
Regulation F.
Very truly yours,
Chester MorHll,
Secretary *
Inclosures. (L-349)
TO ALL FEDERAL RESERVE AGtSNTti.
\
353
COPY
X-9362-a
TREASURY DEPARTMENT
Comptroller of the Currency
Washington
Novekber 8, 1935.
MEMORANDUM
Res
Section 9(c) of Tentative Draft of
Regulation F Relating to Exercise
of Trust Powers by National Banks.
In Section 9(c) provision is made for deposit of
funds held in trust awaiting investment or distribution, in the commercial
or savings departments of the trustee bank and the delivery of collateral
security to protect such deposits.
I think it is extremely inadvisable and perhaps
erroneous to take the position that banks are authorized to deposit trust
funds awaiting investment in the savings department and pledge collateral
to the trust department for the protection of such deposits. It is realized that similar permission is indicated in existing regulations of the
Board on this matter, but this office has consistently refused to recognize the validity of such arrangement in connection with the liquidation
of national banks having trust departments. The most common type of situation presented in this connection is where an individual deposits a sum
of money in a trust department under an agreement directing that this
money be deposited in the savings department at savings department rate of
interest, the income therefrom to be paid to a designated party with a
possible provision for principal to be paid out at a certain time for a
certain purpose.
There are a number of objections to this type of
arrangement. It is believed Section Ilk of the Federal Reserve Act in
permitting the bank to use trust funds awaiting investment in the conduct
of its business contemplated a temporary arrangement whereby the bank
would have the benefit of the use of the funds for such short periods of
time as might elapse pending the investment of such funds in some form of
security or otherwise. It is true that the Board by a regulation has extended the statute to include funds "awaiting distribution." Without
passing upon the validity of this extension of the statute, it will be
conceded that in such case there is contemplated merely a temporary short
term deposit pending a more or less immediately contemplated distribution.
There can be no argument that a deposit of trust
funds in a savings account is an investment thereof. Swan v. Children's
Home Society, 67 Fed. (2d) 84. Consequently, when such fund is deposited
354
—
2
—
X-9362-a
in the savings department, it is no longer a trust fund awaiting investment
and since it is no longer a trust fund awaiting investment, then under Section Ilk it is not entitled to the benefit of a pledge of collateral security to the trust department.
To permit a pledge of collateral to protect such
savings deposit makes the bank a guarantor of the trust investments which
it has in such accounts. If and when interest rates on savings deposits
approach their former basis of three per cent, it is manifest that the
average trust beneficiary or donor would rather have the trust funds carried in a savings account at three per cent fully protected by collateral
security and insurance, than ho would to have such funds invested even in
Government bonds.
The Supreme Court of the United States has laid down
the principle that national banks cannot pledge collateral for the protection of private deposits. We have come into frequent contact with arrangements whereby a deposit was made in the trust department under such conditions that the bank in fact had no true fiduciary duties as to such
funds and the depositor was practically as free to obtain or use such deposit as though he had deposited direct in the savings department. We
recently had a case where a church collected insurance as a result of a
fire. One of the church officials was president, of e national bank. They
wanted to deposit this fund in the bank pending disbursement of it for
construction of a new church. They desired to be protected by a pledge
of collateral. The bank's attorney, who was also a church official, ascertained that the bank could not pledge collateral to protect a private
deposit but accomplished the same result by depositing the fund with the
trust department of the bank under an agreement which provided that the
bank should deposit it in the savings department at interest and then
should disburse the fund from time to time at the orders of the church
trustees. The Federal courts held that this trust fund was entitled to
the collateral protection given other funds in the trust department, thus
clearly nullifying the principles that private deposits should not be protected by pledge of collateral. If such practices are to be permitted,
there is nothing to prevent individuals who have funds in excess of the
amount protected by insurance from making similar arrangements with trust
departments of banks, and thereby obtaining in fact to the disadvantage of
the other depositors of the bank full collateral coverage for their deposits.
Under existing regulations of the Federal Reserve
Board it is not permissible for a national bank to accept in its savings
department as a savings account funds which do not represent "thrift" accounts. The theory underlying such regulation even though it is not going
to be incorporated in the new regulations in principle should operate to
prevent the deposit of trust funds awaiting investment or distribution in
the savings departments of banks, because rarely, if ever, can such fund
come into the "thrift" account classification.
To permit such deposit of trust funds in principle
seems to be a perversion of the intent of Congress in Section Ilk and is
355
— 3 -
X-9562—a
extremely questionable as an acceptable trust activity or as truly representing an element of fiduciary relationship.
A particularly significant statement was made in
Carcaba v. McNair, 68 Fed. (2d) 795, certiorari denied, 292, U.S. 646.
The court said, page 798, with respect to trust department transactions:
"The deposits which are prohibited are
not those made by the trust department in
the exercise of its functions, but those
made with the trust department by the
bank's customers. The purpose is to prevent such customers in their ordinary commercial transactions from obtaining a preferential security from other commercial customers
contrary to the general policy of the National
Bank Act."
See also Santee Timber Corporation v. Elliott, 70 Fed. (2d) 179.
It is believed that permitting banks to deposit trust
funds in the savings department and also secure them by pledge of collateral
inevitably leads to the establishment of dubious relationships between
the trust department and its customers which are not true trust transactions
and in which the funds involved are not as against the other depositors
of the bank, fairly entitled to the protection of collateral.
While the foregoing discussion deals specifically
with the matter of depositing trust funds in the savings department the
same objections in our opinion may be made to their deposit with the bank
on any time and interest bearing basis such as by certificate of deposit
or otherwise.
JOHN F. McGRATH,
Special Counsel.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9363
November 16, 1935.
SUBJECT: Code Words Covering New
Issues of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYCUP" - Treasury Bills to be dated
November 20, 1935, and to
mature March 16, 1956.
"NOYDAR" - Treasury Bills to be dated
November 20, 1935, and to
mature August 19, 1936.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYBUL" on page 172.
Very truly yours,
J. C • Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
.357
X-9364
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
STATEMENT FOR THE PRESS
For immediate release
November 18, 1935
INTERPRETATION OF NEW YORK STOCK
EXCHANGE MARGIN RULES FOR
"WHEN ISSUED" DEALINGS
Ruling No. 47 interpreting Regulation T. The Board of Governors
of the Federal Reserve System has been asked to interpret section
3(f)(4) of Regulation T with respect to the application of the "margin rules covering 'when issued' contracts" adopted by the New York
Stock Exchange on November 12, 1935.
In reply to this inquiry the Board rules that the "required
margin" in sections 1(a), 1(b) and l(c) of such rules of the exchange
constitutes for members of the exchange "the amount of margin customarily required by the creditor on every future commitment in unissued securities . . . . plus any unrealized loss on each such
commitment and/or minus any unrealized gain on each such commitment
not exceeding the margin thereon" referred to in section 3(f)(4) of
Regulation T.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9365
November 19, 1935.
SUBJECT: Holidays During
December, 1935
Dear Sirs
The Board of Governors of the Federal Reserve System is advised that the
Havana Agency of the Federal Reserve Bank of
Atlanta will be closed on Saturday, December
7, in observance of Cuban Memorial Day.
On Christmas Day the offices of the
Board and all Federal Reserve banks and
branches will be closed.
Very truly yours,
J.
J
*. C. Noell
Noell,
Assistant Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS
359
X-9366
BOARD OF G O V E R N O R S
• F THE
*******
FEDERAL R E S E R V E SYSTEMv ember 22, 1935.
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TD THE BOARD
SUBJECT: Salaries of officers and employees
of Federal Reserve banks.
Dear Sir;
In accordance with the usual practice, a statement showing
the 1936 salary provided by your Board of Directors at its first
meeting in January for each officer of your bank and branches, if
any, subject to the approval of the Board of Governors of the
Federal Reserve System, should be forwarded to the Board as early
thereafter as practicable. Plaase list the officers and their
salaries in the manner indicated in the attached form, X-9366-a.
In case the bank's counsel is not an officer of the bank, his
annual retainer fee and any additional compensation for clerk
hire should be shown separately.
Please also furnish the Board as early in January as practicable a statement showing the name of each employee of your bank
and branches, if any, on January 1, 1936, and the salary paid to
each as ®f January 1, 1935 and January 1, 1936. The list should be
prepared in accordance with the attached sample form, X-9366-b, in
order to facilitate checking with the approved personnel classification plan for your bank on file with the Board.
It is also
360
-3-
X-9366
requested, that a summary statement showing the number of employees
as of January 1, 1935, and as of January 1, 1936, and salary changes
i
since January 1, 1935, by salary groups, he submitted in accordance
with the attached sample form, X-9366-c. As in the past, the schedules should cover all employees on the bank's payroll, including
those whose salaries are reimbursed to the bank in whole or in part.
The Board's letter of January 5, 1935 outlined in some detail
its general position at that time with respect to increases in salaries #f officers and employees of the Federal Reserve hanks, and in
its letter of April 13, 1935 (X-9178) the Board called attention to
an increase from $1,555 to $1,585 in the average salary of all employees at the Federal Reserve banks, and stated that, while salary
increases in individual cases may be necessary, it was felt that
under existing conditions such increases during 1935 should not
result in an increase in total salary payments or in average salaries, unless a study indicated that the salaries paid to employees
by the Federal Reserve bank are materially out of line with those
paid by local member banks for comparable services.
While it has not been practicable as yet to make a detailed
study of the information furnished the Board regarding salaries
paid by the Reserve banks and by local member banks in response to
its letter, X-9178, such study as has been given to the matter in*
dicates that, in general, the salaries paid by Federal Reserve
banks are not materially out of line with those paid by local
member banks for comparable work.
361
~3~
X-9366
The Board feels that the principles set forth in the above
mentioned letters should continue to be followed during the year
1936, and that no increases should "be made in existing salaries
of officers and senior employees unless very exceptional circumstances clearly justify an increase, and that no increases should
be made in salaries of junior employees unless there has been a
sufficient change in the character or quantity of work performed
to clearly warrant an increase.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
LETTER TO ALL CHAIRMEN
(Copy to Governorj no extra, copies to banks.)
362
X-9366-a
SALARIES OF OFFICERS OF THE FEDERAL RESERVE BANK OF
AND ITS BRANCHES, IF ANY, FOR THE YEAR 1936 AS PROVIDED BY THE BOARD OF DIIESIGBS
SUBJECT TO APPROVAL BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
NAME
TITLE
"departments or
functions super~
vised (Form A
classification)I
Total,
officers.
a-nn-^1 Salary
1936, for
Dec. 31, approval of
Board of
1935
Governors
X-936S-b
EMPLOYEES OF THE FEDERAL RESERVE BANK OF
,
363
AND ITS
BRANCHES (IF M Y ) ON JANUARY 1, 1936
Name of employee
NOTE:
Classification
symbol
Salary on Jan. 1
Title of job
Salary
range'
1935*
1936 "
Employees should be listed by functions or departments and the positions
or .jobs arranged in the same order as they appear in the personnel classification plan, Form A, on file vrith the Board of Governors of the Federal Reserve System. The total number of employees including employees
whose salaries are reimbursed to the bank in whole or in part and the total
salaries paid should be shov/n for each function or department. Extra help
or temporary employees should be listed with the regular employees of the
bank and designated by the letter "T" after the classification symbol. In
case of employees on a per diem or hourly basis, the estimated total annual
compensation should also be shown.
-*If hired during 1955, please show the initial salary.
X-9566-c
SALARIES OF EMPLOYEES OF FEDERAL RESERVE BANK OF
(INCLUDING BRANCHES)
ON JANUARY 1, 1936 AND SALARY CHANGES SINCE JANUARY 1, 1935
Salaries
under
$1500
Salaries Salaries
from
from
#2500
11500
to $2499 to #3999
Salaries
of $4000
and
over
Total
Number of employees •,
1. On roll on January 1, 1935
2. On roll on January 1, 1936
3. Removed (a) from roll in 1935
4. Added (b) to roll during 1935
Salaries;
5. Total on January 1, 1935
6. Total on January 1, 1936
7. Average on January 1, 1935
8. Average on January 1, 1936
Salary changes (c);
9. Salaries increased a. Number of employees
b. Aggregate increase
c. Salaries on January 1, 1936
10. Salaries reduced a. Number of employees
b. Aggregate reduction
c. Salaries on January 1, 1936
11. Salaries unchanged
a. Number of employees
b. Salaries on January 1, 1936
(a) Exclusive of persons subsequently restored to roll.
(b) Exclusive of persons subsequently removed from roll.
(c) Of employees on roll on January 1 of 1935 and 1936. The total of items 9a, 10a, and 11a should
equal item 2 less item 4.
X-9567
BOARD
OF
GOVERNORS
OF
THE
FEDERAL. RESERVE
SYSTEM
FOR THE PRESS
IMMEDIATE RELEASE
NOVEMBER 22. 1935.
Statement by Chairman Eccles on inflation and reserves.
There appears to be widespread misunderstanding of the situation
now existing with respect to inflationary possibilities, as well as a
misconception of my own attitude with regard to inflation.
I sought
to emphasize in my speech before the American Bankers Association that
it was the duty of the Government to intervene in order to counteract
as far as possible the twin evils of inflation and deflation.
The
word inflation is used by some people to mean any expansion of credit,
or any rapid advance in prices.
In order to make it clear what I have
in mind when I speak of inflation as a phenomenon that needs to be controlled, I define inflation as a condition brought about when the means
of payment in the hands of those who will spend them increases faster
than goods can be produced.
In other words, the volume and velocity of
money must be related to the volume of actual and potential production
of real wealth.
I asked the question:
"How is it possible to have inflation in
that sense when men are idle and plants are idle?"
"There can be speculative excesses when surplus funds bid up
stocks or real estate, but inflation in the generally accepted sense
can only come about by increasing the means of payment in the hands
of people who are willing to spend faster than we can increase production.
We are a long way from such a period of inflation."
Considerable confusion seems to exist in some quarters, as re-
flected in some of the newspapers, about the dangers of "inflation"
at present.
But it is evident that what is meant in most cases is
not inflation in the sense I have indicated, but a stock market "inflation".
In other words, there seems to be concern about a repetition of the stock
367
X-9367
market excesses of 1929 and a lack of understanding of the Federal Reserve
System's power to deal with the situation.
I wish so far as possible to
clarify the picture in order to correct the notion that the Federal Reserve
System could, by action at this time, reach the stock market situation, and
secondly, the totally mistaken idea that the Chairman, or for that matter,
the other officials of the Federal Reserve System, are indifferent to or disinclined to do whatever is within their power to prevent the development of
an unsound condition.
Anyone who will take the trouble to consult the Reserve System 1 s reports
on the condition of member banks will see at once that the total of security
loans by banks both to customers other than brokers and to brokers have shown
no growth since the middle of March, when the present rise in security prices
began.
In fact, the figures show something of a decline between March 13 and
November 15, as is indicated by the following table:
LOANS ON SECURITIES BY REPORTING
MEMBER BANKS IN 101 LEADING CITIES
(In millions of dollars)
March 13
1935
Total loans on
To brokers and
Total
In New York
Outside New
To customers*
securities*
dealers:
City
York City
November 13
1935
Change
3,239
3,052
- 187
1,031
854
177
2,208
974
815
159
2,078
- 57
- 39
- 18
- 130
STOCK PRICES
(1926= 100)
421 stocks
63.1
'^Exclusive of loans to banks
93,3
-f
(+
30.2
48%)
368
— 3 —
X-9367
The rise in security prices has not been financed by bank credit*
The securities are being bought mostly for cash out of the abundant investment funds in the hands of corporations and individuals and out of
funds sent to this country by foreigners who wish to invest here because
they believe that this is the safest and most profitable use for their
money.
I wish to emphasize two points as strongly as I can: First, I think
that there is an element Of safety and of strength in the fact that the
security purchases are being financed out of cash without increased use
of bank credit. I am doubtful whether a run-away stock market situation
can proceed very far without being reflected in an increased demand for borrowed funds.
In this connection I wish also to point out that the amount of money
going into the stock market is not, as some have contended, depriving the
capital market of adequate funds and thus retarding recovery. That ample
funds are available in the capital markets is evidenced by the fact that offerings of long term securities and mortgages are being absorbed at yields
which have been steadily declining.
The second point which I wish to emphasize even more strongly is that
those who are suggesting that the Federal Reserve System should do something
about stock market conditions at present are under the mistaken impression
that the System can intervene in the market at any time. As a matter of fact,
the System has no authority whatsoever to curb buying of securities by
individuals or corporations, whether foreign or domestic. Its only authority
in this matter is over margin requirements, which apply only when transactions
•— 4 «—
X-9367
are on credit, as is not the case to any extent at the present time.
The
only power the System has is to control the speculative use of bank credit.
There is no speculative use of bank credit in the present situation.
Therefore, I should like to correct, if possible, the idea that the
Federal Reserve System is neglecting at this time to exercise its power
over stock market speculation.
As for the general business and credit situation and the volume of
member bank reserves - it is clear that there is no excessive expansion
in any field at this time.
There is no evidence of accumulation of inven-
tories, or of frantic bidding for a limited amount of goods, or of an expansion of bank credit, save through the purchase of Government securities.
The turnover of deposits is still relatively low.
The general credit situation as well as developments in the stock
market require close and careful study as to the appropriate time for and
method of action.
This close study is being given by the System, including
not only the Board of Governors itself, but the Open Market Committee and
the Advisory Council as well.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9368
November 25, 1935.
SUBJECT:
Code Words Covering New
Issues of Treasury Bills
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code words have been designated
to cover new issues of Treasury Bills:
"NOYDEK" - Treasury Bills to be dated
November 27, 1935, and to
mature March 16, 1956.
"NOYDIA" - Treasury Bills to be dated
November 27, 1935, and to
mature August 26, 1936.
These words should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYDAR" on page 172.
Very truly yours,
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9369
November 23, 1935
SUBJECT: Code Word Covering Discount Earned
on Foreign Loans on Gold.
Dear Sir:
In order to reduce phraseology in telegrams sent by the
Federal Reserve Bank of New York to other Federal reserve
banks on the last day of each month advising their share of
discount earned on Foreign Loans on Gold during the month,
the following code word has been designated for use effective November 30, 1935:
CORRUPTKIN: We credit you today $
representing
your share of discount earned on Foreign
Loans on Gold for the current month.
This word should be inserted in the Federal Reserve Tele
graph Code book, following the supplemental code word "CORRUP
TIVE" on page 59
Very truly yours,
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS.
372
B O A R D OF G O V E R N O R S
DF THE
FEDERAL
RESERVE SYSTEM
WASHINGTON
SUBJECT:
X-9370
November 26, 1935.
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
E BOARD
Regulation I - Increase or decrease
of Capital Stock of Federal Reserve
Banks and Cancelation of Old and
Issue of New Stock Certificates.
Dear Sir:
There are inclosed three mimeographed copies of a revision of
Regulation I relating to "Increase or Decrease of Capital Stock of Federal
Reserve Banks and Cancelation of Old and Issue of New Stock Certificates",
together with applicable forms in connection therewith., in the form adopted
by the Board on November 26, 1935.
tive on January 1, 1936.
The regulation as so revised is effec-
There is also inclosed a letter containing in-
structions relating to the chocking and handling of applications for issuance and cancelation of Federal Reserve bank stock.
In order to expedite the distribution of the regulation and forms
you are requested to have copies printed and to forward one or more copies to
each member bank in your district as soon as possible.
The "X" number ap-
pearing on the inclosed copies of the regulation and forms should, of
course, be omitted.
An official print of the regulation and forms will be prepared by
the Board and you are requested to advise the Board at your early convenience as to the number of copies of such print which you desire.
Very truly yours,
hr)crXAA^Jl
Chester Morrill,
Inclosures. (X-9370-a-b)
TO ALL FEDERAL RESERVE AGENTS.
Secretary.
373
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
the federal reserve board
X-9571
November 26, 1935.
SUBJECT:
Instructions relating to the checking
and handling of applications for issuance and cancelation of Federal Reserve bank stock.
Dear Sir:
In connection with the revised procedure of handling applications for the issuance and cancelation of Federal Reserve bank stock as
contemplated by Regulation I, Revised, Effective January 1, 1936, such
applications should no longer be sent to the Board for approval, and Federal Reserve bank stock may be issued and canceled by Federal Reserve banks
as soon as the appropriate applications are found to be in proper form and
are approved by the Federal Reserve Agent, except in the case of applications of State banks for admission to membership or notices of intention
to withdraw from membership.
For guidance in this connection, the follow-
ing instructions are set forth covering the principal points to be kept
in mind in the checking and handling of applications and related matters.
1.
Care should be exercised to see that all such applications
are properly executed by persons duly authorized, that the figures of
capital and surplus appear to be correct according to available data,
that the number of shares of Federal Reserve bank stock which the applying bank is required to hole, subscribe for or surrender has been
correctly computed, and that the application conforms in all respects
to the provisions of the law and the Board's regulations and rulings.
374
- 2 -
X-9371
The capital and surplus of national banks as shorn in applications should
be checked against the notices received from the Comptroller's office
and against condition reports. The capital structure in the case of
State member banks, and total deposit liabilities in the c&sei of mutual
savings banks, should be checked against reports of condition and other
available data,
2. If there be any doubt whether an application is properly
executed, or as to the number of shares of Federal Reserve bank stock
which the applying bank is required to hold, subscribe for or surrender,
the matter should be taken up with counsel for the Federal Reserve bank
and, if necessary, the question should be referred to the Board.
3. In connection with the organization of national banks, the
Comptroller of the Currency should be advised direct by telegraph by the
Federal Reserve Agent as soon as an application for the issuance of
Federal Reserve bank stock has been found to be in proper form and the
required payment has been received on the bank's subscription to Federal
Reserve bank stock. This advice should be given by using the new code
word "NARRATEMENT", the meaning of which will be as follows:
"Application for Federal Reserve bank stock to be issued
to the organizing national bank hereafter named has been
found to be in proper form and approved by the Federal
Reserve Agent, the required payment has been received
on the applicant's subscription for the number of shares
of Federal Reserve bank stock hereafter shown, and such
375
- 3 -
X-9571
stock will be Issued to the organizing national bank as
of the date on which it is authorized by your office to
commence business:
(name and location of organizing
national bank, and number of shares of Federal Reserve
bank stock applied for)*"
Upon the issuance of Federal Reserve bank stock to a newly organized national bank, the Board should be advised thereof by telegraph by
the Federal Reserve Agent, using the new code word "NxtmaTEMILL", the
meaning of which will be as follows:
"Federal Reserve bank stock has been issued as of the date
hereafter shown to the following newly organized national
bank:
(give date of the stock certificate and name and
location of organizing national bank)."
4.
Upon cancelation of a member bank's entire holdings of
Federal Reserve bank stock and cessation of its membership, the Board
should be advised by telegraph by the Federal Reserve Agent, using, as
at present, code word "NAVIFQRM", the meaning of which will hereafter be
as follows:
"Refund of capital stock payments was made on the date
hereafter shown on account of cessation of membership
of the following named bank:
(date of cancelation of
Federal Reserve bank stock and name and location of the
b
a
n
k
)
.
376
- * -
X-9371
5. Whenever a State member bank has been placed in the hands
of a conservator or other State official acting in a capacity similar to
that of conservator, it may wish to file a notice of intention to voluntarily withdraw from membership in the Federal Reserve System in the
manner provided in section 9 of the Federal Reserve Act, as amended, and
the Board's Regulation H, and request the Board to permit withdrawal
immediately, waiving the six months' notice. In any such case the conservator must join in such notice of intention to withdraw and request
for waiver. Upon receipt of advice that you have received such notice
and request for waiver and that your counsel is satisfied as to the
legal aspects of such notice and request for waiver, together with your
recommendation in the matter, the Board will take action as soon as
possible.
6. As soon as practicable after February 1 and August 1,
respectively, of each year, each member bank's required holdings of
Federal Reserve bank stock should be computed by the Federal Reserve
Agent on the basis of its latest condition report. If the computation
shows that its holdings of Federal Reserve bank stock are either greater
or less than the amount required by law, the bank should be requested to
file an application for an adjustment in its holdings of Federal Reserve
bank stock. More frequent adjustments may be required in the event of
substantial changes in a member bank's capital and surplus. Adjustments
at the request of a member bank may, of course, be made at any time that
it changes the amount of its aggregate capital and surplus.
377
X-937-1
7, It will no longer be necessary to furnish the Comptroller
of the Currency semi-annual certificates of increases and decreases of
Federal Reserve bank stock on Forms 58 and 59. In lieu thereof, please
furnish a report to the Board as of the end of June and December of each
year showing the following information:
1. Number of shares of Federal Reserve bank stock outstanding at beginning of the semi-annual period
_
2. Number of shares issued during the period to
(a) New member banks
(b) Existing member banks
(c)
Total issued
3. Number of shares of Federal Reserve bank stock canceled during the period on account of
(a) Cessations of membership
(b) Surrender of stock by continuing member
banks
(c)
Total canceled
4«
Number of shares of Federal Reserve bank stock outstanding at end of semi-annual period
5* Number of member banks at end of semi-annual period
National banks
State banks
(a) Active
,
(b) Inactive (banking
operations discontinued)
_____________
In connection with items 2(a) and 5(a) above, please attach a
list showing the name and location of each bank, number of shares issued
or canceled, and date issued or canceled. The figures reported against
378
X-9571
— 6 —
items 2(b) and 5(b) should represent the number of shares of stock
i
issued and canceled, respectively, pursuant to applications on Forms
56 and 56a; they should not include stock certificates issued in exchange
for stock certificates canceled. In support of item 5b, please show the
name and location of each bank, the date on which banking operations were
discontinued, the date placed in liquidation or in the hands of a receiver, if this has been done, and the status of the application for
cancelation of Federal Reserve bank stock if filed.
Very truly yours
Chester Morrill
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-9372
November 26, 1955.
Subject: Regulation D - Reserves of Member Banks.
Dear Sir:
There are inclosed three mimeographed copies of a
revision of Regulation D relating to "Reserves of Member Banks"
in the form adopted by the Board on November 26, 1935.
The
regulation as so revised is effective on January 1, 1956,
In order to expedite the distribution of the regulation you are requested to have copies printed and to forward one
or more copies to each member bank in your district as soon as
possible.
The "X" number appearing on the inclosed copies of
the regulation should, of course, be omitted.
An official print of the regulation will be prepared
by the Board and you are requested to advise the Board at your
early convenience as to the number of copies of such print which
you desire.
Very truly yours,
hr\crvuMl
Chester Morrill,
Secretary.
Enclosures. (X-9372-a)
TO ALL FEDERAL
RESERVE AGENTS
380
B O A R D OF G O V E R N O R S
OF THE
FEDERAL
RESERVE SYSTEM
WASHINGTON
J
X-9575
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
November 26, 1935.
Subjects
Regulation Q - Payment of Interest on
Deposits
Dear Sir:
There are inclosed three mimeographed copies of a revision of
Regulation Q relating to "Payment of Interest on Deposits" in the form
adopted by the Board on November 26, 1955. The regulation as so revised is effective on January 1, 1936.
In order to expedite the distribution of the regulation you are
requested to have copies printed and to forward one or more copies to
each member bank in your district as soon as possible. The Supplement
to Regulation Q inclosed herewith should be printed separately from the
regulation but should be forwarded to the member banks with the regulation. The "X" number appearing on the inclosed copies of the regulation and supplement should, of course, be omitted.
An official print of the regulation will be prepared by the
Board and you are requested to adviso the Board at your early convenience as to the number of copies of such print which you desire.
Very truly yours,
Inclosures.
(X-9373-a-b)
TO ALL FEDERAL
RESERVE AGENTS
Chester Morrill,
Secretary.
381
B O A R D OF G O V E R N O R S
DFTHE
FEDERAL
RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO T H E B O A R D
X-9575
November 27, 1955.
SUBJECT: Federal Reserve notes
Dear Sir:
Regulation "0", series of 1915, as amended, entitled "Regulations for the guidance of Federal Reserve Agents in the matter of
issuance and redemption of Federal Reserve notes", is hereby revoked as of the close of December 2, 1955, and revised instructions
on this subject, effective at that time follow.
Early in May of each year the Board will furnish to each Federal Reserve agent a statement showing the stock by denominations
of Federal Reserve notes of his Federal Reserve bank at the Bureau
of Engraving and Printing, the amount by denominations of such notes
in process of printing, and an estimate of the amount of Federal Reserve notes that should be printed during each of the next two fiscal years. Upon receipt of the Federal Reserve agents' recommendations with respect to such estimates, the Board will place a printing order with the Comptroller of the Currency for such amount of
each denomination of Federal Reserve notes as is regarded necessary
to meet estimated requirements for the following fiscal year, and
will also advise the Bureau of Engraving and Printing of the probable
requirements
for such notes for the succeeding fiscal year.
X-9375
—2—
Requests for the shipment of Federal Reserve notes from Washington shall be submitted to the Board on Form 45 or by telegram
confirmed by written request on such form.
Requests for the ship-
ment of Federal Reserve notes shall be signed by the Federal Reserve agent or by an Assistant Federal Reserve agent.
Federal Reserve notes may be issued to the Federal Reserve
bank by the Federal Reserve agent on written application signed by
an officer of the Federal Reserve bank, authorized by the Board of
Directors or the Executive Committee to sign such application, provided collateral eligible, under the provisions of the Federal Reserve Act, as security for Federal Reserve notes is pledged with the
Federal Reserve agent by the Federal Reserve bank in an amount at
least equal to the amount of Federal Reserve notes issued to the bank.
The Federal Reserve agent, acting for the Board of Governors
of the Federal Reserve System, may at any time call upon the Federal
Reserve bank for additional collateral to protect the Federal Reserve notes issued, to such bank.
The Federal Reserve Agent may per-
mit the Federal Reserve bank: to make substitutions in collateral held
by him as security for Federal Reserve notes provided the amount of
the collateral so substituted is at least equal to the amount of the
collateral withdrawn.
If at any time the amount of collateral held
by the Federal Reserve agent as security for Federal Reserve notes
is in excess of the amount of such notes outstanding, the Federal
Reserve agent may permit the Federal Reserve bank to withdraw such
excess collateral or any portion of such excess.
-5-
X-9375
Federal Reserve notes unfit for further circulation received
by a Federal Reserve bank shall be canceled and cut longitudinally
by the Federal Reserve bank and the uppers and lowers forwarded on
separate days to the Treasurer of the United States.
The amount
of unfit notes of each other Federal Reserve bank forwarded to the
Treasurer of the United States should be telegraphed to the Board,
code CHRISTIAN, for credit in the
Interdistrict Settlement Fund.
Each Federal Reserve agent shall authorize the Treasurer of
the United States by power of attorney to turn over to the Comptroller of the Currency for destruction all unfit Federal Reserve notes
of the Federal Reserve bank to which such Federal Reserve agent is
accredited which are received by the Treasurer of the United States
for the account of such Federal Reserve agent.
Fit notes of other Federal Reserve banks shall be forwarded
promptly to the bank through which they were issued, and on the date
of shipment the amount of such notes of each Federal Reserve bank
shall be telegraphed to the Board, code CHEMICALLY, for credit in
the Interdistrict Settlement Fund.
The Federal Reserve Act requires that a gold certificate reserve
be maintained against Federal Reserve notes equal to not less than
40 percent of the amount of such notes in actual circulation.
If at
any time the gold certificate reserve required by law to be held by
a Federal Reserve bank against Federal Reserve notes in actual circulation falls below forty percent, the Federal Reserve agent shall
X-9575
at once notify the Board of Governors of the Federal Reserve System, and thereupon, until otherwise directed by the Board of Governors of the Federal Reserve System, a graduated tax upon such deficiency as provided in Section 11(c) of the Federal Reserve Act shall
be established and shall be computed as follows:
Wnon such reserve falls below forty percent, but is not less
than thirty-two and one-half percent, the tax upon the deficiency
shall be at the rate of one-tenth of one percent per annum;
When such reserve falls below thirty-two and one-half percent,
but is not less than thirty percent, the tax upon the entire deficiency below forty percent shall be at the rate of one and six-tenths
percent per annum;
When such reserve falls below thirty percent, but is not less
than twenty-seven and one-half percent, the tax upon the entire deficiency below forty percent shall be at the rate of three and onetenth percent per annum; and so on, increasing the tax at the rate
of one and one-half percent per annum with each further deficiency
in reserves amounting to two ana one-half percent, or any fraction
thereof.
As at close of business each day the Federal Reserve Agent
shall submit a statement to the Board on form F.R.A. 5, covering all
issues and retirements of Federal Reserve notes.
Very truly yours,
TO ALL FEDERAL RESERVE AGENTS
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-9376
November 27, 1935.
SUBJECT:
Regulation 0 - Loans to Executive
Officers of Member Banks.
Dear Sir:
There are inclosed three mimeographed copies of Regulation 0 relating to "Loans to Executive Officers of Member
Banks" in the form adopted by the Board on November 27, 1935.
The regulation is effective on January 1, 1936.
In order to expedite the distribution of the regulation you are requested to have copies printed and to forward one
or more copies to each member bank in your district as soon as
possible.
The "X" number appearing on the inclosed copies of
the regulation should, of course, bo omitted.
An official print of the regulation will be prepared
by the Board and you are requested to advise the Board at your
early convenience as to the number of copies of such print which
you desire.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures
(X-9376-a)
TO ALL FEDERAL RESERVE AGENTS
386
X-9377
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Statement for the Press
For release in morning newspapers
of Thursday, November 28.
November 27, 1935,
ISSUANCE OF REGULATIONS Q. D and I.
The Board of Governors of the Federal Reserve System has issued,
effective January 1, 1936, a revision of Regulation Q relating to payment of interest by member banks of the Federal Reserve System on time
and savings deposits. Heretofore the maximum rate payable by member banks
on both time and savings deposits was 2§ per cent per annum. Under the new
regulation the maximum rate payable on savings deposits continues to be 2§
per cent but with regard to time deposits the following schedule of maximum
rates has been prescribed: On time deposits payable in not less than 6
months, 2f per cent; on time deposits payable in less than 6 months and not
less than 90 days, 2 per cent; and on time deposits payable in less than 90
days, 1 per cent.
The reason for this reduction in the maximum rate payable upon time
deposits is that under present conditions banks cannot afford to pay
higher interest rates than those fixed in the new regulation on funds deposited for short terms.
The maximum rate payable on Postal Savings funds, which are time
deposits, continues to be 2^ per cent, or such lower rate as State banks
are permitted to pay under State laws.
X-9577
387
-2-
The revised regulation is accompanied by a separate supplement stating
the schedule of maximum rates. The use of such supplements will enable the
Board to change the maximum rates from time to time in order to meet
changing conditions without the necessity of amending the regulation or issuing a new regulation.
Definition of Savings Deposits
The definition of savings deposits in the new regulation has been revised in order to eliminate two provisions of the definition in the former
regulation which have proven unsatisfactory, namely, the requirement that
savings deposits shall consist of funds accumulated for "bona fide thrift
purposes" and the requirement that the pass book must be presented whenever
a withdrawal is made.
In lieu of the requirement that savings deposits shall consist of funds
accumulated for bona fide thrift purposes, there has been substituted a
requirement that savings deposits shall consist of funds of one or more
individuals or of an organization operated primarily for religious,
philanthropic, charitable, educational, fraternal or other similar purposes and not operated for profit.
The provision regarding the presentation of pass books has been
liberalized so as to permit withdrawals through payment to any authorized
person presenting the pass book and to permit withdrawals without presentation of the pass book where payment is made to the depositor in person or is remitted by an instrument payable to the depositor. The purpose of this provision is to enable member banks to take care of all
388
X-9377
cases in which there is a legitimate reason why the pass book cannot be
presented and yet to forbid the practice which has existed in certain sections of the country of drawing checks on savings deposits, thus using them
as ordinary commorcial accounts and evading the statutory prohibition against
payment of interest on demand deposits.
Definition of Interest
Under the authority conferred upon the Board by the Banking Act of
1935 to define certain terms, the term "interest" is defined in the new
regulation as a payment, credit, service or other thing of value which
is made or furnished by a bank as consideration for a deposit and which
involves the payment or absorption by the bank of out-of-pocket expense,
regardless of whether such payment, credit, service or other thing of
value varies with or bears a substantially direct relation to the amount
of the depositor's balance. The new definition expressly provides that
the payment or absorption of exchange or collection charges which involve
out-of-pocket expenses constitutes the payment of interest. An exception
is made of taxes upon deposits, premiums on bonds securing deposits where
such bonds are required by or under authority of law; and isolated items
of out-of-pocket expense in trivial amounts under certain circumstances.
Where such isolated items are paid or absorbed the bank is required to
keep a record of such items and to make such record available to bank
examiners.
X-9377
-4Pavment of Time Deposits before Maturity in Emergencies
Prior to the enactment of the Banking Act of 1935, section 19 of the
Federal Reserve Act provided that no member bank could pay any time deposit before maturity. The Banking Act of 1935 amended section 19 so as
to permit the payment of time deposits before maturity "upon such conditions and in accordance with such rules and regulations as may be prescribed by the said Board". In accordance with this authority, the revised Regulation Q permits the payment of time deposits before maturity
in an emergency where it is necessary to prevent great hardship to the
depositor. As a condition to such payment, the depositor must sign an
application describing fully the circumstances constituting the emergency,
which statement must be approved by an officer of the bank and retained
in the bank's files and made available to examiners authorized to examine
the bank. The depositor is also required to forfeit accrued and unpaid
interest on the amount withdrawn for a period of not more than 5 months.
Loans by the depositary bank to its depositors on the security of
time or savings deposits are permitted under the new regulation provided
that the rate of interest on such loans shall be not less than 2 per cent
per annum in excess of the rate of interest on the deposits securing
them.
Regulations D and I
The Board has also, effective January 1, 1936, issued a revision of
Regulation D relating to the reserves which member banks are required to
390
X-9377
-5carry with the Federal Reserve banks, and a revision of Regulation I relating to the issuance and retirement of Federal Reserve bank stock.
These regulations have been revised to conform to a number of changes in
the law, largely of a technical character, made by the Banking Act of 1935.
Reserve requirements have not been changed in the revised Regulation
D but, in accordance with the authority conferred upon the Board by the
Banking Act of 1935 to change reserve requirements, the revised regulation provides that the actual net balance which each member bank is required to maintain on deposit with the Federal Reserve bank of its district
shall be changed by such percentage, within the limits prescribed by law,
as the Board shall prescribe from time to time in order to prevent injurious credit expansion or contraction.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X—9578
November 29, 1935.
SUBJECT: Expense, Main Lines, Leased
Wire System, October, 1935.
Dear Sir:
Inclosed herewith you will find two mimeographed statements,
X-9578-a and X-9378-b, covering in detail operations of the main
lines of the Leased Wire System, during the month of October, 1955.
Please credit the amount payable by your bank for your share
of the expense of the Leased Wire System to the Federal Reserve Bank
of Richmond in your daily statement of credits through the Gold Settlement Fund for the account of the Board of Governors of the Federal
Reserve System, and advise the Federal Reserve Bank of Richmond by
wire the amount and purpose of the credit.
It will be noted that on X-9378-b there has been added to
the total expenses to be prorated among the twelve Federal reserve
banks 1963.57. This represents the total amount of three vouchers
rendered to the Treasury Department covering telegrams sent during
the months of July, August and September against the Treasury appropriation for miscellaneous and contingent expenses. Since April,
1925, the Board has sought reimbursement from the Treasury Department for the cost of telegrams sent for the account of this appropriation, but the Treasury has advised that it has been unsuccessful
in obtaining the necessary appropriation to permit of reimbursement.
The matter was taken up again in November, 1954, and the Board advised the Treasury at that time that it felt that the arrangement
which had been in effect whereby the cost of the telegrams chargeable to the appropriation was absorbed by the Federal reserve banks
was not a satisfactory one and should be discontinued as promptly as
possible, and that, if it was felt desirable to have the telegrams
handled by the Leased Wire System after July 1, 1955, every effort
should be made to bring to the attention of the proper persons the
necessity for the inclusion in the Treasury Department appropriation
of an amount sufficient to permit reimbursement for the cost of the
telegrams. Nothing further was heard from the Department regarding
the matter and, beginning with the fiscal year 1936, vouchers were
rendered covering the cost of the messages sent during the first
three months of the fiscal year. When advice was received from the
392
X-9378
— 2—
Treasury Department that funds had not been provided to cover the
cost of the telegrams, the matter was the subject of further negotiation with the Department which resulted in the Board advising
the Treasury Department under date of November 21, 1935, as follows:
"It is understood that there has been included in
the Treasury estimates of expenses for the fiscal year
1937 an amount sufficient to permit of reimbursement for
the telegrams of the kind in question transmitted during
that year and that the Treasury Department will do all
that it can to have the item included in its appropriations . In view of these assurances and the inability of
the Treasury to pay for telegrams transmitted prior to
July 1, 1936, the Board will continue to handle such
telegrams without reimbursement during the remainder of
the fiscal year 1936 with the further understanding that
if the appropriation referred to be not obtained the
Treasury Department will make some other arrangement
under which the Federal reserve banks will be relieved
of this expense."
The amount of $15,535.05 shown on form X-9378-b includes
$323.26, the cost of handling such telegrams for the Treasury Department for the month of October.
Very truly yours,
0. E. Foulk,
Fiscal Agent
Inclosures
TO GOVERNORS OF ALL F. R. BANKS.
X-9573-s
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF OCTOBER, 1935.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
Words sent by
New York chargeable to other
F. R. Banks (l)
31,789
133,663
28,634
43,571
47,947
51,029
76,437
62,526
33,056
62,632
53,592
81.979
706,855
1,527
1,577
1,577
1,574
1,512
2,213
2,028
1,486
1,557
2,771
2.419
20,241
Board business
Net Federal
reserve
bank
business
33,316
133,663
30,211
45,148
49,521
52,541
78,650
64,554
34,542
64,189
56,363
34.398
727,096
322,848
Reimbursable business Incoming & Outgoing
Total words transmitted over main lines
...
.........
.
Per cent of total
bank business (
4.58
18.38
4.15
6.21
6.81
7.23
10.82
8.88
4.75
8.83
7.75
11.61
100.00
1,049,944
571,748
1,621,692
(*) These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement, (X -9578-b) <
(l) Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance with action taken at Governors' Conference
November 2-4, 1925.
CO
8
I
X-9378-b
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER, 1935.
Name of bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Board
Total
Operators1
Salaries
Retirement
Contributions
Operators'
overtime
$ 260.00
$ 24.65
1,358.29
122.79
225.00
20.25
306.66
27.60
190.00
17.35
262.50
21.52
4,195.14(f) 336.84
195.00
17.43
199.98
17.10
287.00
25.83
251.00
22.34
380.00
32.03
—
$8,110.57
-
#685.73
Less Reimbursable Charges
(&)
(#)
(*)
(a)
(b)
Main line rental, Richmond-Washington
Includes salaries of Washington operators
Credit
Amount reimbursable to Chicago
See attached letter
Wire
rental
Total
expenses
Pro rata
share of
total
expenses
$
-
—
—
-
$ 284.65 $
755.64
1,481.08
3,032.45
245.25
684.69
334.26
1,024.56
230.00(6)
437.35
1,123.56
284.02
1,192.85
4,531.98
1,785.15
212.43
1,465.08
783.68
217.08
312.83
1,456.83
273.34
1,278.64
412.03
1,915.49
14.968.55
14.968.35
$15,198.35
$23,994.65 $16,498.62
-
—
—
—
—
-
—
-
—
—
8,459.60
$15,535.05
Credits
Payable to
Board
$ 284.65 $ 470.99
1,481.08 1,551.37
245.25
439.44
334.26
690.30
437.35
686.21
284.02
908.83
4,531.98 2,746.83(*)
212.43 1,252.65
217.08
566.60
312.83 1,144.00
273.34 1,005.30
412.03 1,503.46
—
$9,026.30 $10,219.15
2.746.85(a)
$7,472.32
965.57(b)
$16,498.62
$
395
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9579
November 29, 1955.
Dear Sir:
For your guidance in connection with any similar situations in your district, there is inclosed
a copy of a letter sent to the Federal Reserve Agent
at Riclimond with respect to the manner in which a
State bank member may show its capital accounts in
condition reports rendered pursuant to Section 9 of
the Federal Reserve Act in case the bank has preferred stock outstanding with a retirable value in
excess of par value.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS EXCEPT RICHMOND
X-9379-a
November 27, 1955.
Mr. W. W. Hoxton,
Federal Reserve Agent,
Federal Reserve Bank of Richmond,
Richmond, Virginia.
Dear Mr. Hoxton:
This refers to Mr, Fry's letter of November 12 with respect to the publication of the November 1 condition report by
the '
,
,
It appears that the excess of the bank's assets over its
liabilities to depositors and other creditors is less than the retlrable value of its preferred stock plus the par value of its common stock and that, accordingly, under the instructions contained
in the Board's letter B-966 of March 17, 1934, the bank is not permitted to show any surplus and undivided profits in condition reports on Form 105. It is understood, however, that in reports rendered and published pursuant to calls of the State banking department a bank is permitted to show both surplus and undivided profits
if its assets exceed liabilities plus the par value of preferred
and common stock. Mr. Fry states in his letter that "we are of the
opinion that the public would be very much misled and disturbed if
the bank should be required to publish its report of condition showing no surplus and no undivided profits because of the requirement
Mr. W, W. Hoxton - 2
X-9379-a
that the retirable value of the Class 'A' stock be extended in
the capital account".
The Board appreciates that it would be confusing to the
public for a bank to publish two condition reports as of the same
date, or approximately the same date, one of which showed surplus
and undivided profits and the other did not. In the circumstances
you may advise the
,
•
,
, and any other bank with preferred stock out-
standing with retirable value different from par value, that the
excess over the par value of preferred and common stock, rather
than the excess over the retirable value of preferred stock and
the par value of common stock, may be used in determining the
amount of surplus and undivided profits to be shown in condition
reports submitted to your bank, provided that any surplus that may
be shown in the condition reports shall be shown against the amended caption "Surplus over par value of capital stock".
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-9380
398
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
For the Press
For release in morning newspapers
of Saturday, November 30.
November 29, 1935.
ISSUANCE OF REGULATION 0.
The Board of Governors of the Federal Reserve System has issued, effective January 1, 1936, a new regulation designated as "Regulation 0" relating to loans to executive officers of member banks.
Section 22(g) of the Banking Act of 1933, approved June 16, 1933, prohibited executive officers of member banks from borrowing from or otherwise becoming indebted to member banks of which they were executive officers and likewise prohibited member banks from making loans or extending
credit to their executive officers. Any violation of such provision was
declared to be a misdemeanor and the proscctuion of violations came under
the jurisdiction of the Department of Justice.
In order to clarify the moaning of the term "executive officer" and the
question as to whether or not certain transactions were loans or extensions of credit within the moaning of the provision of law, the Banking
Act of 1935, which was approved on August 23, 1935, authorized the Board
of Governors of the Federal Reserve System to define the term "executive
officer", and to determine what shall be deemed to be a loan or extension
of credit. The Act also repealed the criminal penalties and made it clear
X-9380 3 9 9
-2-
that the Board of Governors of the Federal Reserve System could remove
offending officers from office for violations of the kind described. The
Act also prohibited partnerships in which one or more executive officers
of a member bank are partners having either individually or together a
majority interest in the partnership from borrowing from or otherwise becoming indebted to the member banks. Other provisions granted exceptions
which did not theretofore exist; namely, executive officers of member
banks are permitted to borrow from or become indebted thereto in amounts
not exceeding $2500 on condition that a majority of the entire Board of
Directors of the bank consents to such indebtedness, and also to endorse
or guarantee obligations previously acquired by the member bank for the
purpose of protecting it against loss.
The Board has defined the term "executive officer" as follows:
"The term 'executive officer' means the Chairman of the Board of Directors, the President, every Vice
President, the Cashier, Secretary, Treasurer, and Trust
Officer of a member bank, and, in addition, every other
officer of a member bank who participates in the management of the bank or any branch thereof, regardless of
whether he has an official title or whether his title
contains a designation of assistant, and regardless of
whether he is serving without salary or other compensation; but such term does not include a director or member of a committee who is not also an executive officer
within the foregoing definition."
Similarly the Board has defined the terms "loan", "loaning", "extension of
credit", and "extend credit" to mean:
"the making of a loan or the extending of credit in any
manner whatsoever, and include n
(l) Any advance by means of an overdraft, cash
item, or otherwise;
X-9380
-5"(2) The acquisition by discount, purchase, exchange,
or otherwise of any note, draft, bill of exchange
or other evidence of indebtedness upon which an
executive officer may be liable as maker, drawer,
indorser, guarantor, or surety;
"(3) The increase of an existing indebtedness, except
on account of accrued interest or on account of
taxes, insurance, or other expenses incidental to
the existing indebtedness and advanced by the bank
for its own protection;
"(4) Any advance of unearned salary or other unearned compensation for periods in excess of 30 days; and
"(5) Any other transaction as a result of which an executive officer becomes obligated to a bank, directly
or indirectly by any means whatsoever, by reason of
an indorsement on an obligation or otherwise, to pay
money or its equivalent•
"Such terms, however, do not include (i) advances against
accrued salary or other accrued compensation, or for the purpose of providing for the payment of authorized travel or other
expenses incurred or to be incurred on behalf of the bank,
(ii) the acquisition by a bank of any check deposited in or delivered to the bank in the usual course of business unless it
results in the granting of an overdraft to or the carrying of
a cash item for an executive officer, or (iii) the acquisition
of any note, draft, bill of exchange, or other evidence of indebtedness, through a merger or consolidation of banks or a
similar transaction by which a bank acquires assets and assumes
liabilities of another bank or other organization, or through
foreclosure on collateral or similar proceeding for the protection of the bank."
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9381
November 50, 1935.
SUBJECT: Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve
banks, the following code word has been designated
to cover a new issue of Treasury Bills:
"NOYDUM" - Treasury Bills to be dated
December 4, 1955, and to
mature September
1936,
This word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOYDIA" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
.402
B O A R D OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E
TO THE BOARD
X-9582,
December 2, 1955
SUBJECT: Code Vvord Covering New Issue
of Treasury Notes.
Dear Sir:
In connection with telegraphic transactions
between Federal reserve banks covering Government
securities, the following code word has been designated to cover a new issue of Treasury Notes:
"NOWKLTD" 1 l/2% Treasury Notes,
Series C-1940# to be dated
December 16, 1955, and to
mature December 15, 1940.
This code word should be inserted in the Federal Reserve Telegraph Code book, on page 172.
TO GOVEnitonS OF aLL F. n. B/.NKS
403
B O A R D OF G O V E R N O R S
• F THE
FEDERAL RESERVE SYSTEM
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 BOARD
X-9583
December 3, 1955<
SUBJECT: Proposed Revision of Regulation R
Relating to Interlocking Relationships under Section 32 of the Banking Act of 1955.
Dear Sir:
There are inclosed six copies of a tentative draft (L-380)
of a revision of Regulation R relating to interlocking relationships under section 52 of the Banking Act of 1955.
It will be ap-
preciated if you and the officers and counsel of your bank will
study this draft and forward your comments and suggestions thereon
to the Board at the earliest practicable date, not later than fifteen days from the date of this letter.
Your attention is invited to Section 2 of the proposed
draft, in which permission would be granted by the Board covering
interlocking relationships between member banks and dealers confining their activities to certain types of securities. The section as
drafted does not refer to general obligations of States or of political subdivisions thereof, and your comments are particularly requested with respect to the question whether such obligations should
be included.
404
- 2 -
X-9385
Your attention is also invited to the fact that the inclosed
draft of regulation would not except from the prohibitions of the statute a special partner who has no voice in the management or control of
the business of the partnership and whose liability is limited to the
amount of his contribution to the partnership. As you know, the Board
decided that the word "manager", which was contained in section 32 as
originally enacted, did not include such a special partner, and the
present Regulation E so states. However, since the section as amended
by the Banking Act of 1955 is applicable to a "partner", it will apparently be applicable to a special partner unless the Board should grant
its permission in such cases; and your comments with respect to the
desirability of granting permission in such cases are also requested.
The tentative draft of regulation has been prepared by the
Board's staff but has not been considered by the Board and, in order to
expedite the matter and with the permission of the Board, is being sent
to you at the same time that it is being submitted to the members of
the Board for consideration.
Very truly yours,
Inclosures.
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
X-9384
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Statement for the Press
For release in morning newspapers
of Thursday, December 5.
December 4, 1935.
CHANGES IN ORGANIZATION OF THE FEDERAL RESERVE SYSTEM
The Board of Governors of the Federal Reserve System today, in connection with important changes in the organization of the Federal Reserve
System which go into effect on February 1 and on March 1, 1936, under the
terms of the Banking Act of 1955, issued the following statement.
On February 1, 1936, the Board of Governors of the Federal Reserve
System will be succeeded by a new Board as provided by the Banking Act of
1935* As of March 1, 1936, by the terms of the Act, each Federal reserve
bank will elect, in lieu of its governor, a president, who will thereupon
become and be formally recognized in the law as the chief executive officer of the bank when approved by the new Board.
In order that the new Board which takes office on February 1, 1936,
may be free to make its own designations of chairmen and Federal reserve
agents at the same time that it is required to pass upon the selection of
the newly elected presidents of the Federal reserve banks, the present
Board of Governors has decided to have the designations of all chairmen
and Federal reserve agents expire on March 1, 1936, and has also decided
for the same reasons not to fill existing vacancies. The new Board will
thus be enabled to be represented at the different Federal reserve banks
by chairmen and Federal reserve agents of its own selection, chosen in accordance with its views as to how the chairmanships may best be made to
fit into the changed organization of the Federal Reserve System,
406
X-3584
**2—
The following chairmen and Federal reserve agents have, therefore,
been designated by the Board for the period extending from January 1 to
March 1, 1936;
Federal Reserve Bank of:
F.
J.
R.
W.
E»
J*
J.
C,
H.
H.
L.
W.
M.
S.
N.
C.
Curtiss
Case
Austin
Hoxton
Stevens
Wood
Peyton
Walsh
Boston
New York
Philadelphia
Richmond
Chicago
St. Louis
Minneapolis
Dallas
The Board has been guided by the same considerations with reference
to the appointment of deputy chairmen, and has, therefore, appointed the
following deputy chairmen for terms from January 1 to March 1, 1936:
Federal Reserve Bank of:
Allen Hollis
E. S. Burke, Jr,
F. A. Delano
W. H« Kettig
Paul Dillard
H. P. Clark
E, P. Brown
S. B. Perkins
W. N, Moore
Boston
Cleveland
Richmond
Atlanta
St. Louis
'Minneapolis
Kansas City
Dallas
San Francisco
In acting upon other Class C directorships expiring December 31, as
well as upon the appointments of such directors as it is authorized to appoint at branches of the Federal reserve banks, the Board of Governors has
also been guided by the views it expressed by letter of January 9, 1935, to
directors of Federal reserve banks and of their branches, as follows:
"In view of the special character of the functions of
these institutions and the public interest in them the Board
believes that the composition of the boards and the tenure of
service of their members are matters of great importance. The
X-9384
"Board recognizes that experience gained from participation
in the direction of the management of the Federal Reserve
banks and their branches has its distinct value but it believes that this can be overstressed and that there are special
advantages that would come to these institutions from bringing
to bear on their management from time to time new points of
view and differing backgrounds of experience. In consequence,
the Board believes that neither great length of service nor
too frequent changes are desirable and has endeavored to find
a solution which on the whole and in the long run will be conducive to the best development of the policies of the banks
and at the same time protect them against criticisms based
either upon the fact or the possibility of crystallization
of control of their managements by particular individuals
or groups through long continuance in power.
"Therefore the Board has reached the conclusion that
six years of service represents the maximum period during which
a director should remain continuously in office. It will be
guided by this view in future and will not continue in office
as directors men appointed by it who have served six or more
consecutive years (except in the cases of chairmen of the Federal Reserve banks).
"It is also the view of the Board that the welfare of the
Federal Reserve banks will be served best by directors whose
business and financial interests are primarily within and
representative of the bank or branch territory for which they
are selected rather than of interests controlled or owned outside of such territory."
With respect to directors of branches, the Board also
stated:
"It is the intention of the Board to follow uniformly
in all districts the policy of selecting as its appointees
individuals who are not officers of banks or primarily engaged in banking, although they may be stockholders or directors of banks.
"The Board expects to apply these principles in the
selection of directors appointed by it in the future."
In accordance therewith, the Board has reappointed Class
C directors, whose terms expire on December 31, but who will not
have served six or more consecutive years, and has not reappointed
Class C directors whose terms expire on December 31 but who will
X-9384
408
-4have served six or more consecutive years. Therefore, E. S. Burke, Jr.,
of Cleveland, Ohio, and J. R, Stanley, of Evansville, Indiana, whose
terms expire December 31, but who have not served six or more consecutive years, have been reappointed Class C directors, respectively, of
the Federal Reserve Banks of Cleveland and St. Louis, and Owen D. Young
of New York, who will have served 13 years (the last 9 years as a Class
C director and 4 years as a Class B director), James Simpson of Chicago,
who will have served 18 years, and E. R. Brown of Dallas, who will have
served 6 years, have not been reappointed as Class C directors, respectively, of the Federal Reserve Banks of New York, Chicago, and Dallas,
In conformity with the foregoing considerations with respect to appointments, designations and vacancies, the Board has reappointed the following directors of branches of Federal reserve banks:
Branch
J.
J.
R.
H.
S.
B.
E.
E.
M.
A.
Hill
O'Connell
Campbell
Haller
Easton
Louisville
Helena
Omaha
Portland
Spokane
Federal Reserve Bank of
St. Louis
Minneapolis
Kansas City "
San Francisco
San Francisco
Vacancies which will occur as of January 1, 1936, as a result of the
application of the Board's policy, are not being filled at this time, for
the reasons stated, but will be left for the new Board to fill in accordance with such policies as it may wish to adopt.
* 409
i
B O A R D OF G O V E R N O R S
OF THE
..a****,.
FEDERAL
I%A
RESERVE SYSTEM
WASHINGTON
9»
address
official c o r r e s p o n d e n c e
to the board
X-9385
December 3, 1955
SUBJECT: Issuance of General Voting Permits.
Dear Sir:
The Board expects to authorize the issuance of general voting permits to a number of the applicants therefor in the near
future. It desires that such permits be issued prior to the next
aniiual meetings of the stockholders of the subsidiary banks and, in
order to expedite the issuance of the permits, it will follow the
procedure outlined herein.
When the Board authorizes the issuance of a general voting
permit to a holding company affiliate in your district, you will be
advised by telegram. In this connection, the code word "ANCILDALE"
will be used and will have the following meaning:
"The Board of Governors of the Federal Reserve System
authorizes the issuance of a general voting permit, under
the provisions of section 5144 of the Revised Statutes
of the United States, to the holding company affiliate
named below after the letter 'A', entitling such organization to vote the stock which it owns or controls of the
banks named below after the letter 'B' at all meetings of
shareholders of such banks, subject to the conditions
stated below af tci^tjie -latter 'C'. The period within
which a permit may be issued pursuant to this authorization is limited to thirty days from the date of this telegram unless an extension of time is granted by the Board.
Please proceed in accordance with instructions contained
in the Board's letter of December 5, 1955, (X-9585).11
X-9585
410
—2—
One of the conditions listed after the letter "C" in
each telegram will require the applicant to execute and deliver to
you two copies of an agreement prepared in accordance with the form
attached hereto subject to any changes and with any additional provisions prescribed by the Board in the particular case. The attached
form of agreement contains as numbered provisions thereof the standard
conditions which the Board has adopted after considering the criticisms and suggestions relative to the tentative conditions set out
in the Board's letter of November 9, 1955 (X-9560). In some instances,
the Board may prescribe special conditions which are to be incorporated in the agreement as additional numbered provisions thereof and
in other cases it may possibly modify, in minor particulars, the
standard conditions. Full details concerning such special conditions or changes in the standard conditions will be set out in the
Board's telegram.
The required agreement should be prepared by your counsel
in strict accordance with the attached form and the terms of the
Board's telegram in the particular case. Any additional conditions
which are to be incorporated in the agreement must bo incorporated
verbatim. The agreement must be executed in form satisfactory to
your counsel and he should certify that it is a valid and binding
obligation of the applicant before you issue the permit.
In addition to the execution of the required agreement containing the conditions, the Board may also prescribe other conditions
which must be complied with prior to the issuance of the permit and
X-9585
-
411
—3—
which are not to be incorporated in the agreement. If any such
condition requires the execution of a written instrument (e.g.,
Exhibit L or N), the executed instrument should be approved by
your counsel before you issue the permit.
It is important to note that special conditions which are
not required to be complied with before the permit is issued should
be incorporated in the agreement as numbered paragraphs thereof,
in addition to and immediately following the numbered paragraphs
contained in the inclosed form; whereas special conditions which
must be complied with, prior to the issuance of the permit should
not be incorporated in the agreement, but you should be satisfied
that they have been complied with before the permit is issued.
If the person executing the required agreement or any other
instrument on behalf of the applicant is not one of those designated
by the resolution set out in Exhibit C of the voting permit application, you should bo furnished with two certified copies of a
resolution of the Board of Directors of the applicant authorizing
such person to execute such agreement or other instrument.
When the required agreement has been executed and all other
conditions have been complied with, you shall, on behalf of the
Board, execute and deliver to the applicant a general voting permit
prepared by your counsel in accordance with the form attached hereto.
It is essential that the permit contain the names and locations of
the holding company affiliate and the subsidiary banks exactly as listed
in the Board's telegram. The permit should be executed in triplicate.
X-9385
—
Vfhen the permit has been issued, please forward to the
Board an executed copy thereof, together with an executed copy
of the required agreement of the applicant, an executed copy of
each other instrument required by the conditions prescribed by
the Board, a certified copy of any resolution of the applicant's
Board of Directors required under the above instructions, and
full information concerning the manner in which any other conditions have been satisfied.
Under the procedure outlined herein the Board will, of
course, rely entirely upon you to see that each permit is in
proper form and is .issued only in accordance with the Board's
authorization. If in any case you have any question concerning
how you are to proceed or what is intended by the Board, please
communicate with the Board before issuing the permit.
Very truly yours,
hr)<rVuA^
Chester Morrill
Secretary.
Inclosures.
TO ALL FEDERAL RESERVE AGENTS
.413
X-9585-.a
AGREEMENT
In consideration of the granting by the Board of Governors
4f the Federal Reserve System, under authority of section 5144 of the
Revised Statutes of the United States and pursuant tfr &n application
heretofore filed with the Board of Governors if the Federal Reserve
System Tiy the undersigned, of a general voting permit entitling the
undersigned to vote the stock which it owns or controls of the member
bank or banks specified in such permit at all meetings of shareholders
of such bank or banks, the undersigned hereby represents, undertakes
and agrees as follows:
1 * That, as s*on as practicable and, in any event, within
two years from the date such voting permit is granted,
the undersigned will charge off or otherwise eliminate
from its assets,
(a) the part of the carrying value on its books of its
investments in stocks of subsidiary and/or affiliated organizations wMch is in excess of ihe adjusted value of such stocks, after effect shall
have been given to the deduction of all estimated
losses of such subsidiary and/or affiliated organizations, all depreciation in stocks and defaulted
securities, and all depreciation in all other securities not of the four highest grades, as classified by a recognized investment service organization regularly engaged in the business of rating
or grading securities, as shown by the latest available reports of examination of such organizations by
the appropriate supervisory authorities and/or as
shown by the latest appraisal of their assets by
other examiners, auditors or appraisers satisfactory
t# the designated representative of the Board of
Governors of the Federal Reserve System in the
district in which the undersigned is located,
(b) (i) all depreciation in its other stocks and in
its defaulted securities, (ii) all depreciation in
its securities not of the four highfcst grades as
classified by a recognized investment service organization regularly engaged in the business of
rating or grading securities,(iii) all losses in all its
other assetsall as shown by the latest available reports of examination by the appropriate supervisory
authorities and/or as shown by the latest appraisal
of assets by other examiners, auditors or appraisers
X-Sbt>5-a
-2-
satisfactory t# the designated representative of
the Board of Governors of the Federal Reserve
System in the district in which the undersigned
is located,
(c) all its other known losses;
2. That the undersigned will take such action within its
power as may be necessary to cause each of its subsidiary
State banking institutions to charge off or otherwise
eliminate from its assets as soon as practicable and, in
any event, within two years from the date such voting
permit is granted, (a) all estimated losses in loans
and discounts, (b) all depreciation in stocks and defaulted securities, (c) all depreciation in securities
not of the four highest grades, as classified by a
recognized investment service organization regularly
engaged in the business of rating or grading securities,
(d) all other losses, all such charge-offs or eliminations to be based upon the latest available reports of
examination by the appropriate supervisory authorities
and/or as shown by the latest appraisal of assets by
other examiners, auditors or appraisers satisfactory to
the designated representative of the Board of Governors
of the Federal Reserve System in the district in which
such institution is located 4
5#
That the undersigned will take such action within its
power as may be necessary to cause each of its subsidiary banking institutions to maintain a sound
financial condition and to cause the net capital and
surplus funds of each such subsidiary banking institution to be adequate in relation to the character
and condition of its assets and to the deposit liabilities and other corporate responsibilities of such
subsidiary banking institution;
4e
That the undersigned will take such action within its
power as may be necessary to cause each subsidiary
national bank or affiliate thereof to comply with the
recommendations or suggestions of the Comptroller of
the Currency based upon any report of examination of
such bank or affiliate made to him pursuant to authority
conferred by law and to ctmply with the regulations or
requirements of the Board of Governors of the Federal
Reserve System made pursuant to authority vested in it
by law;
5. That the undersigned will take such action within its
power as may be necessary to cause each subsidiary State
banking institution or organization affiliated therewith
to comply with the rocemmendations or suggestions of the
414
-3*-
X-9o85-a
Board of Governors of the Federal Reserve System or
its designated representative in the district in which
the institution is located based upon any report of
examinatioh ef such institution or affiliated organization
made pursuant to authority conferred by law and t* comply with the regulations or requirements of the Board
of Governors of the Federal Reserve System made pursuant
t# authority vested in it by law;
6. That the undersigned will take all necessary action within
its power to prevent any of its subsidiary banks and any
other banks with which the undersigned or any of its subsidiaries is affiliated from hereafter making, any loans
or extensions of credit to, or purchases of securities
under repurchase agreements from, the undersigned or any
of its subsidiaries or any other organizations with which
the undersigned or any of its subsidiaries is affiliated,
or any investments in, or advances against, securities
•f the undersigned or any of its subsidiaries or any
other organizations with which the undersigned or any of
its subsidiaries is affiliated, except within the same
limitations and subject to the same conditions and provisions as are applicable under section 23A of the Federal Reserve Act to such transactions involving member
banks and their affiliates;
7•
That the management of the undersigned will be, and
the undersigned will take such action within its
power as may be necessary to cause the management of
each of its subsidiaries to be, conducted under sound
policies governing its financial and other operations, •
including statements issued relating thereto; that the
undersigned will maintain a sound financial condition;
that its net capital and surplus funds shall be adequate
in relation to the character and condition of its assets
and to its liabilities and other corporate responsibilities; and that, except with the permission of the Board
ef Governors of the Federal Reserve System, it shall
not cause or permit any change to be made in the general
character of its business or investments*
The foregoing representations, undertakings and agreements are
subject to the following understandings:
(A) In determining the amount of depreciation in securities
owned by the undersigned or by any of its subsidiary or affiliated
415
416
organizations, appreciation in accuritios owned by any such organization may bo off-set against depreciation in securities owned by the
same organization, provided that such appreciation shall first bo
off-set against depreciation in securities of the four highest
grades owned by such organization, as classified by a recognized
investment service organization regularly engaged in the business
of rating or grading securities•
(B)
Whenever, under the terms of this agreement, any amounts
arc required to be charged off or otherwise eliminated, this agreement
shall be doomed to have been complied with to the extent of any
valuation reserve that may be set up for the securities or other
assets involved; provided that, in all reports and published statements of condition, the amount of such reserves be deducted from the
respective assets against wh'ch they are allocated#
(C)
Whenever the stock of any of its subsidiary or affiliated
organizations is carried on the books of the undersigned at less than
its adjusted value, as determined in accordance with the foregoing
clause numbered 1, nothing in this agreement shall prevent the
undersigned from increasing the amount at which such stock is
carried on its beoks to an amount not exceeding such adjusted value•
(D)
In case any dispute arises with any designated representative
of the Board of Governors of the Federal Reserve System as to compliance with the terms of this agreement and such dispute involves
disagreement with respect to any appraisal or valuation by any
•{-9385-a
,417
-5-
oxaminer, auditor or appraiser, or any recommendation or suggestion
of such designated representative;, the undersigned shall have the
right to appeal to the Board for review and final determination.
This agreement is executed in duplicate•
Dated
_
(Name of holding company affiliate)
%
(SEAL)
Attest:
Secrctbry.
418
X-9385-b
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
Pursuant to the authority vested in it by section 5144
of the Revised Statutes of the United States, the Board of Governors of the Federal Reserve System hereby grants a permit, subject
to revocation in accordance with the provisions of said section,
entitling
(Name and address of holding company affiliate)
to vote the stock which it owns or controls of
(Name and address of each blank)
at all meetings of shareholders of such (bank) (banks).
IN WITNESS WHEREOF the Board of Governors of the Federal Reserve System, has caused this instrument to be executed in
its behalf by iti= agent at the Federal Reserve Bank of
Dated
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
By
Federal Reserve Agent
419
B O A R D OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
X-9586
address
December 7, 1955,
official c o r r e s p o n d e n c e
to the board
Dear Sir:
There is attached, for the information of
your bank and others mho may be interested, a copy
of the Board's reply to an inquiry regarding the
question whether the distribution of savings devices,
commonly known as coin banks, constitutes the payment of interest on deposits within the meaning of
the term "interest" as used in section 19 of the
Federal Reserve Act and as defined in section 1(f)
of Regulation Q.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
430
X-9586-a
December 7, 1955.
?
>
>
,»
Dear Sir;
This refers to your letter dated October 22, 1935, regarding the question whether the distribution, by loan, gift, or otherwise, of savings devices for coin and currency accumulation, commonly
known as coin banks, constitutes the payment of interest on deposits
within the meaning of the term "interest" as used in section 19 of
the Federal Reserve Act and as defined in section 1(f) of the recent revision of the Board's Regulation Q.
You suggested the inclusion in Regulation Q of a clause designed to make it clear that the distribution of coin bancs does not
constitute the payment of interest on deposits.
However, the Board
decided that the determination of this question should be in the
form of a ruling rather than a specific provision on the point in
the regulation.
Prior to the date of your letter, Mr,
, a repre-
sentative of your corporation, had called at the Board's offices
regarding this matter and had left v.dth a member of the Board's
staff a coin bank manufactured by your corporation bearing the name
"CcleMeter".
This coin bank is a small box with a slot for the in-
sertion of coins in the top and can be unlocked only with a key.
421
- 2 -
X-9586-a
It also has a device for changing the date -.rhen a coin is deposited
therein.
However, the device is not an accurate calendar since it
indicates thirty days for every month.
It is understood that in your letter you refsr to coin banks,
such as the "CaleMeter", which are used for the accumulation of coin
or currency, or both; that such banks are distributed, by loan, gift,
or otherwise, to savings depositors or prospective savings depositors^
that the coin banks are constructed so that money placed in them can
not be removed without unlocking the banks? that the distributing
bank retains the key or combination to the coin banks 5 and that the
coin banks have no value except as devices tc aid in the accumulation of savings and are not useful for any other purpose.
After considering the matter the Board has reached the opinion
that the distribution in the manner described above of coin banks of
the type described above does not constitute the payment of interest
on deposits within the meaning vf section 19 of the Federal Reserve
Act or section 1(f) of Regulation Q.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
423
B O A R D OF G O V E R N O R S
OF THE
*******
FEDERAL RESERVE SYSTEM
W A S H I N G T O N
X-9587
a d d r Ie EE
s s
official c o r r e s p o n d e n c e
December 7, 19357=
Dear Sir:
There is attached a copy of a letter being
sent by the Board today to the cashier of a national
bank in response to his inquiry whether the bank may
make a loan to a depositor upon the security of his
time certificate of deposit.
It will be noted the reply states that while
Regulation Q as recently revised does not become effective until January 1, 1936, the Board will not
object to the bank acting in accordance with subsections (d) and (e) of section 4 of the regulation
prior to that date.
Very truly yours,
Chester Morrill,
Secretary.
Inclosurc.
TO ALL FEDERAL RESERVE AGENTS.
BOARD
423
X-9387-a
December 7, 19.55.
>
Dear Sir:
This refers to your.letter of November 23, 1935, inquiring
whether your bank may make a loan to a depositor upon the security of
his time certificate of deposit.
The Board has recently approved a revision of its Regulation
Q which deals with this subject, and subsections (d) and (e) of section
4 of this revised regulation provide as follows:
"(d) Payment in emergencies. - In an emergency
where it is necessary to prevent great hardship to the
depositor, a member bank may pay before maturity a
time deposit or the portion thereof necessary to meet
such emergency, provided that before making such payment the depositor shall sign an application describing fully the circumstances constituting the emergency
which is deemed to justify the payment of the deposit
before maturity, which application shall be approved
by an officer of the bank who shall certify that, to
the best of his knowledge and belief, the statements
in the application are true. Such application shall
be retained in the bank's files and made available to
the examiners authorized to examine the bank. Where
a time deposit is paid before maturity the depositor
shall forfeit accrued and unpaid interest for a period
of not less than three months on the amount withdrawn
if an amount equal to the amount withdrawn has been
on deposit three months or longer, and shall forfeit
all accrued and unpaid interest' on the amount withdrawn if an amount equal to the amount withdrawn has
been on deposit less than three months. When a
portion of a time certificate of deposit is paid before maturity, the certificate shall be canceled and
a new certificate shall be issued for the unpaid portion of the deposit with the same terms, rate, date
and maturity as the original deposit.
-
X-9587-a
2 -
"(e) Loans upon security of time deposits. A member bank may make a loan to the depositor upon
the security of his time deposit provided that the
rate of interest on such loan shall be not less than
2 per cent per annum in excess of the rate of interest
on the time deposit."
This revised regulation does not become effective until January 1, 1936, but the Board will not object to your bank acting in accordance with these provisions prior to that date.
Very truly yours,
(Signed)
. Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-9588
December 7, 1955.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir;
In connection with telegraphic transactions in
Government securities between Federal reserve banks,
the following code word has been designated to cover a
new issue of Treasury Bills:
"NOYFAN" - Treasury Bills to be dated
December 11, 1935, and to
mature September 9, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental
code word "NOYDUM" on page 172.
Very truly yours
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9389
December 7, 1935
Dear Sir:
In the Board's letter B-999 of July 18, 1954
you were requested, among other things, to obtain monthly
reports on Form 254 from selected member banks, commencing with September 1954 and continuing thereafter until
otherwise advised, in order to provide data for a study
in connection with the changes in member bank reserve requirements recommended in 1951 by the Federal Reserve
System Committee on Member Bank Reserves.
You are nor advised that the collection of these
reports may be discontinued as of the end of the year.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
X-9590
address official correspondence t o
the federal reserve board
December 10, 1935
SUBJECT:
Complimentary Copies of Federal Reserve Bulletin for
State Bank Examiners.
Dear Sir:
The Board of Governors of the Federal Reserve System
will furnish a complimentary copy of the Federal Reserve
Bulletin during the year 1936 to each State bank examiner who
may desire it.
Please send to this office, not later than
December 30, 1935 a list showing the name and address of
each State bank examiner in your district who desires to receive a complimentary copy of each issue.
Very truly yours,
TO
kLL
F.
ft.
aGEMTS
428
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9391
December 10, 1955.
Dear Sir:
On October 5, 1928, a letter (X-6151) was sent to all
Federal reserve banks in which it was suggested that it would
be of very great assistance to the Board if, at the time the
directors of a Federal reserve bank voted to make a change in
the discount rate at the bank, the chairman, in advising the
Board of the action taken, would inform it also of the reasons
which actuated the directors in establishing the new rate. Some
of the banks, in response to this suggestion, have undertaken to
state, very briefly in most cases, the reasons for the new rates
established by the banks.
As you know, the Board of Governors of the Federal Reserve
System is required by the last paragraph of section 10 of the Federal Reserve Act, as amended by the Banking Act of 1935, to keep
a record of actions taken on questions of policy and of the reasons
underlying such action. The Board feels that in connection with
its compliance with this new requirement of the law it will be
highly desirable that it have the benefit of a statement of the
reasons underlying the action of a Federal reserve bank in establishing new rates of discount and purchase and for advances made
by it.
— 2—
X-9S91
Therefore, the Board requests that, in the future, when
new rates are established by your bank your telegram to the Board
requesting approval of such action contain a statement of the
important reasons which prompted your directors in voting to make
• •
the change.
ZMT - V W W., .
'
Advice of action on discount rates by the Federal reserve
banks in the past usually has been transmitted to the Board by telegraph. In some cases, however, the Board has been informed of such
action by telephone. The Board is of the opinion that, in acting
on new rates fixed by a Federal reserve bank, it should have before
it, whenever possible, a definite statement of the reasons for the
bankts action and, therefore, requests that, in the absence of
unusual circumstances making some other procedure necessary, it be
advised by telegraph of new rates established by your bank and
that there be included in the telegram in each case the statement
referred to above as to the important reasons for such action.
Of course, such a statement ordinarily would not be included in
the telegram sent to the Board advising of the establishment without change of the rates of discount and purchase in your existing
schedule,
It will be appreciated by the Board if you will bring this
letter to the attention of your directors at their next meeting.
Very truly yours,
„
Ho <rVU - £ ^.
Chester Morrill,
Secretary,
TO ALL F. R. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9392
December 11, 1935
Dear Sir:
There are enclosed herewith copies of
statement rendered by the Bureau of Engraving
and Printing, covering the cost of preparing
Federal reserve notes for the month of November,
1935.
Very truly yours,
0. E. Foulk,
Fiscal Agent
Enclosure
TO ALL FEDERAL RESERVE AGENTS
431
X-9392-a
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
November 1 to 29, 1935.
Series 1954
§5
Boston,
New York,
Philadelphia,
Cleveland,
Richmond,
Atlanta,
Chicago,
St. Louis,
Minneapolis,
Kansas City,
Dallas,
San Francisco,
—
58,000
—
41,000
-
44,000
12,000
15,000
15.000
165,000
S10
- 54,000
259,000
35,000
47,000
31,000
21,000
139,000
23,000
10,000
20,000
&20
10,000
7,000
10,000
18,000
22,000
10,000
-
10,000
6,000
10,000
—
—
637,000
—
105.000
Total
Sheets
Amount
64,000 $ 5,504.00
266,000 22,876.00
81,000
6,966.00
65,000
5,590.00
53,000
4,558.00
72,000
6,192.00
159,000 11,954.00
77,000
6,622.00
28,000
2,408.00
30,000
2,580.00
15,000
1,118.00
15.000
1.290.00
905.000 £77.658.00
903,000 sheets, @ $86.00 per M,
177,658.00
433
FEDERAL RESERVE BOARD
WASHINGTON
X-9393
address official correspondence t o
the federal reserve board
December 13, 1935.
Subject: Retirement by State member banks
of preferred stock, capital notes
and debentures.
Dear Sir:
The Board has recently had its Division of Examinations
make a review of the condition of State member banks in which the
Reconstruction Finance Corporation has a capital investment.
In
connection with this review you were asked to advise which banks
could, in your opinion, retire with safety at this time all or a
substantial portion of the capital held by the Corporation.
The review developed that certain banks were in a position
to retire all or part of the capital investment held by the Reconstruction Finance Corporation and still have capital in an amount
adequate for the protection of the depositors and other customers
of the bank. As recovery continues to progress and further corrections are made of the conditions which weakened the capital structure
of the banks, there will undoubtedly be other cases where retirement
of excess capital will be justified. The Board, therefore, feels it
desirable to indicate at this time its views regarding the general
policies which it feels should govern the retirement of preferred
— 2 —
X-9593
stock and capital notes and debentures of State member banks, whether
held by the Reconstruction Finance Corporation or by local investors.
In the letter X-9048 (December 15, 1954) the Board outlined
the procedure to be followed by the Federal Reserve Agents in passing
upon proposed reductions of preferred stock and capital notes and
debentures by State member banks. In passing upon such proposed
reductions the Board requests that the Federal Reserve Agents give
full consideration to the capital ratio of the bank, the general
type of assets held by the bank, its investment in fixed assets,
quality of investment securities, trend of deposits, size and activities of trust department, competency of management and other tangible and intangible factors bearing on the adequacy of the amount
of net sound capital of the bank. The Board believes that if, after
consideration of the various factors enumerated above, it appears
that a bank is in a position to retire with safety part or all of
the preferred stock or capital notes or debentures held try the Reconstruction Finance Corporation or local investors, it should be
permitted to do so. It has been indicated, however, that there is
a tendency among some banks, in view of improving conditions and a
surplus of liquid assets, to retire prematurely part of the capital
structure and the Board is strongly of the opinion that such action
should not be taken until it is clearly demonstrated that the capital proposed to be retired is no longer needed for the protection
of the depositors or in the conduct of the bank's business.
— 3 —1
X-9393
It is, of cotirse, desirable that local investors acquire as
early as possible the Reconstruction Finance Corporation's holdings
of capital in banks. While the Board does hot feel that it would be
advisable at this time for the Federal Reserve Agents to undertake
a campaign to promote such transfers to local interests, it desires
that such action be encouraged in particular esses when such transfers appear to be practicable.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal. reserve board
X-9394
December 13, 1935.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills;
"NOYFED" - Treasury Bills to be dated
December 18, 1935, and to
mature September 16, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOYFAN" on page 172.
truly yours
J. C. Noell
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9595
December 17, .1935
Dear Sir:
For your information and guidance there is
inclosed a copy of a letter sent to the Federal Reserve Agent at Dallas, with respect to the publication of reports of condition rendered to State banking departments pursuant to the requirements of State
law and to Federal Reserve banks pursuant to the requirements of the Federal Reserve Act.
You may advise State banking departments in
your district accordingly.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS EXCEPT DALLAS
437
X-9595-a
December 17, 1955,
Mr. C, G. Walsh,
Federal Reserve Agent,
Federal Reserve Bank of Dallas,
Dallas, Texas.
Dear Mr. Walsh:
Reference is made to your letter of December 2 stating that
the Banking Commissioner of Texas and the various State bank members
in that State are anxious to work out some arrangement whereby the
requirements of both State and Federal law can be satisfied by the
publication on the part of such banks of only one form of report at
each call.
It is noted that the State Banking Commissioner is considering the advisability of changing his present form of report in such
manner as to make it identical with the form currently prescribed by
the Board for State member banks and wishes to know whether in the
event the State form of report is so revised the Board of Governors
would be willing to accept one publication as covering both State and
Federal requirements.
The Board is anxious to avoid the unnecessary preparation
and publication of reports wherever possible and believes that one publication should be sufficient to satisfy both the State and Federal requirements if the form of the two reports is identical. You are
authorized to advise the State Banking Commissioner of Texas, therefore,
that if and when the form of condition report prescribed for State
438
- 2 -
X-9395-a
banks in Texas by the State Banking Department is identical with the
corresponding form prescribed by the Board, the Board will be glad
to accept a single publication of reports of condition rendered to
the State Banking Department pursuant to requirements of State law
and to your bank pursuant to the requirements of the Federal Reserve
Act provided the following words appear in the published report immediately above the caption "Assets":
"Published in accordance with calls made by the State
Banking Commissioner of Texas and the Federal Reserve batik
of this district"
There are inclosed proof copies of Forms 105 and 105®, which
are to be used by State bank members at the time of the next call for
their condition reports. It will be appreciated if you will furnish
these copies to the State Banking Commissioner of Texas for his information, in case he decides to have the face side of the report form
used by State banks in submitting reports to his office identical with
that used by State bank members in submitting reports to your bank.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9396
December 18, 1955.
t
Dear Sir:
There is inclosed herewith for your information a copy of a letter and inclosure which
the Board has "addressed to the Federal Reserve
Agent at the Federal Reserve Bank of St. Louis
with reference to the investment of trust funds
in mortgages insured under the provisions of Title
II of the National Housing Act.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO ALL FEDERAL RESERVE AGENTS EXCEPT ST. LOUIS
440
X-9396-a
December 18, 1955.
Mr. John S. Wood,
Federal Reserve Agent,
Federal Reserve Bank of St. Louis,
St. Louis, Missouri.
Dear Mr. Wood:
This refers to Mr. Stewart's letters of May 25, 1935, and
August 22, 1955, relating to inquiries from the (State member bank),
Arkansas, and the
.
National Bank of
with regard to the possible investment of trust funds
held by a member bank in mortgages insured under Title II of the
National Housing Act. Among other papers, Mr. Stewart has forwarded
a copy of a circular addressed to financial institutions by the Federal Housing Administration and it has been observed that such circular specifically states that it is not to be construed as permitting
the pooling of insured mortgages in the hands of a trustee for the
purpose of issuing participation certificates or other such evidences
of interest.
The authority of a member bank to invest trust funds in mortgages or other securities depends upon the terms of the particular trust
instruments, court orders, and State laws. A bank, however, should,
of course, exercise proper discretion within the limits thus prescribed
and act at all times in accordance with the principles of sound trust
practices governing the investment of trust funds with careful consideration of the needs of each particular trust. Within the above
441
-• 2 -
X—3596--a
considerations, first mortgages, including mortgages insured under Title
II of the National Housing Act, would constitute a proper investment for
trust funds.
It is understood that the Federal Housing Administration contemplates that institutions exercising fiduciary powers will conform
to the fundamental principles of trust administration in connection
with insured mortgages. In this connection, there is inclosed a copy
of a letter and inclosure which the Federal Housing Administration has
forwarded to institutions to which had been forwarded tentative drafts
of proposed trust agreements by the Federal Housing Administration, and
you will note that it is stated in this letter, among other things:
"It is essential that all trust agreements be prepared *** in accordance
with recognized trust practices, and this basic principal, obviously,
can in no way be affected simply by reason of the inclusion of insured
mortgages in the corpus of any trust". It is believed that the inclosed letter of the Federal Housing Administration disposes of the
questions raised by your trust examiner relating to the applicability
of fundamental principles of trust administration to the investment of
trust funds in insured mortgages, and it is requested that you advise
the (State member bank) accordingly.
Since one of the inquiries to which you referred was received
from a national bank, that inquiry has been referred to the Comptroller
of the Currency for attention, and the Comptroller, who has already
- 3 -
X-9596-a
been furnished with a copy of the inclosed letter of the Federal
Housing Administration, is being furnished with a copy of this letter.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
Inclosure.
X-9396-b
FEDERAL HOUSING ADMINISTRATION
Washington, D, C.
Dear Sirs:
On March 15, 1955 the Regulations of the Federal Housing
Administrator for Mutual Mortgage Insurance were amended to
permit banks, trust companies, and other fiduciary institutions,
approved as mortgagees under Title II of the National Housing
Act and subject to the inspection and supervision of some governmental agency, to include insured mortgages among the assets of
trusts administered by them.
Following the adoption of this amendment, a number of institutions requested that we furnish them with an outline form of
trust instrument, indicating the manner in which insured mortgages
might be held in trust for individuals, or other beneficiaries not
approved as mortgagees, upon a basis conforming to the requirements of the National Housing Act and our Regulations.
In response to these requests, the Legal Division of this Administration prepared skeleton drafts of two proposed trust agreements and the institutions in question were advised that these forms
were available for their assistance and information upon request.
Each of the forms sent out was accompanied by a memorandum and a
letter of transmittal pointing out that all the provisions of the
proposed trust, other than those peculiarly applicable to insured
mortgages, should be submitted to counsel for advice as to their
validity under the laws governing the operations of the particular
institution.
Notwithstanding this fact, it has apparently been assumed by
some institutions that these forms represented a standardized trust
instrument approved by this Administration for use in all cases in
which insured mortgages were to be hold under trusts. As a result
of this assumption considerable confusion has arisen which I wish
to dispell.
Because of the wide differences in the laws of the various
states dealing with the administration of trusts and of the fact
that every trust is necessarily shaped by the particular needs of
the trustor and other unique circumstances surrounding the transaction,
-2-
X-9396-b
it is, of course, neither possible nor desirable to develop a
uniform instrument which can be generally used, and nothing of
this character was contemplated by this Administration in preparing these tentative forms. It is essential that all trust
agreements be prepared by counsel for the creator of the trust,
together with counsel for the trustee, in accordance with recognized trust practices, and this basic principal, obviously,- can
in no way be affected simply by reason of the inclusion of insured mortgages in the corpus of any trust.
However, in view of the fact that insured mortgages have
certain characteristics that are not common to other forms of
security, it is necessary that fiduciary institutions be thoroughly informed as to the special provisions which it is necessary to insert in the trust instrument in connection with the
handling of any such mortgages held under it. To clarify this
situation, we have prepared four clauses which we are enclosing.
With these clauses available it seems there is no need
for the tentative forms which have heretofore been sent you and
you should, therefore, disregard them.
But we wish to emphasize that in order to protect the interests of all parties, clauses, substantially similar to those
enclosed, should be inserted in each trust agreement which includes insured mortgages.
Very truly yours,
(Signed) R. M. Catharine
Robert M. Catharine,
Deputy Administrator.
. X-9396-C445
FEDERAL HOUSING ADMINISTRATION
WASHINGTON, D. C.
SUGGESTED PROVISIONS FOR TRUST AGREEMENTS AUTHORIZING INVESTMENT IN MORTGAGES INSURED UNDER THE NATIONAL HOUSING ACT
The trustee is directed and empowered:
(a) to invest the whole (or any part) of the trust fund in (a) note(s)
or bond(s) insured under the provisions of the National Housing Act and
secured try a first mortgage (or mortgages) on real estate;
(b) to collect all monthly payments provided for in such mortgage(s)ae
they become due and apply them in accordance with the provisions thereof,
to discharge all other obligations of an approved mortgagee under the
Contract of Insurance, and to satisfy and discharge such mortgage(s) on
receiving payment thereof in the amount and in the manner specified in
such mortgage(s) and the note(s) or bond(s) secured thereby;
(c) in case of default, to institute foreclosure proceedings, or proceed
to acquire the property by other means approved ty the Federal Housing
Administrator, at any time within the limit set forth in the Regulations
of the Federal Housing Administrator under which such mortgage was insured, and, upon such foreclosure or otherwise acquiring title, to transfer to the Federal Housing Administrator the property so acquired and
all claims against the mortgagor, arising out of the mortgage transaction
or foreclosure proceedings, in exchange for the debentures and certificate
of claim provided for in the National Housing Act and to hold such debentures and certificate of claim under the terms of this trust; and
(d) upon the termination of this trust to sell such insured mortgage(s)
t
to a mortgagee approved by the Federal Housing Administrator.
11/5/35
12297
446
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9397
December 19, 1935,
Dear Sir:
Following the revision of the Board's Regulation D, Reserves of
Member Banks, effective January 1, 1936, and the revision of the deposit
schedules in the forms to be used by member banks on the next call for
condition reports, the reserve computation form (B-15) which was revised
by the Board's telegram Trans 2301 of August 27, 1935, has been further
revised and a copy of the revised form is inclosed. A copy of Schedules
I, J, and K of the form to be used on the next call for condition reports
of member banks is also inclosed. It will be noted that as in the past
the items in the reserve computation form refer to corresponding items
in the call report form.
It is understood that the semi-weekly, weekly and semi-monthly
reports of deposits for reserve purposes, now being rendered to the Federal
Reserve banks by member banks, show only two items for each date in the
reserve computation period, namely, net demand deposits and time deposits,
and that the formula is furnished to member banks merely to illustrate
the method of computing required reserves.
It would, be of considerable
value to have figures not only of the amount of net demand deposits subject to reserve but also of the principal items entering into the computations thereof, namely, gross demand deposits, balances due from banks, and
447
— 2 —
X-9597
cash items in process of collection. Accordingly, it will be appreciated
if you will amend the forms which you furnish to member banks for use in
rendering their reports of deposits for reserve purposes, beginning with
1956, so as to show for each day the amount of (l) gross demand deposits,
(2) balances subject to immediate withdrawal due from other banks, (5)
cash items in process of collection, (4) time deposits, conforming to
items 1, 2-a, 2-b, and 4, respectively, of the new reserve computation
form* Since the additional figures requested are used in computing reserve
requirements, no additional burden should be placed upon the member banks
in compiling the reports on the new basis. The form should, of course,
provide for showing the aggregate of the daily figures for each of the 4
columns, but averages should be computed only of net demand deposits and
time deposits as at present. If on any given day a bank's gross demand deposits are less than the allowable deductions, net demand deposits on that
date should be taken as zero.
Inasmuch as the forms for the next call report will not be distributed to member banks until around the end of the year, the new reserve
computation formula, which refers to items in the revised call report,
Should not be distributed until that timo.
Very truly yours,
^h&LAXZo
Chester Morrill,
Secretary.
Inclosures.
TO ALL FEDERAL RESERVE AGENTS.
j-Ylcn/uUf
448
X-9397-a
Board of Governors
of the Federal Reserve System
Form B-15
(Revised Dec. 1955)
COMPUTATION OF RESERVE TO BE CARRIED WITH THE FEDERAL RESERVE BANK
BY MEMBER BANKS
(For definitions of the terms gross demand deposits, deductions
allowed in computing reserves, cash items in process of collection, net demand deposits and time deposits, see Regulation D
of the Board of Governors of the Federal Reserve System)
1. GROSS DEMAND DEPOSITS, including U. S. Government
deposits and demand balances of other banks
. .$
(See Schedule J of the quarterly condition report for
items constituting demand deposits)
2. DEDUCTIONS ALLOWED IN COMPUTING RESERVES:
(a) Balances subject to immediate withdrawal
due from other banks* (except balances
due from Federal Reserve banks, from
foreign banks or branches thereof, from
foreign branches of domestic banks, or
from private banks)
$
(Corresponds to item 1 in Schedule I of
the quarterly condition report)
(b) Cash items in process of collection, except
to the extent included in item 2-a (including checks with Federal Reserve banks
in process of collection and checks on
hand which will be presented for payment
or forwarded for collection on the
following business day)
(Corresponds to item 2 in Schedule I of
the quarterly condition report)
3. NET DEMAND DEPOSITS (item 1 minus item 2)
4. TIME DEPOSITS
(See Schedule K of the quarterly condition report
for items constituting time deposits)
5. RESERVE REQUIRED:
(a) On net demand deposits (item 3 above):
Banks in central reserve cities, 13 percent;
Banks in reserve cities> 10 percent;
Banks located elsewhere, 7 percent . . . . .
(b) On time deposits (item 4 above): 3 percent
(c)
. .
Total reserve to be maintained with Federal
Reserve bank . .
^Including cash items forwarded to a correspondent bank for collection and
credit and charged to item "Due from banks".
SCHEDULE I — GASH. BALANCES WITH OTHER BANKS.
EXCHANGES FOR CLEARING HOUSE. ETC.
X-9397-b • 4 4 9
(Page 4 of Form 105)
1. Demand balances with other banks in the United States
(except private banks and American branches of
foreign banks):
(a) Due from banks in New York City
(b) Due from banks elsewhere in the United States
2. Cash items in process of collection, including
exchanges for clearing house, except to the
extent included in item 1
SUBTOTAL of items 1 and 2 (amount deductible from
demand deposits in determining amount subject to
reserve)
S
(Amount not
to be extended)
3. Time balances with other banks in the United States
(except private banks and American branches of
foreign banks)
4» Balances with private banks and American branches of
foreign banks
5, Balances with banks in foreign countries (including
balances with foreign branches of other American
banks but excluding amounts due from own foreign
branches)
6, Cash in vault
TOTAL of items 1 to 6 (must agree with item 9 of "Assets")
SCHEDULE J — DEMAND DEPOSITS (all deposits other than "time
deposits" as defined in Regulation D of the
Board of Governors of the Federal Reserve System)
1. Deposits of individuals, partnerships, and corporations
(must agree with item 14 of "Liabilities")
2. United States Government deposits
3. State, county, and municipal deposits
4. Deposits of other banks in the United States
(except private banks and American branches
of foreign banks)
5. Deposits of private banks and American branches
of foreign banks
6. Deposits of banks in foreign countries
(including balances of foreign branches of
other American banks but excluding amounts
due to own foreign branches)
7. Certified and officers' checks, letters of credit
and travelers1 checks sold for cash, and amounts
due to Federal Reserve bank (transit account)
TOTAL DEMAND DEPOSITS (items 1 to 7 of this schedule)
SCHEDULE K — TIME DEPOSITS (as defined in Regulation D of
the Board of Governors of the Federal Reserve
System)
1. Deposits (except savings deposits), of individuals, partnerships and corporations:
(a) Certificates of deposit (other than for
money borrowed)
(b) Open accounts
(c) Christmas savings and similar accounts
2. Deposits evidenced by savings pass books (No.of acc1 ts_
SUBTOTAL of items 1 and 2 (must agree with
item 15 of "Liabilities")
$>
5, Postal savings deposits
4. State, county, and municipal deposits
5. Deposits of other banks in the United States
(except private banks and American branches
of foreign banks)
6. Deposits of private banks and American branches
of foreign banks
7. Deposits of banks in foreign countries
(including balances of foreign branches of other
American banks but excluding amounts due to own
foreign branches)
TOTAL TIME DEPOSITS (items 1 to 7 of this schedule)
$
)
•
__
(Amountrotto
be extended)
_____________
____________
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9398
December 19, 1955.
SUBJECT:
Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills:
"NOYFOP" - Treasury Bills to be dated
December 24, 1935, and to
mature September 23, 1936.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOYFED" on page 172.
Very truly yours
J. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS
451
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9399
December 20, 1935.
SUBJECT: Holidays during January, 1936.
V
Dear Sir:
On New Year's Day the offices of the Board of Governors of
the Federal Reserve System and all Federal reserve banks and branches
will be closed.
The Board is advised that the following holidays will also be
observed by Federal reserve banks and branches during January:
Wednesday,
January 8,
Monday,
January 20,
Richmond
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
New Orleans
Louisville
Memphis
Dallas
El Paso
Houston
San Antonio
Anniversaiy of
Battle of New
Orleans
Observance of
anniversary of
birth of General
Robert E. Lee
(January 19)
Tuesday,
January 28,
Havana Agency
Anniversary of
birth of
Jose Marti
Friday,
January 31,
Portland
Special election
in Oregon
On the dates given the offices mentioned will not participate
in either the transit or the Federal reserve note clearing through the
452
2.
X-9399
Gold Settlement Ftind. Please ihclude transit clearing credits for
the offices concerned on each of the holidays with your credits for
the following business day. No debits covering shipments of Federal
reserve notes for account of the head offibes named should be included in your Federal reserve note clearing of Monday, January 20.
Please notify branches.
Ve£Y truly yours
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
453
FEDERAL RESERVE BOARD
WASHINGTON
X-9400
address official correspondence t o
the federal reserve board
December 20, 1935.
Dear Sir:
There are inclosed, for your information, a copy of a letter
dated November 6, 1955, from Governor Harrison, of the Federal Reserve
Bank of New York, a copy of a letter dated November 50, 1935, from the
Secretary of State, and a copy of the Board's letter of this date to
Governor Harrison, with regard to the financing of shipments of goods
to belligerent nations.
The statements referred to in the letter from the Secretary of
State are also inclosed, together with a copy of the Proclamation issued
by the President of the United States on October 5, 1935.
Your attention is invited particularly to the suggestions contained in the Board's letter to Governor Harrison in connection with future
inquiries received by the Federal reserve bank and with regard to the acceptance by the Federal reserve bank of paper which appears to represent
the extension of credit to finance shipments of the character referred to
in the inclosed statements.
It will be appreciated if you will bring this correspondence
promptly to the attention of the Governor and the directors of your bank.
Very truly yours,
Inclosures.
TO ALL CHAIRMEN.
Chester Morrill,
Secretary.
COPY
X-9400-a
FEDERAL RESERVE BANK
of New York
November 6, 1935.
Dear Governor Eccies:
I am writing to confirm my telephone conversations with you
regarding the question of bank credits to finance shipments of goods to
belligerent nations.
The proclamation of the President dated October 5, 1935, issued
under the authority of Section 1 of the Joint Resolution approved August
51, 1935, (Public Resolution No, 67 of the 74th Congress) proclaimed the
existence of war between Ethiopia and Italy, and prohibited and made unlawful except under license the export of "arms, ammunition, or implements of war" as defined in the proclamation. Supplementing this proclamation there has been published in the newspapers statements of the
President dated, I think, October 5 and 30, 1935, and of the Secretary of
State dated October 10 and 30, 1935, which, together with the newspaper
comment thereon, seem to indicate that they were intended to discourage
trade and transactions with the belligerent nations even beyond the prohibitions of the proclamation of October 5, 1955.
In the light of the reported statements of the President and the
Secretary of State, counsel for the
•
Bank (of New York)have
called upon us to discuss the question of its policy with reference to
granting credits to its customers to finance shipments of goods to Italy,
This question does not relate to credits to finance the shipment of "arms,
ammunition, or implements of war", the export of which is prohibited under
the President's proclamation of October 5, 1935, nor does it relate to
455
-ii 2
X-9400-a
outstanding irrevocable credits to cover the export of other goods. Counsel
for the
Bank (of New York) took the position, and I think cor-
rectly , that the bank had no legal basis for cancelling such irrevocable
credits. The question, therefore, concerns only outstanding revocable
credits, or applications for new credits, for account of the customers of
the bank to finance the shipment of goods other than "arms, ammunition,
or implements of war",
I am enclosing a copy of a letter which we received from the
vice president of the
' Bank under date of October 51, which
raises specifically the question of the propriety of financing a shipment
of cotton to Italy for one of their regular customers.
As long as there is no apparent question of law involved, but
rather merely a question of propriety or judgment, I have thus far taken
the position that we could not advise them what their policy should be,
I do not feel that I can with propriety urge or even advise individual member banks to decline to extend credit which is requested by customers to
finance the shipment of goods not prohibited by law or by proclamation.
To have them do so would only arouse the resentment of the customers of
those individual banks and divert the business to other institutions so
that no real purpose would have been served. If it is in fact desired that
banks should refuse credits to finance the shipment of any goods to belligerent countries, some action would seem necessary which would insure
the universal adoption of this policy by all banks in the country. Without this it seems to me that it would be ineffective, and unfair to the
individual shippers and banks concerned, to attempt to influence particular
f ,
•— 3 —
X—9400—3.
institutions to refuse such credits.
I should appreciate your advising me if you or the Board of
Governors feel differently or if you think of any other course I should
follow.
Very truly yours,
(Signed) George L. Harrison
George L. Harrison,
Governor»
Hon. Marriner S. Eccles,
Chairman, Board of Governors
of the Federal Reserve System,
Washington, D. C.
Enc.
457
COPY
X-9400-b. •
DEPARTMENT OF STATE
WASHINGTON
November 30, 1955
My dear Mr. Morrill:
I am in receipt of your letter of November 19, 1935, enclosing a
copy of a letter of November 6 addressed to the Chairman of the Board of
Governors of the Federal Reserve Board by Mr. George L. Harrison, Governor
of the Federal Reserve Bank of New York, in regard to a question submitted
by an officer of the
Bank (of New Yor$ with respect to the
propriety of financing shipments of cotton to Italy.
In reply, I enclose, for your consideration, copies of statements
recently made by the President and by me in which are set forth the purpose and the policy of this Government in respect to commercial transactions with the belligerents. I do not feel that I can undertake to
amplify these statements at this time or to issue a special ruling in
respect to any particular case. I assume, however, that all agencies of
the Government and all semi-governmental agencies will wish to conform
their action to the policy set forth in these statements.
I may add that in a Press Conference on November 26 I made it clear
to the representatives of the Press that the policy of this Government
in respect to abnormal shipments to belligerents of primary war materials,
enunciated in niy statement of November 15, flowed naturally from the
general purpose and policy of this Government as expressed in preceding
statements made by the President and by me.
Enclosures:
Five Statements
Sincerely yours,
(Signed) Cordell Hull
Mr. Chester Morrill,
Secretary, Federal Reserve Board
Washington, D. C.
COPY
X-9400-c
DEPARTMENT OF STATE
FOh THE PRESS
OCTOBER 5, 1935
The President made the following statement tonight at the
time of issuing his Proclamation under Section I of a Joint Resolution of Congress entitled "Joint resolution Providing for the
Prohibition of the Export of Amis, Ammunition, and Implements of
War to Belligerent Countries;" etc.:
STATEMENT BY THE PRESIDENT OF THE UNITED STATES
"In view of the situation which has unhappily developed between Ethiopia and Italy, it has become my duty under the provisions of the Joint Resolution of Congress approved August 51,
1935, to issue, and I am today issuing my proclamation making
effective an embargo on the exportation from this country to
Ethiopia and Italy of arms, ammunition and implements of war.
Notwithstanding the hope wo entertained that war would be avoided,
and the exertion of our influence in that direction, we are now
compelled to recognize the simple and indisputable fact that
Ethiopian and Italian armed forces are engaged in combat, thus
creating a state of war within the intent and meaning of the
Joint Resolution.
"In these specific circumstances I desire it to be understood that any of our people who voluntarily engage in transactions of any character with either of the belligerents do so at
their own risk."
459
COPY
X-9400-d
DEPARTMENT OF STATE
FOR THE PRESS
OCTOBER 10, 1935.
CONFIDENTIAL RELEASE FOR PUBLICATION IN THE MORNING NEWSPAPERS OF FRIDAY. OCTOBER
11. 1955. NOT TO BE PREVIOUSLY PUBLISHED. QUOTED FROM OR USED IN
ANY WAY.
At the press conference at the Department of State today, in answer to the
following question put to him by a correspondent;
"Mr. Secretary, would you care
to elaborate on what the President said about American interests trading with
belligerents at their own risk?", Secretary Hull made the following remarks:
"As I said to you gentlemen heretofore, the language of the President's statement has thoroughly well-defined meaning and every person should be able to grasp
its meaning and its implications. Technically, of course, there is no legal prohibition—apart from the proclamation governing the export of arms,—against our
people entering into transactions with the belligerents or either of them. The
warning given by the President in his proclamation concerning travel on belligerent ships and his general warning that during the war any of our people who
voluntarily engage in transactions of any character with either of the belligerents do so at their own risk were based upon the policy and purpose of keeping
this country out of war,—keeping it from being drawn into war. It certainly
was not intended to encourage transactions with the belligerents,
"Our people might well realize that the universal state of business uncertainty and suspense on account of the war is seriously handicapping business between all countries, and that the sooner the war is terminated the sooner the
restoration and stabilization of business in all parts of the world, which is
infinitely more important than trade with the belligerents, will be brought about.
"This speedy restoration of more full and stable trade conditions and relationships among the nations is by far the most profitable objective for our
people to visualize, in contrast with such risky and temporary trade as they
might maintain with belligerent nations.
"I repeat that our objective is to keep this country out of war".
* * * * *
COPY
FOR THE PRESS
IMMEDIATE RELEASE
OCTOBER 30, 1935
Statement by the President
In dealing with the conflict between Ethiopia and Italy,
I have carried into effect the will and intent of the Neutrality
Resolution recently enacted by Congress. We have prohibited all
shipments of arms, ammunition, and implements of war to the belligerent governments. By my public Statement of October fifth,
which was emphasized by the Secretary of State on October tenth,
we have warned American citizens against transactions of any
character with either of the belligerent nations except at their
own risk.
This Government is determined not to become involved in the
controversy and is anxious for the restoration and maintenance
of peace.
However, in the course of war, tempting trade opportunities
may be offered to our people to supply materials which would prolong the war. I cio not believe that the American people will
wish for abnormally increased profits that temporarily might be
secured by greatly extending our trade in such materials; nor
would they wish the struggles on the battlefield to be prolonged
because of profits accruing to a comparatively small number of
American citizens.
Accordingly, the American Government is keeping informed
as to all shipments consigned for export to both belligerents.
X-9400-f
COPY
DEPARTMENT OF STATE
FOR THE PRESS
OCTOBER SO, 1935
A member of the press having made inquiry as to whether
the United States Government is keeping in touch with exports
to the belligerent countries, the Secretary of State today said:
"We have been and are each day giving the most diligent and earnest attention to this and other phases of
our situation as it relates to the Ethiopian-Italian
controversy. At this stage I reiterate and call special
attention to the definite implications and the effect of
the policy of this Government to discourage dealings with
the two belligerent nations as set forth in the President' s public statement of October 5 and my statement of
October 10 warning our people not to trade with the
belligerents except at their own risk-
The policy of
the government as thus defined rests primarily upon the
recent neutrality act designed to keep the nation out of
war, and upon the further purpose not to aid in protracting
the war.
"It is my opinion that our citizens will not be disposed to insist upon transactions to derive war profits
at the expense of human lives and human misery. In this
connection I again repeat that an early peace with the
restoration of normal business and normal business profits
is far sounder and far preferable to temporary and risky
war profits."
-SBttf-
462
COPY
X-9400-g
DEPARTMENT OF STATE
FOR THE PRESS
NOVEMBER 15, 1935
STATEMENT BY THE SECRETARY OF STATE. MR. COKDELL HULL
In view of the many inquiries that are being asked from time
to time with respect to trade with Ethiopia and Italy, I deem it
proper again to call attention to the statement by the President on
October 5, that he desired it "to be understood that any of our
people who voluntarily engage in transactions of any character with
either of the belligerents do so at their own risk."
On October 10 I explained that the President's statement was
based primarily upon the policy and purpose of keeping this country
out of war, and that "It certainly was not intended to encourage
transactions with the belligerents." I further explained that "our
people might well realize that the universal state of business uncertainty and suspense on account of the war is seriously handicapping business between all countries, and that the sooner the war
is terminated the sooner the restoration and stabilization of business
in all parts of the worlc, which is infinitely more important than
trade with the belligerents, will be brought about." The President,
in a statement on October 30, further emphasized the spirit of this
policy.
The American people are entitled to know that there are certain commodities such as oil, copper, trucks, tractors, scrap iron
and scrap steel which are essential war materials, although not
actually "arms, ammunition or implements of war," and that according to recent government trade reports a considerably increased
amount of these is being exported for war purposes. This class of
traae is directly contrary to the policy of this Government as announced in official statements of the President and Secretary of
State, as it is also contrary to the general spirit of the recent
neutrality act.
The administration is closely observing the trend and volume
of exports to those countries and within a few days the Department
of Commerce expects to have complete detailed lists of all commodities exported to the belligerents which will, enable exact comparison with lists for the same period last year.
-iBBHt-
463
COPY
X-9400-h
December 20, 1935,
Mr. G. L. Harrison, Governor,
Federal Reserve Bank of New York,
New York, New York.
Dear Governor Harrison:
Following receipt of your letter of November 6, 1935, with respect to the financing of shipments of goods to belligerent nations, a
copy thereof was sent to the Secretary of State, with a request for an
expression of his views concerning the position taken in your letter. A
reply was received from the Secretary of State under date of November 30,
1935, a copy of which is attached, together with copies of the inclosures
mentioned therein.
It will be noted that the Secretary of State refers to the inclosed statements by the President and the Secretary as setting forth the
purpose and policy of the Government in respect to commercial transactions
with the belligerents; that he does not feel that he can undertake to amplify these statements at this time or to issue a special ruling in respect to any particular case; and that it is assumed that all agencies of
the Government and all semi-Governmental agencies will wish to conform
their action to the policy set forth in the statements.
It will also be noted that in the statement of November 15, 1935,
reference is made to shipments of goods, which are considered to be essential wax materials, as a class of trade which is directly contrary to the
policy of the Government, and that the Secretary states in his letter that
the policy with regard to these abnormal shipments of primary war materials
flowed naturally from the general purpose and policy of the Government a s
464
-2-
X-9400-h
expressed in earlier statements.
The Board suggests that, if other inquiries similar to the one
referred to in your letter be received by your bank, you reply by forwarding copies of the statements issued by the President and the Secretary of
State as announcing the policy of the Government, and that you state that
you are informed that the State Department advised the Board that it did
not feel that it could undertake to amplify these statements at this time
or to issue a special ruling in respect to any particular case.
The Board feels that the only proper course for the Federal reserve system to follow is to cooperate with the Government in carrying out
its announced policy in this matter and believes that the banks of the
Federal reserve system will agree with the Board. It is not improbable,
unless the situation should improve materially, that questions involving
not only the attitude of the Federal reserve system but also the exercise
of the discount functions of the Federal reserve banks may arise. It is
the feeling of the Board that such matters might well be left to be dealt
with when the occasion for their consideration appeal's, in which event
the Board will expect that these questions be brought to its attention.
Copies of this letter are being sent to the Chairmen of all Federal reserve banks and to the Secretary of State.
Very truly yours, •
(Signed) Chester Morrill
Chester Morrill,
Secretary.
Inclosures.
465
COPY
X-9400-i
EXPORT OF ARMS, AMMUNITION, AND IMPLEMENTS OF WAR TO ETHIOPIA AND
ITALY
0
By the President of the United States of America
A PROCLAMATION
WHEREAS section 1 of a joint resolution of Congress, entitled
"JOINT RESOLUTION Providing for the prohibition of the export of arms,
ammunition, and implements of v/ar to belligerent countries; the prohibition of the transportation of arms, ammunition, and implements of
war by vessels of the United States for the use of belligerent states;
for the registration and licensing of persons engaged in the business
of manufacturing, exporting, or importing arms, ammunition, or implements of war; and restricing travel by American citizens on belligerent ships during war", approved August 31, 1935, provides in part as
follows:
"That upon the outbreak or during the progress of war between,
or among, two or more foreign states, the President shall proclaim
such fact, and it shall thereafter be unlawful to export arms, ammunition, or implements of war from any place in the United States,
or possessions of the United States, to any port of such belligerent
states, or to any neutral port for transshipment to, or for the use
of, a belligerent country."
AND WHEREAS it is further provided by section 1 of the said joint
resolution that—
"The President, by proclamation, shall definitely enumerate the
arms, ammunition, or implements of war, the export of which is prohibited
by this Act,"
AND WHEREAS it is further provided by section 1 of the said joint
resolution that—
- 2 -
X-9400-i
"Whoever, in violation of any of the provisions of this section,
shall export, or attempt to export, or cause to be exported, arms, ammunition, or implements of war from the United States, or any of its
possessions, shall be fined not more than $10,000 or imprisoned not
more than five years, or both, and the property, vessel, or vehicle
containing the same shall be subject to the provisions of sections
1 to 8, inclusive, title 6, chapter 50, of the Act approved June 15,
1917 <40 Stat. 223-225; U. S. C., title 22, sees. 238-245)."
NOW, THEREFORE, I, FRANKLIN D, ROOSEVELT, President of the
United States of America, acting under and by virtue of the authority
conferred on me by the said joint resolution of Congress, do hereby
proclaim that a state of war unhappily exists between Ethiopia and
the Kingdom of Italy; and I do hereby admonish all citizens of the
United States or any of its possessions and all persons residing or
being within the territory or jurisdiction of the United States or
its possessions to abstain from every violation of the provisions
of the joint resolution above set forth, hereby made effective and
applicable to the export of arms, ammunition, or implements of war
from any place in the United States or its possessions to Ethiopia
or to the Kingdom of Italy, or to any Italian possession, or to any
neutral port for transshipment to, or for the use of, Ethiopia or
the Kingdom of Italy.
And I do hereby declare and proclaim that the articles listed
below shall be considered arms, ammunition, and implements of war for
the purposes of section 1 of the said joint resolution of Congress;
CATEGORY I
(1) Rifles and carbines using ammunition in excess of cal, 26.5,
and their barrels;
(2) Machine guns, automatic rifles, and machine pistols of all
calibers, and their barrels;
467
- 3 -
X-9400-i
(3) Guns, howitzers, and mortars of all calibers, their mountings and barrels;
(4) Ammunition for the arms enumerated under (1) and (2) above,
i.e., high-power steel-jacketed ammunition in excess of cal. 26.5;
filled and unfilled projectiles and propellants with a web of thickness of .015 inches or greater for the projectiles of the arms enumerated under (5) above;
(5) Grenades, bombs, torpedoes, and mines, filled or unfilled,
and apparatus for their use or discharge;
(6) Tanks, military armored vehicles, and armored trains.
CATEGORY II
Vessels of war of all kinds, including aircraft carriers and submarines.
CATEGORY III
(1) Aircraft, assembled or dismantled, both heavier and lighter
than air, which are designed, adapted, and intended for aerial combat
by the use of machine guns or of artillery or for the carrying and
dropping of bombs or which are equipped with, or which by reason of
design or construction are prepared for, any of the appliances referred to in paragraph (2) below;
(2) Aerial gun mounts and frames, bomb racks, torpedo carriers,
and bomb or torpedo release mechanisms.
CATEGORY IV
Revolvers and automatic pistols of a weight in excess of 1 pound
6 ounces (630 grams), using ammunition in excess of cal. 26.5, and
ammunition therefor.
CATEGORY V
(1) Aircraft, assembled or dismantled, both heavier and lighter
than air, other than those included in category III;
(2) Propellers or air screws, fuselages, hulls, tail units, and
under carriage units;
(3) Aircraft engines.
CATEGORY VI
(1) Livens projectors and flame throwers;
(2) Mustard gas, lewisite, ethyldichlorarsine, and methyldichlorarsine.
And I do hereby enjoin upon all officers of the United States,
charged with the execution of the laws thereof, the utmost diligence
in preventing violations of the said joint resolution, and this my
468
— 4 —
X-9400—i
proclamation issued thereunder, and in bringing to trial and punishment any offenders against the same.
And I do hereby delegate to the Secretary of State the power of
prescribing regulations for the enforcement of section 1 of the said
joint resolution of August 51, 1955, as made effective by this my
proclamation issued thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the
seal of the United States to be affixed.
DONE at the City of Washington this 5th day of October, in the
(SEAL)
year of our Lord nineteen hundred and thirty-five, and
of the Independence of the United States of America the
one hundred and sixtieth.
FRANKLIN D ROOSEVELT
By the President:
' CORDELL HULL
Secretary of State.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9401
December 21, 1955.
Subject: Charges for examinations
of State member banks.
Dear Sir:
There is attached for your information a copy
of a letter forwarded by the Board today to the Federal
Reserve Agent at the Federal Reserve Bank of Boston with
regard to charges for examinations of State member banks.
Very truly yours,
Chester Morrill,
Secretary.
mciosure.
TO ALL FEDERAL ixESERVE AGENTS
470
X-940l-a
December 21, 1955.
Mr. Frederic H. Curtiss,
Federal Reserve Agent,
Federal Reserve Bank of Boston,
Boston, Massachusetts.
Dear Mr. Curtiss;
Reference is made to your letter of December 4, 1935, to
Mr. Hamlin regarding charges for examinations of State member banks
in your district. It is noted that both you and Governor Young feel
that* unless all the Federal reserve banks make a charge for actual
expenses in connection with examinations, you should recommend to
your directors that, after January 1, 1936, your bank should absorb
all expenses in connection with examinations of State member banks.
The question of charges for examinations of State member
banks has, as you know, been the subject of serious consideration
by the Federal reserve agents and the Board for some time, but as
yet a final conclusion as to the future policy with respect to
charges for such examinations has not been reached. Pending final
conclusion as to such policy, however, and until further notice,
you are authorized, in your discretion^ to waive the charges for
examinations of State member banks.
The majority of Federal reserve banks, as you know, are
, , not at the present time assessing charges for examinations of State
member banks and at the recent conference of assistant Federal reserve agents representatives of 11 of the Federal reserve banks
471
—
X
-
9
4
0
1
-
a
expressed themselves as not in favor of charging for examinations
at this time.
In your letter of July 16, 1935, to Mr. Hamlin, you referred to the situation in one State in your district where the State
Banking Department did not have facilities for examining the large
member banks. It is understood that, for a number of years, the
only examinations of those banks have been your examinations and
that charges for such examinations have consistently been made.
The Board's letter to you of March 2, 1954, had particular reference
to such situations, and it is believed that consideration might
properly be given to making an exception to your proposed policy in
such cases.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9402
December 26, 1955
SUBJECT: Code Word Covering New
Issue of Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities between Federal
reserve banks, the following code word has been
designated to cover a new issue of Treasury Bills:
"NOYFUL" - Treasury Bills to be dated
December 31, 1935, and to
mature September 30, 1956.
This word should be inserted in the Federal Reserve Telegraph Code book, following the
supplemental code word "NOYFOP" on page 172.
-
T0 GOVERNORS OF ALL F. R. BANKS
473
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-9404
December 27, 1955
SUBJECT: Expense, Main Lines, Leased
Wire System, November, 1935
Dear Sir:
Inclosed herewith you will find two mimeographed statements, X-9404-a and X-9404-b, covering in detail operations of the main lines of the
Leased Wire System, during the month of November,
1955
Please credit the amount payable by your
bank for your share of the expense of the Leased
Wire System to the Federal Reserve Bank of Richmond
in your daily statement of credits through the Gold
Settlement Fund for the account of the Board of
Governors of the Federal Reserve System, and advise
the Federal Reserve Bank of Richmond by wire the
amount and purpose of the credit.
Very truly yours,
0. E. Foulk,
Fiscal Agent
Inclosures
TO GOVERNORS OF ALL F. R. BANKS
X-9404-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF NOVEMBER, 1935
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
29,490
119,372
25,700
58,723
42,198
45,641
77,467
57,281
30,232
59,248
50,150
80.456
655,958
Board business
Reimbursable business Incoming & Outgoing
Total words transmitted over main lines
Words sent by
New York chargeable to other
F. R. Banks (l)
Net Federal
reserve
bank
business
966
30,456
119,372
26,722
39,757
43,266
46,622
78,917
58,701
31*224
60,246
51,848
81.829
668,960
-
1,022
1,034
1,068
981
1,450
1,420
992
998
1,698
1.373
13,002
*
Per cent of total
bank business (*)
4.55
17.84
3.99
5.94
6.47
6.97
11.80
8.78
4.67
9.01
7.75
12.23
100.00
315,952
.......
.......
984,912
.........
.......
579,598
. . . . . . . 1,564,310
(*) These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-9404-b)«
(l) Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance with action taken at Governors' Conference
November 2-4, 1925,
^
£
X-9404-b
REPORT OF EXPENSE MAIN LINES
FEDERAL RESERVE LEASED WIRE SYSTEM, NOVEMBER, 1935.
Name of bank .
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Board
Total
(&)
8
Operators'
Salaries
Retirement
Contributions
$ 24.65
260.00
115.26
1,274.96
225.00
20.25
27.60
306.66
190.00
17.35
21.52
262.50
4,060.43(#) 302.46
195.00
17.43
199.98
17.09
25.83
287.00
251.00
22.34
380.00
32.03
$
Total
expenses
$643.81
Pro rata
share of
total
expenses
684.49
$ 284.65 $
1,398.22
2,683.81
600.25
245.25
893.60
334.26
437.35
973.33
230.00(&)
1,048.55
284.02
4,369.89
1,775.17
7.00
1,320.84
212.43
702.55
217.07
1,355.45
312.83
1,165.89
273.34
—
1,839.86
412.03
15.112.30
15.112.30
$23,893.64 $15,043.79
#15.00 $15,342.30
s
s 8.00
-
-
-
-
-
—
-
—
-
-
-
.
-
—
—
—
-
—
—
Less Reimbursable Charges
Main line rental, Richmond-Washing ton
Includes salaries of Washington operators
Credit
Amount reimbursable to Chicago
Includes $327.83, which represents the cost
of handling contingent expense telegrams
for the Treasury Department for the month
of November.
Wire
rental
—
—
$7,892.53
Operators *
overtime
—
8.849.85
$15,045.79(b)
Credits
Payable to
Board
$ 284.65 $ 399.84
1,398.22 1,285.59
355.00
245.25
559.34
334.26
535.98
437.35
764.53
284.02
4,369.89 2,594.72(*)
212.43 1,108.41
485.48
217.07
312.83 1,042.62
892.55
273.34
412.03 1,427.83
—
—
$8,781.34 $8,857.17
2.594.72(a)
$6,262.45
§
476
B O A R D OF G O V E R N O R S
OF THE
FEDERAL RESERVE SYSTEM
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
t o
t h e
b o a r d
X-9405
December 27, 1935.
Dear Sir:
The Board in its letter, X-9051, of December 26, 1934, authorized the Federal Reserve banks to make a special contribution to
\
the Retirement System for the purpose of increasing the annuity to
which an employee 65 years of age or over may be entitled under the
Rules and Regulations of the Retirement System to $30 a year for
each year of service up to 16 years, and in its letter X-92.54, of
July 1, 1955, authorized the payment of a dismissal wage to employees
involuntarily separated from the service.
It is believed that a retirement allowance of $480 a year
thus authorized in the case of an employee with 16 years of service
or more is inadequate under circumstances frequently prevailing and
that a dismissal wage of up to 6 months' salary is insufficient in
the case of employees with extended service. Accordingly, in cases
of involuntary separation of employees from the service through no
fault of their own where a supplementary retirement allowance or a
dismissal wage is thought to be justified, your bank is authorized,
(a) to pay in its discretion a dismissal wage of 10% of
terminal salary for each year of service up to 5 in the
case of any employee involuntarily separated from the service and in the case of an employee with at least 10 years
477
-2-
f
X-9405
of service and under age 55 to pay in addition 3% of
terminal salary for each year of service in excess of
five. Such payment may be a cash payment in a lump sum,
or in not to exceed 6 monthly payments, in the case of
employees under age 65 with less than 10 years of service.
In all other cases payment shall be made to the Retirement System for the purpose of providing, together with
the employee's own contributions, an annuity beginning
at or after age 55, except that not to exceed an amount
equal to 2 months' salary may be paid to the employee as
a cash payment at the discretion of the Federal Reserve
Bank if the employee is under age 55 and therefore not
eligible to receive an immediate annuity. In applying
the above, the part of any salary in excess of $12,000
shall be disregarded and no supplemental payment shall
be: made in such amount as to increase the retirement allowance at age 65, or its equivalent, to more than 50
percent of terminal salary, or to give an employee under
age 55 an annuity of greater actuarial value than he
might be granted if he were 55 years of age, and
(b) in the case of an employee involuntarily separated
after attaining age 55 to make in its discretion in lieu
of the additional contributions authorized in paragraph
(a) above a special contribution to the Retirement System
sufficient to increase the regular retirement allowance
to which the employee is entitled if 65 years of age or
more, or to which he would be entitled at age 65 if under
such age, to a retirement allowance on a straight life
basis equal to $4.50 for each month of service up to 15
years, or to the actuarial equivalent thereof under any
option offered by the Retirement System that the employee
may select. Such retirement allowance in the case of ah
employee under age 65 shall be deferred to age 65 or be
converted into an immediate annuity of equal actuarial
value, and be reduced by 5% for each year the employee
may lack of having attained age 60.
In computing service for the purpose of determining the retirement allowance that may be granted at the rate of $4.50 a month
for each year of service up to 15 years, all service to date of retirement may be counted, even though a portion of such service may
not be creditable service as defined in Section 1 of the Rules and
Regulations of the Retirement System.
X-9405
-3-
Authority contained in the Board's letters X-9051 of December 26, 1934, arid X-9254 of July 1, 1935, to make special contributions to the Retirement System for the purpose of providing supplementary retirement allowances for employees retired at or after age
65 and to pay dismissal wages to employees involuntarily separated
from the service is hereby rescinded.
Very truly yours,
h)cnSuJU
Chester Morrill,
Secretary.
TO ALL GOVERNORS
479
FEDERAL RESERVE BOARD
WASHINGTON
X—9406
address official correspondence to
the federal reserve board
December 27, 1935.
SUBJECT:
Exemption of Mortgages Covered by Insurance under National Housing Act from
Provisions of Condition of Membership
Numbered 12 Set out in Board's Letter
of March 11, 1933, (X-7556).
Dear Sir:
The Board recently, upon the request of a State member bank,
excepted from the prohibitions of condition of membership numbered
12, set out in the Board's letter of March 11, 1935, (X-7356), mortgages covered by insurance under the provisions of the National
Housing Act.
At the same time the Board granted similar exceptions
to all State member banks subject to such condition of membership.
In this connection, your attention is invited to footnote 11 of the
Board's Regulation H, revised effective January 1, 1936, in which it
is provided, in the case of State banks admitted to membership after
the effective date of the regulation, that condition of membership
numbered 3 (subsection (a) of section 6) does not apply to the sale
of mortgages covered by insurance under the provisions of the National
Housing Act.
Accordingly, you are requested to advise all State member
banks in your district which are subject to condition of membership
X-9406
numbered 12, or any condition to the same general effect, that such
condition does not apply to the sale of mortgages covered by insurance under the provisions of the National Housing Act.
Very truly yours,
Chester Morrill,
Secretary•
TO ALL FEDERAL RESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
X-9407
December 27, 1935.
Dear Sir:
At the October Governors' Conference it was voted that it
was desirable that meetings of the boards of directors of the twelve
Federal reserve banks be held on the same day, and that the Board
of Governors of the Federal Reserve System be asked to arrange with
the several Federal reserve banks for uniformity in this regard;
the new arrangement to become effective after February 1, 1936.
This action was taken in the light of the amendment to the Federal
Reserve Act which requires each Federal reserve bank to establish
rates of discount every fourteen days, or oftener if deemed necessary by the Board.
In this connection, it may be noted that the boards of directors of six of the Federal reserve banks meet only once a month,
three twice a month, two every two weeks and one each Thursday.
Eliminating shifts in meeting dates because of holidays, the meetings of four of the banks are held on Thursday, three on Wednesday,
three on Friday, one on Monday and one on the 7th of the month.
It is assumed that the action of the Governors' Conference
has been or will be brought to the attention of the directors of
your bank and the Board will be interested in receiving advice from
482
X-9407
you as to their reaction to the suggestion of a uniform meeting
date.
Very truly yours,
Chester Morrill,
Secretary.
TO CHAIRMEN OF ALL F. R. BANKS.
483
FEDERAL RESERVE BOARD
WASHINGTON
X-9409
address official correspondence to
the federal reserve board
December 31, 1955.
SUBJECT; Assessment for General Expenses of the Board
of Governors of the Federal Reserve System,
January 1 - June 30, 1936, and for Other Purposes.
Dear Sir:
In confirmation of my telegram of December 30, 1935, there
is attached a copy of a resolution adopted by the Board of Governors
of the Federal Reserve System levying an assessment upon the various
Federal reserve banks in an amount equal to six hundred five thousandths of one per cent (.00605) of the total paid-in capital stock
and surplus (Section 7 and Section 13b) of the Federal reserve banks
as of the close of business December 31, 1935, to defray the estimated expenses and salaries of the members and employes of the Board
from January 1 to June 30, 1936, together with $1,000,000 to be applied upon the cost of the erection of a building for the Board of
Governors of the Federal Reserve System.
The resolution also confirms the instructions contained in
the telegram with regard to the manner in which the payments on the
assessment shall be deposited with the Federal Reserve Bank of Richmond.
TO CHAIRMEN
Very truly yours,
0. E. Foulk,
Fiscal Agent.
OF ALL FEDERAL RESERVE BANKS
X-9409-a
RESOLUTION LEVYING ASSESSMENT.
WHEREAS, Section 10 of the Federal Reserve Act, as amended,
contains the following provisions:
"The Board of Governors of the Federal Reserve System
shall have power to levy semiannually upon the Federal reserve banks, in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses
and the salaries of its members and employees for the half
year succeeding the levying of such assessment, together
with any deficit carried forward from the preceding half year#
and such assessments may include amounts sufficient to provide for the acquisition by the Board in its own name of such
site or building in the District of Columbia as in its judgment alone shall be necessary for the purpose of providing
suitable and adequate quarters for the performance of its
functions. After approving such plans, estimates, and specifications as it shall have caused to be prepared, the Board may,
notwithstanding any other provision of law, cause to be constructed on the site so acquired by it a building suitable
and adequate in its judgment for its purposes and proceed to
take all such steps as it may deem necessary or appropriate
in connection with the construction, equipment, and furnishing
of such building. The Board may maintain, enlarge, or remodel any building so acquired or constructed and shall have
sole control of such building and space therein.
H
it # -X" # # # #
"The Board shall determine and prescribe the manner in
which its obligations shall be incurred and its disbursements
and expenses allowed and paid, and may leave on deposit in
the Federal reserve banks the proceeds of assessments levied
upon them to defray its estimated expenses and the salaries
of its members and employes, * * * * and funds derived from
such assessments shall not be construed to be Government funds
or appropriated moneys."
VEEREAS, it appears from a consideration of the estimated
expenses of the Board of Governors of the Federal Reserve System for
the six months period beginning January 1, 1936, and of the amounts
which in the judgment of the Board may be needed during such period to
provide for the costs, or part thereof, of the acquisition of a site
and erection of a building thereon suitable and adequate for the
Board's quarters, that it is necessary that a fund equal to six
-
2
-
X-9409-a
hundred five thousandths of one per cent (.00605) of the total
paid-in capital stock and surplus (Section 7 and Section 15b) of
the Federal reserve banks be created for such purposes, exclusive
of the cost of engraving and printing of Federal reserve notes;
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM, That:
(1) There is hereby levied upon the several Federal reserve
banks an assessment in an amount equal to six hundred five thousandths
of one per cent (.00605) of the total paid-in capital and surplus (Section 7 and Section 13b) of each such bank at the close of business
December 51, 1935.
(2) Twenty-two and three tenths per cent of such assessment
shall be paid in on January 2, 1956, twenty-two and three tenths per
cent thereof shall be paid in on March 2, 1956, and the remainder
(fifty-five and four tenths per cent) shall be paid at such times
and in such amounts as the Board may call for the payment thereof during such six months period beginning January 1, 1956.
(3) Every Federal reserve bank except the Federal Reserve
Bank of Richmond shall pay such assessment by transferring the
amount thereof on the dates as above provided through the Interdistrict Settlement Fund to the Federal Reserve Bank of Richmond for
credit to the account of the Board of Governors of the Federal Reserve
System on the books of that bank, with telegraphic advice to Richmond
of the purpose and amount of the credit, and the Federal Reserve Bank
of Richmond shall pay its assessment by crediting the amount thereof
on its books to the Board of Governors of the Federal Reserve System
on the dates as above provided&
486
FEDERAL RESERVE BOARD
WASHINGTON
July 9, 1935.
3-1090.
address official correspondence to
the federal reserve board
SUBJECT: Audit of Stock of Unissued Federal Reserve ITotos and Federal Resorvo Bnjnk
Notes in Vault at Bureau of Engraving
and Printing,
Dear Sir:
There is inclosed, for your information, a copy of a letter from
Mr. M. R. Loafmon, Chief, Division of Public Debt Accounts and Audits,
Treasury Department, advising the Secretary of the Treasury that an
audit of the stock of completed Federal Reserve notes and Federal
Reserve "bank notes on hand in the Federal Reserve vault at the Bureau
of Engraving and Printing was "begun on June 20 and completed on June 22,
as of close of "business June 19, 1935* Mr. Loaftoan states that the
amounts on hand, $3,605*100,000 of Federal Reserve notes and
$^50,800,000 of Federal Reserve "bank notes, were in agreement with the
records of the Federal Reserve vault and with the statement submitted
by the Federal Reserve Issue 'and Redemption Division of the Comptroller's office. Copies of statements "A", "B" and "C" which accompanied Mr, Loaftnan's letter are also inclosed.
Very truly yours,
/}
E, L. Smead, Chief,
Division of Bank Operations.
Inclosure.
TO ALL FEDERAL
RESERVE AGENTS*
487
June 29, 1935.
The Honorable
The Secretary of the Treasury,
1
Sir:
An audit has "been made of the completed stock of -unissued
Federal Reserve notes and Federal Reserve "bank notes on hand in the
Federal Reserve Vault in the Bureau of Engraving and Printing, The
Audit was begun on June 20 and completed June 22, 1935»
as
°f the
close of business June 19, 1935*
The following tabulation reflects the amounts on hand as
disclosed by the audit:
Federal Reserve Notes...........
Federal Reserve Bank Rotes......
$ 3,605,100,000
1+50,300,000
Total
$ 4,055,900,000
*
The above balance, comprising 63,268 packages, was in agreement with the records of the Federal Reserve Vault and with the statement submitted by the Federal Reserve Issue and Redemption Division
of the Office of the Comptroller of the Currency, Detailed information
with respect to each of the above classes of currency is reflected in
the attached statements "A", "B" and "C", respectively.
The entire stock consists of sealed packages bearing the seal
of the Bureau of Engraving and Printing and is under the joint custody
488
** 2 **
of representatives of the Secretary of the Treasury, the Bureau of
Engraving and Printing and the Federal Reserve Board.
It was
therefore not considered necessary to "break the seals onr: the packages
in making the verification but the brief en each package was examined
with respect to the package number, serial numbers of tho notes, bank,
and denomination. Tho packages were found in orderly arrangement and
grouped in such manner as to permit the auditors to accomplish the
verification with dispatch.
Prior to beginning the audit the Chief of the Secret Service
was notified and a representative of his office was present.
Appreciation is extended to the officials of the Bureau of
Engraving and Printing and the representatives at the Federal Reserve
Vault for the cooperation and assistance rendered during the conduct
of tho audit.
Respectfully submitted:
(Signed)
M. R. Loafman.
Chief, Division of Public Debt Accounts and Audit.
STATEMENT "A"
FEDERAL RESERVE MOTES (SERIES 1928) ON HAND IH THE FEDERAL RESERVE
VAULT IN THE BUREAU OF ENGRAVING AND PRINTING AS DISCLOSED
BY AUDIT AS OF JUNE 19. 1915.
(IN THOUSANDS OF DOLLARS)
5»s
BANK
10's
20'.#
35.8110 $ 46,400 $
50's
100's
500'>
1,000's
50,400 $
50,400 $
30,000 4$ 30,000 $
# # # * # #
27,120
30,200
87,600
64,800
54,400
5,000's 10,000*s
3,000 $1
TOTAL
6,000 $
299,920
6,000
366,080
Philadelphia . .
36,780
4o,i6o
65,200
75,000
78,000
42,000
50,400
Cleveland
50,240
47,320
123,200
4i,4oo
28,400
39,300
31,600
6,000
2,000
369,460
13,8%0
7,840
43,800
28,800
28,500
21,000
9,000
10,000
189,120
22,920
37,920
23,400
20,000
19,600
16,800
4,000
9,320
175,120
15,000
126,000
98,200
96,800
108,900
135.200
16,000
20,000
681,380
8,200
19,280
19,200
25,200
18,600
16,200
106,680
St. Louis
. . .
. . .
387.540
Minneapolis
. .
7,180
11,200
40,480
12,000
22,400
13,300
13,000
119,560
Kansas City
. .
28,140
7,320
28,560
22,600
26,400
25,700
25,800
164,520
23,480
25,920
22,600
20,000
24,600
23,400
1,000
2,000
160,980
5,520
33,760
12,600
27,600
21,600
17,400
3.720
9,840
162,080
Dallas • . • . •
San Francisco
.
TOTAL . . . . .
30,040
230,800 $ 581,680 $ 451,400 $ 511,600 $ 436,900 41 435,200 $ 42,720 $ 65,160 $ 3,182,440
I
STATEMENT "B"
FEDERAL RESERVE NOTES (SERIES 1914) OU SAM) IN THE FEDERAL RESERVE
VAULT IN THPraraaHJOF ENGRAVING* AND PRINTING AS DISCIOSED
BY AUDIT AS Of JUNE 19. 1935.
f IN THOUSANDS OF DOLLARS)
5's
New York
Philadelphia
10*8
20*8
...... $
53.760 $
•••»••
26,160
62,o4O
35,280
6,480
27,840
7,920
8,040
Cleveland •.
24,120
Richmond
50«s
100*8
500's
1,000*8
Minneapolis
10,000*s
If200
••••••
, # * # # *
e *
# # # # # #
••••••
18,960
»••••
TOTAL
$
$ •••••• $
53,760
125,880
******
42,240
8,040
* • • • • <
43,080
••••••
2,400
1,800
600
St. Louis
5,000*8
75.060
6,660
68,4oo
21,860
11,280
5,520
>•••••
9,660
16,680
1,200
# • # • • •
• • •#<
38,660
# * * i
27,5%)
6,000
Kansas City
Dallas « • •
San Francisco •
TOTAL
# * # * # #
. . $ 71,420 $ 278,160 $ 68,880 $
# # # # # #
1,200 $
* * * * #
# * » # # #
1,200 $ . . . . . . $
• • • • • •
• • • • • •
1,800 $ . . . . . . $
$
422,660
STATEMENT W C W
FEDERAL RESERVE B A M 1T0T3S (SERIES 1929) OH HAMD IIT THE FEDERAL RESERVE
VAULT IN THE BUREAU OF EETG-B1VIITG A1ID PRIHTIHCr AS DISCLOSED
BY AUDIT AS OF'jQHB 19. 1915.
(IIT TSOUSAiISS' OF DOLIARS)
TtA^TTT
5»s
$
Philadelphia . . . .
Minneapolis
. . . .
Kansas City
, . . .
5,020
10*8
$
5,000
TOTAL
5.o4o
100*8
$
$
$
TOTAL
15,060
22,800
75,580
# # * * # *
••••••
21,740
23,800
23,600
69,020
15,600
48,040
6,600
27,320
18,000
4,100
3,800
13,840
10,020
10,080
1,520
#•••••
10,840
21,600
5,640
5,880
15,520
* * » * * #
19,380
23,440
24,720
15,000
2,120
5,040
1,880
11,280
6,600
l4,4oo
34,160
2,840
7,120
12,800
8,400
40,180
1,680
1,200
1,200
4,080
#**»#»
9,020
4,800
. . •
$
$
50*s
860
•••»••
San Francisco
20«s
53,Vw
$
98,000
10,800
93,340
7,160
11,200
••••••
$ 125,360
26,440
$
77,200
16,000
# * * » * *
$
96,800
$
450,800
I
492
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
August 9, 1935
B-1091
Dear Sir:
There is attached, for your information* a statement, B-1091, showing
the financial results cf operations under ?::otion ljb of the Federal
Reserve Act for the first half of 1935 a s reported by each Federal Reserve
bank on Form B-23s
The Board's letter of November 23, I33^» B-1040, regarding the preparation of Form B-23» stated that "Expenses reported on Form 3-23 should
include an equitable proportion of the expenses of the provision of space
function, rental of furniture and. equipment (whether owned by Federal
Reserve bank or rented from outside agencies), retirement system contributions at the full rate, and all other expenses incurred in connection
with the making of industrial advances and. commitments under Section ljb,
except such expenses as are paid by the applicants for loans *"
It will be
noted from the attached statement that certain items, such as "provision
of space", are not being reported on Form B~?3 by all banks in accordance
with the above-quoted instructions and it is understood that some banks
are not including any portion of the salaries of senior officers although
they devote an appreciable amount of their time to work in connection
with industrial advances.
It is important that these reports be prepared on a uniform
basis by all banks and that they properly reflect the actual earnings
and expenses of the several Federal Reserve banks in connection with
operations under Section 13b.
Very truly yours,
Chester Morrill,
Secretary,
Inclosure.
TO ALL GOVERNORS
PIxIAITCIAl RESULTS OF OPERATIONS U2TDER" SECTI01T" 13b OF THE "FEDERAL RESERVE
ACT FOR THE FIRST HALF OF I935
| System
Earnings from industrial advances and
conmitments:
Loans, discounts, advances and
purchases
Commitments
Other earnings on funds received from
Secy, of Treas. under Section ljb
Total earnings
Expenses:
Salaries: Officers
Employees
Contributions - Retirement System
Industrial Advisory Committee members
Expense or per diem allowances
Traveling expenses (a)
Legal fees
Appraisers1 fees
Registered mail insurance
Other insurance
Provision of space
Rental of furniture and equipment
Printing and stationery and office
and other supplies
Telephone and telegraph
Postage and expressage
Miscellaneous expenses
Total expenses
Current net earnings
Add: Recoveries of losses previously
charged to current net earnings
Deduct: Credits to reserve for losses
Losses charged off (other Wvin
those charged to reserves)
Het earnings
$618,060
93,215
J Boston
*
$51,238
9,880
Hew
York
Philadelphia
Cleveland
1
$94,865
32,453
$102,017
306
$38,465
9,218
$100,280
10,600
$31,646
1,835
$45,531
3,753
47,683
110,880
33,482
49,284
23,133
2,250
937
29,248
2,629
7,250
16,033
2,057
6,875
9,759
l,5io
18,629
14,121
2,487
8,465
11,908
1,820
228
1,524
616
4o6
337
991
-284
200
4
20
5,035
254
393
346
3,461
280
586
3,070
-,.50
652
653
109,990
316,044
34,435
3,750
9,168
15,497
73.019
6,927
7,262
I4,4SD
17,713
1,896
8
393
22,603
2,994
804
426
444
1,221
-336
5^2
619
1,3^7
211
44,255
1.379
385
4l4
96
442
357
11
/o
490
21
209
24,431
40,44-5
7,238
32,290
78,590
24,431
65,641
7,238
78,590
102,887
53,730
157,545
?4g
189
134
St.
Louis
247
«%
10,047
11
I Minn— ilCansas
jeapolis | City
$13,822 $57,070
9,3H
200
— —
586
208
257
258
36,682
65,641
126
(h)3.6l
,268
157.545
165
1,720
886
10,361
6,15s
2,119
26,162
2,576
j Atlanta Chicago
— —
2,881
$18,623
B-ioqi
San.
Dallas
Francisco
3,197
$44,554
546
$19,949
11,915
57,270
21,820
45,100
31,864
4,050
24,408
2,272
4,000
8.539
1.407
12,283
8,997
2,134
26,004
84,682
7,295
2.165
4,428
2,255
527
510
487
2.675
212
800
2,929
20
"*"26
16
11
881
90
, 929
4,072
3,327
14
4
91
6,547
1,194
374
I67
3,446
219
2,341
187
325
19
201
28,949
140,472
16,151 -108,608
7,622
-3,237
13.471
1,944
16,151
I
-108J608
1
— 2w
FIKAHCIAL B3SHLTS OP OPERATIONS TTODBH SECTIOH l]b OP THE FEDEBA1 EBSBRVE ACT FOR THE FIBST HALF OF 1935
Memoranda
System
Boston
ITew
York
Philadelphia
Cleveland
Rich*,
mond
Atlanta
Chicago
St.
Louis
B-109U
Kansas
MinnCity
eapolis
Dallas
San
Francisco
(In thousands of dollars)
6
2
10
3,393
1,064
1,663
507
1,919
838
1,549
665
1,307
931
720
393
1,463
40
236
112
1,427
2,058
997
2,049
754
1,272
501
992
589
711
653
2,099
1,016
2,919
757
1,418
548
1,008
779
939
698
Expenses paid hy applicants
Average daily amount of Industrial
advances outstanding
30
8
4
22,067
2,068
3,545
3,551
1,305
Average daily amount of Commitments to
make Industrial advances outstanding
15,617
2,398
6,160
(d)430
Average daily amount of funds received
from Secretary of Treasury
15,5H
1,912
3,023
Amount of funds received from the
Secretary of the Treasury as of
June 30, 1935
20,934
2,167
6,586
(a) Other than those of Industrial Advisory Committee members.
(h) Includes: Credit Reports, $584; Stenographic, $2,700*
(c) Includes: Dan and Bradstreet, $663; Temple Brissman & Co., $750; Credit Service - Audit of Insurance policies, $233; Stenographic, $446.
(d) With comnitment' fee on only $45,076,
I
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence to
the federal reserve board
July 18, 1935
B-1092
SUBJECT:
Retirement System Expenditures.
Dear Sir:
In view of the more detailed information now contained
in the semi-annual functional expense reports, Form 3, in
regard to Retirement System expenses, the monthly statement
showing total expenditures on account of the Retirement
System, requested in our telegram of March 29, 193^» (TRAITS
1982) may he discontinued as of July 1, 1935.
Veiy truly yours,
E. L. Smead, Chief,
Division of Bank Operations
TO ALL GOVERNORS
497
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
July 25, 1935
B-1093
Dear Sir:
In lieu of reports on changes in status of banks now furnished in
response to the Board's wire TRAITS 1818 of June 9, 1933» it is requested
that in the future weekly reports of bank changes "be submitted on the
attached form(B-12), a supply of which has been forwarded to you under
separate cover.
It is also requested that in the case of consolidations,
mergers, absorptions* etc.* the report show whether or not the bank or
banks terminating existence became branches of the absorbing institution.
Bach change should be listed under the appropriate one of the following
headings and only such headings need be shown on a given report as are
necessary to cover changes occurring during the report period:
New banks (primary organizations)
Successions and conversions
Reopenings of unlicensed banks
Reopenings of suspended banks
Suspensions and receiverships
Liquidations (except incident to absorptions, successions, etc.)
Consolidations, mergers, absorptions, etc.
Admissions of State banks to membership
Withdrawals of State banks from membership
Changes in title or location
498
-
2
3-1093
In case none of the captions appear to cover a given change
ade(JUately, kindly givo available information under an appropriate
caption.
To assist in the preparation of uniform reports for all districts,
there is attached hereto a specimen copy of a report illustrating the
manner of reporting the various types of changes on Form B-12,
Reports on forms St. 6386-b and c wore discontinued in June 1933*
as authorized in THAUS 1818 of June 9» 1933«. lb View of the information
requested in the new reports of hank changes, reports on Form St, 6386-a
(Bank Consolidations) may be discontinued effective immediately.
Very truly yours,
imead, Chief
Division of Bank Operations
Inclosures
TO ALL FEDERAL RESERVE AGSNT3
Federal Beserve Board
Itora 3-12
jHily, 1935
. 4 9 9
WEEKLY STA3BM33JT OF 3 A M CHjiHGES
(All banks listed are licensed except as otherwise indicated)
y. E. Bonk of
Namo of bank
NOTE J
-•
Week ended Wednesday,
Location
193
1 Member or 1 Date of
1 nonmember 1 change
In the case of consolidations, mergers, absorptions, etc., indicate in every
case Whether or not the bonk or banks terminating existence became branches
of the absorbing institutions.
Federal Reserve Board
Form B-12
"July. 1935
Page 1
500
WE3XLY STATEHSHT OF BASK CHANGES
(All "bonks listed are licensed except as otherwise indicated)
F. E. Bank of
Name of "bank
Week ended Wednesday,
Location
Member or
nonmember
Date of
change
1225
Sew "banks (primary organizations)
Security Trust and Sear. Bank
193.
Docorah, Iowa
Nonmember
Ju&o 10
Successions and conversions
First State Bank*of Pattonsburg
(Succession of Pattonsburg
Savings Bank, unlicensed)
The Commercial National Bonk
of Grand Island
(Conversion of Commercial Bank)
the Rational Bank of Norfolk
(Succession of Security
State Bank)
Minersville Safe Deposit Bank
(Succession of Miners State
Bank, in receivership)
Pattonsburg, Mo.
mbor
1
June 28
Grand Island, Neb.
Norfolk, Heb.
Hay
[ember
June
3
21
Minersville, Pa.
Nonmember
Nonmember
May
Munising, Mich.
Nonmember
May 29
Morristown, Ohi
Nonmember
June
Reopening of un&loonaad
Peoples State Bank
Reopening of suspended banks
The Morristown State Bank
1
Suspensions aad receiverships
Citizens Bank (unlicensed)
Blub Springs State Bank
lonmomber
'onmember
June 17
Juno 3
Consolidations, mergers, absorptions, etc.
Tempo National Bank
(Absorbed by Phoenix National
Bank, Phoenix, and operated
as a branch)
Ithaca Trust Company
Tompkins County National Bank
(These two banks combined under
charter Of Ithaca Trust Co.,
and under title of Tompkins
County Trust Co. Discontinued
bank not operated as a branch)
The Citizens National Bank of
The Parkorsburg National Bank of
(These two banks consolidated
under the chatter and corporate
title of The Parkersburg Nat.
Bank, Discontinued bank not
operated as branch)
NOTE:
Tempe,
Member
June 17
Ithaca, N. Y.
Ithaca, N. Y,
Member
it
May
Parkersburg, W, 7a.
Parkorsburg, W. Va.
Member
<Juno 15
M
28
Member
In the case of consolidations, mergers, absorptions, etc., indicate in every
case whether or not the bank or banks terminating existence became branches
of the absorbing institution.
Federal Reserve Board
•Form B-12
July, 1935
Page 2
WEEKLY STATSJEST OF B M K CHANGES
501
(ill banks listed are licensed except as otherwise indicated)
F. R. Bank of
•
Name of tank
Week ended, Wednesday,
location
Member or
nonmombor
.193.
Date of
change
Liquidations (except incident to absorptions, successions, etc.)
Florida Bank & Trust Co. of
Farmers Bank
West Palo Beach, j La,
Starkweather, N.
Member
Nonmember
June 15
June 3
Admission of State banks to membership
Commercial and Farmers Bank
June 13
Bllocott City J
Withdrawal of State banks from membership
Bank of Marvell (unlicensed)
Marvel},
June 25
Changes in title or location
State I)oad National Bank
(Title and location changed
to TJpper Darby National Bank,
Upper Darby)
Bechtel Trust Company
(Title changed to First Trust
and Savings Bank)
Highland Bark, Pa
Member
May
Davenpoet, Iowa
Nonmember
June 10
24
HOTS: In the case of consolidations, mergers, absorptions, etc., indicate in every
case whether or not the bank or banks terminating existence became branches
of the absorbing institutions.
502
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence to
the federal reserve board
July 31, 1935.
B-IO95.
SUBJECT: Preliminary figures of loans and
investments of member banks on
June 29, 1935.
Dear Sir:
Therb is inclosed for your information and confidential
use a copy of a statement prepared for the Board giving preliminary figures of loans and investments of member "banks on
June 29, 1935. based upon data submitted by the Federal
Eeserve agents, in comparison with corresponding figures for
March 5, 1935, and June 30, 193%.
Very truly yours
2. 1. Smead, Chief,
Division of Bank Operations,
Inclusure
TO AIL GOVERNORS AMD FEDERAL RESERVE AGENTS.
C Q 8 P I S T l A t
PRELIMINARY FIGURES Of LOANS AHD INVESTMENTS OF ALL LICENSED MEMBER BANKS ON JUNE 29, 1935, COMPARED WITH MARCH 4, 1935, AND JUKE 30, 193%
Total
loans
and
investments
(In millions of dollars)
Open market loans
Loans to ether customers
AcceptAcceptComSecured by Secured Otherwise
ances
ances, etc. mercial
stocks
by
secured
Total
Total
paper
payable
payable
and
real
and
bonds
estate
bought
unsecured
in U.S.
abroad
:
Loans
to
"banks
Total - All
licensed member
"banks
1934- June 30
1935- Mar. 4
1935- Jane 29
27,175
28,271
28,794
153
133
120
10,804
10,420
10,420
3,516
3,215
3,121
2,357
2,250
#2,278
4,931
4,955
5,020
1,566
1,400
1,439
264
235
201
20
34
17
New York City**
1934- June 30
1935- Mar. 4
1935- June 29
7,666
7,783
8,361
68
£
2,202
2,19.8
2,214
937
861
841
156
139
138
1,109
1,199
1,235
1,131
904
1,126
225
203
183
6hicaso**
1 9 3 W u n e 30
1935-Mar. 4
1935-June 29
1,445
1,704
1,589
13
8
7
491
462
456
230
201
196
21
17
15
240
245
245
66
20
Reserve
193419351935-
city "bancs
June 30
9,609
Mar. 4
10,036
Jvme 29
10,132
4o
48
43
4,096
3,974
3,962
1,297
1,173
l,l4l
1,124
1,077
#1,105
1,675
1,725
1,716
Country
1934193 51935-
"banks
June 30
Mar. 4
June 29
33
25
22
4,016
3,786
3,785
1,053
981
94-1
1,056
1,018
1,021
1,906
1,785
1,823
8,456
8,749
8,712
Loans to
brokers
in
New York
Investments
U.S. Govt, Obligations
direct
fully guarOther
anteed by
obligasecurities
tions
U.S.Govt,
200
255
246
1,082
875
976
9,137
9,821
9,870
*27$
1,200
1,558
5,239
5,298
5,387
10
19
7
5
883
678
930
3,053
3,200
3,462
•157
298
348
1,055
1,131
1,164
S4
1
3
1
18
21
14
19
28
1
585
877
766
*76
78
87
228
212
253
259
249
155
21
12
10
6
9
7
97
122
112
135
106
25
3,516
3,724
3,714
376
571
1,679
1,666
1,687
124
181
139
i
2
2
2
72
109
115
1,982
2,020
1,929
*25
448
552
2,276
2,289
2,283
3
£
19
FEDERAL RESERVE BOARD
*Exclusive of an estimated small amount of obligations of Home Owners Loan Corporation fully guaranteed "by the United States
DIVISION OF
OPERATIONS
Government, which are included in the next column.
JULY 27* 1935
**Cantral Reserve city "banks only.
f-tumcsliA
$5
#Increase due to inclusion of certain mortgage loans previously held in trust against
'
° '
55
w
participation certificates outstanding,
BASK
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence to
the federal reserve board
September 5* 1935
B-1096,
SUBJECT:
Member Bank Call Report
for June 29, 1935*
Dear Sir:
We are forwarding to you under separate cover
copies of the Board's Member Bank Call Beport
No. 66 showing the condition of licensed member banks
on June 29, 1935-
Please forward a copy to each
member bank in your district that has expressed a desire to receive copies of call reports as issued.
Very truly yours.
J. E. Van Fossen, Ass't, Chief
Division of Bank Operations,
TO All, FEDERAL RESERVE AGENTS
505
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
August 2, 1935*
B-1097
SUBJECT: Audit of Reserve Stock of Incomplete
Federal Reserve Notes.
Dear Sir:
For your information there is inclosed a copy of the recapitulation of an audit of the stock of incomplete Federal Reserve
notes held at the Bureau of Engraving and Printing as of close of
business June 29, 1935» forwarded to the Secretary of the Treasury
by Mr, M, R, Loafman, Chief, Division of Public Debt Accounts and
Audit.
In his letter forwarding the report of the audit to the
Secretary of the Treasury* Mr. Loafnan stated that:
"The audit
extended from June 26 to July 1, 1335t inclusive, and consisted
of a piece count of the entire stock of faces and a package count
of the uniform backs allocated to Federal Reserve notes.
In view
of the fact that a recent piece count has been made by this office
of the entire stock of each denomination of uniform backs on band
in the Bureau, a package count and inspection of the uniform backs
allocated to Federal Reserve notes was deemed sufficient at this
506
B-1097
time. The total sheets of Federal Reserve notes, faces and backs,
were found to "be in excess of the required reserve of 4,250,000
sheets, as authorized in the letter of the Governor of the Federal
Reserve Board to the Under Secretary of the Treasury dated December
2, 1929."
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations,
Inclosures
TO ALL FEDERAL RESERVE AGENTS
RECAPITULATION OF AUDIT OF FEDERAL HSS3R7E MOTES, SERIES 1928. 12 SUBJECTS, OK H M D IH THE BUREAU OF WGRkYTHGr
AS AT THE CLOSE OF BUSIKESS JUHS 29, 1935
A2TO ERINTIHGr
B-1097a
SHEETS OF 12 SUBJECTS EACH
Federal Reserve "bank
Faces:
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St* Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total faces Series 1928
»
«
« 1934
$5
77,478
35,072
28,474
23.654
61,513-1/3
295,619-2/3
455,617-2/3
1,319,737-1/3
$20
38,002-1/3
69,427-1/3
Backs:
Uniform Backs allocated to
the various denominations of
Federal Reserve Notes
568,500
Total faces and backs
$10
51.824-2/3
32,310
28,871
95,770
28,875-1/3
62,891-2/3
20,422
25,045-2/3
93,164-2/3
6,663-2/3
30,105-1/3
24,026
15,448-2/3
36*341-2/3
0
8
4,465
8,922
320,226-1/3 142,674
656.500
630.500
1,652,182-2/3
1,473.459-2/3
,
2,989-2/3
156,952
.
838,730-2/3
522,733-1/3
$100
$50
44,300
11,343-1/3
9,974
12,305
8,125 ,
5,851-1/3
30,660
3,982-1(3
5.024-1/3
7,582-1/3
3,001
12,251
110,099-2/3
45,300
149,000
120,500
335,974
275,899-2/3
$500
1,535
345
399
30
\ $i,ooo)$5,ooo $10,000
293
345
100
252
15
13
5p
24
224
120
402
300
*8
102
250
226
11
9
4o
2,682
50
275
2%
200
4,508
24
127,304-2/3
36
, 739
,
40,578-1/3
— —
170
200
698
474
34
79
—
25
77
34
32
•*—
68
—
Total
13
7
48
296
— •
165,990-2/3
59,140-2/3
71,167-2/3
131,105-1/3
10,179-1/3
^9,883-1/3
61,221-1/3
83,887-1/3
272,135
1,033,332-2/3
1,906,731-2/3
2,125,000
4,508
2,732
275
296
5,065,064-1/3
3-1097%
K E G A P i m m O l ? OF AUDIT OF FEDERAL BESERiE BOTES, SERIES 19*. 12 SUBJECTS, 01? 2M1D £T THE BUBE&.U OF E0G-RATOJG
ABD PRI17TBTG AS AT CLOSE OF BUSINESS JTJ1IS 29, 1935,
SHEETS OF 12 SUBJECTS EA.CH
Federal Reserve bank
Faces:
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total faces
$5
131,500
68,566-2/3
28,675
180,266-2/3
26,576
20,033-1/3
455,617-2/3
$10
$20
107,300
167,900
70,200
79,900
32,133-1/3
7,000
188,266-2/3
64,ooo
30,000
40,266-2/3
276,397-1/3
46,300
20,500
38,100
117,800
833,730-2/3
522,733-1/3
$50
$100
44,300
45,300
$500
$i,oooj$5,oooj $10,000
50
20,200
50,900.
4,300
44,300
45,300
50
Total
114,300
577.266-2/3
202,766-2/3
109,900
72,400
28,725
574,464
93,076
91,433-1/3
42,400
1,906,731-2/3
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
August 16, 1935*
B-109S.
SUBJECT:
Condition of licensed member banks.
Dear Sir:
There is inclosed, for use ponding the printing
of Member Bank Call Report No. 66, a statement showing
the assets and liabilities and a classification of loans,
investments, and deposits on Juno 2$, 1935* of all
licensed member barflcs, together with corresponding data
by classes of banks.
Very truly yours,
E. I. Smoad, Chief,
Division of Bank Operations.
Inclosure.
TO ALL GOVERNORS AED F. R. AGENTS
510
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence to
the federal reserve board
September 20, 1935
B-1100
SUBJECT:
Call Reports of State Bank Members
and their affiliates.
Dear Sir;
There have been forwarded to you today under separate cover the
indicated number of copies of the six forms attached hereto, for the use of
State bank members and their affiliates in submitting reports as of the next
call date;
Number of
copies
Form
Form 105* Report of condition of State bank member.
Form 105b (Schedule "0")» Loans and advances to
affiliates and investments in aa& loans secured
by obligations of affiliates.
Form 105o, Publisher's copy of report of condition
of State bank member.
Form 220, Report of affiliate or holding company
affiliate.
Form 220a, Publisher's copy of report of affiliate
or holding company affiliate.
Form 220b, Instructions for preparation of reports
of affiliates and holding company affiliates.
It will be noted that a new form, 105e, has boon provided in view
of the requirements of Section 9 of the federal Reserve Act, as amended by
-
511
2
Soction 320 of the Banking Act of 1935, that condition reports rendered by
State bank members to their respective Federal Reserve banks shall be published. The instructions on the reverse side of Form 220a have been amended
so as to provide that reports of affiliates shall bo published under the
same conditions as the reports of condition rendered by State bank members
to their respective Federal Reserve banks, and Form 220b has been revised
in view of the amendments to the law which modify the definition of holding
company affiliates and authorize the Board of Governors of the Federal
Reserve System in certain cases to waive reports of affiliates.
Please hold the forms at your bank until receipt of telegraphic
advice from the Board giving the date on which the forms should reach State
bank members in your district. Upon receipt of such advice please arrange
to mail to each State bank member, scheduled so as to reach the bank as
nearly as practicable on the date given in the Board's telegraphic advice,
three copies of Form 105, two copies of Form 105e, and an appropriate number
of copies of Forms 105b, 220, 220a and 220b, with the request that the forms
be held pending the receipt of a call for reports thereon. Please include
in your letter to State bank members the instructions pertaining to the
preparation of reports contained in the accompanying inclosure.
Please furnish the Board with a copy of the letter transmitting the
forms to State bank members, a copy of the letter calling for reports, and
a list of the State bank members on which the call is made.
The original copies of reports on Forms 105, 105b and 220 should
be retained for the files of your bank, while the duplicate copies thereof
and reports on Forms 105c and 220a should bo forwarded to the Board.
B-1100
-
513
3
The reports of condition should, "be examined and compared with the
reports for the preceding call in accordance with past procedure and any
necessary corrections obtained, if practicable, "before the reports are
forwarded to the Board, Schedule 0 (Form 105b) should be compared with
reports of affiliates on Form 220 to determine whether all reports of
affiliates, except those waived by the provisions printed on Form 220b, have
boon received. Corrections should be clearly indicated on the copies of the
reports and schedules forwarded to the Board, with an indication of the
authority for the corrections and the initials of the person at your bank
who makes them, When necessary to make clear the nature of the correction,
a copy of the member bank's letter authorizing the correction should be
furni shod the Board,
The printed copies of reports of State bank members nnd their
affiliates, clipped from the newspapers and attached to the reverse side of
Forms 105© and 220a, should be carefully examined to see that they agree
with the face side of the official reports rendered on Forms 105 and 220,
respectively. As indicated by the instructions printed on the reverse side
of Form 220a, every item on the face of that form mast appear in the published statement, whether or not an amount is shown therefor. In the bank's
own published statement (Form 105e), however, items for which no amounts
arc reported need not be printed. If the published statement of a State
bank member or of an affiliate is not complete or differs from the official
report otherwise than as referred to above, it may be necessary to have the
report republished in amended form. Until further notice, however, this
should not be required until the matter is called to the Board's attention.
3-1100
t
513
- 4 Under the terms of Section 301 of the Banking Act of 1935 organizations which own or control the stock of member "bonks, but which have been
determined by the Board not to be engaged as a business in holding such stock,
are not holding company affiliates, except for the purposes of Section 23A
of the Federal Reserve Act, Consequently, they are not subject to the requirement of reports, but they should nevertheless be listed by the neriber
baric on Schedule 0, The action to be taken in order to have it determined
whether an organization is engaged as a business in holding the stock of
banks has been stated in the Board's telegram, TRAMS 2305» of September l6,
1935.
If you are satisfied that additional time is needed for the preparation of the report of any affiliate, either on the next or on future
calls, you are authorized on behalf of the Board of Governors of the Federal
Reserve System 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
call for the report. Please furnish the Board with a copy of each letter
granting an extension of time.
It is requested that, as soon as practicable after the issue of the
call, you inform the Board, with respect to each State whose capital city
lies in your district, whether or not State authorities issued a call for
condition reports as of the same date as the call issued by the Board and,
if not, the date of the State call nearest thereto. Please furnish the
same information regularly hereafter in connection with all future calls
for condition reports made upon member banks.
B-1100
514
5
Please have compiled from the next call reports and mailed or
wired in time to reach the Board within 3 weeks after the date on which the
call is made, if practicable, a summary statement showing separately for
central reserve city member banks, reserve city member banks, and country
member banks, the amount of (1) each class of loans and discounts as shown
against Items 1 to 8 of Schedule 3, (2) each class of United States Government obligations, direct and/or fully guaranteed, as shown against items
1(a) to 2(c) of Schedule F, and (3) total other bonds, stocks and securities,
as shown against Asset item four (total of Schedule G).
You will note that the faco side of Form 105. Condition Report of
State Bank Members, remains substantially unchanged from the previous call.
In view of the requirement contained in the Banking Act of 1935 that reports
of condition of State bank members submitted to the Federal Reserve banks
mist be published, the Board feels that it may be desirable, as soon as
practicable, to modify the faco of the condition report in order to make it
somewhat more informative to tho public. This matter will be given further
consideration ond you will be advised at a later date of any contemplated
changes.
Very truly yours,
L. P. Bethea,
Assistant Secretary
Inclosure
TO ALL FEDERAL RESERVE AG31ITS
3-1100
Paragraphs to "be included in Federal Reserve Agents' letters to
State Ba-wlr Members at time of next call
515
REPORTS OF COKDITIffi-'
A new form, 105e, has been provided in view of the requirements of
Section 9 of the Federal Reserve Act, as amended by Section 320 of the Banking Act of 1935, that condition reports rendered by State bank members to
their respective Federal Reserve banks shall be published. The regulations
of the Board of Governors of the Federal Reserve System governing publication
of such reports are printed on the reverse side of the form. Everything
printed or reported on the face side of that form beginning with the words
"Report of condition of" must be published, except that items for which no
amounts are reported may be omitted. Form 105e should be prepared in duplicate; one copy should be given to the printer for publication; the other copy
should be sent to this bank, with a copy of the printed statement, clipped
from the newspaper, attached to the reverse side thereof.
REPORTS OF AFFILIATES
It will be noted that the forms and instructions relating to reports
of affiliates and holding company affiliates have been changed. The changes
are due largely to amendments to the law, which modify the definition of
holding company affiliates and authorize the Board of Governors of the
Federal Reserve System in certain cases to waive reports of affiliates other
than holding company affiliates.
Schedule 0 (Form 105b) is a part of the member bank's own condition
report and must be submitted by every State bank member regardless of whether
or not it has any affiliate or holding company affiliate. If yourbank has
3-1100a
516
—
2
•*
no affiliate or holding company affiliate within the terms of the Bonking
Act of 1933, as amended, Schedule 0 should be submitted with the following
signed statement on the face thereof:
"This bank (or trust company) has no affiliate
or holding company affiliate within the
terms of the Banking Act of 1933> a s amended.'1
If your bank has one or more affiliates or holding company affiliates
every such affiliate or holding company affiliate should bo listed on
Schedule 0, including such as arc inactive or in formal liquidation or receivership, and also including any organizations which under the last paragraph of Section 2(c) of the Banking Act of 1933, added by Section 301 of the
Banking Act of 1935, are not holding company affiliates except for the purposes of Section 23A of the Federal Reserve Act.
In addition, reports of all holding company affiliates, as defined in
Section 2(c) of the Banking Act of 193), as amended, must without exception
be submitted on Form 220 and published; but as indicated in the preceding
paragraph the term holding company affiliate does not include (except for the
p u r p o s e s 0f
Section 23A of the Federal Reserve Act) organizations which have
been determined by the Board of Governors of the Federal Reserve System not
to be engaged, directly or indirectly, as a business in holding the stock of,
or managing or controlling, banks, bonking associations, savings banks, or
trust companies. Reports on Form 220 are, therefore, not required of such
organizations.
Reports of other affiliates, as defined in Section 2(b) of the Banking Act of 1933, as amended, must also bo submitted on Form 220 and published, except such as are covered by the waiver which appears on Form 220b.
In general terms, this waiver will be found to cover affiliates in wnich the
bank has no substantial financial interest.
3-1100a
Schedule 0 should "bo prcparod in triplicate; the original and one
copy aro to be submitted to this banlc and the remaining copy is to he retained for your files.
Form 220 should he prepared in quadruplicate; the original and one
copy should he sent to this hank, and the remaining copies should he retained by your bank and the affiliate or holding coopany affiliate.
Henceforth reports of affiliates and holding company affiliates
required to be submitted on Form 220 mast be published under the same conditions as govern publication of the condition reports submitted by State
bank members to the Federal Reserve banks, instructions for publication will
be found on the reverse of Form 220a. Form 220a should be prepared in duplicate; one copy should be given to the printer for publication; the other copy
should be sent to this bank, with a copy of the printed statement, clipped
from the newspaper, attached to the reverse side thereof. 15very item appearing on the form must appear in the published statement, whether or not an
amount is shown therefor.
If it is not practicable for you to obtain and transmit to this bank
the reports of your affiliates and holding company affiliates, if any, at the
same time you transmit the condition report of your bank, i.e., within ten
days from receipt of the call for such report, prompt request should bo made
to the Board of Governors of the Federal Reserve System through this bank
for on extension of the time within which to transmit such reports. Such
request should set forth the additional time required and the specific
reasons why additional time is necessary.
FEDERAL RESERVE BOARD
518
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
October 23, 1935
3-1102
SUBJ3CT: Forms for use during 1936.
Dear Sir:
It will "be appreciated if you will advise the Board the number
of copies of the forms listed below that will he required "by your hank
(including branches, if any) during the calendar year 1936$
Form
Title
34 Daily balance sheet, (Please state the number required
for the head office and each branch separately, and
indicate any special punching that may be desired).
F.R.A. -5 Federal Reserve notes - Daily statement of Federal
Reserve Agent,
38 Classification of discounted and purchased bills held at
the end of the month,
44 Monthly report of Federal Reserve notes showing the
number of each denomination and aggregate amount received, issued to bank, and returned to the Comptroller
of the Currency.
95 Monthly report of earnings,
96 Monthly report of current expenses.
160 Monthly report of receipts and payments of paper currency.
519
B-1102
2
Form
19^
E
Title
Monthly report of Federal Reserve notes received and
issued; also stock on hand at beginning and end of
month.
Semiannual functional expense report.
Please show separately the number of copies of each form,
except form
required if revised and the number if not revised.
Very truly yours,
E, I,, Sinoad., Chief,
Division of Bank Operations
TO ALL FEDERAL KSS3RVE AGENTS
520
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
November 5» 1935
B-1103.
Dear Sir:
Beginning with the statement as of Wednesday,
November 6, 1935* the Board's weekly condition statement
of reporting member banks will cover 101 leading cities as
it did prior to the banking holiday in 1933, instead of 91
cities as in the recent past. The statement will also be
issued in condensed "balance sheet form and will include
additional items T#iich have been reported by the banks since
September 193*+• For your information there is inclosed a
copy of the form in which the statement will appear and of
an accompanying explanatory statement to be given to the
press.
Monday, November 11, being a holiday at all Federal
Reserve banks and branches, the statement as of November 6
will be issued on Tuesday, November 12, instead of on Monday,
November 11#
Very truly yours,
Inclosure,
TO ALL FEDERAL RESERVE AOEtTTS
Chester Morrill,
Secretary,
531
Fofr immediate release
Board of Governors
of the Federal Reserve System
November 12, 1935
STATEMENT FOR THE PRESS
Beginning this week the weekly condition statement of reporting member
"banks, issued by the Board of Governors of the Federal Reserve System, will cover
reporting banks in 101 leading cities as it did prior to the banking holiday in
1933» instead of 91 cities as in the recent past. When publication of the statement was resumed following the banking holiday, 11 cities were dropped from the
published statement temporarily because all or some of the important reporting
banks in each of those cities had not then been licensed to reotune full banking
operations •
The weekly statement has been revised further so as to show additional
items which have been reported to the Board since September 193^" • The amount of
"Loans to banks" was included heretofore partly in "Loans on securities - to
others" and partly in "Other loans". The item "Demand deposits - adjusted" represents the total amount of demand deposits standing to the credit of individuals,
partnerships, corporations, associations, States, counties, municipalities, etc,,
minus the amount of cash items reported as on hand or in process of collection.
The new item is a more accurate measure of changes in the volume of demand deposits
available for use of the general public than was the old item "Net demand deposits",
which represented merely demand deposits subject to legal reserve requirements.
The method of computing the item "Net demand deposits" , furthermore, has been
changed in two respects in accordance with provisions of the Barking Act of 1935:
first, it includes United States Government deposits, against which reserves must
now be carried, while previously these deposits required no reserves, and, secondv
amounts due from banks are now deducted from gross demand deposits rather than
solely from amounts due to banks, as was required under the old law. These changes
make the present item "Net demand deposits" not comparable with the same item as
shown prior to August 23, 1935. The item "Time deposits" differs from that previously published in that it formerly included a relatively small amount of time
deposits of other banks, which are now included in "Inter-bank deposits". The
item "Due to banks" shown heretofore in the statement included only demand balances
of domestic banks, The item "Borrowings^ Represents funds received, on bills payable and rediscounts, from the Federal Reserve banks and from other sources.
Figures are shown also for "Capital account", "Other assets - net" and "Other liabilities", By "Other assets - net" is meant the aggregate of all assets not otherwise specified, less cash items reported as on hand or in process of collection
which, as previously indicated, have been deducted from demand deposits*
Data by weeks since September 5» 193^» for all reporting member banks, for
reporting banks in New York, and for those in other leading cities, corresponding
with the figures for the current week, will be published in the forthcoming issue
of the Federal Reserve Bulletin,
(B-SOUc)
522
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
November 5» 1935
B-110'4.
SUBJECT; Federal Reserve Bank Balance Sheet,
lorn 3^» for use during 1936c
Dear Sir:
There is inclosed for your information a copy of
the 1935 edition of the daily balance sheet, Form 34, on which
has been indicated the changes to be incorporated in the 193&
edition. If you have any comments to submit with reference to
the proposed changes it would be appreciated if you would forward
them to us promptly.
Very truly yours,
E. L. Smead, Chief,
Division of Banl: Operations.
Inclosure.
TO ALL G07EE2T0BS
523
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
November 18, 1935•
B-1106,
Dear Sir:
In May 1935 a conference on standardization of bank call reports
was held in Washington at which were present representatives of Federal
and State supervisory authorities and of bankers' associations. At
that conference a permanent standing committee was appointed to work
toward the development of standard condition report forms. Since that
time a tentative draft of a proposed revision of the call report form
has been prepared, and a copy thereof is inclosed. The proposed revised form has not been acted upon by the Board or any of the supervisory authorities, but copies thereof are in the possession of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation. Ho copies have yet been furnished to State bank supervisors or
to the representatives of the bankers' associations who are members
of the standing committee above referred to, nor have the tentative
revisions in the form been discussed with them. It is, therefore,
requested that the form inclosed herewith be not discussed with anyone
who is not an officer or an employee of your bank.
It will be appreciated if you will discuss the proposed revised
form with your associates in the baric and write the Board fully with
respect to any changes you think it desirable to make therein. The
524
- 2 -
Board would like to have yoxr comments and recommendations within two
v/eelcs, if practicable.
It will be noted that the capital account has been tentatively revised so as to show separately the capital investment of the Reconstruction Finance Corporation, It has also been suggested that the capital
account might be simplified if the aggregate par and aggregate retirable
values of each class of capital stock were shown, instead of the par and
retirable values per share, with an extension as at present of the book
value of the capital stock and capital notes or debentures. Following
is the proposed alternative method of presenting this part of the
capital account:
31, (a) Reconstruction Finance Corporation capital
retirable at $
(b) Preferred stock sold to public
retirable at $
(c) Capital notes and debentures sold to
public
(d) Common stock (Deferred obligations shown
in Item 33 are payable before any distribution is made on common stock)
$
$
$
$
)
)
)
)
)
)
)
)
)
It has also been suggested that the item "Loans and discounts" should
be shown following investments, i.e., that it should appear as the seventh
item of assets instead of as the third item* Your comments on the desirability of such a change will be appreciated.
Schedule "G" shows the items which the staff has recomended be allowed
as deductions from gross demand deposits in order to determine the amount of
demand deposits on which member banks are required to carry reserves. Any
changes necessary in the schedule to make it conform with Regulation "D",
when approved by the Board of Governors of the Federal Reserve System, will
be made before the form is finally approved*
In schedule E it is intended
that overdrafts be included in the appropriate item or items (5« 6, 7« 10,
525
- 3 ~
11 and 12), instead of 'being shown separately. This will be brought
out in the instructions governing the preparation of condition reports.
After receipt and consideration of the comments and suggestions
of the Federal Reserve hanks the proposed form will be discussed with
other members of the permanent standing committee on the revision of
call reports. It is contemplated that complete instructions will be
prepared governing the preparation of the condition reports, which
will include definitions of items appearing in the schedules as well
as those appearing on the face of the report. Such instructions and
definitions will be sent to you for comment before the Board is asked
to pass upon thorn.
Very truly yours,
) r ) < r v u ^
Chester Morrill,
Secretary,
TO ALL FEDERAL BESE3VE AGENTS
Confidential
Tentative draft
526
FACE SIDE OF PROPOSED REVISED CALL REPORT FORM (105)
Form 105--Call No.
BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
Revised
1935
Reserve District No,
Every blank space and schedule mast be filled
in. Where there are no figures to report the
word "None" mast be written or stamped. Printed
items on this blank mast not be scratched or
amended in any manner. Any amounts Which cannot
be properly included in the printed items mast
be entered under "Other assets" or "Other
liabilities".
REPORT OF CONDITION OF "
"
(Give within the quotation marks the full and exact legal
title of the bank)
of
t in the State of
, at the
(City or town)
close of business on ................
193....
m m s
1. Cash, balances with other banks, exchanges for
clearing house, etc,
$.
2. Reserve with Federal Reserve bank
3. Loans and discounts
4. United States Government obligations, direct and
fully guaranteed
5. State, county, and municipal obligations
6. Other bonds, notes, and debentures
7. Corporate stocks, including $
Reserve bank stock
8. Banking house owned $
$
of Federal
, furniture and fixtures .
9. Investments $
in and advances $
to affiliated company holding title to banking house
10. Other real estate owned
11, Investments $
in and advances $
to affiliated companies or nominees holding title to
other real estate for bank's benefit
12. Customers' liability to this bank on acceptances
executed by. or for the account of this bank
13, Borrowed securities (mast agree with per contra item 27)
14-, Other assets
15.
TOTAL ASSETS
(B-1105-a)
527
Confidential
Tentative draft
FACE SIDE 0? PROPOSED REVISED CALL REPORT FORM (105) — Cont'd)
LIABILITIES
16. Deposits of individuals, partnerships, and corporations:
(a) Demand deposits
(b) Time deposits evidenced by savings pass books
(c) Other time deposits
$
___
17. United States Government and postal savings deposits
(mast agree with total of item 2 in Schedule H and
item 3 in Schedule I)
18. State, county, and municipal deposits (mast agree with
total of item 3 in Schedule H and item 4 in Schedule I)
19. Deposits of other banks (must agree with total of items
4, 5 and 6 in Schedule H and items 5> 6 and 7 in
Schedule I)
20. Certified and officers' checks, letters of credit and
travelers' checks sold for cash, and amounts due to
Federal Reserve bank (transit account)
21. Total deposits (items l6 to 20)
_
22. Bills payable, rediscounts, and repurchase agreements
23. Obligations on industrial advances transferred to
Federal Reserve bank
24. Mortgage bonds and participation certificates outstanding
25. Mortgages or other encumbrances $
on banking
house and $
on "other real estate™
_
26. Acceptances executed by or for the account of this bank
—
27. Securities borrowed (mast agree with per contra item 13)
__
28. Dividends declared but not yet payable
_
29. Other liabilities
—
30.
TOTAL LIABILITIES, EXCLUDING CAPITAL ACCOUNT
(B-1105-t>)
538
Confidential
FACE SIDE OF PROPOSED REVISED CALL IMPORT FORM (105) —
Tentative draft
(Cont'd)
LIA3ILITISS (Cont'd)
31. Capital accoimt:
(a) Preferred stock sold to Reconstruction
)
Finance Corporation
shares,
)
par $
per share, retirable
)
at $
per share
)
(t>) Preferred stock sold to public
)
shares, par
per share,
)
retirable at $
per share
)
(c) Capital notes cud debentures sold to P.econ- )
struct ion Finance Corporation
)
(d) Capital notes end debentures sold to
)
public $
)
(e) Common stock
shares, par
)
per share (Deferred obligations shown in )
item 33 ore payable before any distri)
bat ion is made on common stock)
)
(f) Reserves for dividends payable in common stock
(g) Surplus
(h) Undivided profits
(i) Retirement account (preferred stock or
capital notes and debentures)
(j) Reserves for contingencies
(k) Total capital account
32. TOTAL LIABILITIES, INCLUDING CAPITAL ACCOUNT
33. Deferred obligations not included in liabilities shown
above, subordinated to claims of depositors and
other creditors but payable before any distribution
is made to common stockholders as such;
(a) Deposits subordinated, and contributions made,
for bank's benefit
(b) Past due dividends on preferred stock and past
due interest on capital notes and debentures
(3-1105-c)
539
Confidential
FACE SIDE 0? PROPOSED REVISED CALL REPORT FORI; (105) —
Tentative draft
(Cont'd)
MSHORAMDA
34. Pledged assets (except real estate), rediscounts, and securities
loaned:
(a) U. S. Government obligations, direct and fully
guaranteed, pledged to secure liabilities
(b) Rediscounts, securities sold under repurchase
agreement, and other assets (except real
estate) pledged to secure liabilities
(c) Asoots deposited with State authorities to qualify
for the exercise of fiduciary or corporate
powers
(d) Securities loaned to banks, dealers in securities,
and others
(e) TOTAL
$,
35* Secured and preferred liabilities:
(a) Deposits secured by pledged assets pursuant to requirement of law
(b) Bills payable, rediscounts, and repurchase agreements
(c) Other liabilities secured by pledged assets
(d) Deposits preferred under provisions of law but not
secured by pledge of assets
(e) TOTAL
36. Outstanding encumbrances on banking house on which bank
is not liable
(3-1105-d)
530
Confidential
Tentative draft
PACE SIDE OF PROPOSED REVISED CALL REPORT JOHH (105) —
(Cont'd)
of
I
(Name and title of officcr authorized to sign report)
the above named bank, do solemnly swear that the above statement is true, and
that the SCHEDULES attached hereto atid those on the back of this report fully
and correctly represent the true state of the several matters therein contained
and set forth, to the best of my knowledge and belief.
NOTE — This report must be sworn
to by the President, Vice President,
Cashier, or other duly authorized
officer, attested by not less than
three directors other than the
officer signing the report, and forwarded to the Federal Reserve bank
with, the least possible delay (in
no case later than 10 days from rcceipt of call)
(Signature of officer authorized
to sign report)
Correct, - Attest.
,)
)
,)Directors
)
.)
State of
County of
Place for official seal
to bo affixed by officer
before whom acknowledged.
Notary must not bo an officer or director of the
bank.
—
*...)
) ss:
.)
Sworn to and subscribed before me this
day of
193
and I hereby certify that I am not an
officcr or director of this bank,
.Notary Public
(3-1105-e)
Confidential
531
Tentative draft
StifffiTOLBS OF PROPOSED K3VIS3D Ci-lL REPORT FORM (105)
SCH3DUL3 A — COi^IHGScfT LIABILITIES
1. Commercial and. travelers' letters of credit issued
and other credits opened for customers, other
than for cash, tut not need
$.
2. Foreign exchange future contracts
3. Accoptances of other banks and bills of exchange
or drafts sold vdtli endorsement of this bank
4. Real estate titles guaranteed
5. Other contingent liabilities (itemize)
TOTAL
SCHEDULE B — BRMCHES AID BRANCH OFFICES
(Do not count, as a branch, the head office of the bank or a
department or subdivision of the head office)
Humber in
operation
1. Within corporate limits of the head office city
.
2. Outside corporate limits of the head office city,
bit in the same county
3. Elsewhere in the same state, in counties contiguous to
the county in which the head office is located
.
4. Elsewhere in the same state, in counties not contiguous
to the county in which the head office is located
5. Elsewhere in the United States
6. In Foreign countries
TOTAL
(B-1105-f)
Confidential
SCHEDULES OF PROPOSED HEVISSD CALL H3P0RT FOE!,! (105)
SCHEDULE C —
Tentative draft
533
(Cont'd)
ITEMIZED STATSliSflT OF "0TH3H ASSETS"
1. Interest, commissions, rent, etc., earned
or accrued Taut not collected
$
2. Taxes, insurance, and other expenses prepaid
3. Cash items not in process of collection
TOTAL (mast agree with item l4 of "Assets")
SCHEDULE D — ITEMIZED STATEMENT OF "OTHZR LIABILITIES"
1. Interest, discount, rent and other income collected
"but not earned
2. Interest, taxes, and other expenses accrued and
unpaid
TOTAL (mast agree with item 29 of "Liabilities")
(3-1105-g)
533
Tentative draft
Confidential
SCHEDULES OF PROPOSED H3VIS3D CALL E3P0BT FOBM (105) —
(Cont'd)
-SCHEDULE' 3 — LOANS Aim DISCOUNTS (Including rediscounts
and overdrafts)
1. Commercial paper bought in open market
$
2. Notes, bills, acceptances, and other instruments
evidencing loans, payable in foreign countries
3. Acceptances of other banks, payable in United
States
»
4. Acceptances of this bank purchased or discounted
5. Loans to banks
6. Loans to brokers and dealers in securities in
New York City
7. Loans to brokers and dealers in securities outside
New York City
________
8. Loans to others for the purpose of purchasing or
carrying securities
9. Heal estate loons:
(a) On farm land
(b) On other real estate
10. Agricultural loans (including loans on livestock
but excluding loans on farm land)
11. Commercial and industrial loans (not included above)
12. All other loans
13. TOTAL LOANS AND DISCOUNTS
_____
. l4. Less; Valuation reserves
15. NET TOTAL (mast agree with Item 3 of "Assets")
(3-1105-h)
Confidential
SCHEDULES OF PROPOSED REVISED CALL B3POBT FOHM (105) —
534
Tentative draft
(Cont'd)
SCHEDULE E — LOAMS AMD DISCOUNTS (Cont'd)
MSlTOAiSDA
l6. Total loans eligible for rediscount under the provisions of Section 13 and l)a of the federal Heserve Act (including any such eligible paper now
under rediscount or pledged against liabilities)
$.
17. Officers' and directors' liabilities to the bank
(including both individual liability and liability
as members of partnerships):
(a) As payers of loans and discounts
(b) As endorsers or guarantors of loans
and discounts
(c) On overdrafts and on cash items not in process
of collection
(d) TOTAL
o) Less duplications
f) M3T LIABILITY TO THE B A H
18, Loans on which either interest or principal is,
or both are,
(a) Past due not more than six months
(b) Past due more than six months
19. Five largest outstanding loans (2 or more notes,
including overdrafts, of the same individual,
partnership, or corporation should be combined):
(a) Largest
(b) Second largest
(c) Third largest
(d) Fourth largest
(e) Fifth largest
(f) TOTAL
(B-1105-i)
Tentative draft
Confidential
SCHEDULES OF PROPOSED REVISED CALL REPORT FORM (105) —
(Cont'd)
535
SCHEDULE F — BOKDS. STOCKS, Aim OTHER SECURITIES (including
securities sold under repurchase agreement)
1, (a) Direct obligations of the United States Government:
(1) Bonds
(2) Treasury notes
(3) Treasury bills
(b) Obligations guaranteed "by the United States
Government as to interest and principal:
(1) Reconstruction Finance Corporation
(2) Federal Farm Mortgage Corporation
(3) Home Owners' Loan Corporation
(c) TOTAL
$
'
==——==:
2, (a) State, county, and municipal obligations
(b) Less: Valuation reserves
(c) NET TOTAL (must agree with item 5 of "Assets")
3, Other bonds, notes, and debentures (not including stock):
(a) Domestic
(1) Federal Land banks
(2) Federal Intermediate Credit banks
(3) Railroads
(4) Public utilities
(5) Other domestic corporations
(b) Territorial and insular possessions of the
United States
(c) Foreign-public and private
(d) TOTAL
(e) Less: Valuation reserves
(f) NET TOTAL (must agree with item 6 of "Assets")
4. Stock of —
(a) Federal Reserve bank
(b) Other domestic corporations
(c) Foreign corporations
(d) TOTAL
(e) Less: Valuation reserves
(f) MET TOTAL (mast agree with item 7 of "Assets")
MEMORANDA
5. (a) Securities in default (included in items 2 and 3 above)
(b) Securities not in default (included in items 1, 2 and
3 above) maturing within 5 years from date of call
report:
(1) U.S.Government obligations, direct and fully
guaranteed
(2) State, county, and municipal obligations
(3) Other bonds, notes, and debentures
(c) Non-dividend paying stocks (included in items
4(b) and 4(c) above)
(3-1105-j)
536
Tentative draft
Confidential
SCHEDUL3S
OF
PH0P0S3D
B3VIS3D CLML
BBPOPvT
IT O H M
( 1 0 5 )
—
(Cont'd)
SCHEDULE & ~ CASH. BALAUC3S T.ITH 01H3H 3.uES.
3XCHA3KSS
FOB
C L 3 A S m
H0US3.
STG.
1, Demand balances with other banks in the United States
(except private "banks and American "branches of
foreign bonks)
(a) Due from banks in Hew York City
(b) Due from banks elsewhere in the
United States
$,
2, Cash items in process of collection, including
exchanges for clearing house, except to the
extent included in item 1
3. Total amount deductible from demand deposits in
determining amount subject to reserve (total
of items 1 and 2)
4. Time balances with other banks in the United States
(except private banks and American branches of
foreign banks)
5. Balances with private banks and American branches of
foreign banks
6. Balances with banks in foreign countries (including
balances with foreign branches of other Arterican
banks but excluding amounts due from own foreign
branches)
7. Cash (including cash in transit)
8. TOTAL of items 3 to 7 (must agree with item 1 of "Assets")
(3-1105-k)
537
I s
Confidential
SCHEDULES OF PROPOSED REVISED CALL REPORT FORM (105) —
Tentative draft
(Cont'd)
SCHEDULE H - DEMAND DEPOSITS (all deposits other than
"time deposits" as defined in Regulation
D of the Board of Governors of the Federal
Reserve System)
1. Deposits of individuals! partnerships, and corporations
(must agree with item l6a of "Liabilities")
$.
2. United States Government deposits
3. State, county, and municipal deposits
4. Deposits of other "banks in the United States
(except private "banks and American branches
of foreign banks)
5» Deposits of private banks and American branches
of foreign banks
6. Deposits of banks in foreign countries
(including balances of foreign branches of
Other American banks but excluding amounts
duo to iiwn foreign branches)
7. Certified and officers' checks, letters of credit
and travelers1 checks sold for cash, and amounts
due to Federal Reserve bank (transit account)
(must agree with item 20 of "Liabilities")
8. TOTAL DEMAND DEPOSITS
4
-r
(3-1105-1)
<
«-
Confidential
538
Tentativo draft
SCHEDULES OF PROPOSED 3271SED CALL REPORT FORM (105) — (Cont'd)
SCHEDULE I — TIKE DEPOSITS (As defined in Regulation D
of the Board of Governors of the Federal
Reserve System)
1, Deposits of individmls (not including savings
deposits), partnerships and corporations:
(a) Certificates of deposit (other than
for money "borrowed)
(b) Open accounts
(c) Christmas savings and similar accounts
(d) TOTAL (must agree with item l6(c) of
"Liabilities")
$.
.
2, Deposits evidenced "by savings pass books (must
agree with item 16(b) of "Liabilities")
3, Postal savings deposits
4, State, county, and municipal deposits
5, Deposits of other banks in the United States
(except private banks and American branches of
foreign banks)
6, Deposits of private banks end American branches
of foreign banks
7* Deposits of banlcs in foreign countries
(including balances of foreign bronchos of other
American banks but excluding amounts duo to own
foreign branches)
8. TOTAL TIME DEPOSITS (items Id to 7 of this schedule)
-r
(B-1105-m)
539
*
Confidential
SCHSDUL3S 0? PROPOSED E3VIS3D CALL R3PQRT FORI! (105)
Tentative draft
(Cont'd)
SOKTOTTT.TI .T — BILLS PAYABLE. ISP IS COUNTS. £3D Z3PHRCKASE
AGR33M3NTS
1. With Federal Reserve banl:
$.
2. With other "banks and trust companies
3. With Reconstruction Finance Corporation
»
4. With others
5. TOTAL (mst agree with it on 22 of "Liabilities")
M3M0RJ0IDUM:
6. Bills payable (including certificates of deposit
issued for borrowed money)
7. Rediscounts (including notes and bills sold under
repurchase agreement)
8. Agreements to repurchase securities sold
9. TOTAL of items 6, 7 and 8 (must agree with item 5)
i
*
f
/
(3-1105-a)
540
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
November 19» 1935
B-1107
SUBJECT:
Form F.R. 194
Dear Sir:
It is requested that "beginning with the report on Form
F. R. 19^ for November, 1935» the amount of new Federal Reserve
notes on hand at end of the report month be subdivided into
notes of the 1928 series and notes of the 1934 series. In this
connection it has como to our attention that in some instances
Federal Reserve notes issued to the Federal Reserve "bank and
subsequently returned to the agent in original packages are
being reported as "fit" Federal Reserve notes. It will "be
appreciated if in future reports on Form 194 all now Federal
Reserve notes in original packages held by the Federal Reserve
Agent are reported as new notes.
Very truly yours
E. L. Smead, Chief,
Division of Bank Operations.
TO ALL AGEiJTS
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
December 4, 1935.
B-1108.
SUBJECT: Preliminary figures of loans and
investments of member banks on
November 1, 1935*
Dear Sir:
There is inclosed for your information and confidential
use a copy of a statement prepared for the Board giving preliminary figures of loans and investments of member banks on
November 1, 1935» based upon data submitted by the Federal
Reserve agents, in comparison with corresponding figures for
June 29, 1935, and October 17, 1934.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations
Inclosure
TO ALL GOVERFORS AND FEDERAL RESERVE AGENTS
C O B 1 ID - S T I A L
PB3LIMHTAHY FIG0H2S OF LOANS AND INVESTMENTS OF ALL MEMB2B BASES OH NOVEMBER 1, 1935, COMPAEEB WITH JTJE2 29, 1935, AH) 0CT0B2B If. 1934
(In millions of dollars)
Call
date
Total - All
licensed member
banks
193^ - Oct. 17
1935 - June 29
1935 - Bo?. 1
ITew York City*
193% - Oct. 17
1935 - June 29
1935 - Hov. 1
Chicago*
I93U -Oct. 17
1935 ~ June 2§
1935 - 3ov. 1
Reserve city banks
1934 - Oct. 17
1935 - June 29
1935 - 2?ov. 1
Country banks
193% - Oct. 17
1935 - June 29
1935 - ITov. 1
Loans to customers (except banks)
Open market loans
Total
To broPurchased
paper
Loans to
To
Reporting
Otherwise
1
loans
kers out- ethers | Seal
Commer- brokers
bank1 s
secured Loans Accept- !
and in- Total side
in
(estate
cial
Bills
on
to
ances
and
own
vestsecu- I loans acceptH. Y.
E. Y.
banks payable (payable paper
unments
City 1/
City 1 i rities 1
ances
secured
in U.S. {abroad bought
27,559 10,782
28,785 10,369
29,055 10,430
167
192
180
3,158
2,931
2,834
2,297
2.277
2.278
229
135
159
4,932
4,834
4,928
149
7,543
3.303
8.151
2,294
2,148
2.179
50
58
59
826
783
774
150
136
159
82
101
1,108
1.085
1.108
1,542
474
458
432
23
33
25
1
20
15
15
18
12
11
4,088
3,967
4,085
80
87
82
1,142
1,053
1,055
1,100
1,105
1,102
47
40
44
1,720
1,682
1,802
5
3,926
3.798
3.734
15
13
13
1,012
932
901
1,026
1,020
1.025
5
2
3
1,868
1,831
1,792
28
21
19
1.592
1.791
9,826
10,151
10.434
8,649
8.739
8.679
BOARD OF G0VEM02S
OF TH2 FSDSHA1 ai5Z2Y2 SYSTEM
Division OF BA2K OPERATIONS
D2CBMB2B 3. 1935
g
276
201
154
30
17
25
66
48
35
232
135
12
7
12
11
20
4
3
7
1
l
19
3
13
10
5
3
3
3
6
227
44 A
I83
10
253
247
262
I
8
3
13
802
975
841
631
930
828
24
1
1
(
Investments
1 U.S. Government ,
I sbligatiecs
Other
Total ]1
securi\
Fully
1
ties
Direct I guaran[ teed
15.267 9,186
16,857 9,871
17,249 10,080
4,300
4,983
4,958
982
1,107
1,336
637
76b
973
l:764
2?7
348
405
U
77
5,372
5,427
5,405
1,109
1,174
1.213
218
254
267
6,170
180
§71
655
1,708
1,703
1,621
4,545
4.780
4,785
1,992
1,931
1.873
215
553
2,337
99
25
9
5.441
5,986
2
1!
2
132
48
18
4
•Central reserve city banks only.
1/ Loans (secured by stocks and bonds) to brokers and dealers in securities.
3,34o
709
3.553
3.712
3,894
126
112
113
7
3-llOg
609
2.296
2,304
01
to
543
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
December 11, 1935
B-1109
SUBJECT* Data for 1935 Annual Report of the Board
of Governors of the Federal Reserve System,
Dear Sir*
It will be appreciated if you will kindly furnish us, not later than
January 15, 1936, with the following data for use in the Board's forthcoming
annual report t
1. Statement showing the number of member banks in each State
(or part of State in the district) accommodated through
the discount of paper during each month of the calendar
year 1935 and during the year as a whole.
2. Statement showing the number of nonmember banks other than
mutual savings banks on the par list and not on the par
list, respectively, on December 31, 1935, with separate
figures for each State or part of State in the territory
assigned to the head office and to each branch, if any.
The statement should include all banks on which checks
are drawn, whether or not on a restricted basis.
The figures of banks on the par list and not on the par list should be
reconciled with the latest State banking department abstracts and the Board
544
— 2 ~
advised of the names and locations of the banks which account for any
differences between the number of banks shown in your statement and in
the State banking department abstracts of condition reports. A copy of
the reconcilement should accompany the statement showing the number of
nonmember banks on par list and not on par list, unless the furnishing
of the statement would thereby be delayed, in which case the reconcilement
should be furnished as soon as practicable thereafter.
Very truly yours,
E. L. Smead, Chief,
Division of Bank Operations.
TO ALL FEDERAL RESERVE AGENTS
545
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
December 13, 1935•
B-1120.
SUBJECT: 1936 edition of Form 34.
Dear Sir:
Inclosed is a proof copy of the 1936 edition of Form 3^, daily
"Balance Sheet of Federal Reserve Bank", as returned to the printer.
Most of the changes made are self-explanatory.
It will "be noted that the reserve block on the liability side of
the revised form provides only for reserves for self-insurance and reserves for losses not elsewhere provided for. All reserves carried by
the bank other than those for which specific provision has been made on
Form 3^ should be combined and shown against the caption "Reserves for
losses not elsewhere provided for". Should any of the reserves reported
against the caption "Reserves for losses not elsewhere provided for"
have been set up for a specific purpose, the books of the bank should
show the amount of each such reserve. Any reserves held against assets
reported against the item "Claims account closed banks" should be shown
as a deduction from the amount repotted against such item and any losses
charged off on such claims should be charged to such reserves.
In order to obviate the necessity of carrying bills and securities
among the earning assets of the bank for any extended period after both
interest and principal have become due and unpaid, a new caption "Bills
-
546
2 -
and securities past due 3 months or more" has "been added in the miscellaneous assets block. Any reserves set aside to take care of losses
on bills and securities past due three months or more should be shown as
a deduction from the amount of such bills and securities. The amount of
industrial advances, if any, included in the item "Bills and securities
past due 3 months or more" and the reserve deducted therefrom should be
indicated in an appropriate footnote.
Losses on industrial adavances and commitments should be charged to
reserves, current earnings, or surplus in the following order: (a) to
reserves set aside out of net earnings on industrial advances and commitments, (b) to current earnings on industrial advances and commitments,
and (c) to surplus (Section 13b) in the proportion that the average daily
amount of suiplus (Section 13b) bears to the average daily amount of
industrial advances and commitments outstanding and the balance to surplus
(Section 7)•
It will be noted that the "Primary, secondary and additional collateral and securities held" block on the reverse side of ?orm 3^ has been
simplified somewhat, with a view to eliminating some of the difficulties
that have been experienced with the existing classifiction.
Very truly yours,
Chester Morrill,
Secretary.
IncInsure.
COPY HO-ALL GOVEH'TOHS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
December 20, 1935
B-1121.
SUBJECT: Condition of member banks.
Dear Sir:
There is inclosed., for use pending the printing
of Member Bafik Call Report Ho. 67, a statement showing
the assets and liabilities and a classification of loans,
investments, and deposits on November 1, 1935> of all
meaber banks, together with corresponding data by
classes of banks.
Very truly yours
3. L. Smead, Chief,
Division of Bank Operations
Inclosure
TO AIL GOV33ITOES AiTD F. B, AGENTS
548
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
December 21, 1935•
3-1123.
SUBJECT: Earnings and Dividends Beports of
State Bank Members, Form 107.
Dear Sir:
There have been forwarded to you today under separate cover
copies of Form 107 to be used by State bank members in submitting
their reports of earnings and dividends for the six months ending December
31, 1935.
It will be noted that former item 2-a has been subdivided into
two new items, "Salaries - officers" and "Salaries and wages - employees
(other than officers)", also that immediately above Section 1 two new
items have been inserted for reporting the number of officers and the
number of employees on the payroll at the end of the report period. It
is understood that corresponding items will appear in the form of earnings and dividends reports rendered by national banks beginning with
next year. Please advise State bank members that the additional information will be called for regularly hereafter, and that the collection
thereof will enable the Department of Labor to discontinue monthly reports
of employment and payrolls which the department now obtains from many
banks. So far as the current period is concerned, the collection of the
549
-
2
-
additional data will also make it possible for the Bureau of the Census
to dispense with sending enumerators to the banks, as was originally contemplated, to collect employment and payroll data for inclusion in the
census of business. The compilations that will be made by the Department
of Labor and the Bureau of the Census will not disclose figures for individual banks; only totals for all commercial banks will be published by
States and counties and perhaps by principal cities.
In the examination of the reports on form 10%, it is suggested
that particular attention be paid to the reconcilement of the capital
accounts as shown against items l4 to 17 with the corresponding items as
shown in condition reports on Form 105i and the items shown in Section 3
with the corresponding items in the report fer the immediately preceding
report period.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure,
10 ALL FEDERAL BESERVE AGSHTS
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
December 24, 1935*
3-1123.
Dear Sir:
In view of the revision of the Board's Regulation D, Heserves
of Member Banks, effective January 1, 19361 an& of the fact that the
deposit schedules in the forms to be used by member banks on the next
call for condition reports will conform to the new regulation, the
weekly member bank condition report form (B-21) has been revised and
a copy of the revised form is inclosed, together with a copy of
Schedules, I,
and K of the form to be used on the next call for
condition reports of member banks. The changes in Form B-21 are
largely in the classification of deposits, which, insofar as intertable
balances are concerned, is somewhat simpler than the present
classification. As a result the number of items to be reported by
member banks has been reduced by four.
It is requested that reports be submitted on the new form
beginning with Wednesday, January 8, 1936. In view of the fact,
however, that the forms for the next call report will not be distributed to member banks until around the end of the year, and in order
that the weekly reports may be rendered on the present form "by all
reporting banks up to and including the last report date of the
present year, it is suggested that a supply of revised form B-21 be not
distributed before January 2, 1936*
It will be appreciated if you will ask each reporting member bank
to advise you, when it submits its first report on the new form, what
part of the amount shown in its report for December ^1, 1935 a s "Du®
from banks and trust companies in the United States" (Item Cr of the
present Form B-21) represented demand and time balances on deposit
with private banks and American branches of foreign banks and time
balances on deposit with other banks in the United States, Please
indicate in your telegraphic and mail reports to the Board the total
amount of such balances included in item Q of the reports rendered
as of December 31, 1935*
Very truly yours,
Chester Morrill,
Secretary.
Inclosures
TO ALL FEDERAL BESERVE AGENTS
FEDERAL RESERVE BOARD
552
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
V
December 21f 1935 •
B-1124.
SUBJECT: Call Reports of State Bank Members
and their Affiliates.
Dear Sir:
There have "been forwarded to you today under separate cover the
indicated number of copies of the six forms attached hereto, for the use
of State bank members and their affiliates in submitting reports as of
the next call date:
Number of
copies
Form
Form 10$, Report of condition of State bank member,
Form 105b (Schedule "0"), Loans and advances to
affiliates and investments in and loans secured
by obligations of affiliates.
Form lCFje, Publisher's copy of report of condition
of State bank member.
Form 220, Report of affiliate or holding company
affiliate.
Form 220a, Publisher's copy of report of affiliate
or holding company affiliate.
Form 220b, Instructions for preparation of reports
of affiliates and holding company affiliates.
The number of copies of Forms 105b, 220, 220a, and 220b, being forwarded to you, is based on the number requested in response to telegram
TRAITS 2329 of November 21, 1935,
-
553
2 -
Please hold the forms at your bank until receipt of telegraphic
advice from the Board giving the date on which the forms should reach State
"bank members in your district. Upon receipt of such advice please arrange to
mail to each State hank member, scheduled to reach the bank as nearly as
practicable on the date given in the Board's telegraphic advice, three copies
of Form 105. two copies of Form lO^e, and an appropriate number of copies of
Forms 105b, 220, 220a and 220b, with the request that the forms be held pending the receipt of a call for reports thereon.
Please furnish the Board with a copy of the letter transmitting the
forms to State bank members, a copy of the letter calling for reports, and
a list of the State bank members on which the call is made.
The original copies of reports on Forms 105, 105b and 220 should be retained for the files of your bank, while the duplicate copies thereof and reports on Forms 105© and 220a should be forwarded to the Board,
It will be noted that the schedules on page 4 of Form 105 have been considerably revised and simplified so as to conform to revised Regulation D,
effective January 1, 1936. Please advise the banks to report the figures called for in Schedules I, J and K on the basis of the revised regulation, and call
their special attention to the provisions of paragraph (e) of Section II of the
regulation entitled "Continuance of 'time deposit1 status". The changes in the
regulations governing publication of condition reports, printed on the reverse
side of Form 105@, are of a minor character and were made simply to conform to
revised Regulation H, The instructions governing publication of affiliate reports have also been amended to conform to revised Regulation H.
The Board and the Comptroller of the Currency have modified the terms
of waiver applicable to reports of affiliates by the substitution of two new
paragraphs for the old paragraphs (a), (b), and (c), appearing under the cap
(E-1124)
554
- 3tion "Waiver of Requirement for Reports of Affiliates" in the instructions
for preparation of affiliate reports (Board's Form
2.20b
revised August
1935)• A copy of the statement attached hereto, which shows the amended
terms of waiver in full, including the new paragraphs, should "be furnished
to each State bank member and its attention specifically called thereto in
your letter sending out the forms for the next call*
It will he noted that
the waiver now applies to reports of all affiliates in which the member bank
does not have an interest in excess of 1 percent of its capital and surplus
or $5,000, whichever is the smaller, and that the amount of such interest
is to be taken at the value at which it is carried as an asset on the bank's
books.
The reports should be examined at your bank in accordance with past
procedure and any necessary corrections obtained, if practicable, before they
are forwarded to the Board, The printed copies of reports of State bank members and their affiliates, clipped from the newspapers and attached to the reverse side of Forms 105e and 220a, should be exanined to see that they appear
to be in proper form. Copies of letters sent to State bank members in connection with published reports, and of any replies received thereto, should be
furnished the Board.
Ploaso have compiled from the next call reports and mailed or wired in
time to reach the Board within 3 weeks after the date on which the call is
made, if practicable, a summary statement showing separately for central reserve city member banks, reserve city member banks, $nd country member banks,
the amount of (l) each class of loans and discounts as shown against Items 1 to
(B-112U)
555
- 4 8 of Schedule E, (2) each class of United States Government obligations,
direct and/or fully guaranteed, as shown against it ens l(a) to 2(c) of
Schedule F, and (3) total other bonds, stocks and securities, as shown
against Asset iten four (total of Schedule G).
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS
(3-1124)
556
The following waiver provisions supersede those printed on the instructions for preparing reports of affiliates (Form 220-4) revised August 3-935) •
WAITER OF REQUIREMENT FOB REPORTS OF AFFILIATES
Pursuant to section 21 of the Federal Reserve Act, as amended, the
Board of Governors of the Federal Reserve System waives the requirement for
the submission of reports of affiliates (other than of holding company
affiliates, as defined in section 2(c) of the Banking Act of 1933» as amended,)
of State "bank members of the Federal Reserve System, except i
(a) When indebtedness, if any, of the affiliate to the member
hank has been carried for more than 6 months in the 12
months preceding the report date as an asset on the
bank's books at a value in excess of 1 percent of the
bank's capital and surplus or $5,000, whichever is the
smaller, regardless of whether the affiliate is so
indebted on the report date,
(b) When, on the report date, the affiliate is indebted to the
member bank, or the member bank owns obligations of, or
stock or other evidences of ownership in, the affiliate,
and the aggregate amount of such indebtedness, obligations, stock, or other evidences of ownership is carried
as an asset on the bank*s books at a value in excess of
1 percent of the member bank's capital, and surplus, or
$5»000, whichever amount is the smaller,.
The Board of Governors of the Federal Reserve System also waives the
requirement for the submission of reports of affiliates in all cases where
the affiliate relationship is based solely on ownership or control of any
(B-1124)
557
-
2 -
voting shares of the affiliate "by a member "bank as executor, administrator,
ttustee, receiver, agent, depositary, or in any other fiduciary capacity,
except where such shares are hold for the "benefit of all or a majority of
the stockholders of such member "banks.
The above provisions with respect to the waivin.? of the requirements
for submission of reports of affiliates arc subject to change whenever domed,
advisable by the Board of Governors of the federal Reserve System in order
to require the submission of reports which are necessary to disclose fully
relations between member banks and their affiliates and. the effect thereof
up*n the affairs of member banks.
(3-1124)
558
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
December 26, 1935*
B-1125.
SUBJECT: Indebtedness and outside business
interests of officers and employees .
Dear Sir:
In order that the information furnished to the Board with respect
to indebtedness incurred by officers and employees in the Federal Eeserve
AgentW departments may be prepared on a uniform basis by all Federal
Reserve Agents, it is requested that in the future reports be submitted
on Form B- 208 , a supply of which is being forwarded to you under separate
cover. A specimen copy of Form B-20S illustrating the manner in which
the report should be prepared is attached for your information. Please
include with your report a statement indicating whether in your opinion
any cases require special attention, and if so, the action taken or proposed to be taken in each case.
As it is desirable that the information in regard to outside business
affiliations of officers and employees of the Federal Reserve bank, including the Federal Reserve Agent's department, requested in the Board's letter
X-7425 of April 29, 193), he received by the Board at stated intervals, it
is requested that you report thereon at the same time that statements are
furnished on indebtedness of officers and employees in your department.
559
— 2 —
At the Governors' conference held in Washington on October 23,
1935» it was brought out that at a number of the Federal Reserve Banks
at least it is the practice to prepare data on the indebtedness of
officers and employees of the bank annually and the Governors recommended
that the reports covering indebtedness of officers and employees in the
Federal Reserve Agent's department be also prepared and submitted annually
instead of semi-annually as at present. The Board concurs in the Governors'
recommendation, and requests that such reports be submitted as of July 1
of each year in time to reach the Board not later than September 15.
Very truly yours,
Chester Morrill,
Secretary.
Inclasure,
TO ALL FEDERAL RESERVE AGENTS.
Board of Governors
of the Federal Reserve System
(Form B-20S)
—
—
Name and
position
Division,
section,
or unit
FEDERAL RESERVE AGENT'S DEPARTMENT^a'
Federal Reserve Bank of
STATEMENT OF PERSONAL INDEBTEDNESS^) OF OFFICERS AND EMPLOYEES,. AS .QE. JELY 1, 1.93
Annual
salary
To whom
indebted(°)
Amount j Amount
Indebteaness incurred
of
liquidated
Maturity
Before or
current
since
after
employof
Date
indebted- nreceding
ment by
indebtedness
ness
July 1
F. R. bank
Security
Reason for
incurring
Plan
for
indebtedliquidation
ness
1
(a) Includes all activities under supervision of Federal Reserve agent, but not those, such as auditing, under supervision of the Chairman of the Board of fl)
Directors.
O
w
(b) Excluding bills for ordinary current expenses and installment purchases of household equipment, unless past due, but including debts, if any,
incurred to others in order to pay such bills.
http://fraser.stlouisfed.org/
(c) Indicate member banks with an asterisk (*).>
Federal Reserve Bank of St. Louis
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
December 31, 1935
2-1126.
SU3J2CT: 193& Budget for Federal Reserve Bank,
Dear Sir:
It will be appreciated if you will forward to the Board, as
soon after January 1 as practicable, a statement of the budget approved
for the head office and each of its branches, if any, for the calendar
year 193& with separate figures for the first half and the second half
of the year. If any material changes are subsequently made in the
budget for the second half of the year the Board should be advised of
such changes on or about July 1, 1936,
The budget statement as submitted to the Board should be prepared
in accordance with the sample form attached and should show totals for
each separate unit (department, division, section or expense unit) for
which separate figures are shown in the budget approved by the bank's
budget committee.
Very truly yours,
Inclosure
TO CHA.IBMEN OF THE F3D3HAL BSSSRVS BAHS
Chester Morrill,
Secretary.
SUMMABY OF BUDG®$ ZSTIW33S, 1936
Federal Reserve Bank of
Unit*
Total
Adjustments ( specify)
necessary to place the
above figures on Form 2
basis:
562
(Indicate whether for head
office or 'branch)
Expenses
Budget
Expenses
Budeet
1st Half, 1st Half, 1st Half, 2nd Half, 2nd Half, 2nd Half,
. >936 ,
w,,\
„ WA •:1 n;,1. air,:.,,1 .y riff, ir nrnnnrwrL. \ : M an1, n
„"i , u • „ r,111 r ; ; 1 ; a, .a. vf?< ir,r,„vi r, 1
r I, n s s s
Total (mast agree
with Form 3)
I
MEMORANDUM
Furniture and Equipment
•Totals should be shown for each department, division, section or expense unit for
which separate figures are shown in the "budget approved by the bank's budget
committee.
B-1126a
563
(
FEDERAL RESERVE BOARD
WASHINGTON
December 31, 1935 •
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
3-1127.
V
SU3J3CT: Summary Statement of Federal Reserve
Bank Personnel.
Dear Sir:
In accordance with the usual practice, please furnish the
Board with a summary statement showing the number and salaries of
officers and employees of your bank (including branches, if any)
as of December }1» 1935« and January 1, 1936, made out in
accordance with the attached form. The figures for December 31,
19351 which should not include any changes in either the number
or salaries of officers or employees that become effective on
x
January 1, 1936, will be published in the Board's 1935 annual
report. The figures for January 1, 1936, should represent the
number and annual salaries of officers and employees after all
changes effective as of January 1 have been made.
t
Very truly yours,
YY)otaLl
Chester Morrill,
Secretary.
Inclosure
L3TT3B TO ALL CHAIBMBN
http://fraser.stlouisfed.org/
/
Federal Reserve
Bank of St. Louis
564
NUMBER AND SALARIES OF OFFICERS AMD EMPLOYEES OF THE
FEDERAL RESERVE BANK OF
(INCLUDING- BRANCHES)
Pec. 31. 1955
Jan, 1,, 193,6
Annual salary of Chairman and Federal Reserve Agent
$_
Governor
$_
$.
Other officers:
Number
Annual salaries
£
$,
Bnployees, both permanent and temporary,
(except those whose salaries are
reimbursed to bank):
Number
Annual salaries
5
Employees, both permanent and temporary,
whose salaries are reimbursed to
bank:
Number
Annual salaries
B-112?a
565
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 31, 1935
B-1128
SUBJECT! 1936 Budget for Statistical
and Analytical Work
Dear Sir:
In accordance with your usual practice, a statement
of the budget for the Statistical and Analytical function
of your bank (including branches, if any), for the calendar year 1936 should be forwarded to the Federal Reserve
Board as soon after January 1 as practicable. The budget
should be prepared in accordance with the attached form.
Very truly yours,
Chester Morrill
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS
566
FEDERAL RESERVE BANK OF
(Including branches) B-1128a
Proposed budget for the Statistical and Analytical function (as defined in
the Manual of Instructions covering functional expense reports, Form E)
(All figures to be shown to the nearest dollar, cents omitted)
STATISTICAL (OTHER THAN SPECIAL REPORTS)»
Salaries - Officers
Salaries - Employees
Contributions - Retirement system
Traveling expenses
Printing, stationery, and other supplies
Telephone and telegraph
Postage
All other*
BUDGET
for
1935
EXPENSES
during
1935
BUDGET
for
1936
TOTAL
STATISTICAL (SPECIAL REPORTS)i
Salaries - Officers
Salaries - Employees
Contributions - Retirement system
Traveling expenses
Printing, stationery, and other supplies
Telephone and telegraph
Postage
All other*
TOTAL
MONTHLY LETTER:
Printing and stationery
Postage
TOTAL
LIBRARY:
Salaries - Officers
Salaries - Employees
Contributions - Retirement system
Traveling expenses
Printing, stationery» and other supplies
Telephone and telegraph
News service - Subscriptions to
periodicals, etc.
Books
All other*
TOTAL
GRAND TOTAL
"'MEMORANDA*
Number of copies of monthly letter printed, December 1935
Receipts from monthly letters sold;
Year 1935 4
Estimated, Year 1936 S
^Classify, if in excess of ^100.
D 0 not deduct
from expenses
@FedFRASER